Ulster Bank DAC v McDonagh

JurisdictionIreland
JudgeMr. Justice Twomey
Judgment Date06 April 2020
Neutral Citation[2020] IEHC 185
Docket Number[2018 No. 5922 P]
CourtHigh Court
Date06 April 2020
BETWEEN
ULSTER BANK DAC, PAUL MCCANN

AND

PATRICK DILLON
PLAINTIFFS
AND
BRIAN MCDONAGH, KENNETH MCDONAGH

AND

MAURICE MCDONAGH
DEFENDANTS

[2020] IEHC 185

Twomey J.

[2018 No. 5922 P]

THE HIGH COURT

COMMERCIAL

Summary judgment – Loan – Civil Liability Act 1961 – Plaintiff seeking summary judgment – Whether an alleged concurrent wrongdoer had a liability for the damage caused to the plaintiff in monetary terms

Facts: The first plaintiff, Ulster Bank, sought judgment jointly and severally against the three defendants, the McDonaghs, in the sum of €22,090,302.64. This amount was sought in respect of a loan taken out by the McDonaghs in connection with the purchase of approximately 82 acres of land in Kilpeddar, Co. Wicklow, intended to be used as a data centre. There were two key issues for resolution. The first related to factual disputes between the parties regarding alleged breaches of a Compromise Agreement entered into by the parties for the writing-off of approximately €20 million of that loan. These disputes were resolved by, inter alia, the credibility of the claims made by the McDonaghs and an analysis of contemporaneous documents. The second issue was a legal issue concerning s. 17(2) of the Civil Liability Act 1961. This arose because as well as suing the McDonaghs for the repayment of the loan of €22 million to buy the Kilpeddar site, Ulster Bank previously sued CBRE for an alleged negligent valuation of that site at a value of €56 million, which proceedings were settled for a figure of €5 million. An issue arose as to the effect, pursuant to s. 17(2) of the 1961 Act, of that settlement with one alleged concurrent wrongdoer (CBRE) on these proceedings by Ulster Bank against the other alleged concurrent wrongdoer (the McDonaghs). In particular, the McDonaghs claimed that as the Bank settled with one alleged concurrent wrongdoer (CBRE), it must be identified with CBRE for the purposes of its proceedings against the other alleged concurrent wrongdoer (the McDonaghs) and so cannot claim from the McDonaghs the difference between the settlement sum (€5 million) it agreed with CBRE and the full amount of the claim (€22 million). For its part, the Bank claimed that the provisions in the 1961 Act regarding concurrent wrongdoers have no application to debt collection claims such as this one.

Held by the High Court (Twomey J) that the Heads of Agreement are not a binding contract for sale, the consent of Ulster Bank was required for the proposed sale of the Kilpeddar site under the terms of the Compromise Agreement and the Mortgage, the consent of Ulster Bank was not obtained to the proposed sale of the site, and the McDonaghs breached the Compromise Agreement in a number of respects thereby entitling Ulster Bank to seek payment of all sums due from the McDonaghs to Ulster Bank under the Facility Letter, subject to what was stated regarding the 1961 Act. In light of the Court’s conclusions on the application of the 1961 Act, and in particular its finding that neither the Bank nor the McDonaghs were correct in their interpretation of that Act, if after considering the terms of this judgment there was no agreement between the parties on the effect of the 1961 Act on the judgment amount, then before final orders were made, it would be necessary to hear from both parties in detail on firstly whether CBRE was a concurrent wrongdoer and if so, whether it had a liability for the damage caused to the Bank in monetary terms, in excess of the sum of €5 million (which has already been deducted from the Bank’s loss).

Twomey J held that once the parties had an opportunity to review this judgment, the Court would hear from counsel regarding final orders.

Appeal dismissed.

JUDGMENT of Mr. Justice Twomey delivered on the 6th day of April, 2020
SUMMARY
1

This is a case in which the first named plaintiff, Ulster Bank (referred to herein both as “the Bank” and “Ulster Bank”), is seeking judgment jointly and severally against the three named defendants, who are brothers, (the “McDonaghs”) in the sum of €22,090,302.64. This amount is sought in respect of a loan taken out by the McDonaghs in connection with the purchase of approximately 82 acres of land in Kilpeddar, Co. Wicklow (the “Kilpeddar site”), intended to be used as a data centre.

2

There are two key issues for resolution. The first relates to factual disputes between the parties regarding alleged breaches of a Compromise Agreement entered into by the parties for the writing-off of approximately €20 million of that loan. These disputes are resolved by, inter alia, the credibility of the claims made by the McDonaghs and an analysis of contemporaneous documents.

