National Assets Loan Management Ltd v Garrett Kelleher
| Jurisdiction | Ireland |
| Judge | Mr. Justice Fullam |
| Judgment Date | 24 February 2015 |
| Neutral Citation | [2015] IEHC 169 |
| Court | High Court |
| Date | 24 February 2015 |
[2015] IEHC 169
THE HIGH COURT
BETWEEN
AND
JUDGMENT of Mr. Justice Fullam delivered the 24th day of February 2015
1. This is an application for summary judgment by the plaintiff (NALM) against the defendant on foot of personal guarantees securing loan facilities advanced by Anglo Irish Corporation Plc ("The Bank") to a group of corporate entities known as "The Shelbourne Connection". The defendant was the beneficial owner of the Shelbourne Connection.
2. Under the Cratloe Facility dated the 16 th June, 2005, the Bank advanced a maximum facility of €6.2 million to CWD Properties Ltd (CWD) in connection with the development of lands at Cratloe Woods, Co. Limerick.
This facility was secured by the defendant's guarantee also dated 16 th June, 2005.
3. Under the Modillion Facility dated 19 th December, 2007 the Bank advanced a sum of €299.4 million through three separate term loan facilities (A, B and C) to a number of Shelbourne corporate entities (the Modillion Borrowers)in connection with property development in Dublin and Belgium.
These facilities were secured by the defendant's guarantee also dated 19 th December, 2007, under which, liability was limited to a maximum of €50 million. By an undated side letter in 2007, the Bank agreed to reduce the defendant's liability under the guarantee to €40 million to take account of monies recoverable under a separate guarantee from Royal Bank of Scotland (RBS).
4. On 11 th March, 2014, NAMA decided to demand repayment of the Modillion and Cratloe Facilities. The defendant's solicitors were informed of the decision on 27 th March.
5. By letters dated 27 th March, 2014 the plaintiff demanded payment of €6,771,024.36 from CWD in respect of the Cratloe Facility and the sum of €250,352,315.10 from the borrowers under the Modillion Facility.
By letters dated 28 th March, 2014 the plaintiff demanded payment from the defendant pursuant to the Cratloe guarantee of €6.7 million and the sum of €40 million in respect of the Modillion guarantee.
The plaintiff's claim against the defendant is for judgment in the sum of €46,834,427.35 together with continuing interest.
6. The execution of the guarantees, the granting of the loans, the default by the borrowers, the demands for repayment and the quantum of the defendant's indebtedness arising under the guarantees are not denied.
7. To understand the defences put forward by Mr. Kelleher, it is necessary to set out some background concerning the development known as the Chicago Spire.
In 2006, the Shelbourne Connection acquired a development site at 400 North Lakeshore Drive, in Chicago at a cost of $80 million. The acquisition was financed, in part, by a loan from Anglo Irish Bank Plc. of $54.6 million.
It should be pointed out that neither this loan nor the underlying security forms part of the secured facilities the subject matter of these proceedings.
The site comprised 2.2 acres on the city's lake shore on which it was intended to construct a residential building (the Chicago Spire) designed by the architect Santiago Calatrava. The Spire, comprising 150 storeys with 1,194 units, was to be part of an integrated development covering seven acres.
At the time of its launch in January, 2008, the defendant states that the development had an "Enterprise Value" of $500 million against which there was outstanding bank debt of $54.5 million leaving an equity of approximately $450 million. The defendant says that the gross completed development value was projected by Savills of London at $3.47 billion with total projected costs of $2.1 billion.
Development on the Spire came to a halt in 2008.
In 2009/10, Bank of America took proceedings in Chicago against Shelbourne and the defendant for repayment of loans in connection with the Spire.
On the 2 nd October, 2010, Anglo appointed a receiver over the property at which time the debt was $80 million. A month later, on 1 st November, NALM acquired the Shelbourne Connection's loans and associated guarantees.
In January 2011 the plaintiff began to engage with the Shelbourne Connection in relation to its total indebtedness.
In 2011, US creditors instituted foreclosure proceedings in Chicago in respect of debts owing on the Spire by the Shelbourne Connection. These creditors included the plaintiff. On 16 th September, 2011, the defendant signed an Interim Letter of Support, a condition of which required the Connection to agree to a Consent Foreclosure.
