Dáil Éireann debate -
Thursday, 20 Jun 2002

Vol. 553 No. 4

Written Answers. - Company Closures.

Pat Rabbitte

Question:

13 Mr. Rabbitte asked the Minister for Agriculture and Food the terms of the recent settlement arrived at with a number of insurance companies and brokers arising from the fire at a company (details supplied); the total value of the beef destroyed; the total liability of the State in this matter; the total legal fees incurred by the State during the litigation; and if he will make a statement on the matter. [14082/02]

Minister for Agriculture and Food (Mr. Walsh)

The Deputy is referring to the fire at the UMP plant in Ballaghaderreen in 1992 in which some 7000 tonnes of intervention beef were destroyed. My Department had placed insurance against such loss. As soon as the loss occurred, one group of insurers immediately repudiated liability and initiated legal proceedings. My Department counter-claimed and brought proceedings against a further set of insurers and against the brokers involved.

A complex series of legal issues relating to liability, quantum and jurisdiction gave rise to 16 different High Court actions involving more than 70 underwriters and brokers both here and abroad. My Department and the Attorney General's office have been most active in pursuing this matter, ensuring the appointment of a single judge to hear all interlocutory applications etc. to expedite progress through the courts and on the advice of the CSSO and the Attorney General engaging a private firm of solicitors Matheson Ormsby Prentice on its behalf.

Following an approach by legal representatives of all the insurers involved, settlement negotiations began in October 2001. An initial offer, made in February of this year, was rejected. Following further negotiations involving the legal representatives of the insurers, the brokers and the Department, an offer of payment of €21,928,376.61 in full and final settlement was made on 5 April 2002. On the advice of solicitors, counsel and the Attorney General, and following consideration by Government, I agreed to settle on the basis of this significantly increased offer. Claims of each side will be struck out by joint request and each side will bear its own costs.

The regulatory valuation in 1992 of the intervention beef destroyed in the fire was €25 million and this was paid to the EU in 1992. Intervention stocks are funded by borrowings, which are repaid over time from EU and sales receipts. In accordance with national financial procedures the loss incurred as a result of the fire could not be charged to the Department's Vote until the insurance issues were resolved. The time value of the money between the time of reimbursement to Brussels and the settlement now reached was of the order of €12 million. Legal advice to the Department was that, because of the complexity of the issues involved in these proceedings, there were limited possibilities of success in pursuing such an additional claim through the courts.

In addition, the EU regulation governing valuation of losses was amended in 1993, some two years after the fire. The Commission has taken the view that this applies to prior losses. Discussions between the Department and the Commission were put on hold pending the resolution of the insurance claim. The Department had legal advice that this amount was not recoverable from the insurers and further discussion will now take place with the EU Commission having regard to the fact that the market value of this beef would have been much lower than any regulatory value.

Legal fees, including witness expenses and experts fees incurred by the State to date amount to €2.2 million. Debris disposal costs already paid for by the Department amounted to some €1 million.

Had the case proceeded to trial, it is estimated that it would have involved additional costs of some €15 million and could have taken up a further three years from a current date to reach conclusion with uncertainty as to the final outcome on both liability and quantum.

I am pleased that this long running complex legal dispute has been finally resolved on a basis which in the circumstances is a most satisfactory outcome.