The owners and operators of two Co Cork-based resorts have obtained temporary orders freezing the assets of two former directors alleged to have defrauded the businesses of more than €1.8 million.
The ownership of the Fota Island and Kingsley resorts, and several other properties, had been the subject of a legal dispute involving Chinese businessman Yuzhu Kang, which was resolved last month.
On Friday Xiu Lan Hotels Limited, Xiu Lan Riverside Hotel Limited, Xiu Lan Payroll and Management Services, which are firms owned by Mr Kang, obtained temporary freezing orders against Xiu Xiang Kelly and her son Tuo Du.
It is claimed that defendants are both former directors of the first and second plaintiff firms which own and operate the resorts.
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Ms Kelly has been ordered by the court not to reduce her assets below a value of €1.85 million while Mr Du cannot reduce his assets below a value of €1.7 million.
In a sworn statement to the court, Mr Kang claims that the defendants have engaged in dishonest and fraudulent behaviour.
Mr Kang sought the orders as he believes the defendants may try to dissipate the money he claims are owed to the companies.
He alleges that at a time when the defendants were directors they got the companies to pay Ms Kelly approximately €1.5 million for various artworks and furniture.
The money was paid between September-December 2023, for more than 20 “antiques” placed on display in the hotels. The items were “not remotely worth” what was paid for them, Mr Kang claims.
Mr Kang said that Ms Kelly was not the owner of any of the artworks in question.
Mr Kang also claims that €246,000 was paid to the defendants in 2021 over what the court was told were “sham redundancies”.
The court further heard that the plaintiffs have concerns about a directors loan of €125,000 advanced to Ms Kelly by Xiu Lan Hotels Ltd which remains unpaid.
As a result of these alleged activities Mr Kang’s firms have sought “Mareva” or freezing orders restraining the defendants from reducing their assets pending the out come of proceedings against them.
Last month Mr Kang settled separate, but related proceedings, he brought against Ms Kelly and Mr Dun, with addresses at Fota Island, where the businessman alleged he was the victim of conspiracy to defraud him.
He claimed that he had invested some €30 million in the resorts, and other commercial properties in Galway, Dublin and Cork.
The claims were denied.
That action, which was resolved following out of court talks, was also against Xiu Lan Holdings Ltd and Lan Sideriver Investment Holdings Ltd, both with offices at Ballincollig, Co Cork, and Allied Express International Development Ltd with registered offices in Hong Kong.
As part of that settlement agreement, various declarations were made including that Mr Kang was the 100 per cent shareholder of the firms that own the resorts and various other commercial properties.
It also declared that the defendants did not enjoy any right over shares in companies linked to the properties.
Ms Kelly’s counterclaim that she effected the purchase of the Fota Island property in 2013 using her own money and that she has at all times been the beneficial owner of the resort was dismissed.
In addition, Mr Kang agreed to make a payment of €2.5 million to the defendants, which the court heard was a small fraction of the value of the properties in dispute, which have an estimated worth of €70 million.
On Friday, Stephen Walsh BL, instructed by Taylor Wessing Solicitors, for Mr Kang, said the businessman only became aware of payments to the defendants for the artwork and the sham redundancies after the earlier proceedings had settled.
Counsel said that the application for the freezing orders was not an attempt to enforce the settlement of the other proceedings, but is an attempt to recover money belonging to the companies that have been unlawfully misappropriated by Ms Kelly with the assistance of Mr Du.
Counsel said it is their case that in the earlier proceedings the defendants committed a serious fraud against Mr Kang and tried to deprive him of very valuable assets.
The recently revealed behaviour, counsel said, was also dishonest.
It is their case that the defendants had “lied repeatedly” and had attempted to “siphon off” cash from the businesses before Mr Kang retook control of the hotels.
As a result it could be inferred that there was a real risk of assets being dissipated, counsel said.
Counsel said that arising out of the recent discoveries his client does not intend to make the €2.5 million payment due to be paid to the defendants as part of the settlement on Friday, March 15th.
Mr Justice Rory Mulchay granted the plaintiffs temporary freezing orders on an ex parte basis.
The judge said he was satisfied that the applicant had made out a sufficiently strong case that the funds may be dissipated, that merited the granting of the injunction.
The court made the matter returnable to a date early next week.
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