In the recent case of Re M.D.Y. Construction Limited  IEHC 676, an Interim Examiner made an application pursuant to section 541 of the Companies Act 2014 (the “2014 Act”) to have proposals for a scheme of arrangement confirmed by the High Court. Interestingly, the application was made before the Interim Examiner’s appointment had been confirmed by the Court.
Section 541 of the 2014 Act provides, inter alia, that the report of an Examiner shall be set down for approval by the Court as soon as may be after receipt of the report by the Court.
On 20 September 2018, Neil Hughes of Baker Tilley Hughes Blake (the “Examiner”) was appointed Interim Examiner of M.D.Y. Constructions Limited (the “Company”) on foot of a petition presented to the Court by the Company’s directors. The Company was indebted to its secured lender in the sum of €4.48 million arising from losses deriving from the acquisition of development sites.
At the hearing of the petition on 22 October 2018, the Examiner delivered a report to the Court on the work undertaken by him since his appointment. The Examiner reported that in addition to the standard process of familiarising himself with the Company’s affairs, he engaged with potential investors and formulated proposals for a scheme of arrangement. On 17 October 2018, five days before the Court date, the Examiner, on behalf of the Company, entered into a binding agreement with an investor to support the implementation of a scheme of arrangement of the Company. On the same day, the Examiner also issued notices convening meetings of members and creditors pursuant to section 534(2) of the 2014 Act for the purpose of considering and voting on the proposals. Somewhat unusually, the meetings were scheduled for the day after the hearing of the petition by the Court.
At the hearing of the petition, Counsel on behalf of Ortelo (an unsuccessful bidder in the investment process) sought an adjournment to afford time to file an affidavit in support of an application to remove the Examiner and/or appoint a different Examiner. Counsel on behalf of the petitioner, and a number of other interested parties, made submissions to the Court to the effect that time was of essence in relation to this examinership in circumstances where two important clients of the Company had threatened to terminate their contracts with the Company. The Court refused Ortelo’s application for an adjournment on the basis that no party opposed the making of the Order confirming the appointment of the Examiner save for Ortelo who was not in fact a creditor of the Company but rather a disappointed bidder in the investment process. The Court confirmed the appointment of the Examiner. The Court commented that although it was unusual for an Interim Examiner to activate section 534(2) of the 2014 Act prior to the hearing of the petition, no party had suggested that he did not have the power to do so.
On 15 November 2018, the Court confirmed the proposed scheme of arrangement despite opposition from various unsecured creditors of the Company. The Court found that the concerns expressed by the objecting creditors did not evidence a failure by the Examiner to perform the duty conferred on him by the 2014 Act and did not amount to a deviation from the proper exercise of the Examiner’s commercial judgment in selecting an investor. The Court also noted that the Examiner had demonstrated that the Company had a reasonable prospect of survival if the proposals were confirmed.