BGB Property Holdings Ltd v Tifco Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Reynolds |
| Judgment Date | 29 May 2020 |
| Neutral Citation | [2020] IEHC 314 |
| Docket Number | [2018/1986 P.] |
| Court | High Court |
| Date | 29 May 2020 |
AND
[2020] IEHC 314
Reynolds J.
[2018/1986 P.]
THE HIGH COURT
Frivolous and vexatious proceedings – Reasonable cause of action – Bound to fail – Defendant seeking an order striking out the proceedings – Whether the proceedings were frivolous and vexatious and/or disclosed no reasonable cause of action and/or were bound to fail
Facts: The plaintiffs, BGB Property Holdings Ltd, Arno Properties Ltd, Tagus Properties Ltd, Tiber Properties Ltd and Downby Developments Ltd, claimed an indemnity from the defendant, Tifco Ltd, in the sum of €3,500,500 in respect of losses incurred as a result of the breach by the defendant of its obligations under a Sinking Fund Agreement and Charge dated 9 October 2007. The defendant applied to the High Court seeking an order pursuant to the inherent jurisdiction of the court striking out the proceedings on the grounds that they were frivolous and vexatious and/or disclosed no reasonable cause of action and/or were bound to fail.
Held by Reynolds J that the plaintiffs had presented a “credible basis for suggesting that it may, at trial, be possible to establish the facts which are asserted and which are necessary for success in the proceedings” as per Clarke J in Lopes v Minister for Justice Equality and Law Reform [2014] 2 I.R. 301. In addition, Reynolds J held that it was readily apparent that the factual dispute surrounding the contractual documents and the issue of any supporting documentation together with the legal issues which had been raised by the plaintiffs took this application outside of the scope of the “clear cases” that are amendable to resolution on summary application.
Reynolds J proposed making an order dismissing the application.
Application dismissed.
In this application, the defendant seeks an order pursuant to the inherent jurisdiction of the court striking out the within proceedings on the grounds that they are frivolous and vexatious and/or disclose no reasonable cause of action and/or are bound to fail.
In the proceedings, the plaintiffs claim an indemnity from the defendant in the sum of €3,500,500 in respect of losses incurred as a result of the breach by the defendant of its obligations under a Sinking Fund Agreement and Charge dated 9 October 2007 (“the SFAC”).
There is no factual dispute between the parties and they have kindly assisted the Court by preparing an agreed factual chronology as to the events giving rise to the within proceedings.
Under a Development Agreement dated 31 July 2006, the fifth plaintiff (“Downby”) agreed to procure the building of the Crowne Plaza Hotel at Green Park Estate, Dundalk, Co. Louth (“the Hotel”). The Hotel was to be delivered to the first to fourth plaintiffs (“the Borrowers”) with the intent that it would be operated by the defendant (“Tifco”).
Under an Investment Facility Agreement dated 21 July 2006 (“the Facility Agreement”), Anglo Irish Bank Corporation plc (subsequently Irish Bank Resolution Corporation Limited) (“the Bank”) granted a seven-year loan of €25,500,000 to the Borrowers to part finance the development of the Hotel.
The Borrowers and Tifco entered into a lease of the Hotel dated 9 October 2007 for a term of 34 years and nine months (“the Lease”). Tifco's obligations under the Lease were guaranteed by Banesto Limited (“Banesto”).
In addition, the Borrowers, Tifco and Banesto entered into a Put and Call Option Agreement dated 9 October 2007 (“the Option Agreement”) under which the Borrowers could call on Tifco to purchase the freehold in the Hotel from them, and Tifco could call on the Borrowers to sell the freehold in the Hotel to it. The option price specified in the Option Agreement was to be a sum of not less than €25,810.000 or the amount then due by the Borrowers to the Bank under the Facility Agreement (“the Option Price”).
As security for its obligations under the Option Agreement, Tifco and the Borrowers entered into the Sinking Fund Agreement and Charge dated 9 October 2007 (“the SFAC”).
Under the SFAC, Tifco agreed to pay €4 million into a sinking fund in a designated security account with the Bank. That sum was to be deposited by Tifco by way of five equal yearly instalments between 9 October 2010 and 9 October 2014 of €800,000 each.
As security for the Facility Agreement, the Bank obtained charges over the Lease, the Option Agreement and the SFAC and in addition a guarantee from Banesto in respect of Tifco's contractual obligations.
