Fallon & Byrne examiner approved

The High Court has confirmed the appointment of an examiner to award-winning iconic food business Fallon & Byrne.

This morning Mr Justice Brian McGovern said he was satisfied to appoint Mr Neil Hughes, of Hughes Blake, Chartered Accountants, as examiner to the the company which runs a restaurant and gourmet food hall in Dublin’s Exchequer Street.

Mr Hughes now has up to 100 days to come up with a scheme of arrangement with the company's creditors, which if approved by the High Court, will allow the firm to continue to trade as a going concern.

The company sought Mr Hughes' appointment on the grounds it is insolvent and unable to pay a €1.4m tax bill. However the High Court heard that independent accountant report has said the business has a reasonable prospect of survival if certain conditions, including securing new investment into the country.

The court made the appointment after lawyers for Revenue said that they were taking "a guarded" but "neutral" stance to the company's application for examinership.

Yesterday Rossa Fanning Bl for Mr Hughes said his client shared the view that the company has a good prospect of survival. Counsel also told the court that there has already been 18 expressions of interest by prospective investors in the company.

No bookings had been cancelled and six further bookings for significant events had been made since the company sought Mr Hughes' appointment, counsel added.

Gary McCarthy SC for the company said that the firm's creditors were supporting the application were either supportive of or were neutral towards the application for examinership.

Counsel said that in the event the company was liquidated there would a deficit of more than €2m and the creditors including revenue would get very little, however if the company was to continue as a going concern that deficit would be reduced to €390,000.

Previously the court heard that 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.

Between 2006 and 2009 and 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 company.

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.

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 un-named family member responsible had suffered a psychological breakdown and ceased to be employed. She was not in a position to compensate the company.

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.

The company 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 €9m.

The bad Christmas weather in 2010 was devastating for the company. Many functions and restaurant bookings had been cancelled, normal lunch trade had fallen away and Christmas gift purchases were significantly down because consumers had been unable to travel to the city.

Then there had been the unexpected arrival to Ireland of the IMF in November 2010 and the ensuing austerity budget which further dampened the economic outlook.

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 company had been unable to get a tax clearance certificate which was necessary to renew its drinks sales license.

DLT accountants believed that given the protection of the court from its main and other creditors the company will succeed and is currently trading well.