Ulster Bank Ireland Ltd, Paul McCann and Patrick Dillon v Brian McDonagh, Kenneth McDonagh and Maurice McDonagh

• Jurisdiction: Ireland
• Judge: Collins J.,Murray J.
• Judgment Date: 06 April 2022
• Neutral Citation: [2022] IECA 87
• Court: Court of Appeal (Ireland)
• Docket Number: Court of Appeal Record Nos. 2019/491, 2020/174 & 2020/175

Between

Ulster Bank Ireland Limited, Paul McCann and Patrick Dillon

Plaintiffs/Respondents

and

Brian McDonagh, Kenneth McDonagh and Maurice McDonagh

Defendants/Appellants

[2022] IECA 87

Murray J.

Collins J.

Pilkington J.

Court of Appeal Record Nos. 2019/491, 2020/174 & 2020/175

THE COURT OF APPEAL

CIVIL

Summary judgment – Appointment of receivers – Loan agreement – First respondent seeking summary judgment – Whether the second and third respondents were validly appointed as joint receivers

Facts: The first respondent, Ulster Bank Ireland Ltd (the Bank), sought to recover judgment against the appellants, Messrs McDonagh, in the sum of €22,090,302.64. The liability was said to arise from a loan advanced by the Bank to the defendants in July/August 2007 (the Loan). The second and third respondents, Mr McCann and Mr Dillon (the Receivers), were appointed as receivers by the Bank on foot of security documents executed as a term of that loan agreement. The Receivers sought orders that they were validly appointed as joint receivers over the secured assets. Proceedings were instituted by the Bank in July 2018 and came on for trial before the High Court (Twomey J) on 3 December 2019. As explained by Twomey J in his first and principal judgment, given on 6 April 2020 ([2020] IEHC 185) (the Judgment), there were two broad issues in the case. The first was whether the appellants had been in breach of the Compromise Agreement entered into on 13 March 2013 thereby entitling the Bank to treat the Agreement as at an end and/or to pursue the appellants for the debt alleged to be due on foot of the “Finance Documents”. The second arose from the settlement entered into between the Bank and CBRE and the appellants’ contention that the effect of the provisions of s. 17(2) of the Civil Liability Act 1961 was that the Bank was - by reason of what was characterised as a compromise with a concurrent wrongdoer (CBRE) - precluded from claiming from the appellants some or all of the debt. Both of those issues having been determined against the appellants, the High Court (by Order dated 23 July 2020) granted judgment against the appellants jointly and severally in the sum of €22,947,202.85. The High Court also made two declarations. The first of those was to the effect that the appellants were as of October 2014, and continued to be, in breach of the Compromise Agreement. The second was that the Receivers were, and continued to be, validly appointed as joint receivers over an 80 acre site at Kilpeddar Co. Wicklow (the Kilpeddar Lands). The appellants appealed to the Court of Appeal.

Held by Murray and Collins JJ that the Compromise Agreement did not constitute a consent by the Bank to the sale of the Lands. They held that no basis had been shown for impugning the Judge’s conclusion that the “Heads of Agreement” of 13 June 2004 did not constitute a binding agreement for the sale of the Kilpeddar Lands to Granja Ltd. They held that the second and third appellants had failed to establish that the Bank breached the Compromise Agreement and the breaches of the Agreement by the appellants on which the Bank relied could not be attributed to any breach by the Bank. They held that the contention that the Judgment should be set aside because the Judge wrongly deployed findings made in respect of the first appellant against the second and third appellants was without basis. They rejected the first appellant’s complaints that he was wrongfully excluded from calling evidence either from employees of the Bank or from a graphologist. They were not persuaded that the Judge erred in concluding that the Bank was entitled to require Joint Selling Agents in relation to the proposed sale of the Kilpeddar Lands. They held that the Judge was correct to refuse to review his Judgment when the first appellant sought such a review following the conclusion of the hearing and the giving of the Judgment and Supplemental Judgment. They held that the Judge was entitled to find that the Bank was entitled to sue on the basis that it remained the legal owner of the facilities and the underlying security. They held that the first appellant was not entitled to raise issues relating to the redaction of the Declaration of Trust for the first time on appeal to the Court. They held that the contention that the Bank’s failure to join the Receivers as co-plaintiffs in the claim against CBRE gave rise to some defence against the Bank’s claim was specious and without merit.

Murray and Collins JJ held that both of the appeals must be dismissed. It was their provisional view that the unsuccessful appellants should have to pay the costs of the Bank.

Appeals dismissed.

