The High Court has approved a five-year disqualification on holding company directorships against the former owner of a Carlow-based wholesale fruit and vegetable firm which went into liquidation with a €2.3m deficit.
John Swan (60), of Meadow Bank, Palatine, Co Carlow, main shareholder and MD of Swan Fruit Ltd (in voluntary liquidation), consented to the disqualification following settlement of proceedings under the Companies Act brought by liquidator PJ Lynch.
He also consented to an order directing Irish Life to transfer some €239,000 from a pension fund to the liquidator in his role as pension trustee of the company.
Mr Justice Brian Cregan also approved orders against Mr Swan's sons, Alex Swan (33), of Pollerton Big, and Niall Swan (30), of The Downs, Pollerton, both Co Carlow, who had also both acted as managers and directors of the company. They both consented to orders restricting them from acting as directors for five years of companies with certain capital requirements.
Swan Fruit, which had an annual turnover of €40m, went into voluntary liquidation in 2014, with the loss of 23 jobs, because it was insolvent and unable to pay its debts.
Set up by John Swan in 1996, it operated a retail store in Mullingar along with the wholesale cash and carry fruit and vegetable business in Carlow.
Proceedings against the Swans were brought by liquidator Lynch with the approval of the Director of Corporate Enforcement in 2016 as part of a complex investigation into the company.
In an affidavit, Mr Lynch said he believed John Swan was knowingly a party to the carrying on of the business in a reckless manner and with intent to defraud creditors of the company.
While there was no evidence available as to the extent of the involvement of the sons in the firm’s financial affairs, as directors they had a duty to comply with their obligations under company law, he said.
John Swan, in affidavits, denied there was a failure to keep records or that any had been erased. He claimed the failure of Revenue to make a €480,000 VAT refund was "a material contributory factor to the ultimate demise of the company”.
The liquidator disputed this and said, among the reasons the company failed, was the total lack of control over all aspects of the operation of the business, the lack of a financial controller despite having a €40m turnover, and total mismanagement of the affairs of the company.
There was also a failure to properly account for non-cash assets, the unlawful disposal of assets on an on-going basis, unlawful withdrawals of monies from company bank accounts, the misappropriation of company revenues and failure to properly account for transactions on an ongoing basis, the liquidator said.
There was further a failure to keep proper books and records and the erasement of supporting software relevant to those records. There was also a failure to discharge monies to Revenue in a timely manner and the use of those monies due for use as cash flow to keep the company going.
Mr Lynch said the company continued to trade at a time when it was abvious that it was insolvent and there was a failure to wind it up earlier than it did. Monies due to creditors were not paid and there was significant falsification of the books,
Mr Lynch said that in a deliberately planned operation, at the behest of John Swan, a company called Haupt Distribution Ltd, trading as Bestway, of which Mr Swan was a director, took over the business of the company "lock stock and barrel free gratis and continued to trade in the place of the company".
This was a “Phoenix company” operating from the same premises as Swan Fruit, with the same management team, and upon the winding up of the company on 16 April 2014, continued to operate as if it were Swan Fruit, he said.
In the process, the directors sought to abandon responsibility for around €2.3 million of losses, including €800,000 due to Revenue and €1.8 million due to unsecured creditors, he said.
Mr Lynch said John Swan refused to answer many questions about the operation of the business and about financial transfers to certain individuals.
He believed the attitude Mr Swan showed towards him (Lynch) and to the liquidation was "totally unacceptable having regard to the level of wrongdoing that has gone on under his stewardship as the Managing Director."
