Month: December 2010

An insight into life under NAMA from the family law courts

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.

&copy NAMA

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.

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Presuming to know the law

ignorantia juris, quod quisque scire tenator neminem excusat *

Imagine the chaos that would unfold if one were able to defend a drunken driving charge by claiming not to know of the offence. But, in light of the volume and complexity of contemporary law, is the rule that ignorance of the law is not a defence fair? Generally, the answer will be in the affirmative, but the question raises wider issues about difficulty in understanding the law.

Of course, the rule does not mean that everyone is expected to actually know the law, they are merely presumed to know it so that they cannot be excused on the basis of ignorance. Nevertheless, many laws are inaccessible; sometimes literally. Take this example concerning the Criminal Procedure Act 2010:

For reasons unknown the Act (which among other things prescribes new procedural and evidential rules applicable to all trials since enactment) has not been published by Official Publications and it is not possible to get a copy. At a murder trial in the Central Criminal Court recently the prosecution sought to rely on the 2010 Act but could not produce a copy. Did someone say Kafka?

Do not want
Legislation fail

The bulk of Irish laws, particularly acts and statutory instruments, are available online but that does not mean that they are accessible. Beyond primary law, it is amazing how many simple legal documents presented to the public remain so complicated. Below is a small example.

Around 64% of summary cases in the District Court relate to road traffic (333,161 in 2009) and given that the Road Traffic Acts 1961 to 2007 and related legislation are of such wide application, one would think them suitable for consolidation or at least restatement (bizarrely, the Attorney General’s office has restated the Tourist Traffic Acts 1939 to 2003, but not the Road Traffic Acts).

Order 15 Rule 3(1) of the District Court Rules provides:

A summons shall state shortly and in ordinary language particulars of the cause of complaint or offence alleged …

The summons for a road traffic offence will state the nature of the offence at its head; for example: “Failure to produce insurance certificate“. The body of the summons itself will set out the details:

  1. the name and address of the accused;
  2. details of the application by a member of the Gardaí for the summons to issue;
  3. the time and venue of the court at which the prosecution will be dealt with;
  4. the date and location of the alleged offence; and
  5. the law under which the offence arises.

So, what if you are served with a summons headed “Non display of disc (use)“? This could refer to a tax, insurance or NCT disc, so the final part of the summons (5) is important. In the case of the summons I have in mind, that section states that the offence was committed:

Contrary to sections 73(1) and 76 (as amended by section 63 Finance Act 1993) of the Finance Act 1976.

Huh?

Reading these sections suggests the existence of an offence and the potential penalties, but where is the plain statement of what offence is alleged? Is the accused to be prosecuted for not displaying the disc referred to at the head of the summons or for not having the licence referred to in section 73(1)? And, either way, what disc or licence are we talking about?

Section 73(1) points to section 5(5) of the Roads Act 1920, a pre-Free State statute that belongs to the statutes of the United Kingdom of Great Britain and Ireland. It has been preserved in Irish law but you won’t find it on the Irish Statute Book. It is still in force in the UK and available on their legislation directory, which is so good that it consolidates amendments. Section 5 of the Act was repealed there in 1949, but the UK government has helpfully retained the original version available here.

Having made it thus far, we find that section 5(5) provides:

Subject as may be prescribed, every such licence as aforesaid shall, in the prescribed manner, be fixed to an exhibited on the vehicle in respect of which it is issued.

Despite having torn out at least some hairs at this point, we appear to be near the legislative treasure so let’s search back in section 5 for the aforesaid licence; where we find that it is probably one issued under the Finance Act 1920. It is here that I throw in the towel.

The offence, for anyone still with me, is of not displaying a tax disc.

Lawyers have it easy: they will either know the offence from experience or can look up a book and find the answer in a few seconds. But you don’t necessarily need a lawyer to attend the District Court for a case of this nature and there is no reason why the summons should not state at its head “Non display of tax disc“.

It is hard to see how a cryptic summons like this, though rare, satisfies O15R3 of the District Court Rules nor is it fair or practical for such unnecessarily complex legal instruments to remain in use.

* Ignorance of the law, which everyone is presumed to know, excuses no one.

Economic traitor!?

Senator Dan Boyle wants to amend the Constitution to provide for an offence of “economic treason”. The phrase is an effective political barb, recently thrown at Brian Cowen by Eamon Gilmore in a clearly political exchange, but what does it actually mean?

