The High Court ordered the operator of Dublin’s Shelbourne Hotel to give the hotel’s owner access to specified management, audit, customer, employee and accounting information amid a dispute over financial controls and VAT. The court stayed the substantive proceedings for arbitration but allowed the owner’s application for interlocutory relief to proceed.
Shelbourne Hotel Holdings Limited brought the action against Torriam Hotel Operating Company Limited, which managed the hotel under a 20-year agreement. The owner said it was unable to obtain records needed to examine the hotel’s financial systems and its compliance with revenue obligations. The operator disputed that it was required to provide the requested material.
The judgment records that the owner’s auditors had not signed off on the 2007 accounts after identifying serious problems with the hotel’s financial management. A Marriott task force produced successive revisions: a previously reported net profit of €1.429 million became a net loss of €65,309 in a certified restatement dated 15 September 2008. The judge also recorded the operator’s admission of a serious breakdown in financial controls and said the final 2007 position remained unclear after six restatements.
The operator had made a voluntary disclosure to the Revenue Commissioners concerning VAT payments and was trying to negotiate a settlement. It also accepted that it had underpaid the owner for VAT on Marriott rewards and advance booking deposits in 2007 and 2008. It paid €46,094 to the owner to hold against possible interest charges. The judgment did not determine the full extent of any VAT liability.
The operator sought a stay under the parties’ arbitration agreement. Mr Justice Kelly held that the arbitration clause covered the substantive dispute, including termination and damages, but did not prevent the court from hearing the application for interlocutory injunctions. He therefore stayed the action, not the injunction motion.
The judge treated the requested order as a mandatory interlocutory injunction and said such relief was exceptional. He found the owner had established a clear case on access to the information, damages would not be an adequate remedy, and the balance of convenience favoured an order. The order required access to specified records, including management meeting minutes, internal control and audit material, computer-system access rights, customer names, employee details and journal-posting information.
Information obtained under the order was restricted to use in the litigation, the arbitration, the owner’s dealings with the hotel business and its creditors, including the Revenue Commissioners. Any other use required the operator’s consent or, if withheld, the court’s permission. The judgment did not decide whether the owner could terminate the management agreement or recover damages; those issues had been referred to arbitration.