Challenge to legality of Anglo promissory note set for High Court this coming week

Whilst faceless negotiators are still hammering out a deal on the Anglo promissory notes, in the High Court from Tuesday next, 22nd January, 2013, the legal challenge to the legality of the notes will be tested. Campaigner for those in mortgage distress, David Hall – pictured above courtesy of Twitter – will be taking on the Minister for Finance, the Attorney General, the Central Bank of Ireland and Ireland itself, as he tries to have the notes declared unlawful and void.

When former finance minister Brian Lenihan was bailing out the banks in 2009 and 2010, he partly used cash which he mostly obtained by raiding the National Pension Reserve Fund. But he also used IOUs or promissory notes to partially bail out the banks, and he issued €31bn of the buggers to Anglo Irish Bank, Irish Nationwide Building Society and the Educational Building Society – over €25bn of the IOUs went to Anglo, €5bn to INBS and a less than €1bn to EBS. We are presently paying off these IOUs with annual payments every March. Last year, instead of paying the €3.1bn due, we issued a sovereign bond and used the proceeds to pay the instalment due. By the due date this 31st March, 2013, we hope that we will have some deal in place, but the view on here remains skeptical.

David launched his legal action in March last year, and he is claiming that the decision to issue the notes was never approved by the Dáil. He also claims that the provisions of two Acts which allowed the Government to issue the notes are unconstitutional.

David is represented by Mullan and Associates solicitors. The respondents are represented by the Chief State Solicitor, Eileen Creedon except for the Central Bank which is represented by McCann FitzGerald. The case reference at the High Court is 2012/3230 P. A judge doesn’t appear to have been yet assigned. You can follow David on Twitter @DavidHall75

UPDATE: 22nd January, 2013. The case opened this morning before the President of the High Court, Mr Justice Nicholas Kearns. It has been pencilled in to last for four days. David is being represented by barrister John Rogers SC. Today, David is outlining his case, and there will then be a response from the respondents, who are apparently being represented by two former Attorneys General.

UPDATE: 23rd January, 2013. Former Attorney General and leader of the Progressive Democrats went out to bat for the Government today, as the hearing entered its second day. Although the Government appear to have amply resourced the legal firepower – there were some 14 barristers on both sides milling about – they had somehow failed to provide David with a written defence. Conspiracists might believe the Government was deliberately trying to lose the case, but no, it was an oversight it seems – “startling” said the judge, President of the High Court, Mr Justice Nicholas Kearns. In the afternoon, Michael McDowell SC set out to justify the Government and Minister for Finance’s decisions, which weren’t referred to the Dail, but the Government’s claim is that the two Acts affecting the Anglo bailout gave the Minister and the Government the authority to spend any sum of money – ANY SUM OF MONEY – in saving Anglo. The hearing will probably go to a third day tomorrow.

UPDATE: 25th January, 2013. The hearing has concluded in Court 4 of the High Court in Dublin, and the judge has retired and reserved judgment, as might be expected in a case of this nature. No indication has been given as to when a judgment will be delivered, though hopefully it will be before 31st March 2013 when the next promissory note payment falls due. There was a dramatic development this morning when three Independent TDs, Deputy Shane Ross, Deputy Stephen Donnelly and Deputy Joan Collins arrived in court with a solicitor, Tony Williams. They were there, said their solicitor to the court, to counter the claim made by Michael McDowell yesterday as barrister for the Government, that no elected representative had resisted the payment of the promissory notes. It was said in court this morning that each of the three had written to Minister for Finance, Michael Noonan protesting about the payments but had received correspondence back in which the Minister is reported to have said the matters were best left to “ongoing litigation”  – a reference to David Hall’s case.

