Pepper Finance Corporation (Ireland) DAC v Emerald Properties (IRL) Ltd

JurisdictionIreland
JudgeMr. Justice Quinn
Judgment Date19 February 2021
Neutral Citation[2021] IEHC 114
Docket Number[2019 No. 753 S]
CourtHigh Court
Date19 February 2021
BETWEEN
PEPPER FINANCE CORPORATION (IRELAND) DAC
PLAINTIFF
AND
EMERALD PROPERTIES (IRL) LIMITED, JOHN MCCARTHY

AND

WENDY MCCARTHY
DEFENDANTS

[2021] IEHC 114

Quinn

[2019 No. 753 S]

THE HIGH COURT

COMMERCIAL

Judgment of Mr. Justice Quinn delivered on the 19th day of February, 2021
1

The plaintiffs have applied for summary judgment pursuant to O.37 of the Rules of the Superior Courts in an amount of €12,369,550.12. The amount claimed in the notice of motion before the court is a lower sum of €12,364,400.

2

The defendants oppose the application and have applied for leave to defend the claim at a plenary hearing.

3

The intended grounds of defence may be summarised under three headings:

(1) The defendants make a number of objections to the manner in which the plaintiff's proofs are presented. This includes issues concerning the particulars and calculation of the balance claimed to be due and objections to the inclusion of certain interest and default charges. Related submissions are made concerning asset realisations by and the conduct of receivers appointed by the plaintiff's predecessor in title, KBC Bank, and the impact of those matters on the balance claimed.

(2) The defendants assert the existence of a collateral agreement made on 12 November, 2008, pursuant to which they say that the plaintiff's predecessor agreed to extend the relevant facilities beyond their stated maturity date and would refrain from placing the first defendant in receivership provided the second defendant funded the continuance of interest payments. They assert that the plaintiff and its predecessors have acted in breach of that agreement.

(3) The defendants submit that the transaction whereby the plaintiff acquired the loans the subject of these proceedings and the right to pursue these proceedings amounts to a champertous assignment.

The Facilities
4

On 7 October, 2004, IIB Bank, which later became KBC Bank (and is referred to in this judgment as “KBC” or “the Bank”), granted to the first named defendant a facility of up to €10,750,000.

5

The purpose of the facility was to refinance existing borrowings of the first defendant with the then Anglo Irish Bank Corporation of €9.5 million, and to fund property renovations, interest on facilities and working capital requirements.

6

The facility was expressed to be repayable on demand at any time, and in any event on or before 1 November, 2006.

7

The facility was to be secured by a first legal mortgage over nine properties, comprising four houses at Lansdowne Road, Dublin 4 (Nos. 18, 20, 22 and 24), two houses at Lansdowne Park (Nos. 96 and 99, being properties at the rear of two of the houses on Lansdowne Road, and three apartments at The Plantations, Herbert Street, Dublin 2 (apartments 7, 8 and 9).

8

The facility provided also for the grant of guarantees by the second and third named defendants, who were directors of the first defendant.

9

The guarantee was executed by the second and third named defendants on 1 December, 2004.

10

The mortgage of the nine properties was executed in favour of KBC on 1 December, 2004. No point is taken in the case as to the validity of the mortgage or of the guarantees. In August 2014, receivers were appointed pursuant to the mortgage. Separate proceedings are pending between the receivers and the second and third named defendants in relation to one of the properties, No. 22 Lansdowne Road, which are the subject of a judgment delivered also today.

11

The terms of the facility were amended from time to time by amending facility letters dated 25 November, 2004, 13 November, 2004, 20 October, 2009, and 11 June, 2010. The meeting at which the defendants say the collateral agreement was made occurred on 12 November, 2008.

12

The amount of the facility was increased by these amendments and the maturity date extended from time to time. The letter of 20 October, 2009, provided for the grant of additional security comprising a charge over a certain Account, and over shares in a company referred to as Mainstream Renewable Power Limited, held by the second named defendant.

13

By the final amendment of 11 June, 2010, the amount advanced was increased to €13,271,820 and the final maturity date was extended to 1 June, 2011.

14

That letter also provided for a number of refinements to the provisions concerning the charges over the shares in Mainstream and for the execution of a Deed of Confirmation from the guarantors that the guarantee remained in full force and effect, which Deed was duly executed.

Events after the maturity of facilities
15

On 7 August, 2014, KBC served demands on the first defendant and on 11 August, 2014, KBC appointed Shane McCarthy and Kieran Wallace of KPMG as joint receivers over the assets charged by the mortgage.

16

The joint receivers have brought plenary proceedings against the second and third named defendants for possession of property at No. 22 Lansdowne Road. In those proceedings an injunction was sought which is the subject of a separate judgment delivered today.

