Duddy Hospitality Ireland Holdings Ltd and Others v Propiteer Ireland Holdings Ltd and Others

• Jurisdiction: Ireland
• Judge: Mr Justice Rory Mulcahy
• Judgment Date: 09 April 2024
• Neutral Citation: [2024] IEHC 190
• Court: High Court
• Docket Number: Record No.: 2023/2831P

Between:

Duddy Hospitality Ireland Holdings Limited, Brendan Duddy and Lawrence Duddy

Plaintiffs

and

Propiteer Ireland Holdings Limited, DADAC Limited, Propiteer Limited, Colin Sandy, David Marshall, Ken Fennell and Andrew O'Leary

Defendants

[2024] IEHC 190

Record No.: 2023/2831P

THE HIGH COURT

JUDGMENT of Mr Justice Rory Mulcahy delivered on 9 April 2024

Introduction

1 . The first plaintiff forms part of the Duddy Group, of which the second and third plaintiffs are principals. The first, second and third defendants are part of the Propiteer Group, of which the fourth and fifth defendants are principals. The Duddy and Propiteer groups have a number of joint or intertwined interests in various projects. On 13 September 2020, a settlement agreement (“ the Settlement Agreement”) was concluded for the purpose of seeking to decouple the two groups' interests permanently. On 8 December 2000, a further agreement, a call option agreement (“ the Call Option Agreement”) was reached between the two groups.

2 . The Duddy Group and Propiteer Group had, together, owned and controlled the Ibis Red Cow Hotel in Clondalkin, Co. Dublin (“ the Ibis Hotel”). These proceedings concern alleged breaches of the Settlement Agreement and Call Options Agreement (together “ the Agreements”) in relation to the ownership of the Ibis Hotel. In brief terms, the plaintiffs allege that the first five defendants are in breach of their obligations to use reasonable endeavours to ensure that, in accordance with the Settlement Agreement and Call Option Agreement, ownership of the Ibis Hotel, or of the companies through which it is owned, was transferred to the plaintiffs. Instead of fulfilling those obligations, the plaintiffs argue that the defendants have pursued a strategy whereby the defendants gain control of the hotel. The defendants deny any wrongdoing and argue that the plaintiffs had only a conditional entitlement to ownership of the hotel and that their difficulties arise from the fact that they have not been able to satisfy the required conditions.

3 . This judgment concerns two separate injunction applications by the plaintiffs. The first application in time sought injunctions restraining the second, fourth and fifth defendants from making any alterations to the board of directors of the companies controlling the Ibis Hotel and directing the re-appointment of the second and third plaintiffs as directors (“the Board composition injunction”). The second injunction sought to restrain the sixth and seventh defendants, receivers appointed by the second defendant over those companies, from selling or disposing of the Ibis Hotel (“the Sale injunction”).

4 . The injunction applications were heard over three days, on 29 February, 1 March and 5 March. The first to third defendants, the fourth and fifth defendants, and the sixth and seventh defendants were all separately represented. On 22 March 2023, I indicated to the parties that I was refusing both injunctions. I provided a short statement of my reasons for so deciding and indicated that a written judgment setting out those reasons in more detail would follow. This is that judgment.

Background

5 . The parties exchanged a total of ten affidavits in relation to the Board composition injunction, one of which was delivered during the hearing, another after the hearing concluded, and six in relation to the Sale injunction. The following is a summary of the most pertinent facts as appear from those affidavits, together with some of the arguments the parties make by reference to those facts.

6 . On 20 July 2018, three companies, Propiteer Hotels Exeter Limited (PHEL), Waring Street Limited (WSL) and Propiteer Ibis Red Cow Limited (PIRCL) as borrowers, entered a financing agreement with Fairfield REF ECS DAC (Fairfield) (“ the Fairfield facility”). Pursuant to the Fairfield facility, Fairfield made available separate sterling and euro facilities to the borrowers. The purpose of the euro facility was to part-fund the acquisition of the Ibis Hotel. The sterling facility was for the purpose of acquiring a development property in Waring Street, Belfast and also refinancing the debt on a hotel in Exeter, United Kingdom. The sterling facility was made up of two loans totalling £16,050,000; the euro facility was in the sum of €10,575,000. The purchase price of the Ibis Hotel was in excess of €14 million. It appears that the Propiteer Group provided the balance of funds required for that purchase.

7 . Although the euro and sterling facilities were separate, each of the companies guaranteed the entirety of the debt and, importantly, the facilities were cross-collateralised, i.e. the collateral provided for the loans, including the Ibis Hotel, provided security for the entirety of the debt.

