The Supreme Court has allowed Star Elm Frames Limited’s appeal against the High Court’s refusal to appoint an examiner, continuing court protection and appointing the interim examiner as examiner. The court said its decision did not endorse the proposed creditor scheme, which would require separate consideration by the High Court.
In a judgment delivered on 10 December 2013, Ms Justice Laffoy said the company had met the statutory threshold of showing a reasonable prospect of survival as a going concern. She described the case as “very much a borderline case”. The independent accountant’s report and the interim examiner’s reports supported survival, and the court found there was not enough basis to reject their opinions despite concerns raised by the Revenue Commissioners.
The company was incorporated in July 2011 and made windows and doors at leased premises in Raheen Business Park, County Limerick. It had 31 employees. It petitioned for examinership on 3 October 2013 after Revenue attached its bank account, leaving it unable to pay wages due two days later. The High Court refused the petition on 4 November, finding that survival had not been shown and declining to exercise its discretion in the company’s favour given its failure to remit collected VAT and an earlier repayment default. The company appealed, and a stay kept protection in place pending the appeal.
New evidence before the Supreme Court included the interim examiner’s scheme proposals and updated reports. The proposals identified two outside investors who would provide €120,000, alongside €30,000 generated by the company during the interim examinership. They proposed paying the Revenue Commissioners in full over time, including an initial €87,500 payment, while the landlord and unsecured creditors would receive 2.5% of their debts. Examinership costs were estimated at €52,000.
Revenue was not opposing appointment of an examiner but questioned whether the investment would secure the company’s survival, and raised concerns about inconsistencies between financial projections and trading performance. The Supreme Court accepted that Revenue’s concerns and arguments were cogent, but concluded on balance that the evidence supported a reasonable prospect of survival.
The court also exercised its discretion in favour of examinership, reasoning that it was likely to be more advantageous to creditors as a whole than winding up. No creditor opposed the appointment; several major creditors supported it, and the court considered the 31 employees’ interests. It stressed that the proposed scheme remained for the High Court to assess under section 24. The judge said provision for unsecured creditors appeared “very meagre” and recommended that the examiner reassess it.