It seems that yesterday’s costs hearing at the Supreme Court in Dublin marked the conclusion of the Paddy McKillen and NAMA saga. That, and the decision by NAMA, communicated to Paddy yesterday morning, not to acquire €1.4bn of Paddy’s loans.
NAMA is understandably trumpeting its success in having had parts of the NAMA Act tested for compatibility with the Constitution – remember the NAMA legislation was galloped through the Oireachtas in 2009 and signed off by President McAleese without a referral to either her Council of State or the Supreme Court. The NAMA Act is a long document, however and it should be noted that this case dealt with specific sections of the Act. There may well be other attacks on the constitutionality of other parts of the NAMA Act in future. NAMA also claims its operation under EU state aid rules has been approved. And lastly, NAMA has acquired €0.7bn of loans “linked to” Paddy.
Paddy is reported to be “delighted” at the outcome in the sense that he has kept the majority of his loans – apparently €1.4bn at NAMA banks – and his substantial legal costs have been awarded against NAMA. Whilst some costs may need to be finalised, reporting today suggests that NAMA might be bearing €7m of costs for the action, though it is not yet clear if these are just Paddy’s costs or the total of Paddy’s and NAMA’s costs.
The case was closely followed on here, and there is a 15,000-word “Paddy McKillen v NAMA” page dedicated to the background and progress of the case, including the participants, witnesses and Joe Stiglitz’s witness statement. The “Paddy McKillen v NAMA” page is now being moved from the tab at the top of this page but will still be available here.
To summarise the case – Paddy McKillen, one of Ireland’s most successful property developers (he claims “property investor” is more appropriate), was identified as one of the developers whose loans were to be absorbed into NAMA. Paddy is probably most associated with the Maybourne group of luxury hotels in London including Claridges, in Ireland his flagship development is the Jervis Street shopping centre. Paddy objected to NAMA’s plans and took his case toIreland’s High Court where he comprehensively lost in October/November 2010. He then appealed the ruling to Ireland’s Supreme Court where Paddy won in February 2011 on what seemed like narrow points – that NAMA failed to make a proper “legal” decision to acquire Paddy’s loans because the good folks at NAMA decided to acquire Paddy’s loans before NAMA was incorporated without subsequently ratifying the decision after incorporation, and also Paddy was entitled to be consulted before his loans were acquired, even though NAMA had the right to absorb them anyway. NAMA said in February 2011 it would consider whether or not to make a fresh decision to acquire Paddy’s loans. And yesterday, six months later, it communicated its decision to Paddy not to acquire €1.4bn of loans, though it has already acquired €0.7bn of loans “linked to” Paddy.
Final thoughts on here – firstly it seems almost incredible that NAMA failed in this legal case, and failed on such a narrow point : that the decision made by NAMA in December 2009, days before NAMA came into legal being, was not “valid”. We suffer from “Blamegame” fatigue in this country but in this case, there are questions that impinge on competence that need be asked of NAMA and its legal advisers. How could the agency get this so wrong? Specifically how could the agency not know that decisions taken prior to the legal coming into existence of an entity, taken in the name of the entity, need to be ratified in the name of the entity. The cost of NAMA’s failure can be partly measured in the €7m reported costs plus the overwhelming distraction of this case during NAMA’s loan acquisition phase. To balance this, NAMA might say that its legal position was competently assessed, and this is evidenced by the fact NAMA won at the High Court.
Secondly, Ireland is a country where you can lose comprehensively at its High Court; and remember it was a special three judge panel that heard the case at the High Court which comprised President of the High Court, Mr Justice Nicholas Kearns with Mr Justice Peter Kelly and Mr Justice Frank Clarke. And in Ireland, having comprehensively lost at the High Court, you can then “win” three months later at the Supreme Court. Other countries’ courts might also reach different decisions on appeals, but on the narrow question of whether or not a legal entity has made a valid decision, it seems remarkable that two senior courts can reach opposing conclusions and it gives an impression of a shaky legal system.
