A GROUP OF private investors, who have been found to be entitled to summary judgment orders for €62.5 million against developer Bernard McNamara and €98 million against his company Donatex, have told the Commercial Court they will call evidence to show Mr McNamara’s financial position has “deteriorated”.
The investors were procured by Davy stockbrokers to invest in the €412 million purchase of the Irish Glass Bottle site at Ringsend and include businessmen Lochlann Quinn and Martin Naughton.
Through Jersey-registered company Ringsend Property Ltd, the investors had applied for the summary judgment orders over loans to Donatex towards the purchase of the Irish Glass Bottle site and a personal guarantee of Mr McNamara over the loan principal.
Mr Justice Peter Kelly ruled yesterday that neither Donatex nor Mr McNamara had made out any arguable defence to the summary judgment claims and directed that the investors were entitled to summary judgment for €98 million against Donatex and €62.5 million against Mr McNamara, plus costs.
Martin Hayden SC, for Mr McNamara and his company, applied for a stay on the order, saying his side wanted time to study it and to decide if they would appeal.
John Gleeson SC, for the investors, agreed to the judgment order not being made up before January 11th and stressed he was doing so to have an opportunity to adduce evidence on affidavit that Mr McNamara’s financial situation has deteriorated.
On that basis, Mr Justice Kelly agreed to defer the making of the judgment order until January 11th when he will be told if Mr McNamara intends to appeal that order.
If an appeal is to be brought, the judge will then hear an application for a stay on the order pending that appeal. It is expected the investors will put forward their evidence about Mr McNamara’s financial position during any such stay application.
In his judgment, Mr Justice Kelly noted the Irish Glass Bottle site was bought by a consortium consisting of the Dublin Docklands Development Authority (DDDA), Mr McNamara and another developer, Derek Quinlan. The purchase was made by Becbay Ltd in a form to avoid paying the stamp duty, which would have been due on a straightforward sale of land.
Mr McNamara held 41 per cent of Becbay through Donatex; Mempal Ltd, representing the Quinlan interest, held 33 per cent and the DDDA held the remaining 26 per cent. Donatex issued loan stock which offered the prospect of a good return to investors at 14 per cent annual interest and a 3 per cent redemption premium payable to them, the judge said.
Davy was retained to market the investment proposals. Its information memo made clear there was no planning permission in existence for the proposed development.
The investors subscribed for the loan stock on terms contained in a loan stock instrument (LSI) of January 29th, 2007. It was envisaged the investment would have a seven-year lifetime but the LSI became immediately redeemable in certain circumstances including if Becbay had not applied, within 30 months of January 2007, for all necessary section 25 certificates (fast-track planning permission) from the DDDA or had not received planning permission for the development from Dublin City Council.
Becbay had not applied for the section 25 certificates, had not received planning permission from Dublin City Council and 30 months had elapsed, the judge said. In those circumstances, the investors claimed entitlement to the €98 million from Donatex.
Mr McNamara had agreed that if there was no arguable defence to that claim, he was also liable under his personal guarantee for €62.5 million.
Mr Justice Kelly noted the defendants had argued that their prospect of securing permission had been partially frustrated because of a High Court decision in another case, the North Quay Holdings case, which meant, they claimed, the DDDA had no power to issue the section 25 certificates in relation to a development with which it was itself involved.
Mr Justice Kelly said the decision in the North Quay case did not mean the DDDA had no power at all to issue section 25 certificates but had made clear the specific circumstances in which such certificates might be issued.
This case was about a formal commercial contract between the sides. When they entered it, they knew the venture was “speculative” because of the absence of any planning permission, knew there was no planning scheme and “took the chance to proceed”.
The investors advanced the monies on the basis they would be repaid if the circumstances specified in the relevant clause of the LSI arose. The risk under that clause – relating to planning permission – was entirely allocated to Becbay and the defendants. If the conditions were not met, the monies were immediately repayable. The relevant clause was carefully drafted by experienced lawyers.
There was a clear obligation on the defendants to pay the monies in specified circumstances which had occurred, he said.
In a statement last night, a spokesman for Mr McNamara said he intended to file an appeal to the Supreme Court. He added that Mr McNamara’s building contracting business Michael McNamara Co was not affected by the judgment.
