Trust battle has just begun

This year, whispers of a special trust, which claims it is somehow able to protect distressed properties from repossession, speedily spread across the country.

For those starved of hope, it was a sight of salvation.

Now its inevitable battle with the banks has started and those who flocked towards it over the last eight months will find out if they were lured by an oasis or a mirage.

Initially, people picked up on the private trust by word of mouth which usually came with news that high profile figures such as Bill Cullen were already involved.

Developers and farmers, in particular, queued up at meetings in Cork and Kilkenny to sign their properties into it.

Indebted people joined the trust by getting their original purchase instruments from the Land Registry.

They then signed them over with an agreement to lease back their land for 999 years.

The trust, run by Kilkenny-based Charlie Allen, has said it has already accepted 2,000 properties worth up to €2bn. In each case, it charged a small fee of €200 per property. And, in the case of commercial loans, it has taken up to 10% of the value of the debts outstanding.

However, it has yet to fully explain how its system works or what it is offering.

Receivers, auctioneers and potential buyers have been warned to stand down once the properties have been placed in the trust.

But, crucially, the courts have yet to rule on whether it has any standing or if its strategy will hold water beyond a little-understood delaying tactic.

The first public standoff happened this week. Eugene McDermott’s 120-acre stud farm at Brannockstown, Co Kildare, was due to be repossessed. He owed Bank of Scotland €7m and Anglo Irish Bank had also got an order against him for debts of €814,000.

However, chains were placed around the gates and a mini digger was used to reinforce the property.

The receivers backed down on the day and Mr Allen said “they had no jurisdiction” to be there.

It will not end there. Neither will other cases where the trust has been used to block sales.

Earlier this summer, an auction was called off in Kildare when the spectre of the trust was raised and next week another property is due to be repossessed.

The existence of the trust came to public prominence when it was flagged on the front page of the Irish Examiner in July.

This drew scrutiny.

Senator Thomas Byrne discussed his reservations about the project in the Seanad. He said it had all the hallmarks of a scam and, having met the backer of the trust, he felt it was not open or transparent.

“The scheme purports to put mortgages into a private trust and thereby take them away from the banks and take them away from the ability of the banks to repossess properties. I met one of the promoters of this scheme here in Leinster House… and I am deeply suspicious of the scheme.”

Following Mr Byrne’s comments, all senators received an email from Mr Allen threatening legal action.

Senators are protected from defamation actions for comments they raise in the Seanad because Oireachtas proceedings enjoy absolute privilege.

However, Mr Allen’s email used language typically associated with those seeking to live outside the confines of national law and claim to be freemen of the land.

It said Mr Byrne had been guilty of trespass and he must submit a response by oath or attestation within seven days of Mr Allen’s email.

The trust operated by Charlie Allen is called the Rodolphus Allen Private Family Trust.

Word of mouth has suggested it is a unique operation with a protection not available elsewhere.

However, the deeds are almost identical to those available from the internet though similar universal community trusts internationally.

These universal trusts are heavily linked to freemen of the land strategies that ultimately rely on the defence that a person asks nothing of the State so therefore can chose to be outside its laws.

There is nothing unusual or untoward about trusts. They are used to great effect by religious orders to protect assets. However, it appears the difficulty for indebted people will be using a trust to protect their assets when they have already provided the properties as security for loans from lenders.

One of the explicit statements in the Allen trust deeds is that those placing properties into it confirm it is free of any claim from a third party — such as a bank.

“The grantor/trustees also warrant that they hold good title to the property hereby granted into the Trust, free and clear of all lawful liens and encumbrances.”

It will be for the trust or the trustees to show the loans are unlawful and therefore cannot block their entry into a trust.

But if it can be proved that the loans are unlawful, the banks’ repossession cases will fall whether or not the properties in question are in trust.

The battle has just kicked off.