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Judgment
Title:
McInerney Homes Limited & ors & Companies (Amendment) Act 1990
Neutral Citation:
[2011] IESC 31
Supreme Court Record Number:
77 & 78/11
High Court Record Number:
2010 475 Cos
Date of Delivery:
07/22/2011
Court:
Supreme Court
Composition of Court:
Fennelly J., Macken J., Finnegan J., O'Donnell J., McKechnie J.
Judgment by:
O'Donnell J.
Status:
Approved
Result:
Dismiss
Judgments by
Link to Judgment
Concurring
Dissenting
O'Donnell J.
Finnegan J. McKechnie J.
Fennelly J., Macken J.
Fennelly J.
Macken J.



THE SUPREME COURT
77 & 81/11

Fennelly J.
Macken J.
Finnegan J.
O'Donnell J.
McKechnie J.
IN THE MATTER OF MCINERNEY HOMES LIMITED

AND IN THE MATTER OF MCINERNEY HOLDINGS PUBLIC LIMITED COMPANY, MCINERNEY CONSTRUCTION (HOLDINGS) LIMITED,

MCINERNEY CONTRACTING LIMITED,

MCINERNEY CONTRACTING DUBLIN LIMITED,

(EACH A RELATED COMPANY),

AND IN THE MATTER OF THE COMPANIES (AMENDMENT) ACT 1990 (AS AMENDED)

MCINERNEY HOMES LIMITED, MCINERNEY HOLDINGS PUBLIC LIMITED COMPANY

AND

MCINERNEY CONTRACTING LIMITED

APPLICANTS

Judgment delivered by O’Donnell J. on the 22nd day of July, 2011.

Background
1. On the 26th August, 2010, Mr. William O’Riordan was appointed interim examiner to the companies named in the title hereof which were then the companies comprising the McInerney group. For reasons which are not relevant to this appeal, the third and fifth named companies were removed from the examinership and the winding up by order of the 24th November, 2010. I will refer to the remaining companies herein as either “the McInerney group”, “the group” or “the companies”. This is in essence an appeal by those companies against the refusal by the High Court of an application made by the companies and the examiner pursuant to s.24 of the Companies (Amendment) Act 1990 (hereinafter referred to as “the Act of 1990”), for the approval by that Court of the scheme proposed by the examiner. In order to understand the issues raised by this appeal, and indeed the cross-appeal by the banking syndicate, it is necessary to set out the somewhat complex history of this vigorously contested litigation.

2. Until recently the McInerney group had been a long established and successful property development company with interests in this country and indeed in the United Kingdom, Spain and Portugal. During its period of recent success it had received the support of its bankers, principally Bank of Ireland plc., Anglo Irish Bank Corporation Ltd. and KBC Bank Ireland plc. (hereinafter referred to collectively as “the banks”, or “the banking syndicate”). The mutual congratulation which no doubt was a feature of their relationship has now turned to bitter recrimination as they have battled to force each other to consume some very unpalatable fare: a receivership and effective termination of their business for the companies; and in the case of the banks, a dramatic write-down and forced realisation of their €110 million indebtedness, which was secured upon the assets of the group. The result has been, in the words of the trial judge, Clarke J., one of the most hard fought examinerships in recent times which has generated five judgments of the High Court over a relatively short period. In the end the Court did not approve the scheme proposed by the examiner. Against that outcome the companies appealed. The banks have also cross-appealed.

3. This case has resulted in the somewhat surreal scenario that over a three day period this Court was occupied by teams of lawyers, accountants and assorted experts engaged in a bitter struggle to gain control of an Irish property development company, united only in the apparent belief that the development of property in Ireland over the next decade would be a lucrative business. Furthermore, each side confidently outlined their expectations as to the performance of the market over that period and invited the Court to decide this case by accepting one or other view of the likely profitability of a receiver controlled work out of the existing McInerney group land bank. It might be observed that the prediction of the future development of the property market in Ireland is something that defeated policy makers and experienced developers and lending institutions over the past decade and brought the latter two groups to financial ruin, and the companies to their present difficult and unhappy state.

4. The McInerney group was, it was said, a very successful development company with a long history of development in Ireland, specialising in traditional suburban homes in established residential areas. It was also said that it did not become involved in developments in Ireland of a more speculative nature, such as apartments in remote suburbs or large housing estates in more rural towns. Even so, the pace of the market downturn, when it arrived, surprised the McInerney group, as it did others. The value of the group’s assets dropped precipitously until it was clear that it was effectively insolvent. The McInerney group identified both the need to seek outside investment and a reduction in its debt to the banking syndicate which, by mid 2010, stood at something slightly in excess of €110 million. It retained Goldman Sachs to seek an investor and entered into discussions with the banks. Eventually a U.S. firm specialising in investments in distressed assets, Oaktree Capital Management L.P. (hereinafter referred to as “Oaktree”), emerged as a potential investor if the group’s banking arrangements could be restructured. The McInerney group entered discussions with its bankers and proposed a work out model and the banking syndicate appointed IBI as its advisor in discussions of the companies’ work out model. These developments represented a commendable degree of pragmatism on both sides. There was a high degree of mutual interest in at least progressing those discussions between the banking syndicate, Oaktree and the companies. For Oaktree the investment would only become viable if the bank debt could be reduced and, importantly, the more that debt could be reduced, the more viable and valuable Oaktree’s investment would then become. On the other hand, the banks had an interest in ensuring as significant an investment from Oaktree as possible so as to make the business viable and thus ensure the likely payment of the interest on the written-down debt and the ultimate repayment of the debt. This involved a significant degree of engagement by the banks’ advisors (IBI) with the companies and Oaktree in respect of the companies’ business plan. The familiarity of all the parties with the recovery prospects of the companies, and the manner in which that could be calculated, becomes relevant to an issue that occupied much of this appeal.

5. However, difficulties emerged in the early part of August, 2010. Two of the members of the banking syndicate, Bank of Ireland and Anglo Irish Bank, are so-called “NAMA banks” in that they are participants in the NAMA scheme. On the 5th August, 2010, McInerney group representatives were invited to attend a meeting at the Bank of Ireland and were informed that, arising from certain procedures and requirements which the participating institutions were obliged to follow and to comply with under the National Asset Management Agency Act 2009, and following, it appears, consultation with and instruction from NAMA, the banking syndicate would not advance €0.5 million as standby working capital to the McInerney group, had cancelled its overdraft facility, and had implemented what was described as a 100% cash sweep. A cash sweep means that any available cash is taken by the bank on foot of its security and applied in reduction of the borrower’s loans. This was a process which would have led immediately and irreversibly to the collapse of the companies. Accordingly, an application was made for the appointment of an examiner.

6. It is now a statutory requirement that on the appointment of an examiner, the petitioning company supply an independent accountant’s report as to the potential viability of the company the subject of the examinership. In this case, the banking syndicate vigorously opposed the appointment of the examiner. This gave rise to the first judgment of Clarke, J. delivered on the 24th of September, 2010.

7. The key issue on the application to appoint an examiner was the potential viability of the group if a scheme of arrangement was put in place. The negotiations between Oaktree and IBI, on behalf of the banks, had reached the point where Oaktree was prepared to offer an investment of €40 million to the group as a whole (of which it should be said only €10 million was to be applied in Ireland) in circumstances in which the banks would accept a write-down of their debt to €50 million, and, if certain contingencies occurred, to €60 million. Interest would be paid on the written-down amount over the lifetime of the work out anticipated to be in the region of ten years. One of the potential routes to survival for the company identified on the examinership application was, it was suggested, that such a scheme would be put into operation, not, as the negotiations had originally envisaged, by way of a voluntary agreement between the parties, but rather pursuant to the examinership process and with the benefits that attach to such a process. Significantly, and perhaps fatefully, the banking syndicate responded to this proposal by informing the companies, Oaktree, and ultimately the Court, that there were no circumstances in which the banking syndicate would become lenders to the companies proposed to be restructured pursuant to an examinership.

8. For the purposes of this appeal it is important to note that the negotiations during the summer of 2010, and the debate before the High Court on the question of the examinership, occurred in the context of a business plan put forward by the McInerney group showing cash flows over a ten year period and an ultimate return of between €50 and €60 million to the banks together with interest on that sum over the period of the work out. For the purposes of the hearing in relation to the appointment of the examiner, the banking syndicate took the stance of accepting the assumptions which underlay the companies’ plan and made a calculation which suggested that under a receivership controlled work out, the banks could recover over a ten year period something to the order of €90 million which, discounted to present values, appeared to be something in the order of €60 million. This exercise was utilised in part to explain why the banks were not willing to accept the proposal made by the group and Oaktree and why the banks wished to appoint a receiver. Ultimately, the Court came to the conclusion that there was sufficient information to suggest there was a realistic prospect of survival if a new lender could be secured. In particular, the Court recorded its conclusion that the McInerney group business plan represented a realistic approach, even though the Court acknowledged that no one could predict what the Irish house construction business was going to look like over the next three to five years. There was, however, enough to justify the examinership process, although the success of that process would depend on the ability to construct a viable scheme. Accordingly, the Court confirmed the appointment of Mr. O’Riordan as the examiner.

9. In due course the examiner conducted further negotiations and investigations and was able to propose a scheme of arrangement to the Court. On the 20th and 21st December, 2010, the Court heard the companies’ application to confirm the scheme of arrangement pursuant to s.24(3) of the Act of 1990. This application was also resisted, again with considerable vigour, by the banking syndicate.

