Power Tells Government That NAMA Should Appeal Priory Hall Developer’s UK Bankruptcy

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Adjournment Debate Tabled By Senator Averil Power in Seanad Éireann, 26th January 2011

Senator Averil Power: I welcome the Minister of State to the House. I am sure he is well aware of the despicable situation in which the residents of Priory Hall have found themselves. Following a case brought by Dublin City Council, families have been forced to move out of their homes before Christmas, with little certainty for the future. Their apartments were not just badly built by Coalport Limited, they are very dangerous.

Dublin City Council has sought at every juncture to avoid responsibility. Its officials have displayed no humanity since the beginning of this debacle. It has also been clear from the outset that it is acting under the advice of the Department of the Environment, Community and Local Government, yet to date the Minister will not even meet with the families concerned to listen to their stories.

While the residents are still facing a very bleak future, they now have to stomach watching the developer, Thomas McFeely, become the latest high profile Irish businessperson to avail of bankruptcy tourism in the UK, deliberately evading proceedings that are already underway in the Irish courts. Mr. McFeely will be free of restrictions in 12 months, having been declared bankrupt by the UK courts. He will be able to go about his life and his future business interests in his nice house on Ailesbury Road, without the slightest thought for the families affected by his shoddy, dishonest and cruel business practices.

As the Minister of State is aware, Seán Quinn also attempted to avail of the UK’s more lenient bankruptcy laws, and was declared bankrupt in the North on 11 November. IBRC was successful in having that adjudication of bankruptcy overturned by the High Court in Belfast on 24 November, by establishing that his

centre of interest was not in Fermanagh, but in the Republic. This has allowed his case to be heard by the Irish courts, as is proper. The Seán Quinn case has established a precedent that bankruptcy tourist can and should be challenged.

While Mr. McFeely was declared bankrupt in London almost two weeks ago, I understand that NAMA still has not sought to have that overturned, and it is being left to a private individual to do so. A lady who was a victim of Mr. McFeely’s shoddy practices in another development went to the distress of bringing him through the Irish courts and won a judgment against him for damages and costs, yet two years later he still has not paid. She has now filed bankruptcy proceedings in the Republic and he has now gone to London – his own lawyers claim in the newspapers that they did no know about this – and has been awarded bankruptcy there.

Does the Minister of State think it acceptable that NAMA is standing by while one of its creditors uses the much more lenient bankruptcy proceedings in the UK system? If he does not, will the Government indicate to NAMA that it should seek to have the judgment in the UK overturned?

I appeal to the Minister for the Environment, Community and Local Government to meet with the residents and listen to their stories, and I appeal to the Government to change tack. So far, the Government has shown no support to the residents. I appeal to the Minister of State to change that approach and help these people.

Minister of State at the Department of Finance (Deputy Brian Hayes): I thank Senator Power for raising this important matter. NAMA has assured me, and has stated publicly on many occasions, that it will pursue all debts to the greatest extent feasible, in order to achieve the best achievable financial return for the State. Where debtors are refusing to co-operate, it has been necessary for NAMA to adopt a number of approaches, depending on the legal advice received in each case. Not all

cases are the same, as the Senator is aware. Based on those legal opinions which come before NAMA on the particulars of each case, an individual view is determined as to which approach to follow. This may involve the pursuit of personal guarantees through the courts and in some cases, will require litigation to reverse asset transfers where the original intention appears to have been to place the assets concerned beyond the reach of NAMA.

I do not wish to comment on the position of any individual debtor or any particular existing or proposed legal proceeding. Indeed as the case referred to by the Senator is sub judice, it would not be appropriate for me to comment. However, I would make the following points to address the general issue raised by the Senator. Debtors do not normally inform their creditors in advance of their intention to pursue bankruptcy proceedings, and neither NAMA nor any other institution can prevent a debtor from applying for bankruptcy in Ireland or elsewhere if he or she has a legal right to do so. However, NAMA has advised me that where one of its debtors seeks to pursue bankruptcy proceedings outside of Ireland, and where NAMA does not believe that it is bona fide, it will challenge the court decision in such instances.

