Talos Capital Ltd v Joseph Sheehan and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Ryan
• Judgment Date: 23 January 2015
• Neutral Citation: [2015] IEHC 27
• Court: High Court
• Date: 23 January 2015

[2015] IEHC 27

THE HIGH COURT

[No. 1392 S./2014]

Talos Capital Ltd v Sheehan & Flynn

Redaction not required

BETWEEN

TALOS CAPITAL LIMITED

PLAINTIFF

AND

JOSEPH SHEEHAN AND JOHN FLYNN

DEFENDANTS

AVESTUS CAPITAL PARTNERS v DANSKE BANK AS T/A NATIONAL IRISH BANK & MCQUILLAN UNREP LAFFOY 14.11.2012 2012/3/611 2012 IEHC 483

KUTCHERA v BUCKINGHAM INTERNATIONAL HOLDINGS LTD 1988 IR 61 1988 ILRM 1 1987/3/912

GRUPO HOTELERO URVASCO SA v CAREY VALUE ADDED SL (FORMERLY LOSAN HOTELS WORLD VALUE ADDED I SL) 2013 EWHC 1039 (COMM) 2013 BUS LR D45 2013 NLJR 19 2013 AER (D) 221 (JUN)

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

FIRST NATIONAL COMMERCIAL BANK v ANGLIN 1996 1 IR 75

Summary Judgement –Liability – Omissions – Interest – Loam – Company – Practice and Procedures – Shareholders – Guarantee – Defences – Defaulted Payments

Facts: This case concerned a claim for summary judgment in which the plaintiff contended that the defendants” affidavits had not established any basis of defence and that the plaintiff was accordingly entitled to judgment. The plaintiff claimed €2.4 million plus accrued interest from the defendants jointly and severally on foot of a guarantee dated the 19th March 2014, whereby the defendants guaranteed the payment obligations of a company known as JCS and agreed to indemnify the plaintiff against any losses arising from the failure of the company to meet its liabilities under an agreement of the 17th March 2014. Pursuant to that agreement, the plaintiff lent the company €2.4 million which was drawn down on the 7th April 2014. The plaintiff alleged that the company defaulted in its obligations by way of a series of acts and omissions, any one of which would have been sufficient, giving rise to a right of immediate demand of full repayment of the amount of €2.4 million that was advanced by the plaintiff together with accrued interest and also to make a claim under the guarantee from the defendants and each of them in the same amount.

Held by Justice Ryan in light of the available evidence and submissions presented that the plaintiff”s claim was established and that there was no defence to it. It was reasoned that the defendants were jointly and severally liable to indemnify the plaintiff against any loss arising under the loan contract with JCS. Justice Ryan said that it followed that if Talos was entitled to assert default on the part of JCS Limited and to call in the deposit loan plus interest then Talos was entitled to recover judgment jointly and severally against the defendants on the basis of their guarantees. The plaintiff”s case was that these matters were not in dispute and there was accordingly no factual issue to be decided and that no defence had been suggested that would justify the matter being referred to plenary hearing.

Introduction

1 1. This is a claim for summary judgment in which the plaintiff contends that the defendants' affidavits have not established any basis of defence and that the plaintiff is accordingly entitled to judgment.

2 2. The plaintiff claims €2.4 million plus accrued interest from the defendants jointly and severally on foot of a guarantee dated the 19 ^th March 2014, whereby the defendants guaranteed the payment obligations of a company known as JCS and agreed to indemnify the plaintiff against any losses arising from the failure of the company to meet its liabilities under an agreement of the 17 ^th March 2014. Pursuant to that agreement, the plaintiff lent the company €2.4 million which was drawn down on the 7 ^th April 2014. The plaintiff alleges that the company defaulted in its obligations by way of a series of acts and omissions, any one of which would have been sufficient, giving rise to a right of immediate demand of full repayment of the amount of €2.4 million that was advanced by the plaintiff together with accrued interest and also to make a claim under the guarantee from the defendants and each of them in the same amount.

3 3. The defendants are shareholders in Blackrock Hospital Limited (BHL), the company that operates the Blackrock Clinic. The first defendant, Dr. Sheehan, holds his shares personally and the second defendant, Mr. Flynn, has his shares owned by a company that he controls named Benray Limited. Dr. Sheehain's shares amount to approximately 28% of the issued share capital of BHL and the Benray shares approximately 8%.

4 4. Dr. Sheehan's shares are charged to IBRC as successor to Anglo Irish Bank plc to secure substantial borrowings. The Benray shares are charged to NALM as security for borrowings from the same original lender.