And lastly, NAMA’s decision to abandon the acquisition of Paddy’s remaining €1.4bn loans is curious. Although, according to NAMA, the loans now have a smaller “land and development” element than previously, there is no intimation that the loans have lost their NAMA eligibility. So NAMA is walking away from €1.4bn of what are understood to be performing loans secured on good-quality assets. Let’s remind ourselves that NAMA was supposed to take over a certain class of loans, good or bad or toxic and was entitled to apply discounts to the loans when valuing them. The view on here is that NAMA is walking away from profitable loans that might have yielded the agency profits over €100m, comprising the interest margin it would earn on the loans plus the discount applied on acquiring the loans. For an agency charged with maximizing the return to the taxpayer, it seems a curious decision. Though no doubt the agency will be formally challenged on its decision, for example, the next time it appears before an Oireachtas committee.
As Supreme Court Chief Justice Hardiman pointed out recently about tribunals, justice must be seen to be done in public. That doesn’t necessarily mean that the public will be any wiser, even though the pile of documents may reach to the ceiling.
Legal processes can be pretty opaque, and nowhere more so than in the area of commercial law, where the principle of public law comes up against the opposing principle of commercial secrecy. Arm wrestling and bluff is normal in these circles. That’s why most big business disputes are settled by arbitration, rather than adversarial means.
The relevant NAMA decisional processes here were probably off the record, or were conducted under privilege. Can’t see our rather toothless Dail Commitees getting much out of that bunker.
The citizen is likely to take the view that NAMA (aka Ireland) came up against a tough cookie here, and that pragmatism and realpolitik prevailed.
This is called cutting your losses, obviously we did not sit in and listen to the minutiae of this case. However, someone in NAMA has decided it is better to to put this to bed, to let Paddy off the hook. I say the reasons given are mere subterfuge. The point you make about the potential for further better thought out challenges to the constitutionality of NAMA are probably closer to the real reason for letting Mr. McKillen substantially go his own way. The odds have been considered and the potential gain has been judged too risky and that tells us all we need to know and where NAMA’s legal team are coming from.
It does seem to be that reaction to this is muted both on here and in the press. Paddy got away by and large but any reaction from his peers in the first tranche is not to be countenanced!? For NAMA it is business as usual as they seek to dismantle the rest…
This decision is a watershed in the history of the Agency. It surely throws open the doors to further challenges:
The constitutionality of denying debtors such as David Daly the right to refinance their assets at a rate advantageous to both themselves and the tax player;
For people such as Bernard Mc who was taken in at the same time as Paddy, what does it mean that his businesses were effectively destroyed, his reputation ruined. All on the back of an erroneous decision before the Agency was constituted. Could he not now potentially not seek legal redress or damages?
Many debtors are quite simply scared. They have been browbeaten, threatened and bullied. For those on whom the axe has fallen there are also many others threatened with foreclosure and receiverships if they do not play ball. The defense that too much time has passed and developers are engaged and have done so for the past year is farcical. They had no choice but to as the alternative was the instigation of proceedings against them and their loved ones. What does inventories of the wives jewelry matter when debts are so large. What motivates men to carry out such personal and vindictive attacks?
For the debtors there should be some form of opportunity in this decision. What it is I do not know. But I’m sure if they were to act pike lions and not the lambs they have become, they will find it!
As for NAMA, the board should be replaced. They have cost their beloved tax payer millions in their defense of this case. They should be replaced by fair minded individuals with knowledge of property and property finance who are motivated not by revenge or some misplaced desire to serve the State.
Quo vadis?
@Marcin, the one point you make above that I would wholeheartedly agree with is about further challenges. All litigation is a gamble, and I think some developers might look at Paddy’s progress through the courts and conclude that if enough legal buckshot is fired at NAMA, some might hit the target.
