Six companies controlled by one of the country's largest property developers, Liam Carroll, have lost their bid to have an examiner appointed to them by the High Court.
At the Commercial Court his afternoon, Mr Justice Peter Kelly said he was refusing the application on the basis that he was not convinced that the companies had proven that they met the legal test of having a reasonable prospect of survival.
However, while expressing some misgivings, the judge did grant a stay until Tuesday on his refusal to extend the court's protection, so that the companies could lodge an appeal with the Supreme Court before a receiver were appointed.
Vantive Holdings, Villeer Developments, Peytor Developments, Caragh Enterprises Ltd, Parlez International Ltd and Jersey registered Morston Investments, were all seeking the court's protection, after ACC began proceedings to have them wound up over €136 million of unpaid debts.
Mr Justice Kelly said he had the gravest reservations about the projections put forward by the companies in their application, which he said were devoid of reality. He said that even if he had been satisfied that the conditions for the test had been met, he would be disinclined to extend the court's protection to the companies, as he believed there was an artificial exercise under way to assist shareholders whose investments had been unsuccessful.
Justice Kelly said it had long been said that when a business that owes a small amount of money to a bank gets into difficulty, the business surely has a problem. But when the amount of money is large, it is the bank that has a problem, and this was the situation in this case. He said the amounts of money involved were enormous, with the total projected shortfall if the six companies were liquidated standing at over €1 billion.
He said that having lent extensive sums of money to a Byzantine corporate structure, the banks involved were showing great forbearance in relation to getting that money back - forbearance which was generally absent when they were dealing with smaller sums elsewhere.
And given the collapse in the property market, he said, one would be forgiven for being sceptical about the banks’ attitude to the plans. But, he added, the truth is probably that they can do little else but show forbearance, because if they move on the companies, it will bring about the collapse of a house of cards.
As a result, he said, the banks had stood back and taken no steps at all, and more than that, some had even lent further money to the companies and were willing to lend more.
He said the companies' had proposed plans to turn around their financial fortunes by enhancing the value of their sites, selling much of their residential stock and selling development sites with planning permission that aren't key to their intentions. But he said these plans contained much management speak.
He said the independent accountant's report filed as part of the application was written by an accountant who acted as auditor to the companies. He said the report was written in four days, contained a number of errors in its original form and used trading projections which had been supplied by management and not independently verified.
He said it contained valuations which were already seven months out of date, which were supplied by CBRE and Hooke and McDonald - two valuers which had previously worked for the companies concerned.
He said if one were to accept the projections, it would involve a remarkable turnaround over three years. The companies would have to move from being insolvent to having a net surplus of €300 million over that period.
He added that given market conditions and little or no prospect of then improving in the foreseeable future, this degree of optimism borders or even trespasses on the fanciful. He claimed that the market is grossly oversubscribed and not moving at all, and pointed out that since the business plan was written in December 2008, the companies have sold only 39 units.
Mr Justice Kelly also said the proposed scheme of arrangement was unusual in that it didn't see the companies requiring any additional investment or writing down their debts, as the banks are the only creditors.
He said the number of jobs directly threatened by not granting court protection was 100, and not 650 as claimed in the application. The judge said he was satisfied the companies are all related, and that Jersey based Morston Investments does fall within the remit of the court.
But he said the structure of the wider Zoe Group of which the companies are part was so complex that the companies had mixed up the number of businesses in the group in their submission. He also commented on the large number of directorships held by the directors of the companies, with Mr Carroll holding over 200.
Senior counsel Michael Cush, who represented the companies, asked for a stay on the court's refusal, pending a possible appeal to the Supreme Court.
He said the Supreme Court was not in a position to deal with the matter today, and if a stay were not given, creditors could move to have a receiver appointed between now and Tuesday, which might effect the outcome of any appeal.
Counsel for ACC Bank, Rossa Fanning, said he was not in a position to give comfort to the companies, and would prefer it the stay were not granted. But counsel for two of the largest creditors, Bank of Scotland Ireland and AIB, and for the Revenue Commissioners, said they had no objection to a stay.
Mr Justice Kelly said it was unclear whether there was any legal basis for a stay in such circumstances. But having considered the matter for a period, he said he had to balance the intent of the legislation with the constitutional rights of the companies.