Avestus Capital Partners v Danske Bank and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 14 November 2012
• Neutral Citation: [2012] IEHC 483
• Judgment citation (vLex): [2012] 11 JIC 1403
• Court: High Court
• Date: 14 November 2012

[2012] IEHC 483

THE HIGH COURT

[No. 484 SP/2011]

Avestus Capital Partners v Danske Bank AS t/a National Irish Bank & McQuillan

BETWEEN

AVESTUS CAPITAL PARTNERS

APPLICANT

AND

DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK

AND

ROBERT MCQUILLAN AND JANE MCQUILLAN

RESPONDENTS

ALLIED IRISH BANK (AIB) PLC v HIGGINS & ORS UNREP KELLY 3.6.2010 2010/2/422 2010 IEHC 219

DELANY & MCGRATH CIVIL PROCEDURE IN SUPERIOR COURTS 3ED 26-15

KUTCHERA v BUCKINGAM INTERNATIONAL HOLDINGS LTD 1988 IR 61 1988 ILRM 1 1987 3 912

CONCORD TRUST v LAW DEBENTURE TRUST CORPORATION PLC 2005 1 WLR 1591

BNP PARIBAS & ORS v YUKOS OIL COMPANY 2005 EWHC 1321

MURPHY,STATE v DEALE 1964 IR 40

RSC O.57 r2

PRACTICE AND PROCEDURE

Summons

Summary summons - Summary judgment - Defence - Conflict of laws - Contract - No evidence of foreign law before court - Burden of adducing evidence of foreign law - Real or bona fide defence - Whether real or bona fide defence to debt proceedings - Whether conflict of laws - Special Summons - Interpleader proceedings - Interest in subject matter in dispute -Collusion with claimant - Applicant willing to pay subject matter into court - Beneficial entitlement to subject matter monies - Whether interest in subject matter in dispute -Whether collusion with claimant - Whether applicant willing to pay subject matter into court - Whether court in position to determine beneficial entitlement to subject matter - Allied Irish Banks Plc v Brian Higgins [2010] IEHC 219, (Unrep, Kelly J, 3/6/2010) and Kutchera v Buckingham International Holdings Ltd [1988] IR 61 applied - National Westminster Bank v Daniel [1993] 1 WLR 1453; Concord Trust v The Law Debenture Trust Corporation Plc [2005] UKHL 27, [2005] 1 WLR 1591 and BNP Paribas v Yukos Oil Company [2005] EWHC 1321, [2005] All ER (D) 281 followed - State (Murphy) v Deale [1964] IR 40 applied - Rules of the Superior Courts 1986 (SI 15/1986) O 57 rr 2 and 8 - Reliefs granted (2011/484SP - Laffoy J - 14/11/2012) [2012] IEHC 483

Avestus Capital Partners v Danske Bank

Facts: The Bank had issued a facility letter offering the second respondent a structured term loan. The purposes of the facility had been varied. The Bank sought the repayment of the facilities. Interpleader proceedings were initiated together with substantive proceedings where the applicant Avestus sought an Interpleader order in respect of funds in which it did not have an interest in. In the debt proceedings, the Bank sought judgment in the sum of Eur 677,586.50 against the second respondent. The second respondent averred that the Bank as not entitled to judgment and asserted inter alia that the Bank was not entitled to appropriate the proceeds of a joint investment, that the Bank could not pray in aid the provisions of a Pledge Agreement and that the Bank had incorrectly sought to call in the balance of the loan. The Court considered in the debt proceedings whether it should give summary judgment or whether it should go to plenary hearing and in the interpleader proceedings, assessed whether the applicant could satisfy the requirements for an interpleader order, pursuant to Order 57, rule 2 of the Superior Courts.

Held by Laffoy J. that it was very clear that there was no defence to the debt proceedings. The Bank was entitled to summary judgment. The question could be resolved without having to consider the provisions of the pledge agreement. There would be an order for judgment for the amount due. The applicant had satisfied the Court as to the requirements of an interpleader. The Court would grant the relief sought by Avestus. A substantial sum was in dispute and it was not appropriate for the Court to determine the beneficial entitlement to the monies.

1 Judgment of Ms. Justice Laffoy delivered on 14th day of November, 2012.

The proceedings

2 1. These proceedings (the Interpleader Proceedings) were heard together with proceedings entitled the High Court, Record No. 2011/3127S between Danske Bank A/S trading as National Irish Bank, plaintiff and Robert McQuillan ,defendant (the Debt Proceedings).