David Daly’s case is indeed very interesting (it’s progress is being reported here with daily updates, but there is consideration to giving the case its own tab like Paddy McKillen’s – https://namawinelake.wordpress.com/2011/06/22/nama-understood-to-have-pulled-plug-on-david-daly%E2%80%99s-albany-homes/)
And as for a “muted response”, yesterday was just about the costs which NAMA won’t disclose and also NAMA’s decision to abandon €1.4bn of €2.1bn of loans. The costs and NAMA’s statement were reported on the Paddy McKillen v NAMA page here https://namawinelake.wordpress.com/paddy-mckillen-v-nama/
As for NAMA’s abandonment of Paddy’s loans, its statement was reported and the agency hasn’t commented further. The curiosity of the decision is referred to above, but if NAMA isn’t saying any more then it will fall to other forums, eg an Oireachtas committee, to get at more detail.
What a joke.
Very simple solution to all developers. Pay back your loans as per agreement or appoint a receiver.
Forget this nonsense.
It now looks from this (I could be wrong here?) that the taxpayer via NAMA has taken on the dud loans, and the banks (ie taxpayers) have ponied up for the write down on these.
Meantime, over here, other loans underwritten by good assets will be paid off with a grand old surplus remaining for the privateers.
In summary for the taxpayer:
Here’s the shit, you take it.
The good stuff. Well, that stays with me.
Have a nice day.
That isn’t what’s being done though. They are expected to sell the assets in order to try and pay back a fraction of the loan. What happens with the shortfall is anyone’s guess! Things aren’t as black and white as you make out.
@Garfunkel, just to expand on what you say, NAMA has indeed taken a position with developer business plans where the agency generally wants to see the repayment of the loan is 3-5 years. And in Paddy’s case, even with quality assets, there is a strong chance that the sale proceeds would not enable the loans to be repaid – Paddy’s valuations indicate otherwise, but I understand NAMA’s valuations were substantially below Paddy’s.
I’m not sure what you mean by saying things “aren’t as black and white as ” made out on here. A €100m profit would come from applying a 2% interest margin to €1.4bn of loans for 3-4 years alone. And NAMA’s valuation, as noted above and in the hearing at the High Court is substantially below Paddy’s so even if the assets were sold below the nominal value of the loans, NAMA would still profit.
@NWL “And yesterday, six months later, it communicated its decision to Paddy not to acquire €1.4bn of loans, though it has already acquired €0.7bn of loans “linked to” Paddy.”
Do you have any details of this €700M NWL?
Can’t seem to find NAMA’s press statement regarding the decision, any links?
Legal challenge aside, Sovereign Debt and associated bank debt is junk status (according to moodys). Under ECB rules the ECB cannot accept collateral that is adjudged to be junk, or put it another way ‘you may want to purchase paddys loans at a knock down valuation but we place no value on the paper you are trying to purchase them with so no thanks’.
@JR, NAMA’s full statement was reported here yesterday – https://namawinelake.wordpress.com/paddy-mckillen-v-nama/
NAMA doesn’t generallty reveal information on its loans. All NAMA would publicly say about the €0.7bn loans is that they are “linked to” Paddy. Paddy has , in the past, embarked on ventures with others, eg Padraig Drayne, Derek Quinlan.
The ECB has waived its rules in respect of accepting junk-rated debt in respect of Greece, Portugal and Ireland.
NWL you say:
“Other countries’ courts might also reach different decisions on appeals, but on the narrow question of whether or not a legal entity has made a valid decision, it seems remarkable that two senior courts can reach opposing conclusions and it gives an impression of a shaky legal system.”
My impression is that there is in Ireland, not just in the courts, but anywhere there are “rules” a tendency to regard them as a helpful devise for ensuring the “right” decisions are made. Right for the right people, businesses or interest groups that is.
When the rules and the words in them would, on a dispassionate reading, result in the “wrong” result – they just get ignored.
What the high court did was in keeping with that tradition. It is exactly what is going on with respect to non- implementation of paragraph 1.28 of the Croke Park Agreement. It is what was done with financial regulation generally, it is how the planning system works.
The thing is that there is no sign of anybody in Ireland starting to understand that rules matter. It is business as usual for the “is he one of theirs or one of ours?” style of governance.
