Brothers spent €146,000 on 'expenses'

Brothers Simon and Christian Stokes, whose Bang Cafe restaurant in Dublin has been wound up with debts of €2.4 million, spent almost €146,000 of the company's money over an 18 month period on personal expenses, including hotels and restaurants in Ireland, London, Denmark and Barbados.

The company owes more than €470,000 to the Revenue.

In the High Court today Ms Justice Mary Finlay Geoghegan was told the brothers were consenting to orders under Section 150 of the Companies Act restricting them, for a period of five years, acting as directors of companies unless those companies meet minimal capital requirements.

An application by Tom Murray, liquidator of Mayfair Properties Ltd, which operated Bang Cafe, for orders under Section 160 of the Companies Act disqualifying the brothers from involvement in the management of any company on grounds of unfitness has been adjourned for three weeks.

Bernard Dunleavy, for the liquidator, said, given the consents to the restriction orders, a number of issues arose and he wanted the Section 160 matter adjourned for three weeks. Issues related to discovery for that application were also adjourned.

An examination by Mr Murray of credit card statements between January 2007 and June 2009 showed large sums of Mayfair company monies were used to pay personal bills incurred by Simon Stokes at hotels, restaurants and a range of stores in Ireland and abroad, the court heard.

The payments included €2,421 to the Coral Reef Club, Barbados; €1,891 to Blakes' Hotel in London; €4,425 to the Gucci Store in New York; €2,000 to the Professional Golfers Association in Blackrock; €2,277 to the Skovshoved Hotel Denmark; €2,621 to Brown Thomas in Dublin and €6,494 to Pia Bang Interiors in Dublin.

Credit card payments in the name of Christian Stokes between January 2007 and June 2009 included a payment of €3,835 to Ashford Castle; €2,091 to Maroma Resort & Spa and €2,011 to the Skovshoved Hotel, Denmark.

Mayfair was incorporated in 1997, began trading in 1999 and operated the Bang Cafe at Merrion Row, Dublin until it was wound up in January last year.

In an affidavit, Mr Murray outlined several concerns about the operation of Mayfair. These were - outstanding payments to the Revenue; history of under-declaring Revenue returns; personal use of company credit cards; failure to liquidate the company on a timely basis; inter-company loans; cash management; failure to submit accounts to the Company Registration Office and failure to implement changes in tax legislation.

Mr Murray said the outstanding Revenue liability is €477,996 and he believed the directors had improperly used monies owing to the Revenue as a means of financing the business.

He also believed, from January 2008 to October 2009, the Revenue was not made fully aware of all liabilities of the company due to under-declaring returns in the sum of €189,325 and failed to submit returns at all for €151,251.

He also believed the company from January 2007 to June 2009 paid some €127,275 for Ulster Bank Business Credit Cards, and from June 2008 to June 2009, paid €19,851 in Bank of Ireland business credit cards.

Credit card statements showed significant personal use of the cards by the directors accounted for the vast majority of the monies spent, he said.

Mr Murray said the company should have been liquidated earlier as, from 2005, the shareholders did not financially support the company and in fact drew directors loans from it. The company had generated a loss from 2005 to 2010, he said.

He also said a subsidiary company, Auldcarn Ltd, was insolvent by the end of 2005 and ceased to trade in 2007 when it owed Mayfair €536,811. He said the directors should have known this debt was not collectable and should have written it off which would have made it obvious sooner that Mayfair was grossly insolvent.

Mayfair also should not have made intercompany loans to Auldcarn and should not have used monies from Missford Ltd, a related company, to fund Mayfair's operations when cash flow was difficult.

Mr Murray said Mayfair began to use the credit card machine of Missford after the Revenue had in November 2009 placed an attachment order on Mayfair's bank account. Investigation of credit card transactions processed through the Missford terminal showed not all transactions were accurately recorded in the intercompany account, he said.

On issues about cash management, Mr Murray said PAYE/PRSI was not returned for employees paid casual wages and the directors also failed to implement necessary changes to the way the company administered tips and gratuities to staff.