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'City club was subsidised by the taxpayer'

A High Court judge has said an insolvent private members club had operated under "a form of thieving" in which employees' tax contributions were used to subsidise the business.

Residence at St Stephen's Green, Dublin, whose directors are restaurant owners Simon and Christian Stokes, is seeking a continuation of court protection because of its financial difficulties.

It opened in May 2008 and is a haunt of celebrities and Dublin socialites.

Yesterday, Mr Justice Peter Kelly said it was was effectively subsidised by the "hard-pressed Irish taxpayer" through employees' tax deductions not being passed on to the Revenue Commissioners, who are now owed €1.2m.


It was "a form of thieving" to use employees money deducted for PAYE and PRSI contributions to subsidise a business, he said. The laws on examinership were not intended to provide "a form of absolution for recalcitrant directors", he said.

After being told by chartered accountant Paul Wyse that many companies are "regrettably" doing the same thing, the judge said the accountancy description of such tax monies as "working capital" appeared "extraordinary" and gave "a form of respectability to money being improperly used" by a company. Mr Wyse agreed.

Earlier, counsel for the directors of Missford Ltd, the holding company for Residence, accepted they bore ultimate responsibility for the conduct of its business. However, counsel said, they did not know the employee tax contributions had not been passed on to the Revenue until the Revenue itself initiated an audit after the company claimed a VAT refund.

Saying the case raised "very serious" issues, Mr Justice Kelly postponed to next Wednesday a decision on whether to continue court protection for Missford, which employs 58 people.

The club has 1,450 members and its initial fees were €1,600 a year, plus a €250 joining fee.

Pending the court's decision, interim examiner Jim Stafford continues in place and the judge has also made orders for payment of wages. The application for protection was supported by all creditors, including Zurich Bank, owed more than €2.3m, while the Revenue said it was "very guardedly neutral".

Rossa Fanning, for the bank, said Missford's directors had provided personal guarantees over loans and the bank also had charges over insurance policies.

In seeking protection, Lyndon MacCann, for the company, said Mr Wyse, in his independent accountant's report, believed the company had a reasonable prospect of survival.