Cripps Warburg v Cologne Investment

JurisdictionIreland
CourtHigh Court
JudgeMr. Justice D'Arcy
Judgment Date01 January 1980
Neutral Citation1980 WJSC-HC 63
Docket Number[1977 No. 3837P.],No. 3837P 1977
Date01 January 1980

1980 WJSC-HC 63

No. 3837P 1977
No. 8Sp 1978
CRIPPS WARBURG v. COLOGNE INVESTMENTS
CRIPPS WARBURG LIMITED
Plaintiffs

and

COLOGNE INVESTMENT COMPANY LIMITED, ARAN FRIENDLY SOCIETY, SAMUEL STEPHENSON ARTHUR GIBNEY AND TERENCE SUDWAY
Defendants
CRIPPS WARBURG LIMITED
Plaintiffs

and

COLOGNE INVESTMENT COMPANY LIMITED, ARAN FRIENDLY SOCIETY, D.R.M. TRUSTS, F. K. LIMITED AND MARS NOMINEES LIMITED
Defendants
1

Delivered by Mr. Justice D'Arcy the 28th day of November 1979.

2

The Plaintiff claims repayment of loans and money due on foot of guarantees to repay same. The Plaintiff, further, claims to realise a mortgage and charge dated the 20th June 1973 and alleged to be given to secure the said loans. No affidavit or defence was filed by any of the Defendants in the mortgage proceedings. It was agreed by Counsel that the defence filed in the Common Law action should be taken as the defence in the mortgage proceedings. By agreement between the parties both causes were heard together in plenary hearing.

3

The Plaintiff is a limited company incorporated in England having their registered, and only office, at No. 20 Birchin Lane, London, England. They were stated in evidence to be Merchant Bankers. The first-named Defendant is a liability company having its registered office in Dublin. It was sued as a Trustee for the second-named Defendant. The second-named Defendant is a Friendly Society having its registered office at Molyneux House, 68 Bride Street, Dublin. The third and fourth-named Defendants are Architects and at all material times resided in Dublin. The fifth-named Defendant in the first proceedings, is a chartered Surveyor and resided at all material times in Dublin. In the mortgage proceedings the Plaintiffs and the first and second-named Defendants are the same as in the Common Law proceedings. The Defendant, D.R.M. Trusts was at all material times a sub-lessee of the premises secured by the mortgage. The action was discontinued, as against the Defendant F.K. Limited, subject to their rights to apply for costs. The Defendants Mars Nominees Limited are a company registered in Dublin. They are a wholly owned subsidiary of Guinness and Mahon Dublin bankers. They are joined in the proceedings as the owners of the legal estate in the mortgage property, and no relief is claimed against them save a direction in relation to such estate as may be required. The Defendants Stephenson Hotel Group Limited were joined in the proceedings so they may be bound by any decree that may be made.

4

It is necessary to outline a brief history of the transactions leading to the making of the loan, the giving of the guarantee and the granting of the security.

5

Early in 1973 a Syndicate consisting of the Defendant Mr. Stephenson, the Defendant Mr. Gibney, the Defendant Mr. Sudway and other gentlemen who retired at an early date and are not relevant to these proceedings, were anxious to purchase the South County Hotel and adjoining property, at Stillorgan, County Dublin, for the purpose of development into office premises. The intention was to have a quick transaction involving a purchase, the acquisition of the necessary planning permission for the change of user, and a quick re-sale. It was never the intention to demolish the existing building and re-build offices. Speed was an important factor. For the purpose of the venture the first three named Defendants desired to borrow money for what was expected to be a very short period.

6

Mr. Avery Chope at material times resided in Dublin. He was a friend of and a spokesman of the Defendant, Mr. Stephenson, the Defendant Mr. Gibney and the Defendant Mr. Sudway. Mr. Chope was a friend of Mr. George A. Newell, at material times an executive director of Cripps Warburg the Plaintiffs. Mr. Chope and Mr. Newell had, at a prior date, worked together with the First City National Bank in New York. In March and April 1973 there were telephone calls and correspondence between Mr. Avery Chope in Dublin and Mr. Newell in London, in which Mr. Chope outlined the venture of the syndicate for the development of the South County Hotel premises and the requirements of the 3rd 4th and 5th Defendants for a loan to finance the development. In these telephone calls and correspondence Mr. Chope gave Mr. Newell general information about the matter. They could be described as preliminary negotiations. These led to a meeting in the office of the Plaintiff company, Cripps Warburg, in London.