3 2. The Interpleader Proceedings were initiated by a special summons which issued on 17 ^th June, 2011. The applicant (Avestus), which was formerly known as Quinlan Private, seeks an interpleader order in respect of funds it holds in which it does not claim any interest. There is a dispute between the first respondent (the Bank), on the one hand, and the second respondent (Mr. McQuillan) and the third respondent (Mrs. McQuillan) as to the entitlement to the said funds, each side claiming the right thereto. The position of Avestus is that it does not in any manner collude with either the Bank or Mr. McQuillan and Mrs. McQuillan or any of them. It asserts that it is ready to bring the money into Court and to pay or dispose of the funds in such manner as the Court may order.

4 3. In the Debt Proceedings, which were initiated by summary summons which issued on 26 ^th July, 2011, the Bank seeks judgment against Mr. McQuillan in the sum of €677,586.50 together with interest on foot of a loan agreement. What is before the Court is a motion for judgment, which was transferred from the Master's Court.

5 4. The Interpleader Proceedings and the Debt Proceedings have a common origin, as the following outline of the factual background will illustrate.

Factual background

6 5. On 25 ^th July, 2005 the Bank issued a facility letter to Mr. McQuillan offering him what was termed a "structured term loan". The amount of the loan was €1,562,500, but it was stipulated that the amount would not exceed the euro equivalent of STG£1m on the date of initial drawdown up to a maximum of €1,562,500. The purpose of the facility was stated to be to fund an investment in a Quinlan Private Clients Syndicated Commercial Property Investment known as "The Estate", Knightsbridge, Central London (the Knightsbridge Scheme). It is common case that Mr. McQuillan had sought a loan in the sum of STG£2m from the Bank, because that was what he intended to invest in the Knightsbridge Scheme, but the Bank was only prepared to advance the euro equivalent of STG£1m. The acceptance of the facility letter dated 25 ^th July, 2005 was signed by Mr. McQuillan on 12 ^th August, 2005.

7 6. The terms of the loan were subsequently varied on a number of occasions, but the variation which is of relevance for present purposes was contained in a letter dated 20 ^th January, 2006 which was expressed to be supplemental to the facility letter dated 25 ^th July, 2005. On 10 ^th February, 2006, Mr. McQuillan endorsed his agreement to and acceptance of the varied terms on the letter of 20 ^th January, 2006. One of the variations made in that letter was related to the purpose of the facility. As varied the purposes of the facility were expressed to be:

"to finance the subscription by [Mr. McQuillan] for:"

(a) [89] shares to be issued by Carraig Investments SA …;

(b) [919,756] loan notes to be issued by Carraig Beag SA; and

(c) [8,858] redeemable convertible bonds to be issued by Carraig Beag (collectively called the 'securities')."

8 Carraig Investments SA (Carraig Investments) and Carraig Beag SA (Carraig Beag) were companies incorporated under the laws of Luxembourg.

9 7.The provisions of the facility letter of 25 ^th July, 2005 as so varied (the Loan Agreement) which are relevant for purposes are the following:

10 (i) Clause 3, which dealt, inter alia, with repayment and provided that the loan was to be extended on an interest only basis until 31 ^st July, 2010 followed by a capital repayment of €781,250 or half of the amount of the initial drawdown, whichever was the lower on that date. Thereafter the outstanding capital balance on the loan would be extended on an interest only basis for a further period until 31 ^st July, 2012, by which date the full and final repayment would be due. However, it was provided that notwithstanding the foregoing, the loan and interest accrued thereon should become immediately due and payable on demand by the Bank (and the security would become enforceable) on the occurrence of any event set forth at the Default Appendix attached.

11 The event of default primarily relied on by the Bank is contained in Clause (o) of the Default Appendix and it is in the following terms:

"If, in the reasonable opinion of the Bank, circumstances have altered materially since the granting of the Bank facilities or such new information has come to light as would justify requesting the immediate repayment or termination of the Bank facilities".

12 The Bank also places some reliance on Clause (i) (if any representation or warranty or undertaking from time to time made by Mr. McQuillan to the Bank is or becomes incorrect or misleading in any material respect) and Clause (j) (if any guarantee or security for any obligation or liability from time to time owing by Mr. McQuillan to the Bank fails or is terminated or disputed or becomes in jeopardy, invalid or unenforceable) of the Default Appendix.

13 (ii) Clause 5, which was headed 'Security'. As varied, that clause provided that the loan should be secured by the following:

14 (a) a pledge agreement governed by the laws of Luxembourg executed by Mr. McQuillan over each of "the Securities" held by him legally and/or beneficially in Carraig Investments and/or Carraig Beag and all dividends and distributions payable thereon;

15 (b) a legal assignment over a life policy, which is not in issue;

16 (c) an undertaking from Quinlan Asset Management that any returns on Mr. McQuillan's investment up to the total amount of the loan would be forwarded directly to the Bank on foot of its charge over Mr. McQuillan's shareholding in Carraig Investments;

17 (d) a limited recourse guarantee and indemnity from Quinlan Investments Ltd.; and

18 (e) a...