UPDATE: 31st January, 2013. Judgment was handed down this morning – not yet available online – which rejected the challenge from David on the seemingly narrow grounds that he did not have the standing to challenge spending decisions by Ministers directly, though the judge, High Court president Mr Justice Nicholas Kearns did indicate that a challenger that was an existing TD might be more successful. There was also criticism of the three year delay in taking the challenge, with the promissory notes first deployed by then-finance minister Brian Lenihan in 2010. David has tweeted to say that he will be appealing the decision to the Supreme Court tomorrow morning and seeking an early hearing. It’s not over yet.

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NAMA refuses to provide assessment of losses to taxpayer on sales-to-developers prohibition

It’s a good job that Larry Goodman isn’t in NAMA, he would never have been entitled to buy his assets back from the banks in the 1990s, because in NAMA’s eyes, he would be a “defaulting debtor” and NAMA is prohibited by section 172 of the NAMA Act from selling assets to “defaulting debtors”. There’s a good political reason for this – it’s hard enough to stomach the colossal debt shouldered by the State in bailing out the banks, but to locally see the same developers buying back their properties, for what would generally be a large discount and continuing as if nothing had happened, might be the straw that broke the camel’s back. Or at least, that’s how former Minister for Finance, the late Brian Lenihan portrayed it.

The 76-year old Larry, currently in the headlines, for his horse infused burgers rebounded from his misfortunes after the collapse of meat business in 1991 when the Iraq/Kuwaiti war meant he wasn’t going to get paid for his meat exports to Iraq. He bought back his business from the banks four years later, and has gone on to become one of Ireland’s richest men, with his meat processing business, an extensive property portfolio on both sides of the Border – he’s developing a shopping centre in Newry – and private hospitals. Another Irish man who likes to keep his affairs private, he will not have been happy with the publicity this week.

Over at NAMA, there has been some internal agonizing going on about the prohibition on selling assets back to defaulting developers – the NAMA chairman, Frank Daly said last year “It might not be popular to say it but, for example, the restriction in the Act which bars us from selling assets back to a defaulting debtor is a restriction that does not apply to any other body in the same business or space as us. I do not know if that will be a problem in future but it is something we must consider “.

What we’d like to know is how much the prohibition is costing NAMA, and by extension, the tax payer. If it’s only €2m over the life of NAMA, then it may well be a political price worth paying, just so we don’t have to have our faces rubbed in the sight of developers who we thought had failed, with the debt transferred to our shoulders courtesy of Government action, then getting back in the saddle on the same property at a discount. But if the cost is €2bn, then I for one, would want to see the prohibition repealed. The likely cost is probably somewhere between the two.

So, the obvious question is how much are we losing. And NAMA should be in the best position to give an overall independent assessment. But when asked for an assessment in the Dail this week, NAMA, through the responsible minister, in the best civil servant tradition that even Sir Humphrey would admire, said “as NAMA is not permitted to sell assets to borrowers in default, neither I nor NAMA are in a position to assess the potential foregone profit (if any) if NAMA were permitted to sell assets to borrowers in default.”

This is the NAMA that wants to portray itself as a commercially-adept entity. I’m sure if you asked IBRC what the effect of introducing such a prohibition at that bank, it could tell you the effect, and it would be in the tens of millions.

It was the Sinn Fein finance spokesperson Pearse Doherty that posed the question to Minister for Finance, Michael Noonan. This is the full parliamentary question and response.

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question 115 of 25 September 2012, if he will provide an assessment of the profit foregone in the National Asset Management Agency as a result of the proscription in section 99 and 202 of the NAMA Act 2009, blocking NAMA from selling assets to borrowers who are in default..

Minister for Finance, Michael Noonan: I am advised by NAMA that Sections 99 and 202 of the NAMA Act 2009 relate to debtor confidentiality, not to the sale of assets.

We assume the Deputy is referring to Section 172 of the NAMA Act which relates to Limitations on certain dealings in land etc. As NAMA is not permitted to sell assets to borrowers in default, neither I nor NAMA are in a position to assess the potential foregone profit (if any) if NAMA were permitted to sell assets to borrowers in default.

