Pyrite company paid out €3.75m dividend during legal action
Commercial court refuses application to fast-track wind-up petition on Irish Asphalt
A COMPANY which was sued over the supply of a defective construction material paid out €3.75 million in dividends despite facing a legal action which has left it now owing some €2.4 million to another firm, it has been claimed.
While that case was ongoing, Irish Asphalt transferred assets to other companies within the group and paid dividends to shareholders, James Elliott Construction claims.
The case arose out of Irish Asphalt’s supply to Elliotts of stone infill with excessive amounts of pyrite used in the Ballymun Cental Youth Facility building in Dublin, which subsequently had to undergo major repair work.
On Monday, Elliotts asked that its application to wind up Irish Asphalt, arising out of its failure to pay the €2.4 million outstanding from the 2011 judgment, be admitted to the fast track Commercial Court list.
Mr Justice Brian McGovern declined to transfer the case, with the effect it will go through the normal High Court list. The judge said winding up applications normally go through the ordinary High Court list and he would not exercise his discretion to transfer this matter to the commercial list.
In an affidavit, accountant Mark Mulcahy, who reviewed the accounts of Irish Asphalt, said James Elliott Construction had launched its case over pyrite against Irish Asphalt in 2008. Judgment was given in 2011 and, despite appeals, including a reference to the Court of Justice of the European Union, the judgment stood and some €2.4 million remained to be paid.
Following instigation of that case, it was clear the Lagan Group underwent significant reorganisation with the effect Irish Asphalt is “now isolated from other group activities”, Mr Mulcahy said.
A significant portion of its trade appeared to have been stripped out while it was defending the legal action, he said.
Lagan Holdings’ two shareholders, Kevin and Michael Lagan, appeared to have decided to split the overall Lagan interests between them, Mr Mulcahy said. The trade of Irish Asphalt appeared to have been transferred to a subsidiary called Lagan Macadam Ltd.
Between 2011 and 2015, Irish Asphalt incurred exceptional costs of €24.4 million arising out of settlement of separate proceedings with another company which built homes containing pyrite supplied by Irish Asphalt. It was evident that Irish Asphalt disposed of a significant number of tangible assets during this period, Mr Mulcahy said.
Despite incurring a net loss of €7.1 million in 2010, Irish Asphalt paid a dividend of €3.75 million that year, he said. It also owed €7 million to Lagan Cement Group and €5.8 million to Lagan Construction Group even though the accounts did not disclose the advancement of intercompany loans to Irish Asphalt, Mr Mulcahy said.
While the company had sufficient distributable reserves to allow for a dividend, the “timing of the payment in the midst of significant legal proceedings with an uncertain outcome is questionable”, he said.
At an overall level, the net assets of Irish Asphalt decreased from a high of €43 million in 2009 to a net liability position of €9.9 million in 2015, he said.
Mr Mulcahy said there should be a full investigation of the affairs of the company since it became aware of the potential litigation over pyrite in 2007. A liquidator would be very likely to investigate the transfer of assets, the payment of the dividend and the loans and such an investigation would have potential to generate significant recovery of assets for creditors, he added.