A liquidator has rejected Independent TD Mick Wallace’s offer to consent to a restriction order under the Companies Act over his conduct of the affairs of his company, MJ Wallace Ltd.

While prepared to accept a similar offer from the TD's son, Sasha, liquidator Michael Leydon said Mick Wallace should be subject to the more serious sanction of disqualification, particularly over the "systemic, planned, dishonest and fraudulent" non-payment of some €1.4 million VAT by the company over a two-year period up to 2010, the High Court was told.

Concerns

Stephen Brady, for Mr Leydon, said the liquidator’s other concerns included lack of clarity about various debts; unreliable company accounts and various post-liquidation matters, including delay in providing a statement of affairs and the level of the Wallaces’ co-operation with the liquidator.

The liquidator could not make “head nor tail” of the TD’s claim of an alleged arrangement between a Wallace company and Ulster Bank for treatment of rental income from properties over which the bank had a charge, he added.

Mr Wallace and his son were in court for the opening on Monday of the hearing of the Companies Act application before Mr Justice Robert Haughton. It continues on Tuesday.

Mr Leydon was appointed liquidator over MJ Wallace by Promontoria Aran, a subsidiary of US fund Cerberus, arising from a €2 million judgment obtained by the fund against the company in relation to the Italian Quarter development in Dublin.

Arising from their stewardship as directors of the company prior to the liquidator’s appointment, Mr Leydon brought proceedings under the Companies Act against both the TD and his son.

Questions

Mr Wallace, who previously raised questions over the €1.6 billion purchase by Cerberus from Nama of a group of Northern Ireland-linked loans, called Project Eagle, was earlier this month refused orders requiring the liquidator to discover documents concerning the motivation for the proceedings.

The liquidator's application was due to open at 2.15pm on Monday but was delayed while talks continued between the sides. When it opened, the judge heard both Wallaces were prepared to consent to restriction orders but Mr Leydon would only accept a restriction order for Sasha Wallace.

A restriction order prevents a person being involved in a company for five years unless it meets certain capital requirements.

Mr Justice Haughton said he considered a restriction order in relation to Sasha Wallace “entirely appropriate” as it could not be said he had acted honestly and responsibly in relation to the conduct of the company’s affairs.

The judge made that order, with a stay of one month, plus a costs order for €1,500.

Application

Moving the disqualification application against Mick Wallace, Mr Brady said he had to establish Mr Wallace was unfit to be involved in managing a company’s affairs.

That test had been made out, primarily because of the “extraordinary” VAT liability which was the “most important” issue in this matter, he argued. It was notable Mick Wallace has never denied the fact of the €1.4 million being due and, in a statement to the Dáil in 2012, had said the manner in which the VAT was dealt with was an error of judgment.

It seemed the company and its directors grappled with the VAT issue only as a result of a Revenue audit in 2010, he said.

Mr Justice Haughton noted the firm had been in existence since 1970, appeared to have been tax complaint until 2008-2010, and asked how that history should be approached by the court. He also asked whether Mr Wallace’s public acknowledgement of the VAT liability was a point in his favour.

Mr Brady said the court was entitled to look at the overall position of a company but compliance with legal obligations over a long period did not entitle the court to overlook the seriousness of the VAT issues.

Debts

The value of the company’s trading during the 2008-10 period was some €11.9 million and less than 10 per cent of the underdeclared sum was repaid by the time of the company’s liquidation, he said.

Mr Leydon was also concerned about the lack of clarity in the company’s accounts, including about sums of some €181,000 owed to MJ Wallace by Wexford Youths Football Club Ltd.

There was also lack of clarity about a debt due from Amnesty International and no documents about an alleged arrangement between a related company and Ulster Bank concerning an apparent rent set-off arrangement.

Mr Wallace had in affidavits sought to explain the various matters but the liquidator had difficulty in understanding the explanations, the court heard.

Mr Wallace had also referred to his criticism of “vulture funds” but the court had already ruled that as not relevant to this matter, counsel said.

The hearing continues.