National Asset Loan Management Ltd v Kelleher

• Jurisdiction: Ireland
• Judge: MR JUSTICE MICHAEL PEART,Ms. Justice Finlay Geoghegan
• Judgment Date: 15 April 2016
• Neutral Citation: [2016] IECA 118
• Docket Number: [C.A. No. 172 of 2015],Appeal No. 2015/172 RECORD NUMBER: 2015/172
• Court: Court of Appeal (Ireland)
• Date: 15 April 2016

Finlay Geoghegan J.

Peart J.

Irvine J.

BETWEEN:

NATIONAL ASSET LOAN MANAGEMENT LIMITED

PLAINTIFF/RESPONDENT

AND

GARRETT KELLEHER

DEFENDANT/APPELLANT

[2016] IECA 118

Finlay Geoghegan J.

Peart J.

Appeal No. 2015/172

RECORD NUMBER: 2015/172

THE COURT OF APPEAL

CIVIL

Estoppel ? Counterclaim ? Breach of duty ? Appellant seeking to appeal against Commercial Court order ? Whether trial judge was entitled to preclude the appellant from pursuing a counterclaim

Facts: The respondent, National Asset Management Ltd (NAMA), sought to recover a sum in excess of ?46 million plus interest from the appellant, Mr Kelleher, on foot of his guarantees which were executed as part of the security provided for certain loans advanced by former Anglo Irish Bank to corporate entities, together known as the ?Shelbourne Connection? of which Mr Kelleher is in reality the beneficial owner. The guarantees were given firstly in respect of a loan facility dated 16th June, 2005 granted to CWD Properties Ltd to assist with its development of lands at Cratloe, Co. Limerick, and secondly in respect of loan facilities granted to certain entities within the Shelbourne Connection to assist with their development projects in Dublin and in Belgium. The total indebtedness of those corporate entities on foot of those facilities ran to almost ?260 million. However, the liability of Mr Kelleher on foot of his guarantees was capped at ?50 million. On the 24th February, 2015 the Commercial Court (Fullam J) adjourned summary summons proceedings to a plenary hearing limited to the single issue as to whether NAMA is estopped from enforcing certain guarantees against Mr Kelleher by virtue of alleged representations made and assurances given to him after the underlying loans had been transferred into NAMA and while he was engaging with NAMA in relation to the security assets. The appellant appealed to the Court of Appeal against Fullam J?s order. The issue on the appeal was whether the trial judge was entitled to preclude the appellant from pursuing what he submitted was essentially a counterclaim rather than a defence, and therefore not an issue which requires passing the?Aer Rianta v Ryanair?[2001] 4 IR 607 test. The issue sought to be raised by way of counterclaim was whether NAMA breached its duty as mortgagee and in particular the duty imposed upon NAMA by ss. 10 and 11 of the NAMA Act, and by doing so wrongly exposed the appellant to a liability on foot of his guarantees. Mr Kelleher had argued before Fullam J that NAMA sold what was referred to as the Chicago Spire loan at a fire sale price, and that by failing to maximise the real potential value of the proposed Chicago Spire development which, if achieved, would have enabled all of the Shelbourne Connection loans to be repaid in full, he was left with a liability under his guarantees which he ought not and would not have otherwise had. The appellant submitted that the trial judge erred in concluding that there was no reality to the counterclaim and in excluding it as an issue in the plenary hearing. The respondent made it clear that in the event that new separate proceedings are issued in order to litigate the counterclaim, it will argue that the issues raised by way of counterclaim are?res judicata?as a result of the finding of Fullam J that there is no reality to the claims and his refusal to permit it to be litigated.

Held by Peart J that since the Chicago Spire issue was raised specifically as a point of defence and not at all as being a counterclaim, the trial judge was correct to consider it in that light, and to form a view that it did not amount to a?bona fide?defence to the plaintiff?s claim on the guarantees. Given the counterclaim?s lack of relationship to the claims on foot of the guarantees, Peart J held that it would be unjust to require that the respondent should be held up in the determination of the unrelated estoppel issue while embroiled in what inevitably became a long and complex litigation of the counterclaim. Peart J held that the appellant was perfectly free to bring his counterclaim by way of separate proceedings.

Peart J held that he would uphold the decision of Fullam J confining the proceedings to the issue of estoppel identified by him as constituting a?bona fide defence to the respondent?s claim. The Court dismissed the appeal.

Appeal dismissed.