When you have the property industry run as a State monopoly with Gestapo like CAB thinking overseeing a fiefdom that has its foot firmly planted on the oxygen supply of the economy, this is the type of mess that you get. A visit to NAMA says it all. Meeting rooms like confessionals, waiting cubicles that separate debtors like criminals, separate secure phones that are taped and answered mostly by message minder. A mentality akin to Hoover’s America.
The sooner we have the likes of the CEO of British Land trading the assets in a commercial manner the better, but that is unlikely to happen. We are a country run by teachers and with the most important commercial entity in the economy managed by civil servants and an ex-custom’s officer.
Whatever tenacity McKillen had is matched “in spades” by David Daly. These two challenges are just the first of many. There are more than a few developers known for their successful pugnacity in the legal area who are not afraid of a fight. And there are some real scandals yet to surface in the courts relative to the banks’ actions when issuing loans to developers that will have a negative effect on the majority of NAMA’s inherited loans.
Two years on and no Irish property assets are moving out of NAMA, no Agreements with developers are completed, no liquidity in the market place, the economy collapsing and our youth emigrating.
NAMA’s loan recovery (as I have said before) will not be more than €15 billion. It is discounting its London sales by choosing expediency over maximisation.
It spins talk of its successes while bearing responsibility for causing a downward spiral towards total collapse of the core economy. Give me a Break. There will be no growth as long as it exists in its present form.
It is choosing expediency in its London asset sales because it has neither the funds nor the expertise to complete developments and because it has to sell 25% of its loan book by the end of 2013. London is the only place where it can make that target.
It has no chance of selling Irish assets above their acquired value within that timeframe as there is no core bank debt available here. If NAMA wants to sell any Irish loans within the next two and a half years, it will have to provide staple financing. No one else will.
I say this is one great strategy, hold on to the property that is falling in price, but quick sell the appreciating assets. What could be wrong with that? And, oh, for the clincher, alienate the people who could help you maximize the value of the property.
You’re all idiots!
Try not to distract from the main..There is always distraction from the main on here!
This is a blow and a half, it may not be lethal, but it’s what you want to make of it!
We get the ghosts estate announcement today as a reaction! Some poor guy will be foreclosed against next week! To reinforce the power…
Good luck with that and NWL… Don’t ignore the personal, it’s the distasteful side of contemporary Irish accountancy!
@Garfunkel, not sure what you mean. Last Friday was an epilogue. It was the Supreme Court decision handed down in two parts in February and April that was significant to the law surrounding NAMA’s operations. That was covered extensively on here on both the Paddy McKillen dedicated page – https://namawinelake.wordpress.com/paddy-mckillen-v-nama/
And also with dedicated posts – April – https://namawinelake.wordpress.com/2011/04/12/paddy-mckillen-v-nama-supreme-court-rules-again/
February – https://namawinelake.wordpress.com/2011/02/03/paddy-mckillen-v-nama-%e2%80%93-the-supreme-court-rules-%e2%80%93-paddy-wins-on-narrow-point-substantive-part-of-appeal-not-yet-judged/
So not sure what the “distraction from the main” is that you talk about.
@Garfunkel
I agree that it is a major blow to NAMA and I believe that David Daly will deliver another one. IMHO, I believe that a court will find that the expression “on demand” is subordinate to the agreed term of a performing loan. I do not believe that they will find it equitable that a performing loan can just be called at will.
@nwl. “The ECB has waived its rules in respect of accepting junk-rated debt in respect of Greece, Portugal and Ireland.”
Any link to this?
@JR, it was reported extensively in the media eg – http://www.irishtimes.com/newspaper/finance/2011/0708/1224300301023.html
It’s probably on the ECB website somewhere also.
“For Eire it came into force on April the 1st this year, (who said Germans don’t have a sense of humor) the ‘cut’ snippet is…
The Eurosystem’s credit quality threshold shall not apply to marketable debt instruments issued by the Irish Government. Such assets shall constitute eligible collateral for the purposes of Eurosystem monetary policy operations, irrespective of their external credit rating.”
