Mr. Justice Abbott gave judgment earlier this year in XY v. YX, a very interesting judicial separation case substantially concerned with the impact of the National Asset Management Agency on a married couple’s separation. The judgment has recently been made available on the Courts Service website.
Abbott J outlines the scope of the case as follows:
This is a case involving very substantial assets, but even more substantial debts, in consequence whereof the assets of the parties … are in very substantial negative equity. A major implication of this situation is that it is likely that the debts attaching to the vast majority of the assets of the husband will be taken over by the National Asset Management Agency (NAMA), established under the National Asset Management Agency Act 2009 (“the Act of 2009”).
Abbott J said that the case “assumed a greater degree of urgency” due to the “likely onset of NAMA”.
This situation is in stark contrast with the picture painted in the affidavits of means of the parties filed after the proceedings were initiated in 2007, which indicated that the husband’s assets amounted to some hundreds of millions of euro, even if a forced sale of the assets had been effected by the banks.
Abbott J outlined the pre-NAMA fortunes of the couple:
An indication of the changed times through which this case has progressed is given by the fact that in his first affidavit of means, prior to the collapse of Lehman Brothers, the husband could freely declare his income from all sources at €6,000,000 per annum while, at the same time, the wife indicated de facto household expenses of €694,418 per annum, although she said she received only monthly payments from the husband’s company averaging €6,750 …
This is a standard of living which might be expected of a couple whose net worth could be stated in the region of €230,000,000. They enjoyed the facility of a luxurious home, a choice of private air flights, good holidays and a good social life generally. However, notwithstanding their generous lifestyle, it could not be said that they led the life of the idle rich.
The extent of the husband’s negative equity is concluded as follows:
[A] total net value forced sale loss of €304,309,445.00. The final horizontal column on the spreadsheet gives an equivalent net value, having regard to estimated long term market values of the husband at the end of the ten year term of NAMA operations, at a negative €112,073,477.00
Two interesting aspects of the judgment relate to NAMA itself. A chartered valuation surveyor from Jones Lang LaSalle, giving evidence on behalf of the wife, said that the property market was close to the bottom and that the market represents a good buy at the moment. However:
He said that it could take longer than the ten years minimum period of NAMA’s lifetime to deal with certain assets, and that more realistically NAMA is not a ten year exercise in the long run.
Viewers of last Monday’s Prime Time Investigates will be interested in section 211 of the Act of 2009, referred to by Abbott J. It provides:
Where, on the application of NAMA or a NAMA group entity, it is shown to the satisfaction of the Court that—
(a) an asset of a debtor or associated debtor, guarantor or surety was disposed of, and
(b) the effect of the disposition was to defeat, delay or hinder the acquisition by NAMA or a NAMA group entity of an eligible bank asset, or to impair the value of an eligible bank asset or any rights (including a right to damages or any other remedy, a right to enforce a judgment and a priority) that NAMA or the NAMA group entity would have acquired or increased a liability or obligation but for that disposition,
the Court may declare the disposition to be void if in the Court’s opinion it is just and equitable to do so.
In XY v. YX Abbott J did not believe that the disposition involved (security on an unencumbered property to the value of €300,000 in respect of maintenance) would later be found by a court to be void under section 211 and believed it would be found just and equitable to allow the disposition. Of course, the circumstances of the XY v. YX case appear very different to those transfers dealt with by Prime Time.