ZURICH BANK lent approximately €32 million to a shopkeeper to develop a shopping centre in Co Monaghan in 2007 just months after Allied Irish Banks had pulled out of funding the project on the basis that it was not viable, the Commercial Court heard yesterday.
A €30 million valuation placed by estate agents CBRE in 2007 on the shopping centre site at Main Street, Castleblayney, involved development costs of €10,000 for each of the town’s population of 3,000 people and was akin to justifying “a single development in Dublin of over €10 billion”, Jim McConnon said. “There has never been such a development contemplated anywhere in the world,” he said. The current value of the centre is between €1 million and €2 million, he added.
Mr McConnon (40), Main Street, Castleblayney, is resisting the bank’s application for €32 million summary judgment against him on several grounds, including the bank’s alleged failure to analyse properly what he claims were “nonsensical” site valuations provided in 2007 to him and the bank by CBRE.
His decision to proceed with the development was based on the €30 million valuation and it was perfectly reasonable for him to assume Zurich and CBRE knew the property market, he said. He claims the bank made an unsolicited approach to him in April 2007 and, within 24 hours of meeting him for the first time, gave him terms for a €32 million loan on conditions contained in the bank’s formal loan offer issued in June 2007.
Mr Justice George Birmingham reserved judgment on the summary judgment application yesterday and said he hoped to give his ruling shortly.
Earlier, Paul Gardiner SC, for the bank, said nothing advanced by Mr McConnon amounted to an arguable defence to summary judgment. Despite various “outrageous” suggestions by Mr McConnon, there was no wrongdoing by the bank concerning this project, counsel said. Mr Gardiner said the CBRE valuations were clearly based on information provided to CBRE by Mr McConnon and his various agents and advisers. Mr McConnon was arguing he won’t pay back the loan because that was difficult or impossible given the collapse in property prices and rental values but that was a risk a developer takes and constituted no legal defence, counsel said.
Nor could Mr McConnon establish any defence on the basis that he was acting as a consumer within the meaning of the Consumer Credit Act, Mr Gardiner said. This was a businessman borrowing €32 million for a commercial development who had received the advice of auctioneers, accountants and lawyers.
Ross Maguire SC, for Mr McConnon, argued his client was entitled to rely on the credence given by the bank to the CBRE valuations. He also argued the total collapse in property values here amounted to an “unforeseeable and cataclysmic” event, disentitling the bank to judgment.