Ireland temporary ECB ruling…
http://www.ecb.int/ecb/legal/pdf/l_09420110408en00330034.pdf
and Portugals…
http://www.ecb.int/ecb/legal/pdf/l_18220110712en00310032.pdf
‘sur thats ok then….
I suppose the supreme court took the view that NAMA does acquire rights against a developer/ borrower that the original lending bank did not have and that therefore the state is not simply stepping into the shoes of the lender.
It follows that NAMA was exercising State power vis a vis the borrower / interfering with his constitutional rights and the borrower was entitled to fair procedures when that power is exercised. The Supreme Court held;
“79. The appellants identified several matters which would impact on their rights if NAMA acquired the appellants’ loans. I am satisfied that the appellants have successfully raised matters which could affect the rights of the appellants. The remit of NAMA is different to that of a bank, thus a change from a bank to NAMA is such that it could affect the appellants’ rights. These include the following:- (a) NAMA is not a bank, it is a particular State institution, it is a work-out vehicle, which is contrary to the business model of Mr. McKillen’s business. Its modus operandi will affect Mr. McKillen’s business, including his income stream. (b) NAMA will move on the properties in a manner different to the banks, and this raises potential expenses and losses to the appellants. (c) There will be an effect on Mr. McKillen’s reputation. Mr. McKillen earns his livelihood in the commercial world. It is a fact that NAMA is referred to in commercial circles as a “bad bank”. This implies bad assets and consequently a bad borrower, which reflects adversely on Mr. McKillen’s reputation. (d) I have read the judgment of Finnegan J. and agree with his comments on two aspects of the appellants’ submissions, namely NAMA’s statutory exemptions and powers in relation to mortgages, and the commercial consequences for a mortgagor of the transfer of a mortgage to NAMA.
Consequently there is clear evidence which shows that a decision of NAMA to acquire the loans of the appellants will affect the constitutional rights of the appellants, any such decision by NAMA under s.84 of the Act of 2009 directly affects the appellants, and this triggers a right to be heard.
80. Also, the commercial relationship between the appellants and the bank has been altered by the actions of the bank. The appellants submitted that the Bank of Ireland wished to continue with the appellants as customers. However, the Bank of Ireland had taken a step which deprived it of control of the loans. Bank of Ireland decided, in the vernacular, to go into NAMA. This was a commercial decision on its behalf. It is an important aspect of the case as the situation, at the bank’s request, is now governed by NAMA and the Act of 2009. Consequently, when it was stated that the bank wished to continue to do business with the appellants, this must be read as subject to their prior decision that the bank join the NAMA process. The relationship between the bank and the appellants was thus changed forever by the bank’s decisionto join the NAMA process. The appellants have been affected by this unilateral action of the bank.
81. This analysis may also be stated as follows. The appellants have constitutionally protected rights. An order under s.84 of the Act of 2009 directly affects the appellants and could affect the rights of the appellants, in that it might restrict their interest in the underlying properties; it might restrict the income stream from the properties, thus it might restrict Mr. McKillen’s right to earn a livelihood; it might restrict their rights in contract; and it might damage Mr. McKillen’s reputation. Thus there is potential interference with these constitutional rights. Such a possible result is sufficient to require that the procedures conform to constitutional justice, and so the appellants are prima facie entitled to fair procedures. These rights are not displaced by the Act of 2009, nor is there any justification to exclude the rights.”
Now the High Court addressed these issues. I would simply say that if Mr McKillen wished to restrict the banks ability to sell his loans to other institutions he ought to have included such a term in the loan agreement he signed with his bank. Also, such a term ought not to be implied in the contract because, first it is not necessary to give the contract business efficacy and second because such a term would have reduced the value of the loan to the bank and they would not have agreed to it without getting higher payment.
Further, if the bank wished to sell his loans to, for instance, a private equity fund that specialized in the work out of loans from an insolvent bank, it’s not clear to me that Mr McKillen’s contractual rights would not have been affected in the same manner. In other words, does the fact that the state buys the loans, in and of itself, confer rights?
