by Jeremy Erwin March-18-2021 in Litigation & Dispute Resolution, Insolvency & Restructuring
A discrete issue, which has been considered in recent examinership cases, is cross-examination where there is a conflict of evidence before the Court.
In Re New Look Retailers (Ireland) Ltd, a dispute arose at the petition stage of the examinership process. Several landlords of premises which housed New Look outlets asserted that New Look was manipulating the examinership procedure “in order to feign insolvency” and to avoid discharging its liabilities, i.e., rent arrears owing to the landlords.
The High Court was asked to consider S 509(1)(a) of the Companies Act 2014 which provides that the Court may appoint an examiner when “a company is, or is likely to be, unable to pay its debts”. New Look asserted that it would become insolvent by March 2021. In opposing the Petition, the landlords presented expert evidence to the contrary and sought to rely on an earlier decision of the Supreme Court in RAS Medical Ltd v Royal College of Surgeons, to contend that they were entitled to seek leave to cross-examine the evidence of the Petitioner.
In considering this issue, Mr Justice McDonald referred to the “closest analogous situation” in Re McInerney Homes Ltd. In that case, a significant conflict of evidence arose at the confirmation hearing of a scheme of arrangement. Mr Justice Clarke, in that case, was troubled by the difficult position in which the Court was placed to determine a conflict of evidence which had not been explored through cross-examination. He pointed out that a court may delay the approval of a scheme to allow time for evidence to be contested at a hearing. Nevertheless, the Court acknowledged that given the clear statutory intent that a company should not be in examinership for too long a period, a Court could not lightly contemplate allowing for a prolonged gap between the presentation of a scheme of arrangement and the decision on whether or not to confirm that scheme.
In New Look, the Court emphasised that time was of the essence at the hearing of a petition for examinership and that “[i]t is manifestly undesirable that the hearing of a petition should be protracted or delayed”. The Court held that cross-examination at that stage should only be undertaken as a last resort and a Court should endeavour to deal with the matter, as best it can, on the basis of the affidavit evidence before it. However, Mr Justice McDonald said he would not go so far as to exclude the possibility that in an appropriate case, cross-examination might be necessary.
This point was also considered recently in Re Ina’s Kitchen Desserts, where the Court was presented with opposing expert opinions as to the solvency of the Company. Though neither party sought to cross-examine the respective experts, Mr Justice Quinn took the opportunity to cite, with seeming approval, the approach of Mr Justice Clarke and Mr Justice McDonald; while cross-examination cannot be ruled out at the petition stage of an examinership, it should be seen as a last resort. Mr Justice Quinn was satisfied to determine the matter based on the affidavit evidence before him.
In summary, recent examinership decisions suggest that the Courts, while expressing their dissatisfaction at being asked to resolve conflicts of affidavit evidence, are more likely to work through the affidavit evidence to reach a conclusion, with cross-examination being regarded as a last resort. For further information on this issue, please contact Jeremy Erwin, Partner in the Commercial and Business Team jerwin@hayes-solicitors.ie.
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About the Author
Jeremy Erwin
Jeremy specialises in insolvency, commercial litigation and dispute resolution, acting for a variety of companies and financial institutions in contract law cases, enforcement and recovery actions and in high value complex Commercial Court proceedings. Jeremy also specialises in intellectual property matters, including advising on registration and protection of trade marks and related rights and on trade mark disputes.