Danske Bank A/S (t/a National Irish Bank) v Durkan New Homes and Others

JurisdictionIreland
JudgeMr. Justice Charleton
Judgment Date26 June 2009
Neutral Citation[2009] IEHC 278
CourtHigh Court
Date26 June 2009

[2009] IEHC 278

THE HIGH COURT

No.151S amd No. 915S/2009
Danske Bank A/S (t/a National Irish Bank) v Durkan New Homes & Ors

BETWEEN

DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK
PLAINTIFF

AND

DURKAN NEW HOMES, DON CASEY, MARIAN CASEY AND TULLYCROSS DEVELOPMENTS LIMITED
DEFENDANTS

RSC O.37 r6

RSC O.37 r7

MCGRATH v O'DRISCOLL & ORS 2007 1 ILRM 203 2006/35/7529 2006 IEHC 195

COW v CASEY 1949 1 KB 474 1949 1 AER 197

IGOTE LTD v BADSEY LTD 2001 4 IR 511 2001/12/3308

NATIONAL TOURISM DEVELOPMENT AUTHORITY v COUGHLAN & ORS UNREP CHARLETON 17.2.2009 2009 IEHC 53

REARDON SMITH LINE LTD v HANSEN-TANGEN (THE DIANA PROSPERITY) 1976 1 WLR 989 1976 3 AER 570

BANK OF IRELAND v AMCD (PROPERTY HOLDINGS) LTD 2001 2 AER (COMM) 894

ANTAIOS COMPANIA NAVIERA SA v SALEN REDERIERNA AB (THE ANTAIOS) 1985 AC 191 1984 3 WLR 592 1984 3 AER 229

ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & ANOR 2005 1 IR 274 2005 2 ILRM 131 2005/2/242 2005 IESC 12

CONTRACT

Interpretation

Loan agreement - Construction - Term of contract - Intention of parties - Surrounding circumstances - Claimant bank entering into facility agreement with defendant - Demand for repayment of sums outstanding under agreement - Whether loan contract constituted a term loan - Contractual status of repayment date - Whether relevant date determined at close of business or continued up to stroke of midnight - Clause obligating defendant to maintain 70 per cent debt to security ratio - Whether plaintiff's failure to invoke clause relating to debt to security ratio by close of business on repayment date released defendant from obligations under main agreement - Whether plaintiff entitled to summary judgment - Complexity - Whether plenary hearing necessitated - McGrath v O'Driscoll [2006] IEHC 195 (Unrep, Clarke J, 14/6/2006), Cow v Casey [1949] 1 KB 474, Igote Ltd v Badsey Ltd [2001] 4 IR 511 followed; Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989, Bank of Ireland v AMCD (Property Holdings) Ltd [2001] 2 All ER (Comm) 894, Antaios Compania Naviera SA v Salan Rederiena AB [1985] AC 191 and Analog Devices v Zurich Insurance [2005] 1 IR 274 considered - Plaintiff granted judgment jointly and severally for amounts stated in summary summons as against all defendants (2009/915S & 1501S - Charleton J - 26/6/2009) [2009] IEHC 278

Danske Bank A/S v Durkan New Homes

1

1. The plaintiff claims summary judgment against each of the defendants for the repayment of two loans of €29,460,000 and €7,640,000 together with interest. The liability of some of the defendants is dependent upon guarantees for the repayment of those amounts. These guarantees are not in dispute. Instead, both parties are agreed that the guarantees are dependant upon the correct interpretation of the main contract of loan advanced by two similar letters dated 22 nd February, 2006. Each letter offered one of the loans and each of them was accepted on the terms therein set out. If these primary contracts establish liability to repay the amounts, then the guarantees are operative. Although there were two separate loan offers advanced by the plaintiff to Durkan New Homes and to Tullycross Developments Limited respectively, the contract terms were identical. Hence, two separate sets of proceedings have been consolidated. It is only necessary in this judgment to refer to one set of documents as the other duplicates this.

2

2. The plaintiff argues an entitlement to summary judgment, contending that the terms of the contract are clear and that none of the defendants have any defence to these primary contracts on which the guarantee liability of the other defendants are dependant.

