Luxury food emporium can't pay €1.4m tax bill
AWARD-winning food business Fallon & Byrne is insolvent and unable to pay a €1.4m tax bill, an emergency sitting of the High Court was told yesterday.
Mr Justice George Birmingham granted the company, which still has a sales turnover of more than €8m at its restaurant and gourmet food hall in Dublin's Exchequer Street, protection of the court by appointing chartered accountant Neil Hughes as interim examiner. He will run the business as a going concern.
The court also heard that a family member who was looking after the company accounts misappropriated company funds of more than €220,000 over a number of years.
Barrister Gary McCarthy told the court that while the firm was still making a profit on an €8m sales turnover it had found itself, for a number of reasons, unable to meet its historic and current tax liabilities.
He said the Revenue Commissioners had served a petition to wind up the company but the directors felt there still were strong prospects of it surviving under examinership.
Mr McCarthy, for the company, said its problems arose mainly from a decision of the directors Paul Byrne and Fiona McHugh to concentrate on front-of-house duties while leaving financial administration to an under-qualified bookkeeper member of Mr Byrne's family.
Unbeknownst to the directors, substantial arrears of taxes in the region of €840,000 had been allowed to build up despite relevant returns having been made to the Revenue Commissioners which eventually issued letters of demand and, ultimately, a petition to wind up the firm.
Mr McCarthy said the ability of the financial administrator to mask such a significant tax liability from the directors was a fundamental weakness in the systems the directors had put in place when the company was set up in 2006.
He said Fallon & Byrne had called in Delaney, Locke and Thorpe (DLT) accountants to represent it during an audit and discovered a number of inaccuracies and discrepancies in record keeping.
It had found that the financial administrator had misappropriated company funds of at least €223,000 over a number of years.
The court heard that the unnamed family member responsible had suffered a psychological breakdown and ceased to be employed.
She was not in a position to compensate the company, the court was told.
Mr McCarthy said an instalment plan to pay off its historic tax debts had been agreed with the Revenue but in so doing the company had fallen behind with its current tax payments and the Revenue Commissioners had ultimately lost patience.
He told Judge Birmingham that the firm had suffered due to the economic recession since 2008 and turnover had decreased from €11m over the last number of years but had levelled off at just over €8m.
Last year's bad Christmas weather had been devastating. Many functions and restaurant bookings had been cancelled, normal lunch trade had fallen away and Christmas gift purchases were significantly down as consumers had been unable to travel to the city.
He said the arrival of the IMF in November 2010 and the ensuing austerity budget further dampened the economic outlook.
Mr McCarthy said the economic downturn, together with other businesses going into examinership and the receivership in Superquinn, had led to a tightening of credit from suppliers, many of whom would accept only cash on delivery.
As a result of its difficulties with the Revenue Commissioners, the firm had been unable to get a tax clearance certificate which was necessary to renew its drinks sales licence.
Mr McCarthy said DLT accountants believed that, given the protection of the court from its main and other creditors, the company could succeed again and was currently trading well above its breakeven turnover figure of €8m.
Its order book for 2012 was strong with significant prospects for future sales growth in the areas of home catering and on-line shopping.
Judge Birmingham appointed Mr Hughes as interim examiner, adjourning proceedings until January 12.