Unapproved

No redactions required

JOINT JUDGMENT of Murray J. and Collins J. delivered on 6 ^th April 2022

BACKGROUND

1 . In these proceedings, the First Plaintiff (‘ the Bank’) seeks to recover judgment against the Defendants in the sum of €22,090,302.64. The liability is said to arise from a loan advanced by the Bank to the Defendants in July/August 2007 (“ the Loan”). The Second and Third Plaintiffs (“ the Receivers”) were appointed as receivers by the Bank on foot of security documents executed as a term of that loan agreement. The Receivers sought orders that they were validly appointed as joint receivers over the secured assets.

2 . As the Facility Letter of 20 July 2007 recites, the initial amount of the Loan was €21,500,000, of which €20,000,000 was to part fund the acquisition by the Defendants of what was stated to be an 80 acre site at Kilpeddar Co. Wicklow ( “the Kilpeddar Lands”). In fact, the site extended to something more than 80 acres but nothing turns on that. The Loan was secured by a mortgage and charge over the Kilpeddar Lands executed on 3 August 2007 (“ the Mortgage”). It was a condition precedent of the Facility Letter that the Bank would receive an “ independent valuation addressed to the Bank confirming a valuation of minimum EUR56,000,000” and on 25 July 2007 the Bank received a valuation report from CBRE valuing the Kilpeddar Lands at €57,000,000.

3 . The borrowing was restructured via a further Facility Letter dated 5 January 2009, for the somewhat higher amount of €21,8555,00. It was not repaid.

4 . On 13 March 2013 the Bank and the Defendants entered into an agreement ( ‘the Compromise Agreement’). 1 This agreement arose in the context of the collapse of the property market, delays in obtaining planning permission for the development of a data centre on the Kilpeddar Lands site and the failure of the Defendants to comply with their repayment obligations under the Facility Letter of 5 January 2009.

5 . The Compromise Agreement acknowledged that “ the Debt” – all of the sums due pursuant to the Facility Letters and the Accounts specified in the Agreement – was lawfully due and owing to the Bank (clause 1) and the Defendants also confirmed the contents of the “ Finance Documents” (the Facility Letters and associated security documents) (clause 2). It then provided that, subject to compliance by the Defendants with certain conditions, the Debt due by them would be written-off. These conditions were that the Defendants would make a payment of €250,000 in reduction of the Debt, that certain artwork would be transferred to the Bank with a view to its sale, with the proceeds to be applied in reduction of the Debt and that a number of properties (including the Kilpeddar Lands themselves) would be disposed of “ for the best price reasonably obtainable’ by 31 July 2015 “ or such later date as the Bank in its absolute discretion may agree.” It was at the same time agreed that agents would be appointed by the Defendants to sell the site ‘ with the intent of having the sale of same concluded no later than’ 31 July 2014. The Defendants were to ensure that the Bank was at all times kept fully appraised as to all enquiries and interest shown in the site and were to direct and instruct the Agents to provide such information to the Bank as and when required by it. The Compromise Agreement identified a ‘ Long Stop Date’ of 30 September 2015. Time was stated to be of the essence (clause 5.9).

6 . The net effect of the Compromise Agreement was that the liabilities of the Defendants to the Bank – standing at the time in the region of €25,000,000 — were to be written off in return for a payment by the defendants of approximately €5,000,000. It was an express term of the Compromise Agreement that the Defendants would disclose to the Bank all of their assets in a Statement of Affairs scheduled thereto. Clause 3.1.3 provided as follows:

“ If it transpires that there is any inaccuracy in the Updated Statements of Affairs (other than unintentional typographical error that is subsequently rectified) this Agreement shall be at an end.”

7 . Clause 4 of the Agreement was as follows:

“ PROVIDED ALWAYS that in the event of a failure by or on behalf of the Borrowers to comply with the terms of the Agreement or in the event of a breach of any of the covenants herein contained or, in the event that the Properties have not been disposed of by the Long Stop Date, the Bank shall be at liberty, without notice to the Borrowers, to take whatever steps it shall, in its absolute discretion, deem fit on foot of the Finance Documents, at law or otherwise.”

8 . On 26 June 2013, the Bank instituted proceedings against CBRE alleging negligence in the preparation of the valuation of the Kilpeddar Lands. On 13 June 2014, the Lands were — according to the Defendants — sold by them to a company called Granja Limited (“ Granja”) for €1,500,100. The document alleged to comprise the contract of sale comprised a single page which described itself as “ Heads of Agreement”. Seven days later, in ignorance of the purported sale to Granja, the Bank withdrew its consent to the sale and ongoing marketing of the Kilpeddar Lands.

9 . On 1 October 2014, the...