17

On 30 November, 2018, the facilities the securities and the guarantees were all transferred by KBC to Beltany Property Finance DAC (“Beltany”).

18

The first defendant was duly notified of the assignment by KBC by letters dated 30 November, 2018, and 5 December, 2018, and by the plaintiff on behalf of Beltany by letter dated 11 December, 2018.

19

On 4 April, 2019, Beltany served a demand on the first defendant for a balance then claimed in an amount of €12,262,768.55.

20

On 15 April, 2019, Beltany served a demand on the second and third named defendants pursuant to the terms of the guarantee for a balance of €12,272,132.04.

21

On 28 May, 2019, further letters of demand were issued by Beltany to the second and third defendants in respect of a balance said to be due at that date of €12,308,785.50.

22

These proceedings were commenced by a summary summons issued by Beltany on 7 August, 2019.

23

On 10 September, 2019, an order was made by this court (Haughton J.) entering the proceedings in the Commercial List and listing for hearing provisionally on 12 November, 2019, the plaintiff's application for summary judgment.

24

Following exchanges of affidavits and further adjournments, the application for summary judgment was heard on 12 and 13 January, 2021.

25

On 7 August, 2020, Beltany transferred its legal interest in the facility, the security, and the guarantee to the plaintiff pursuant to a Mortgage Sale and Purchase Deed and a Global Deed of Assignment. This is the assignment which the defendants submit is champertous.

26

Notice of the assignment was given to the defendants by Beltany on 14 August, 2020, and by the plaintiff on 31 August, 2020.

27

On 15 October, 2020, Barniville J. made an order pursuant to O.17 r.4 of the Rules of the Superior Courts amending the title of these proceedings to the current title from the previous title in which the named plaintiff was Beltany Property Finance DAC.

28

By the same order Barniville J. granted liberty pursuant to O.28 r.1 to the plaintiff to amend the Summary Summons and an amended summons was issued on 23 October, 2020.

This application
29

The application for summary judgment is grounded on an affidavit sworn on 28 August, 2019, by Mr. Donal O'Sullivan. Mr. O'Sullivan states that he is a director of Beltany Property Finance DAC, which was then the plaintiff.

30

Mr. O'Sullivan said that he made the affidavit on Beltany's behalf following a review of the relevant books and records of Beltany and the relevant books and records maintained on Beltany's behalf by its servicing firm, the plaintiff.

31

Mr. O'Sullivan exhibited to his affidavit the facility letters, the guarantee, the Deed of Transfer by KBC to Beltany dated 30 November, 2018, the letters giving notice of the transfer to the defendants, and the demand letters.

32

He says that the total sum advanced to Emerald under the facility was €13,271,820, and that interest was payable on that sum at the rates specified in the facility as amended. He said that as at the 27 August, 2019, the total sum of €12,364,400.13 remained due and owing, together with continuing interest.

33

Mr. O'Sullivan exhibited what he described as a Statement of Account in respect of the facility, dated 27 August, 2019. He said:

“A Statement of Account in respect of the facility, prepared at my request by Pepper on Beltany's behalf, appears at Tab 14 of the booklet”.

34

Mr. O'Sullivan referred to the fact of the appointment of the joint receivers and to the injunction proceedings relating to No. 22 Lansdowne Road. He then stated as follows:

“The sale of the security (including 22 Lansdowne Road) will not be sufficient to discharge Emerald's indebtedness to Beltany. It is anticipated that there will be a shortfall of approximately €2.5 million following the sale of the security. That shortfall will be in the order of €4.5 million if the joint receivers are unable to sell 22 Lansdowne Road.”

35

Mr. O'Sullivan then continued by stating:

“the current redemption figure gives credit for the fact that the joint receivers have sold three of the secured properties and will be further reduced in the event the balance of the security is sold.”

36

The Statement of Account dated 27 August, 2019, is a statement running to one page (although it contains a second page with standard notes attached). It refers to an “opening arrears balance” of €12,209,936.80 and a “ closing arrears balance” of €12,364,400.13.

37

This “ Statement of Account” is simply a statement of an amount of €12,209,936.80 being the “ opening balance” at the time when Beltany acquired the loan from KBC, and an amount of €12,364,400.13 on 27 August, 2019, apparently being the balance after applying interest charges and payments between 3 December, 2018, and 1 August, 2019.

38

There are a number of difficulties with this...

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1 cases
  • The Governor and Company of the Bank of Ireland v Hanley and Others
    • Ireland
    • High Court
    • 1 December 2023
    ...the Bank”. I see this case as distinguishable from Pepper Finance Corporation (Ireland) DAC v. Emerald Properties (Irl.) Limited & Ors. [2021] IEHC 114(Quinn J.), relied on by the Plaintiff, as it is clear from the judgment that a failure to properly particularise the claim on the submissio......

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