The general test applied in most jurisdictions as to whether a person is eligible to petition for bankruptcy in that jurisdiction is where that person’s centre of main interests, or COMI, is in that jurisdiction. In England and Wales the threshold to establish COMI is comparatively low. The profile of some of NAMA’s substantial debtors is of persons with some business interests in the UK and often there may be a well-established pattern of travelling and staying in the UK in connection with these interests. The frequency and duration of such visits to the UK may have increased substantially over recent years as the Irish property market stalled and the UK market remained reasonably buoyant, particularly in London. Accordingly it has proved possible for certain NAMA debtors to legitimately pass the COMI requirement in the UK and seek to be made bankrupt there.

Where an individual has been made bankrupt in the UK, it is open to NAMA as a creditor to appoint a trustee in bankruptcy. The trustee will generally be an individual from the private sector and a licensed insolvency practitioner. He or she is charged, among other things, with maximising the return to creditors. The trustee has the power to summons the bankrupt to be examined as to his assets and to conduct investigations for hidden assets. NAMA advises me that it has already appointed trustees in bankruptcy who are carrying out such work.

The trustee in bankruptcy has the ability to apply to have the 12 month timeframe extended where there is non-co-operation from the bankrupt, or where there is evidence of assets being hidden.

The point NAMA makes there is that people should not automatically assume, when NAMA appoints an individual to pursue debtors in this or indeed other cases, that work is not ongoing. When published, a bankrupt in the UK may be discharged from bankruptcy after a lapse of one year, with a further two years during which he or she is monitored. In Ireland, it currently takes 12 years. As proposed in the draft Bill introduced yesterday by my colleague, the Minister for Justice and Equality, that period will be substantially reduced. The draft personal insolvency Bill provides for automatic discharge after three years in place of the current 12 years. Hence, there is an element of convergence which may make the UK process less attractive to some NAMA debtors in the future.

I assure Senators that the Government is committed to introducing fair and appropriate revisions of bankruptcy laws as soon as possible. In the interim, NAMA assures me it will be using all of the powers available to it, within the existing legal framework, to ensure that developers face up to their responsibilities and maximise the return to the State on loans transferred to it.

Senator Averil Power: With respect, that is an extraordinarily hands-off reply given the general policy implications. What message does this send out in the current environment, not just to Priory Hall residents but to individuals and families who are under huge pressure? They can see their assets being taken from them and are worried about being able to pay their mortgages and feed their children, yet they can see developers and other business people taking a quick one-hour flight and availing of lenient measures in another jurisdiction. Given the broader policy implications, this is an issue that the Government needs to be much more hands-on about.

Will the Minister of State speak to the Minister for the Environment, Community and Local Government, Deputy Hogan, and request that he meet with the residents concerned and listen to their side of the argument?

Deputy Brian Hayes: With respect, I do not think the Senator is in a position to make assumptions about this case without full knowledge of the facts.

Senator Averil Power: Has the Minister of State seen the legal advice?

Deputy Brian Hayes: Also with respect, as I pointed out in my contribution, this matter is sub-judice. The Senator is well aware – or if not, she should be – of the clear constitutional barriers that exist between the courts of this land and the decisions of this or the other House. With regard to NAMA, to which these dubious assets have been transferred – an agency, I hasten to add, that was established by the Senator’s own party – we have a responsibility, in the first instance, to maximise

the amounts of money returned to the State. While I appreciate the Senator’s concerns about this case – concerns that are equally borne by the Government – we must deal with this in a way that stands the test of legal challenge. I do not believe she should automatically assume, in this or other cases, that NAMA is not pursuing this matter in the way in which it normally does its business, namely, appointing persons who normally act in cases of insolvency and then trying to maximise the amount of money reclaimed from debtors.

I will transmit to my colleague the Minister for the Environment, Community and Local Government the Senator’s views that he should meet with the group concerned. I give her my word that I will say that to him.

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