 

The Execution of Guy Fawkes
Lessons from the past in dealing with traitors?

The ordinary offence of treason is punishable by a life term in prison. Deputy Gilmore and Senator Boyle appear to refer to alleged mismanagement of national affairs by the government. Senator Boyle has not gone to the effort of defining the offence with sufficient precision to understand what is actually proposed and the question arises as to why primary legislation cannot be drafted to introduce whatever nebulous offence he has in mind.

What existing aspect of constitutional law bars the creation of a new offence? Or, indeed, what deficiency exists in the current laws that requires a new law? On the evidence of the draft bill, these questions do not appear to have been considered.

The draft provision states:

Economic treason shall consist of actions that result in reputational damage for the country, an unacceptable economic cost, or a loss of economic sovereignty for the State.

The lack of precision suggests that any reputational damage done to the country (what is the country? why not the State?) constitutes an offence. Likewise, any circumstances leading to an unacceptable economic cost could constitution treason. And what, politics aside, constitutes “a loss of economic sovereignty”? The various European Union treaties ratified by the State involved some loss of economic sovereignty; are all taoisigh since Jack Lynch guilty?

Well, of course, those events happened in the past. However, the draft Article 49.3 suggests one constitutional problem which Senator Boyle wishes to overcome. It provides:

Nothing in this section shall preclude the drafting of legislation, applying these definitions retrospectively.

If this provision is to be interpreted as intending that a criminal offence of retrospective effect could be enacted, Article 15.5.1 prohibits it.

The Oireachtas shall not declare acts to be infringements of the law which were not so at the date of their commission.

One might suggest that Senator Boyle’s Article 49.3 be amended to provide that nothing in the Constitution shall preclude retrospective effect. That option is not available. Article 7 of the European Convention of Human Rights provides:

No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed.

Not only has Ireland signed and ratified the Treaty, the Government gave it direct effect under Irish law in the European Convention on Human Rights Act 2003.

It would appear, then, that the proposed amendment takes Deputy Gilmore’s soundbite and proposes to paste it into the Constitution, without any serious thought as to the possibility or consequences of doing so. It is not a serious proposal and one can only see it as a purely political stunt.

Conspiracy theorists (and others): who is writing our laws?

Perhaps it’s only fitting, with the IMF and the EU pulling the State’s financial strings, that Irish legislation is taking on a European flavour.

© Rem Koolhaas and/or others

Irish primary legislation usually consists of a short title, a long title, operative sections and schedules. The short title is the name by which legislation is known to and the long title describes it further. For example, the long title to the Finance Act 2010 is:

AN ACT TO PROVIDE FOR THE IMPOSITION, REPEAL, REMISSION, ALTERATION AND REGULATION OF TAXATION, OF STAMP DUTIES AND OF DUTIES RELATING TO EXCISE AND OTHERWISE TO MAKE FURTHER PROVISION IN CONNECTION WITH FINANCE INCLUDING THE REGULATION OF CUSTOMS.

It has 165 operative provisions and four schedules, the latter containing tables of rates and other technical amendments. Background information is contained in the explanatory memorandum which accompanies legislation at draft stage (the 35-page explanatory memo for the Finance Bill 2010 is here).

Murdoch‘s notes:

In Irish legislation, preambles [which include descriptive recitals] are mainly found in Acts to amend the Constitution [eg. the 2009 ratification of the Lisbon Treaty], and Private Acts [eg. the Limerick Markets Act 1992].

Take 2006 as representative: 42 acts passed in a pre-crash year, with no constitutional amendments or private acts. None of those 42 acts contains recitals.

recently observed that legislative mission statements were present in new Irish financial laws. These include operative sections outlining the purpose of the legislation (rather than the actual effect) and recitals, which I said were “common in continental European civil law systems and familiar to Irish lawyers thanks to the regulations and directives of the European Union.” Take, for example, Directive 2010/65 which puts up 28 recitals for the reader to wade through before getting to the good stuff: reporting formalities for ships in EU ports (though article 1(1) again sets out the purpose of the directive).

Yesterday, the Minister for Finance published the Credit Institutions (Stablisation) Bill 2010. This is a substantial piece of legislation containing sweeping powers for the Minister, but on a superficial level, it was striking that the Bill again contains a purpose provision (section 4) and a lengthy set of recitals which shout the background (reproduced below).

