The former operator of the National Aquatic Centre is claiming more than €30 million losses and damages over being pursued by a State-owned company for years to pay some €10 million VAT under the centre’s lease until that claim was abandoned in 2010.
Dublin Waterworld Ltd (DWW) claims documents obtained under Freedom of Information legislation show Campus Stadium Ireland Development Ltd (CSID), the since dissolved State company that developed the aquatic centre, pursued the Vat claim in an “alarming” manner and despite advice it was not acting in strict compliance with VAT legislation in relation to valuation of the lease for the centre.
DWW entered into a lease with CSID in 2003 to operate the centre but a dispute later arose whether VAT was payable on the lease. DWW claims documents show that CSID in 2002 received from the Revenue Valuation Office advice to the effect the €35 million open market value of the lease was less than the €60 million “economic value”, making the lease VAT exempt.
The VAT battle and associated threats of restriction orders against DWW directors resulted, the company claims, in it later having to abandon plans for water-based property developments in England, Spain, Prague and Bulgaria with consequent estimated losses of more than €30 million.
DWW is suing the National Sports Campus Development Authority (NSCDA), as legal successor to CSID.
Mr Justice Peter Kelly today granted an application by Brian O’Moore SC, for DWL, to have the case fast-tracked in the Commercial Court.
Denis McDonald SC, for NSCDA, said it was consenting to the fast-tracking but was concerned by the claims made in an affidavit by John Moriarty, director of DWW, and refuted those.
In pursuing the VAT claim, CSID had genuinely believed it could proceed as it did and the Revenue was consulted before any demand for VAT was made, counsel said.
In its action, DWL is claiming damages over alleged abuse of the civil process, alleged interference with its business relations and economic interests and alleged breach of contract, misrepresentation, negligence and breach of duty.
In his affidavit, Mr Moriarty of DWW said CSID in May 2003 issued an invoice claiming some €10.2 million in VAT.
DWW disputed VAT was owed and the matter went to court in 2005 which referred it to arbitration. In July 2005 an arbitrator ordered DWW to pay €10.2 million VAT to CSID.
The alleged VAT liability was then subject of extensive litigaton resulting in a 2010 Supreme Court decision overturning a 2005 High Court decision in favour of CSID, he outlined.
The Supreme Court found CSID, when calculating VAT liability, used a formula plainly adverse to DWW’s interests and ruled the arbitrator was wrong in finding that CSID could disregard the open market value placed on the lease by the Valuation Office.
The matter was returned to a different arbitrator but in July 2010 the NSCDA indicated it did not intend to contest the matter further and agreed to pay DWW’s “reasonably incurred costs” of the first arbitration.
Mr Moriarty claims CSID had received advice in 2002/2003 the then charging of VAT was not in strict compliance with the relevant law.
Correspondence between CSID, its tax advisors Price WaterhouseCooper and the Revenue between late 2002 and May 2003 showed CSID was advised by PwC the open market price valuation of the lease provided by the Valuation Office did amount to “evidence” of the open market value for the purposes of the relevant regulation, which meant CSID could not rely on the mathematical methods of valuation it later invoked, he said.
He also claims documents obtained show CSID was crictised in 2004 and 2005 by various State entities - the Comptroller and Auditor General and the Attorney General - over the manner in which the VAT dispute was managed. It was strongly recommended by those entities that CSID end the dispute and withdraw its claim, he said.
After the September 2005 High Court judgment in favour of CSID, its solicitors issued a demand to DWW and noted any liqudator appointed to DWW would be obliged to bring restriciton applications against the directors, he said.
He had made a number of freedom of information requests from CSID/NSCDA without success from 2006 and the information and documents which formed the crux of this action only came to light last November, he added.
