Sheehan v Breccia and Others

JudgeMr. Justice Haughton
Judgment Date05 February 2016
Neutral Citation[2016] IEHC 67
CourtHigh Court
Docket Number[2014/10816P]
Date05 February 2016

[2016] IEHC 67

Haughton Robert J.




Banking & Finance – Contract – Redemption of loan – Assessment of redemption amount – Inclusion of default surcharge interest – Enforcement costs

Facts: The plaintiff sought an order for determination of a figure at which the plaintiff was entitled to redeem certain loans which were vested with the first named defendant by virtue of a deed of transfer whereby the first named defendant acquired all the rights, interest and title of the Bank as mentioned in the facility letters. The key issue between the parties was related to the redemption figure and whether it could be contractually claimed by the first named defendant along with enforcement costs, charges and expenses.

Mr. Justice Haughton held that the first named defendant could contractually claim the redemption figure under the concerned applicable general conditions mentioned in the facility letters by virtue of the deed of transfer. The Court observed that the surcharge rate of 4% interest in the relevant clause was a generic rate and not a pre-estimate of loss arising from default and it was levied to deter the borrower from defaulting on his loan. The Court found that the said surcharge interest was unenforceable and the first named defendant was thus estopped from claiming any surcharge interest up to a certain period; however, the first named defendant could claim the said interest on account balances. The Court opined that in general the costs incurred by a mortgagee in defending before a court the validity or quantum of its core claim were costs that it was entitled to add to the debt or redemption figure. The Court held that in the present case, the first named defendant was not entitled to include the costs notified in the correspondence in the redemption figure and could charge costs of the modular hearing if it was awarded by the Court, which was to be taxed in default of an agreement. The Court determined the correct redemption figure for the parties and held that the costs for the modular hearing, if awarded, would be added to that figure.

JUDGMENT of Mr. Justice Haughton delivered on the 5th day of February, 2016

This judgment arises from a modular hearing of certain issues arising from amended pleadings as between the plaintiff and the first named defendant (‘Breccia’) only and is concerned with the figure at which the plaintiff as borrower is entitled to redeem certain loans which, for the purposes of this modular trial, are assumed to be vested in Breccia.

Background Facts

The plaintiff is a consultant surgeon residing in the United States of America, and is one of the founding shareholders of Blackrock Hospital Ltd. (‘BHL’).


Breccia is a private unlimited company controlled by Lawrence Joseph Goodman (‘Mr. Goodman’), and its directors are Mr. Goodman and Catherine Goodman.


In 1983 the health insurer BUPA, in conjunction with four doctors, namely brothers Joseph Sheehan (the plaintiff) and James Sheehan, George Duffy and the late Maurice Neligan, put together an investment package to build and develop the Blackrock Clinic, which in due course became vested in BHL.


In 2006 BUPA agreed to sell its shareholding of approximately 56% of BHL to inter alia the plaintiff and Breccia. Financing for the purchase of the shares was obtained from Anglo Irish Bank (‘Anglo’). As an integral part of the purchase of the BUPA shareholding the parties, including all existing shareholders and two guarantors, entered into a Shareholders Agreement dated 28th March, 2006. As part of the Shareholders Agreement it was agreed that an annual dividend would be declared which would be used to pay the interest on the Anglo loans until they matured, whereupon the entire facility would become immediately due and payable.


The plaintiff entered into two facilities with Anglo, the first on 28th March, 2006 (‘the 2006 Facility Letter’) and the second on 12th November, 2008 (‘the 2008 Facility Letter’, and together with the 2006 Facility Letter, ‘the ‘Facility Letters’). The plaintiff's borrowing was secured by a mortgage of his shareholding in BHL (‘the Mortgage’); a deed of covenant entered into between Breccia and Anglo, deeds of “cross guarantee' and indemnity entered into by the other shareholders (Benray Ltd., James Sheehan, Rosemary Sheehan and George Duffy), all dated 28th March, 2006; and a mortgage dated 24th August, 2006 of a house in Ballybeigue, Co. Kerry. The plaintiff also entered into a guarantee on 28th March, 2006, cross guaranteeing the financial obligations of the other shareholders who took out Anglo loans.


The plaintiff was advanced the principal amount of €11,188,256 pursuant to the terms and conditions of the 2006 Facility Letter, and a further €6,342,000 pursuant to the terms and conditions of the 2008 Facility Letter. The Facility Letters provided for an annual interest rate varying between 1.75% and 2.75% above the three month EURIBOR plus RAC.


For the purposes of this modular hearing it is agreed that the loans under the Facility Letters all fell due for repayment on 31st December, 2010. Breccia asserts that under General Terms and Conditions which were incorporated into the Facility Letters the lender has an entitlement to an interest surcharge of 4% per annum. Whether such a claim can be maintained is a central issue in this modular hearing.


On 21st January, 2009 Anglo re-registered as a private limited company under the name ‘Anglo Irish Bank Corporation Ltd.’ Notwithstanding that the Facility Letters fell due on 30th December, 2010, Anglo did not demand repayment or initiate any proceedings against the plaintiff. By special resolution dated 3rd October, 2011 Anglo's name was changed to ‘Irish Bank Resolution Corporation Ltd.’ (‘IBRC’). Pursuant to the Irish Bank Resolution Corporation Ltd. Act, 2013, on 7th February, 2013 the Minister for Finance made the Irish Bank Resolution Corporation Act (in Special Liquidation) Order, 2013, providing for the appointment of Kieran Wallace and Eamonn Richardson of KPMG as joint Special Liquidators of IBRC (‘the Special Liquidators’) for the purpose of winding up IBRC.


