Cave Projects Ltd v Peter Gilhooley and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Noonan
• Judgment Date: 16 January 2015
• Neutral Citation: [2015] IEHC 14
• Court: High Court
• Date: 16 January 2015

Cave Projects Ltd v Gilhooley & Ors

BETWEEN

CAVE PROJECTS LIMITED

PLAINTIFF

AND

PETER GILHOOLEY, JOHN KELLY, JOHN MORONEY, ROY O'BRIEN AND JOSEPH O'HARA

DEFENDANTS

[2015] IEHC 14

[No. 740 S/2011]

THE HIGH COURT

Contract – Loans – Assignment – Bank assigning loans to plaintiff – Application for summary judgment

Facts: The defendants had taken loans from the Bank of Ireland. These loans had been assigned by the bank to the plaintiff. The plaintiff now sought summary judgment for the balance of the outstanding sums owed by the defendants under the terms of those loans. The defendants disputed the matter.

Noonan J stated that the test to be applied in applications of this nature had been set out in earlier case law. Having considered the arguments put forward by the parties, the Court was satisfied a number of issues in the matter could not be resolved within an application for summary judgment, and it was not clear that the defendants” arguments were lacking merit. The application would therefore not be granted and the matter would be remitted for hearing. Aer Rianta v Ryanair [2001] 4 IR 607 applied.

Background

1 1. This matter comes before the court by way of motion for summary judgment on foot of the summary summons herein against the 2nd and 5th named defendants (respectively "Mr. Kelly" and "Mr. O'Hara"), the plaintiffs claim having been compromised as against the 1st, 3rd and 4th named defendants. The claim is for the sum of €11,485,543.14 being the balance allegedly due and owing by Mr. Kelly and Mr. O'Hara to the plaintiff in respect of various loans advanced by the Governor and Company of the Bank of Ireland ("the bank") to the defendants, which loans were allegedly ultimately assigned to the plaintiff in the circumstances hereinafter appearing. The matter was heard on affidavit.

Facts

2 2. On the 27th November, 2003, the defendants entered into a partnership agreement essentially for the purpose of purchasing and developing land. On various dates between December, 2005 and January, 2007, the bank entered into loan agreements with the defendants on foot of which monies were advanced to the defendants for this purpose. These proceedings were originally commenced by the bank on the 24th November, 2011 grounded on the affidavit of Kevin O'Donovan, a senior manager with the bank's Specialist Property Group. In his affidavit, Mr. O'Donovan exhibits the various facility letters relied upon which were executed by the defendants. He avers that the funds were drawn down and were payable on demand on or after the 31st January, 2008. The loans were called in on the 5th January, 2011, no repayments having been made. He gives the amount due as of the swearing of the affidavit. He exhibits a statement of account showing how the balance due was calculated. He makes the usual averment that the defendants have no bona fide defence and the appearances entered on their behalf were solely for the purposes of delay.

3 3. A replying affidavit was sworn by Mr. O'Hara, a solicitor, on the 9th March, 2012, in which he disputes the bank's right to recover the sum claimed from him on a number of grounds. First, he claims that the bank had a fiduciary duty and a duty of care towards him. This appears to be based on an allegation that a sum of €750,000 was advanced by the bank for the purpose of investing in one of its own products which constituted the bank an investment intermediary and rendered it in breach of its own guidelines for lending. He alleges that the bank was in breach of these duties and this precludes it from recovery.

4 4. Secondly, Mr. O'Hara says that the contracts of loan were subject to conditions precedent to which the bank failed to adhere and in particular, he puts the bank on full proof of adherence to the condition requiring a valuation of the lands to be undertaken by a valuer appointed from the bank's own panel. Thirdly, he says that some or all of the money loaned was paid to the first to fourth defendants only and consequently there was no valuable consideration flowing from the bank to him supporting the contracts. Fourthly, he claims that the money loaned was drawn down by parties other than him for purposes not sanctioned by the contracts of loan. Fifthly and finally, Mr. O'Hara says that the bank was guilty of a failure to mitigate its loss by refusing to sanction a sale of the lands at a time when they were considerably more valuable than now.

5 5. Mr. Kelly swore a replying affidavit in or around the 15th May, 2012, in which he details the history of the matter and is very critical of the bank's lending policy and the manner in which the loans were managed. Although it has to be said that it is not entirely clear from this affidavit what defence is being advanced by Mr. Kelly, it seems to be based on an allegation of reckless lending by the bank which gave rise to the loss of the loan funds.