Facts
3

3. Under a letter of 22 nd February, 2006, the plaintiff offered the first, second and third named defendants a loan of €29,460,000. This happened in the context of existing loans on land which were to be refinanced, and in order to facilitate the purchase of additional houses, whereby a large site could be made up at Beech Park, Cabinteely, County Dublin. Some eleven or twelve individual suburban houses were to be bought and these were to be knocked, a large site was then to be assembled, and planning permission was to be sought for some hundreds of dwellings. There was a moratorium put on interest and capital payments but full repayment was to be effected on date scheduled as being two years and six months after the date of the first drawdown. A separate letter of loan offer dated the same date, as the first letter, offered the fourth named defendant the sum of €7,640,000 on the same terms. Then, by separate guarantees, the defendants accepted liability conditional upon these loans for the repayment of the relevant sums. In addition, a claim is made for interest by the plaintiff as and from the 30 th September, 2008. On that date, it is agreed, two years and six months had expired from the date of the first drawdown of the relevant tranche of finance. When that date is over is in dispute: was it at midnight, as would be usual, or when office work had customarily ceased? On that date, within office hours, the defendants had paid such interest as was due to the plaintiff over the term of two years and six months from the date of the first drawdown. If there is liability under this judgment, then they must also pay interest from that date to the date hereof.

4

4. The defendant claims that they are not liable to pay interest after that date. They further claim that the terms of the contract entered into between the parties allowed the plaintiff bank recourse only to certain secured properties and to no more than that. The defendants are willing to hand over these properties to the plaintiff bank which, they say, is not entitled to any judgment against them for the return of the loans advanced.

5

5. A loan to the first, second and third named defendants was secured by a guarantee provided by the fourth named defendant and that in turn was supported by a legal charge executed by the fourth named defendant over its interest in certain specified properties. These were, in essence, the various pieces of property that were individually purchased and which were to be gathered together into one large site for development. The loan offered to the fourth named defendant was conditional on a guarantee by the first second and third named defendants and this in turn was supported by a first legal charge to be executed by them over and in respect of their interests in certain of the specified properties. These, in turn, were portions of the large agglomerated site.

6

6. I will, in due course, quote the relevant documents in this case as they are and without putting in (sic) or making any comment as to grammar. For precision I will need later to quote the precise terms of the loan offer letter of 22 nd February, 2006. In summary, however, the condition which gives rise to a claim by the defendants that there is no liability for summary judgment in this case, and in fact no liability at all, is one whereby the value of the property securing the loan was to be at least 70% of the loan. When the amounts of the two offers are added together, and when that figure is looked at as being 70% of the sum necessary to secure the loan, it meant that the value of the property could not drop below the sum of €53,000,000.

7

7. As a matter of fact, no one disputes that as of the repayment date of the 30 th September, 2008, the value of these properties had declined below that figure. As of that date, the agglomeration of properties was worth €45,000,000. If the plaintiff bank's recourse against the defendants is limited to their respective interests in those properties, then the bank is entitled to possess these properties, to realise whatever it can from them and, in the event of shortfall, which in the current market is more than probable, they have no recourse against the defendants. The plaintiff bank does not agree with this. Their argument is that the terms of the contract are clear in establishing that this limitation on liability by the defendants is not operative.

8

8. The date when the first drawdown of the loan facilities was made, clearly establishes 30 th September, 2008 as the repayment date. There is no dispute that during the summer of that year, concerns began to arise as to the value of the secured property. In consequence, howsoever it came about, a valuation firm called CB Richard Ellis conducted a detailed study of the properties and gave comparative valuations with a view to arriving at an overall figure. This exercise was done in July. Some dispute arose to the accuracy of the valuation. The defendants suggested that an initial valuation of €40,000,000 was incorrect. They submitted a figure which was, in itself, below the value of €53,000,000 required for limitation of recourse under the contracts. The valuer revised his estimate upwards, whereby on 24 th September, 2008 the defendants were advised that the final valuation was €45,000,000. The plaintiff bank was notified some few days later. Then followed a flurry of activity centred on the 30 th September.

9

9. As there are two separate loan contracts, two separate letters were written in respect of each issue. I need only refer to one and to one of the similar sets of letters whereby the alleged dispute on limitation of recourse arose. By letter delivered by hand on 30 th September, 2008, the defendants wrote to the bank enclosing a cheque for all the interest due under the loans over its two and half year duration up to that date and saying:

"We refer to the Facility Letter and wish to advise that in accordance with clause 5 we have today discharged all interest due up to and including the "Repayment Date". Accordingly the provisions of clause 11 apply and your right of recourse is limited to...

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