One might be inclined to speculate as to the source of this Europeanisation of Irish legislation.

Recitals to the Credit Institutions (Stabilisation) Bill 2010

WHEREAS THERE IS A SERIOUS DISTURBANCE IN THE ECONOMY OF THE STATE;

AND WHEREAS MEASURES ARE NECESSARY TO ADDRESS A UNIQUE AND UNPRECEDENTED ECONOMIC CRISIS WHICH HAS LED TO DIFFICULT ECONOMIC CIRCUMSTANCES AND SEVERE DISRUPTION TO THE ECONOMY;

AND WHEREAS THERE IS A CONTINUING SERIOUS THREAT TO THE STABILITY OF CERTAIN CREDIT INSTITUTIONS IN THE STATE, AND TO THE FINANCIAL SYSTEM GENERALLY;

AND WHEREAS IT IS NECESSARY, IN THE PUBLIC INTEREST, TO MAINTAIN THE STABILITY OF THOSE CREDIT INSTITUTIONS AND THE FINANCIAL SYSTEM IN THE STATE;

AND WHEREAS IT IS NECESSARY, IN THE INTERESTS OF THE COMMON GOOD, TO CONTINUE THE PROCESS OF REORGANISATION, PRESERVATION AND RESTORATION OF THE FINANCIAL POSITION OF ANGLO IRISH BANK CORPORATION LIMITED BEGUN WITH THE ANGLO IRISH BANK CORPORATION ACT 2009;

AND WHEREAS THE FUNCTIONS AND POWERS CONFERRED BY THIS ACT ARE NECESSARY TO SECURE FINANCIAL STABILITY AND TO EFFECT A REORGANISATION OF CERTAIN CREDIT INSTITUTIONS;

AND WHEREAS IT IS NECESSARY TO AMEND THE EUROPEAN COMMUNITIES (REORGANISATION AND WINDING-UP OF CREDIT INSTITUTIONS) REGULATIONS 2004 (S.I. NO. 198 OF 2004) TO IMPLEMENT DIRECTIVE 2001/24/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 4 APRIL 2001 TO PRESERVE OR RESTORE THE FINANCIAL POSITION OF CERTAIN CREDIT INSTITUTIONS;

AND WHEREAS THE CONSIDERABLE FINANCIAL SUPPORT PROVIDED BY THE STATE TO CERTAIN CREDIT INSTITUTIONS HAS HELPED THOSE INSTITUTIONS TO MEET THEIR FINANCIAL AND REGULATORY OBLIGATIONS;

AND WHEREAS THE STATE WISHES TO PROVIDE FOR THE PERFORMANCE OF THE FUNCTIONS CONFERRED BY THIS ACT IN ORDER TO ACHIEVE THE FINANCIAL STABILISATION OF THOSE CREDIT INSTITUTIONS AND THEIR RESTRUCTURING (CONSISTENTLY WITH THE STATE AID RULES OF THE EUROPEAN UNION) IN THE CONTEXT OF THE NATIONAL RECOVERY PLAN 2011–2014 AND THE EUROPEAN UNION/INTERNATIONAL MONETARY FUND PROGRAMME OF FINANCIAL SUPPORT FOR IRELAND;

AND WHEREAS THE COMMON GOOD REQUIRES PERMANENT OR TEMPORARY INTERFERENCE WITH THE RIGHTS, INCLUDING PROPERTY RIGHTS, OF PERSONS WHO MAY BE AFFECTED BY THE PERFORMANCE OF THOSE FUNCTIONS;

AND WHEREAS THE URGENT REORGANISATION OF CERTAIN CREDIT INSTITUTIONS IS OF SYSTEMIC IMPORTANCE TO THE STATE;

AND WHEREAS IT IS NECESSARY TO MAINTAIN PUBLIC CONFIDENCE IN, AND ENHANCE, THE PROTECTION OF DEPOSITS IN CREDIT INSTITUTIONS GENERALLY;

AND WHEREAS IT IS DESIRABLE TO PROMOTE AND FACILITATE INVESTMENT BY PERSONS OTHER THAN THE STATE IN CREDIT INSTITUTIONS TO REDUCE THEIR
RELIANCE UPON STATE SUPPORT;

AND WHEREAS BECAUSE CERTAIN CREDIT INSTITUTIONS IN THE STATE ARE PARTIES TO CONTRACTS AND OTHER ARRANGEMENTS GOVERNED BY THE LAW OF A STATE OTHER THAN THE STATE;

BE IT ENACTED BY THE OIREACHTAS AS FOLLOWS:

The Government could help bring down legal costs overnight, but won’t

Legal costs in Ireland are high, yet the Minister for Justice could, overnight, activate an existing change to the law which could have a significant impact on such costs.

