King and Others v Ulster Bank Ireland Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Cooke |
| Judgment Date | 07 June 2013 |
| Neutral Citation | [2013] IEHC 250 |
| Court | High Court |
| Date | 07 June 2013 |
[2013] IEHC 250
THE HIGH COURT
BETWEEN
AND
ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & ANOR 2005 1 IR 274 2005 2 ILRM 131 2005/2/242 2005 IESC 12
KRAMER v ARNOLD 1997 3 IR 43 1997/9/3148
IGOTE LTD v BADSEY LTD 2001 4 IR 511 2001/12/3308
RYANAIR LTD v BORD PLEANALA UNREP CLARKE 11.1.2008 2008/56/11640 2008 IEHC 1
INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY 1998 1 WLR 896 1998 1 AER 98 1998 1 BCLC 493
RAINY SKY SA vVKOOKMIN BANK 2011 1 WLR 2900 2012 BUS LR 313 2012 1 AER 1137 2011 2 CLC 923 2011 UKSC 50
EQUITY & LAW LIFE ASSURANCE SOCIETY PLC v BODFIELD LTD 1987 54 P & CR 290 1987 1 EGLR 124
EMO OIL LTD v SUN ALLIANCE & LONDON INSURANCE PLC UNREP SUPREME 22.1.2009 2009/20/4795 2009 IESC 2
DANSKE BANK A/S T/A NATIONAL IRISH BANK v MCFADDEN UNREP CLARKE 20.4.2010 2010/10/2402 2010 IEHC 116
PARTNERSHIP ACT 1890 S9
IRISH LIFE ASSURANCE CO LTD v DUBLIN LAND SECURITIES LTD 1989 IR 253
LUCEY v LAUREL CONSTRUCTION CO LTD UNREP KENNY 18.12.1970
JOSCELYNE v NISSEN 1970 2 QB 86 1970 2 WLR 509 1970 1 AER 1213
ROONEY & MCPARLAND LTD v CARLIN 1981 NI 138
Bank loan – Repayment of capital and interest – Declaratory relief – Ambiguity – General mistake – Unilateral mistake
Facts: The case involved an application made by the plaintiff partnership for declaratory relief to prevent the counterclaim by the defendant bank to recover capital and interest due under a loan agreement.
The issue before the court was whether the wording of the security provision on the extension of the Facility provided in 2005 which had previously held the recourse of the Bank to the partners was limited to the payment of interest. The new recourse clause omitted to mention that only interest was payable once full planning permission was in place, this led the plaintiffs to claim that the provision was ambiguous.
Cooke J held, that the wording of the clause omitted no ambiguity, under the plain and obvious sense of the words, the Bank had full recourse for both capital and interest. The factual matrix of the 2005 Facility could not be used to create ambiguity.
The Court addressed the contention that the wording of the provision was the result of common mistake or unilateral mistake. Evidence adduced by the plaintiff”s representative lacked credibility and failed to establish that a verbal agreement had been agreed before the document was signed, that during the period of the agreed extension of the facility recourse for capital would be excluded, Irish Life Assurance Company Limited v. Dublin Land Securities Limited [1989] I.R. 253considered.
1. The declaratory reliefs and other orders claimed by the plaintiff partnerhip in this action have as their effective purpose to forestall, at least in part, the counterclaim brought by the defendant to recover monies due for capital and interest under a loan agreement which has its origins in December 2005. In its counterclaim the defendant (the "Bank") seeks judgment for the sum of €3,494,636.86 on foot of a written agreement which it claims was made on the 18 th June, 2008. The plaintiffs agree that a loan agreement was made but assert that it was made on the 22 nd May, 2008 and they deny that under its terms, when properly construed, they are personally liable to the Bank for repayment of the capital amount of the loan.
2. As explained below in greater detail, the essential issues between the parties turn upon the provision contained in the document in question relating to the recourse the Bank was entitled to have to the plaintiffs personally and whether it is entitled to look to them on a joint and several basis for the full amount of both capital and interest or whether, as the plaintiffs assert, the true agreement limited the Bank's recourse to the payment of interest. They say the provision in question must be construed in the light the corresponding provision in the original loan agreement of December 2005, and that if there is any ambiguity in the later provision it should be construed in their favour and against the Bank by giving it a business sense in its context. If it is not ambiguous, then there has been a mutual mistake and the plaintiffs are entitled to have the instrument rectified or rescinded. If there is no mutual mistake, there has been a unilateral one which was induced by misrepresentation made by an official of the Bank to the partner who negotiated the agreement at the time.