7

On the 19th April 1973 Mr. Chope, the Defendant Mr. Stephenson and the Defendant Mr. Sudway attended at the office of Cripps Warburg, in London. There they met Mr. Newell and a Mr. Newhouse, an executive of the Plaintiff Company. At that meeting the basic heads of agreement to lend the money and take security therefor to finance the venture was reached.

8

At that time the 3rd 4th and 5th Defendants Mr. Stephenson Mr. Gibney and Mr. Sudway required the money quickly for the commercial venture. The Plaintiffs, Cripps Warburg Ltd. were not willing to make a loan until satisfied that certain conditions, such as, personal guarantees would be forthcoming from the Defendant Mr. Stephenson, Mr. Gibney and Mr. Sudway and they were satisfied with the status of the borrower, the title, and the value of the property then intended to be Mortgaged. These conditions were subsequently set out in a "telex" message from the Plaintiff Company to Mr. John Guinness, a director of Guinness and Mahon, Merchant Bankers, Dublin dated the 25th April 1973.

9

So, the Defendants raised an interim short-term loan from Guinness and Mahon, Merchant Bankers, Dublin. This loan was for the period of one month and was interest free for that period. In fact it lasted for two months and interest was charged for the second month. This short-term interim loan was made by Guinness and Mahon on the understanding that they would be "taken out" of the loan by the Plaintiff Company Cripps Warburg Ltd. In other words that they would be repaid by monies advanced by Cripps Warburg Ltd. This understanding arose from communications between the Plaintff Company Cripps Warburg Ltd. and Guinness & Mahon.

10

By the telex message dated the 25th April 1973 and referred to above the Plaintiffs, Cripps Warburg Ltd. confirmed to Guinness and Mahon that they would make available to Aran (in telex spelt Eire) Friendly Society (the borrower) an advance of £650,000 on demand against the security of the South County Hotel site. The loan to be repayable on demand but it was expected to be made available to the borrower for not less than a year. This was all subject to six conditions which are no longer relevant as they had been complied with. Guinness and Mahon did not advance the money on the interim loan until they had received this telex and the confirmation from the Plaintiffs Cripps Warburg Ltd.

11

At an early stage it was agreed that the transaction would be carried out through the vehicle of a Friendly Society namely the Defendant Aran Friendly Society. As a Friendly Society could not borrow money and create the mortgage as a Security for repayment, the Defendant, Cologne Investment Company Limited, was incorporated to act as a Trustee for Aran Friendly Society and perform the legal acts on its behalf, which Aran Friendly Society had not the legal status to perform.

12

Between the 19th April and the 3rd May 1973 the Plaintiff Company, Cripps Warburg Limited, had satisfied themselves of the compliance with the conditions upon which they were willing to make the loan. They had also received a report as to the value of the property from Messrs Jones, Lang and Wootton. Cripps Warburg Limited may have received telephone notification as to the contents of Messrs Lang and Wootton's report prior to the 19th April 1973.

13

On the 3rd May 1973 the Plaintiff company, Cripps Warburg Limited, in pursuance of the verbal agreement of the 19th April 1973 sent to Aran Friendly Society a Facility Letter. The term "Facility Letter" and "Commitment Letter" have been used indiscriminately by Counsel, and sometimes by the witnesses, as having the same meaning. Whatever be the proper terminology, that letter, which I will call a Facility Letter, dated the 3rd May 1973 from Cripps Warburg Limited to Aran Friendly Society formed the basis upon which Cripps Warburg offered and were prepared to make available an on demand overdraft facility against the security of the free-hold of the South County Hotel site. It provided that the total Facility should be £900,000 of which £650,000 would be available when security, by way of a first legal charge, was created for the benefit of an Irish bank to be nominated by Cripps Warburg Ltd. and, in the form acceptable to their solicitors. The remainder of the Facility, £250,000 was to be available when full and detailed planning permission for the development of the site in accordance with the scheme submitted to Cripps Warburg's surveyors, had been obtained.

14

The Facility was also subject to conditions;

15

(1) That written confirmation was forthcoming from Cripps Warburg's solicitors as to the legal status of the Defendant Aran Friendly Society for the purpose of the advance.

16

(2) That unlimited and irrevocable guarantees joint and several were forthcoming from the Defendants, Messrs. Stephenson, Gibney and Sudway in a form acceptable to Cripps Warburg's solicitors.

17

(3) That planning permission was forthcoming.

18

It provided interest would be payable on the advance at Williams and Glynn's base rate plus 6%, subject to a minimum rate, not relevant. The letter also provided that a Commitment Fee of £6,500 "will be payable on the acceptance of this letter and will not be refundable in any event. Payment of this Commitment Fee shall accompany acceptance of this letter and this offer shall not be binding upon us until we have received this payment".

19

The offer or Facility was expressed...

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