Judge says cases showing falls in property values of up to 80%

A HIGH Court judge has said he is dealing “on a daily basis” with cases illustrating falls in property values of between 70-80 per cent.

Mr Justice Peter Kelly, who manages the list of the Commercial Court, the big-business division of the High Court, made the comment yesterday when dealing with a list involving some 70 commercial cases, including 18 new cases seeking admission to the court.

Many of the cases before the court relate to alleged failures to repay loans secured on properties bought at the height of the property boom.

One case admitted to the court in recent weeks involves the EBS seeking repayment of a €19.5 million loan made in June 2007 in circumstances where, it alleged, it had procured a valuation of some €6 million last June on the lands in Kilcock, Co Kildare, on which that loan was secured.

In another recent case, in a decision placing an €11.1 million value on lands in Kilbride which were subject of a purchase contract for €6 million in August 2007, the judge assessed damages of €4.9 million were due to the plaintiffs over breaches of the terms of settlement of an action brought over failure to perform that contract.

Yesterday, the judge’s remark was made when he was dealing with an application to admit to the court proceedings by ACCBank against five men in which the bank wants summary judgment orders totalling some €5.5 million over alleged unpaid loans made in 2005 to Westhatch Ltd, Woodford Bar, Paul Street, Cork.

ACC’s action is against Francis O’Callaghan and John O’Callaghan, both of Castletownkenneigh, Enniskeane, Co Cork, from whom some €1.54 million and €1.26 million is sought respectively; Tadhg O’Callaghan, Killowen, Nohoval, Co Cork, alleged to owe €334,000; Michael O’Riordan, Castleisland, Co Kerry, who is being pursued for €183,000; and Niall O’Callaghan, Gortroe, Dunmanway, Co Cork, said to owe more than €1.54 million.

The bank appointed a receiver over the Westhatch company last December and claims the defendants’ liabilities for various sums arise from guarantees and indemnities provided by them.

When Mr Justice Kelly asked counsel for the defendants to indicate if they had a defence, counsel said he needed to take specific instructions but believed two issues arose, the first relating to the purpose to which the loan monies were put, and the second as to valuations of the property.

Counsel said the company was to get an independent valuation for the property but the bank had obtained a valuation where the value had “jumped” to €6 million.

The receiver over the company was trying to sell it and was seeking tenders for some €2 million.

Counsel said a defence may arise in that the property was “greatly overvalued” and the loan monies were not used for the purpose stated in the loan documents.

He said the loan monies were advanced to refinance an existing loan with ACC and to repay directors’ loans, but some monies went to buy a director’s shares and the bank was aware of that.

Caroline Costello, for ACC, said she had to take instructions about these matters but, under law, company directors were bound by decisions taken by their company.

Both the bank and company directors would have confirmed the valuation report, she added.

The judge said property values appeared 70-80 per cent less than they were.

“I see that every day of the week here,” he said.

Remarking the suggested defence appeared “very thin”, he adjourned the case to Friday.