Irish Bank Resolution Corporation Ltd v Cambourne Investments Incorporated

• Jurisdiction: Ireland
• Judge: Mr Justice Charleton
• Judgment Date: 14 June 2012
• Neutral Citation: [2012] IEHC 262
• Court: High Court
• Docket Number: [2011 No. 1759 S]
• Date: 14 June 2012

Irish Bank Resolution Corp Ltd v Cambourne Investments Inc & Curistan

No Redaction Needed

Commercial

Between

Irish Bank Resolution Corporation Limited

plaintiff

and

Cambourne Investments Inc, Century City Limited and Peter Curistan

defendants

[2012] IEHC 262

[1759 S/2011 and 116 COM/2011

The High Court

BANKING LAW

Guarantee

Guarantor - Rights - Liability - Alteration to principal contract without assent of guarantor - Whether guarantees under facility letters enforceable - Whether guarantees separate to facility letters disavowed in equity - Danske Bank A/S trading as National Irish Bank v McFadden [2010] IEHC 116, (Unrep, Clarke J, 20/4/2010); Wittmann (UK) Limited v Willdav Engineering SA [2007] EWCA Civ 824, (Unrep, CA(CivDiv), 31/7/2007); Gabbs v Bouwhuis [2007] BCJ No. 1380; 2007 BCSC 887 and Polak v Everett (1876) 1 QBD 669 approved - Judgment entered (2011/1759S - Charleton J - 14/6/2012) [2012] IEHC 262

Irish Bank Resolution Corp v Cambourne Investments Inc

CONTRACT

Breach

Mutuality of obligations - Conditions precedent -Effect of waiving conditions precedent - Whether loan given as part of overarching agreement - Whether conditions precedent for the benefit of both parties - Whether conditions severable - Whether contract of loan on facilities letters came into operation - Whether monies borrowed repayable - Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989; BNY Trust Company [Ireland] Ltd v Treasury Holdings [2007] IEHC 271 (Unrep, Clarke J, 5/7/2007); ICS Ltd v West Bromwich BS [1998] 1 WLR 896 and National Tourism Development Authority v Coughlan [2009] IEHC 53, [2009] 3 IR 549 approved; Analog Devices BV v Zurich Insurance Company [2005] IESC 12, [2005] 1 IR 274 applied; Mannai Ltd v. Eagle Star Life Ass Co Ltd [1997] AC 749; Antaios Compania SA v Salen AB [1985] AC 191 and Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523 approved - Judgment entered (2011/1759S - Charleton J - 14/6/2012) [2012] IEHC 262

Irish Bank Resolution Corp v Cambourne Investments Inc

Facts: The plaintiff was the former Anglo Irish Bank which sought recovery of debts worth €10,436,178 and €145,000 together with on-going interest against the first named defendant. The second and third named defendants were guarantors of the loan. The third named defendant, Peter Curistan (who was the managing director and main shareholder of the other two defendants), was the only defendant to appear and he represented himself. A claim for summary judgment on behalf of the plaintiff had been rejected. It was Mr Curistan's defence that the loan was granted in consideration of the purchase of a Dublin property but that this was only one element to a quasi-partnership of property development as they had also agreed to loan an amount to purchase a Belfast property which was now before the Northern Ireland courts. Essentially, it was the defendant's contention that the plaintiff's valuation of the property was grossly inaccurate and therefore a breach of contract because they owed a duty of care, the overall objective of which was so that the bank would ultimately gain control of the property.

The third named defendant alternatively claimed that there were certain conditions in facility letters for the loan that had to be met before it could be said a loan contract existed, specifically the loan to value ratio had to reach a certain level. As this never materialised, it was stated there was no contract. The plaintiff's response was that these conditions were for their exclusive benefit and could therefore be waived.

The plaintiff also contended that there were other guarantees signed by the second and third named defendants in respect of loans made to the first named defendant. It was the third named defendant's contention that those guarantees when read did not impose a liability on him or the second named defendant for that specific transaction.

Held by Charleton J that certain conditions of the facility letters which outlined the loan for the Dublin property provided by the plaintiff were not fulfilled by them and so the guarantee between the parties in those could not stand. The monies were still repayable by the resulting contract of loan minus conditions and guarantees specific to the facility letters. However, two other guarantees were deemed to validly guarantee the transaction. These guaranteed any loans of the first named defendant by the second and third named defendants. As such, although the facility letter's guarantee failed for the loan it stated, the overarching guarantee survived and the plaintiff was entitled to recover.

Judgment against the first, second and third named defendants for the amount claimed.