3. The background to the claim can be more fully summarised as follows. In the Autumn of 2005, the plaintiffs were brought together to enter into an agreement to form a partnership known as the "Birr Partnership" for the purpose of a commercial venture involving the acquisition and development of a property at Syngefield, Birr, Co. Offaly. They had been brought together for this purpose by three individuals who had previously been involved in promoting or carrying out similar projects. These were: Mr. Kevin O'Donoghue and Ms. Fionnuala Breen-Walsh, solicitors, who practised in partnership in Cork as "O'Donnell Breen-Walsh O'Donoghue" Solicitors; together with Mr. Billy Lewis who was the principal of a company called Social and Affordable Solutions Limited located in the same building as the offices of the solicitors. These three had been involved in development projects in the course of which they had had dealings with a building company, Bowen Construction Limited. The partnership which was formed to acquire and develop the site in Birr was to be structured on the basis that 20 individual partners would be recruited who would hold a 50% interest in the project, the remaining 50% being split equally between the two solicitors as to 25% and two directors of Bowen Construction as to 25%. (The Court was informed that a subsidiary issue has arisen within the project as to whether the Bowen interest was personal to those two directors or an interest undertaken by them on behalf of their company. That isue has no bearing upon the present case.)
4. For the purpose of recruiting the twenty individuals to the partnership, Mr. Lewis prepared a "Project Summary" which described the venture and gave estimated figures for the cost of purchasing the property and obtaining planning permission; the basis upon which these would be financed together with profit projections. Each of the twenty partners was to contribute €50,000 with the 25% equity partners contributing €500,000 each. It was proposed to borrow €2,766,750 and in addition each partner was, if necessary, to undertake to purchase one of the developed units at cost price. This was explained in the Project Summary as follows:-
"With previous schemes in order to make the package more attractive to the lending institution the partners would agree that in the event of the units not selling that each of them would agree to take one of the housing units at its cost price, that is excluding any aspect of the development profit. It is not envisaged that this would occur however, it gives the lending institution comfort of knowing that should for some reason the units not sell that a proportion of the monies can be recouped by means of the sale to the individual partner. In return for this we would require non-recourse finance from the institution."
5. In previous projects Mr. O'Donoghue had dealt with Mr. Sam Beamish at AIB Bank. Mr Beamish had since moved to the defendant bank in Cork and had indicated to Mr. O'Donoghue and Mr. Lewis that he would be keen to consider any new projects they might be planning.
6. It appears that in anticipation of the formation of the partnership, a contract had already been signed for the purchase of the lands in October 2005 and the vendors had been pressing for the sale to be completed. On a date which has not been provided to the Court, the partnership agreement was entered into and Mr. O'Donoghue and his partner Ms. Breen-Walsh were appointed trustees with power of attorney giving them, inter alia, authority to open and operate a bank account for the venture.
7. Following discussions with Mr. Beamish and the furnishing to the defendant of documentation relating to the partnership, to the property and the contracts together with a valuation of the site, a letter of loan offer issued to 'The Secretary, The Birr Partnership C/O Mr. Kevin O'Donoghue" on the 13 th December 2005, (the "2005 Facility"). This offered to lend the partnership two amounts: Facility A, an overdraft in the sum of €50,000; and Facility B, a term loan in the sum of €2.9 million.
8. The letter then set out the detailed terms of the offer over six pages. So far as Facility B was concerned, the loan was to be repayable on demand and its stated purpose was to assist with the purchase of the Birr site. Its term was for one year with a normal review date on the 31 st December, 2006. Interest was to be charged at variable rate given as "the Bank's Prime 1 + 0.875% rate, currently 3.75% per annum variable." Under the heading "Repayments" it was provided that:
" Variable Rate: Interest is to be rolled up on the loan...
To continue reading
Request your trial