“And by the way, being declared bankrupt in the UK does not mean NAMA loses interest in you – far from it” NAMA chairman Frank Daly speaking on a Dublin radio station in April 2012
With Ray Grehan emerging this week from UK bankruptcy – though with some legacy matters to be sorted out – and his brother Danny emerging next week and path-finding Cork developer, John Fleming over a year since he emerged from British bankruptcy, this blogpost examines what lies in store for the NAMA developers who have – to a greater or lesser extent – escaped the grasp of the Agency, by obtaining bankruptcy orders elsewhere.
There was a frisson on here during the past week when a filing was made in the NAMA v the Dunnes case in Connecticut where the filing title referred to “CH 13”. Had the heavily-indebted Sean Dunne obtained a Chapter 13 US bankruptcy? No, the CH 13 turned out to be a reference to the Connecticut legal code, and so, to date, David Drumm, the former CEO of Anglo Irish Bank remains the only publicized Irish national to have obtained a bankruptcy order in the US. The British bankruptcy courts have been busier and this is the record on here of the NAMA bankruptcies so far – Minister Noonan said there were about 20, but because of the archaic British insolvency service, we can’t view bankruptcies where a recent address was in (the Republic of) Ireland, so the following may not be a comprehensive listing.
Whilst Ray will emerge from bankruptcy, his dealings with NAMA aren’t over as the Agency appears to be still contesting the disposal of an apartment in the upmarket One Hyde Park development in Knightsbridge in central London. And whilst John Fleming emerged from bankruptcy in November 2010, NAMA still went on to pursue him for his personal pension, and at time of writing, it seems that this matter is outstanding. The NAMA chairman Frank Daly who was formerly the chairman of the Irish tax authorities, the Revenue Commissioners, has darkly warned that just because a developer obtains a bankruptcy order in the UK and subsequently emerges from bankruptcy, doesn’t mean that NAMA loses interest in that developer – this was interpreted on here to mean that NAMA might continue to monitor developers after emergence from bankruptcy for evidence of undeclared assets or asset transfers.
Unlike Bank of Ireland and Anglo/IBRC, NAMA says that it is neutral on the jurisdiction in which its developers obtain bankruptcy orders – Bank of Ireland fought tooth-and-nail to successfully have the bankruptcy of the O’Donnell couple, Brian and Pat, overturned in the UK and IBRC successfully reversed Sean Quinn’s bankruptcy in Belfast. AIB was unsuccessful – on a technicality – in its bid to bankrupt Ivan Yates in Dublin, but didn’t appear to object when Ivan obtained a bankruptcy order in Wales. Minister for Finance Michael Noonan revealed that NAMA was contesting the release from bankruptcy of one developer in the UK and the betting on here was that it was Sean McWilliams, but in any event, Sean won his freedom in a Belfast court in October 2012.
We do know that Martin Doran’s discharge from bankruptcy has been suspended indefinitely
So, what does bankruptcy hold for NAMA developers? It seems that many have started property consultancies and have been earning some income during their bankruptcy which has presumably been handed over to the trustee for distribution to creditors. Others like Ivan Yates, are contemplating writing a book. Income earned after the discharge is generally secure from former creditors except in the UK, certain court costs and social welfare clawbacks. Most emerge from bankruptcy with a slight blemish on their credit records but if they have wealthy spouses, that is likely to be a short-term problem, Restrictions on directorships can be imposed in some instances, and if creditors are unhappy with disclosures, they can resist a discharge. NAMA will also keep an eye on you.