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Another NAMA developer declared bankrupt (in the UK, of course)

Good luck to justice minister Alan Shatter when he has to justify the still-harsh bankruptcy regime that will come into effect when the Minister eventually decides on a so-called “Establishment Day” for the new Personal Insolvency Act which was signed by President Higgins on 26th December 2012. The Insolvency Service recently informed this blog

“The Personal Insolvency Act has been signed into law and will be the subject of commencement orders which shall be made by the Minister. It is envisaged that Establishment Day and associated sections of the Act will come into force shortly.”

The reason the new regime might be difficult to justify is that sources like this blog will be a constant reminder of the NAMA developers who tipped over to the UK, got their bankruptcy over and done with in 12 months, and are back in business whilst Irish bankrupts will still be in year one of a three-year bankruptcy.

Last Sunday, Gavin Daly in the Sunday Times – not available online without a subscription – reported on the latest NAMA bankrupt. 57-year old Pat Shine whose Irish address is given as 4 The Courtyard, Corman Hall Road, Sandyford, Dublin 18 was declared bankrupt in Birmingham, England on 19th December 2012. He is set to emerge from bankruptcy on the one-year anniversary on 19th December 2013. His British address is given as Apartment 31, 36 Ryland Street, Birmingham B16 8DB.

Pat was behind Ardawn and Cova, and NAMA has in the past year – see here and here – appointed receivers to a slew of the group companies, most of which were ventures with NCB Stockbrokers.

Pat’s bankruptcy brings to 21 , the number recorded on here, though that might be an underestimate. Only one of the 21 bankruptcies, that of Tom McFeely, has been reversed and NAMA says it is neutral on the jurisdiction in which developers declare themselves bankrupt. Martin Doran, of Ellen Construction fame, is still showing as having his discharge from bankruptcy indefinitely suspended.

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Of the Week…

Table of the Week

 

The debate about whether Ireland is a high-tax or low-tax economy still has some potential, and this week in the Dail, the finance minister Michael Noonan provided a response to a parliamentary question which included the above table showing tax revenues as a proportion of GNP. Seems that in 2010, more than two years into the crisis, the percentage hit a low of 24.4% and that is down from a high of 32.6% in 1994.

Quote of the Week

“The next phase of Europe’s recovery will involve untapping the full potential of the Single Market. We will be ambitious for progress on the Professional Qualifications Directive, on the Posting of Workers Directive and on pensions portability.” An Taoiseach Enda Kenny appeared before the European Parliament on 16th January 2013 where he delivered this speech.

I think he meant “tapping” or “unblocking” but whatever he meant, he’s back. Who “he”? The eejit speech writer who embarrassed us all on the world stage in March 2011 at the St Patrick’s Day celebrations in the White House when Enda Kenny delivered the most inarticulate, toe-curlingly bad, “black man equals slave”, mumbo jumbo that you’re ever likely to hear.

This week, at the European Parliament, An Taoiseach surprised many who thought that we’d had a hush-hush EU enlargement which encompassed the Chechens, Georgians, Armenians, Ingush, Tatars when he said “From the Atlantic to the Urals our people want and need security.”

He solemnly prioritized at least four areas for the Irish EU presidency which kicked off three weeks ago, and delivered another speech bereft of targets or tangibility. And I know it was the same speech writer who made a holy show of us in Washington two years ago – this sort of sh*te doesn’t write itself

“In the sixth and seventh Centuries our monks, Columbanus and Killian among their number, left in their small boats to bring the light of learning to the European mind.”

With €168,000-a-year advisers, you’d think one of them would pluck up the courage to tell the boss to cop on.

One Up for New Media of the Week

The news that Ireland’s biggest state agency, the one for which we’re on the hook for €27bn of state-guaranteed bonds, published its third quarter report and accounts went unnoticed in The.Paper.Of.Record.

