James D. Vandever, Christopher Samuel Forman and Suzanne Elise Forman v Patrick Rainsford and Angela Rainsford
|Mr. Justice Quinn
|29 October 2021
| IEHC 685
|2020 No. 131 S
 IEHC 685
2020 No. 131 S
THE HIGH COURT
JUDGMENT of Mr. Justice Quinn delivered on the 29th day of October 2021.
The plaintiffs seek summary judgment in the sum of US$4,708,739 against the first named defendant and in the sum of US$2,327,709 against the second named defendant, together with continuing interest.
The claim arises pursuant to 16 promissory notes executed by the defendants in favour of Michael R. Forman (“the Deceased”) between 22 August 2008 and 20 December 2018. Mr. Forman died on 29 January 2019.
The plaintiffs are the trustees of the Michael Forman Living Trust (“the Trust) and the claim is being pursued by them on behalf of that Trust.
The defendants seek leave to defend the proceedings. The ground of their intended defence is that the loans the subject of the promissory notes were advanced in the context of a “loan for equity deal”. The defendants assert that before any of the monies were advanced and the first promissory note was signed, the deceased agreed that he would seek repayment of the loans not on their stated maturity dates, or extended dates, but only after the business of the companies into which the defendants invested the monies lent was in a position to fund repayment, or “on an exit on sale or flotation” of the relevant companies.
The threshold for granting leave to defend such a claim is low and it is only necessary that the defendants demonstrate an arguable case. I have considered the affidavit evidence and submissions made on behalf of the defendants and have concluded that the claims made by the defendants are no more than a bald assertion of the “loan for equity deal” and contradict the documentary evidence exhibited. Accordingly, the plaintiffs are entitled to judgment in the amount claimed.
The first named defendant is the sole Obligor on this note.
The core obligation stated in this note is in the following terms:-
“For value received, the undersigned, Patrick Rainsford, an individual (“Obligor”) hereby promises to pay to Michael R. Forman, an individual (“Holder”) at 120 North Robertson Boulevard, Los Angeles, California 90048, or at such other place or to such other party or parties as the holder of this Note may from time to time designate, the principal sum of One Million, Five Hundred Thousand and 00/100 US Dollars (US$1,500,000) with interest thereon at the rate of six and one quarter percent (6.25%) per annum (the “Interest Rate”)”.
The note provides for the payment of interest monthly in arrears commencing on 1 November 2008 up to and including the stated Maturity Date of 1 February 2009, “at which time any and all unpaid principal together with accrued but unpaid interest shall be due and payable”.
The note provides for an increase in the rate of interest to 10% on the occurrence of any default, and the provision for the payment by the Obligor of all costs and expenses including legal costs incurred by the holder related to the collection of any amounts due under the note. Para. 5 provides:-
“Obligor, for itself and all endorsers, guarantors and sureties of this note, and each of them and their heirs, legal representatives, successors and assigns, hereby waives presentation for payment, demand, notice of non – payment, notice of dishonour, protest of any dishonour, notice of protest, and protest of this Note and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note and agrees that its liability shall be unconditional and without regard to the liability of any other party and shall not be in any manner affected by any indulgence, extension of time, renewal, waiver or modification granted or consented to by the holder”.
Para. 7 provides:-
“Nothing contained herein shall prevent holder from waiving in any certain instance or in any particular occasion, any right or remedy hereunder (including, but not limited to, the operation of the acceleration clause above) Consent to one such transaction shall not be deemed to be a consent or waiver of any future transactions. No such waiver shall constitute a further or continuing waiver of such right or remedy as to any preceding or succeeding breach hereunder. No single or partial release of any right hereunder or under any instrument securing or guaranteeing this note shall preclude any other or further exercise thereof or the exercise of any other right. Holder shall at all times have the right to proceed against any security for this Note in such order and in such manner as holder may deem fit, without waiving any rights with respect to any other security. No delay or omission on the part of the holder in exercising any right hereunder or under any other instrument shall operate as a waiver of such right or of any other right under this Note”.
