The High Court confirmed modified schemes of arrangement for three companies connected with Flannery’s pub in Camden Street, Dublin, despite finding that their examiner breached his duty of candour to the court. The schemes were confirmed after secured creditor Vanguard agreed to the revised terms and withdrew its opposition.
The judgment, delivered by Ms Justice Finlay Geoghegan on 28 February 2014, concerned Camden Street Taverns Ltd., which operates Flannery’s; Camden Street Properties Ltd., which owns adjacent property, part of which is used as the pub’s beer garden; and their parent, Camden Street Investments Ltd. The companies entered examinership after being unable to repay loans. Vanguard was owed about €11 million.
The examiner’s original proposals relied on an investment bid by Paul Clinton and provided Vanguard with €7.1 million. During the confirmation proceedings, the court received the bid document and found it was a joint proposal by Clinton and Colin Dolan, a director of all three companies and a shareholder of the parent company. The examiner had described it to the court as Clinton’s proposal without disclosing Dolan’s involvement. The court also found that Dolan knew the companies’ €7 million CBRE valuation when the joint bid was made, and that the examiner had not told the court this when responding to Vanguard’s concern that the valuation might have been available to Clinton.
The examiner apologised and said he had not intended to mislead the court. The judge nevertheless found that he had breached his duty to disclose material matters fully. She also found that the examiner’s legal representatives failed to make appropriate enquiries before settling an affidavit and submissions, while accepting their explanation that they had not recalled the joint nature of the bid.
After a commercial settlement, the modified proposals increased Clinton’s investment to €7,358,915. Vanguard was to receive €7.1 million immediately from the tavern company, €1,000 immediately from the parent, and €1.5 million from the property company in instalments beginning in December 2014. Vanguard was to release security over the pub after the €7.1 million payment, while retaining security over part of the adjacent property until the final instalment. Vanguard then withdrew its objection; the Revenue Commissioners supported confirmation.
The court found the revised schemes gave each company a reasonable prospect of survival as a going concern. It decided the examiner’s breach did not require refusal of confirmation, noting the prospects for the business and its approximately 39 jobs. It confirmed the proposals for each company under the 1990 Act. Although the proposals had been drafted as one scheme, the court treated them as three distinct schemes with common provisions, and directed that the modified scheme be attached to the orders and registered for each company.