Twins could be held liable for €4m debts at members club
Judge withdraws legal protection
Published 21/01/2010 | 05:00
RESTAURANT-owning twins Simon and Christian Stokes could be prosecuted for reckless trading and be made personally liable for the debts of their insolvent private members' club.
High Court judge Peter Kelly yesterday withdrew court protection from Residence, an exclusive club on St Stephen's Green, Dublin.
The judge directed that papers in the failed court protection bid be sent to the Director of Corporate Enforcement.
The judge, who last week described some of the financial affairs of the elite club as "a form of thieving", said there "was at least a question mark" over the conduct of the twins as he directed that corporate enforcer Paul Appleby investigate the brothers.
He said the appointment of an examiner to Missford Ltd, the company behind Residence, would result in the twins avoiding a full investigation under the Companies Act.
Section 297a of the act outlaws reckless trading. Mr Justice Kelly said such an inquiry could not be completed within a 100-day examinership process.
Zurich Bank is the club's largest creditor and is owed €2.3m. Last night the bank, which supported the examinership process, appointed a receiver over the club which has liabilities of over €4m and has never traded profitably since it opened in May of last year.
The club, which is expected to be sold as a going concern, has more than 1,450 members and runs a public bar and nightclub. Refusing court protection, the judge strongly criticised the brothers' management -- in particular, the fact that Residence traded using employees' tax monies and VAT payments made to it as working capital.
The deducted PAYE tax and PRSI contributions and VAT payments were due to be forwarded to the Revenue Commissioners, which is now owed €1.2m in unpaid taxes.
In a 22-page ruling, which will not be appealed by the pair, whose parents are restaurateur Jeff Stokes and designer Pia Bang, the judge said it was "high time" for the abandonment of what he had been told was a "normal" accountant's convention of treating tax money as working capital.
He said: "There must come a time when companies that have flouted the obligations of company law, revenue law and their obligations to employees, should not be allowed to call in aid the very legislation they have ignored so as to save the enterprise."
The judge said the examinership process could not be allowed when it was likely to have a beneficial effect for "delinquent directors".
He said the purpose of the law -- which grants a limited period of protection from creditors -- was not intended to provide directors with "a ready form of absolution".
Last night, the brothers said that Residence would remain open during the receivership and said it was their intention to work with the receiver to keep the business going. "We have been heartened by the tremendous support we are receiving from the club's members during this time," they said.
"Jim Stafford, of Friel Stafford Corporate Recovery, who has been appointed receiver, is working with the two of us and our team to operate the club, under his control, while he seeks a purchaser for the business."
In his ruling, the judge said a 100-day examinership would not allow for an investigation.
However, he added it would allow the directors to have the liabilities of the company written down and avoid the full investigation he believed was warranted.