European Property Fund Plc and Another v Ulster Bank Ireland Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 02 July 2015
• Neutral Citation: [2015] IEHC 425
• Date: 02 July 2015
• Court: High Court
• Docket Number: [2014 No. 5450 P] [2014 No. 5449 P]

[2015] IEHC 425

THE HIGH COURT

COMMERCIAL

Costello J.

[2014 No. 5450 P]

[2014 No. 5449 P]

BETWEEN

EUROPEAN PROPERTY FUND PLC AND LAURELMORE LIMITED

PLAINTIFFS

AND

ULSTER BANK IRELAND LIMITED

DEFENDANT

AND

BETWEEN

VIEIRA LIMITED

PLAINTIFF

AND

ULSTER BANK IRELAND LIMITED

DEFENDANT

Banking & Finance – Practice & Procedures – O. 19, r. 28 of the Rules of the Superior Courts – Inherent jurisdiction – S. 11 of the Statute of Limitations 1957 – Delay

Facts: The defendant in both proceedings sought an order for striking out the proceedings as time barred. The defendant alleged the Statement of Claims to be fundamentally defective as it failed to comply with o. 19, r. 5 (2) of the Rules of the Superior Courts. The plaintiffs in both proceedings alleged fraud and concealment of facts due to which the relevant properties were mis-sold.

Ms. Justice Costello dismissed the proceedings of the second named plaintiff in the first proceedings and the plaintiff in the second proceedings in entirety. The Court dismissed all the claims of the first named plaintiff in the first proceedings except those that related to coercion and intimidation for selling the relevant properties. The Court held that it had jurisdiction under o. 19, r. 28 to strike out the proceedings and that must be exercised rarely. The Court observed that if the pleadings could be amended to save the action, then dismissal should not be ordered. The Court observed that the plaintiffs entered into relevant agreements after seeking professional advice and were under knowledge of all the material facts to carry out the terms of the contract and as such could not prove any fraud on the part of the defendant. The Court opined that in cases where the inherent jurisdiction of the Court was invoked including a plea of fraud, the Court must be vigilant to differentiate between a prima facie case of fraud versus a bare allegation of fraud.

JUDGMENT of Ms. Justice Costello delivered the 2nd day of July, 2015

1 These are two related cases in which the defendant, Ulster Bank Ireland Ltd. (‘Ulster Bank’), in each case seeks orders pursuant to the inherent jurisdiction of the court dismissing or in the alternative striking out the claims in whole, or in part, on the grounds that the actions are frivolous and vexatious, factually unsustainable and bound to fail, in the alternative on the grounds that the actions are scandalous and an abuse of process. It seeks to strike out the Statements of Claim on the basis that they are fundamentally defective and fail to comply with O. 19, r. 5(2) of the Rules of the Superior Courts. It is also sought to dismiss portions of the plaintiffs' actions on the grounds that the claims are statute barred by virtue of the provisions of s. 11 of the Statute of Limitations 1957.

The Larkin Group

2 Laurelmore Ltd. (‘Laurelmore’), the second named plaintiff in the first proceedings (‘the EPF proceedings’) is a company incorporated in the Isle of Man. The directors of Laurelmore are professional trustees.

3 J&E Davy (‘Davy’) is a firm that specialises in providing wealth management, asset management, capital markets and financial adviser services. Davy incorporated a company known as Davy European Property Fund Plc on 13th July, 2006 (‘DEPF’) to be an investment company. The directors were very experienced qualified members of Davy with considerable expertise and experience of investment in a variety of financial instruments. DEPF subsequently changed its name to European Property Fund Plc (‘EPF’) and is the first named plaintiff in the EPF proceedings.

4 EPF is a variable capital investment company which provides facilities for the direct or indirect participation by the public and which is authorised by the Central Bank of Ireland under s. 256(5) of the Companies Act 1990, Part XIII. It is an express condition of EPF's authorisation by the Central Bank that it comply with the provision of NU Notices issued by the Central Bank from time to time. The notices set out the conditions imposed by the Central Bank in relation to Collective Investment Schemes other than UCITS. If a company contravenes any condition in relation to its authorisation or business imposed by the Central Bank under s. 257 of the Act of 1990, the company and every officer who is in default shall be guilty of an offence. It was a condition of EPF's authorisation to carry on business as an investment company within the meaning of Part XIII of the Act of 1990, that investors in EPF (and in particular, its shareholder, Vieira Ltd.) were required to certify in writing to EPF that they met the qualifying investor criteria and that they were aware of the risk involved in the proposed investment and that, inherent in such investment, was potential to lose all of the sum invested; EPF was required to have a prospectus which was required to contain a prominent risk warning making specific reference for the potential to above average risk in relation to the investment and that the type of investment was suitable only for people who were in a position to take such a risk; EPF was required to have an investment manager who was responsible for managing the investments of EPF in accordance with the investment objectives and borrowing policies of the scheme as identified in the prospectus.

