Parsley Properties Ltd and Others v Bank of Scotland Plc and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian J. McGovern
• Judgment Date: 20 December 2013
• Neutral Citation: [2013] IEHC 624
• Court: High Court
• Date: 20 December 2013

[2013] IEHC 624

THE HIGH COURT

[No. 6902 P/2013]

[No. 165 COM/2013]

Parsley Properties Ltd & Ors v Bank of Scotland PLC & McAteer

No Redaction Needed

BETWEEN

PARSLEY PROPERTIES LIMITED, ANGEL PROPERTIES LLC, CLIVE HOLMES AND SUZANNE HOLMES

PLAINTIFFS

AND

BANK OF SCOTLAND PLC AND MICHAEL McATEER

DEFENDANTS

RSC O.19 r28

COMPANIES ACT 1931 S272 (ISLE OF MAN)

COMPANIES ACT 1963 S310(1)

COMPANIES (CONSOLIDATION) ACT 1908 S223

COMPANIES ACT 1929 S294 (UK)

COMPANIES ACT 1948 S352 (UK)

COMPANIES ACT 1985 S651 (UK)

QUAYLE v ADJAR SHIPPING CO UNREP 27.8.2008 CPL 2004/7 (ISLE OF MAN)

MORRIS v HARRIS 1927 AC 252

JODDRELL v PEAKTONE LTD 2013 1 WLR 784 2013 1 AER 13 2012 CP REP 42 2013 BCC 112 2012 EWCA CIV 1035

WALSH MAGUIRE & O'SHEA LTD, IN RE UNREP LAFFOY 5.12.2011 2011/49/13835 2011 IEHC 457

COMPANIES ACT 1963 S310

MACCANN & ORS COMPANIES ACTS 1963-2009 2010 581

MCCAUGHEY v ANGLO IRISH BANK CORP LTD & MAINLAND VENTURES CORP UNREP BIRMINGHAM 27.7.2011 2012/30/8875 2011 IEHC 546

INTERFOTO PICTURE LIBRARY LTD v STILETTO VISUAL PROGRAMMES LTD 1989 QB 433 1988 2 WLR 615 1988 1 AER 348

MCCAUGHEY v IRISH BANK RESOLUTION CORP LTD & MAINLAND VENTURES CORP UNREP SUPREME 13.3.2013 2013 IESC 17

SPRINGWELL NAVIGATION CORP v JP MORGAN CHASE BANK & ORS 2010 2 CLC 705 2010 EWCA CIV 1221

ANGLO IRISH BANK CORP PLC v MCGRATH UNREP KELLY 21.12.2005 2006/2/387 2006 IEHC 78

COMPANY LAW

Practice and procedure

Application to dismiss proceedings - Provision of loan for investment in retail site - Dispute over interest rates - Alleged misselling of interest swap rates - Plaintiff incorporated in Isle of Man - Plaintiffs dissolved at time proceedings instituted but subsequently restored - Manx law - Locus standi - Privity of contract - Whether proceedings must fail as commenced while company dissolved - Whether claim unstateable - Whether reasonable prospect of success - Morris v Harris [1927] AC 252; Joddrell v Peaktone Limited [2012] EWCA Civ 1035, [2013] 1 WLR 784; In re Walsh Maguire & O'Shea Limited [2011] IEHC 457, (Unrep, Laffoy J, 5/12/2011); McCaughey v Anglo Irish Bank Corporation Ltd [2011] IEHC 546, (Unrep, Birmingham J, 27/7/2011); Inter-photo Picture Library Limited v Stiletto Visual Programme Limited [1989] 1 QB 433; McCaughey v Anglo Irish Bank Corporation Ltd [2013] IESC 17 (Unrep, SC, 13/3/2013); JP Morgan Chase Bank v Springwell Navigation Corporation [2010] EWCA Civ 1221, [2010] 2 CLC 705 and Anglo Irish Bank Corporation PLC v McGrath [2006] IEHC 78, (Unrep, ex tempore, Kelly J, 21/12/2005) considered - Rules of the Superior Courts 1986 (SI 15/1986), O 19, r 28 - Companies Act 1963 (No 33), s 310(1) - Application granted (2013/6902P & 2013/165COM - McGovern J - 20/12/2013) [2013] IEHC 624

Parsley Properties Limited v Bank of Scotland Plc

Facts: The plaintiff alleged that Parsley had entered into an arrangement on the basis that it would involve fixed interest rates, whereas the true position was that they had entered into a transaction in respect of a sophisticated high risk derivative product. The defendants sought to dismiss the claim of the plaintiff. A liquidator had been appointed to Parsley and it was dissolved under Manx law in 2012.

Held by McGovern J. in granting the relief sought and making an order dismissing the claim of the plaintiff. The Court could not on the basis of the evidence envisage any circumstances under which parsley could avoid the terms of the various instruments entered into it by it. The exclusionary terms were clear and were enforceable. The claim of the plaintiff had to fail on the basis that Parsley was dissolved at the time that the proceedings were issued. The remaining claims also had to fall away. Even if the Court was in error, there was not reasonable prospect of the claims against the Bank succeeding.

