The High Court found that Peter Killeen, managing director of PSK Construction Limited, was knowingly party to reckless and fraudulent trading after deciding in March 2005 to under-declare and underpay the company’s PAYE/PRSI and Relevant Contracts Tax liabilities. The court declared him personally liable for company debts up to €1,604,526 and decided to disqualify him as a company director for seven years.
The judgment, delivered by Ms Justice Finlay Geoghegan on 7 December 2009, arose from an application by the company’s liquidator, Tom Kavanagh. PSK Construction was in voluntary liquidation. The court said the company’s losses on contracts at Sir John Rogerson’s Quay and Beacon South Quarter were the primary cause of a sharp deterioration in its finances.
The court found that between February and September 2005, the company under-declared and underpaid PAYE/PRSI by €1,075,851. It under-declared RCT by €583,172 between January and September. The total under-declared to the Revenue Commissioners for both taxes in 2005 was about €1.66 million. Justice Finlay Geoghegan accepted that Killeen intended the underpayments to be temporary, but found he had no reasonable basis to believe the company could later pay the amounts due. Given the loss-making contracts and the scale of the under-declarations, he knew the decision created an obvious and serious risk of loss to creditors, the judge found.
The court also found that the under-declarations were made to lead the Revenue Commissioners to believe the company owed less than it actually did. It concluded that Killeen had knowingly participated in that conduct for a fraudulent purpose.
The court refused the reckless trading claim against Lorraine Higgins. It was not satisfied she had enough knowledge of the company’s financial position in March 2005 to know that continuing to trade while under-declaring tax created a serious risk to creditors. She was an employee and director, with no accounting expertise, and said she believed Killeen’s explanation that the measure was temporary.
However, the court found both respondents responsible for the company’s failure to keep proper books of account. It declared them jointly and severally liable for €21,447 in additional liquidation expenses to reconstruct the books. The applicant did not establish that missing records caused his inability to recover certain company debts.
The court did not resolve an allegation that Killeen bought stolen tarmacadam, saying affidavit evidence alone was insufficient, and ignored it in reaching its decisions. It also made no separate order over €8,823.34 in personal expenses charged to Killeen’s company credit cards, as it considered that amount included in the deficit used to calculate his liability.
Justice Finlay Geoghegan ordered disqualification periods of seven years for Killeen and five years for Higgins. The court said Higgins’s involvement in the under-declarations made her unfit to manage a company for the purposes of disqualification, despite refusing the reckless trading claim against her. It reserved any further order concerning payment of Killeen’s €1,604,526 liability for a later hearing.