REARDON SMITH LINE LTD v HANSEN-TANGEN 1976 1 WLR 989 1976 3 AER 570

BNY TRUST CO IRL LTD & ANOR v TREASURY UNREP CLARKE 5.7.2007 2007/5/998 2007 IEHC 271

V (B) v ZURICH INSURANCE CO 2005 1 IR 274

INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY 1998 1 WLR 896 1998 1 AER 98

NATIONAL TOURISM DEVELOPMENT AUTHORITY v COUGHLAN 2009 3 IR 549

DANKSE BANK A/S v COYNE UNREP CHARLETON 25.5.2011 2011/11/2489 2011 IEHC 234

PEEL LAW OF CONTRACT 13ED 2011 PARA 1.002

EDWARDS v O'CONNOR 1991 2 NZLR 542

YOSHIMOTO v CANTERBURY GOLF INTERNATIONAL LTD 2001 1 NZLR 523

LLOYDS BANK LTD v BUNDY 1975 1 QB 326 1974 3 AER 757

MALONEY v ELF INVESTMENTS LTD 1979 ILRM 253

BENNET v FOWLER 1840 2 BEAV 302

IRWIN v WILSON 2011 2 P & CR 8 2011 EWHC 326 (CH)

HERON GARAGE PROPERTIES LTD v MOSS 1974 1 AER 421 1974 1 WLR 148

HAWKERS v VICKERS 1991 1 NZLR 399

ZURICH BANK v MCCONNON UNREP BIRMINGHAM 4.3.2011 2011/50/14278 2011 IEHC 75

WILLIAMS & GLYN S BANK LTD v BARNES 1981 COM LR 205

BANK OF SCOTLAND PLC v FERGUS UNREP FINLAY-GEOGHEGAN 30.3.2012 2012 IEHC 131

ULSTER BANK LTD v ROCHE & BUTTIMER UNREP CLARKE 29.39.2012 2012 IEHC 166

DONNELLY LAW OF CREDIT & SECURITY 2011 CHAP 19

DANSKE BANK v MCFADDEN UNREP CLARKE 20.4.2010 2010/10/2402 2010 IEHC 116

WITTMAN (UK) LTD v WILLDAV ENGINEERING SA 2007 BLR 509 2007 AER (D) 505 2007 EWCA CIV 824

GABBS v BOUWHUIS 2007 BCJ 1380

EA TOWNS LTD v HARVEY 1945 2 DLR 782

MCGUINNESS THE LAW OF GUARANTEE 1ED 1986 PARA 10.23

MCGUINNESS THE LAW OF GUARANTEE 1ED 1986 PARA 10.24

HIGH MOUNTAIN FEED DISTRIBUTORS LTD v PAW PLEASERS LTD 2004 MBQB 220

1 1. The plaintiff is the former Anglo Irish Bank, a financial entity nationalised in January 2009 and then renamed as in the title hereof. It is called "Anglo" hereafter. The first defendant, hereafter "Cambourne", is a company registered in the British Virgin Islands and owned by a family trust to the benefit of the third defendant Peter Curistan, a property developer, and his wife. The second defendant, hereafter "Century City", operates an amusement arcade and pool hall in the Parnell Centre in Dublin.

2 2. Anglo seeks the recovery of debts against Cambourne in the sums of €10,436,178 and €145,000 together with ongoing interest, which at the date of issuing the summons was €28,210. The final figures are given at the end of this judgment to account for interest. That money was lent pursuant to facility letters. Century City is a guarantor of the borrowings of Cambourne that gave rise to those debts and so is Peter Curistan. In the case of Century City and Peter Curistan the guarantees were signed by Peter Curistan on his own behalf and on behalf of Century City as an appendix to the facility letters. Century City also entered a separate guarantee to the facility letters and this was dated 5 February 2010. In the case of Peter Curistan the guarantee obligation also arises through a contract separate from the loan transactions through the facility letters and this guarantee is dated 2 March 2009.

3 3. Neither Cambourne nor Century City were represented at the 14 day hearing. Peter Curistan represented himself. He was entitled only to address the issue of the enforceability of any guarantee against him. Although he is the managing director and main shareholder of both corporate defendants, he was not entitled to represent them; only a solicitor can do that. The task of the court in such a default situation is to examine the case of the plaintiff against the two unrepresented defendants in order to see if the proof of entitlement to debt recovery is met. Where a defendant is represented a court will, in addition, examine the case of the represented defendant on its merits.

4 4. Central to this case are two large leisure centre developments: the Odyssey Centre in Belfast and the Parnell Centre in Dublin. The vast bulk of the hearing concerned the Belfast property, though the loan for which recovery is sought in these proceedings arises only on the Dublin property. The debt on the Belfast property, amounting to about £78,000,000, is central to other proceedings in the High Court in Northern Ireland. It is claimed that there is a link between the two properties and the two loans.

Defence

5 5. Anglo sought summary judgment in this case but that was refused. An elaborate defence was put before the court. In essence, the defendants, all then legally represented, claimed that the contract of loan on the Dublin property did not stand alone but was part of a wider agreement whereby Anglo agreed to support Peter Curistan in the development of both that property and the Dublin property, adopting a duty of care pursuant to a quasi-partnership agreement, in circumstances which rendered the bank liable to account on a fiduciary basis, which agreement was broken.

6 6. On the Belfast property, in essence, the defence is that when the money loaned on that development could not be repaid, Anglo undertook to find a purchaser to take over the Odyssey Centre but for internal and dishonest reasons turned down parties who were suitable in favour of a company with which it had...