8. In March 2013, the plaintiffs began marketing the Spire loan which then had a par value of $92.8 million. The defendant makes a number of criticisms of the marketing process, not least, that the plaintiff should have waited until the foreclosure litigation had concluded and, more importantly, the marketing brochure indicated that the development lacked certain planning permissions when, in fact, they were extant. The plaintiff complains that he introduced a property billionaire, Andy Ruhan, who was prepared to pay par value for the loan, but Mr. Ruhan was excluded from the bidding process by the plaintiff.
9. On 31 st May, 2013, the Chicago Spire was certified as an EB5 Regional Centre which the defendant says had a material and significant effect on its value.
10. In June, 2013, the Spire loan together with Mr. Kelleher's guarantees were sold to a company called RMW at a price believed to be $ 35 million.
11. On 26 th March, 2014, the Chicago Foreclosure Court approved an agreement giving the defendant an option to pay RMW the sum of $109 million for the loan and the secured development site, on or before 31 st October, 2014, or, at his option, in two stage payments, namely $22 million before 31 st October, 2014 with a further payment of $92 million on or before the 31 st March, 2015.
12. The defendant said that he had identified a purchaser, Atlas, who was prepared to acquire the loan at the asking price. Ultimately, Atlas did not provide assistance.
13. The defendant relies on the private law defence of estoppel. The defendant maintains that at a meeting in mid- September 2009 in the Schoolhouse Bar, Northumberland Road, Dublin, Mr. John Mulcahy, who subsequently became part of NAMA's executive, represented to him that if he co-operated in helping NAMA obtain maximum value in realising the assets under its control, he would be dealt with equitably and NAMA would not enforce the guarantees against him. The defendant says that he informed Mr. Mulcahy at the meeting that he had been advised to file for bankruptcy in the United States.
14. The defendant says that Mr. Mulcahy repeated the representation of September, 2009 at a subsequent meeting at the Treasury Building Dublin on 2nd November 2010, as did other officials of the plaintiff at various meetings between 2009 and 2013.
The defendant says that he acted on the representations. He did not avail of the quick and easy option of US bankruptcy; instead he worked for the plaintiff for 4 years; he enhanced the value of the Spire by obtaining EB5 Certification, voluntarily provided additional security in the form of valuable Dolmen shares, and acted to his detriment, thereby fulfilling the precondition of co-operation required by the plaintiff.
The defendant submits he has met the ingredients for promissory estoppel as identified by Laffoy J. in The Barge Inn Ltd. v. Quinn Hospitality Ireland Operation 3 Limited [2012] IEHC 387.
15. The defendant makes a linked but separate argument that the decision to enforce was not based on fair procedures. He submits the real reason and only commercial rationale for the plaintiff's decision, which only emerged in the affidavit of Mr Malbasha sworn on 9 th September, 2014, was that the plaintiff believed that the defendant had hidden assets. That allegation, he says, was not put to him in the course of the enforcement decision process and he was not given an opportunity to address it in submissions to the plaintiff.
16. The defendant says that ss. 10 and 11 of the Act impose a statutory obligation on NAMA to "take all steps necessary or expedient to protect, enhance or realise the value of acquired bank assets including -
(i) The disposal of loans in the market for the best achievable pricehellip;
(iii) Holding, refinancing, realising and disposing of any relevant security.'"
17. The defendant says that NAMA breached its statutory duty by failing to enhance or realise value of the Spire loan so as to obtain the best achievable price. The defendant submits that the plaintiff disposed of the Spire loan at "a fire-sale price", as a consequence of which the defendant was deprived of the " very real possibility" of paying off his personal liabilities to the plaintiff.
The defendant submits that NAMA should have waited, prepared an integrated development of the area, (comprising seven acres), and ensured that there was sufficient time given for appropriate parties to bid for the area. Instead, the site was sold as a "hole in the ground" without planning even though it contained complex underground development costing $80m.
The defendant accepts that the obligation being imputed to NAMA is novel and goes beyond the recognised obligations of mortgagees and receivers, but states that is what the 2009 Act requires.
18. The defendant submits that it is not right as a matter of statutory construction, common sense, or having regard to the constitutional right to...
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