Dowley v O'Brien
| Jurisdiction | Ireland |
| Judge | Mr. Justice Clarke |
| Judgment Date | 21 December 2009 |
| Neutral Citation | [2009] IEHC 566 |
| Court | High Court |
| Docket Number | [2008 No. 10707 P] |
| Date | 21 December 2009 |
[2009] IEHC 566
THE HIGH COURT
AND
O'MAHONY v HORGAN 1995 2 IR 411
Z LTD v A - Z & AA -LL 1982 QB 558
LAW SOCIETY v SHANKS 1988 1 FLR 504
BANK MELLAT v KAZMI 1989 QB 541
OCEANIICA CASTELANA ARMADORA SA v MINERALIMPORTEXPORT 1983 1 WLR 1294
GANGWAY LTD v CALEDONIAN PARK INVESTMENT (JERSEY) LTD & ANOR 2001 2 LLOYDS 715
POLLY PECK INTERNATIONAL PLC v NADIR 1992 4 AER 769
INJUNCTION
Interlocutory
Mareva injunction - Third party interests - Right of set off - Injunction to restrain removal of defendant's assets - Third party made loans to defendant prior to injunction - Application by third party to vary terms of injunction - Whether third party had right to vary terms of injunction - Whether third party entitled to variation of injunction to exercise right of set off against defendant's assets - Whether right of set off existed prior to injunction - Jurisdiction of court - Application by third party to vary injunction - Whether court had jurisdiction to hear application by third party - Whether third party had right to apply to court to vary injunction - O'Mahony v Horgan [1995] 2 IR 411 applied; Bank Mellat v Kazmi [1989] QB 541; Gangway Ltd v Caledonian Park Investment (Jersey) Ltd [2001] 2 Lloyd's Rep; Law Society v Shanks [1988] 1 FLR 504; Oceanica Castelana Armadora SA v Mineralimportexport [1983] 1 WLR 1294 and Z Ltd v A-Z and AA-LL [1982] QB 558 considered - Variation of terms refused (2008/10707P - Clarke J - 21/12/2009) [2009] IEHC 566
Dowley v O'Brien
Practice and procedure - Third parties - Application to vary terms of mareva injunction by third party - Whether third party having right to apply to Court to vary terms of mareva injunction - Circumstances where third party entitled to apply to vary terms of mareva injunction.
Facts the High Court had granted the plaintiff a mareva injunction over the defendant's assets. Some of those assets had been the subject of the right of a set off by Anglo Irish Bank. That bank applied to the High Court to vary the terms of the injunction so as to permit it to exercise its right of set off.
Held by Mr. Justice Clarke in declining to vary the terms of the injunction that a third party, such as a bank, may have a legitimate right to deal with an asset covered by a mareva injunction.
Z Ltd v. A -Z [1982] QB 588, The Law Society v Shanks [1988] 1 FLR 504 and Bank Mellat v Kazmi [1989] Q.B. 541 and Oceanica Castelana Armadora SA v Mineralimportexport [1983] 1 W.L.R. 1294 considered.
That, as the purpose of a mareva injunction was not to give security to the plaintiff but rather to prevent the defendant from acting improperly so as to place his funds outside the control or jurisdiction of the court so as to frustrate execution of any judgement which might ultimately be obtained, it did not prevent a party using its assets in the ordinary course of business or paying its lawful debts provided that payments made were bona fide for the purposes of that ordinary business or the payment of those ordinary debts and were not a device for removing relevant assets from the jurisdiction of the Court. O'Mahony v. Horgan applied.
However, a plaintiff who successfully obtained a mareva injunction and ultimately went on to secure a judgement had no greater entitlement than any other party to assets which could, in substance, have been affected by the mareva order. The successful plaintiff who obtained a mareva injunction did not, by obtaining that injunction, move any further up the queue for payment. Such a plaintiff simply improved the chances of there being funds available, in the ordinary way, to meet any judgement which might ultimately be obtained. A plaintiff who obtained a mareva injunction did not, therefore, obtain any additional interest in any particular asset of the defendant.
Where a bank had already in place a right of set-off or security in advance of the notification of the existence of a mareva injunction against the bank's customer, then the mareva injunction concerned could have no effect on the validity of the right to set-off or security concerned.
That a typical mareva injunction placed no barrier in the way of a financial institution in making a bona fide exercise of any power of set-off or security realisation which it may have had in place prior to it being notified of the existence of a mareva injunction. In order for the bank to exercise any such rights it needed to be bona fide exercised.