However, Hardiman J’s judgement does seem pretty persuasive when it argues a borrower’s equity of redemption is interfered with in a way that would not be possible if the buyer was a private company and if that is the case then a right to fair procedures must follow even on the High Court’s analysis.
It does seem strange that McKillen did not even get leave to bring the application for judicial review in the High Court (it was a telescoped hearing and the court found he did not raise an arguable case) but was successful in the Supreme Court on several points. Although this was an area where there was little authority that was on point.
For all the above reasons, David Daly will get a hearing of his case. And when he does, we will then find out why NAMA refused an offer that repaid 80% of the full par value and gave it a hugely profitable return.
I can’t see our European masters being too impressed with the Department of Finance’s decision to turn down €300 million plus repayment towards our €100 billion indebtedness.
@Mark, progress in the David Daly case is being tracked here, and depending on how he gets on after the conclusion of the present hearing which is expected tomorrow, a new tab may be opened to replace the Paddy McKillen v NAMA tab above which will shortly be archived to the About tab.
https://namawinelake.wordpress.com/2011/06/22/nama-understood-to-have-pulled-plug-on-david-daly%E2%80%99s-albany-homes/
First and foremost apologies for the ‘idiots’ comment. I may have had one sherry too many on Saturday night L
The crux of the matter that arises out of the decision is NAMA’s relationship with the debtors. There would seem to be some division within the Agency as to the draconian features being introduced through Memoranda and/or Term Sheets, especially where the measures imposed on debtors are penal in the extreme. This can only be coming from higher up in the Agency. Some more junior personel or either in full agreement with those terms or are uncomfortable – depending on how far they have been effected by the brainwashing – the taxpayer mantra etc
One key issue in this is the constitutionality of this treatment. How can debtors be discriminated against to this extent?
There is no fair procedure in decisions emanating from the board room. In my view the right to fair procedure should extend beyond the decision to acquire loans, into the debtor/NAMA relationship itself. In all cases no borrower has a right to appeal. They have been notified of the Agency’s decision as regard to their business plan and that is that. They cannot make counter argument, they cannot appeal, they can do nothing but accept. It is presented as a fait accompli. If they were to do otherwise, demur or stall, they have been threatened with foreclosure. This threat hangs like a sword above their heads in all their dealings with the Agency. As noted above NAMA is alienating the people best qualified to realise the value of the loans.
On a further point of discrimination – how can borrowers be excluded from buying back their assets or refinancing their entire portfolio under the legislation. How can debtors be treated in this manner? Are all citizens, even the vile developer, not entitled to equal treatment under the constitution? This is a basic point but one which seems to be overlooked. If they can refinance their assets at the best price then why should NAMA not take that price? How can you say that an individual who has accrued these debts is barred from the process to recoup them? We may as well exclude others from the process if that is the case…?
There is a distasteful side to the treatment of debtors that has not received much attention – largely due to the fact that the public seems to have believed for a time the idea that the Agency was a bailout for developers. In practice this has not been the case. Debtors have been treated as harshly as the public would have wished. Recent editorial and commentary in the press seems to recognise that the time for this is now over and the Agency should be required to work with the debtors to realise the best outcome for all concerned.
@Garfunkel
“how can borrowers be excluded from buying back their assets or refinancing their entire portfolio under the legislation” – presumably you are aware of section 139 of the NAMA Act and the various statements by politicians and most recently by the NAMA chairman, Frank Daly, that a debtor that has defaulted cannot buy their assets back.
http://www.nama.ie/Publications/2010/NAMAAct2009.pdf
This is plainly a political decision. Economically if as a developer your limited company which owned the asset has become insolvent, then you are technically a debtor in default as an individual it seems, and therefore ineligible to buy your own assets back even if you quite lawfully have the funds to do so, because for example, you have other limited companies or private unencumbered wealth or because you can form a syndicate with others. The political rationale for the decision is that in a decent society, those that are seen to have caused damage can’t later be seen to be rewarded. And like it or not, developers whose loans have gone sour are regarded as having caused damage to our society.
