The High Court has dismissed a petition by La Plagne Ltd shareholder John Fraher to wind up the company, finding that the evidence did not establish that it was unable to pay its debts as they fell due. The court also held that Fraher did not have standing to petition as a contingent creditor because his liability under a personal guarantee had not crystallised.
Miss Justice Laffoy delivered judgment on 17 January 2011. The petition, presented on 26 November 2010, was opposed by the company’s other 50 per cent shareholder, John F. Ronan. Fraher relied on alleged insolvency; he did not plead that winding up was just and equitable.
La Plagne is a holding company that has never traded. Its recurring direct debt was a loan from AIB, with four monthly instalments totalling €73,872 in arrears as of December 2010. The company had relied on its subsidiary P. & S. Kavanagh (Thomastown) Ltd to provide funds for those repayments. The judgment records that Thomastown had previously made the payments, but they stopped without a company resolution to that effect.
Fraher argued that the subsidiaries could not realistically continue supporting the parent. His accountant’s cash-flow analysis assumed Thomastown would no longer provide that support. Ronan maintained that it should continue and that Thomastown had the capacity to do so. The judge was not satisfied that payments had stopped because Thomastown could not meet its own debts. She noted that even Fraher’s forecast showed Thomastown with capacity to assist the company.
The judge found that Fraher’s guarantee did not give him standing as a contingent creditor at that point. He had made no payment under it, and the company’s primary liability to pay the full AIB debt immediately had not crystallised. The judgment also recorded residual doubts about whether Fraher could petition as a fully paid shareholder, but the judge did not decide that issue definitively.
In exercising the court’s discretion, Laffoy said it would be unjust to permit Fraher to end the company on the basis of an alleged insolvency he had contrived by resiling from the arrangement for Thomastown to support it. The court noted that three retail subsidiaries were trading and their AIB commitments were being serviced. It left open the possibility of a future winding-up order on just-and-equitable grounds after an oral hearing.
The order was to dismiss the petition. The judgment did not wind up La Plagne.