6 6. It would appear that sometime prior to the 22nd January, 2013, the loans, the subject matter of these proceedings, were acquired by National Asset Loan Management Limited ("NALM") pursuant to its powers under the National Asset Management Agency ("NAMA") Act 2009 ("the Act") and on the 22nd January, 2013 the loans were sold on to the plaintiff pursuant to a Loan Asset Deed Sale. By order of the Master of the High Court made on the 6th February, 2013, the plaintiff was substituted for the bank as plaintiff in the within proceedings.

7 7. On the 5th March, 2013, two affidavits were sworn by Mr. Thomas Kelly on behalf of the plaintiff in reply to the affidavits of Mr. O'Hara and Mr. Kelly respectively. Mr. Thomas Kelly swore the affidavits in his capacity as solicitor for the plaintiff. In the first affidavit, he exhibits a letter from NALM dated the 5th March, 2013 confirming that it acquired the loans pursuant to s. 90 of the Act, had power to sell them on pursuant to s. 139 and did so to the plaintiff on the 22nd January, 2013. He exhibits the partnership agreement and two deeds of charge signed by Mr. O'Hara in relation to the partnership lands acquired with the loan monies. He then goes on to in effect make submissions in response to the allegations in Mr. O'Hara's affidavit.

8 8. In his second affidavit, Mr. Thomas Kelly exhibits the order substituting the plaintiff and its certificate of incorporation and memorandum and articles of association. In para. 6 of the affidavit, Mr. Thomas Kelly refers to the instrument transferring the loans to NALM as exhibit "TK3". However, that exhibit is the deed of assignment of the loans from NALM to the plaintiff. He also exhibits correspondence dated the 22nd January, 2013 from NALM to each of the defendants notifying them of the sale of the loans to the plaintiff. Finally, he exhibits what is stated to be a certificate from NALM setting out the balance outstanding on foot of the loans.

9 9. A further affidavit was sworn on behalf of the plaintiff by Mr. Brendan Delaney, a director of the plaintiff company on the 23rd May, 2013. He avers that the letter of offer of the 5th September, 2007 was transferred to the plaintiff on foot of a loan asset deed sale dated the 22nd January, 2013. He avers that the loan asset deed sale is subject to a confidentiality clause and he is precluded from exhibiting it in his affidavit. He says that each of the borrowers was informed of the transfer and that no payments had been made under the letter of offer dated the 5th September, 2007, so that the amount originally certified in the grounding affidavit of Kevin O'Donovan remains due.

10 10. In an affidavit sworn on the 30th May, 2013 by Michael Broderick, he says that he is a portfolio manager with NALM. He says that assets including the letter of offer of the 5th September, 2007 were acquired by NALM pursuant to s. 90 of the Act. He avers that NALM held these assets as of the 22nd January, 2013 and he exhibits a document as "NALM2" certifying this fact which he refers to as a "certificate". This document purports to emanate from NALM and certify that the loans were transferred to NALM on the 7th December, 2011 and were held by it until assigned to the plaintiff on the 22nd January, 2013. He avers that NALM transferred absolutely all its rights, title and interest in the loans to the plaintiff pursuant to s. 139 of the Act and he refers to the letter of the 5th March, 2013, previously seen, confirming these facts. He avers that each of the defendants was notified of the transfer by letters of the 22nd January, 2013 which he again exhibits as "NALM4".

11 11. Mr. Kelly responded to these affidavits in a second affidavit. In this affidavit, he appears to adopt much of what is stated by Mr. O'Hara in his affidavit. He says that he did not sign the final letter of loan offer dated the 26th November, 2009 although it emerged during the course of the hearing that this was not being relied upon by the plaintiff. He says that the bank dealt with the third defendant at all times and allowed him to draw down funds for purposes other than those set out in the facility letters. Like Mr. O'Hara, he claims that the bank placed itself in a fiduciary capacity vis a vis himself and calls for proof of adherence to the conditions precedent regarding valuation. He also complains of a failure to mitigate the bank's losses. He refers to the same transaction regarding the €750,000 as Mr. O'Hara and says that this constituted the bank a fiduciary and advisor to him and that this sum was advanced contrary to the bank's own guidelines.

12 12. He says that no information has been provided regarding the value at which the loans were transferred to the plaintiff and he goes on to suggest that there is strong circumstantial evidence of an improper relationship between the plaintiff and the 1st, 3rd and 4th defendants which would invalidate the transfer...