Irish Bank Resolution Corporation Ltd v John Morrissey

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 14 May 2013
• Neutral Citation: [2013] IEHC 208
• Court: High Court
• Date: 14 May 2013

Irish Bank Resolution Corp Ltd (in special liquidation) v Morrissey

COMMERCIAL

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED (IN SPECIAL LIQUIDATION)

PLAINTIFF

AND

JOHN MORRISSEY

DEFENDANT

[2013] IEHC 208

[No. 1548 S/2011]

[No. 86 COM/2011]

THE HIGH COURT

Commercial law – Banking law – Credit and security – Contract – Estoppel – Default – Letter of demand – Terms of facility letter – Definition of “fiduciary”– Appointment of asset manager – Whether Bank stopped from calling in loans – Whether fiduciary relationship existed between Bank and customer – Irish Bank Resolution Corporation Act, 2013.

Facts The plaintiff (formerly Anglo Irish Bank Corporation Ltd.) issued a summons against the defendant seeking a summary judgment of some €36,787,674.38. The application for summary judgment was refused and the proceedings were remitted for plenary hearing. Two preliminary issues fell to be determined; whether the plaintiff bank was entitled to make demands on foot of the loan facility and whether a fiduciary relationship existed between the plaintiff and the defendant. The defendant contended that the plaintiff Bank in making the demand for repayment of all monies due, was in breach of an express or implied term of existing contractual arrangements and that the Bank was estopped from terminating the defendant”s facilities. The representations, warranties, conduct, advice and consulting services provided by the Bank to the defendant had created a fiduciary relationship between them.

Held by Finlay Geoghegan J in making the following order: As of a certain date the defendant became obliged to repay the facilities to the Bank. There was no express or implied term thereof which prevented the Bank demanding repayment after that date. The Bank had not made representations that the lending facilities would be extended beyond the expiry of the term provided in the facility letter or that they would be “rolled over”. The Bank was entitled to make the demand that the lending facilities be repaid. The evidence did not disclose that the Bank participated in any way as ‘a venture-capital financier’ participating with the defendant in his property investment business or share portfolio. The relationship between the plaintiff and the defendant did not go beyond that of a contractual relationship and there was no evidence of a fiduciary relationship. note - The court held that the passing of the Irish Bank Resolution Corporation Act, 2013 did not stay the proceedings against the defendant.

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HOSPITAL PRODUCTS LTD v US SURGICAL CORP 156 CLR 41

IRISH BANK RESOLUTION CORP 2013 S4

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IRISH BANK RESOLUTION CORP 2013 S6(2)(A)

IRISH BANK RESOLUTION CORP 2013 S6(1)

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COMPANIES ACT 1963 S23(1)(A)

COMPANIES ACT 1963 S10(1)

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COMPANIES ACT 1963 S231

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COMPANIES ACT 19631963 SCHEDULE PART 1 PARA 8

COMPANIES ACT 1963 S231(1)

COMPANIES ACT 1963 S10 PART 1

GREENDALE DEVELOPMENTS, IN RE 1997 3 IR 540

1 JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 14th day of May, 2013

2 1. This judgment is given on issues which, by order of the High Court (Kelly J.) of 23 ^rd January, 2012, were set down to be tried and determined in advance of the determination of any other issues in the proceedings. The two issues are:

3 (a) Whether the plaintiff was entitled to make demands on foot of the loan facility of February [2009] as it did; and

4 (b) Whether the relationship between the plaintiff and the defendant went beyond that of a contractual relationship such that a fiduciary relationship existed between the plaintiff and the defendant.

5 2. The proceedings in which these issues arise were commenced by summary summons dated 13 ^th April, 2011. In the proceedings, the plaintiff, the former Anglo Irish Bank Corporation Ltd. ("the Bank") seeks judgment in the sum of €36,787,674.38 plus interest. The sums in question are the aggregate sums allegedly due and owing by the defendant ("Mr. Morrissey") to the Bank pursuant to facilities granted. The most recent facility letter which covered all the then facilities is dated 2 ^nd February, 2009. Facilities were first granted to Mr. Morrissey by the Bank in 2000.

