Deputy Jim Kemmy gave me notice of his intention to raise on the Adjournment the collapse of the building firm of Fitzgerald and Dowling Limited, management contractors, at the Savoy Complex, Limerick, with the loss of 50 jobs.
Adjournment Debate. - Collapse of Limerick Building Firm.
It is a sad and painful story that I have to relate here tonight concerning a building firm of management contractors, Fitzgerald and Dowling Limited. They are different from the normal building firm. This was a new concept for Limerick and, indeed, a new concept for Ireland because it was the first time the normal building contractor was not used. They were set up as management contractors and subcontracted almost all the work — to more than 30 sub-contractors. Indeed, they had the overall responsibility for carrying through the single biggest building project in the city centre of Limerick, namely, the Savoy Complex.
As I mentioned, the company subcontracted all the work to more than 30 bona fide sub-contractors who supplied the labour and building materials. The complex is almost complete and was officially opened some time ago with great ceremony, pomp and circumstance. However, last week the company went into liquidation with debts of about £1.5 million, £1 million of which is due to 30 subcontractors, who are owed sums ranging from £20,000 to £175,000, and the rest to the Revenue Commissioners, the Department of Social Welfare and the workers concerned. Many of these subcontractors, decent people, who pulled themselves up by their boot straps, worked very hard to establish themselves. They are now in a desperate plight, in an emotional state of insecurity and financial ruin. Many will, undoubtedly, go out of business as a result. Employees have also suffered a loss of wages and holiday pay. Pension, social welfare and income tax payments have not been returned to the appropriate bodies. I have a P45 in my pocket which shows that, in the case of one of the employees who worked there for 28 weeks, "nil" was returned to the Revenue Commissioners and the Department of Social Welfare for his income tax payments and social welfare contributions.
Other employees have great difficulty in obtaining their P45 because the office in Limerick has closed down. There was no bonding involved, no guarantees or protection for the subcontractors or the workers concerned. Despite the fact that it was a multi-million pound project in the centre of Limerick the company had no real assets. The share capital in the company was £2 and there was nothing unusual about that but it was suspicious in the circumstances. The plant and equipment for this multi-million pound complex was valued at only £500 on the list of liabilities. The office furniture was valued at £10,000. I see this as a betrayal of those 30 subcontractors and the 50 employees concerned who worked extremely hard. It was reckless, irresponsible behaviour by the firm concerned for the livelihoods of those concerned.
The Minister has expressed his concern to me in private about this and I discussed the matter with him twice. I understand his concern very well because he also met the employees and the sub-contractors. Concern is not good enough. We must have action to seal off these loopholes and prevent this abuse. I thought we were in the process of stopping this abuse but, apparently, new abuses crop up every day. This is obviously a new one which requires new legislation. I spoke to the Minister about this problem and perhaps he will reply to me tonight. It should not be possible in this day and age for a contractor to do this to ordinary people. It was an act of betrayal, the first time I have seen this type of behaviour here and I hope it will be the last.
I would have to point out to the Deputy in the first instance that, as Minister for Industry and Commerce, I have no specific function in relation to the particular operations of an individual building firm. Only companies who are engaged in manufacturing activity or who provide a specified type of international service are grant-aided for industrial employment purposes.
Notwithstanding that, of course I am aware of some of the circumstances of this case and of the deep upset which has been caused to the individuals and companies who may have lost substantial sums of money arising therefrom.
I would stress at this stage that it would be inappropriate to make definitive statements in the light of our current state of knowledge, and it is in any event a matter for the liquidator of the company to decide what future action should be taken. Of course, should it be established that there were any transactions of a criminal nature, these would have to be pursued by the Fraud Squad.
In relation to the general principles involved, of late much attention has focused on the role of the Examiner in relation to rescues in recent legislation. However, it may be relevant to elaborate somewhat on the concepts of fraudulent trading and reckless trading.
Section 33 of the 1990 Act introduced the concept of reckless trading in the context of the new rescue mechanisms which I have just adverted to. Section 136 of the main Companies Bill also provides for its introduction in the context of the winding up of a company.
Section 297 of the Companies Act, 1963 already contains a civil sanction for fraudulent trading, by giving the court power to impose unlimited liability on any person whom it considers to have been involved in the carrying on of business in such a way.
Section 297 however, has been criticised because of the standard of proof which it is considered would be required in such a case. The argument is that, even apart from the considerable difficulty of proving intent to defraud in its own right, that difficulty is worsened by the likelihood of criminal standards of proof being required, even in civil cases.
Thus, it is fairly widely held by those who specialise in the winding-up of companies that section 297, as it currently stands, is deficient and has little deterrent effect.
Accordingly, the received wisdom is that those liquidators and creditors entitled to do so are reluctant to embark on civil proceedings, with the result that few persons are ever made personally liable for the debts created by means of fraudulent trading.
In an effort to tackle the deficiencies in the existing law, to facilitate court proceedings and, where appropriate, to encourage liquidators and creditors to take civil proceedings, the approach adopted in sections 135 and 136 of the Bill is to separate clearly the civil and criminal elements of section 297 of the Principal Act.
In regard to the criminal sanction, I should just like to mention that, on Report Stage in the Dáil last week, I moved an amendment which will allow criminal proceedings for fraudulent trading to be taken under section 135 even where a company is not being wound up. This reflects the wider approach accepted by the Oireachtas in examinership cases under section 34 of the 1990 Act.
As I mentioned earlier, civil liability for fraudulent trading is now contained separately in section 136 of the present Bill but the section goes further, however, and will extend the scope of potential civil liability to cover reckless trading as well. When the Bill was originally published, there was no attempt in that section to define what was meant by trading in a reckless manner, and the provision was, perhaps rightly, criticised on that account. However, the provisions were considerably amended in the Seanad, and these amendments, among other things, effectively crystallised a definition of the term.
None of the foregoing should be construed as implying that there were any such improprieties in the case which is the subject of the motion tonight, but to the extent that what may have happened to the company or indeed to those who may have traded with them reflects any weakness in existing company legislation I want to assure the House that I am determined to rectify the situation, and soon.
It was my intention to have the Bill finally passed today but, unfortunately, it was not possible for one of the Opposition parties to agree to that. I understand that the arrangement now is that it will be passed through this House on this day week. That is not before its time. It will be generally welcomed because the matter raised tonight by Deputy Kemmy is one of many examples we have which could be more fully dealt with if this long awaited legislation was passed.