On 29th May, 2013 IBRC wrote to the plaintiff notifying him that the loan facilities under the 2006 Facility Letter were in default and that IBRC were reserving their rights. They wrote again on 31st October, 2013 notifying him of the Special Liquidators' decision to sell his loans, and those of the fourth named defendant, George Duffy. On 8th November, 2013 the plaintiff wrote to the Special Liquidators advising that he wished to redeem his loans, and they responded on 12th November, 2013 indicating that he could redeem ‘at par at any time in the sale process’.


In March, 2014 the plaintiff made a bid to IBRC to buy his loans, and the loan of Mr. Duffy. This attempt to purchase was unsuccessful, and is the subject matter of other pleas in these proceedings which are not the subject matter of this modular trial.


As the plaintiff's loans did not sell in March, 2014, the Special Liquidators initiated a further sales process in respect of the plaintiff's loans (but not that of Mr. Duffy which had been redeemed) later that year. The plaintiff bid to purchase them, but was outbid by Breccia. The validity of the purported purchase by Breccia of the plaintiff's loans is also challenged in these proceedings. For the purposes of this modular trial, it is assumed that the purchase of the plaintiff's loans by Breccia was valid.


By letter dated 18th December, 2014 Breccia wrote to the plaintiff notifying him of the acquisition, inter alia, of the plaintiff's loans under the Facility Letters, and Breccia demanded ‘immediate payment and discharge of the sum of €16,144,572 under the BHL Loan Agreement and the 2008 Loan Agreement and the sum of €6,734,852 under the Guarantee, being in total the sum of €22,879,424’. The letter indicated that Breccia reserved the right inter alia to appoint a receiver in the event of non-payment and was stated to be without prejudice to ‘any other rights or remedies we may have including….the right to make further demands in respect of sums owing to us’.


Following receipt of this letter these proceedings were initiated by Plenary Summons issued on 22nd December, 2014, and on that date the plaintiff applied for and obtained an interim injunction (Noonan J.) restraining Breccia from acting on foot of the letter of demand of 18th December, 2014, or seeking to enforce any of the security held, or appointing a receiver.


The Statement of Claim herein was delivered on 9th February, 2015. The first and second named defendants' Defence and Counterclaim were delivered on 26th February, 2015. This includes a counterclaim for the two sums demanded in the letter of 18th December, 2014.


By letter dated 25th May, 2015 Arthur McLean, the plaintiff's solicitors, wrote to Matheson, solicitors for Breccia, requesting a redemption figure in respect of the Facility Letters as ‘our client is in the process of refinancing his loans’. The reply dated 9th June, 2015 indicated a figure of €19,663,673.88, and that interest was continuing to accrue at a daily rate of €3,059.29. As this greatly exceeded the amount in the demand letter in respect of the plaintiff's loans Arthur McLean sought a breakdown. In response by a letter of 19th June, 2015 Matheson explained that €16,198,273.71, excluding surcharge, was due under the Facility Letters at the date of acquisition of the loans by the defendant; that surcharge interest at 4% from 31st December, 2010 amounting to €2,822,957.05 was due under clause 5 of the General Conditions up...

To continue reading

Request your trial
13 cases
  • Purcell v Central Bank of Ireland
    • Ireland
    • High Court
    • 29 July 2016
    ...decided.' The most recent example of this principle of judicial comity was its application by Haughton J. in Sheehan v. Breccia & Ors. [2016] IEHC 67 where he applied the Worldport principles in deciding that he could not depart from a previous decision of Finlay Geoghegan J. in ACC Bank P......
  • First Active Plc v Cunningham
    • Ireland
    • Supreme Court
    • 22 February 2018
    ...Beavis [2016] A.C. 1172. That reformulation was subsequently considered in this jurisdiction by Haughton J. in Sheehan v. Breccia & Ors [2016] I.E.H.C. 67. For reasons which the learned judge described as being based on 'judicial comity', he did not find it necessary to definitively state h......
  • Whelan v Promontoria (Finn) Ltd
    • Ireland
    • High Court
    • 12 December 2017
    ...of any awareness PFL had of those equities. In making this argument, he relies on Haughton J.'s decision in Sheehan v. Breccia [2016] IEHC 67. Specifically, the plaintiff submits that the two loans are subject to an estoppel by convention within the meaning of Denning L.J.'s reasoning in A......
  • Launceston Property Finance Ltd v Burke
    • Ireland
    • Supreme Court
    • 15 March 2017
    ...traditional ‘genuine pre-estimate of loss’ formula. 40 The Cavendish decision was considered by Haughton J. in Sheehan v. Breccia & Ors [2016] I.E.H.C. 67 (judgment of the 5th February, 2016), albeit that he did not reach a decision on whether it should be adopted: this out of judicial comi......
  • Request a trial to view additional results
1 firm's commentaries
  • Penalty Clauses – Recent Supreme Court View
    • Ireland
    • Mondaq Ireland
    • 19 October 2017
    ...rigid test, which should lead to fewer clauses being struck down as penalties in the UK. In the recent Irish case of Sheehan v Breccia [2016] IEHC 67 (Breccia), the High Court continued to apply the traditional test. While the High Court in Breccia did consider the test applied in Cavendish......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT