by Matthew Austin February-22-2021 in Litigation & Dispute Resolution, Insolvency & Restructuring

In a recent consideration of the decision of the High Court in Re New Look Retailers (Ireland) Ltd, we raised the question as to whether that decision had introduced a new requirement, in petitions to appoint an examiner, to demonstrate to the Court’s satisfaction that the appointment is "necessary". 

In the recent case of Re Ina’s Kitchen Desserts Ltd (9 December 2020), Mr Justice Quinn was tasked with deciding on a petition to appoint an examiner to Ina’s Kitchen Desserts Ltd where the petition was advanced by a shareholder/director in the company (holding 10.45% of the issued share capital).

In all of the circumstances of the case, Judge Quinn refused the petition and was particularly influenced by the fact that none of the other creditors of the company supported the petition (the petitioner was a relatively small creditor).  In his judgement, Judge Quinn made the point that he felt that examinership was not the appropriate remedy in the case and that he was not persuaded that the company was at risk of enforcement action by the creditors such as would justify the appointment of an examiner.

Significantly, Judge Quinn endorsed the decision of Judge McDonald in “New Look” in relation to the requirement to demonstrate necessity in seeking to persuade the Court to exercise its discretion in favour of appointing an examiner.  Judge Quinn stated as follows:

“While the facts of New Look were very different from those before me now, I consider that the analysis of McDonald J to the effect that there must be shown a "necessity" for the appointment of an examiner is directly relevant to the exercise of discretion in this case."

It would seem therefore that the "necessity" test in the context of an examinership petition is here to stay.  However, it is not clear how "necessity" will be demonstrated to the Court in a given case in circumstances where New Look and Ina's Kitchen Desserts dealt with very different scenarios and in both cases the Court exercised its discretion not to appoint an examiner.  Where consideration is being given to petitioning the Court for the appointment of an examiner, and obtaining the consequent protection from creditors, those involved will need to show the court that the appointment is necessary in the circumstances of the case.

For further information on any of these issues, please contact Partner Matthew Austin at Hayes solicitors. 

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