Irish Bank Resolution Corporation Ltd v Morrissey

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 10 November 2014
• Neutral Citation: [2014] IEHC 527
• Court: High Court
• Docket Number: [2011 Nos. 1548S, and 86 COM]
• Date: 10 November 2014

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED (IN SPECIAL LIQUIDATION)

PLAINTIFF

AND

JOHN MORRISSEY

DEFENDANT

[2014] IEHC 527

[2011 No. 1548 S] [2011 No. 86 COM]

THE HIGH COURT COMMERCIAL

Commercial - Application for substitution - O. 15 rules 13, 14 and 15 of the Rules of the Superior Courts 1986 - Recovery of monies owed - Facility letter - General conditions - Special liquidation -Notice of assignment - Necessary party to proceedings - Irish Bank Resolution Corporation v. Comer, (Unreported, ex-tempore, High Court, Kelly J., 30th July, 2014) applied

Facts The case involved the recovery of monies allegedly due by the defendant to the plaintiff on facilities granted in a facility letter accepted on the 5th February 2009. It stated ‘the Bank may, at any time, transfer, assign or dispose of the benefit of the Agreement and the Security Documents to any person on such terms as the Bank may think fit, whether as part of a loan transfer or securitisation scheme or otherwise without notice to the Borrower or any other person.’ On the 7th February 2013 a special liquidation order pursuant to s. 4 of the Irish Bank Resolution Corporation Act 2013 was made and joint special liquidators were appointed. The special liquidators executed a deed of transfer in which IBRC who was in special liquidation, as assignor, assigned to Stone, as assignee, all rights, title and interest of IBRC to the facilities granted to the defendant. Notice of the assignment was given to the defendant, initially, by giving notice to the receiver appointed by IBRC over certain assets of the defendant who, in turn, transmitted it to the defendant by email of the 23rd July, 2014. The defendant disputed the effectiveness and validity of the agreement for sale, the deed of transfer and the appropriateness of the notice given to him but he did not dispute that the documents were entered into or that he received notice of the purported assignment of IBRC’s interest in the facilities previously granted to him by Anglo. The applicants submitted that they had before the Court sufficient evidence that the assignment provided for in the deed of transfer was lawful and effective to assign to Stone all IBRC’s rights to the defendant’s facilities and that Stone was now the entity entitled to the benefit of the facilities or the debt allegedly due by the defendant. The applicants argued that Stone, as the entity to whom the relevant debts had been assigned, was now a necessary party to be joined in the proceedings in substitution for IBRC who retained no beneficial interest in the debt.

Held The judge agreed with Kelly J in the approach set out in Comer as to the threshold to be met in such procedural motions. The judge said there should be put before the Court sufficient prima facie evidence to justify the making of the order. Accordingly he sought to apply the same standard of proof to the evidential burden which the applicants had to discharge in order to succeed in such an application. The judge was satisfied on the evidence adduced by the affidavits of Mr. Willis and the exhibits thereto, that the applicants had put before the Court prima facie evidence that IBRC had by deed of transfer of the 11th July 2014 assigned to Stone all its rights, title, interest and benefits in the facilities to the defendant. The judge mentioned that Stone was clearly an entity whose presence before the Court was necessary to determine the plaintiff’s claim to be entitled to judgment against the defendant for the amounts owing on the facilities. The judge rejected the argument of the defendant, concluding as a matter of law that the special liquidators had the capacity to enter into the purported transaction. The Court made an order pursuant to O. 15, r. 14 of the Rules of the Superior Courts, substituting LSREF III Stone Investments Ltd. for Irish Bank Resolution Corporation Ltd. as plaintiff in the proceedings and an order amending the title of the proceedings accordingly. The judge also sought to give directions in relation to any potential applications for discovery following the exchange of amended pleadings as it was probable that there would be issues to be determined in relation to the production of the loan sale deed and deed of transfer in redacted form.

-Substitution order granted pursuant to O. 15, r. 14 of the Rules of the Superior Courts

Ms. Justice Finlay Geoghegan

JUDGMENT (No. 4) on Application to Substitute LSREF III Stone Investments Limited as Plaintiff of Ms. Justice Finlay Geoghegan delivered on the 10th day of November 2014

1 This judgment is given on the application to substitute LSREF III Stone Investments Ltd. (“Stone”) for the existing plaintiff, Irish Bank Resolution Corporation Ltd. (in special liquidation) (“IBRC”) in these proceedings. The application is brought by motion issued on the 11th August, 2014, by Arthur Cox as solicitors for the existing plaintiff, IBRC, and the applicant, Stone. I will refer to these together as “the applicants”.

