A SECOND unprecedented bid by grossly insolvent key companies in Liam Carroll’s Zoe property group to secure court protection has been rejected by the High Court.

Mr Justice Frank Clarke also yesterday became the fifth senior judge to voice strong criticism of the financial basis presented for the companies claims to have a reasonable prospect of survival.

ACC Bank, which is owed €136 million by the group, will apply today to wind up two crucial funding companies in the group but they and five other companies may choose to try and stave off liquidation or receivership by appealing to the Supreme Court.

Mr Justice Clarke said he was refusing the petition for protection by the seven Zoe companies, on whose survival the entire 51-company group depends, and would give his reasons for that refusal in a written judgment today. The judge earlier expressed trenchant criticism of the quality of Independent Accountant Reports (IAR) by David Wilkinson of KPMG presented to the court in support of the companies claims of having a reasonable prospect of survival.

The clarification of how the companies presented their accounts strengthened his view protection should be refused, he added.

Claims in the IAR that the companies would have sufficient income by the end of July 2011 to meet overheads and interest were not borne out by the papers in the case, the judge said.

The manner in which figures were presented and projections made in the reports had rendered it extremely difficult for him to analyse the figures objectively as required by the Supreme Court, the judge said. There were “so many inaccuracies” in the material it caused him great difficulty to assess it.

Clearly irritated, he said this material was either presented to him in a “very poor” way or was just “plain wrong” and he took “a very serious view” of this. He had done the sums and they did not seem to add up.

It now appeared the companies would not have enough income to pay their overheads unless they secured additional rental income.

He made the criticisms having asked a series of detailed questions of counsel for Zoe arising from the financial projections for the companies in summer 2011. Among a series of concerns, the judge queried figures suggesting the companies would by the end of July 2011 have adequate income to meet their day to day overheads and to service interest.

From his own calculations, the judge said it appeared the companies would, in the seven months to end July 2011, have a deficit of €3 million, even factoring in interest roll-up, and not a surplus of €2.84 million as suggested in the IAR. After several discussions inside and outside court between lawyers for Zoe, two of the companies directors – John Pope and David Torpey – and others, extending over some 90 minutes, Bill Shipsey SC, for the companies, agreed the judge was correct but added it was possible the companies may generate additional rental income. The roll-up of interest also made a significant difference, he submitted.

Was Zoe now making the case, to get to the magic 100 per cent [income to meet expenses], the court had to factor in the possibility of additional rental income from uncontracted properties, the judge asked. He said great stress had been lain by Zoe on this 100 per cent figure but how could the court get to that without taking into account a large amount of additional rent.

The judge said he took a very serious view of the quality of the IAR which had not made even the slightest mention of the fact, to achieve the 100 per cent figure, the court had to assume rental income from leases not even entered into yet. Was there any explanation from the IAR in that regard? he asked.

However, the judge continued, the additional clarifications provided yesterday by the companies as to how their accounts were presented had not materially altered the view he had come to as to whether the companies should be protected.

He said he had prepared a written judgment in which he had concluded the companies’ petition should be refused. If anything, the clarifications “strengthened” his view. Because some matters would now have to be incorporated into his decision, he would give that judgment in court today.

Rossa Fanning, for ACC Bank, said he would be applying today to have a liquidator appointed to two of the petitioning companies, Vantive Holdings and Morsten Investments, which provide funding loans within the Zoe group.

Mr Shipsey said he would take instructions on what position the companies would adopt in light of the court’s ruling.