In the Matter of Tivway Limited (In Examination) & ors And The Companies Acts

Factual and Procedural Background

Company A (a secured creditor) appealed to the Supreme Court from an order of Judge McGovern in the High Court confirming three Schemes of Arrangement under s.24 of the Companies (Amendment) Act 1990 (“the Act”). The schemes concerned:

• Company B – a property-holding vehicle owning two key development sites;
• Company C – an unlimited construction company employing 137 workers and holding both a profitable third-party contracting division and a loss-making development portfolio; and
• Company D – the Group’s holding and finance company.

An examiner had first been appointed to Company B on 20 July 2009 and, on 21 September 2009, was extended to Companies C and D. All creditors except Company A supported the schemes. The High Court approved them (with one minor modification). Company A filed thirty-five grounds of appeal, contending that the schemes were contrary to the statutory purpose, based on improper classifications, and unfairly prejudicial.

Legal Issues Presented

1. Whether, on the evidence, the court had jurisdiction under s.2(2) of the Act to confirm schemes that did not show a “reasonable prospect of the survival of the company and the whole or any part of its undertaking as a going concern.”
2. Whether the examiner had correctly classified Company A’s claims and whether the schemes were “unfairly prejudicial” to Company A within s.24(4)(ii).
3. Whether the High Court erred in approving schemes that effectively relieved unlimited shareholders (Shareholder A and Shareholder B) of personal liability.

Arguments of the Parties

Company A’s Arguments (Appellant)

• The statutory purpose of examinership is corporate rescue, not putting entities into a ten-year holding pattern; none of the three companies had a viable business capable of surviving as a going concern.
• The profitable contracting arm of Company C was being sold to Company F, leaving only a dormant property portfolio.
• Company A was mis-classified as a contingent creditor in Companies C and D and would suffer unfair prejudice compared with other secured lenders.
• The schemes improperly relieved unlimited shareholders of liability and ignored the May 2009 asset transfers into a trust fund.

Examiner’s Arguments

• The schemes were supported by every creditor class except Company A, demonstrating commercial credibility.
• Sale of the contracting business and creation of a Residual Debt Fund, backed by continuing bank support, gave a reasonable prospect of survival.
• No unfair prejudice arose because Company A was treated consistently with other banks holding cross-guarantees.

Company E’s Arguments (Supporting Bank)

• Creditor support, while not determinative, was highly persuasive; the court should not substitute its own commercial judgment.
• Company E had already advanced new working-capital facilities, evidencing genuine confidence in the schemes.

Unsecured Creditors of Company C

• Without confirmation they would receive nothing; with the schemes they expected a 25–45 % dividend.
• Liquidation would cause significant job losses and economic harm in The City and surrounding areas.

Revenue Commissioners

• Took a neutral stance, noting that tax liabilities were up to date.

Table of Precedents Cited

Court's Reasoning and Analysis

Judge Denham performed a statutory, step-by-step analysis:

1. Jurisdiction under s.2(2) – The Court concluded that none of the companies had a reasonable prospect of surviving as a going concern. The schemes merely preserved assets for up to ten years in hopes of a future property-market recovery, which the Court likened to aircraft in a “holding pattern.”
2. Effect of Selling Company C’s Profitable Arm – Divesting the only active, income-generating segment meant Company C would be left with a “moribund” property portfolio, defeating any notion of ongoing trade.
3. Passive Nature of Company B and Company D – Company B owned land and an incomplete building but had no funds or plan to develop them; Company D was dormant. Minimal site-maintenance funding from Company E did not constitute ongoing trade.
4. Employee Considerations – Only 15 of 137 jobs would remain with Company C; the remainder would transfer to Company F. This limited benefit could not cure the jurisdictional defect.
5. Unfair-Prejudice Allegations – Because jurisdiction failed at the threshold, the Court found it unnecessary to reach s.24(4) questions on creditor classification or prejudice.

Holding and Implications

APPEAL ALLOWED. The Supreme Court reversed the High Court order and, pursuant to s.24(3) of the Act, refused to confirm the three Schemes of Arrangement.

Implications: The examiner’s proposals collapsed; the statutory protection ends, exposing Companies B, C and D to normal insolvency processes such as receivership or liquidation. No new precedent was set, but the judgment re-affirms the strict requirement that examinership proposals must demonstrate a genuine prospect of trading survival, not merely asset warehousing.