The High Court has dismissed a petition to confirm the appointment of an examiner to JJ Red Holdings Limited, finding that the petition was not presented in good faith and would likely allow the company to avoid or vary a recent settlement with its landlord.
Ms Justice Baker delivered the judgment on 15 September 2016. The company operates the Dublin Citi Hotel and Bar at 46 to 49 Dame Street, Dublin. It was insolvent, but its independent expert said it had a reasonable prospect of survival if it could renegotiate the settlement, secure substantial funding and obtain creditor approval for a rescue scheme.
The settlement was reached on 19 July 2016, during proceedings over rent arrears and the landlord’s attempt to forfeit the lease. It required the company to pay €850,000 in agreed arrears, €115,000 for the current quarter’s rent, a €100,000 security deposit and €150,000 towards the landlord’s costs. The terms included enforcement provisions if the company defaulted.
The company paid the €115,000 current-rent instalment. It did not pay the first €425,000 instalment of the agreed arrears, due on 9 August. In a letter sent that day, the company’s solicitors said the funds were in place but the bank could not transfer them immediately. Justice Baker found that no funding facility was available and that the letter contained untruths. She also found the company had been reckless in entering the settlement without securing finance to meet it.
The company said it had expected to obtain a commercial loan and sought more time to pay. Its expert’s reports described possible investor funding of €500,000, with a further €250,000 said to be available during the examinership. The judge found the letters from potential investors were conditional expressions of interest and that the indicated funding fell well short of the estimated €1.7 million needed for the proposed payments to creditors and the landlord, before examinership costs.
The judge accepted that examinership is a discretionary remedy and that a recent debt alone does not prevent a company receiving court protection. But she found the likely effect here was to reopen or vary a settlement of contentious proceedings that had been made an order of court. She concluded that the petition was an attempt to buy time and that the company had no reasonable basis to expect the settlement funding would become available.
The landlord had indicated it would continue employing the permanent staff, apart from the company’s directors and the child of one director. The judge was satisfied employees’ interests would not be adversely affected by refusing the application. She dismissed the petition in the exercise of her discretion. The judgment refused confirmation of the interim examiner’s appointment; it did not approve a rescue scheme.