A group of private investors found today by a judge 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 €410 million purchase of the Irish Glass Bottle site at Ringsend and a personal guarantee of Mr McNamara over the loan principal.
Today, Mr Justice Peter Kelly ruled neither Donatex nor Mr McNamara had made out
any arguable defence to the summary judgment claims and directed 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 judgment order and said his side wanted time to study the judgment 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 next when he will be told whether 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 IGB site was bought by a consortium consisting of the Dublin Docklands Development Authority (DDDA), Mr McNamara and another developer, Derek Quinlan and the purchase was made by Beebay 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 Beebay through Donatex while Mempal Ltd, representing the Quinlan interest held 33 per cent and the DDDA held the remaining 26 per cent.
To finance Mr McNamara's share, Donatex issued loan stock which offered the prospect of a very good return to investors at 14 per cent annual interest and a 3 per cent redemption premium payable to them, the judge said.
Davy stockbrokers were retained to market the investment proposals and 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 lifetime of seven years but the LSI became immediately redeemable in certain circumstances including if Beebay 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.
Beebay had not applied for the Section 25 certificates and 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 Eu 98 million from Donatex and Mr McNamara had agreed, if there was no arguable defence to that claim, he was also liable under his personal guarantee for €62.5 million.
The judge then analysed the various defences advanced on behalf of Donatex and ruled there was no arguable defence.
He noted the defendants had argued 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.
Even assuming the position was as stated by Mr McNamara, there was still no arguable
defence on the grounds advanced, he said.
This case, he said, 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 Beebay and the defendants, not the investors. 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.
