High Court: Investment fund awarded €8m against former AIB bankers who invested in property

Four CourtsAn investment fund which bought billions of euros worth of property loans in the State has been granted a summary judgment against former AIB bankers in “highly unusual circumstances” which involved the recusal of Mr Justice Max Barrett ex post facto due to his involvement with IBRC.

Agreeing with the findings made by Justice Barrett in the judgment he published prior to his recusal, and criticising one of the defendants for failing to make the application for recusal during the original proceedings, Mr Justice Brian McGovern found that Promontoria (Aran) was entitled to summary judgment totalling €7,959,003.95.

Recusal

The application for summary judgment was heard by Justice Barrett in May 2017.

After the judgment was delivered in July 2017, one of the defendants, Thomas Browne, and his solicitor swore affidavits grounding an application ex post facto for Justice Barrett to recuse himself on the basis that Justice Barrett was a former company secretary of IBRC at a time when it decided to commence litigation against Mr Browne for a sum of approximately €50m.

It was emphasised that Mr Browne’s solicitor had no knowledge of any possible conflict of interest on the part of Justice Barrett, before Mr Browne approached him sometime after the judgment was delivered.

Mr Browne averred that if he had known who Justice Barrett was when the matter proceeded, he would have brought an application for the judge to recuse himself.

There was no suggestion that the IBRC proceedings against Mr Browne were in any way connected with these proceedings; nor any indication that Justice Barrett was aware of any possible conflict of interest.

There was no averment that Justice Barrett was actually involved in the decision to prosecute proceedings against Mr Browne, even though he was at senior management level in IBRC at the relevant time.

However, Mr Browne himself held a senior executive position in IBRC – as such, Justice McGovern stated that it was “extraordinary” that he had not “immediately identified the connection” between himself and Justice Barrett.

To that effect, it was said that Mr Browne let another defendant, John Hughes, “make the running” so far as these proceedings were concerned and was not present in court at the earlier hearing.

“Out of an abundance of caution”, Justice Barrett decided to recuse himself, and his published judgment was vacated.

Judgment

Justice McGovern stated that the only change since the hearing before Justice Barrett was that counsel for Promontoria (Aran) was no longer pursuing a claim for the €502,864.59 overdraft.

As such, the hearing before Justice McGovern was “on the same documents and facts” as that before Justice Barrett. Appending Justice Barrett’s vacated “judgment”, Justice McGovern asserted that he agreed with and adopted its contents – adding that it was “wholly unsatisfactory that the scarce resources of the court” had been taken up by a second hearing due to Mr Browne’s failure to take “a more proactive role” in the proceedings.

Justice McGovern found that the defendants “had not met the low threshold required by Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 I.R. 607, or Harrisrange Limited v. Duncan [2003] 4 I.R. 1, to have the matter remitted for plenary hearing” – therefore Promontoria was entitled to summary judgment.

Additional comments

Justice McGovern stated that he was satisfied that sufficient proof had been furnished by Promontoria of the transfer of the loan to it.

It was clear that some of the facility letters were signed, and the failure to sign others was not a defence to Promontoria’s claim. Considering Governor and Company of the Bank of Ireland v. Flannagan & Anor [2015] IECA 56; where no draw down of funds took place in circumstances where some of the facilities were restructured this did not afford a defence so long as the defendants had the use of funds that were covered by the restructuring facility.

Regarding a collateral agreement to “waive residual debt” raised by the defendants, Justice McGovern stated that there was “no documentary or corroborating evidence to support” this “mere assertion”. Furthermore, this was inconsistent with the sworn statement of affairs, which showed the residual debt as a current liability – therefore this amounted to an estoppel in respect of such a claim.

Concerning the complaint to the Financial Services Ombudsman (FSO) that the defendants were not given sufficient time to meet a settlement proposal from Promontoria, Justice McGovern was satisfied that this provided no defence to the claim.

In any event, there was no obligation on any plaintiff to make a proposal for settlement; and none of the criteria set out in Section 57BX of the Central Bank Act 1942 (as amended) had been met by the defendants complaint to the FSO.

The FSO was not warranted to “involve himself in disputes between a lender and a borrower in respect of disputed debts once the matter has proceeded to court” and the “reference to the FSO does not provide any defence to the proceedings”.

Refusing the application for a stay on several grounds, Justice McGovern stated that Promontoria was entitled to judgment in the sums of €1,107,891.26; €3,495,933.99; and €3,355,178.70.

  • by Seosamh Gráinséir for Irish Legal News