Developer tells court his liabilities exceed assets

WELL-KNOWN property developer Paddy Kelly has told the Commercial Court his liabilities exceed his assets and he is considering the possibility of a bankruptcy arrangement.

Mr Kelly, of Clonmore, Shrewsbury Road, Dublin, made the disclosure in proceedings before Mr Justice Peter Kelly yesterday where he consented to the court making an order requiring him to pay some €131,000 to an insurance broker Hugh McGivern under a settlement of proceedings arising from a share purchase agreement.

Mr Kelly also said in an affidavit he simply could not give assurances to Mr McGivern as to his ability to discharge the sums, due on foot of rental obligations on certain premises of the Mango retail chain. It was a matter of “great personal regret” he had not been able to honour his financial commitments, whether to Mr McGivern or others, he said.

Mr Justice Kelly said a “serious situation” was disclosed from the affidavits, adding he would not put a stay on the judgment order as there may be “a rush to judgment” by other creditors in light of what was disclosed.

Mr McGivern, of Seafield Road, Clontarf, Dublin, an insurance broker, had brought proceedings in June 2007 against Mr Kelly arising from a share purchase agreement where Mr McGivern agreed to sell Mr Kelly shares in four companies, including Fabline Ltd and Latest venture (NI) Ltd, operating the Mango franchise for ladies’ clothing.

Paddy Kelly delivered his defence on July 5th, 2007 and, in the early hours of that day, his son Simon sent an e-mail to Mr McGivern referring to “your bullshit claim for the 1m” and warned: “If you continue this action regarding Mango, I am going to be forced to seek to cause you loss and pain in other business arrangements.”

The proceedings settled at the Commercial Court in February 2008 on terms including a payment of €1.35 million by Mr Kelly to Mr McGivern. Mr Justice Kelly was also told Simon Kelly, who apologised in court over what the judge described as the “shameful” e-mail, would make a €20,000 donation to St Vincent De Paul.

Yesterday, the case was again before the judge. Mr McGivern sought orders directing Mr Kelly to comply with the 2008 settlement by paying some €131,000 in unpaid rent of various premises. Mr McGivern said the failure to pay had led to judgment being marked against Mr McGivern.

The judge was told Mr Kelly was consenting to judgment against him in the sums sought.

In an affidavit, Mr McGivern said Mr Kelly had provided indemnities to him which covered the rental claims, but had acted in a manner designed to frustrate the discharge of those.

In an affidavit, Paddy Kelly denied he was seeking to obstruct discharge of the liabilities and said he had actively sought to meet his obligations to Mr McGivern but this would take some time.

Mr Kelly said he had sought to wind down the relevant businesses in an organised fashion and had personally made rent payments due for empty premises. Last month, Anglo Irish Bank stopped any further drawings on a facility granted in February 2008 and this had “a dramatic impact” on his ability to access funds to discharge ongoing rental obligations.

The position now “is that my liabilities exceed my assets”, Mr Kelly said. “I have been very concerned about this situation for some time as the credit crunch and economic downturn have progressively worsened.” He was determined to deal with the situation in an “open and transparent manner” and had taken active steps to explore the possibility of instigating the process leading to implementation of a personal scheme of arrangement under the Bankruptcy Act or under any order the court might make.