O'Rourke v Considine and Others

JurisdictionIreland
JudgeMs. Justice Finlay Geoghegan
Judgment Date10 May 2011
Neutral Citation[2011] IEHC 191
CourtHigh Court
Date10 May 2011
O'Rourke v Considine & Ors
COMMERCIAL

BETWEEN

DERMOT O'ROURKE
PLAINTIFF

AND

THOMAS CONSIDINE, PATRICK SWEENEY AND GERARD PRENDERGAST
DEFENDANTS

[2011] IEHC 191

[No. 4196 S/2009]
[No. 402 COM/2009]

THE HIGH COURT

CONTRACT

Terms

Loan - Assignment - Interpretation - Reasonable commercial person with knowledge of background circumstances - Natural and ordinary meaning - Intention of parties - Equity of redemption - Reassignment - Whether plaintiff entitled to sue for repayment following assignment - Whether plaintiff had continuing interest - Whether absolute assignment of loan agreement - Whether construction contrary to legitimate commercial purpose - Kramer v Arnold [1997] 3 IR 43; Analog Devices v Zurich Insurance [2005] IESC 12, [2005] 1 IR 274; Investors Compensation Scheme Ltd v West Bromich Building Society [1998] 1 WLR 896; Mannai Ltd v Eagle Star Ass Co Ltd [1997] AC 749; Igote Ltd v Badsey Ltd [2001] 4 IR 511; Plumb Brothers v Dolmac (Agriculture) Ltd [1984] 271 EG 373 and Linden Gardens Trust Ltd v Lenesta Ltd [1993] WLR 408 considered - Supreme Court of Judicature (Ireland) Act 1877 (40 & 41 Vict C 57) - Claim dismissed (2009/4196S, 2009/402COM - Finlay Geoghegan J - 10/5/2011) [2011] IEHC 191

O'Rourke v Considine

SUPREME COURT OF JUDICATURE (IRELAND) ACT 1877 S28(6)

KRAMER v ARNOLD 1997 3 IR 43

ANALOG DEVICES v ZURICH INSURANCE 2005 1 IR 274

INVESTORS COMPEANSATION SCHEME LTD v WEST BROMICH BUILDING SOCIETY 1998 1 WLR 896

ANTAIOS COMPANIES v SALEN AB 1985 AC 191

MANNAI LTD v EAGLE STAR ASS CO LTD 1997 AC 749

IGOTE LTD v BADSEY LTD 2001 4 IR 511

PLUMB BROTHERS v DOLMAC (AGRICULTURE) LTD 1984 271 EG 373

LINDEN GARDENS TRUST LTD & ORS v LENESTA LTD 1993 WLR 408

1

1. The plaintiff is a businessman who seeks judgment against the defendants in the sum of €21,978,000, together with interest on the said sum at the rate of 32% from 9 th August, 2009, to the date of judgment.

2

2. The essential facts in the proceedings are not in dispute. The plaintiff, with a Mr. Gerry Conlon, controlled two companies, Bandenberry Ltd. and Maplefern Holdings Ltd., which owned lands at Naas, County Kildare, known as the Millennium Park. In August 2006, the defendants agreed to purchase Millennium Park by the purchase of the shares in Bandenberry Ltd. and Maplefern Holdings Limited. The total purchase price was €315 million.

3

3. In order to facilitate the defendants in raising sufficient monies to complete the purchase, the plaintiff, inter alia, entered into a loan agreement in writing dated 9 th August, 2006 ("the Loan Agreement"), according to which he agreed to provide a loan to the defendants in the sum of €10 million. The sum was drawn down on 9 th August, 2006. The repayment date was specified as 9 th August, 2009. In accordance with clause 7 of the Loan Agreement, the principal and all accrued but unpaid interest was to be repaid by 9 th August, 2009.

4

4. The defendants did not repay the loan and accrued interest on 9 th August, 2009. On 28 th August, 2009, the plaintiff, through his solicitors, demanded immediate repayment of the sum of €21,978,000, failing which it was stated that proceedings would be issued. A summary summons was issued on 5 th October, 2009.

5

5. In the meantime, on 27 th February, 2008, the plaintiff entered into a deed of assignment and charge with Bank of Scotland (Ireland) Ltd. (BOSI), pursuant to which it assigned absolutely to BOSI, inter alia, the Loan Agreement as security for certain liabilities of the plaintiff to BOSI.

6

6. The plaintiff brought an application for leave to enter the Commercial List and for summary judgment against the defendants. By order of the High Court (Kelly J.) of 7 th December, 2009, the proceedings were entered into the Commercial List and the application for summary judgment adjourned to allow the defendants put in a replying affidavit. An affidavit was sworn and filed by the third named defendant.

