Irish Bank Resolution Coropration Ltd v Moran

JurisdictionIreland
JudgeMr. Justice Kelly
Judgment Date25 January 2013
Neutral Citation[2013] IEHC 40
CourtHigh Court
Date25 January 2013

[2013] IEHC 40

THE HIGH COURT

[No. 3213 P/2011]
Irish Bank Resolution Corporation Ltd v John (aka Johnny) Moran
COMMERCIAL

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED
PLAINTIFFS

AND

JOHN (ALSO KNOWN AS JOHNNY) MORAN
DEFENDANT

Practice & procedure - Amendment to defence - Counterclaim - Additional defendants - Alleged liability as security for borrowings

Facts: The defendant was claimed to be liable as surety for the borrowings of two companies which had gone into receivership. The defendant sought leave from the court to permit him to deliver an amended defence and counterclaim against the plaintiff bank. The amendment consisted exclusively of a counterclaim to which additional defendants would be added, including the Minister for Finance. Reliance was placed on ord 28 of the Rules of Superior Courts in support of this claim, with numerous grounds pleaded.

Kelly J considered the likelihood of failure of the proposed claim and the case of Citywide Leisure v Irish Bank Resolution [2012] IEHC 220 where an amendment included a plea practically identical to the constitutional rights the defendant now sought to claim. The amendment had been refused in that case as it was considered to amount to a constitutional challenge of the legislation. In this case it would also not be allowed, Citywide Leisure v Irish Bank Resolution [2012] IEHC 220 applied.

Furthermore, the claim lacked the necessary evidence required to justify such a discretion being exercised in favour of the defendant. In response to the attempt to add additional defendants the court held that no sufficient connection had been established which would justify the addition. Shell E and P Ireland Limited v. McGrath [2006] 2 ILRM 299 considered.

Permission for the amendment was therefore granted on the sole ground of misrepresentation.

Introduction
1

1. In these proceedings, the plaintiff claims €19,282,828 against the defendant. The claim is made in respect of his alleged liability as surety for the borrowings of two companies. The first is known as JRM Hotels Limited (JRM) which is now in receivership. The second is known as Blarney Inn Limited (Blarney) which is also in receivership. The defendant is a director of those companies and is alleged to be a direct or indirect shareholder in them.

2

2. The plaintiff alleges that the defendant executed a guarantee and indemnity under seal in respect of JRM's borrowings on 30 th June, 2005. Restructuring of JRM's borrowings took place in June 2008. On that occasion, it is alleged that the defendant executed a deed of confirmation confirming that the earlier guarantee of 2005 would continue as security for JRM's borrowings.

3

3. It is alleged that on 30 th June, 2008, the defendant entered into a guarantee and indemnity under seal in respect of Blarney's borrowings. It is alleged that he also executed confirmations appended to facility letters confirming his agreement to guarantee the obligations of the two companies.

4

4. It is alleged that the companies defaulted in their obligations as a result of which the defendant's guarantees were called in July 2011.

5

5. A lengthy defence has been delivered by the defendant. Amongst other things he denies that he entered into the guarantees but, if he did, he alleges that he is released from his obligations by reason of a variation of the loan agreements to which he did not consent. The defence also alleges an estoppel, misrepresentation - both fraudulent and negligent - and a breach by the plaintiff of s. 60 of the Companies Act thus rendering the loans and guarantees voidable.

6

6. The final part of the defence which commences at para. 62 deals with alleged inequality of treatment.

Alleged Inequality
7

7. The relevant paragraphs of the defence are as follows:-

2

2 "62. The defendant claims and asserts that he has been subjected to a profound inequality of treatment and/or invidious discrimination by agencies of the State which constitutes and continues to constitute a breach of his rights guaranteed by the Constitution of Ireland.

63

63. The plaintiff is a financial institution licensed in the State and fully owned and controlled by the State and/or its agents.

64

64. The State in recognising the need to address the serious threat to the economy and the instability of credit institutions in the State generally and the need for the maintenance and stabilisation of the financial system in the State and recognising the need to facilitate the availability of credit in the economy of the State, to resolve the problems created by the financial crisis in an expeditious and efficient manner and achieve a recovery in the economy and to contribute to the social and economic development of the State, enacted the National Asset Management Agency Act 2009.

