The High Court has refused to impose restriction orders on two directors – including developer Seamus Ross – of a firm involved in the acquisition of land.
The orders were sought by Stephen Tennant, of Grant Thornton, as liquidator of Andiamo Properties, of which Mr Ross and Michael Keogh were directors. It was alleged the directors acted in an irresponsible manner over a tax demand for €2.9 million.
In his judgment, Mr Justice Paul Gilligan said he was satisfied “from the facts and surrounding circumstances in the case” that the two directors acted responsibly and honestly with regard to the affairs of the company. There were “no circumstances” to justify granting the restriction orders.
Mr Tennant sought the restriction orders under Section 150 of the 1990 Companies Act, which provide a person cannot act in any way as a director or secretary of a company for five years unless the company meets certain capital requirements.
Mr Ross, Barberstown House, Clonsilla, Dublin 15, and Mr Keogh, Baconstown, Trim, Co Meath said they had always conducted the company’s affairs in a honest and responsible manner.
Mr Ross was a director between January 2001 and October 2012 while Mr Keogh was director from 2001 until the company was liquidated in 2013.
The company, established in 2001 to acquire development land, was part of a group of companies connected with the construction industry and did not trade for four years before it was liquidated.
The action arose out of a demand by Revenue in 2005, following a VAT audit, to pay €2.9 million arising from land deals the company had treated as VAT exempt. The assessment was upheld on appeal in 2010 and the company’s High Court proceedings concerning the assessment were dismissed in 2012.
Mr Tennant claimed the company should not have paid out dividends of €16 million in 2007 and a further €850,000 in 2009 to other companies within the group allegedly controlled by the directors. Those payments had “stripped the company of its assets”, leaving it unable to pay the Revenue, it was alleged.
The respondents said they did not believe the company had a VAT liability at the time of the company’s liquidation. They said the company had operated a scheme devised by its auditors to enable Andiamo limit its VAT liability, based on advice from accounting and legal experts, which the directors relied upon in good faith.
The dividends were paid when the group of companies were undergoing re-organisation and with the approval of its auditors, Deloitte and Touche, they said. They also said the company believed at all stages it would win its dispute in relation to the VAT assessment.
It was only after the company went into liquidation in 2013 their appeal against the High Court’s dismissal of their action was withdrawn, they added.
In his decision, Mr Justice Gilligan said the central issue was whether the directors were obliged to hold back €3 million from March 2005 until the final resolution of the original VAT assessment many years later.
Deloitte and Touche, a high regarded accountancy firm, had no difficulty preparing accounts for the relevant years which did not contain any contingent liability in respect of the VAT assessment, the judge said.
The directors, while experienced directors of construction firms, did not have professional qualifications and acted on the professional advice furnished to them concerning the VAT scheme it had operated, he said.
It was also significant, during the relevant period, Revenue continued to give the company tax clearance certificates with no reference to the €2.9 million VAT assessment and that Mr Tennant initially found no reason to justify seeking restriction orders and brought this application after the ODCE refused to relieve him of his obligation to seek such orders, the judge added.
There was extensive communication between the ODCE and liquidator and it was reasonable to conclude Mr Tennant had “considerable doubt” about this matter, he added.
