Luxor Investments Ltd and Others v Beltany Property Finance Ltd

 
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[2015] IEHC 316

THE HIGH COURT

[No. 1200 P./2015]
Luxor Investments Ltd & Ors v Beltany Property Finance Ltd
COMMERCIAL

BETWEEN

LUXOR INVESTMENTS LIMITED, LUXOR LEISURE LIMITED,
ALMADA LIMITED, BALLINCASTLE CONSTRUCTION LIMITED,
PADRAIC RHATIGAN, PSR PROPERTY COMPANY LIMITED,
DRIFTVIEW ENTERPRISES AND PSR PROPERTY HOLDING COMPANY
PLAINTIFFS

AND

BELTANY PROPERTY FINANCE LIMITED
DEFENDANT

2015/1200P - McGovern - High - 13/5/2015 - 2015 IEHC 316

Banking and Finance – Redemption of loan – Commercial Agreement – Whether agreement in force between parties vitiated by unforeseen circumstances

1

1. On 5 th March, 2015, Fullam J. directed an expedited hearing of a discrete issue in these proceedings, namely:-

"Whether or not an agreement dated 25 October, 2013, made between Luxor Investments Limited and Luxor Leisure Limited (the 'UBSIG obligors') of the one part and UBSIG (ROI) Limited (the 'UBSIG Agreement') is applicable in circumstances where the plaintiffs propose to redeem their loans with the defendant at par."

2

2. It appears, in fact, that this is the sole remaining issue in dispute in these proceedings. The UBSIG Agreement has the title "Fee Agreement" and for ease of reference I will use that term throughout this judgment when referring to the agreement.

Background
3

3. The plaintiffs are part of the Rhatigan Group of companies. Some of these companies have been customers of Ulster Bank Ireland Limited ( "UBIL") for approximately seventeen years. Facilities advanced by UBIL to the Rhatigan Group have included development finance, investment finance, life insurance policies, interest rate instruments, current accounts and deposit accounts. The plaintiff companies have been involved in land purchase and development and property management. Up until 2013, all accounts held by the Rhatigan Group with UBIL performed within the terms of their agreements. Loans were repaid on completion of relevant developments or on maturity and overdrafts operated within agreed limits.

4

4. Luxor Investments Limited (the first plaintiff) is a limited liability company and a wholly owned subsidiary of PSR Property Company Limited (sixth plaintiff). It is the owner of properties in Dublin City Centre. It is also the developer and owner of the Radisson Blu Royal Hotel, Golden Lane, Dublin 8 ( "the hotel").

5

5. Luxor Leisure Limited (second plaintiff) is a limited liability company which holds the occupational interest in the hotel pursuant to the terms of an occupational lease and is the operating company of the hotel. It is also the guarantor of a loan facility in respect of the hotel.

6

6. Almada Limited (third plaintiff) is a limited liability company and is the owner of a property at Ship Street, Dublin and three apartments known as Castleway Apartments at Castleway, Golden Lane, Dublin 8.

7

7. Ballincastle Construction Limited (fourth plaintiff) is a limited liability company and is the developer and owner of manufacturing units at Athlone, Co. Westmeath, developed in conjunction with the Industrial Development Authority. It is also the owner of premises known as the Atlantaquaria, Galway.

8

8. In 2012, UBIL, on instructions from its parent Royal Bank of Scotland ( "RBS"), commenced a strategy designed to deleverage their loan book. At that time, they indicated to the plaintiffs that they were not prepared to extend further facilities and that the Rhatigan Group should seek new investors for their facilities. A number of proposals were put forward by the Rhatigan Group but were not acceptable to UBIL and this culminated in a restructuring of certain facilities and ultimately led to the fee agreement being concluded. In restructuring the Rhatigan Group, certain facilities were granted by UBIL in respect of the funding of loans connected to those properties other than the hotel. These are referred to as the "non-hotel facilities". The non-hotel facilities are supported by First Legal Mortgages over Luxor properties, the Almada properties and the Ballincastle properties, together with various corporate guarantees and an extension of conditional personal guarantees provided by Mr. Padriac Rhatigan (fifth defendant). The non-hotel facilities are "demand facilities" repayable on or before 30 th April, 2015.

9

9. The hotel was built between 2005 and 2007, and was funded by a combination of debt provided by UBIL, equity contributions provided by certain entities in the Rhatigan Group and a number of third party investors (the "consortium"). The funding provided by UBIL was (pursuant to a facility letter of 21 st December, 2007) to two nominee companies established by agents of UBIL, namely Cassius Investments Limited and Tolamor Limited (the "hotel borrowers"). This was supplemented by a facility letter of 23 rd September, 2009. The funding of the hotel was part of a tax efficient scheme whereby investors could avail of capital allowances. On 20 th December, 2007, Luxor contracted to sell the hotel to the hotel borrowers on behalf of the consortium, who acquired and held the beneficial ownership of the hotel on trust for members of the consortium. The purchase price for the sale of the hotel to the hotel borrowers was €50m of which €39,854,000 was funded by the hotel facility with the balance being funded by equity mainly from the Rhatigan Group.

10

10. The hotel facility is secured by legal mortgages, charges and security assignments over the respective interests of the hotel borrowers, Luxor and Luxor Leisure in the hotel, the occupational lease, an option agreement, a management agreement and co-ownership agreement and the assignment of contracts and collateral warranties entered into in respect of the construction of the hotel. In 2009, additional security for the hotel facility was provided to UBIL by the first plaintiff and Driftview Enterprises Limited (seventh plaintiff) which was a guarantor of the hotel facility and by Ballincastle, Almada and J.J. Rhatigan and Company. Notwithstanding this funding structure, the plaintiffs claim that it was always intended that the repurchase of the hotel by Luxor (on foot of a put and call option) would be funded by longer term property finance. When the original funding structure was put in place, it was not believed that it would be difficult to obtain such longer term finance.

11

11. From the establishment of the hotel in 2007, the hotel facility at all times continued to perform in accordance with its terms. And as of the year ending December 2014, the hotel returned an operating profit of approximately €2.8m.

12

12. In 2009, the non-hotel facilities were refinanced for a further three years on the basis that all income from non-hotel assets would be applied to service interest in the first place and that any surplus would be applied in reduction of capital. In the five years prior to these court proceedings, all interest on the non-hotel facilities has been fully serviced and the capital has been reduced by approximately €14m. When the non-hotel facilities fell due for review in 2012, UBIL informed the plaintiffs that they were not prepared to extend further facilities but were seeking to deleverage their loan book and that the Rhatigan Group should seek new investors and funding elsewhere. During 2012 and 2013, the Rhatigan Group sought new funders and discussions continued with UBIL culminating in a restructuring of non-hotel facilities in October 2013.

13

13. These restructuring facilities involved the existing UBIL loans granted to Almada, Ballincastle and Luxor being extended and a new facility letter dated 15 th October, 2013, was signed. The 2013 facilities were "demand" facilities but repayable on or before 30 th April, 2015. UBIL was pressing the Rhatigan Group to sell non-hotel assets and insisted on the appointment of selling agents and solicitors to engage in that process. The plaintiffs claim that they cooperated with UBIL in this process and were not made aware that the bank intended to sell their loans. It was agreed, that insofar as the relevant commercial properties were sold, the conditional personal guarantee which had been...

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