10. On the 3rd December, 2010, in advance of the hearing the examiner had delivered his report to the Court. Under the scheme of arrangement he proposed, the companies had not secured an alternative lender. However Oaktree had agreed to pay €25 million in extinguishment of the banks’ €110 million debt. The examiner had retained Lisney to advise as to the current market value of the secured property. Lisney had advised that the property had a value of €20 million if sold in one lot within six months; €23 million if sold within three lots in the same time period; and €30 million if sold on an unrestricted time period. These figures were present values. The examiner then turned to the position of the banking syndicate. He referred to the affidavit of Mr. Murray of the 7th September opposing the appointment of the examiner which had suggested that the banking syndicate could achieve a return of €90 million if it appointed a receiver to work out the debt of the companies over an extended period. The examiner pointed out that, despite repeated requests, the banks had not furnished to him the calculations underpinning that figure. Accordingly, he had been forced to construct his own calculation on the information disclosed by Mr. Murray, namely that the banks had been working from projections and assumptions provided to them by the companies in the summer of 2010 and “showing the number of units that may be sold, the average selling price which may be achieved, and construction costs”. He was able by this method to show how the figure of €90 million had been arrived at and then advised the Court that he considered that that figure was fundamentally flawed. Ultimately he concluded that he was firmly of the opinion that the proposal involved “no unfair prejudice to the banking syndicate”.

11. On the 13th December, 2010, the banks delivered a number of affidavits in response to the examiner’s application for approval of the scheme of arrangement. At the centre of these was a detailed analysis provided by the proposed receiver, Mr. Kieran Wallace of KPMG, of the likely outcome of what he described as a receiver controlled work out. Mr. Wallace also set out his experience in the field of receivership of property companies which, as might be expected, has been a flourishing business in recent years. That calculation followed the format which had been anticipated by the examiner but now calculated the outturn of a receivership over an eleven year period at €75 million, discounted to €50 million in present values. Mr. Wallace also expressed the view that this was a conservative analysis and a greater return was possible. The KPMG/Wallace analysis had in turn been reviewed by both Farrell Grant Sparks, as independent accountants, and IBI. On this basis the banking syndicate contended that the figure of €25 million proposed for the bank debt was unfairly prejudicial to the bank creditors. The companies and the examiner responded on the 15th December, 2010. On the 20th and 21st December, the confirmation of the hearing proceeded with commendable speed, and the judge delivered a comprehensive judgment on the 10th January, 2011 (hereinafter referred to as “the first confirmation judgment”).

12. In essence, the issue on the confirmation hearing was whether the proposal was unfairly prejudicial to the banks. In this regard the judge adopted a test with which the parties agreed. He considered (at para. 4.3) that “it would require exceptional circumstances before a court could approve a scheme of arrangement where secured creditors could be shown to be worse off under the scheme than under the alternative methods by which the value of the secured creditors’ security could be realised”. At other points in his judgment he described this test as being one of whether the secured creditors would be “materially” worse off than under any alternative process. He also pointed out that although it was possible to conceive of circumstances where a Court would exceptionally approve a scheme in which a creditor received something less than he or she might obtain under an alternative scenario, there was nevertheless a comparative aspect to the assessment of unfair prejudice. Thus, if there was a significant disparity between the treatment afforded to one creditor class and the treatment accorded to another, then that in itself might amount to unfair prejudice. The judge pointed out that under this proposal, as under many if not all examinership proposals, the unsecured creditors would be paid an amount which was calculated as being more than that which they would receive under a liquidation. He suggested that if such a proposal nevertheless required that another class of creditors (in this case the secured creditors) receive something less than they would receive under receivership or liquidation, then that would by itself be a reason to conclude that there was unfair prejudice to the creditors, unless the disparity was justified by strong reasons. This approach was not contested on this appeal.

13. In the case of unsecured creditors the calculation of whether or not they are being unfairly prejudiced by a proposed scheme of arrangement should be relatively straightforward. The only alternative course for such an unsecured creditor is to seek the liquidation of the company. It is normally possible to calculate a return on liquidation. While there may be some room for debate about values, it should be possible to show relatively easily whether or not a proposal would involve the unsecured creditor doing better than he or she would on the liquidation. However in the case of secured creditors, the position is not so simple. By very definition a secured creditor has options which are not open to the unsecured creditor. He or she is not limited to the price that can be obtained on an immediate liquidation sale. The ability to appoint a receiver means that the creditor has the option of managing the business for some time, a deferred sale of whole or part, or some combination of these approaches depending on what seems most profitable. It is therefore necessary to show that a secured creditor is doing better under the proposal, or at least is not doing materially worse, than he or she would do under any of the alternative arrangements that would be open to a secured creditor. In this case, this led to a focus on the receiver controlled work out model. The confirmation hearing before the judge involved therefore a lengthy, complex and contentious dispute as to the plausibility of the recovery anticipated by the banks under this model.

14. The companies and the examiner made five specific criticisms of the receiver’s calculations. First, it was said that the receiver had failed to account for the phenomenon that the market would demand a lower price from a receiver than from a company which was trading normally. Second, it was asserted that the receiver would not be able to construct the houses as cheaply as he had calculated. Initially it was alleged that he would have to pay a contractor and thus must allow for a contractor’s margin. If, however, as the receiver maintained, the work would be carried out under the supervision of the receiver’s staff, then it was asserted, that he would require more staff to carry out such a project than had been shown and costed for in his proposals. Third, it was suggested that the proposed receiver had wrongly included a figure of €22 million as part of his calculation in respect of the anticipated return from the model, under the heading “Release of Work in Progress”. Fourth, it was argued that the property was at risk of rezoning. Accordingly it was said the receiver would not be able to develop all the properties contemplated by his model. Finally, the companies and the examiner said that a deep discount should be applied to the figure for recovery under the model to take account of the significant risk involved in bringing such a project to completion, although it should be said that the companies and the examiner differed as to the amount. Ultimately it was suggested that on a best case scenario the receivership model would only produce €18.5 million in present values, but could produce as little as €11.9 million and, on some versions, the receivership model would, it was said, result in a loss. The figures would also have to be discounted to present values. In this instance, a discount rate of 10%, for example, would produce figures of €8.9 million and minus €7.9 million respectively. On that basis it was contended that the proposal was not unfairly prejudicial, notwithstanding the calculations made by the banking syndicate as to the likely outturn of the receiver controlled work out model.

15. This debate posed considerable difficulties for the High Court judge, conducted, as it was, under considerable pressure of time and involving rival desktop calculations which varied wildly in their outcome. The judge referred to the fact that there had been no attempt made by the companies or the examiner to cross-examine the witnesses on behalf of the banks. He referred to an almost contemporaneous decision of the Supreme Court in Boliden Tara Mines v. Cosgrove [2010] IESC 62, which had been delivered on the 21st December, 2010, and which emphasised the importance of cross-examination when two conflicting versions of facts were deposed to on affidavit. He considered the arguments that had been advanced on either side as set out in affidavits and in exhibited reports, and as supplemented by counsel’s observations and information provided on their instructions. It is plain that he considered this to be a very unsatisfactory process. Ultimately he considered that, in the absence of cross-examination, he could do no more than conclude that the banks had put forward a credible case and that the criticisms made had not fatally wounded the banks’ case in any regard. He also considered the overall context of the proposal and, in particular, the significant disparity between what had been envisaged on the application to appoint an examiner and what was now proposed. Ultimately, having concluded that the banks’ analysis was credible and had not been undermined, he concluded that it followed that there was a significant disparity between the banks’ anticipated return and what was proposed under the scheme of arrangement. Accordingly, he concluded that the scheme was unfairly prejudicial to the banks.

16. However, the judge did not refuse to confirm the scheme on the day he delivered judgment as to do so would have removed the companies from the protection of the examinership which might in turn have precluded any appeal. Rather, because of the complexity of the matter, he allowed the parties time to consider the judgment and what steps might be taken thereafter, and accordingly he proposed making a formal order of refusal as of the 14th January, 2011. However, in the short interval provided, the companies and the examiner sought to reopen the hearing on the basis that they asserted there was now credible information that both the Anglo and the Bank of Ireland loans to the companies were to be transferred immediately to NAMA. If so, it was said, this radically altered the scenario being considered by the Court which had concentrated upon the returns likely to be generated by the receivership model, which would be irrelevant if the NAMA acquisition proceeded (at least in respect of the NAMA banks), and it was argued that it was thus necessary to reopen the entire matter.

17. The High Court judge then had to consider whether or not he would reopen the hearing. He delivered his third judgment on the 21st January, 2011. He adopted the analysis set out in the decision of the U.K. Court of Appeal in Paulin v. Paulin [2010] 1 W.L.R. 1057 on the circumstances in which a court can reopen a hearing after delivery of judgment, and concluded that he could do so in exceptional circumstances. He observed that the hearing had proceeded on the assumption that the banks were going to pursue a ten to eleven year receivership work out model and that the position now was that it was highly likely, indeed almost certain, that NAMA would acquire the loans in the very near future. He recorded his own view that the absence of any reference by the banking syndicate in their affidavits of December, 2010 to the prospect of NAMA acquiring the loans had led him to assume that that eventuality was no longer a significant possibility. He concluded therefore that the true position in relation to NAMA was justification for reopening the hearing. However, he ruled that this would not involve an entire hearing. The conclusions in relation to the confirmation hearing must stand and the only issue to be addressed in the further hearing was the impact that the likelihood of NAMA acquiring the Bank of Ireland and Anglo loans would have on the question of unfair prejudice.

