Lease and franchise deal worth €825k ‘not on books’

The High Court has made restriction orders against two directors and one non-executive director of a company which operated a restaurant in the Liffey Valley shopping centre, Dublin.
Lease and franchise deal worth €825k ‘not on books’

In granting the orders, Mr Justice David Keane noted lease and franchise arrangements with another company, of which two of the directors were shareholders, cost the company about €825,000 and were not reflected on the balance sheet in the company’s financial statements.

The fact the third director played an “entirely passive” role in the company did not exonerate that director from responsibility, the judge added.

The restriction application was sought by Eamon Leahy, who was appointed liquidator of Spur (Liffey Valley) Restaurants Ltd, against Helen Bailey, Stephen Logue, and Denis Cremin when it went into voluntary liquidation in 2013.

Ms Bailey was the company’s operations director, Mr Logue the managing director, and Mr Cremin was a non-executive director.

At the time of the liquidation, the respondents were directors of the company that had operated a restaurant at the Liffey Valley for around 11 years. It had suffered a downturn in recent years and went into liquidation with a deficit of €309,000.

Mr Leahy sought the orders over how the firm dealt with a debt owed to it by another company, Trinity Leisure Leisure Ltd. Trinity, whose directors are Mr Logue and Ms Bailey, held 95% of Spur’s shares.

He had made enquires about two transactions involving Trinity and Spur in 2010.

The transactions saw Trinity’s debt to Spur reduced by €825,00 when Spur acquired franchise rights and the transfer of the restaurant’s lease from Trinity for an agreed amount.

The explanations proffered to the liquidator were not sufficient, he claimed. The liquidator had sought documents and details about the agreements but did not receive them. This, he said, was a failure to co-operate.

The directors did not oppose the application, nor were they represented in the proceedings.

In his judgement yesterday, Mr Justice Keane said there was a failure to provide the liquidator with the documentation to allow a proper examination to support the transactions between Trinity and Spur.

The judge said the purported lease and franchise agreements were not reflected on the balance sheet in the company’s affairs in 2010 copies of the agreements, which benefited another company of Ms Logue and Mr Bailey and were not produced.

The agreements gave rise to an obvious potential conflict of interest on the part of Ms Logue and Mr Bailey.

The practical benefit of the transactions to Spur was at the least questionable, said the judge. Spur, he said, had acquired assets that had little or no realiseable value on insolvency when Spur was already in financial difficulty.

The amount expended in the transactions was €825,000, more than twice the company’s net deficiency on insolvency.

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