Nolan v Allied Irish Banks Plc

JurisdictionIreland
CourtHigh Court
JudgeMr. Justice Haughton
Judgment Date09 June 2016
Neutral Citation[2016] IEHC 313
Date09 June 2016
Docket Number[2012/10389P]

[2016] IEHC 313

THE HIGH COURT

Haughton Robert J.

[2012/10389P]

BETWEEN
ELIZABETH NOLAN, ANN NOLAN, PATRICIA NOLAN, JOHN NOLAN, RAYMOND NOLAN, SEAMUS NOLAN, NOEL NOLAN, BRENDAN NOLAN, RICHARD NOLAN, KEVIN NOLAN, JOAN NOLAN JUNIOUR, OLIVER NOLAN, SALLY NOLAN
AND
NOLAN TRANSPORT
PLAINTIFFS
ALLIED IRISH BANKS PLC.
DEFENDANT
AND
BYRNE WALLACE SOLICITORS
THIRD PARTY

Banking & Finance – Non-payment of loan – Breach of contract – Damages – Rescission of contract – Misrepresentation

Facts: The plaintiffs sought various reliefs against the defendant, including damages for breach of contract, misrepresentation and rescission of various agreements entered into between the plaintiffs and the defendant for the purpose of financing the proposed development. The plaintiffs contended that they had entered into the said agreements with the defendant on the representation made by the defendant that would provide funding to the third party when exercising put and call options to take over the loans thereby discharging the liability of the plaintiffs under an agreed tax scheme arrangement. The defendant denied existence of any such arrangement.

Mr. Justice Haughton refused to grant the desired reliefs to the plaintiffs. The Court held that a plaintiff who claimed misrepresentation must prove that there was, in fact, a representation on which he had acted upon against his detriment and thereby suffered losses. The Court found that the first meeting between the parties was of general character to know the intricacies of the proposed development so that the defendant could discuss the funding with its credit committee and there was no discussion about the broader tax scheme. The Court held that the fact that there was no mention of the third party funding in the “Discussion Paper” provided by the plaintiffs went on to strengthen the argument that no representation was made by the defendant regarding funding, otherwise that issue would have prominently appear in the said Paper. The Court observed that the representation made by the defendant in the “Indicative Heads of the Terms” amounted to a collateral contract as the defendant felt bounded by it provided that the conditions mentioned therein were fulfilled and the plaintiffs, too, treated it as a contractual document. The Court however, observed that “Indicative Heads of the Terms” came down from the credit committee and any major alteration to that document would dependent upon approval by the said committee and not the defendant.

JUDGMENT of Mr. Justice Haughton delivered on the 9th day of June, 2016
Introduction
1

The plaintiffs seek various remedies against the defendant (‘AIB’ or ‘the bank’) arising from alleged breaches of a number of loan transactions (‘Loan Facilities’) between the parties relating primarily to the development of two hotels, a complex in Dublin 1 (‘the Isaacs Hotel’) and Lismore House Hotel, Co. Waterford (‘Lismore Hotel’).

2

Remedies sought by the plaintiffs include but are not limited to damages for breach of contract and/or negligence and/or breach of fiduciary duty; damages for breach of banking codes and/or breach of statutory duty; damages for misrepresentation and/or negligence; equitable rescission of a number of agreements entered into between the parties; rectification of certain guarantees; a declaration of invalidity of a deed of mortgage concerning the Lismore property; an order restraining AIB from taking steps to enforce repayment of monies allegedly owing under the Loan Facilities and/or to enforce its security on foot of security instruments relating to same; and an order restraining AIB from appointing a receiver over properties charged pursuant to said security instruments.

3

AIB counterclaims that the monies under certain of the Loan Facilities are due and owing, and seeks judgment against the 1st-13th plaintiffs (‘the Nolan Family’), jointly and severally, on a number of bases – on foot of Facility Letter dated 28th September, 2009 in the sum of €7,653,704.50; in the Nolans' capacity as members of the Beresford Partnership, in the sum of €4,361,019.17 arising from Facility Letter dated 22nd August, 2006; in the Nolans' capacity as partners of the Lismore Partnership on foot of Facility Letter dated 11th May, 2007 in the amount of €6,004,295.27; and on foot of Facility Letters dated 22nd August, 2006 and 28th September, 2009 in the sum of €4,992,434. AIB also seeks interest on all sums claimed as well as specific performance of certain security instruments relating to the Beresford properties, or damages in lieu of specific performance, among other remedies.

