Limits on Carway as company director

Businessman Mr John Carway, his son Stephen and daughter Elaine have been restricted by the High Court from acting as company directors for five years.

Mr Justice McCracken yesterday said he had "no doubt" the Carways, as directors of Verit Hotel and Leisure (Ireland) Limited (in receivership and in liquidation), "knew or ought to have known" that, for a considerable period before the firm went into liquidation, it was not viable and would continue to lose money at the expense of its creditors, particularly the Revenue Commissioners.

He said it was clear that, "at least from the beginning of 1993, this company was being kept alive by the fact that it was in effect trading on monies due to the Revenue and allowing huge arrears to build up, together with the attendant interest".

He was astonished that counsel for the directors had attempted to justify this by arguing if a company was temporarily short of funds, it might be justified in not paying the Revenue and in effect taking a loan on interest to keep the company going. "To try to justify trading by using what is in effect its employees' money without their knowledge and consent is to me a quite bizarre and totally irresponsible attitude."

On that ground alone, he had "no doubt" the directors must be restricted under Section 150.

He was delivering his reserved judgment on an application by Mr Vincent Duignan, liquidator of Verit, for orders against Mr John Carway, with an address at Port Erin, Isle of Man, and against Mr Stephen Arthur Carway and Ms Elaine Carway, of Ballyvalley House, Killaloe, Co Clare, under Section 150. The application was initially brought in 1994 and re-entered in March 2000. Outlining the background, the judge said Verit began business in 1990 and owned and operated six hotels, including the Nenagh Lodge Hotel and the Ormond Hotel in Nenagh, Co Tipperary.

Verit had come under "severe pressure" from the Revenue in 1993 and came to an agreement to pay some £300,000 in tax arrears, apparently by January 31st, 1994.

The Carways used another company they controlled, Letcane Investments, to buy the Ormond Hotel and raise the money.

Mr Justice McCracken noted the liquidator had criticised other matters regarding Verit's affairs, including the transaction with Letcane involving the Ormond Hotel. Mr Justice McCracken described as "certainly questionable" the way in which that transaction was put through the books of Verit. However, iIn his view, the greatest significance of the transaction was not that it may have technically been a fraudulent preference but rather that the panic to put through the sale showed the directors were well aware in January 1994 that if they did not pay £300,000 to the Revenue the company was "going to go under". It was instructive to note the company made no further payments to the Revenue before the winding up, he said.

He had no doubt an order under Section 150 should be made.