The view on here is more utilitarian. If a developer has lawful funds or can form a syndicate which offers the best price for an asset then NAMA should not cut off its nose to spite its face. I would have thought the NAMA Act provision and NAMA’s method of operation were open to judicial review.
This is not an easy area at all and there was a “dilemma” post here last year which tried to explore the issues
https://namawinelake.wordpress.com/2010/09/15/can-nama-sell-loans-and-assets-back-to-the-same-developers-who-obtained-the-loan-and-if-it-can-can-it-sell-at-a-discount-and-if-it-can-should-it/
NWL. You make an interesting, even emotive point. It is quite philosophical and would certainly appeal to the board of NAMA. It is one that I have not seen articulated quite so elegantly on here before or in previous posts.
While I understand the rationale behind such an argument, you are right to say that such a decision is political.
As such it is subject to the whims of our political class, who are in turn subject to the whims of public opinion – a tyranny of the majority! That is most often not rational and most definitely not utilitarian. The desire to see people ground into the dirt is one of the less attractive features of our national psyche.
Also on the point that the debtors have themselves caused harm. I would have to argue that the political class that nationalised their loans have done more harm than the developers. In turn the bankers and professionals who oversaw the implosion of our financial system caused more harm. While developers bear some responsibility they are lower in the list. However I do concede that it is they that have become the scapegoats held up for opprobrium by the very people by whom they were once courted and feted.
@Garfunkel, you must be new on here because that issue has had extensive airing in posts and comments.
“a tyranny of the majority! ” – you mean society. Unfortunately the standard of debate has not been very high . Most of the general public cannot understand how a developer can default on one loan and still have wealth available, and a common view would be that the developer had squirelled it away and hidden it from the banks and NAMA, or transferred it to their spouse – either way there were shenanigans involved. And frankly some developers didn’t help that perception by hammering home obvious displays of wealth even after some of their businesses went down. On the other hand, many developers have gone to ground and don’t want to raise their profiles by defending their businesses. And frankly even during the good years, developers didn’t do a great deal to combat their image as a shower of chancers buying a field and then speculating on an increase in its value, normally accompanied by handing over a few brown envelopes to planners and politicians. And even if they did build something, it was perceived as selling each other property.
What neither NAMA or politicians have done, has been to explain that developers using limited liability companies can walk away from debt in one company, and still have private wealth or wealth in other limited companies or that some transfers to spouses are lawful, even sensible, as long as they’re not designed to cheat creditors.
My own sense is that the debate is moving on because there is a fatigue with blaming people who seemingly can’t be legally touched, because either we don’t have the laws or the apparatus to enforce laws that we do have or there is an acceptance that limited liability companies mean just that : liability of individuals is limited to the assets of the company. Maybe developers themselves have a part to play in promoting their own industry to an audience comprising “the tyranny of the majority”
The whole point of NAMA is to bail out developers, not take away their businesses. NAMA knows it, the developers know it, the government knows it, and while a more scrupulous high court judges might deny it to themselves, the supreme court justices know not to rock a boat as vital to the ascendancy class as this one. The developers eat; and NAMA takes the shit.
@OMF, I think we’ve had this exchange before. NAMA is taking over a class of loans (and associated loans). Some are good (23% are performing according to the latest NAMA quarterly accounts) and some are bad and some are toxic. It’s a mix. NAMA reportedly recovered 100% of the loan associated with 20 Grosvenor Square for example,
https://namawinelake.wordpress.com/2011/02/23/exclusive-nama-understood-to-have-overseen-e300m-sale-opposite-american-embassy-in-london/
So although much of NAMA’s loans are bad to toxic, a significant amount isn’t. And even with the bad stuff, you’d hope NAMA hadn’t overpaid for it.
As for NAMA giving developers an easy ride, remember you’ll find the most up to date list of developers to which NAMA has appointed receivers/liquidators or otherwise taken enforcement action here. It’s presently up to 76 companies and individuals.
https://namawinelake.wordpress.com/the-developers/
https://namawinelake.wordpress.com/the-developers/
Not the case. That is incorrect. Were you involved at all you would know that debtors are not being bailed out. Obviously the debate has not moved on much.
