High Court: Promontoria fund granted summary judgment for €3.9m loan facilitated by AIB in 2005

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The primary defence submitted on behalf of one of the defendants was that he had reached a binding agreement of €80k to settle his liability for the loan, however Justice Twomey said that even if he could accept that an oral agreement had made in principle, that it was not legally binding until legal documentation had been signed.

Background

In December 2004, Anglo Irish Bank offered the defendants (Clody Norton, Michael O’Neill, Ciaran Redmond, and Peter Crean – trading as the NORC Partnership) a loan facility of €3,896,000. In January 2005, the defendants accepted the facility letter and the bank’s conditions.

Pursuant to the NAMA Act 2009, National Asset Management Ltd became legally and beneficially entitled to the facility letter, and in January 2017 this was transferred to Promontora (GEM) DAC.

One of the defendants contesting the proceedings, Mr Crean, alleged that the root of title whereby Promontoria became entitled to the facility letter was not sufficiently established.

In June 2017, Promontoria sought the sum owed by the defendants under the facility letter – totalling €4,545,502.52.

Statute of Limitations

Mr Crean averred that, due to the fact that the last payment in respect of the facility letter was made “over six years ago” in 2009, and that the repayment date was December 2005, that Promontoria’s claim was statute barred pursuant to s.11 of the Statutes of Limitations Act 1957.

Based on Allied Irish Banks plc v. Pollock & anor IEHC 581, Justice Twomey said that the ordinary meaning of the terms of the Facility Letter had to be considered. Rejecting Mr Crean’s claim in this regard, Justice Twomey said that it was clear from the terms that all that was going to happen in December 2005 was a review, and that furthermore, the clause explicitly stated that the facility was “repayable on demand”.

As such, Justice Twomey said that the cause of action in the present proceedings arose when the demand was made in June 2017, and there was “no question” of the proceedings being statute barred.

Condition precedent

Mr Crean averred that Anglo, in failing to obtain a valuation for a property which was to secure the loan, that Anglo failed to adhere to a condition precedent of the facility agreement. Justice Twomey rejected this stating that it was clear that the condition precedent had been waived by Anglo in circumstances where the condition precedent was solely for Anglo’s benefit.

Justice Towmey said that the obligation to repay moneys borrowed was not extinguished by failure to comply with a condition precedent (IBRC v. Cambourne Investments 4 IR 54 considered).

SME Code

Mr Crean alleged that Link ASI Ltd (providing loan administration services on behalf of Promontoria) had made a number of breaches of the Code of Conduct for Business Lending to Small and Medium Enterprises issued by the Central Bank of Ireland. On this basis, Mr Crean said that Promontoria should not be granted summary judgment pending compliance with the SME Code.

Considering ACC Bank plc v. Deacon IEHC 427, Justice Twomey was satisfied that compliance with the SME Code was not a prerequisite to establishing liability, nor could non-compliance furnish a defence.

Justice Twomey also rejected Mr Crean’s arguments regarding Promontoria’s title to bring the proceedings, which he said was not clear due to the heavily redacted agreement between NALM and Promontoria.

Primary defence to summary judgment

The two defendants contesting the proceedings, Mr Crean and Ms Norton, did not dispute that the moneys were borrowed, but argued that the matter should go to a plenary hearing on the basis of an alleged binding settlement agreement which was made between Promontoria and Mr Crean in February 2018.

The primary defence to the summary judgment advanced by Mr Crean was that he reached a binding settlement agreement with Promontoria whereby he settled his joint and several liability of €4.5m for his undertaking to pay €80k. Ms Norton also relied on the alleged settlement agreement as a defence to the summary proceedings against her, on the grounds that the claim against her could not be sufficiently particularised until the amount agreed to be paid by Mr Crean is established at a plenary hearing on that issue.

Mr Crean alleged that his financial adviser negotiated with Link ASI Ltd, and that an agreement of €80K was finalised. Justice Twomey, in considering the evidence submitted to the Court, said that Mr Crean’s averments were contradictory, in that he referred to an “offer” of €70k being increased to €80k, but had previously referred to the figure of €70k being an “agreement”. Justice Twomey said that this was relevant when considering whether the second “agreement” for €80k was in fact an “offer” or a binding agreement.

Justice Twomey said that there was documentary evidence, even contemporaneous notes” that there had been an oral agreement. Furthermore, since the negotiations had been conducted with Link ASI Ltd, which had “no authority to bind, commit or conclude contractual arrangements on behalf of Promontoria” – even if an agreement was reached in principle, this was “subject to contract” and was not legally binding until legal documentation was signed.

Finding that the “inconsistent” affidavit evidence did not support Mr Crean’s claim that there was a binding agreement, even in principle; Justice Twomey concluded that Mr Crean did not have a credible defence.

Justice Twomey said it was appropriate to make an order granting summary judgment for the principal sum of €3,896,000.