18. Thus it was that the High Court judge had to deliver a fourth judgment, which he did on the on the 17th February, 2011 (hereinafter “the reopened judgment”). NAMA held a watching brief throughout the proceedings but did not participate at any stage and did not participate in this hearing. There may have been good reasons for this approach but the lack of information from NAMA was certainly unhelpful in providing assistance to the Court in resolving the issue. Nor was there evidence adduced by the parties as to the approach NAMA would take as to the valuation of loans on acquisition. In the event, having considered what evidence was available, the judge concluded that if NAMA did indeed acquire the loans, it would do so at a price very similar to that implied by the Oaktree offer, and in this eventuality the banks would not be unfairly prejudiced if the scheme of arrangement was approved. However, he concluded that the position in relation to KBC was somewhat different. It was not a part of NAMA, and accordingly NAMA could not compulsorily acquire its loans. Therefore the judge concluded that NAMA would probably take the course which had been proposed by Anglo and Bank of Ireland, namely that of seeking the work out of the loans over a protracted period since, on the basis of the reasoning contained in the first confirmation judgment, that was the most economically advantageous course and was a credible scenario. In that circumstance, KBC would be a partner in the receivership work out model; would stand to benefit from it; and accordingly would continue to be unfairly prejudiced by the scheme of arrangement if it were approved. Since the scheme could not be confirmed if it was unfairly prejudicial to any creditor, and on this scenario it was unfairly prejudicial to KBC, the original decision would stand.

19. It was perhaps predictable that, given the central role the absence of cross-examination played in the reasoning in the first confirmation decision, the companies would seek to cross-examine all the banks’ deponents in the second confirmation hearing. However, the trial judge expressed the view that the issue which remained to be determined did not of itself require cross-examination. He did direct that the witnesses be available should it transpire that any particular point of controversy required to be resolved by cross-examination. In the event he concluded that he was able to decide the issue without the necessity of requiring cross-examination of any of the witnesses.

20. Once again it appeared that the Court had refused to confirm the scheme of arrangement. However there was yet a further twist in the tale. Before the formal order was drawn up, there was another development: Oaktree made an improved offer to the examiner. Although it had been adamant that the €25 million available to be paid to the banks was its final offer, and although the examiner had recommended the scheme on that understanding, Oaktree now indicated that it was willing to increase its offer by an amount of €6.6 million which would be paid to KBC alone. The effect of this would be that KBC would receive the same amount as it would anticipate receiving under the receivership work out model, i.e. effectively 26.5 % of €50 million. Anglo and Bank of Ireland would, however, continue to receive the lesser amount implied in the offer, since the Court had determined that they would suffer no unfair prejudice at that figure because of the probability of the acquisition by NAMA.

21. This development necessitated yet one further hearing and further argument. In a fifth judgment delivered ex tempore on the 21st February, 2011, the judge concluded that Oaktree was effectively a party to the proceedings and that the renewed offer was an abuse of the process akin to that contemplated by the decision in Henderson v. Henderson (1843) 3 Hare 100, and as applied recently by this Court in the context of an examinership application in relation to another Irish property development company: In re Vantive Holdings [2009] IESC 69, (Unreported, Supreme Court, 14th October, 2009). The renewed offer could and should have been advanced in the earlier hearing and to permit Oaktree now to advance a fresh offer in the light of the determination of the Court would, in the High Court’s judgment, amount to an abuse of the process of the Court and should not be permitted. Accordingly, the Court did not consider the merits of the proposal and the order refusing to confirm the scheme of arrangement was finally made.

22. Against that final outcome the companies have appealed to this Court. The banks for their part have cross-appealed two parts of the High Court judge’s reasoning during this lengthy process: the decision to reopen the first confirmation hearing; and the Court’s subsequent conclusion that the probable acquisition by NAMA meant that the NAMA banks would not suffer unfair prejudice if the scheme was approved. The examiner has not appealed the High Court order but has appeared on this appeal and made certain limited, though helpful, observations .

23. It appears to me that, rather than to proceed to consider the companies’ appeal and the banks’ cross appeal in turn, the most useful course is to proceed chronologically and consider the arguments made by each side in respect of each of the judgments. On this appeal it appears that the issues which the Court has to decide are the following:

      i) What is the test for the determination of the existence of unfair prejudice pursuant to s.24 of the Act of 1990?

      ii) On whom does the onus lie of establishing unfair prejudice or its absence?

      iii) Was the Court correct in the first confirmation judgment to conclude that the banks did suffer unfair prejudice on the information before the Courts?

      iv) If so, was the Court correct to reopen the issue of unfair prejudice?

      v) If so, was it correct to conclude that (a) Anglo and Bank of Ireland would not suffer unfair prejudice; but (b) KBC would?

      vi) Was the Court correct to refuse to reopen the decision in the light of the improved Oaktree offer?

24. The companies also made two points of more general application. They argued on this appeal that the High Court was wrong to give particular and decisive emphasis to the absence of cross-examination. Furthermore, the companies argued that the High Court failed to have sufficient regard to the views of the examiner who was an independent officer appointed by the Court. I will deal with these matters in the course of the judgment.

The Test for Unfair Prejudice.
25. Section 24 provides, so far as is relevant, as follows:-

      “(3) At a hearing under subsection (1) the court may, as it thinks proper, subject to the provisions of this section and section 25, confirm subject to modifications, or refuse to confirm the proposals.

      (4) The court shall not confirm any proposals –


        (a) unless at least one class of members and one class of creditors whose interest or claims would be impaired by implementation of the proposals had accepted the proposals, or

        (b) if the sole or primary purpose of the proposals is the avoidance of payment of tax due, or

        (c) unless the court is satisfied that –

            i) the proposals are fair and equitable in relation to any class of member or members or creditors that has not accepted the proposals on whose interests or claims would be impaired by implementation, and

            ii) the proposals are not unfairly prejudicial to the interests of any interested party.”

26. So far as is material to this appeal, the relevant provision can be reduced to this: the Court shall not confirm any proposals unless it is satisfied that the proposals are not unfairly prejudicial to the interests of any interested party.

27. The immediate context of s.24 does not itself provide any insight into what is, or is not, unfair prejudice. However this section, like any other piece of legislation, requires to be set in the context of the Act as a whole. Examinership was first introduced into Irish law by the provisions of the Act of 1990. The scheme has been refined since then, but the essential architecture and rationale of the procedure remains intact. Prior to the Act of 1990, when a company got into difficulties, the possible options open were limited and crude. A company which might have had some realistic prospect of survival if agreement could be reached with its creditors was at the mercy of the most obdurate and trigger-happy of its creditors. The process of liquidation provided for the orderly running down of the business of the company, but at a significant cost in direct terms in the cost of the liquidation, and also indirectly in the reduced value that was inevitably achieved in respect of the companies’ assets. It was recognised that these costs created the potential for the process which might be beneficial to all parties. Creditors could be asked to accept a payment of a very significant written-down debt which would still be more than they could expect to achieve after a perhaps lengthy and costly liquidation. The company that was thus restructured might be attractive to an investor who could perhaps be encouraged to pay more to become an investor in a company as a going concern than he or she would pay to acquire the assets after liquidation. This might provide monies to pay the creditors the written-down amount, and to refloat the restructured company. In theory, therefore, if the problems of the company were not prohibitively severe, the process could provide benefits to all interested parties.

28. The conduct of a successful examinership is not easy. The essential issue in every case is the amount of investment that may be secured for a restructured company and the terms of any possible restructuring. Any investor will value a company by reference to the possible value at which the assets may be acquired in a break up. There is only a limited amount more that an investor may pay. The business of the examiner may be to locate an investor, or ideally a number of potential investors, and shuttle between the parties and seek to negotiate a deal which provides benefits to all parties. The essential structure of a successful examinership should, however, be one where the good sense of the proposal should be obvious, but where the examiner has the significant additional weapon that the Court can force a reluctant creditor to cooperate and write-down his or her debt, if the Court is persuaded that the proposal is fair or, perhaps more accurately, if it is satisfied that the proposal is not unfairly prejudicial.

29. Accordingly, the examinership process is not intended to operate to secure the survival of a company at all costs. Instead the only examinerships which can be approved are those which result in proposals broadly beneficial to all reasonable parties. It is telling that s.24 of the Act of 1990 provides in very clear terms that the Court cannot approve a scheme of arrangement unless it is satisfied that it is not unfairly prejudicial to any interested party. However the clarity of the structure of the section is in contrast to the lack of specificity of the concept of “unfair prejudice”. It might be said that the Act contemplates necessary prejudice to creditors, and only prohibits prejudice which is unfair. However, it may be more correct to conceive of any scheme as being prejudicial since it requires a creditor to accept a lesser amount than is, in theory, his or her legal entitlement. For example in this case the scheme was prejudicial in that it required creditors to accept a written down amount for their debt. But it was said to be unfairly prejudicial because that was less than the banks could obtain on a receivership. The question in any particular case is whether that particular prejudice is unfair. The essential flexibility of the test appears deliberate. It is very unlikely that a comprehensive definition of the circumstances of when a proposal would be unfair could be attempted, or indeed would be wise. The fact that any proposed scheme must receive the approval of the Court means that there will be a hearing. The Act of 1990 appears to invite a court to exercise its general sense of whether, in the round, any particular proposal is unfair or unfairly prejudicial to any interested party, subject to the significant qualification that the test is posed in the negative: the Court cannot confirm the scheme unless it is satisfied the proposals are not unfairly prejudicial to any interested party.