1 JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 20th day of December 2013

2 1. This matter comes before the court by way of the defendants' motion seeking to dismiss the plaintiffs' claim pursuant to 0. 19, r. 28 of the Rules of the Superior Courts 1986.

3 2. The first named plaintiff ("Parsley") is a private company, limited by shares, incorporated in the Isle of Man and owned by a trust, whose trustees are Montpelier (Trust and Corporate) Services Limited ("Montpelier"). The second named plaintiff ("Angel") is a limited liability corporation incorporated in Delaware, United States of America. The third and fourth named plaintiffs are husband and wife, and are the current occupants of a property known as Comeragh House at Kilmacthomas, County Waterford, pursuant to a caretaker agreement entered into with Angel, as well as being beneficiaries under the trust.

4 3. The first named defendant is a banking institution (the "Bank"). The second named defendant is a receiver appointed over various assets held by Angel, including Comeragh House.

5 4. By way of background, the substantive dispute in this matter concerns the provision by the Bank of loan facilities in relation to an investment by Parsley in a retail site in the United Kingdom in 2005. The plaintiffs allege that the Parsley entered into the arrangements on the basis that they would involve fixed interest rates, whereas the true position is that the contract entailed its entering into interest rate swap arrangements, described by the plaintiffs in their pleadings as a "sophisticated high risk derivative product." However, Parsley, nevertheless, went on in 2006 to enter into interest rate protection agreements. Around that same time, Angel mortgaged Comeragh House in favour of the Bank as surety for Parsley. It is alleged that these arrangements were unsuitable, given the nature of the transaction and Parsley's standing, that the Bank mis-sold the interest rate swaps, misstated the position and acted negligently and in breach of fiduciary duty.

6 5. A useful chronology of relevant events is set out in the affidavit of Paul Street, an officer of the Bank, and is not disputed by the plaintiffs:-

7 a "(a) On 22 April 1998, the fourth Plaintiff (Mrs. Holmes) conveyed Comeragh House to a Delaware entity, the second plaintiff (Angel);

8 (b) The third and fourth plaintiffs (Mr and Mrs Holmes) live in Comeragh House on foot of a Management Agreement dated 15 May 1998 between them and Angel;

9 (c) By an agreement in writing made on 28 November 2005 (the Facility Letter) the bank agreed to advance the sum of STG£4,210,484 to an Isle of Man entity, the first plaintiff (Parsley);

10 (d) On 9 January 2006 Angel guaranteed Parsley's obligations to the Bank on foot of the Facility Letter;

11 (e) On foot of the said guarantee Angel mortgaged the property to the Bank on 9 January 2006 (the Angel Mortgage);

12 (f) By a deed of waiver made on 26 November 2005 Mr and Mrs Holmes gave their consent to the Angel Mortgage and declared that the Bank's interest in the property took precedence over any interest that they might have in Comeragh House;

13 (g) On 10 January 2006 Parsley entered into two interest rate swap transactions with a company in the same group as the Bank, HBOS Treasury Services plc (the Swaps) to hedge its liability for interest on foot of the Facility Letter;

14 (h) Parsley defaulted on its obligations under the Facility Letter;

15 (i) The bank made a demand to Angel by letter dated 12 January 2012;

16 (j) By deed of appointment made on 2 February 2012 the bank appointed the [second named defendant] as the receiver and manager over the assets referred to in the Angel Mortgage;

17 (k) By letter dated 30 May 2013 the Receiver gave Mr and Mrs Holmes the required notice under the Management Agreement to deliver up vacant possession of Comeragh House."

18 6. Notwithstanding the somewhat complex nature of the substantive dispute, this application turns on two relatively discreet questions. Firstly, it is common case that both Parsley and Angel had been dissolved at the time that these proceedings were instituted, but were subsequently restored to the respective registers. The Bank submitted that, while Delaware law provides for the retrospective validation of acts purportedly made by the company while dissolved, the law of the Isle of Man has no such provision, and that Parsley's claim must fail on that basis. The Bank further submits that if Parsley's claim fails, this will have the effect of extinguishing the claims of the other plaintiffs, who have no privity to the contract creating the swap. Secondly, and in the alternative, the Bank submitted that the plaintiffs' claim should be struck out as being bound to fail.

19 7. A liquidator was appointed to Parsley on 12 January, 2012, and that company was dissolved on 3 ^rd July, 2012, pursuant to Manx Law. These proceedings were issued on 5 ^th July, 2013. The dissolution of Parsley was declared void on 22 ^nd September, 2013, by the High Court of Justice of the Isle of Man, Chancery Division, pursuant to s. 272 of that jurisdiction's Companies Act, 1931 ("Section 272"). The stated grounds for the application, contained in a witness statement of Mr. William Garrett, an officer of Montpelier, were to enable the prosecution of litigation in relation to the interest rate swaps, as well as to facilitate Angel to "deal with" the appointment of a receiver over its assets in this jurisdiction. It does not appear that the existence of these proceedings was canvassed before the Manx Court.

20 8. Section 272 provides, inter alia, as follows:-

"Where a company has been dissolved, the court may at any time within two years of the date of the dissolution, on an application being made for the purpose by the liquidator of the company or by any other person who appears to the court to be interested make an order, upon such terms as the court thinks fit,...