Saturday 18 November 2017

Bookings to be honoured this weekend at 'liquidated' Dublin hotel

Ray Managh

Breakfast will be served and beds made as usual this weekend for residents booked into a Dublin city centre hotel that has gone bust but will continue to trade under the aegis of the insolvent company’s landlord.

Barrister Rossa Fanning gave Ms Justice Marie Baker in the High Court an undertaking that any pre-paid bookings at the Dublin Citi Hotel and Trinity Bar and night club in Dame Street would be honoured and business continued as usual.

Mr Fanning, who appeared with Galway solicitors McSweeney and Co for the landlord, said that while the court’s refusal to confirm the appointment of an examiner to JJ Red Holdings Limited meant automatic liquidation of the hotel company, the landlord Henciti Ltd planned taking over and running the hotel.

Counsel said the jobs of the 50 employees would be protected apart from those of the two directors and a child of one of them.  A plan to extend the hotel by 15 rooms into an adjoining building would be progressed by the landlord.

Judge Baker said the landlords, brothers Paul and Denis Hennebry, had opposed the examinership because it was “designed to frustrate and evade” a €1million rent debt settlement between Henciti and JJ Red Holdings owned by hotelier brothers Emmet and Donie McDermott.

She said it was not disputed that the company was insolvent.  The hotel company had obtained an ex parte injunction restraining the landlord from taking possession on foot of a forfeiture notice and the landlord had brought Commercial Court proceedings which settled in July last under a written agreement which had been made an order of court.

The settlement, which resulted in crystallising a €1million debt, included a provision that the landlord could immediately obtain an order for possession and a declaration that the lease was validly forfeited in the event of any payment default which occurred shortly afterwards.

Judge Baker said it was clear the hotel company could not meet its obligations under the settlement without a loan or cash injection from some source as well as an achievable arrangement to reschedule discharging the settlement.

Neil Hughes, of Baker Tilly Hughes Blake, believed a proposed examinership condition requiring funding of  €1.7million could not be met and was far outside the capacity of the company.

Judge Baker said Mr Fanning had argued that the sole purpose for the appointment of an examiner was to protect the hotel company from being required to perform obligations freely “and irresponsibly” entered into.

If this was so then the motive for examinership could be seen as one by which the company sought to avoid those settlement obligations and was less focussed on the protection of the business.

“If the appointment of an examiner is to set at naught a court order or compromise of court proceedings…there is a real risk that the process would…fail to further the administration of justice and amount to a collateral attack on previous judgments, orders or compromise,” Judge Baker said.

She found, in a reserved judgment, that funds to pay the first tranche of arrears were never in place and there was no facility from a bank or anyone else, as had been untruthfully claimed.

“I agree with (Mr Fanning) that the company was reckless in entering into the settlement agreement and was equally reckless in instructing its solicitor to write to the landlord’s solicitor saying that the money was in place,” Judge Baker said.

The judge said it was clear that when Emmet McDermott  had gone to negotiate with his bank, the company was already insolvent.

“I consider…the funding was not in place, no reasonable prospect existed that it would be obtained, and the petition was an attempt to buy more time to meet the obligations of the settlement agreement…examinerahip will be to allow the company avoid a recently negotiated and complex settlement of proceedings and would fail to respect the principle of finality of litigation or the solemnity of entering into a compromise and having its terms ruled by a court.” 

The judge said it was the purpose or effect of the appointment that raised issues of improper motive in this case and she believed the petition to appoint an examiner was an attempt to buy time but that time had run out for the company.

Judge Baker said she was not satisfied the petition to appoint an examiner was presented in good faith but she believed the motive was that of the company and not merely a personal motive or purpose of its directors.

She granted the landlord judgment for €1million against JJ Red Holdings Limited and a declaration that the lease of the hotel had been forfeited.  The court was told the landlord would enter into a licencing agreement with the liquidator and negotiate payment for assets of the hotel.

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