Pierse board ‘deluded’ in not winding up company

Directors of Pierse Contracting, once Ireland’s third largest building contractor, rejected claims by the company’s liquidator yesterday that they had engaged in “wilful self-delusion” when they decided not to wind up the company in 2009.

In the High Court, counsel for liquidator Simon Coyle, an accountant from Mazars, continued his case against nine former directors seeking restriction orders under section 150 of the Companies Act.

Mark O’Mahony, counsel for Mr Coyle, said the Pierse board’s decision not to wind up the company sooner “goes beyond commercial misjudgment” and was instead “wilful self delusion on the part of the respondents”.

Mr O’Mahony said the liquidator accepted that the directors of Pierse had acted honestly and not in a “cold, calculated or cynical” way. He agreed that the directors had invested €16 million of their own funds in the company to keep it going but he said: “It was throwing good money after bad.”

Mr O’Mahony outlined reasons why the liquidator believed the directors of Pierse should have known sooner it was being “too optimistic” about its future, before the company went bust, leaving a deficit of €212 million.

He also said, even if a €10 million payment from developer Gerry Gannon had been paid to the company, this would not have been enough to secure its future.

Pierse, he maintained, would not have incurred losses of €26.5 million if it had stopped trading in April 2009 instead of continuing to trade for more than a year longer.

“From the end of 2008, the writing was on the wall,” Mr O’Mahony claimed. “This company was insolvent for a long-time before it went into liquidation.”

Stephen Hanaphy, counsel for Pierse's former chief executive Charles Norbert 'Nobbie' O'Reilly, rejected this claim. He accused the liquidator of "cherry-picking" documents to present a "very selective" view of the facts that was "fundamentally flawed". He said the liquidator's analysis was done "with the benefit of hindsight" and the "benchmark" that Pierse's directors had acted with "extreme imprudence" was not reached. He said the directors had acted responsibly and relied in their decision-making on external and internal advice.

Fought hard

He said that Pierse’s accounts may have had a note of an “emphasis of matter” in them because of the “general uncertainty” during the financial crisis but they were not qualified. He said the company believed it could trade its way through the crisis, and had fought hard to win new business, and directors had paid out their own money to do so.

Brian Conroy, counsel for company chairman Ged Pierse, said his client had invested €8 million in the company, and was the second biggest creditor when it collapsed.

Mr Pierse, he noted, had also entered into a personal guarantee of €1 million in order to secure a project for the company in 2009 and had in the past seen Pierse trade through other downturns.

He said it was “pure exercise in hindsight” for the liquidator to claim an “informed section of the community” knew Ireland’s property bubble had burst in late 2008. He said this was not a view he believed that the Irish State held at the time, as if it had it would not have guaranteed its banks.

James Doherty, acting for non-executive director Kieran Duggan, also rejected Mr Coyle's claims. His response will continue today.