A third party (such as a bank) was not directly the subject of the mareva injunction. In principle, therefore, any third party (including a bank) could only be affected by a mareva injunction if it could be said that an action taken by that party amounted to either aiding and abetting a breach of the order (of which the bank had notice) or frustrating the effect of such an order (again where the bank had notice).
That any party who felt that it could be adversely affected as to its own interests by the existence of a mareva injunction had, prima facie, an entitlement to invite the court to vary the injunction concerned.
Reporter: P.C.
Mr. Justice Clarke delivered on the 21st of December, 2009
2 1.1 The application to which this judgment relates arose from a number of injunctions granted on 15 th December 2008 in the above action and in four related actions, being Daniel Maher v Breifne O'Brien, record number 2008 / 10798P, David Bell and Paul Bell v Breifne O'Brien, record number 2008 / 10709 P, David O'Reilly v Breifne O'Brien, record number 2008/ 10710P and Evan Newell v Breifne O'Brien, record number 2008/ 10711P). In short, this court granted mareva type injunctions restraining the defendant, ("Mr O'Brien"), or his agents, from reducing his assets under the level of €20 million.
3 1.2 On 9 th January, 2009, this court, (Kelly J), granted judgment in favour of the plaintiffs ("the Dowleys") in this case in the sum of €3,065,350 and granted further effect to the mareva injunction given on 15 th December, 2008.
4 1.3 Anglo Irish Bank Plc ("Anglo"), who provided Mr. O'Brien with various loan facilities, sought to vary the terms of the injunctions previously granted in this action. Anglo wished to exercise various rights over assets of Mr O'Brien available to it in one way or another and to have such assets realised or otherwise applied in reduction of Mr. O'Brien's indebtedness to Anglo.
5 1.4 Having considered the matter it seemed to me that it was unnecessary to vary the terms of the injunctions previously granted in order that Anglo be entitled, in relation to Mr O'Brien, to exercise any rights which they might have and bona fide wish to exercise. I, therefore, gave a brief ruling in which I outlined that finding but further indicated that I would later give a judgment setting out my reasons for having come to that view. This judgment is directed towards setting out those reasons. In addition, as counsel for the Dowley's questioned the standing of Anglo to make this application, I also deal with that question at para. 5.19 below. It is necessary to turn, first, to the factual background.
2 2.1 From time to time since 1992, Mr. O'Brien was provided with a number of loan facilities by Anglo's Dublin and London offices in connection with various business activities and investments. Anglo now asserts that Mr. O'Brien has defaulted in repayment of all of his loans from Anglo which are now, it is said, repayable in full. The total indebtedness, under this heading, of Mr. O'Brien to Anglo, as of 9 th February, 2009, was stated by Anglo as being €2,222,047.26 together with further interest on principal sums of €5,547.21. By letters of 6 th February, 2009, Anglo called upon Mr. O'Brien to discharge the balances on the account in the outstanding sum but he has, it would seem, failed to do so.
3 2.2 Mr. O'Brien was also advanced £1,936,000 in order to buy property in Reading, London by Anglo's London branch in 2006. Mr. O'Brien has defaulted in the repayment of this loan which has been called in and the current balance outstanding on the account is said to be £1,935,781.88.
4 2.3 Various other loans, including renewals of existing facilities, were made by Anglo to Mr. O'Brien over the years under the terms of written facility letters accepted by Mr. O'Brien. Loans were made on the basis of Anglo's General Conditions for personal Loans. Paragraph 13 of the General Conditions deals with set-off and provides as follows:-
"Subject to Section 40 of the Consumer Credit, 1995, the borrower hereby agrees that the Bank may at any time notwithstanding any settlement of account or other matter whatsoever, combine or consolidate with any of the Borrower's then existing accounts in whatever currency such accounts may be denominated and whatsoever their nature whether subject to notice or not wheresoever situate and may set-off or transfer any sum standing to the credit of any one or more of such accounts in to towards satisfaction of any obligations or liabilities of the Borrower to the Bank whether such liabilities be present, future, actual, contingent, primary, collateral, several or joint. For this purpose the Borrower hereby irrevocably authorises the Bank to purchaser with the monies standing to the credit of such accounts such other currencies as may be necessary to effect such set-off or transfer at the prevailing spot rate exchange of the Bank as conclusively determined by the Bank."
Anglo wish to rely on this provision in order to facilitate set-off of the amounts due and owing.
2 2.4 Anglo holds security over various assets...
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Walsh v Walsh
...that costs can or should be included in such an injunction gets some support from the decision of Clarke J. in Dowley v. O'Brien [2009] 4 I.R. 752 at p. 763, where he says that: '[31] The starting point for any consideration has to be the fact that a Mareva type injunction, in the standard......