No NWL. I mean exactly what I say, a tyranny of the majority.
I have noted your posts in the past about developers and the way in which they are perceived – you have again brutally articulated it above, albeit by using stereotype, that may not apply to all NAMA’s debtors.
What I had not seen was quite such an elegant synopsis of why they should be denied the rights open to all and inherent in the Constitution under those provisions of the NAMA Act.
I firmly believe that it is the duty of our Courts to protect a minority from populist reactions by the majority – no matter how unpopular that minority! That is a fundamental point of our common law and inherent in our Constitution. Sadly the Irish courts have shown a conservative bent in the past, leaving it to Europe to show us the way. While it is a stretch to compare this commercial situation to human rights, I have yet to see a clear-cut argument that would deny fundamental rights to these debtors.
As to your point that developers promote their own industry? How fair a hearing do you think they would receive? Would it be tolerated by NAMA? I think your generalisation above says more than I can as to why they would be unwilling to go over the top!
This is hopefully an area that will be articulated by David Daly’s legal team in the courts. I do believe that the courts must now elaborate on exactly what rights the developers have in refinancing their assets. You are right in saying that this area is the most open to judicial review and challenge. I also believe a clear decision on the same would also be welcomed by NAMA.
What you’re effectively asking for is that the Courts bail out a minority at the expense of the majority. You’re asking the courts not the protect the vast majority of people from the recklessness and ineptitude of a few.
In a normal system, developers with bad loans they couldn’t pay back would go bankrupt, receivers and liquidators would be appointed and most people wouldn’t hear a whisper about it. Instead Ireland has NAMA; a financial lifeline to developers like no other in the world.
NAMA is like a Chapter 11 bankruptcy on steroids for development companies, providing financing, refinancing, writedowns, and support over and above anything that can reasonably be expected by any of them. All these companies would be bankrupt without it. In return, NAMA was expect to be able to take a substantial proportion of the developer/companies high performing loans as part of the deal, accepting long term equity in assets in exchange for the–literally–millions in support it was giving.
You’re going on about developers rights and the constitution, when all these developers and companies should by rights be bankrupt and in orderly liquidation by now. These aren’t normal circumstances and they most certainly do not have their “normal” rights. Or at least they didn’t until the supreme court decided it couldn’t face the faces at Druid’s Glen again unless it made this decision.
As for the Constitution, try reading Article 43.2.2, and all of Article 45 while you’re at it. This isn’t the US.
The most important thing NAMA gives is Time. Under normal circumstances the Co’s would have been wound down, liquidated etc. Yet here we are 2 years later still talking about the developers. I think we’re forgetting the banks in all this – under normal circumstances they too would be wound down and liquidated, yet here we are with 2 pillars…???
Did Paddys legal challenge give him time to extract a better deal from his bankers than he was getting, time to give the bankers a better deal with Paddy than they would get with NAMA. The ‘composition’ (definition 10) of the loans could indeed have changed a lot.
If it did then it means the bankers and developers would rather work together than be involved with NAMA.
Good rant OMF. Unfortunately this isn’t the USA. If it was, we would have had an RTC disposing of all this toxic property by now and we would have a functioning banking system; because they let the banks go in the USA when they are bust. They don’t decide to let the taxpayer guarantee them. A decision of that quality only comes from amateurs that think they are gifted and cute hoors that haven’t a clue – but because of their genetic inheritance think that such a move is a great stroke.
The courts are not being asked “not the protect the vast majority of people from the recklessness and ineptitude of a few.” That battle has already been lost. We are already suffering from the recklessness and ineptitude of the few. And “few” does not include developers en masse. It includes the politicians who transferred the loss to the citizens, bankers, civil servants in the DoF and the CBI – and developers.
What the courts are being asked is to treat each citizen equally under the Constitution whether they are developers or not.