Further, the Bank obtained a charge over a deposit of €3,500,000 placed by the Downby with the Bank. The Bank's charge over that sum of €3,500,000 was provided for in an Account Charge between Downby and the Bank dated 9 October 2007 (“the Account Charge”),
Tifco failed to make the scheduled payments into the designated security account. The only payment made by Tifco to the account was €292,000 paid on 31 August 2009.
On 9 February 2012, the Bank called on the Borrowers to procure Tifco's compliance with the SFAC within 21 days. On 6 March 2012, the Bank again wrote to the Borrowers, notifying them that an Event of Default had occurred under the Facility Agreement. By further letter dated 23 July 2012, the Bank demanded immediate payment by the Borrowers of the amount then outstanding under the Facility Agreement, being a sum in excess of €26 million.
On or about 24 July 2012, the Bank enforced the Account Charge against Downby over the deposit of €3,500,000. The Bank appropriated those monies and applied them in part discharge of the Borrowers' obligations under the Facility Agreement.
On 23 May 2014, the Bank transferred the Facility Agreement and all related security to Beltany Property Finance DAC (“Beltany”), a company ultimately owned by the Goldman Sachs Group.
On 10 December 2014, Beltany issued a demand calling for the Borrowers to repay the amount then due under the Facility Agreement, which at that time was in excess of €23 million. The Borrowers failed to satisfy that demand, and on 15 December 2014 Beltany appointed Kieran Wallace as receiver over the security (“the Receiver”).
The Receiver (acting on his own behalf and as agent of the Borrowers) entered into a Settlement Agreement dated 15 December 2014 with Beltany, Tifco and Banesto (the Settlement Agreement”).
Under the Settlement Agreement, the Receiver acknowledged that neither Tifco nor Banesto had the means by which to pay the Option Price under the Option Agreement, and Tifco agreed to buy the Hotel for €4 million. The purchase of the Hotel by Tifco for €4 million has completed.
The Settlement Agreement was expressed (in clause 2.2) to be “in full and final settlement of all obligations or potential obligations of Tifco under, pursuant to or in connection with the Option Agreement.” It provided (in clause 2.4.3) that on completion of the sale of the Hotel, “the Option Agreement will be terminated and all parties to the Option Agreement will be released from their obligations or potential obligations thereunder”.
The Goldman Sachs Group took a majority interest in Tifco in December 2014.
The Borrowers (acting through the Receiver) and Tifco entered into a Deed of Release (“the Release”) dated 22 December 2014.
The Release states (at Recital C) that the Borrowers “have now agreed to release the security constituted by the Security Document…”. The Security Document is defined in the Release as the SFAC.
The operative clause of the Release (Clause 1.1) provides that the Borrowers “hereby grant, convey, assign, surrender and release unto Tifco all of its or their respective property, assets and undertaking secured by the Security Document to the intent that all the said property and assets shall henceforth be held by Tifco freed and discharged from all monies, liabilities and obligations now or at any time secured by the Security Document and from all claims and demands thereunder.”
In 2016, Downby (through its solicitors Leman) sought a copy of the Settlement Agreement from Beltany. Downby is not a party to the Settlement Agreement. A redacted version of the Settlement Agreement was furnished by Beltany's solicitors on 22 August 2017.
In November 2017, Leman Solicitors wrote to Tifco on behalf of Downby and the Borrowers calling for confirmation that Tifco was liable to Downby and the Borrowers in respect of the €3,500,000 appropriated by the Bank under the Account Charge. Tifco's solicitors replied on 4 December 2017 to indicate that any liability Tifco might have had to the Borrowers had been compromised under the Settlement Agreement. Leman Solicitors sought a copy of the Settlement Agreement and other information relating to the Settlement on 13 December 2017 and again on 24 January 2018. In circumstances where the information was not forthcoming, and when this was not provided Downby and the Borrowers commenced these proceedings by Plenary Summons on 8 March 2018. A copy of the Settlement Agreement was ultimately supplied (together with a copy of the Release) on 16 July 2018, subject to an agreement that those documents would be covered by the implied undertaking applicable to discovery.
Pursuant to the Settlement Agreement, Tifco purchased the Hotel for €4m: The Borrowers were released from any further obligations to pay Beltany; the security held by Beltany was released; and all parties were released from their obligations under the Option Agreement.
Clause 2 of the Settlement Agreement provided, inter alia, as follows: -
“2.1 Tifco acknowledges that the Companies acting through the Receiver have a right to...
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