6 3. The proceedings were entered into the Commercial List by order of the Court (Kelly J.) of 23 ^rd May, 2011. On 14th July 2011, the Bank's application for summary judgment was refused and the proceedings remitted for plenary hearing. Thereafter, pleadings, notices for particulars and replies thereto were exchanged. There were further interlocutory applications and orders and ultimately the order of 23 ^rd January, 2012, was made for the trial of the two issues set above. That order was made pursuant to an application brought seeking such an order by the Bank. The issues identified appear to arise out of the Bank's claim and the defence pleaded thereto in Mr. Morrissey's amended defence and counterclaim delivered on 21 ^st November, 2011.

7 4. The demand made by the Bank to which the first issue refers is a demand made in a letter of 19 ^th January, 2010, insofar as relevant in the following terms:

"Dear Sir"

8 LOAN AGREEMENT DATED 2 FEBRUARY 2009

9 We refer to our facility letter to you dated 2 February 2009 (the 'Facility Letter') which, as you know, has expired, and to our recent correspondence and meetings in relation thereto.

10 We have considered the proposals made recently on your behalf. However, we regret to inform you that the Bank is not willing to further extend your facilities.

11 Accordingly, we hereby make formal demand for payment and discharge forthwith of all monies and liabilities due, owing or incurred by you to us. The amount outstanding at close of business yesterday was €36,835,678.31 (being the principal sum of €36,787,674.38 together with interest of €48,003.93 accrued up to close of business yesterday). Interest will continue to accrue at the rates specified in the Facility Letter until payment.

12 We further give you notice that failing payment and discharge of the above monies and liabilities to us on or before close of business on Monday, 25 January 2009, we reserve the right without further notice to exercise the power to appoint a receiver over your undertaking, property and assets, the power of sale and all other powers conferred on us by law or by any mortgage, charge or security created by you in our favour.

13 …"

14 5. The relevant defences pleaded in Mr. Morrissey's defence and counterclaim relevant to the issues to be determined in this module in summary are:

15 (i) the Bank, in making demand for repayment of all monies then due, was in breach of an express or implied term of the then contractual arrangements between the Bank and Mr. Morrissey; and

16 (ii) the Bank, in January 2010, was estopped from demanding, calling in or terminating Mr, Morrissey's then facilities;

17 (iii) the representations, warranties, conduct, advice and consulting services provided by the Bank to Mr. Morrissey since 2000 created a fiduciary relationship between the Bank and Mr. Morrissey.

Background to Issues in Dispute: 2000 to 2009

18 6. The relationship between the Bank and Mr. Morrissey commenced in 2000. Prior to that, Mr. Morrissey had initially qualified as an actuary, and is a Fellow of the Institute of Actuaries; worked in the insurance industry; with the Investment Bank of Ireland as an investment portfolio manager; with an actuarial consultancy firm in London and then with Guinness Peat Aviation, an aircraft leasing company. In 1994, he set up his own aircraft leasing business and ultimately sold it successfully to Royal Bank of Scotland. He then returned to study, taking an Honours Degree in Experimental Physics in Trinity College Dublin where he met a founder of HAVOK, a software company in which he became involved, provided bridging finance and restructuring assistance which ultimately resulted in its successful sale to Intel. In approximately 1997, Mr. Morrissey commenced a property business, primarily acquiring period properties in Dublin 6 which he renovated and either sold or rented. In evidence, Mr. Morrissey described himself by the year 2000 as having effectively been "a self-employed serial entrepreneur for twenty years with a mixed portfolio of activities".

19 7. Mr. Morrissey's introduction to the Bank in 1999 was through Ms. Catherine Mullarkey, a senior manager in the banking division who was a spouse of a former colleague in Guinness Peat Aviation. The first facility agreed was a loan of IR£3.6m to enable Mr. Morrissey purchase a commercial property at Park West Business Park, Dublin 12. The loan agreement is comprised of a facility letter of 30 ^th August, 2000, and the General Conditions referred to therein which was accepted by Mr. Morrissey on 31 ^st August, 2000. In accordance with clause 8, the loan was to be repaid in specified quarterly payments of differing amounts commencing on 30 ^th September, 2002, and the full balance outstanding on the facility repaid on or before 30 ^th September, 2015. Those repayment provisions were subject...