Ricoh has lost its appeal for a larger share of the cash proceeds from the 2009 wind-up of print and photocopier reseller Danka Business Systems.
Danka Business Systems plc, acquired by Ricoh Europe in 2007 along with various European subsidiaries, entered voluntary liquidation in 2009 after the sale of its US operation to rival vendor Konica Minolta for $240m (£157m).
Danka's creditors, including Ricoh Europe, were to be paid according to a UK court ruling handed down in March 2012 but the OEM disputed the amount offered to it, filing an appeal which had its first hearing in November.
However, all three judges in the Court of Appeal on Tuesday ruled that Ricoh had no grounds to expect a larger payout from the KPMG liquidators.
Lord Justice Patten said Ricoh's claim was based on "various tax indemnities" stemming from its purchase of Danka.
Ricoh in 2009 had asked the liquidators to wait until it could calculate exactly how much money this represented – but the KPMG liquidators, Jeremy Spratt and Finbarr O'Connell, had found it unnecessary to delay further because, in part, they had already created a "realistic estimate" of the amounts owed.
"Ricoh's position was that no definitive valuation of the contingent claims could be made until the audit process was completed, and that the liquidators should ring-fence a sufficiently large reserve," Patten said in his judgement.
In 2010, Ricoh said it had worked out that taxes owing in Germany, France, Italy and Spain would require a reserve of €11.9m (£10.4m). Soon afterwards, the French tax authorities reduced their estimate, slashing the overall figure to €6.7m.
The liquidators had made what they called a "realistic valuation" of the contingent liabilities at that time of just €268,961, Judge Patten said.
Ricoh maintained that funds should be set aside until either all contingent liabilities had been calculated, or until 2014 – whichever came sooner.
"Where some material change in the relevant factual position occurs, it must be taken into account. But the liquidator is not, in my opinion, required simply to wait and see. That is the opposite of valuation," said Patten in dismissing the appeal.
"I am not persuaded that there was an error by the liquidators in their approach to the valuation of these claims."
Lords Justice Treacy and Mummery, also presiding in the Court of Appeal, agreed with Patten.
The original March 2012 decision had ruled that there is no mechanism by which claims that cannot quickly be quantified can be provided for by hanging on to creditor funds for "an indeterminate future period".
"Such a process would be riddled with uncertainty, would prolong liquidations, would increase the cost of liquidations, and at least potentially could result in unfairness to some classes of creditor in insolvent liquidations," Patten said, quoting the original judgement.
Background to the sale
According to documents filed with the US Securities and Exchange Commission, Konica Minolta had believed the remaining parts of Danka were not worth paying for, citing technological advances and increased competition in the market. This refusal to buy Danka in its entirety left the parts of the company domiciled outside the US to pay off a range of other liabilities.
"The sale of the US operations to Konica Minolta will result in the sale of the Danka group's remaining operating businesses. As a result, once completed, the company will distribute proceeds from the sale through a UK process of voluntary liquidation," wrote Danka's chairman, AD Frazier, at the time.
"Our board of directors believes that the sale transaction represents the best financial outcome for all stakeholders."
Approximately $150m was originally earmarked to pay for credit facilities provided by General Electric Capital, and another $25m was held in escrow in case of further claims from Konica Minolta under its stock purchase agreement.
The remainder, and any other cash, would be used to discharge other liabilities and costs. Anything still left over would then go to shareholders, the SEC documents said.
Danka Business Systems plc, a VAR of print and imaging products from the likes of Canon, HP and Kodak as well as related services, was founded in 1977 and in 2008 employed 1,850 staff. It had headquarters in west London.
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