7

7. There were, at the same time, proceedings brought by Bank of Scotland Ireland against the plaintiff before the High Court and it appears both applications for summary judgment were then adjourned to 18 th December, 2009, and the plaintiff was given liberty to bring a motion seeking the joinder of BOSI in the present proceedings. On 18 th December, 2009, the court was informed that BOSI had declined to consent to be joined, even though an indemnity was offered. By agreement, the defendants were given leave to defend and directions given for the exchange of pleadings and other pre-trial matters.

8

8. A defence was delivered by the defendants on 18 th January, 2010, which raised, as a preliminary objection, the entitlement of the plaintiff to sue on the Loan Agreement by reason of its assignment to BOSI, the acknowledgement which the defendants were required to give at the time of the assignment and the fact that BOSI had not issued any request to the defendants under the Loan Agreement. The defendants also contested the entitlement of the plaintiff to recover interest at 30% per annum upon the ground that the interest rate was unconscionable and that the court, in its equitable jurisdiction, should intervene in relation to the interest rate. Finally, it contended that the additional rate of 2% above the rate of 30% which applied on any sum unpaid at the repayment date was a penalty, and as such, not recoverable.

9

9. A reply to the defence was delivered on 5 th February, 2010, putting in issue all of the above.

10

10. On 25 th June, 2010, the plaintiff entered into a deed of reassignment with BOSI whereby BOSI purported to reassign to the plaintiff all of BOSI's rights, title, benefit and interest in the Loan Agreement and monies to be received thereunder. The plaintiff, through its solicitors, made a further demand on the defendants on 2 nd July, 2010, and thereafter, delivered an amended summary summons. There were amended defences and amended reply to defences delivered.

11

11. The consent of the defendants to the deed of reassignment was not sought. The defendants contend that clause 16 of the Loan Agreement does not apply to a reassignment of the Loan Agreement to the plaintiff as the original lender, and hence, no consent in writing of a majority of the defendants is required for the reassignment.

Issue
12

12. The first issue to be determined in these proceedings is whether, upon the above facts, the plaintiff was, at either the date of commencement or hearing of the proceedings, entitled to seek recovery from the defendants of the amounts due on the Loan Agreement. It is not in dispute that the defendants have failed to repay the loan they received and interest thereon in accordance with the Loan Agreement. There is a secondary dispute as to the rate at which interest is payable pursuant to the Loan Agreement.

Relevant Contractual Terms
13

13. In the Loan Agreement, the plaintiff is defined as "the Lender". The defendants are the Borrowers. The Repayment Date is stated to be 9 th August, 2006, or "such other date as the Lender and the Borrowers may agree in writing". No such other date was agreed. The "Loan" is the aggregate principal amount borrowed and was €10 million. The Loan Agreement is defined and referred to as the "Letter". The "Finance Documents", as the Letter and any other document from time to time agreed in writing by the parties to be a Finance Document. There was no other such document referred to in evidence. The Loan was to be repaid on the Repayment Date and clause 8 provided that the Borrowers are not entitled to prepay the Loan or any part of it prior to the Repayment Date. Clause 13, insofar as relevant, provided:

"GENERAL COVENANTS"

2

13.1 So long as the Facility is available for drawing (whether or not subject to preconditions) or remains outstanding, the Borrowers shall

3

13.1.2 furnish to the Lender such information about the business, assets and financial condition of the Borrowers as the Lender may reasonably require."

14

14. Clause 16 restricted the Lender's entitlement to assign in the following terms:

"ASSIGNMENT"

The Lender may not assign or transfer the whole or any part or parts of his rights and benefits in respect of the Finance Documents and the Facility without the prior written consent of a majority of the Borrowers. The consent of such majority of the Borrowers to an assignment or transfer must not be unreasonably withheld or delayed. Such Borrowers will be deemed to have given their consent hereunder five Business Days after the Lender has requested it unless such consent is expressly refused by such Borrowers within that time. Each Borrower undertakes to enter into such agreements and other documents as may be necessary or desirable to give effect to any such participation, assignment, transfer, novation or other disposal. For the purpose of any such actual or proposed participation, assignment, transfer, novation or other disposal the Lender may not disclose any information of a confidential nature concerning any Borrower without first obtaining from such person a written undertaking in a form reasonably satisfactory to the Lender and such Borrower to keep such information strictly confidential. The expression the "Lender" wherever used herein shall, to the extent of his interest for the time being herein, include every successor, assignee, transferee, novatee or party to whom a disposal is made as aforesaid who shall be entitled to enforce and proceed upon and exercise all rights, powers and discretions under the Finance Documents as if named therein in place of or in addition to the Lender."

15

15. In February 2008, the defendants were requested by the plaintiff to consent to the assignment to BOSI and did so in writing, signed by all three, in the following terms:

"Dear...

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19 cases
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