Judge orders declaration on Anglo solvency

A High Court judge has ordered a sworn “yes or no” answer must be provided by an official of the former Anglo Irish Bank as to whether or not it was solvent during 2009 when it allegedly issued loan facilities to a developer being pursued for some €88 million.

A solicitor for Kevin McNulty had sought orders requiring that all documents be discovered relating to Anglo’s solvency after September 2008 as part of his client’s defence to proceedings brought against him by a National Asset Management Agency company, which took over the Anglo loans at issue.

One of the defences advanced by Mr McNulty and his companies was that Anglo was insolvent when it purported to make the alleged loans, solicitor John Larney said in an affidavit.

‘Wealth of evidence’

While there was “a wealth of evidence in the public arena” suggesting the bank was insolvent since 2008, such material would not constitute the proof required by a court and that was why discovery was being sought, he said.

Mark Sanfey SC, for Nama, opposed discovery relating to Anglo’s solvency, saying it was not relevant to the issues to be decided in the case. The loan facilities at issue were increased, extended and refinanced between 2000 and 2009, he added.

Mr Justice Peter Kelly said that while the courts had found Irish law did not provide for a cause of action for reckless lending, this case involved claims that loans were advanced negligently.

He considered the issue as to Anglo’s solvency was relevant but that matter was best addressed by an Anglo official providing a sworn “simple yes or no” answer to the question whether Anglo was solvent in 2009, rather than the extensive discovery sought.

He made other orders relating to the nature of documents to be provided and adjourned the case for trial in June.

‘Grave irregularities’

National Asset Loans Management Ltd had initiated proceedings last year against Mr McNulty and others. Last April, when applying to have the case fast-tracked in the Commercial Court, lawyers for NALM said there were issues concerning “grave irregularities” in the security provided for some of the Anglo loans and other issues about certain asset transfers to Mr McNulty’s wife Jessica.

The action is against Mr McNulty, Red Bog, Blessington, Co Wicklow, two of his companies – Ashburton Construction, and PA Bello, both with registered offices at Clondalkin, Dublin.

The claim relates to a 2009 facilities agreement provided by Anglo and to personal guarantees allegedly provided by Mr McNulty in 1998 and 2003 over the companies’ liabilities.

The case is also against Conal P Byrne, Castle Park, Mill Road, Leixlip, Co Kildare, who is being pursued for €4.1 million arising from a personal guarantee allegedly provided by him in 1998 concerning liabilities of Ashburton. Mr Byrne denies liability and claims he was “sidelined” from the affairs of Ashburton.

Nama informed Mr McNulty in February 2011 it had acquired his liabilities from Anglo which the bank would continue to administer. Anglo had carried out the required legal due diligence associated with assets acquired by Nama, during which “grave irregularities” were uncovered related to the security, it said.