A COUPLE who wanted to develop a property in Waterford into the Oldcourt Hotel were now effectively destitute and were claiming that accountants Coopers and Lybrand gave them bad advice on the project, the High Court was told yesterday.
Mr Francis Hamm and Ms Dolores Hamm formed a company, Oldcourt Hotel, the owner of the property at Killotteran.
The company is suing Coopers and Lybrand, chartered accountants, of Newtown, Waterford, for damages of over £1 million. It claims the firm failed to advise properly on Business Expansion Scheme funding and was negligent in its advice.
The defence denies the claims.
Mr Richard Nesbitt SC, for Oldcourt Hotel, said events left the people behind the Oldcourt Hotel project effectively destitute. They had to rely on a number of people in bringing the case.
The married couple had seven children and wanted to fulfil a dream to develop the property. In May 1989, the Hamms agreed to buy the house which had 20 acres, stables and gardens. The Hamms had substantial funding at the time.
By oral agreement between Mr Hamm and Mr Hugh McGovern, of C&L, Mr Hamm agreed to retain and employ C&L as accountants and financial advisers, in particular on how the premises could be developed as a hotel so as to ensure it would qualify for and attract BES funds and advise generally on financing the development.
Mr Nesbitt said C&L undertook to give advice on the enterprise and failed in every material respect, so that the Hamms found themselves with nothing.
Mr McGovern told Mr Hamm he would discuss BES funding with the scheme's fund managers. Mr Hamm was advised the fund managers had said they were not interested in a "green site", one that was just starting up. C&L advised that the construction of the hotel and commencement of trading should begin before seeking BES funding.
Mr Hamm was not happy to invest without BES funds but Mr McGovern said there was no alternative.
Planning permission was granted. The hotel started to trade in April 1990. In January 1991, the AIB loaned £260,000 to the company and £70,000 to Mr Hamm personally.
In January, 1991, there was a meeting with Mr McGovern and Mr Michael Hayes of C&L, who was Mr McGovern's senior. Mr Hamm was asked if he had taken up the offer of AIB funds. Then he was told for the first time that there was no guarantee that BES funds would be available.
At all times during the alleged retainer of C&L's advice, the fact was that the Minister for Finance had decided BES funding for hotel schemes would end on April 5th, 1991. There was no mention of this to Mr Hamm. He then drew down the loan and tried to go ahead but the hotel closed in 1993.
The Hamms invested £350,000 of their money in the project, they owed £290,000 to creditors, and £450,000 was the value of the property if it had gone ahead as an up market guesthouse.
C&L denies it was retained and employed as accountants and financial advisers. It did advise on investment finance which would qualify for BES funds. It denies it advised as to the manner in which the premises could be developed as a hotel so as to ensure that the development would qualify for and attract BES funds.
It denied all other claims C&L states it was under no obligation to advise on or predict what legislative changes might take place. The use of BES funding was one of several options the Hamms considered.
C&L did advise that BES fund managers indicated they would not consider investment in the hotel until the business was trading but denied it advised Mr Hamm that, to avail of the funding, it was necessary for him to start up the business and then seek funds.
The case continues before Mr Justice McCracken today.