3

The second issue is a legal issue concerning s. 17(2) of the Civil Liability Act, 1961 (the “1961 Act”). This arises because as well as suing the McDonaghs for the repayment of the loan of €22 million to buy the Kilpeddar site, Ulster Bank previously sued CBRE for an alleged negligent valuation of that site at a value of €56 million, which proceedings were settled for a figure of €5 million. An issue arises as to the effect, pursuant to s. 17(2) of the 1961 Act, of that settlement with one alleged concurrent wrongdoer (CBRE) on these proceedings by Ulster Bank against the other alleged concurrent wrongdoer (the McDonaghs). In particular, the McDonaghs claim that as the Bank settled with one alleged concurrent wrongdoer (CBRE), it must be identified with CBRE for the purposes of its proceedings against the other alleged concurrent wrongdoer (the McDonaghs) and so cannot claim from the McDonaghs the difference between the settlement sum (€5 million) it agreed with CBRE and the full amount of the claim (€22 million). For its part, the Bank claims that the provisions in the 1961 Act regarding concurrent wrongdoers have no application to debt collection claims such as this one.

Background to the dispute
4

The dispute between the Bank and the McDonaghs arises on foot of the alleged breach of a Compromise Agreement (the “Compromise Agreement”) dated 13th March, 2013 pursuant to which the borrowings of the McDonaghs were to be written off in the sum of approximately €20 million by Ulster Bank. This write-off was in return for the sale of certain properties owned by the McDonaghs, including the Kilpeddar site, which they had purchased for €22 million in August 2007 with the assistance of borrowings from Ulster Bank.

5

Under the terms of the Compromise Agreement, the Kilpeddar site was to be sold by the McDonaghs by 31st July, 2014 with the proceeds of that sale to be paid to the Bank. Of significance in these proceedings therefore, is the claim by the McDonaghs that the Kilpeddar site was in fact sold by them on the 13th June, 2014, a claim which is heavily disputed by the Bank. The McDonaghs allege that the Kilpeddar site was sold on this date for a sum of €1,501,000 in alleged compliance with the terms of the Compromise Agreement.

6

In broad terms, when account is taken of the value of the properties to be sold and some cash to be paid by the McDonaghs under the terms of the Compromise Agreement, the Bank was agreeing to write off the sum of approximately €25 million in return for its receipt of cash and the proceeds of the sale of certain properties, all of which were valued at the time of the execution of the Compromise Agreement at approximately €5 million. The Compromise Agreement therefore represented a very significant write-off of approximately €20 million by the Bank of the McDonaghs' borrowings. In this regard, the Compromise Agreement contained a term which required the McDonaghs to keep confidential the terms of the Compromise Agreement and so to keep confidential, inter alia, the fact that they were getting a €20 million debt write-off from the Bank. This obligation to keep confidential the debt write-off arrangement was contained in Clause 5.1 of the Compromise Agreement which stated that all information in the agreement was to be keep “strictly confidential” and was not to be disclosed to any other person absent the “prior written consent” of the Bank.

7

The auctioneer initially engaged in July 2013 by the McDonaghs to sell the Kilpeddar site, Mr. Gabriel Dooley (“Mr. Dooley”) of Dooley Auctioneers, valued the lands at that time at approximately €900,000 on the basis that they were being valued as agricultural land. In this regard, it is to be noted that while in March 2011 Wicklow County Council had granted planning permission for a data centre to be developed on the Kilpeddar site, that decision to grant planning permission was overturned by An Bord Pleanála. However, in January 2013, as a result of a successful judicial review taken by Ecological Data Centres Limited (a company owned by the first named defendant, Mr. Brian McDonagh) against An Bord Pleanála's decision, the original grant of planning permission for a data centre on the Kilpeddar site was reinstated by the High Court ( Ecological Data Centres Ltd v. An Bord Pleanála [2013] IEHC 34). This decision was appealed by An Bord Pleanála to the Supreme Court. In a judgment dated 10th December, 2013 the decision of the High Court was upheld by the Supreme Court ( Ecological Data Centres Ltd v. An Bord Pleanála & Ors. [2013] IESC 61). As a result, at the date of the Compromise Agreement (13th March, 2013), there was planning permission for a data centre to be built on the Kilpeddar site, albeit subject to an Appeal to the Supreme Court.

The Key Dispute
8

The key dispute in this case centres around that alleged binding contract for sale of the Kilpeddar site which is a one-page document dated 13th June, 2014. This alleged contract is headed “Heads of Agreement to Sell,” with the sub-heading “Memorandum of Agreement” (referred to herein as the “Heads of Agreement”) and provides for the sale of the Kilpeddar site for €1,501,000. It was entered into by the McDonaghs, as vendors, with a...

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