Giants’ battle over lucrative property not at an end yet
Published in The Budapest Times and Budapester Zeitung, May 2006
(information from this article was later picked up - with acknowledgement - by the Irish Independent)
Strong allegations and threats of further legal proceedings have followed the move made by Hungarian property firm Pólus Rt. on the night of May 8, when it took possession of an eight-hectare site near Budapest's Nyugati train station. Pólus made the move several weeks after a March 31 decision by the Metropolitan Court of Appeal. That decision favoured Pólus, one of the parties in a long-running legal dispute over the right to purchase and develop the land. For the preceding two years, the site had been occupied by the other claimant, Irish-owned rival Ballymore Kft., which was declared winner of an auction to sell the land in 2003.
Dispute over takeover
Ballymore's lawyer, Alajos Dornbach, has shown The Budapest Times and Budapester Zeitung a report on the events of May 8, written by the manager of Védõpont Vagyonvédelmi Kft., the company that guarded the site for Ballymore. That report states that the site was taken by force. "The executives of Ballymore Kft. have decided to start legal proceedings for trespassing," Dornbach stated.
Pólus's lawyer Károly Varga, said no such actions occurred. "It was instructed to the security people hired by Pólus that they should merely present the court documents, explaining that the territory was Pólus's property. Pólus took possession of the territory legally," he said.
Varga added that Pólus is submitting a legal claim against Ballymore, saying that over the preceding month, the Irish company failed to respond to several requests from the seller of the land - state rail firm MÁV Rt. - that it should hand the land back, so that MÁV could then convey it to Pólus.
Pre-emptive right
Pólus's claim over the land relies upon it exercising a pre-emptive right transferred to it by MÁV Multiszolg Kft. The latter company, which formerly used part of the plot, had been granted a pre-emptive right by its former parent company, MÁV.
Pólus's declaration that it would use that pre-emptive right came immediately after an auction in December 2003, won by Ballymore. Pólus promised to match the price offered by Ballymore: HUF 3.25 billion (EUR 12.18 million). Despite this declaration by Pólus, MÁV signed the sale contract with Ballymore soon after the auction.
The Irish company continues to maintain that the pre-emption was not legitimate. It swore immediately after the decision of March 31 this year that it would launch an appeal to the Supreme Court.
"The judgement did not oblige Ballymore to give the real estate into possession," Dornbach said. "In theory the judgment of the Metropolitan Court was final, but the Supreme Court will review it."
Did it appeal?
Varga said it makes no sense to claim that Pólus should not have taken possession of the land because of Ballymore's outstanding appeal to the Supreme Court. Quite simply, he said, Ballymore had not actually made any such appeal by May 8.
However, Dornbach made a distinction between two different acts of appeal. He stated that before May 8, Ballymore had filed an appeal against an amending decree that complemented the Metropolitan Court's March 31 decision. The appeal against that amending decree, he stated, is enough to have a suspensive effect on the whole case ruling.
On the other hand, Dornbach said Ballymore had not submitted "the petition for review concerning the whole case" by May 8, but that it did so soon afterwards. He said the deadline for that was May 30.
Varga said that the first-mentioned appeal had nothing to do with the substance of the case.
Dornbach also claimed a further reason why Ballymore was not obliged to surrender possession of the land immediately after the March 31 ruling: it had not yet been reimbursed the purchase price.
Dornbach said MÁV finally returned the purchase price to Ballymore's bank account on May 15. Pólus paid the price for the land to MÁV in early April, soon after the Metropolitan Court's decision in its favour.
In addition, Dornbach pointed out that Ballymore has made investments on the plot during the past two years. He said it does not have to yield possession of the property until those expenses, too, are reimbursed.
"Ballymore implemented investments adding value of several hundred million forints to the territory," he stated. He mentioned the demolition of an industrial facility measuring over 30,000 sqm, and the removal of families from flats, giving them proper compensation.
Reasons for holding on
Dornbach said that these are the reasons why Ballymore did not comply with MÁV's request to surrender possession of the property following the March 31 court ruling. He said Ballymore "explained in writing several times" to MÁV that this was the case.
Varga said that the two developers planned very different constructions on the site. Therefore, Ballymore should only be reimbursed for work it did if that work proves useful for Pólus's intentions, he said.
"The investments Ballymore has made, although they cost money, actually cause damage because Pólus wants to use the site for something different," he explained. "If Ballymore has made an investment that is of real value, it can claim the amount back from MÁV, then MÁV can claim the amount from Pólus."
However, Dornbach insisted that all the developments Ballymore has made on the plot are ones which any developer would have had to execute. These were stipulated in the sale tender, he said. In fact, he added, it mostly consisted of demolition of existing construction, and no building had taken place yet.
How much land?
Dornbach said that the property sold in the 2003 auction was not identical with the property subject to the pre-emption right which Pólus obtained.
He said the auction affected twelve plots of land adjoining each other, totalling 82,000 sqm, not including the buildings. By contrast, he said, the pre-emption right was intended to apply only to what MÁV Multiszolg Kft. was renting. He said this was a 1,650 sqm workshop and 762 sqm of empty area.
This argumentation is rejected by Pólus.
There is a similar controversy regarding the exact geographical scope of the court ruling of March 31.
According to Varga's account of things, "the ruling of the court was impossible to misunderstand, because it referred to the original offer, which applied to the whole 8.2 hectares." Nevertheless, Varga added, the wording of the published court decision was "ambiguous in quoting the actual pieces of land." Varga said the necessary precision was only reached when the court complemented its ruling with the amending decree.
"The Metropolitan Court's ruling only established Pólus's right to own about 84%," was Dornbach's description of the issue. "The amending decree changed this to 100%, but this is not final, because we appealed against it."
Dornbach argues that this detail of the case proves that Pólus cannot claim possession of all the land in question. However, Varga said it is a simple matter of the initial court judgement failing to spell out its full intention, hence the need for the later correction.
Dornbach further stated that on May 26, he received from the court a writ which Pólus had issued on May 9, in which Pólus asked for it to be established that Ballymore is obliged to hand over possession of the land. "To issue such a writ on the day after taking possession of the land by force is a thing that would only be done by someone who knows he has broken the law," Dornbach alleged.
