A DEVELOPER being pursued by the Educational Building Society over loans of €8.4 million has claimed the society got its own “in-house” broker to hugely inflate the value of a development site to €10 million to ensure his loan application was successful.
The valuer was “fully dependent” on the EBS and said he was told “from Dublin” to make the valuation, David Dempsey told the Commercial Court. He said the valuation “got me into this mess” and he had “stupidly” relied on advice from EBS to “flip on” the site in Co Tipperary, which had an asking price of €6.6 million, rather than build on it.
When he took on the loan, he had only €900,000 in unsecured assets, Mr Dempsey said. He said EBS wanted “to aggressively grow their development finance department, it appeared very little would stop that growth”, and “David was about to do business with Goliath”.
Mr Dempsey, an engineer and developer from Clonlough, Gorey, Co Wexford, representing himself, was resisting EBS’s application for orders requiring him to repay €8.4 million in loans advanced to him in 2006, on the grounds of alleged culpable conduct by EBS.
He claims the loans were corruptly processed and advanced without the EBS seeing the site.
The society has denied the claims as untrue, “far-fetched” and not credible. A senior EBS manager also said she never advised Mr Dempsey to sell on the site and was “shocked” he had falsified figures in his statement of affairs which the society relied on.
Mr Justice Peter Kelly yesterday ruled Mr Dempsey had made an arguable case to counter-claim against the EBS for damages over alleged negligence and breach of duty in relation to the loans.
The judge said Mr Dempsey had agreed he was given and had used the money and the EBS was entitled to judgment against him in a sum of € 8.4 million. However, the judge placed a stay on registration and execution of that judgment order pending the outcome of the hearing later this year of Mr Dempsey’s counter-claim.
While praising the manner in which Mr Dempsey presented his case, the judge suggested he seek legal advice. Mr Dempsey, whom the court was told has borrowings of some €30 million, had said he could not afford lawyers.
Mr Dempsey agreed with the judge that if the “mad property bubble” had continued, neither he nor the EBS would be in court.
He said he was in court “to expose the truth” about how loans were processed.
In his counter-claim, Mr Dempsey alleges he told the EBS he had no money, but EBS was committed to approving the loan and told him he would be “crazy” not to do the deal. He claims he was advised to substantially increase valuations on some properties owned by him, including a site in his mother’s back garden which he valued at €70,000 but the EBS advised him to have it increased to €400,000. Those increased valuations gave EBS its additional security, he said.
Mr Dempsey said he exaggerated a statement of affairs which he sent to an accountancy firm to have copied on to their headed notepaper. It was convenient for the EBS “to establish I was worth €27 million when I never knew this and my accountant never knew this.” He did not believe he was ever worth that sum.
The EBS had a very aggressive expansion plan and failed to assess the risk in his loan application, he claims.
EBS claims Mr Dempsey altered his account of events in affidavits, that he had put a €10 million value on the Nenagh site and had told a society official he had offers of €8.6 million and €10 million for it. It rejects claims by Mr Dempsey he was told by EBS to fabricate those offers.
Counsel for the society said Mr Dempsey admitted he had inflated the site value to at least €8.6 million in his statement of affairs and also admitted falsifying documents. Mr Dempsey was an experienced developer who was blaming the society for relying on his own falsified figures, counsel added.
