ANALYSIS:The Supreme Court's ruling will have ramifications for the entire property market

STILL AT the precipice, Liam Carroll’s struggle for survival is now in the hands of Chief Justice John Murray and his Supreme Court colleagues Justice Nial Fennelly and Justice Nicholas Kearns. Their ruling, however, could well have major ramifications beyond the realm of the troubled Zoe empire.

After a severe setback last Friday when the High Court refused to appoint an examiner to six companies in his Zoe Developments group, Carroll received a temporary reprieve from the three-judge court yesterday. Protection from Zoe’s creditors, who are owed €1.2 billion, will continue until a full hearing of his appeal next Tuesday.

As Zoe’s fate hangs in the balance, it remains to be seen whether the court rules there and then or reserves judgment. Either way, the timing of its decision could well prove significant for the property market at large and for the Government plan to stabilise the banks with the National Asset Management Agency (Nama).

An immediate refusal to grant an examinership would swiftly prompt insolvency proceedings against Carroll before the formal establishment of Nama, the likely destination of the bulk of his loans. This could result in a large number of property assets flooding the market at fire-sale prices.

The import of that for Nama is that fire-sale valuations would be significantly less than the “long-term economic value” guiding the price at which it buys assets. The gap would be clearly apparent to taxpayers, who will underwrite Nama, potentially creating political difficulty for the Government.

By contrast, an immediate examinership would give Carroll and his creditors 100 days to develop a formula acceptable to all parties. Nama would be up and running within that timeframe, opening potential for the “bad bank” to become a party to the examinership and to seek to dictate the direction and pace of the proceedings.

Seven of Carroll’s eight banks – among them the State-backed AIB and the State-owned Anglo Irish Bank, likely participants in Nama – agreed last December to a business plan under which he has the benefit of a long moratorium on the repayment of his debts.

ACCBank, however, refused to join the pact, hence the current application for an examinership. Although the Carroll camp describes ACC as a “stray creditor” engaged in a “solo run”, its glare cannot be avoided.

What is more, ACC has hardened its stance in relation to Carroll’s application for an examinership. No longer “guardedly neutral” in relation to the matter, now it opposes the examinership application. Although ACC declined to comment on the change in the bank’s strategy, it seems likely that the court will hear from it.

An alternative scenario is that the Supreme Court reserves judgment, extending Carroll’s current lifeline until a later date. While this would prolong the developer’s protection, it would increase uncertainly over his fate, at least before Nama was established.

Whatever the ultimate outcome, however, Carroll seems likely to make part of his appeal through its implications for the market at large. Taking issue with aspects of the High Court’s ruling, Michael Cush SC for Carroll made a point of saying the judgment did not refer to evidence that the property market could not absorb such a large amount of property coming to the market at once if there was no examinership.

A collapse of the Zoe companies, he argued, would have implications for many others. Taken with all the other factors, he said this made a strong case for examinership.

The day of reckoning for Carroll draws nearer and nearer with every court appearance.

A prime player in the go-go years of Ireland’s property boom – and a noted stock market investor, with big stakes in firms such as Greencore and Irish Continental Group – he remains in business only thanks to bank forbearance.

In the High Court last week, Justice Peter Kelly said the business plan was lacking in reality.

“It is sometimes said that when small or modest borrowers from banks encounter difficulties in repaying their loans, then such borrowers have a problem. For those with large borrowings, it is the banks who have a problem. If ever a case demonstrated the accuracy of that proposition it is this one,” Justice Kelly’s ruling said.

Whatever the Supreme Court rules, those words seem apt.