8 . The facility was subject to a requirement that the borrowers maintain a 75% loan to value ratio in the secured assets. The facility was due to expire in July 2021. In the event of a change of control of any of the borrowers without Fairfield's consent, the debt would become immediately repayable.

9 . At the time of the Settlement Agreement, the Ibis Hotel was owned and controlled by Propiteer Ireland Hotels Limited (PIHL). PIHL was owned by the first plaintiff (40%) and the first defendant (60%). PIHL was the owner of 100% of the shares in Propiteer Ibis Red Cow Limited (PIRCL), which in turn owned 100% of the shares in Propiteer Ibis Red Cow Operations Limited (PIRCOL). The Board of PIRCL comprised the second and third plaintiffs (the Duddy brothers), the fourth and fifth defendants, and a fifth director, Tom Dalton. The Board of PIRCOL comprised the same five directors, together with three sisters of the second and third plaintiffs, Patricia, Shauna, and Paula Duddy (the Duddy sisters). The Duddys, together, had a controlling interest on the Board of PIRCOL and were responsible for the operations of the Ibis Hotel.

10 . In or about 2019, the two groups decided to go their separate ways and, accordingly, the Settlement Agreement was executed in January 2020. The parties to that agreement included the second and third plaintiffs, and the first, third, fourth and fifth defendants.

11 . The Settlement Agreement addressed a variety of matters, including issues which are not relevant to these proceedings. For present purposes, of central importance are the provisions in relation to ownership of PIHL. Pursuant to Clause 4.6.1 of the Settlement Agreement, the first Defendant was to transfer its shareholding in PIHL to the first plaintiff. That transfer, however, was contingent on the “Fairfield consent being procured”. Clause 4.6.1 required all parties to the agreement to use their reasonable endeavours to procure that consent.

12 . The Fairfield consent was described in Clause 4.6.2 as being Fairfield's consent to the Fairfield debt in the amount of €10,376,000.75 being transferred into the sole name of the first plaintiff or being refinanced on terms acceptable to Fairfield. Clause 4.6.2 required the Propiteer Group to provide all reasonable assistance to the first plaintiff in the transfer or refinancing “provided that the Propiteer Group will have no further liabilities in respect of such debt (which is currently cross-collateralised in the Propiteer Group.” The debt the subject of this clause was the sum then due and owing on the euro facility element of the Fairfield facility.

13 . It is important to recall that the Ibis Hotel operated as collateral for the sterling facility provided by Fairfield even though only the euro facility had been required for the purchase of the hotel. The defendants' position is that Clause 4.6.2 required the plaintiffs to obtain consent from Fairfield to refinance the euro portion of its debt, but without imposing on the defendants any obligation to provide additional security for the sterling facility, in respect of which the Propiteer Group would remain liable to Fairfield.

14 . Clause 4.6.3 of the Settlement Agreement provides, in part, as follows:

“It is acknowledged by the Parties that for a period of time following the execution of this agreement until DHIHL (or its nominee) has procured a refinance or other proposal as described in clause 4.6.2 above, each of the Propiteer's Managers' Group [defined to include the fourth and fifth defendants] and the BLT Group [defined to include the second and third plaintiff] will not be in control of certain assets connected to the Fairfield facility, of which the Fairfield debt in PIHL forms a part.”

15 . Clause 4.6.5 of the Settlement Agreement provides that until the earlier of either the Fairfield consent being obtained, or a refinance of the Fairfield facility being agreed by the first plaintiff or PIHL, there shall be no change in the constitution of the board of directors of PIHL.

16 . In December 2018, the Call Option Agreement was executed. The third plaintiff, in his first affidavit grounding the Board composition injunction, avers that the Call Option Agreement was made in furtherance of the agreement in the Settlement Agreement that the parties would agree the most tax-efficient approach to the various settlements. In an affidavit filed on behalf of the first to third defendants, it is suggested that it was agreed between the parties that it would make more sense to enter into asset-specific agreements and that the Call Option Agreement was concluded to deal with the Ibis Hotel. This dispute may prove to be of some significance, as the defendants argue that the Call Option Agreement contains an entire agreement clause such that the provisions of the Settlement Agreement are no longer applicable. I address this below.

17 . The parties to the Call Option Agreement included PIHL, the first plaintiff, the Duddy brothers, and Mr Dalton, and the first, fourth and fifth defendants, WSL, PHEL, PIRCL and PIRCOL. Pursuant to Clause 2 of that agreement,...