Baileys seek to restrict use of documents in Bovale application

Developer brothers Michael and Thomas Bailey have asked the High Court to prevent the director of corporate enforcement from …

Developer brothers Michael and Thomas Bailey have asked the High Court to prevent the director of corporate enforcement from relying on certain documents in his forthcoming legal attempt to restrain them from involvement in the management of a company because of alleged serious misconduct and fraud in their running of Bovale Developments.

The documents include a report by PricewaterhouseCoopers (PwC), which concluded that "large sums" were paid to both brothers as salaries but were not recorded in their company's books. It is alleged the brothers received payments of some €3 million over a two-year period in 1997 and 1998, more than 17 times the amounts recorded in the books of Bovale.

Peter Lacy, a partner in PwC who conducted an examination of documents for the office of the director of corporate enforcement, said that during his 35 years in public accounting in Ireland, he had not come across a failure to maintain proper books of account "that compares with the extent and gravity of the failures in respect of Bovale".

PwC was appointed by the director in August 2004 to carry out an investigation into Bovale arising from the Flood tribunal report of 2002.

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The brothers have brought their application to exclude Mr Lacy's report and other material from the full hearing of the director's proceedings, brought under Section 160 of the Companies Act. They claim the report is based on material obtained by gardaí from financial institutions and that such material cannot be lawfully used for the purpose of the director's application.

They have also raised issues as to whether PwC or its employees can act as an officer of the director for the purposes of the relevant legislation and whether reports and other documents by the company's auditors are admissible in evidence.

The hearing of the preliminary application opened yesterday before Ms Justice Mary Irvine and continues today.

It arises from the Section 160 proceedings against Thomas Bailey, Coolcommon, Batterstown, Co Meath and Michael Bailey, Killamonan House, The Ward, Co Meath. The director, Paul Appleby, is also seeking that the brothers pay the costs of the four-year investigation by his office into the Bovale company's affairs.

Mr Appleby claims both brothers are directly responsible for breaches of law and duty in the conduct of the affairs of Bovale. Reports from PwC and the planning tribunal, in addition to a €22 million settlement by the company with the Revenue Commissioners, made clear the misconduct was of a very serious character and extended over a prolonged period, the director claims.

The alleged misconduct includes alleged failure to keep proper books and records of the company. The director claims the company's books of accounts failed to give a true and fair view of the state of affairs of the company and failed to explain its transactions.

In affidavits presented to the court, the director also claims both brothers diverted substantial company funds for their personal use and concealed the true nature of those payments. It is also claimed the brothers made an undisclosed personal profit from their position as directors and failed to account for that profit which they, it is claimed, "secretly derived".

The director claimed that the brothers, as officers of Bovale, have been guilty of fraud in relation to the company and the Revenue, a major creditor.

In the brothers' preliminary application yesterday, presented by Donal O'Donnell SC, with Colm Allen SC, it is claimed that sections of a number of affidavits which the director seeks to rely on contain hearsay and inadmissible evidence, including evidence relating to the contents of two reports of the Flood tribunal.

Mr O'Donnell said the director was seeking to rely on the tribunal reports and other material to support a general claim of "bad behaviour" and "general badness" against his clients over the years 1988 to 2000 and was not entitled to do so.

The director contends the preliminary application may be an abuse of court process. He has rejected the brothers' claims and also contends the information on which it is sought to rely in the proceedings against the brothers was independently obtained by PwC and others.

It is claimed that a range of information was obtained under the provisions of the Companies Law Enforcement Act 2001 and the director is also relying on the report from the Revenue Commissioners and other documents.

Mary Carolan

Mary Carolan

Mary Carolan is the Legal Affairs Correspondent of the Irish Times