4

The proceedings were commenced by way of Plennary Summons dated 17th October, 2012 and admitted to the Commercial List on 12th November, 2012. On 29th April, 2013 an application was granted for AIB to serve a third party notice joining Byrne Wallace Solicitors to the proceedings. Byrne Wallace had acted for AIB on a number of the Loan Facilities, operating at the time as BCM Hanby Wallace. By way of a Third Party Statement of Claim, AIB seeks certain remedies against Byrne Wallace in the event that the court finds against AIB. These include but are not limited to a declaration that Byrne Wallace must indemnify and/or provide a contribution in relation to any liability and/or damages which AIB must discharge in favour of the plaintiffs; damages for breach of contract, negligence, breach of duty (including statutory duty) and breach of warranty.

5

A number of preliminary issues for determination by this court were set down by order of Cooke J. on 4th June, 2013. The issues are as follows:-

‘1. Whether it was a term of the agreements for the loan facilities pertaining to the Isaacs Hotel (or any phase thereof) and/or the Lismore Hotel that:

(i) the Defendant would ensure and supervise the maintenance of an adequate sinking fund by Mr Evans and Mr Good with the Defendant for the purpose of safeguarding the capacity of Mr Evans and Mr Good to obtain finance from the Defendant and to perform under the Option Agreements (as identified further below) when called upon to do so; and/or

(ii) the Defendant would upon the exercise of the options in the Option Agreements effect a debt transfer of any residual debt from the Plaintiffs to Mr Evans and Mr Good; and/or

(iii) the Defendant would provide finance for the exercise by Mr Evans and Mr Good of the options in the Option Agreements when called upon to do so.

2. Whether the Defendant, its servants or agents represented that:

(a) it would ensure an adequate sinking fund would be put in place by Mr Evans and Mr Good which would be supervised and maintained by the Defendant with the express intent and purpose that it would safeguard the capacity of Mr Evans and Mr Good to obtain finance from the Defendant and to perform their contractual obligations under the put and call options under the Option Agreements; and/or

(b) such an adequate sinking fund would be supervised and maintained by the Defendant; and/or

(c) the exercise of the options under the Option Agreements would operate as a debt transfer from the Plaintiffs to Mr Evans and Mr Good; and/or

(d) it would provide finance for the exercise of the options under the Option Agreements.

3. If the matters referred to at paragraph 2 were represented to the Plaintiffs (their servants or agents) by the Defendant (its servants or agents), whether the Plaintiffs relied on same and were thereby induced to enter into the agreements for the loan facilities pertaining to the Isaacs Hotel (or any phase thereof) and the Lismore Hotel and/or whether the Plaintiffs were thereby induced to enter contracts for the purchase of the Isaacs Hotel (or any phase thereof) or the Lismore Hotel and/or to guarantee the loan facilities of Mr Evans and Mr Good pertaining to the Isaacs Hotel (or any phase thereof) and/or to enter into the security relating to the Isaacs Hotel (or any phase thereof) or to the Lismore Hotel or to additional miscellaneous properties set out by the Plaintiffs in their statement of claim.

4. If the matters referred to at paragraph 2 were represented to the Plaintiffs (its servants or agents) by the Defendant (its servants or agents), whether the Plaintiffs relied on same and were thereby induced to enter the agreements for the loan facilities pertaining to 1 & 2 Beresford Place (the Beresford Facility) and whether the Plaintiffs were thereby induced to enter into contracts for the purchase of 1 and/or 2 Beresford Place.

5. If the matters referred to at paragraph 2 were represented to the Plaintiffs by the Defendant (its servants or agents), whether the Plaintiffs relied on same and were thereby induced to enter the agreements for the loan facility pertaining to the Personal Facility 7 as further identified below.

6. If the matters referred to at paragraph 2 were represented, whether they constituted misrepresentations of fact and/or negligent misstatements.’

6

These matters were set down for hearing on 2nd December, 2014. The evidence was heard by this court over 31 days ending 24th June, 2015. Written closing submissions were exchanged and final argument was heard on 24th July, 2015.

The Facts
7

The Nolans operate a successful transport business through the 14th named defendant Nolan Transport, at Oaklands, New Ross, Co. Wexford which is an Irish registered company, and the successor in title to Nolan Transport (Oaklands) Ltd. (‘Nolan Transport’).

8

Between 1995 and 2011, Nolan Transport participated in property investments relating to the Isaacs Hotel which encompassed properties at 5 and 6 Freeman's Lane and 21, 21A and 22 Store Street, Dublin 1 and the Nolan Family participated in developments at the properties at 20 Store Street (the Damp Store), 23-23C Store Street and 1 and 2 Beresford Place, Dublin 1. The...

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