Re: SIAC Construction Ltd & ors & Companies (Amendment) Act 1990 (as amended)

Factual and Procedural Background

Company A and a number of related companies (together, “the Group”) entered examinership in October 2013. The Examiner circulated a draft Scheme of Arrangement to creditors in January 2014 and applied for High Court approval on 7 February 2014. The High Court indicated on 12 February that it would confirm the Scheme.

On the same day the Appellant, a state road authority from a foreign jurisdiction, made its first appearance seeking modifications to the Scheme. Although it filed no evidence, the High Court allowed it to be heard on 14 February 2014 but ultimately rejected its objections and confirmed the Scheme, fixing 17 February 2014 as the effective date.

The Appellant lodged an immediate appeal to the Supreme Court, contending that two clauses of the Scheme unfairly prejudiced its position. Owing to the imminent effective date and the Group’s fragile financial state, the Supreme Court granted an expedited hearing and, on 24 February 2014, orally dismissed the appeal. The present judgment sets out the written reasons for that dismissal.

Legal Issues Presented

1. Whether the Scheme of Arrangement, as confirmed by the High Court, is “unfairly prejudicial” to the Appellant within the meaning of sections 22, 24 and 25 of the Companies (Amendment) Act 1990.
2. Specifically, whether Clause 9.1(c) (excluding claims for penalties, interest and damages) and Clause 12.3 (waiving subrogation claims) violate the statutory requirement of equal treatment among unsecured creditors.

Arguments of the Parties

Appellant's Arguments

• Clause 9.1(c) prevents the Appellant from recovering contractual penalties and related interest, and Clause 12.3 bars recovery of subrogated claims for sums it says it paid to subcontractors; this deprives it of the 5 % dividend available to other unsecured creditors.
• Creditors of the same class must receive equal treatment; the exclusions single the Appellant out and therefore offend section 22(1)(d) of the 1990 Act.
• The Appellant’s potential counter-claims exceed €70 million; denying any dividend while allowing Company A to pursue its €113 million claim is inherently unfair.
• The Supreme Court should either refuse confirmation or remit the matter so the Scheme can be modified to accommodate the Appellant’s claims.

Examiner's Arguments

• The Appellant was permitted late participation despite providing no evidence; its claims remain “unagreed” and are treated exactly like every other unagreed unsecured claim.
• Liquidation is the only alternative; unsecured creditors (including the Appellant) would receive nothing in that scenario, so the Scheme cannot be unfair when compared with the realistic alternative.
• The Appellant retains full rights of set-off or counter-claim in ongoing foreign litigation with Company A; those rights give it a significant advantage over ordinary trade creditors.
• The investor (“Company B”) will not proceed if the Scheme is materially altered; therefore modification is commercially impossible.

Companies' Arguments

• The appeal should be confined to the points argued below: alleged unfair prejudice and proposed modifications.
• The investor’s funds are finite; any extra dividend for the Appellant would eradicate the 5 % dividend for all other unsecured creditors.
• Given the balance of interests and the risk of liquidation, the High Court correctly found no unfair prejudice.

Investor's Position

• Company B confirmed it would withdraw its €10.5 million investment if the Scheme were rewritten for the Appellant; without that funding the Group would enter liquidation.

Table of Precedents Cited

Court's Reasoning and Analysis

• Liquidation benchmark: On liquidation unsecured creditors would receive zero. The 5 % dividend therefore confers a benefit, not a detriment, on the Appellant.
• Equal application: Clauses 9.1(c) and 12.3 apply identically to every unsecured creditor; the statutory requirement of equal treatment is satisfied.
• Set-off advantage: The Appellant remains a substantial debtor of Company A and retains full rights of set-off or counter-claim in the foreign proceedings, a protection unavailable to typical trade creditors.
• Commercial justification: The Examiner showed that recognising penalty and subrogation claims would exhaust the limited investment and jeopardise the Group’s survival; the investor would withdraw if the Scheme were modified.
• Balance of prejudice: Any detriment to the Appellant is outweighed by the benefit to all creditors and the prospect of the Group’s survival; accordingly, the prejudice is not “unfair”.

Holding and Implications

APPEAL DISMISSED

The Supreme Court affirmed the High Court’s confirmation of the Scheme. The Group may now implement the restructuring, receive the investor’s funds and pay a 5 % dividend to unsecured creditors. The judgment underlines three practical principles: (1) liquidation remains the yardstick for assessing prejudice; (2) equal application of a clause across a class usually negates unfairness; and (3) courts will not order commercially unworkable modifications that would collapse an otherwise viable rescue.