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High Court of Ireland Decisions |
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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Avestus Capital Partners -v- Danske Bank & Ors [2012] IEHC 483 (14 November 2012) URL: http://www.bailii.org/ie/cases/IEHC/2012/H483.html Cite as: [2012] IEHC 483 |
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Judgment Title: Avestus Capital Partners -v- Danske Bank & Ors Neutral Citation: 2012 IEHC 483 High Court Record Number: 2011 484 SP Date of Delivery: 14/11/2012 Court: High Court Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
NEUTRAL CITATION 2012 IEHC 483 THE HIGH COURT [2011 No. 484 SP] BETWEEN AVESTUS CAPITAL PARTNERS APPLICANT AND
DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK AND ROBERT MCQUILLAN AND JANE MCQUILLAN RESPONDENTS Judgment of Ms. Justice Laffoy delivered on 14th day of November, 2012. The proceedings 2. The Interpleader Proceedings were initiated by a special summons which issued on 17th June, 2011. The applicant (Avestus), which was formerly known as Quinlan Private, seeks an interpleader order in respect of funds it holds in which it does not claim any interest. There is a dispute between the first respondent (the Bank), on the one hand, and the second respondent (Mr. McQuillan) and the third respondent (Mrs. McQuillan) as to the entitlement to the said funds, each side claiming the right thereto. The position of Avestus is that it does not in any manner collude with either the Bank or Mr. McQuillan and Mrs. McQuillan or any of them. It asserts that it is ready to bring the money into Court and to pay or dispose of the funds in such manner as the Court may order. 3. In the Debt Proceedings, which were initiated by summary summons which issued on 26th July, 2011, the Bank seeks judgment against Mr. McQuillan in the sum of €677,586.50 together with interest on foot of a loan agreement. What is before the Court is a motion for judgment, which was transferred from the Master’s Court. 4. The Interpleader Proceedings and the Debt Proceedings have a common origin, as the following outline of the factual background will illustrate. Factual background 6. The terms of the loan were subsequently varied on a number of occasions, but the variation which is of relevance for present purposes was contained in a letter dated 20th January, 2006 which was expressed to be supplemental to the facility letter dated 25th July, 2005. On 10th February, 2006, Mr. McQuillan endorsed his agreement to and acceptance of the varied terms on the letter of 20th January, 2006. One of the variations made in that letter was related to the purpose of the facility. As varied the purposes of the facility were expressed to be:
(a) [89] shares to be issued by Carraig Investments SA . . .; (b) [919,756] loan notes to be issued by Carraig Beag SA; and (c) [8,858] redeemable convertible bonds to be issued by Carraig Beag (collectively called the ‘securities’).” 7. The provisions of the facility letter of 25th July, 2005 as so varied (the Loan Agreement) which are relevant for purposes are the following:
“If, in the reasonable opinion of the Bank, circumstances have altered materially since the granting of the Bank facilities or such new information has come to light as would justify requesting the immediate repayment or termination of the Bank facilities”. The Bank also places some reliance on Clause (i) (if any representation or warranty or undertaking from time to time made by Mr. McQuillan to the Bank is or becomes incorrect or misleading in any material respect) and Clause (j) (if any guarantee or security for any obligation or liability from time to time owing by Mr. McQuillan to the Bank fails or is terminated or disputed or becomes in jeopardy, invalid or unenforceable) of the Default Appendix. (ii) Clause 5, which was headed ‘Security’. As varied, that clause provided that the loan should be secured by the following: (a) a pledge agreement governed by the laws of Luxembourg executed by Mr. McQuillan over each of “the Securities” held by him legally and/or beneficially in Carraig Investments and/or Carraig Beag and all dividends and distributions payable thereon; (b) a legal assignment over a life policy, which is not in issue; (c) an undertaking from Quinlan Asset Management that any returns on Mr. McQuillan’s investment up to the total amount of the loan would be forwarded directly to the Bank on foot of its charge over Mr. McQuillan’s shareholding in Carraig Investments; (d) a limited recourse guarantee and indemnity from Quinlan Investments Ltd.; and (e) a pledge agreement governed by the laws of Luxembourg executed by Quinlan Investments Ltd. creating first ranking fixed security over all securities held by or to be acquired by it in Carraig Investments and/or Carraig Beag as nominee for Mr. McQuillan.
