The Eircom examinership, the State’s biggest ever examinership, afforded the Irish High Court an opportunity to comment on when it is appropriate for it to intervene in relation to the conduct of an examiner.
An application was made to the High Court in relation to the conduct of Eircom’s examiner, Mr. Michael McAteer. The applicant alleged that its offer for Eircom was not properly considered by the examiner when formulating a proposal for a scheme of arrangement. The applicant sought court orders deferring the creditor meetings and requiring the examiner to withdraw his refusal to allow the bid move to the second phase of the process.
The Court refused the orders sought as otherwise the Court would, in effect, be “micro-managing” the examinership. The judge noted that persons who are appointed as examiners are insolvency practitioners with the necessary experience and expertise. He went on to say that the Court has “neither the expertise nor the back-up” to make commercial decisions and that its role in the examinership process is a supervisory one. If an examiner was “misbehaving or doing something which was wrong in law” there would be scope for the Court to intervene, but it cannot intervene in relation to commercial decisions.
As there is no Irish legal authority in relation to the standard by which an examiner’s conduct is to be judged, the judge was “very much inclined” to follow the English courts which have held that, in the absence of fraud:
“the Court will not interfere unless the is doing that which is so utterly unreasonable and absurd that no reasonable man would so act.”
This decision clarifies for all insolvency practitioners the standards by which they will be judged in the performance of their duties and demonstrates that the making of commercial decisions is one function which they alone perform.
Subsequent to this ruling, Eircom successfully exited examinership, carrying 40% less debt, with the creation of a new holding company, Eircom Holdings (Ireland) Limited, owned entirely by the group’s lenders.
Contributed by Deirdre Murphy.
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