Inside the world of business

A victory for common sense

THE DECISION by the High Court not to allow Ernst Young challenge the investigation of its conduct as auditor to Anglo Irish Bank is a victory for common sense among other things.

Alone among pretty much everybody else in the country the firm seemed to believe that was no basis for any such inquiry by special investigator John Purcell, who was appointed by the Institute of Chartered Accountants (ICAI) regulatory body (Carb) in early 2009.

The basis of their challenge was that no valid complaint had been made against them, and thus no investigation was warranted.

Ms Justice Mary Irvine would appear to have had little time for such arguments and ruled that the definition of complaints set out in the bye-laws of the ICAI was sufficiently wide to include matters reported in the media, including a claim by an expert that they should have spotted what Seán FitzPatrick was up to.

The institute should be happy with the outcome as, barring an appeal, it will be able to press on with its inquiry, which is the most advanced of all the investigations into what happened at Anglo, and the role of its members. A speedy completion of the inquiry with appropriate sanctions is the best way on ensuring that the reputations of the vast majority of its members who never set foot inside the bank is safeguarded.

But there is also a case of being careful what you wish for. The bar for what constitutes something worthy of investigation by the Carb has now been set by the courts. What it may mean in terms of further inquiries is not clear, but potentially the ICAI may be obliged to act on other issues involving its members that surface in the media.

In the meantime Ernst Young are left with more than a little egg on their face. Not least the revelation that they took the challenge after Mr Purcell failed to yield to the “wide-ranging demands” made by the firm through their solicitors on foot of a synopsis of his report.

Building boom turns into litigation rush

IT’S NO secret the Irish construction industry is in crisis. The sector, which employed 250,000 or so directly at the boom’s height in early 2007, got far too big, and as a result, has taken the biggest hit during the last four years.

Over that time, the industry has been relying heavily on State-funded developments to keep going. But as the Exchequer’s resources became focused on shoring up the banks, the rate of new public projects coming on stream slowed rapidly.

Plenty of people will argue that this is the rough justice that the industry deserves, as it benefited from the credit bubble that created the problems. While that is true of plenty of individual operators, it’s not necessarily so of the sector as a whole.

Sub-contractors, many of which did the actual nuts and bolts construction work during the boom, were mostly focused on this rather than on development, and there is a growing sense that they are taking more than their share of the pain.

On Thursday, Construction Industry Federation (Cif) boss Tom Parlon warned large numbers of such businesses are being forced to the wall because of delays in payments due to them, or because they are not getting them at all.

Part of the problem is that the laws governing construction contracts do not provide enough protections for the subs. February’s election stymied a move to reform this, and Cif wants to see the Bill resurrected.

The other part of the problem is that the money is simply drying up. Private development has virtually disappeared. The State is heading the same way. The Government commitment to spend money on schools, retro-fitting and roads will help, but does not go far enough.

The fallout is not going to be pretty. Disputes are a reality of commercial life, but construction is far more prone to them than most. Expect what’s left of the building boom to ultimately morph into a litigation boom.

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