ACC to seek winding up of three Fleming companies
The court yesterday refused court protection after finding that the proposed survival schemes for John J Fleming Construction (JJFC), JJ Fleming Holdings (JJFH) and Tivway Ltd, did not amount to a plan with a reasonable prospect for their survival as “going concerns”.
The schemes were instead a “holding plan”, involving the sale of the profitable “engine” or construction arm of the group to a new company outside the examinership, leaving behind an impaired property development business, Ms Justice Susan Denham said.
The plan was to keep sites in a land bank for 10 years in the “hope” the property market would improve and the banks would support a build-out programme at an appropriate time.
An examinership was “not a process for sale” and the test was a reasonable prospect of survival as “a going concern”, she said.
These proposals were not a plan for survival as going concerns and the companies would be akin to three aircraft permitted to hover in the air for 10 years hoping a property market improvement means they would not end up as “scrappage”.
The facts of the case were “bleak” and epitomised “the consequences of the recent property boom and bust” which had left many people in “dismal situations”, Ms Justice Denham said
Some 137 people are employed by JJFC but, even if the schemes had been approved, all but 15 of those jobs were to go to firms outside the survival scheme.
She also noted JJFC and JJFH are unlimited companies whose shareholders, John and Noreen Fleming, had transferred €3 million of their assets to trust funds in May 2009, and also pledged some €5m to the proposed survival schemes. ACC had said the guarantees of Mr and Ms Fleming in the two unlimited companies were significant to it and approval of the schemes would deprive it of that “route” to the Flemings.
If the schemes were approved, that would terminate the liability of shareholders and the Companies Act was not designed to immunise company principals or shareholders from the consequences of financial difficulties, the judge said.
She was giving the five-judge court’s unanimous judgment allowing the appeal by ACC against a High Court decision last November approving the schemes that ACC, owed €22m by Tivway, described as “asset stripping” and a “personalised NAMA”. The plans were on hold pending the Supreme Court decision.
The Fleming group has total debts of €1bn, including €260m to Anglo Irish Bank and liabilities to AIB, Bank of Ireland Scotland and hundreds of unsecured creditors. All but ACC supported the schemes.
Following the decision, Paul Sreenan, counsel for ACC, sought orders to wind up the companies. ACC had already appointed a receiver over Tivway, he added.
The Chief Justice directed the High Court should deal with those matters and Mr Justice Brian McGovern will deal this morning with them. The sides accept the companies have to be wound up but differ on the identity of the liquidator. ACC wants Kieran Wallace of KPMG but the Fleming companies argue that as Mr Wallace previously provided a report for ACC in the matter, a different liquidator should be appointed.
The struck-down schemes proposed a sale of the Fleming group’s contracting arm and other assets to a new company, Donban, for €3.6m and meant secured bank creditors would have effective control of Fleming’s property development business, including sites in Sandyford, Co Dublin, with the banks having 10 years to realise their security.
Ms Justice Denham said in her decision the case turned on fundamental issues relating to the nature of an examiner, the jurisdiction of the court and the purpose of examinership laws.
The court had been told the survival prospects of the three companies were inextricably linked, she noted.
Under the proposed schemes, all three insolvent companies would remain insolvent. The proposals involved a sale, not an “investment” as suggested, of the group’s profitable contracting arm to Donban leaving behind “moribund” sites.
Tivway, she noted, owned the Sentinel building and two-thirds of an Aldi site at Sandyford, assets once valued at €36m but now valued at €8m to €9m.
Any sales of completed units or rental income would also be of minimal value given the liabilities of the companies, the judge said. They would remain insolvent despite any such so-called business activity.