JUDGMENT delivered on the 15th day of April 2016 by Ms. Justice Finlay Geoghegan

1 This appeal raises an important point of procedure which does not appear previously to have been the subject of a written judgment. Further it is agreed between the parties that the point was not expressly adverted to in submission to the trial judge before judgment.

2 The point is as follows. Where, on an application by a plaintiff for summary judgment the defendant seeks leave to defend upon two grounds: (i) a pure defence and (ii) a defence by way of set off of a counterclaim for damages and the judge determines that the pure defence meets the arguable threshold, but the defence in reliance on the counterclaim does not, has the court in remitting the matter to plenary hearing with leave to defend upon the pure defence jurisdiction to preclude the defendant raising the counterclaim and if so, what are the criteria according to which such a decision should be made.

3 The issue arises in this appeal, upon the following facts. The plaintiff issued a summary summons seeking judgment for ?46,834,472.35 pursuant to guarantees given by the defendant originally to Irish Bank Resolution Corporation Limited of facilities advanced to companies of which the defendant was the ultimate beneficiary.

4 The plaintiff brought a motion seeking entry to the Commercial List and summary judgment against the defendant in the usual way. The proceedings were entered in the Commercial List and a significant number of affidavits were exchanged on the application for summary judgment.

5 The defendant does not dispute the guarantees entered into nor the amounts owing on the guaranteed facilities. He asserted two defences to the claim against him:

(i) the plaintiff is estopped from enforcing the guarantees by reason of representations made that if the defendant cooperated with the plaintiff, which he maintains he did, that it would not enforce the guarantees. This defence was referred to as the estoppel defence.

(ii) the defendant as the ultimate beneficiary of companies collectively referred to by the plaintiff as the ?Shelbourne Connection? has a counterclaim against the plaintiff for damages by reason of certain actions of the plaintiff which diminished the value of assets held by companies within the Shelbourne Connection such that the companies were unable to discharge the amounts due on the facilities and also the defendant as ultimate beneficiary is unable to discharge the amounts due under the guarantees. Alternatively it was contended that the amount of the damages recoverable on the counterclaim exceeded the value of the claim against which it might be set off.

High Court hearing and judgment

6 The summary judgment application was heard over two days in the High Court by Fullam J. upon significant affidavit evidence and exhibits. It was not in dispute that the defences sought to be raised had to meet the threshold of arguability or a bona fide defence in accordance with cases such as Aer Rianta v. Ryanair [2001] 4 I.R. 607.

7 Fullam J. delivered a written judgment on the 24th February, 2015, in which he identified the two defences raised and having analysed the estoppel defence, concluded that the defendant had an arguable defence on that ground. That finding was not in dispute before this Court.

8 The position in relation to the second ground of defence in reliance upon the counterclaim relating to the Chicago Spire is more complex.

9 The trial judge at paras. 42 and 43 of his judgment set out the defence being advanced and his initial analysis of same in the following terms.

?42. The defendant's case is that the plaintiff recklessly sold the Spire loan at a gross undervalue for a price of $35 million when the face value of the loan was in excess of $90 million. He says that had the matter been handled properly the site would have realised the sum of $350 million which would have enabled him to clear his indebtedness in respect of the Spire loan and also his liabilities under the Cratloe and Modillion guarantees. Instead, as a result of the sale of the Spire loan in June, 2013, he has been deprived of the opportunity to clear his indebtedness under the Spire loan and the Cratloe and Modillion guarantees.

43. The effect of the plaintiff's contention is that he has a counterclaim for damages which is more than sufficient to offset against any liability under the guarantees in these proceedings. To succeed with such a counterclaim, the defendant acknowledges that he has to establish that ss.10, 11 and 12 of the Act of 2009 impose obligations on NAMA which are more onerous than the normal duties of a mortgagee as set out in Silven Properties Limited v. RBS plc [2004] 1 WLR 997 and approved by the Supreme Court ( sic) in Dellway.?

It was common case on appeal that the trial judge intended to refer to the High Court judgment of the Divisional Court in Dellway Investments Limited v. NAMA [2011] 4 I.R. 1 and in particular pp. 76 to 77 rather than the Supreme Court. Nothing turns on this.

10 The trial judge appears to have treated the second defence as one dependent on a counterclaim. He first considered the counterclaim asserted in reliance upon ss. 10, 11 and 12 of the National Assets Management Agency Act 2009 and at para. 49 of his judgment stated:-

?In my view, these provisions do not impose additional duties on NAMA towards debtors, guarantors or mortgagors over and above the duties of an ordinary mortgagee in respect of the management...