30. In this case, the trial judge’s approach to the question was to view the scheme against the likely return to affected creditors under the likely alternative in the event that there was no examinership, and no successful scheme. I agree that that is a vital test. Furthermore, as the trial judge recognised, there may well be circumstances where a creditor may be required to accept less than would be obtained in such circumstances on liquidation or a receivership, but those circumstances would normally require weighty justification. However, as this case illustrates, there may remain considerable difficulty in determining the value which a creditor, and in particular a secured creditor, might otherwise obtain, by reference to which the proposal can be judged.

Onus of Proof
31. Much argument in this appeal centred on the question of the onus of proof on the question of unfair prejudice. This was perhaps inevitable given the findings of the trial judge on the criticisms made by the companies of the receivership model. The trial judge did not resolve those criticisms and instead considered that all he could say was that the receivership model’s projected returns were credible. Accordingly it seemed to follow, that if the onus had been on the banks to show positively that there would be unfair prejudice, then the finding of mere credibility of the returns would be insufficient, and arguably the objection would fail, and the proposal would be confirmed. In this regard the companies’ argument relied heavily on the provisions of s.25 of the Act of 1990. It was pointed out that s.24(3) is said to be subject to sections 24 and 25. It was argued that once an objection was made under s.25, whether it related to irregularity or unfair prejudice, the onus of establishing that matter lay on the objector. If so, then since s.24 and s.25 had, it was said, to be read together, this placed the onus on the objector to establish unfair prejudice.

32. This argument was central in this appeal because of the way in which the confirmation hearing had proceeded. The onus of proof is important in every case, but it only becomes decisive when a court cannot be satisfied one way or another on a particular issue. In those circumstances the party bearing the onus must fail. However, I am not sure that this is an entirely useful analysis to apply in the context of an examinership issue. The issue is not only an adversarial one: the Court is conducting a process in the public interest and will, for example, have regard to the interests of parties such as employees who may not be represented before it. It should be noted however that the argument advanced by the companies, if correct, would give rise to some anomalies. If a creditor lacked the means to formally object, then on the companies’ argument, the examiner would still have to bear the burden of satisfying the Court that the proposal was not unfairly prejudicial to such a creditor. On the other hand if the creditor felt so strongly that he or she did formally object, but lacked the resources to do so effectively, then the logic of the companies’ arguments would be that the onus would nevertheless have shifted to him or her and the Court should proceed to approve the scheme on the basis that the objector had failed to discharge the onus of proof of unfairness.

33. In my view, the words of the Act of 1990 are clear, and are fatal to the companies’ argument. Whatever approach is taken to s.25, and whether or not the issue is considered in terms of the onus of proof, the wording of s.24 remains operative. The Court is specifically prohibited from approving a scheme unless it is satisfied that it is not unfairly prejudicial to any creditor. If the end point of the argument between a company, the examiner and a creditor is that the Court cannot say that it is satisfied that the proposal is not unfairly prejudicial to any interested party, then it cannot approve the scheme, whether or not that party has objected or appeared at the hearing. In practical terms it follows that the person who seeks to have a scheme approved will seek to persuade the Court that the scheme is not unfairly prejudicial, and in that sense can be said to bear the burden of proof. However in my view, analysing the issue in these terms at best adds nothing to the clear words of s.24 and may on occasion be misleading. In the event I must reject the companies’ argument that the onus of proof of unfair prejudice lies on the banks.

The First Confirmation Hearing
34. As will become apparent, much of the dispute on this appeal centred on the first confirmation hearing and, in particular (although somewhat surprisingly), on the treatment of the work in progress (“W.I.P.”) issue. However, the companies also made complaints of a general nature. They argued that the trial judge should not have treated the absence of cross-examination as meaning that he could not resolve the competing arguments as to the likely outcome of the receiver controlled model. It was argued that he ought to have adopted the approach which he had outlined at para. 5.2 of his third judgment of the 21st January, 2011:

      “It is important to emphasise that I was not, in the Principal [recte] Judgment, dealing with certainties. I was dealing with a possible course of future events. The Banking Syndicate did not give an undertaking to follow the receivership model. There was not certainty that the model would, therefore, be followed. However, the underlying assumption behind the Principal Judgment was that there was a significant degree of likelihood that the model would, in fact, be followed. In dealing with the future course of events in any court proceedings a court can do no more than look at the possibilities and assess the likelihood of them occurring. Such decisions are not conducted on the balance of probabilities, for that test is relevant to deciding whether facts actually occurred rather than estimating the likely course of future events. In the case of the likely course of future events, the court must form any assessment which it is obliged to make by looking at the likelihood of various events occurring and, where relevant, considering all possibilities, weighted if appropriate for the chances of them actually happening and, thus, reaching an overall fair and just assessment of the likely course of such events.”
35. It was argued that this was the correct way to approach the questions related to the future course of the receiver controlled work out model, but was not in fact the approach the trial judge had adopted in his principal judgment. Furthermore, it was argued that cross-examination was unlikely to be helpful in resolving such issues. A court must decide which of the accounts is more persuasive on the plausibility of the arguments made and, while cross-examination might assist that process, ultimately a court must still come to a conclusion on the available materials. It was also argued that, as a practical matter, s.24 hearings are required to be conducted expeditiously. Under s.5(1) an examinership lasts for an initial period of 70 days, which under s.18 can be extended by another 30 days, together with such period as is necessary to permit the s.24 hearing. The whole concept of the examinership was thus for a short ceasefire period during which the prospect of survival could be investigated. If cross-examination of witnesses was to become routine, then an s.24 hearing would be converted into its own full-blown action with the possibility of considerable delay, particularly since such an approach would necessarily import the requirements of pre-trial procedures such as discovery. It was argued such an approach would not be consistent with either the structure or the object of the legislation and that this reinforced the companies’ contention that the Court was obliged to come to some conclusion on the available materials. Finally, it was also argued in this regard that the Court ought to have paid greater regard to the views of the examiner, who was an independent officer of the Court and who was proposing the scheme to the Court.

The Work in Progress (“W.I.P.”) Issue
36. Moving from these general observations to the particular case of the treatment of W.I.P., it was argued on behalf of the companies that it was demonstrable that even on the competing affidavits and reports that there was a clear and glaring error in the calculations made on behalf of the proposed receiver which should have led the Court to reject the projected returns on the receivership controlled model. It is common case that the receivership controlled model contained in its calculations of the sum of the monies to be achieved, an amount described as “WIP release”. W.I.P. refers to work in progress and here, in practical terms, refers to the work carried out on building sites from the initial preparation and obtaining of planning permission, up to and including the completion of houses as yet unsold. It was argued by the companies that it was simply wrong to include a figure for release of W.I.P., which by definition was something which was realised, if at all, in the sale price of the completed houses. It became clear, however, that the issue was not so much the question of including a figure for release of the W.I.P. per se, but rather whether the calculation of costs for construction of the homes to be built over the lifetime of the model was arrived at on the basis of the average cost of construction of houses, or merely the amount that remained to be expended on the McInerney group lands, which necessarily included some developments which would be partially completed or almost completed. If the former, the calculation of profits would fail to capture all of the returns possible if the model performed as anticipated and it would be correct in principle to make an allowance for the expenditure already incurred under the heading ‘W.I.P. Release’. If, however, the figure for construction costs was calculated only on the basis of future costs to be incurred, then there could be no basis for including a W.I.P. release figure. The companies sought to show that this was indeed what had occurred, and pointed to the description in the receiver’s spreadsheet which read “construction costs to be incurred”. (emphasis added)

37. It appears clear from the evidence to which we referred that the figure for future construction costs was obtained from the banking syndicate’s estate agents, DTZ Sherry Fitzgerald. It was also apparent from the DTZ Sherry Fitzgerald report that it had conducted an exercise of calculating the future cost of completion of the existing unfinished building. If this was the figure included in the receiver’s calculations, then there was a clear error in including the W.I.P. release figure of approximately €22 million. If this adjustment alone was disallowed, the prospective return would be €58 million, and discounted to present values would be something like €35 million. This in itself would not be sufficient to disprove unfair prejudice, but it was said that it would not require very much further adjustment before the present value figure would be close to or below the figure of €25 million included in the Oaktree proposal. In any event, if the companies could establish such a glaring error in the banks’ calculations, then that would substantially undermine the credibility of the overall calculation. Accordingly, the W.I.P. issue became a significant focus of argument on the appeal.

38. The argument on this issue proceeded however in an unsatisfactory way. The precise point made by the companies had not been the subject of detailed analysis in the High Court. However the companies contended that this was not their fault, but rather a further error in the way the High Court hearing had proceeded. It was said that it was only when counsel on behalf of the banks replied to the companies’ observation, that it became clear that the banks maintained that the construction cost figure was an average cost figure and the W.I.P. release figure was therefore appropriate. The companies said they were taken by surprise and were not able to respond and point out what they now alleged to be the case, namely that the figure was derived from the DTZ Sherry Fitzgerald calculation of future costs to completion alone. Furthermore, they argued that it was particularly inappropriate for the Court on the one hand to reject their overall argument on the basis that the companies had not sought to cross-examine the witnesses who had sworn affidavits on behalf of the banks, while at the same time accepting from the banks’ counsel assertions on instructions as to certain matters which had not even been addressed in evidence. The spreadsheet provided by the prospective receiver described the cost of construction as “costs to be incurred”. That, the companies argued, should have been taken at face value and the banks should not have been able to provide, through counsel, a different explanation. If so, the W.I.P. allowance was wrong and had to be discounted.

