Dublin City Council has questions to answer over 2011 loan

The €6.6 million loan given by Dublin City Council, by way of Ballymun Regeneration Ltd, in 2011 to a financially straitened construction company appears an unusual transaction.

Going to court always involves risk, and the fact the funds were in part intended to fund litigation would seem to indicate a risk was being taken.

A second issue that arises is that of tendering. It appears from the documents that the agreement between James Elliott Construction Ltd (JEC) and the council subsidiary, Ballymun Regeneration Ltd, involved JEC repairing buildings it had built in Ballymun, at a profit, while receiving a loan from Ballymun Regeneration, and the work not being put out to tender.

The extent to which all of this was known to the board of Ballymun Regeneration is another issue. Transactions such as the one entered into are exactly the type for which a high level of transparency is required.

Dublin City Council gave €6.6m interest-free loan to building firm

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The pyrite nightmare has produced a sizeable amount of litigation. The stakes are high for a number of parties, not least building firms, suppliers of builders’ materials and the owners of affected buildings.

Insurance companies are another interested party, and the documents covering the JEC loan include clauses stipulating that its insurers are aware of the deal and would not seek to use it to reduce their cover.

Dublin City Council has said it will comment on the transaction later this week.

Remedial work

In the meantime, it appears as if Ballymun Regeneration thought its best chance of recovering its losses following the discovery that there was excessive pyrite in material used in some of the buildings constructed for it by JEC, was to support JEC as it pursued its supplier,

Irish Asphalt

, though the courts.

Why it engaged JEC to carry out the remedial work on the buildings without putting the work out to tender is another question the council will no doubt address.

Perhaps it thought the builder involved was best qualified to address the problems that had emerged, but if there is a profit margin involved, then the issue of tendering should normally arise.

It is not clear how the JEC loan agreement sits with a High Court ruling last year that third party funding of legal cases is not allowed.

The “champerty” ruling arose where Persona Digital Telephony, a failed bidder for the State’s second mobile phone licence, was hoping to use third party funding to sue the State, businessman Denis O’Brien and former minister Michael Lowry.

The court ruled that this was not allowed under Irish law.

The decision, based on a law that dates back to 1634, meant that the case could not go ahead as the plaintiff did not have enough money to pay the estimated €10 million in legal fees.

The law is believed to date back to Roman times and became part of Irish law during British rule when the Maintenance and Embracery Act was passed in 1634.