Commercial Court Ruling In King And Ors v Ulster Bank Ireland Limited

Author:Mr Dudley Solan and Kevin Harnett
Profession:Maples and Calder
 
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Mr Justice Cooke delivered his judgment in the Commercial Court on 7 June 2013 in a banking dispute between a partnership (known as the "Birr Partnership") and Ulster Bank Ireland Limited (the "Bank"). In this case the Birr Partnership sought a declaration that it was not liable for the repayment of capital under a loan agreement it entered into with the Bank. Maples and Calder acted on behalf of the Bank.

Background

Under a 2005 loan agreement (the "2005 Facility") the Birr Partnership borrowed a multi-million euro sum to purchase a development site in Birr, Co. Offaly. The 2005 Facility was for a short term and expressly provided that the Bank would have full recourse to the borrowers for capital and interest until planning permission on the site was granted, and thereafter for interest only.

Planning permission was not granted until February 2008 and interest had continued to be rolled up on the facility in the interim. The Bank issued a further facility letter in May 2008 (the "2008 Facility") which was expressed to supersede the 2005 Facility and was for the purpose of financing the continuation of interest roll-up to the 2005 Facility. The 2008 Facility provided for full recourse to the borrowers for both capital and interest.

Plaintiffs' Claims

The Birr Partnership claimed that the recourse provision in the 2008 Facility was ambiguous and failed to properly reflect the actual agreement for renewal of the facility made between the representatives of the Birr Partnership and the Bank, which was to the effect that the recourse provisions of the 2005 Facility were in substance carried over. The argument was principally based on the addition of the word "Held" in brackets as a post-script to the recourse provisions of the 2008 Facility, which the Birr Partnership claimed had the effect that the recourse remained as per the 2005 Facility, with recourse only for interest once planning permission was granted.

In the alternative, they argued that, if the 2008 Facility was not ambiguous, it was worded as the result of a mutual mistake which entitled the Birr Partnership to rectification.

Further, it was argued that, if there was no mutual mistake, there was a unilateral mistake on the part of the Birr Partnership's representative which was induced by a misrepresentation on the part of the Bank's representative.

Decision

Mr Justice Cooke usefully summarised the principles governing contractual interpretation as follows:

The starting point in...

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