39. Counsel for the banks responded that this argument was wholly incorrect. Furthermore it ignored the fact that after receipt of the replying affidavit on the 15th December, 2010, and prior to the hearing, the solicitors for the banking syndicate had written to the companies’ solicitors and the solicitors for the examiner on the following day informing them that the line on the spreadsheet should read “costs incurred/to be incurred”. That correspondence was acknowledged but the amendment was not commented upon, responded to or challenged in any way.

40. I must say that I share the trial judge’s evident sense of frustration with the manner in which this issue (and the other challenges to the receivership calculations) were presented by the parties and with his conclusion that it was not possible to resolve the debate with any degree of assurance on the material presented. However I do not think that it was merely, or at all, the absence of cross-examination which leads to this conclusion.

41. The W.I.P. issue occupied an inordinate amount of time both in this Court and the High Court (although presented in a somewhat different way there). I observe, however, that the issue is not one of opinion or some complex accounting issue upon which experts differ. Rather, it was in essence a matter of calculation and ultimately a matter of fact as to what the receiver had allowed for in calculating the cost of construction, something which ought to have been detectable from the calculations made. There were three highly resourced teams of lawyers, accountants and financial advisors represented at the hearing. All those teams had in one way or another been engaged for some considerable time with the question of how much could be obtained from developing the McInerney group land and partly completed developments over a ten or eleven year period. I find it difficult to believe that they were all not fully familiar with the calculations involved and would be able to know (on the part of the banks) or at least be extremely confident as to (on the part of the companies and perhaps the examiner) how the receiver’s figures for construction costs were calculated. Yet this Court was presented with two starkly contradictory accounts, one of which had to be wrong.

42. The stark nature of the dispute emerges when it is placed in its context. While it was not put just in this way, it seems that if the companies’ case is correct, then it must follow inescapably that the receiver’s team in KPMG made a schoolchild’s error in adding in the €22 million figure for W.I.P. release into their calculations, an error which was then not noticed by either Farrell Grant Sparks or IBI or, indeed, the client banks. Furthermore once they became aware of the error, it must follow, on the companies case, that all these parties misrepresented the nature of the calculation to the companies and examiner through the solicitor’s letter of the 16th December, 2010, and then gave instructions to counsel to assert a false position to the High Court and to maintain that position in this Court.

43. I would be very reluctant to draw such sweeping and damning conclusions on the basis of an argument advanced for the first time in this Court, particularly when the matter had not been explored in the High Court. The companies’ explanation for this – that the true issue only emerged when counsel for the banks responded and the companies were taken by surprise – is something which, on the material available to me, I find somewhat implausible. Furthermore on closer analysis of the underlying material, I am, to put it at its lowest, unpersuaded by the companies’ argument that the proposed receiver was not entitled to include any figure for W.I.P. release in his calculations of the outturn of a receiver controlled work out. It is noteworthy that the error which is now alleged is the inclusion of an amount for W.I.P., rather than any argument as to the precise amount.

44. There is no doubt that the calculation presented by the banks could have been much clearer and accompanied by a narrative which might have explained the figures in more detail. I also have some doubts both about the methodology which adds one figure for W.I.P. release to a profit and loss figure, and as to the manner in which the W.I.P. figure is calculated. Furthermore, the description in the banks’ spreadsheet of the figure for construction costs as being a figure for “costs to be incurred” was simply wrong and misleading on the banks’ case, and the correction (if that is what it was) of that description in the letter of the 16th December, 2010, was much less forthcoming than it should have been. If all of this had emerged for the first time in the calculations presented on the 13th December, and the explanation in relation to the cost of construction had been given for the first time in counsel’s reply on the 21st December, then there might have been more force to the complaints now made by the companies. However, here, as indeed throughout this case, a broader perspective is of assistance.

45. It appears to me, having considered all the materials submitted, that the calculation of what could be achieved by a work out of the McInerney group land bank and development sites was neither novel on the 13th December, nor particularly complex. The development sites were known and, indeed, the degree of advancement of those sites was also something of which all the parties were aware. That aspect of the calculation was therefore both known and finite. The issues were to determine how many houses could be developed on that land over a ten or eleven year period; the anticipated cost of doing so; and the anticipated selling prices. From those calculations would emerge the likely return, which would have to be discounted by the fact that the return was being achieved over a protracted period and, indeed, the risk involved in the venture. Undoubtedly there could be considerable argument about any one of those variables, but for present purposes the important thing is that the variables were known, identified and understood, and the basic calculation was known and agreed. Thus, there was in truth a relatively simple spreadsheet which could have been prepared and used by all the parties and into which could have been fed different figures on different assumptions to project anticipated returns. There was nothing complex in this, especially for the range of advisors involved in this case.

46. It is significant in my view that this calculation was attempted first by the companies as far back as July, 2010 when they put forward their proposals for what was in effect a company controlled work out of the existing sites. The banks, when they received that proposal, engaged IBI to discuss it with the companies and to scrutinise it. It will be recalled that the companies’ calculations made at that time suggested that the banks could obtain interest repayments on their loans and a return of between €50 million and €60 million over the period of the work out. For present purposes, the significance of the calculation is that it was carried out to project a return to investors, and included a figure for W.I.P. release, indeed a figure very close to the €22million figure included by the proposed receiver in his calculations. Thus the model which was presented by the banks on the 13th December was one that had been in use for almost six months by the time that hearing commenced and had been initially prepared by the companies themselves and had included an anticipated W.I.P. release in its calculation of the return.

47. Furthermore, when the banks originally opposed the examinership they had made clear that the basis of their opposition was that they contended that a receiver controlled work out model could generate much greater return for the banks. In carrying out that calculation the banks were simply adopting the formula of the July 2010 proposal by the companies. What the banks were doing in the receivership workout model was, therefore, understood by both the companies and the examiner. Indeed the examiner was able to construct his own version of the same calculation and present his own report on the 3rd December, 2010. Significantly, that model also included a figure of €21.335 million under the heading “WIP and Accruals Previously Incurred”. It was clear, therefore, that all the relevant parties were very focussed from an early stage on this calculation, namely the likely outturn from a ten year workout. It is also clear that the calculation was not particularly complex. From the moment of the banks’ opposition to the examinership, it was known that a central issue was the somewhat artificial calculation of what the banks could hope to achieve from a receiver controlled work out based upon the assumptions and information already advanced to the banks by the companies.

48. In this context, therefore, the issue of W.I.P. release was very simple indeed. Furthermore, its interaction with the cost of construction figure was obvious. If the cost of construction was calculated as an average cost, (as the companies and receiver had done in July and December respectively) then it was not wrong to include a figure for W.I.P. release. When the proposed receiver’s figures emerged on the 13th December, I consider that it is implausible therefore that the amateur error of calculating the cost of construction as the cost yet to be incurred and at the same time including a figure for W.I.P. release was not immediately evident to the companies, if that was the fact. In a case which did not lack for lengthy affidavits and prolix reports and charge and counter charge , it is more than surprising therefore that the issue was not the subject of one further and powerful short affidavit if the point was as clear and simple as the companies now contend. In this very specific context, there is perhaps some merit, in my view, in the High Court’s observation on the lack of cross-examination. If this error had indeed been made, then it must have been obvious and, if so, it presented an irresistible issue to seek to have determined, since if the error could be demonstrated it would have had a devastating effect on the credibility of the entire calculation advanced by the proposed receiver. Failure to pursue this issue vigorously is difficult to understand if the point had the clear-cut merit which is now asserted. Finally, even if the companies were somehow taken by surprise by the banks’ position in that High Court hearing – and for the reasons set above I doubt it – I do not understand why the companies did not seek to adduce further evidence on this appeal, or why the issue was not ventilated in detail in the companies’ written submission to this Court, if it was indeed such a glaring and obvious error, which would on its own undermine the banks’ argument.

49. I have every sympathy with the trial judge, faced as he was with the rival contentions so stridently advanced. Since the issues involved questions of accountancy, there is I consider some merit in the companies’ more general argument that the Court might have obtained some assistance from the examiner who, after all, is an independent officer of the Court, and who might be best positioned to give an opinion on the appropriate accounting treatment. However, it is noteworthy, that while the examiner was highly critical of the general approach of the banks and considered that the outturn proposed by the banks was extremely ambitious, his comments on the W.I.P. issue were less forceful than one might expect, especially if the point was as clear-cut as is now alleged. In his report, exhibited through his affidavit of the 15th December, 2010, the examiner states simply that the receivership model encompassed the sales and costs of sales, and that “we cannot therefore understand the “WIP Release” line in the model, which is positive and growing year on year”, which is a rather tepid criticism if indeed a fundamental and obvious error had been made. Moreover it is clear from the examiner’s report of the 3rd of December that the examiners and his staff had a good understanding of the calculation and the circumstances in which it would be correct to include W.I.P in a projected return. In any event, the very fact that the issue was being raised by the examiner, even in this tentative way, and was addressed, if somewhat laconically in the banks’ solicitor’s letter of the 16th December, 2010, in reply, is itself evidence that this issue was being focussed upon in the run up to the s.24 hearing and did not emerge for the first time in the reply of counsel for the banks.

