The protracted battle, between the Government agency which owns the National Aquatic Centre and its former managers, was also criticised in advance by the state’s spending watchdog, who said it did not make economic sense.
Yet, after both opinions were submitted to the Department of Sport, the state-owned Campus Stadium Ireland (CSID) spent five years fighting Dublin Waterworld Ltd (DWL) over the €10.5m VAT claim.
In April the CSID lost out in a Supreme Court ruling which echoed the Attorney General’s (AG) original warning.
This had said spending money to fight the case would be “wasteful”.
There has yet to be a final tally of the CSID’s liabilities. However, they are expected to run to millions of euro.
The VAT case was a messy subplot in a round of actions which the CSID successfully took to regain control of the centre from DWL.
Before the 2005 High Court case, the AG and the Comptroller and Auditor General separately told the Department of Sport this battle was ill-advised.
In November 2004 the AG’s advisory counsel, Christopher O’Toole, said the CSID’s case failed the legal test required to succeed.
“It is regrettable that so much time and money has been expended by CSID on the issue and its highly paid advisors did not display the lateral thinking of the C&AG.
“Incurring further legal costs would be even more wasteful,” Mr O’Toole said.
Documents, seen by the Irish Examiner under Freedom of Information laws, showed two months earlier the deputy director of audit at the C&AG’s office, John Chambers, said the CSID should cuts its losses.
“Considerable time and consultancy costs have been extended by the CSID, ultimately, the recovery of VAT by CSID confers no benefit on the exchequer,” he said.
Last month’s Supreme Court case agreed with the AG’s original argument and said the High Court arbitration, which had decided the issue, contained “significant and fundamental errors”.
These, it said, “enabled CSID not so much to succeed at the arbitration, as to register a walkover”.
The Public Accounts Committee is now expected to investigated the issue after its chair, Bernard Allen, confirmed it would examine related correspondence.
Director of DWL, John Moriarty, said there were serious questions to answer.
“VAT experts that reviewed the case on our behalf have expressed amazement that the Government disregarded advice of the office the Attorney General which confirmed that VAT did not arise on the lease,” he said.
A statement from CSID said the VAT dispute was one part of a successful case taken to regain the lease from DWL.
It’s head of administration, Stephen Ryan, said it followed its own legal advice. And he said the VAT issue will be the subject of a fresh, Supreme Court-ordered, arbitration process.
A statement from the Department of Sport said it would await advice from the National Sports Campus Development Authority after it meets next month.