65

65. Under the terms of the said legislation the plaintiff has been designated as a participating institution. In that regard certain of the plaintiff's loans have been transferred to the National Asset Management Agency (NAMA) and borrowers of those loans now deal with the Agency.

66

66. The principals' loans, by reason of the fact that they do not exceed €20m were not transferred to NAMA and remain on the balance sheet of the plaintiff. NAMA, in acquiring loans from the defendant (sic), purchased same at a substantial discount to their face value.

67

67. Having acquired the loans, NAMA requires each borrower to submit a business plan whose primary purpose is to present a complete account of its financial affairs and to provide a detailed plan of how and when all liabilities to NAMA will be repaid. It is to be noted that the liability to NAMA is represented by the discounted price paid by NAMA for the original loans.

68

68. The borrower's business plan is reviewed by an independent business reviewer who assesses the reasonableness of assumptions used by the borrower, conducts a detailed analysis of cash flow projections and presents an independent critique of the plans. The plan and the associated independent business review are then considered by the NAMA board, credit committee, chief executive or senior management, based on a cascading system of delegated authorities approved by the board. Other factors to take into account at this stage include the degree of the borrower's cooperation with NAMA and the quality of its corporate governance arrangements.

69

69. The business plan process leads ultimately either to approval of the borrower's business plan, possibly subject to changes and the imposition of certain conditions, or to enforcement. The latter applies in the case of borrowers who are unable to prove that they have the capacity to meet their debt obligations, even if restructured, or where they have failed to cooperate with the process. NAMA has stated that enforcement is not its preferred option but that its stated objective is to try and achieve a consensual workout with as many borrowers as possible.

70

70. Further, credit activity continues whilst this process of engagement with borrowers is under way. NAMA has provided significant credit to borrowers.

71

71. In circumstances where approval of the borrower's plan is made NAMA do not move to enforce security and do not call in personal guarantees or indemnities.

72

72. The defendant claims and asserts that he is being treated in a manner which is both unequal to the way in which guarantors in NAMA are treated and further claims that were the principals' loans to have been transferred to NAMA that NAMA would have accepted a business plan and would not have proceeded to enforcement.

73

73. In those circumstances the defendant claims that he has been discriminated against in such a way as to be unjustified and/or invidious. The defendant further pleads that there can be and is no legitimate reason for the inequality of treatment made between the defendant, alleged to have guaranteed and/or indemnified loans to borrowers whose loans remain on the balance sheet of the plaintiff, and persons who guaranteed or indemnified loans of borrowers whose loans have been transferred to NAMA.

74

74. Further, the defendant specifically pleads that borrowers such as the principals whose loans have remained on the balance sheet of the plaintiff have been specifically targeted for enforcement by reason of the requirements placed upon the plaintiff to wind its operations down and/or to create cash flow or profit from which to discharge debts. The defendant is directly adversely affected thereby.

75

75. In the circumstances the conduct of the plaintiff is such as to constitute a breach of the defendant's rights and in particular his right to equality. In particular the defendant pleads that the plaintiff has breached his rights in the following manner but without prejudice to his right to rely on further particulars:

(i) appointing receivers to the assets of the principals;

(ii) appointing receivers when it knew or ought to have known that the receivers appointed would not act in the best interest of the principals;

(iii) refusing or denying directors and managers of the principals from engaging in the management of the principals' asset and/or business;

(iv) failing to negotiate in good faith or at all in respect of the principals' indebtedness;

(v) determining to appoint receivers in circumstances where no proper opportunity was afforded to the principals to repay, renegotiate or refinance the debts;

(vi) failing to give any or any adequate consideration to business plans submitted by or on behalf of the principals;

(vii) permitting the loss of the 'Holiday Inn' brand;

(viii) refusing to take such steps as were necessary to retain the 'Holiday Inn' brand;

(ix) closing or causing to be closed the assets and/or business of the principals and dismissing the employees;

(x) failing to afford the principals and...

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