But at least the Irish Times did find time to correct one of the biggest hoaxes in the sporting world for some time, when it re-reported an American blog’s revelation that the girlfriend of a star of the “Fighting Irish” Notre Dame American football team, the girlfriend who had supposedly died last September 2012 which might have explained some poor performances on the field by Manti T’eo, was a girlfriend who didn’t exist.

Yes, it was the American blog “Dead Spin” which last Wednesday broke the news that a woman called Lennay Kekua, the supposed girlfriend of Notre Dame’s linebacker Manti T’eo, and the woman who had supposedly died last September 2012, was non-existent. When the “story” originally broke last September of the woman’s “death”, the old media was full of it, it even had photos of the dead girlfriend – which have now turned out to be some anonymous Californian woman.

At least, The.Paper. Of.Record managed to re-report the blog’s revelations. A day later.

Announcement you never thought you’d see of the Week

“Agriculture Committee to discuss authenticity of beef burgers”

Ireland’s vitally important meat trade came under pressure this week after it was revealed that routine samples of beef burgers sold in Irish stores in November 2012 were assessed to contain not just beef, onions, garlic, breadcrumbs, but….horse! Yes, they talked about horse DNA and molecules but that can’t disguise the fact that in some instances, substantial horsemeat – up to 29% of a burger in one instance reportedly – was being used. Larry Goodman, who disappeared from the national stage in the 1990s when he bought his meat processing business back from the banks – in NAMA, he would have had no chance as he would have been considered a “defaulting debtor” –  has returned. The now 76-year old has amassed a considerable fortune in the past two decades and together with his son, also Laurence, he has been building a considerable property portfolio and private hospital business. And this week, it was revealed it was his meat processing businesses which had used ingredients, apparently sourced overseas, which contained horsemeat. There is still confusion over how 29% of a burger could be horse without someone noticing in the Irish business, but investigations continue. The Oireachtas agriculture committee has summoned officials from the Food Safety Authority of Ireland and from the Department of Agriculture to answer questions on Tuesday next.

Unlike the British mad cow/BSE matter in the 1990s, there is no health risk in consuming horse infused beef burgers – has anyone actually done a taste test? – and the contaminated ingredients were used elsewhere including Britain and Northern Ireland, and it was because we have more rigorous testing here in Ireland that the problem was uncovered at all. Nevertheless, because livestock and meat is such a big business, employing 300,000 people in Ireland and accounting for €3bn of the €9bn of food exports last year, the matter is being taken very seriously indeed. So it’s no time for jokes, like pointing out “hamburger” is an anagram of “Shergar bum” or having your burger cooked “good to firm”, it’s enough to give you night mares!

Book of the Week

“Going Clear” written by Pulitzer Prize winner, Lawrence Wright

Unfortunately, contrary to the claim in the film “The Departed”, it seems that Sigmund Freud never actually referred to the Irish as the only nation impervious to psychoanalysis, but to the best of my knowledge, we remain the only nation where the Church of Scientology makes an accounting loss. After we’ve embraced “Heaven and Hell and everlasting life and all that type of thing. Big Demons sticking hot pokers up your arse for all eternity” the Scientologists were always going to be on a loser with audits, thetans and fifth levels. In the United States, Lawrence Wright, the Pulitzer Prize-winning author of “The Looming Tower” about Al Qaeda, has just published a new book “Going Clear” which claims to give the down-and-dirty on life in Scientology.

I haven’t read the book myself, the review refers to all sorts of nasties employed by the Scientologists – from the review in the New York Times

““the Hole,” a hellish double-wide trailer parked at a California resort owned by the church. Forty or 50 people were housed there with no furniture or beds, eating leftovers, enduring cold-hose group showers. There are stories of people being beaten; and lots of stories of forced divorces, mandatory “disconnections””

The reason I haven’t read the book is that it isn’t being released by the publisher, Transworld, in either Ireland or the UK. And the reason for that? Our libel laws, which place the burden of proof on the respondent rather than the applicant. The Guardian writes “The legal advice was that Going Clear’s content was “not robust enough for the UK market,” they say.”

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