Jurisdiction and choice of law are contentious issues raised by the defendants. Paragraph 10 of the Note provides as follows:-
“This Note shall be governed by and construed in accordance with the laws of the State of California. Any action on this Note must be brought in a US Federal Court or California State Court having jurisdiction, located in Los Angeles County; Obligor hereby agrees and submits to personal jurisdiction of such courts”.
The terms of this note were altered in three important respects by later documents comprising what were referred to as an Omnibus Reaffirmation Agreement made on 31 January 2013 and amendments thereto, referred to in more detail below. The three important amendments were as follows:-
i. The maturity date was amended from time to time. Ultimately by the Seventh Amendment to Omnibus Reaffirmation Agreement made on 31 August 2018 “the Seventh Amendment”, it was extended to 28 February 2019.
ii. The interest accruing on the Note was capitalised from time to time, and by the Seventh Amendment the principal balance was restated at US$1,805,625.48.
iii. The governing law and jurisdiction was altered by the Seventh Amendment of 31 August 2018 to confer on the parties' options of both law and jurisdiction in either California or Ireland.
On this and all subsequent notes, the first and second defendants are joint and several obligors.
The stated maturity date is 31 December 2011.
This note was in substantially the same form as the first promissory note, with the following differences.
The note contained a number of provisions relevant to an option being conferred on the deceased relating to shareholding in eMuse Corporation Limited (“eMuse”) and its subsidiaries. The relevant paragraphs are as follows:-
“9. The proceeds hereof shall be used wholly and exclusively for the general corporate purposes of eMuse Corporation Limited (a company registered in Dublin, Ireland, no. 297026) and its subsidiaries.
10. At the option of Holder all or any part (corresponding to the conversion of any possible number of shares) of the unpaid principal then outstanding may be converted into shares of common stock of eMuse currently owned by the Obligor, at any time starting from the day hereof until the later of (1) the Maturity Date (as such date may be extended by the Holder) or (2) the date that Obligor pays off this Note in full including any outstanding principal, accrued interest and other charges due hereunder, and further provided that Holder gives Obligor not less than five days prior written notice”.
Para. 10 contained further provisions identifying the price per share to be applied upon any conversion.
The terms of the second note were later amended in the following important respects —
(i) The maturity date was extended initially to 31 December 2012 and following a series of further amendments to 28 February 2019. The final such extension was granted by the Seventh Amendment made on 31 August 2018.
(ii) The right of the Obligors to prepay the note before a Maturity Date of 30 November 2013 was excluded, “in order to protect the deceased's ability to exercise the conversion right” (Omnibus Reaffirmation Agreement 31 January 2013).
(iii) The choice of law and jurisdiction clause was amended to confer an option on the parties to elect for California or Irish law and jurisdiction (Seventh Amendment).
The first and second promissory notes were modified by this agreement.
The parties to this agreement were the defendants (the first and second named defendant each having signed the agreement), the deceased and a Californian limited company controlled by the deceased called Robertson Cantara LLC (“RC”).
This agreement recited the first and second promissory note and certain amendments which had previously been made to them.
A number of the recitals are relevant:-
(i) “Recital C – Forman holds a membership interest in RC. On or about January 12, 2009 in consideration for Forman's agreement to extend the maturity date of the US$1.5 million Note, Obligor granted RC the option to purchase five hundred thousand (500,000) shares (the RC shares) of Obligor's personal share holdings of Class A ordinary shares in eMuse Corporation Limited. (“eMuse”). The purchase price for exercising such option was 0.00125 Euros per share. On or about February 3, 2009, RC exercised the foregoing option and paid Obligor the sum of €625. As of the date hereof Obligor has not delivered the stock certificates evidencing the transfer of ownership interest in the RC shares from Obligor to RC”. (emphasis added).
(ii) “Recital D – On or about May 6 2010, in consideration for Forman's agreement to advance the loan...
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