50. My conclusion on this issue, apart from a sense of frustration that an issue to which there was ex hypothesi a single correct answer was obscured, rather than elucidated, by prolonged, bitter and expensive engagement is that, like the High Court judge, I simply cannot have the requisite degree of assurance that such a basic error was made in the banks’ calculations. For reasons which I will address later, it may well be that the figure is somewhat optimistic, but on the information available to this Court, I am not at all satisfied by the companies’ arguments that the figure of €22 million should simply have been excluded. Nor do I consider that this issue can be avoided by suggesting that the written record supported the companies contentions and the onus was somehow on the banks to displace it. That involves putting dispositive weight on a description of “construction costs to be incurred” in a spreadsheet which the receiver had sought to alter without objection from the companies or the examiner. But the record showed that professional advisers had calculated an outturn from a receivership of 75 million which included a figure of €22 million for W.I.P. That methodology was more than plausible in this case since it had been adopted by both the companies and the examiner. The companies case was that the receivers figures were derived from DTZ Sherry Fitzgerald who had calculated the remaining cost of construction , but failed to show that this was the figure included in the receivers calculations , and had failed to take any steps to prove this single fact. In the circumstances, like the High Court judge I am unable to conclude on the written record that the evidence of the receiver is so implausible that it must be discounted.

51. The remaining issues as to the likely outturn of the receivership model can be dealt with more shortly. The companies complained that the banks overestimated the sale price because it was said consumers would demand a reduction in price on a sale from a receiver. The banks and the receiver replied that that generalisation no longer held true, particularly in the Irish property market where sales by receivers were now unhappily the norm and where it could not be said that there was any market confidence in any property development company. Similarly, the companies contended that the receiver would have to employ a contractor who would in turn require to make a profit and, accordingly, a contractor’s margin should be built into the calculations. The banks replied that the receiver, who had particular experience in work outs of property businesses, would control the contracting himself. Furthermore in many cases the same people would be carrying out the building. The companies then riposted that in that case the receivership model did not provide for enough management. The banks responded by pointing out that they were only replicating the lean management model which the companies themselves had proposed. Finally, the companies advanced the Lisney report which asserted that there was a risk of dezoning of some of the McInerney group lands. This would necessarily reduce the land available upon which permission could be obtained and houses built. The banks countered this by demonstrating that the overall number of houses to be built under the receivership model was less than that contemplated by Lisney, and thus it was unlikely that any dezoning and planning difficulties would have the impact on the calculated return that the companies asserted. In each case, like the High Court judge, I cannot conclude that the companies have demonstrated that the receiver’s calculations are wrong.

52. I do not reach this conclusion however merely on the basis that the companies did not cross-examine the banks witnesses. The statutory test is whether or not a court is satisfied that the proposal is not unfairly prejudicial to the interests of the secured creditors. In this case, the secured creditors calculated a return under a receivership work out model. That calculation must be considered plausible, not least since it is based largely on the companies own anticipated returns from a company controlled work out model. Put at its lowest, the companies’ arguments have not persuaded me that the receivership controlled model would not be adopted or, if adopted, would not have the prospect of a return significantly more than €25 million in present day terms. On this basis, the companies have failed to satisfy the Court that the proposals are not unfairly prejudicial to the secured creditors and, accordingly, the High Court was correct in concluding that it could not approve the proposals.

The Valuation of the Security
53. Again however, a broader perspective may be of assistance. There is something fundamentally implausible in the case made so vehemently by the companies, that the receivership controlled work out will generate a return of only €18 million, (or may indeed incur losses of €11 million ) when placed against the fact that the companies’ own controlled work out model (on which the receiver’s plan is faithfully based) was said to be capable of producing €60 million in return for the banks, together with interest and the prospect, presumably, of some significant return on the investment for Oaktree. Again, the whole basis of the examinership proposal was that Oaktree would be able to generate sufficient returns to allow it to pay the banks €25 million, together with the generous return on investment which its investors would expect from such a project. The fact is that both Oaktree and the company are committed to the proposition (which underpins the receiver work out model) that substantial profits can be generated from the development of these lands over a protracted period. The fact is that the receiver controlled work out model is very closely aligned with the companies’ own proposals and only one of the criticisms made by the companies of the receivership proposal was dependent upon the fact that it was a receiver rather than the company who was overseeing the work out. Even allowing for a healthy degree of scepticism of the capacity of any receivership to generate the same profits as a private enterprise, the companies’ contention that the same business could be highly profitable in the companies’ hands, but borderline loss making in the hands of a receiver, is one that has its own high hurdle of scepticism to surmount. It seems to me plausible, therefore, that a receivership with an element of development and perhaps managed sales could generate more than the €25 million which is offered at present.

54. However, I consider the parties’ almost exclusive concentration on the desktop exercise involved in assessing the viability of the receivership controlled model was itself somewhat misguided, and the extent to which it dominated the hearing was unjustified, though perhaps understandable in the light of the parties approach. The business of economic forecasting is notoriously difficult; its sole function according to J.K. Galbraith being to make astrology look respectable. This hardly requires emphasis in the specific context of the Irish property market in the second decade of the 21st century. Thus there was something more than surreal about this controversy being determined by solemn pronouncements as to the likelihood, for example, of a receivership vehicle selling ten years hence something like the quantity of houses at the prices and costs predicted by the spreadsheet, when more detailed and confident proposals now litter the floors of deserted boardrooms of once mighty property companies and banks. I consider that a concentration on the theoretical outturn of the model was all the more lopsided because the issue was not just, or even, whether the receivership model would generate the returns predicted, but more realistically, whether it could be adopted and pursued at all, or at least to the extent contemplated in the model. The banking syndicate seemed, at times, to oppose the examinership on an almost theoretical basis, namely that the receivership model could generate these predicted returns, by reference to which it was said there was unfair prejudice in being required to accept €25 million, but where there was no clear statement that the banks were necessarily committed to the receivership work out course as a matter of fact. Nor is there anything to require the banks to pursue the model. Once the examinership was defeated, there would be nothing to stop a receiver from altering his plans and selling the entire business to Oaktree or indeed anyone else. Even if the receiver did embark upon the work out model, there would be nothing to prevent him from selling off the remaining land at some point during the development cycle, and it might make economic sense to do so. Indeed, the underlying assumption upon which the receivership model was based – the fact that with finance available from the banks and a ready supply of skilled builders and professionals, it would be possible to run the development business successfully – was itself dependent on matters which, it is hoped, were temporary. However, if it transpired that the property market in Ireland did advance (an assumption, however optimistic, which appears to have been shared by everybody in this case including Oaktree), then it was possible that it would become much more difficult to keep costs down, to maintain skilled operatives and to continue the development to its conclusion. In those circumstances I consider that the Court was, and is, obliged to take some broader view of the overall value of the secured property rather than focussing exclusively on the prediction of the likely course of a ten or eleven year receivership, when there was no guarantee that the receivership would be implemented , or maintained , if commenced.

55. Unlike the unsecured creditor, a secured lender has a number of options when it seeks to realise its security. The whole concept of receivership implies a recognition of the fact that greater value may be obtained by running a business at least for some time, rather than by an immediate forced sale. In a market functioning normally, one would not expect there to be a huge disparity between the predicted present value of future returns on development and the present sale value of land, since normally developers with access to finance will compete for the land and should concede some of their expected returns to secure it. The fact that there is a significant disparity between both the receiver’s and the companies’ figures for the projected outturn of the development and, for example, the Lisney valuation of the present sale value of the property, might be thought to indicate some over optimism in the receiver’s calculations and indeed those of the companies. However on the evidence it seems at least as likely to be representative of the fact that the current market for development property is by no means normal. This is a market which on all the evidence is said to be frozen by lack of available capital, by the dominant presence of NAMA and the land bank it controls, and simple fear. In the end, however, even applying a healthy dose of scepticism to the receiver’s figures, it seems to me that the correct conclusion to draw from the evidence is that, in the absence of an examinership, a security holder, particularly one with access to capital, would appoint a receiver to these properties, would seek to develop them over a reasonable period, and in doing so would reasonably expect to achieve returns significantly in excess of €25 million in present day values. That conclusion alone suggests that to force a security holder to accept a figure of €25 million, and to forego the opportunity of seeking to secure the higher returns that might be available, is in itself to treat that security holder in an unfairly prejudicial fashion.

56. This however is only one part of the calculation. There are a number of different pointers to valuation by reference to which the €25 million figure can be assessed. Lisney’s advice to the examiner has already been noted. That suggested that the property was worth €20 million if sold in one lot over a six month period; €23 million if sold in three lots over the same period; and €30 million if sold without any limitation as to time. These figures were discounted where appropriate.

57. There were two other formal valuations presented to the Court. The first was supplied by CBRE on behalf of the companies. CBRE calculated the value for sale in one lot at €24.92 million (say €25 million); and €46.071 million in a sale in a number of lots over a period without limitation of time. These figures were not themselves discounted, although I think it is reasonable to assume that the period for sale would not be unduly protracted and that the discount to present valuation would not therefore be substantial. Finally, DTZ Sherry Fitzgerald provided a single valuation for the banks. This placed a current valuation on the properties at €34.605 million. It should be said that although there was a disparity between the valuations, all valuers expressed similar views about the current state of the market and, in particular, the fact that it is frozen. It is also apparent that the underlying assumption of each valuation is that the sale of a land bank and development property such as this is inadvisable at the moment for anyone other than a business which has an urgent requirement for immediate cash. The spectrum revealed by these figures is itself instructive. The figures for an immediate sale in one lot can be discounted as an unrealistic assumption which would not be followed by any receiver appointed by the banks. The figure of €25 million therefore seems to be at the very lowest extreme of this range of valuations and represents the crystallisation of losses at a very bad time in the market.

