Nama shows a new-found interest in family values

Sunday January 23 2011

IT'S something of a measure of the secrecy of Nama that it takes the publication of a High Court judgment on a developer's legal separation from his wife to shed some light on how the State's so-called 'bad bank' interacts with its borrowers.

For even though the identity of the developer in question remains a closely-guarded secret in the judgment of Mr Justice Henry Abbott (owing to the exigencies surrounding the reporting of cases of family law) the curious case of Mr 'YX' and his estranged wife, Mrs 'XY', offers a rare insight into the collective thinking of the Nama boardroom, and what it deems to be in the best interests of the taxpayer.

When it comes to Mr YX for example, the need for Nama to now have him manage his boomtime borrowings of €2.3bn would appear to have given him secure employment with the agency for the next 10 years.

And while the developer in question states that he is earning a relatively modest €40,000 per annum gross from the company now managing his assets under Nama (as opposed to the €6m he drew down each year during the boom), he anticipates that the agency will continue to employ that same company at a cost of €700,000 per annum as part of its agreement with him.

Not bad, you might say. But it gets better, for Mr YX at least. Elsewhere in Mr Justice Abbott's judgment, we learn that Nama is prepared to leave Mr YX living in his period house outside Dublin rather than force him to dispose of it in a 'fire sale'.

The agency is also giving consideration to the developer, finding what the judge quaintly describes as "bachelor-type accommodation" in the capital to facilitate what might be described as his work-life balance.

While such 'cosy' arrangements will anger taxpayers who believe -- rightly or wrongly -- they are picking up the tab for the excesses of Ireland's developer class, they would still seem to represent a dramatic reversal in the fortunes of Mr YX.

For according to the High Court papers relating to his legal separation, he and his wife had a "super-rich lifestyle" up to 2008, which saw them "enjoy the facility of a luxurious home, a choice of private air flights, good holidays and a good social life generally".

It was "a standard of living which might be expected of a couple whose net worth could be stated in the region of €230m," Mr Justice Abbott notes dryly, before adding: "notwithstanding their generous lifestyle, it could not be said that they led the life of the idle rich."

Indeed, Mrs XY must have had a lot on her hands in running the family home, judging by the annual household expenses of €694,418 the court papers state she incurred in maintaining their house which, according to its most recent valuation, is worth in the region of €4.4m.

Under the terms of their separation for which proceedings began in 2007, the family home and an adjoining mews house were transferred into her name solely.

Outside of the weighty responsibility attached to the upkeep of the house, Mrs XY also claims to have made an important contribution to her husband's property development business.

According to the High Court judgment, "the wife gave evidence that she was always on hand in relation to the choice of decor, furnishing and quality touch for these properties which required a luxurious and quality image, not always obtainable from the employed professionals."

While her former husband attempted to downplay her contribution to the success of his business, Mr Justice Abbott concluded that, "both partners contributed equally to the family and its welfare and resources".

But with the break-up of her marriage of nearly 30 years, which interestingly virtually coincided with the ending of the country's development-fuelled boom, all has changed utterly for the woman the court papers refer to simply as "the wife".

Mr Justice Abbott expresses a great deal of sympathy for Mrs XY's reduced circumstances.

In apportioning annual maintenance payments of €60,000 to her, he writes in his judgement: "I consider that at €40,000 per annum, and even at €60,000 per annum, the wife will have to delve into her cash sum [savings] of €600,000 to ensure the upkeep of the house -- not as a luxury item to be indulged in the face of very straitened circumstances, but as an item to ensure the preservation of the only capital of any significant worth left in the family."

The judge notes that the developer's wife may in time need to sell their family home to pay the Revenue Commissioners a tax charge of approximately €1m which she stands to incur as a result of the transfer of the property's ownership into her name from its previous ownership by a trust set up by her former husband.

Until that potential sale, the judge says however that it is "imperative that it [the house] be maintained up to its current very high standard and the valuable furniture therein retained so as to be in a position to present it well for sale in the medium term".

Notwithstanding her potential tax liability on the family home, Mrs XY would appear to be better off financially than her husband, given his decision during the boom years to give €250m in personal guarantees to secure his bank borrowings, and the very real threat that Nama may seek to call on them.

Even with that threat hanging over him however, Mr Justice Abbott holds out for the possibility that Mr YX could yet come out of Nama at the end of 10 years having paid off his borrowings and made a profit.

And while he is far from optimistic on the chances of this happening, he says, albeit subjectively, that Mrs XY would consider it a "shattering injustice" if she were to be cut off from enjoying the prospect of even a speculative return at the end of 10 years' effort from her husband.

Indeed, such is the seriousness with which the judge views the matter, he concludes that: "to cut the wife off completely would be potentially damaging to her health by making her emotionally insecure", a condition which he believes could cause her to continually litigate the terms of her legal separation.

"This is not in anyone's interest, least of all in the interest of Nama," he says.

Sunday Independent

via independent.ie

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