5 Davy was authorised by the Central Bank of Ireland to act as Investment Manager of EPF and so acted pursuant to a written investment management and distribution agreement made between DEPF and Davy on 31st August, 2006. The prospectus stated:-

‘The Investment Manager will be responsible for the identification of suitable Property and Property-related Assets for acquisition by the Company and, where appropriate, recommending how Property could be developed or improved; reviewing the assets of the Company; recommending how and when Property and Property-related Assets should be sold; and with respect to Property carrying out negotiations as to price and instructing solicitors, surveyors and other professional advisers (including but not limited to property management agents)…

The Investment Manager may from time to time seek the advice or recommendation of any adviser, analyst, consultant or other suitably qualified person to assist it in the performance of its duties under the Investment Management and Distribution Agreement.’

6 Vieira Ltd. (‘Vieira’) is the plaintiff in the second proceedings (‘the Vieira proceedings’), it is a company incorporated within the State and as of 31st August, 2009, the Shareholders' Fund was stated to be €56.9 million. It owned lands at Tyrrelstown and Mount Argus, Co. Dublin for residential development in 2008. It was the sole shareholder in EPF. Laurelmore was a subsidiary of Daneswood Ltd. (an Isle of Man company) which in turn was wholly owned by Vieira until 18th February, 2008, when Vieira transferred the shares in Daneswood Ltd. to EPF. Vieira and Laurelmore were engaged, inter alia, in property development and holding property in Ireland and England. Messrs. Richard and Michael Larkin are the ultimate beneficiaries of Vieira, Laurelmore and EPF. From about 2007, Mr. Richard Larkin was an agent of all three companies.

Chronology of Events

7 In 2001 Laurelmore purchased property in London at 11 Belgrave Road (‘Belgrave Road’). On 14th November, 2002, Laurelmore resolved to accept an offer of loan facilities from Ulster Bank. The actual facility document is no longer available though a copy of the bridging facility was exhibited. The facility was accepted by Laurelmore on 19th November, 2002. Ulster Bank referred to this contract as a fixed rate loan. The plaintiffs in the EPF proceedings refer to it as the Belgrave derivative. There is a dispute as to the nature of this transaction. In this judgment I shall refer to it as the Belgrave Facility.

8 In 2007 the Larkin Group of companies decided to restructure some of the property holdings in order to hold their assets in a more tax efficient manner. Matheson Ormsby Prentice solicitors were acting on their behalf. They obtained tax analysis in respect of Ireland, the United Kingdom and the Isle of Man. The proposed steps were outlined in a letter from Matheson Ormsby Prentice dated 14th January, 2008, as follows:-

‘1. Vieira Limited (‘Vieira’) and DEPF enter into a Share-for-Share Agreement whereby DEPF agrees to purchase the shares in Daneswood Limited (“Daneswood”) from Vieira, as consideration for an issue of shares in DEPF to Vieira.

2. The Property could be transferred inter-group from Laurelmore Limited (“Laurelmore”) to DEPF at market value. It is envisaged that DEPF would borrow from Ulster Bank to finance the acquisition of the Property. The proceeds would be paid by DEPF to Laurelmore. Following the requisite holding period, Laurelmore would be liquidated after extracting all retained earnings by way of dividend.

3. The shares in Diamondridge Ltd. (“DL”) would be sold by Daneswood to DEPF for their market value which should be nominal.’ (emphasis added)

9 As part of the restructuring Laurelmore was to transfer Belgrave Road to DEPF (subsequently EPF). In addition, it was proposed that Laurelmore would acquire a second property in London, referred to as Old Jewry, and the intention was that this property and the financial instruments associated with Old Jewry would also be transferred and novated to EPF shortly after its acquisition. The finance was to be provided by Ulster Bank, initially to Laurelmore and subsequently to EPF.

10 Prior to entering into the Old Jewry transaction, Ulster Bank wrote to Laurelmore setting out the Terms of Business for the Conduct of Investment Services with Ulster Bank by letter date 24th January, 2008. The letter enclosed Ulster Bank's Terms of Business. The letter provided as follows:-

‘All...