2 The application was brought and pursued primarily pursuant to O. 15, rules 13, 14 and 15 of the Rules of the Superior Courts 1986. The applicants also relied upon Order 17, rule 4.

3 The application is grounded upon affidavits of Richard Willis, a partner in the firm of Arthur Cox. Mr. Black, solicitor for the defendant, has sworn affidavits in reply.

4 The background to the proceedings and full procedural history until the hearing of this motion on the 7th October, 2014, is fully set out in the judgment (No. 3) on Quantum herein, delivered on the 29th October 2014, and I do not propose repeating same in this judgment. It is, however, relevant and taken into account in this decision.

Facts

5 The facts relied upon by the applicants for this application are, in summary, as follows. These proceedings are for the recovery of monies allegedly due by the defendant to the plaintiff on facilities granted to the defendant in a facility letter accepted on the 5th February, 2009. That facility letter incorporated all the facilities granted by the plaintiff as Anglo Irish Bank Corporation Ltd. (“Anglo”) to the plaintiff since 2000. Prior to February 2013, the plaintiff beneficially owned the debt due on the defendant’s facilities and these proceedings were in being.

6 The General Conditions which form part of the terms of the facility letter accepted by the defendant on the 5th February, 2009, provided, at para. 18.2:

“The Bank may, at any time, transfer, assign or dispose of the benefit of the Agreement and the Security Documents to any person on such terms as the Bank may think fit, whether as part of a loan transfer or securitisation scheme or otherwise without notice to the Borrower or any other person.”

7 On the 7th February, 2013, on the making of the special liquidation order pursuant to s. 4 of the Irish Bank Resolution Corporation Act 2013 and the appointment of the joint special liquidators, the latter decided to continue these proceedings against the defendant. By an agreement dated the 31st March, 2014, IBRC (in special liquidation), as vendor, and the special liquidators, agreed to sell to Stone, inter alia, the credit facilities the subject matter of these proceedings. On the 11th July, 2014, the special liquidators executed a deed of transfer in which IBRC (in special liquidation), as assignor, assigned to Stone, as assignee, all right, title and interest of IBRC to the facilities granted to the defendant which are the subject matter of these proceedings.

8 Notice of the assignment was given to the defendant, initially, by giving notice to the receiver appointed by IBRC over certain assets of the defendant who, in turn, transmitted it to the defendant by email of the 23rd July, 2014.

9 Whilst the defendant disputes the effectiveness or validity of the agreement for sale and the deed of transfer and the appropriateness of the notice given to him, he does not dispute that the documents were entered into and that he did receive notice of the purported assignment of IBRC’s interest in the facilities previously granted to him by Anglo which are the subject of these proceedings.

10 Mr. Willis, in support of the facts deposed to, exhibited a redacted copy of the deed of transfer of the 11th July, 2014. That redacted copy document identifies Irish Bank Resolution Corporation Ltd. (in special liquidation) as the assignor and Stone as assignee. The special liquidators are also joined. Clause 3, none of which is redacted, provides:

“3. Transfer

3.1 Subject to the terms of Clause 3.2-3.4 and Clause (4) (Trust) below the Assignor unconditionally, irrevocably and absolutely transfers, conveys and assigns to the Assignee all such rights, title, interest, benefits, liabilities, duties and obligations as the Assignor may have in and to the Assets (subject to and with the benefit in each case of the related Finance Agreement) with effect from the date of this Deed.

3.2 The Assignee agrees that it shall accept the transfer and assignment referred to in Claus 3.1.

3.3 The Parties agree that Assets that are Property Collateral governed by the laws of Ireland (excluding the Scheduled Assets) will transfer pursuant to the Irish Transfer Deeds.

3.4 The Parties agree that all Assets shall transfer under this Deed except to the extent they will transfer pursuant to the Irish Transfer Deeds, the Non-Irish Transfer Deeds, and Hedging Transactions Novation Deed, any Hedging Transactions Transfer Deed or any Receiver Novation Deed and excluding the Specified Hedging Agreements.”

Clause 4 is redacted in its entirety.

11 ‘Assets’ are defined in clause 1.1 as meaning:

“All the rights, title, interest and benefits in and to (and only such rights, title, interest and benefits as the Assignor may have:

(a) all Facilities . . .”

‘Facilities’ is also defined as meaning:

“All principal amounts, accrued interest, including...