The legal professions are saddled with most of the blame for the high level of costs, but some of the problem is structural: as a rule of thumb, higher courts involve more work and higher costs. This is particularly the case for cases taken in the High Court. So: why not take a case in a lower court?

Dublin’s Four Courts, nicknamed the Four Goldmines by the Phoenix Magazine, gets its name from the four types of court that historically sit* there. Each court has different jurisdiction: its territory, so to speak. [* TJ McIntyre reminds me that the Four Courts gets its name, of course, from the courts that used to sit there (Chancery, King’s Bench, Exchequer and Commons Pleas) rather than the current varities]. The four courts of the Irish justice system are:

  • The District Court is the lowest court, with jurisdiction to deal with relatively minor, non-jury, criminal trials and civil cases up to a value of €6,349. There are 23 districts in the State (West Limerick is in District 13). The Small Claims Court is part of the District Court.
  • The Circuit Court deals with appeals from the District Court, more serious criminal cases and civil cases up to a value of €38,092. There are eight circuits in the State (Limerick is in the South Western Circuit).
  • The High Court is one of the two constitutional courts (see article 34 here) and has jurisdiction to hear all civil cases of whatever value. The Central Criminal Court is, in fact, the High Court when hearing criminal cases and it deals with the most serious criminal offences (there are a number of other special purpose courts). It may sit as a divisional court with three judges, as it recently did in Dellway Investment Limited & Ors v. NAMA & Ors (a.k.a. McKillen v. NAMA).
  • The Supreme Court is the second constitutional court and is the court of final appeal. Cases generally cannot be started in the Supreme Court and can arrive there only on appeal.
Four Courts (National Library of Ireland)
The Four Courts/Goldmines in quieter times

Anyone who has been involved in High Court litigation will know that it is generally an intensive and expensive undertaking. Yet, if you have a civil case seeking damages over €38,092, you have no option but to start your case there (except in the rare circumstances where both sides agree to the case being heard in the District Court with unlimited jurisdiction). The hierarchy of courts involves a hierarchy of fees, and some parties may find that their potential claim falls into the jurisdiction of the Circuit Court which may carry a risk of unsustainable fees. It is not uncommon to find claims of €10,000 or more taken in the District Court in the knowledge that only €6,349 can be recovered.

Given the very low thresholds at which cases must be initiated in the Circuit and High Courts, why not just increase the jurisdiction of the District and Circuit Courts? In fact, the Government did this in the Courts and Court Officers Act 2002, 8 years ago. Unfortunately, it is not unknown for recent governments to enact legislation but never commence it (meaning it is not operative) and sections 13 and 14 of the 2002 Act are a case in point. They provide that:

  • The jurisdiction of the District Court be increased to €20,000.
  • The jurisdiction of the Circuit Court be increased to €100,000.

Why have these provisions been left to wither on the vine? According to Murdoch’s Dictionary of Irish Law:

As of 1st September 2004, the Minister had decided to await the experience of the recently established Personal Injuries Assessment Board and to assess the proposed increase in the light of that experience. The final report of the Motor Insurance Advisory Board recommended that the current limit not be increased, other than to express the figure in a convenient euro amount.

The MIAB’s position is that increasing the jurisdiction of the lower courts leads to inflation of personal injuries awards. Given the existence of the now well-established Injuries Board, however, why should jurisdictional increases be held up because of insurance industry concerns about a single type of case?

Making the change would have inevitable consequences for all three lower courts, and while the High Court might have its workload reduced the Circuit and District Courts would certainly require additional resources. However, it would appear to be a change that is long overdue and, given the IMF’s interest in legal costs (see p.14 of the EU/IMF Programme of Financial Support for Ireland),* one which that organisation could easily direct the Minister to make.

* Eoin O’Dell‘s article in yesterday’s Sunday Business Post outlines reforms of the Irish legal professions proposed some years ago and which are now “required” to be implemented by the IMF/EU programme. If these are implemented in the relatively short timeframe of the programme, they would represent something of a Big Bang for the professions.

