A HIGH Court judge has granted court protection to Chartbusters home entertainment stores, employing 267 people, on foot of reports indicating it has a reasonable prospect of survival if certain conditions, including the closure of 17 of its 37 stores, are met.
While agreeing yesterday to appoint an examiner, Mr Justice Peter Kelly said the company’s founder, Richard Murphy, had engaged in “sharp practice” and “sleveenism” in his treatment of a major creditor who had sought to wind up the company.
Because of Mr Murphy’s conduct in staving off the winding up petition by Winchurch Investments Ltd through giving it a post-dated cheque which was later stopped, Mr Justice Kelly said he was making Mr Murphy personally liable for the legal costs – estimated at some €20,000 – of that winding-up petition.
The judge noted Winchurch had agreed last October to adjourn its winding up petition on the basis of the post-dated cheque and Chartbusters had subsequently petitioned for court protection. While such conduct was not enough to deny the hearing of the petition for examinership, he wasn’t to be taken as endorsing it and it was “a form of sharp practice or sleveenism of which the courts disapprove”.
“It has to be brought home to company directors they have obligations,” the judge said. If a company director was going “to play ducks and drakes” with the court, they would not be looked on sympathetically.
He was giving his judgment on the application for examinership which was opposed by two substantial creditors – Winchurch and Lombard Ireland, who are owed some €1.8 million between them. Other creditors owed some €18 million between them, including the Revenue, adopted a neutral position.
The judge said the company is insolvent and would have a shortfall between assets and liabilities of some €246,000 as a going concern and of some €4.8 million if wound up.
He said both Winchurch and Lombard Ireland believed the company had no reasonable prospect of survival and both had voiced concerns about the management of the company. Lombard also claimed its core business – renting and selling DVDs – was dead.
After Mr Murphy gave Winchurch a bank draft for €49,973 and post-dated a cheque for €42,972 on October 28th, 2008, in part discharge of Chartbusters debt,
Winchurch had agreed to adjourn its winding up petition. Winchurch was later informed by Allied Irish Banks the post-dated cheque had been stopped because it had been reported lost.
In the interim, the petition for examinership, grounded on Mr Murphy’s affidavit, was moved. Winchurch said it never got an explanation from Chartbusters why the cheque was reported lost.
