The recent decision of the High Court in the case of In the matter of Ladbroke (Ireland) Limited and Others has, in the first written judgment in relation to the matter, reaffirmed the principles established in the eircom examinership regarding an examiner’s engagement with potential investors. The decision upholds the primacy of the examiner’s commercial judgment, which is subject to review by the court only to the extent that it is so “utterly unreasonable and absurd that no reasonable man would have done it”.
Ken Fennell of Deloitte was appointed examiner of Ladbroke (Ireland) Ltd and a number of its related companies (collectively the “Companies”).
A number of potential investors, including Boylesports, expressed an interest in investing in the Companies. Boylesports contended that certain information which it had requested from the examiner, and which it believed was necessary for it to make a proper investment proposal in respect of the Companies, had not been made available to it.
Boylesports challenged the decision of the examiner to withhold such confidential information claiming that: (i) the decision had not been a decision of the examiner but rather a decision of the Companies; and (ii) in reviewing the examiner’s decision the court should seek to balance the competing rights and interests of the parties.
The examiner and the Companies argued that the decision was properly made and was taken with a view to protecting the Companies by mitigating the risk of such commercially sensitive information being used against the Companies by unsuccessful bidders in the future.
In his written judgment delivered on 17 June 2015, Mr Justice Cregan held that the decision of the examiner, to withhold sensitive commercial information with a view to protecting the interests of the Companies and whether this was a proper exercise of his commercial judgment, was a question of fact rather than a question of law. He quoted from the transcript of the judgment of Mr Justice Kelly In the matter of eircom Ltd. (Kelly J. ex tempore 17 May 2012) in finding that the standard to be applied by the Court in reviewing such a question of fact was whether the decision of the examiner was so “utterly unreasonable and absurd that no reasonable man would have done it”. He held that the decision taken by the examiner in the Ladbrokes case was within the scope of his commercial judgment and was neither utterly unreasonable nor absurd.
Significance of the Decision
This line of authority is likely to benefit the examinership process generally. The alternative whereby the examiner’s commercial judgment would be subject to review by the courts at any time would render the process unwieldy and unattractive to directors of insolvent companies.