Your Country, Your Call: “Corporate social responsibility at its best”

I was recently provided with some, but not all, of the documents held by the Department of Enterprise, Trade and Innovation relating to the Your Country, Your Call competition promoted by An Smaoineamh Mór, a private company.

Following an internal review, DETI released additional documents. However, some documents were not released, or were only partially released, on the basis that they relate to an ongoing deliberative process (section 20 FOIA, as amended). A 17 page email was not released on the basis that it relates to the President.

© An Smaoineamh Mór and/or its contractors
A "hard nosed" innovation workshop (or: My Ireland Moment)

The documents released are available at the end of this post or here and here.

DETI ATTITUDES TO YCYC

In April 2010, DETI officials responsible for micro-enterprise were asked internally to prepare to provide a briefing on YCYC and to attend a meeting between Martin McAleese and the Minister later in the month (p.40 here). The response to that request opens: “It is not appropriate that we attend this meeting. We have no role in this matter.” This likely relates from the fact that the aims of YCYC were purportedly macro-economic (see p. 5 here), but note the forcefulness (“I think we need to be firm in our view on this.”).

An internal memorandum (p. 1 here) states:

The current situation is that a commitment clearly appears to have been given at political level to provide financial support to the YCYC initiative. However, no additional funding has been made available to the Department to provide such support. We therefore need to consider, in the absence of additional funding, how financial support can be provided

Furthermore, if financial support is to be made available, the Department must ensure that appropriate financial controls are put in place to ensure appropriate management and accountability of public funds.

Such controls would be difficult to apply, one would think, to an organisation that admitted it didn’t know what it planned to do with the money.

In September 2009, the Irish Times emailed an enquiry to the DETI press office seeking clarity on the proposed payment of €300,000 by DETI to ASM. The query was forwarded to Bernard Mallee, special adviser to Minister O’Keefe, who responded “i have dealt with this” (p. 54 here). No record of how he “dealt with” the query was released.

AIMS OF YCYC

A document is included (p. 43 here) which is referred to as one “which the Tánaiste would have had at the most recent meeting with Martin McAleese.” It is not clear whether this was a departmental document or one supplied by ASM but the latter would appear likely as it mostly consists of aspirational statements. The author sees YCYC as akin to “community development” as “Government of itself cannot create community.” (You might remember, at this point, that YCYC was a business proposal competition.)

The document contains some impressive claims:

  • It is anticipated that the competition will have a very positive national psychological impact … we [who?] expect it to generate optimism and positivity and so to contribute to a renewal of confidence in ourselves and our country’s future.
  • YCYC is a competition with hard nosed outcomes at its core but it is also a vehicle that is capable of lifting the national spirit just as the Special Olympics did.
  • YCYC will complement the [Government] Framework Document, ‘Building Ireland’s Smart Economy’ … It will bring a populist dimension to it and will soften the ‘technology’ flavour of the document by proposing that all areas of potential innovation should be explored by adding the ‘Arts and Humanities’, our culture, classics, music etc. to the more usual areas of science, IT and business.

This, from the document above, is perhaps my favourite nugget from all the documents released:

The integrity of this initiative is underpinned by the fact that those involved in the organisation of the competition have no vested interest … It is heartening to see corporate social responsibility in operation through this initiative at its absolute best in these difficult economic times.

Given that the author is unknown but can be assumed to be YCYC, the sections headed “The Role of the President of Ireland” and “The Role of Government” are astounding. No doubt many other private companies would relish the opportunity to dictate to the democratically elected President and Government of Ireland the roles those offices shall play in the operations of that company. The Government role, the document states, includes:

  • Contribute to funding
  • Engage in supportive activities through messages, speeches and other material
  • Promotion of the initiative by Taoiseach/Tánaiste/Minister(s) at public events
  • Support the implementation phase

Corporate social responsibility at its absolute best indeed!

Something I hadn’t known about until now was RTÉ’s involvement:

RTE propose to do a series of programmes on the 20 potential winning proposals from 15 June 2010 to the conclusion of the competition in October 2010. These programmes will have a human interest format similar to the ‘Nationwide’ programmes.

This series does not appear to have materialised, despite the certainty of the above directions.

THE DOCUMENTS