BGB Property Holdings Ltd, Arno Properties Ltd, Tagus Properties Ltd, Tiber Properties Ltd and Downby Developments Ltd v Tifco Ltd
|Haughton J.,Collins J.,Binchy J.
|24 June 2021
| IECA 181
|Court of Appeal (Ireland)
|Record No. 2020/183
 IECA 181
Record No. 2020/183
THE COURT OF APPEAL
Breach of contract – Frivolous and vexatious proceedings – Bound to fail – Appellant seeking to strike out proceedings – Whether the proceedings were frivolous and vexatious and/or disclosed no reasonable causes of action and/or were unsustainable and/or were bound to fail
Facts: The plaintiffs/respondents, BGB Property Holdings Ltd, Arno Properties Ltd, Tagus Properties Ltd, Tiber Properties Ltd and Downby Developments Ltd, sought, inter alia, a declaration that they were entitled to be indemnified and/or compensated by way of damages by reason of breach of contract on the part of the defendant/appellant, Tifco Ltd (Tifco). Tifco appealed to the Court of Appeal from a decision of the High Court (Reynolds J) given on 29 May 2020, refusing its application to strike out the proceedings on the grounds that they were frivolous and vexatious and/or disclosed no reasonable causes of action and/or were unsustainable and/or were bound to fail. Tifco’s case was that the provisions of the Settlement Agreement dated 15 December 2014 and the Deed of Release dated 22 December 2014 upon which it relied were clear and unambiguous and their effect was to release Tifco from all its obligations under the Sinking Fund Agreement and Charge dated 9 October 2007. Tifco argued that any reasonable person would so interpret the documents as there would be no commercial logic in leaving Tifco facing any potential liability to the plaintiffs for a claim such as that advanced by the plaintiffs. The plaintiffs argued that none of the provisions of the Settlement Agreement or the Release relied on by Tifco could be interpreted as releasing Tifco from the claim advanced in the proceedings. The plaintiffs argued that in order to interpret the provisions in the manner contended for by Tifco, the Court would be required to read into those provisions an intention on the part of the parties to those documents that is broader than the expressed intention. The plaintiffs submitted that it was significant that there was no reference in the provisions relied upon by Tifco to any claim that the first to fourth plaintiffs (the Borrowers) might have against Tifco still less any language indicating any intention to release Tifco from such a claim.
Held by the Court that while Tifco’s argument that its alleged liability to the plaintiffs fell into the category of obligations or potential obligations under, pursuant to or in connection with the Put and Call Option Agreement dated 9 October 2007 which the parties to the Settlement Agreement agreed to settle, fully and finally, may prevail at trial, it was not so clearly correct that it would be appropriate to exercise the Barry v Buckley jurisdiction (Barry v Buckley  IR 306). The Court held that the construction issue presented was not very straightforward and there would be a real risk of injustice were the Court to proceed to strike out the plaintiffs’ claim in limine on the basis of clause 2.2 of the Settlement Agreement. The Court held that, in contrast to the position in Clarington Developments Ltd v HCC International Insurance Company plc  IEHC 630, clause 2.2 does not present a straightforward issue of contractual interpretation which admits of an obvious answer. The Court needed to be careful not to trespass on the High Court who would ultimately have to determine the correct construction of the Release. Tifco’s arguments may well prevail at trial but, in the Court’s view, the issue as to the correct construction of clause 1.1 was not straightforward or obvious or one which could, without any risk of injustice, be determined within the confines of a strike out application.
The Court held that Tifco’s appeal would be dismissed. As the plaintiffs were entirely successful, the Court held that the normal rule should apply, and the plaintiffs appeared to be entitled to their costs from Tifco, to be adjudicated by a legal costs adjudicator in default of agreement. As the consequence of the failure of the motion to strike out was that the plaintiffs’ action would proceed to trial, and one possible outcome was that ultimately there could be costs orders in favour of Tifco, the Court held that it was appropriate that there should be a stay on adjudication and execution of the costs order pending the determination of the proceedings.
JUDGMENT of the Court delivered on 24 June 2021
. This is the judgment of the Court to which all members have contributed.
. The Appellant, Tifco Limited (“ Tifco”) appeals from a decision of the High Court (Reynolds J.) given on 29 May 2020, whereby she refused its application to strike out these proceedings on the grounds that they are frivolous and vexatious and/or disclose no reasonable causes of action and/or are unsustainable and/or are bound to fail.
. In the proceedings, the Plaintiffs/Respondents (“ the Plaintiffs”) seek, inter alia, a declaration that they are entitled to be indemnified and/or compensated by way of damages by reason of breach of contract on the part of Tifco. The background to the proceedings is somewhat unusual and requires to be set out in detail in order that the nature of the proceedings, and the basis for the application made by Tifco, can properly be understood. Very helpfully, the High Court Judge set out the relevant facts, by reference to an agreed summary provided by the parties, at paras. 4–25 of the decision under appeal, which it is convenient to reproduce here:
“4. 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”).
5. 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.
6. 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”).
7. 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”).
8. 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”).
9. 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.
10. 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.
11. 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”),
12. 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.
13. 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.
14. 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.
15. 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.
16. 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”).
17. 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”).
18. 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...
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