The liquidator of a restaurant and café in Castleknock, Dublin, resigned after discovering the operating company’s bank accounts had been “drained of funds”, the High Court has heard.
Castleknock Hospitality Ltd, which ran the Twin Oaks and Acorn restaurant/café, went into voluntary liquidation last September having closed last May after just under two years in operation.
PJ Lynch, of PJ Lynch & Co Chartered Accountants, was appointed liquidator but he resigned in November due to what he said were issues including that the company director and secretary continued to pay creditors after his appointment as liquidator.
On Thursday, Revenue, which is owed nearly €187,000 and is the sole preferential creditor, applied to the High Court for an order replacing Mr Lynch as liquidator. The application was made with only Revenue represented in court.
Barrister Sally O’Neill, for Revenue, said the application was made on foot of concerns raised by Mr Lynch on his resignation. Mr Lynch had been in touch with Revenue since his appointment in relation to corporate governance issues, counsel said.
Miriam Walsh, an official of Revenue’s insolvency unit, said in an affidavit the business traded as a restaurant and café from July 2022.
The sole shareholder and director was Stephen Donnelly, of Beechpark Avenue, Castleknock, while his father John Donnelly was secretary and may also have acted as a shadow director, Ms Walsh said. A “J Donnelly” is the ultimate landlord of the premises they operated from.
Ms Walsh said she attended a creditors meeting on September 27th last when she raised concerns including about the accuracy of a statement of affairs, particularly in relation to employee wages and customer vouchers.
Concerns were also raised about the lack of filed accounts and the delay in holding the creditors’ meeting, given that company had ceased trading last May.
Ms Walsh said that Mr Lynch said in his resignation as liquidator that the directors’ statement of affairs presented to the creditors meeting showed the company had realisable assets of some €27,734.
However, Mr Lynch said, his investigations found there was no stock or tangible assets “and that the bank accounts of the company had been drained of funds”. He said Stephen Donnelly had “made a material omission” knowing or believing it to be false under the Companies Act 2014.
He said he also found that Stephen and John Donnelly continued to pay some creditors after his appointment as liquidator. He said he would term their actions as “intermeddling in the liquidation”, also contrary to company law.
His investigations also showed John Donnelly participated in the day to day operation of the company as a “shadow director”.
Ms Walsh said that given the corporate governance issues and likely misappropriation of company funds, Revenue urgently sought the appointment of a replacement liquidator.
Mr Justice Brian Cregan said he was satisfied this was a suitable case to appoint a replacement.
He ordered that chartered accountant, Thomas Musiol of Musiol Advisory, be appointed and he gave Revenue liberty to apply to the court if it is necessary that an order be made in relation to transferring the files in the liquidation.
The judge told Ms O’Neill he thought it important that Revenue take a stance in cases where there is some sort of alleged misappropriation.