5 5. The plaintiff agreed to fund the acquisition of Dr. Sheehan's loans from IBRC together with the loans of another BHL shareholder, Dr. George Duffy, whose shares amounting to 20% approximately were similarly pledged to IBRC, and also to redeem the Benray loans held by NALM. If the set of complex transactions that was contemplated had proceeded fully to completion the three tranches of shares in BHL would have come out of IRBC and NALM and the plaintiff would have effectively held security for its loans over some 56% of the shareholding in BHL.

The Plaintiffs Claim

6 6. The plaintiffs grounding and replying affidavits are sworn by James Hawkes, a partner in the firm that is the investment manager of the plaintiff and who was centrally involved in the transactions giving rise to the claim. He sets out the initial understanding between the parties that was embodied in a term sheet signed by the defendants and dated between the 1 ^st and 3 ^rd March, 2014. He says that it was envisaged that the plaintiff would lend up to €45 million to the defendants or companies controlled by them to purchase their loans and those of Dr. Duffy from IBRC and NALM.

7 7. On the 13 ^th March, 2014 the plaintiff entered into a facility agreement with a Cayman Island exempted company named Medfund, a special purpose vehicle indirectly controlled by the first defendant, to provide finance for the acquisition of the loans of the first defendant and Dr. George Duffy from IBRC and the acquisition or redemption from NALM of the loans of the second defendant held by him through Benray Ltd.

8 8. The loans were to be secured by way of indirect control of the approximately 56% shareholding in Blackrock Hospital Limited that was cumulatively held by the defendants and Dr. Duffy.

9 9. It was a condition of the financing to be provided by the plaintiff that Dr. Duffy would enter into a framework agreement between the plaintiff and the defendants among others. That agreement would regulate the rights of the various parties including the control of the flow of dividends from the Blackrock Clinic which would fund interest payments on the loans provided.

10 10. Following the execution of the agreement of the 13 ^th March, 2014 the defendants notified the plaintiff that Medfund was unable to provide the deposit of €2.4 million to be paid to IBRC under the loan sale deed for the acquisition of the Sheehan/Duffy loans for €24 million. The plaintiff then agreed on the 17 ^th March, 2014 to amend the facility by advancing the deposit on certain terms including (1) that Medfund would resign as borrower and be replaced by an Irish special purpose vehicle; (2) Medfund would grant a charge over the entire share capital of the acceding special purpose vehicle; (3) that the defendants would enter into personal guarantees in respect of the deposit loan and interest thereon; and (4) that the loan sale deed would be executed. In pursuance of the amended agreement JCS (JCS Investments Holdings XIV Ltd.) acceded to the facility agreement in place of Medfund on the 19 ^th March, 2014.

11 11. On the 2 ^nd April, 2014 the second defendant and Benray undertook by deed of agreement to deliver all of the conditions precedent to the above amended agreement.

12 12. On the 19 ^th March, 2014 each of the defendants executed the deed of guarantee, which is governed by Irish law, and pursuant to which they jointly and severally guaranteed the payment obligations of JCS and agreed to indemnify the plaintiff in respect of any loss arising from failure to pay any amount payable under the amended agreement, such liability being limited to €2.4 million plus any accrued unpaid interest.

13 13. On the 4 ^th April, 2014 the loan sale deed was signed but not exchanged or made effective. There was something of an impasse because the plaintiff could not advance the €2.4 million deposit until the deed was fully effective and IBRC wanted to receive the deposit before it made the deed effective. The difficulty was overcome on the 7 ^th April, 2014 by way of payment transfer between solicitors' client accounts and the deed then became effective.

14 14. On the 13 ^th April, 2014 the plaintiff learned that the Duffy loans had been redeemed in full at or before the time when the deed became effective. Neither on the 4 ^th April, 2014 when the plaintiff paid the money into its own solicitor's account nor at any time up to the 7 ^th April, 2014 when the money was transferred to the account of the special liquidators of IBRC, did the defendants or JCS indicate to the plaintiff that the Duffy loans had been redeemed. From correspondence passing between lawyers for the first defendant and IBRC it appeared that the first defendant became aware in the afternoon of the 4 ^th April, 2014 that the Duffy loans had been redeemed earlier that day which meant that the first defendant was aware of the situation at the time when the money was used.

15 15. The situation therefore as of the 7 ^th April, 2014 was that the only loans available for transfer from IBRC were those of the first defendant, which was an entirely different situation from what had been agreed between the parties. The deponent avers that the plaintiff would...