58. Formal valuations from expert valuers are not, however, the only vantage point for which the figure of €25million can be assessed. As the trial judge pointed out, the companies’ own plans delivered in July, 2010 would suggest that the present value of the secured property was in excess of €25 million. Certainly there is a very substantial disparity - which clearly impressed the trial judge - between the assertion made at the outset of the examinership process that development of this property could allow for repayment of interest on loans of between €50 and €60 million and ultimate repayment of that amount, and the present proposal of a write-down to €25 million and immediate repayment. Furthermore, the Oaktree bid itself could be said to reflect a belief that the property, if developed, could generate returns sufficiently well in excess of €25 million to justify Oaktree’s investment. In this regard it is perhaps not inappropriate to observe, as was urged by the banks, that the final offer made belatedly by Oaktree of an increase in the offer by an amount of €6.6 million to accommodate KBC was itself indicative of a view that the secured property and the loans were worth at least €31.6 million and probably more. Finally, and for reasons which I will address later in this judgment, I consider that if NAMA does acquire the Anglo and Bank of Ireland loans, the probability is the banks will recover in excess of their proportionate share of €25 million.

59. The range of values produced by a consideration of both the direct evidence of value and the indications as to value to be deduced by other aspects of the case formed the background for assessing both the predicted outturn of the receivership controlled model and an evaluation of the figure of €25 million. In the circumstances, even taking a cautious and sceptical approach to the receivership model, it seems entirely plausible that a secured lender would reasonably believe that he or she could obtain significantly more than a present value of €25 million by electing to appoint a receiver and developing the property even to some extent. The same exercise suggests that a figure of €25 million represents almost the lowest present possible valuation of the property. The Court cannot lose sight of the fact that the indebtedness of the companies to the banks is in the order of €110 million. One of the things a secured lender who has advanced these amounts to a company would normally expect is the entitlement to make a decision to enforce security in a way which maximises its possible return. In this case, the examinership proposal would involve a forced crystallisation of losses, which is something a reasonable secured lender would not voluntarily accept.

60. However the companies argue that the Court could and should have had regard to the views of the examiner who, on the advice of Lisney, took the view that the figure of €25 million should be recommended to all secured lenders. I agree that the Court should pay particular attention to the views of the examiner. However, the examiner’s views on value seem to have been based entirely on the Lisney valuation and it does not appear that Lisney had regard to the other valuations, or indeed the other factors to which I have referred. The advice also assumed that a receiver wished to sell the property. However the critical issue in this case is whether a receiver would decide to sell immediately, rather than to hold and sell later or possibly develop the property. In those circumstances it appears to me that the trial judge was correct to take the view that to approve the scheme would leave secured creditors worse off than they would be on any of the alternative methods pursuant to which the value of the secured creditors’ security could be realised. The proposal is not unfairly prejudicial simply because it is asserted that a receivership controlled model would produce something like €75 million over a ten or eleven year period. Rather, it is unfairly prejudicial because the figure of €25 million is simply lower than the valuation placed on the property directly by DTZ Sherry Fitzgerald, CBRE and, on one plausible scenario, by Lisney themselves. It is also lower than the price which in my view NAMA would be likely to pay for the loans, and is lower than the value implied by both Oaktree offers and the companies’ own proposals. Finally it is lower than the value implied by even a sceptical view of the outturn of a receivership. This, it should be emphasised, is a judgment based on a range of valuations and indicators as to value. In particular, it should not suggest that in any given case an examinership proposal must produce a return equivalent to ambitious and optimistic desktop valuations of a long run receivership. Having considered the matter from these different perspectives I conclude that the trial judge was correct to find that he was not satisfied that the scheme was not unfairly prejudicial to the secured creditors.

The Third Judgment (21st January, 2011)
61. Before the formal order was drawn up, the companies applied to reopen the hearing on the examinership proposal. They said it had come to light in some recent correspondence from the banks in relation to the loans that NAMA was about to acquire the Bank of Ireland and Anglo loans and this, it was said, substantially undermined the entire basis on which the confirmation judgment had proceeded. The banks for their part pointed out that there had been a large number of references to NAMA in the documentation at the outset of the application; that the parties were well aware of NAMA’s interest; and that the correspondence relied upon was neither new nor entirely accurate since it exaggerated the likelihood of acquisition for the purposes of encouraging the companies to respond.

62. The trial judge referred to the judgment of the Court of Appeal of England and Wales in Paulin v. Paulin [2010] 1 W.L.R. 1057 and considered that this satisfied the criteria set out therein and that it was an exceptional case which justified a rehearing limited to the question of the likely outcome of any NAMA acquisition of the loans of Anglo and Bank of Ireland. I entirely agree with the judges conclusion that it was necessary to reopen the issue. It is not necessary to express any view on the criteria set out in Paulin v Paulin. Once the trial judge observed that he himself had assumed that there was no longer any prospect of NAMA acquiring the loans, and that that assumption was based upon the somewhat artificial way in which the banks had approached the matter, then, in my view, he was entitled, and indeed arguably obliged, to reopen the matter. If indeed it was the case that the NAMA acquisition of the loans of Bank of Ireland and Anglo was imminent, then it could be said that the hearing, and indeed the judgment, had proceeded almost on a basis of common mistake and that justice required that the matter should be reconsidered.

The Reopened Judgment (17th February, 2011)
63. Having heard argument, the trial judge concluded that while there may have been some exaggeration in the correspondence, it was nevertheless probable, indeed highly probable, that NAMA would acquire the loans of Bank of Ireland and Anglo and that it would do so at a price which would put a value of €25 million on the total secured property. He considered that NAMA would then engage in a form of development with KBC, similar, if not identical, to the receivership work out model, since on the basis of the first confirmation judgment that was the most economically advantageous course for a secured lender to follow. Accordingly, he concluded that KBC would still be unfairly prejudiced and refused to approve the examiner’s proposals.

64. I agree that although the issue should have been reopened, the scheme should not have been approved but, with respect and some diffidence, I differ from the High Court judge in my analysis as to why that should be. However, since this Court has the same material available to it as that upon which the High Court judge based his judgment, I consider that this Court is entitled to and obliged to come to its own conclusion on this issue.

65. The process upon which the parties so willingly engaged of speculating as to what NAMA would do – whether it would seek to overreach KBC and sell the property or whether indeed it had power to do so, and the price at which the hypothetical sale might take place – has the air of, if not positive unreality, then speculation bordering on guesswork. The companies were forced to argue for the following scenario: that NAMA would indeed acquire the loans at a value which was proportionate to an overall value of €25 million; it would then exercise its powers under the interlender agreement to sell without the consent of KBC; and would proceed to sell the properties at a price of €25 million in present day terms. This last assumption was necessary since, if NAMA were to sell at any higher value, then KBC would be entitled to benefit from that and could then claim to have been unfairly prejudiced by the examinership proposal. Even in the bizarre world of the Irish property market 2011 this seems an extraordinarily improbable scenario.

66. The judge was rightly troubled by the absence of evidence, particularly from the banks in relation to the approach NAMA would take to valuation. He pointed out that these were the parties best placed to give that evidence. However, evidence of the approach NAMA takes to valuation is readily available from any participant in the market, if only because a large number of professional valuers are involved in the valuing of property for NAMA. Accordingly, whatever misplaced tactical considerations may have led the parties to avoid direct evidence on this issue, I do not think it would be safe to draw any conclusion from their silence, other than it made the task facing the High Court yet more difficult.

67. The High Court judge concluded that NAMA would probably acquire the loans at a price no different from that employed by the €25 million offer. He did so partly on the basis that he considered that NAMA would discount the value of property at a rate of 15.89%, being a figure derived from the Comptroller and Auditor General’s report on NAMA. However this figure refers to an entirely different process, being the valuation of the extent to which the NAMA process involves state aid and does not in any way reflect the discount figure applied on an acquisition of a loan. The trial judge also recorded the fact that it appeared that the prices being paid by NAMA for loans are figures which, less amounts for due diligence and enforcement, are close to the current market value. Fundamentally he concluded (at para. 5.11) as follows:-

      “Frankly, attempting to predict what NAMA might pay for the loans in question is, on the basis of the materials which were before me, a matter of little more than pure speculation. I am not, therefore, satisfied that it is appropriate to conclude that it is likely that B of I and Anglo Irish would do significantly better in a NAMA valuation today than they would under the scheme of arrangement.”
68. While acknowledging the careful way in which the trial judge scrutinised all the available material and sought to draw conclusions from it, I regret that I cannot agree that this is the correct conclusion to draw from the admittedly limited information that was available to him. There is, of course, first a question as to what is the present market value of the secured loans and how that relates to the €25 million contained in the examinership scheme. For the reasons already set out, I consider that by definition the fair value of the properties is in excess of €25 million. Even assuming that €25 million represents a market value for the property (being the price that will be achieved on an immediate if inadvisable sale) it seems to me that the NAMA scheme involves valuation at a fixed point (which the trial judge held to be November, 2009) and then a payment of a price representing long term economic value, which the entire structure of the scheme assumes to be in excess of the market value. On this basis, a most plausible conclusion must be that NAMA would pay something more for the loans than would be achieved on an immediate fire sale in the market. Indeed, the reverse could be said with some force: unless banks receive something more for the loans from NAMA than they could obtain by an immediate sale in today’s frozen and malfunctioning market, then NAMA would simply not be achieving or pursuing the statutory objective for which it was set up. This is particularly so, if, as the companies assert, NAMA would then immediately sell at the same price. Perhaps nothing would surprise an observer now about the functioning of the property market in Ireland, but I do not think the Court can proceed on the assumption that the entire NAMA exercise will only result in the NAMA banks obtaining what they could obtain in the present market. I would consider it more reasonable to draw the opposite conclusion: that the Court should assume that acquisition by NAMA would involve payment to the banks of something more than the present market value. If the examinership scheme involves payment of that market value, then, to that extent, even if NAMA was to acquire the loans, the examinership scheme could be said to unfairly prejudice the banks.

69. However it is not necessary to rest the decision on this analysis. The companies must go further and establish that KBC (which is not part of NAMA) would also not do better in that scenario than if the examinership proposal was confirmed. This involved much argument as to whether NAMA had the power to enter into arrangements such as the receivership controlled workout model and, if it did, whether it would, in fact, do so. It was urged by the companies that NAMA had the power under the interlender agreement to sell and would do so, and that KBC could not veto that course. In that scenario it was also suggested that such a sale would be €25 million in present day terms, in which case KBC would obtain no greater benefit than if the examinership proposal was accepted.

70. These arguments contained a large element of speculation and hypothesis, but notwithstanding that (or perhaps because of it) they were advanced with considerable vigour on both sides. It seems to me unlikely that NAMA would acquire the loans only to sell the property. Again the NAMA business model would suggest that property would, at a minimum, be held and managed until a better price could be achieved. For the companies to succeed on this aspect of the case, it would be necessary to conclude that it was likely and probable that, (i) NAMA would acquire the Bank of Ireland and the Anglo loans at a figure indicating a value of €25 million for the total secured property; (ii) it could and would overreach KBC to then sell the entire properties; and (iii) it would sell the properties at the same price of in or around €25 million. This is a process which will mean that neither the banks nor NAMA (and therefore the State) would have obtained any benefit from the transactions. I can conceive of no reason why NAMA would act in this way, other than to permit the companies to advance an argument that €25 million is not unfairly prejudicial to the banking syndicate. The hypothesis seems to me to reside at the implausible end of the spectrum and I am accordingly unable to accept it. On any of the more likely scenarios - a NAMA acquisition of the loans at above present market value; a NAMA agreement with KBC to work out the property over some period; or a NAMA and KBC agreed sale at a higher price - it seems that each of the banks would recover more than under the examinership proposal, and could therefore be said to be unfairly prejudiced.

The Increased Offer (21st February, 2011)
71. As is already set out, this judgment was necessitated by the outcome of the fourth judgment and the fact that the trial judge had held that only one bank was now unfairly prejudiced by the examinership proposal in the light of the fact that he had concluded that NAMA would acquire the loans. Oaktree then increased its offer by indicating that it was prepared to pay KBC an amount for its 25% of the loan portfolio, which would be the same as if KBC had participated in the receivership controlled work out model, which it had been estimated would generate a return in present day terms equivalent to €50 million. In essence that meant Oaktree was willing to pay €31.6 million to the banks for the loans, but paying KBC proportionately twice as much as was being paid to Bank of Ireland and Anglo. The Court did not permit the examiner to reopen the issue and have this renewed figure considered. If the Court had been prepared to consider this offer, significant issues would have arisen as to the appropriateness of paying proportionately twice as much to one secured lender as to others. However that did not arise in the High Court because the trial judge concluded that Oaktree was, in effect and in reality, a party to the proceedings and that the renewed offer and consequent attempt to have it approved, amounted to an abuse of the process in a technical sense, namely the attempted re-litigation of an issue which could have been determined in earlier proceedings. It is important to observe that this finding abuse of process does not imply any deliberate wrongdoing on anyone’s part. Indeed in this Court, Oaktree attended to explain that it had not intended any discourtesy to the High Court or any abuse of its process, and I accept that. Oaktree was merely pursuing its own economic interest.

72. I consider that the Court came to the correct conclusion in refusing to reopen the hearing and consider the new offer, although I would reach that conclusion by a slightly different route.

73. In the first place, for the reasons set out above, I do not share the judge’s initial conclusion that the potential acquisition of the Bank of Ireland and Anglo loans by NAMA meant that those banks would not be prejudiced by the examinership proposal, which conclusion was the essential premise upon which the new offer to KBC was based. However, even on the basis that only KBC was unfairly prejudiced by the proposal, I consider that the High Court judge was correct to refuse to reopen the hearing to consider the new Oaktree offer.

74. It is not in my view necessary to go to the length of finding that Oaktree was effectively a party to the proceedings and that the new offer represented a technical abuse of process. It is enough that the offer emerged after a final judgment, but before a final order, and indeed after the Court had permitted the reopening of a limited issue. It is only in exceptional circumstances where justice requires that course that the Court should reopen proceedings after the delivery of judgment and before the formal order is made. This, in my view, is not an exceptional situation. Indeed if it were permitted, it could become a regular event. Nor in my view would the reopening of the proceedings serve the wider interests of justice, or indeed of the legislative scheme.

75. The examinership procedure is one which must be carried out over a very short period and under significant pressures created by the dire financial circumstances in which a company finds itself and the necessity to put together a restructuring proposal. An examiner appointed in such circumstances has the difficult task of seeking to persuade an investor, or ideally a number of investors, to consider introducing funds in to the company. Those investors owe nothing to the company or its employees or creditors. Their calculation is purely self-interested. They must believe that it is worth investing in a restructured company, rather than waiting to acquire the constituent parts of the company from a liquidator, or perhaps investing in some other enterprise. Such an investor, often a professionally managed fund seeking opportunities for investor clients, must have a powerful incentive to seek to invest in the company at the lowest possible price since that will lead to the generation of the greatest possible returns. The examinership process however requires that the examiner seek the maximum available so as to pay creditors some dividend. An examiner has however a very difficult negotiation to conduct. One of the few levers the examiner has is the threat of refusing to submit a proposal to the Court and the possibility that the investment may be lost. Thus, the moment in any negotiation at which an investor asserts that he or she has made his final and last offer is one of great significance in the process. If it were possible to put forward a final offer, but then adjust in the light of a judgment that had removed other uncertainties, then investors and their advisors would have a powerful incentive to seek to game the system by making a low offer in the hope that it might be accepted, and then increasing that offer if it was not. This would be an extremely undesirable additional complication to an already difficult and pressurised process and might often result in the process extracting less for creditors and the company than might otherwise have been the case.

76. Here Oaktree was steadfast in its assertion that €25 million represented its final and last offer. For perhaps good tactical reasons it did not indicate that there were any circumstances in which it might improve that offer. This was perhaps understandable since the dynamic of negotiation makes it much more likely that a person who indicates a willingness to take some step will often be forced to do so. However having taken the course of asserting that this was its last offer, Oaktree cannot complain if it was taken at its word by all the other parties, including the Court.

77. I should emphasise that this does not mean that in the course of an examinership a party cannot indicate a willingness to adjust certain aspects of the proposal if a Court should consider that necessary. It is often the case that a Court will indicate concerns with some or other aspect of the proposal and will adjourn the hearing to allow the parties to consider if they are willing to adjust the proposal to address the concerns which have been expressed. That is an entirely sensible course to adopt. It did not occur here, however, precisely because everyone believed Oaktree when it insisted it had made its final offer.

Employment and Other Issues
78. At times during the case there were some references to the jobs that would be saved if the proposal was approved. This is a common theme in examinership proposals. The companies pointed, for example, to the observations of Clarke J. In Re Traffic Group Ltd. [2008] 3 I.R. 253 at 261 where he stated:-

      “Where there is a high level of likelihood that the company can survive with a consequent saving of a significant enterprise and at least a significant proportion of the jobs at stake, the court should lean in favour of confirmation …”
79. For my part I agree that the maintenance, where possible, of an existing employment creating enterprise is an important objective of the statutory scheme. It is not, however, its only objective. All failing companies could be rescued and employment maintained, if only temporarily, on the basis that all their debts would be written-off. But such a course could not be permitted under the Act of 1990. The Act does not encourage the futile activity of seeking to turn back the economic tide by maintaining employment, albeit temporarily, at the expense of the destruction of all creditors secured or unsecured. Instead it permits a brief period during which fundamentally sound businesses can be restructured in a manner that is not unfair to any party. Here, however, the jobs argument was largely relegated to a supporting and rhetorical role. It is by no means as powerful an argument as it might be in the case of a manufacturing enterprise where closure might result in the loss of that business and employment to the country generally. Here, however, both the companies and the receiver, perhaps for different reasons, have emphasised the lean management structure which the companies adopted and which the receiver would seek to reproduce. It is clear that the bulk of the jobs to be created by the company would be indirect, being in essence the builders, tradesmen and other professionals who would be involved if and when sites were developed. If – and despite the confidence of the parties to this litigation, it is still a large ‘if’ – it becomes a profitable business to develop these sites, then that employment will be created whether the sites are developed by the McInerney group, the receiver or sold piecemeal and separately developed. For that reason, the employment issue did not loom as large in this case as in others. In any event the employment argument cannot trump the clear words of s24.

80. In the circumstances I would dismiss the companies’ appeal against the order of the 14th January, 2011, in which the High Court refused to confirm the examinership proposals. I would also dismiss the banks’ appeal against the order of the 21st January, 2011, reopening the issue. I would also dismiss the companies’ appeals against the order of the 17th February, 2011, in which the Court again refused to confirm the proposals. Finally I would also dismiss the companies’ appeal against the decision of the 21st February, 2011, in which the companies sought to reopen the proceedings in the light of the new Oaktree offer.

81. It should be apparent that, notwithstanding the protracted and costly engagement between the parties on almost every aspect of this litigation, the case does not raise or determine issues of any general application. The points of difference between this judgment and that of Fennelly J in dissent, are matters of inference rather than principle. Instead this litigation is one further sad illustration of the loss and damage that has been caused by the dramatic expansion, and traumatic contraction, of the property market in Ireland in the early years of this century.











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