9. Issues have arisen in relation to the execution of the Pledge Agreement on behalf of Mr. McQuillan by his attorney. The copy of the power of attorney exhibited was quite illegible. However, a more legible copy was furnished to the Court. The first point which arises in relation to the power of attorney is its date, which is totally illegible. It was suggested at the hearing of the application that it might be 5th November, 2006. However, I note that in a letter dated 18th August, 2010 from A. & L. Goodbody, Solicitors for Avestus, to Mason Hayes & Curran, the then solicitors for Mr. McQuillan and Mrs. McQuillan, it is stated that it was dated 6th December, 2006. I am assuming that that date (or perhaps 5th December, 2006) is the correct date. The date is of significance because in the power of attorney Mr. McQuillan irrevocably and unconditionally appointed Fergus Farrell or another person as his attorney “for a period of three months from the date hereof” to do or execute all or any of the acts outlined including to –
10. In early 2010 a decision was taken to dispose of the Knightsbridge Scheme. In connection with the proposed sale, Mr. McQuillan signed a resolution on 13th May, 2010 approving the sale. On the same day, 13th May, 2010, Mr. McQuillan executed a document headed “Direction Letter” to Quinlan in relation to Knightsbridge Scheme. In that document, Mr. McQuillan gave Quinlan extensive authority in connection with the sale, including authority to make, give, sign and execute a wide range of documents which might be necessary or desirable in connection with the sale. 11. By letter dated 9th June, 2010 from Avestus to the Bank, having referred to the Loan Agreement and the fact that it was proposed to sell the Knightsbridge Scheme, Avestus gave an undertaking in the following terms to the Bank:
12. The opening sally in the disputes between Mr. McQuillan and Avestus and between Mr. McQuillan and the Bank was a letter dated 24th June, 2010 from Mr. McQuillan’s then solicitors, Mason Hayes & Curran, to Avestus. In that letter it was asserted that Mr. McQuillan had made two separate and distinct investments in Carraig Investments, one being of STG£1m, which was funded by a loan from the Bank with recourse only to the shares acquired by that STG£1m, and the other being an investment of a further STG£1m, funded by monies borrowed by Mr. McQuillan from Allied Irish Banks (AIB). Avestus was informed that it had no authority to repay to the Bank one hundred per cent of the proceeds of the sale from the total STG£2m equity investment made by Mr. McQuillan. It was acknowledged that the Bank was entitled to be repaid out of the proceeds of sale a sum equivalent to the proceeds of the sale of the initial STG£1m investment made by Mr. McQuillan and funded by the Bank. However, AIB should be repaid the funds attributable to the STG£1m investment which was made by Mr. McQuillan with monies borrowed from AIB. That letter was responded to by A. & L. Goodbody on behalf of Avestus. The position adopted in the reply dated 29th June, 2010 was that Mr. McQuillan and Avestus were legally obliged to discharge the sums due and owing to the Bank on foot of the Loan Agreement out of Mr. McQuillan’s proceeds. A. & L. Goodbody maintained that position in subsequent letters of 15th July, 2010 and 18th August, 2010 to Mason Hayes and Curran. 13. On the basis of the evidence before the Court, Mrs. McQuillan first featured in the dispute in a letter dated 10th November, 2010 from Mason Hayes & Curran to A. & L. Goodbody. In that letter it was stated that Mason Hayes & Curran had been instructed by Mrs. McQuillan that the second tranche of shares was to be in her name. It was alleged that Avestus had failed in its duties to Mr. McQuillan and Mrs. McQuillan, in particular, “to respect her investment as a separate investment”. It was also contended that neither Mr. McQuillan nor Mrs. McQuillan authorised the giving of the undertaking to the Bank by Avestus on 9th June, 2010. It was requested that Avestus procure the immediate release and repayment to Mrs. McQuillan of the proceeds of sale referable to her investment. 14. Within less than a week, Beauchamps, Solicitors, wrote to the Bank, by letter dated 15th November, 2010, on behalf of Mrs. McQuillan for whom they were then acting in respect of what was described as a “joint investment” that she and her husband, Mr. McQuillan, had made in respect of the Knightsbridge Scheme as arranged by Avestus. The thrust of the letter was that the second investment of STG£1m was an investment of Mr. McQuillan and Mrs. McQuillan and the Pledge Agreement could not have captured the equity investment financed by AIB, as I understand it, on the basis of the principle nemo dat quod non habet. Subsequently, Beauchamps were instructed by Mr. McQuillan. Thereafter both Mr. McQuillan and Mrs. McQuillan maintained the position that only half of the return on the sale of the Knightsbridge Scheme should be remitted by Avestus to the Bank. The Bank maintained the position that it was entitled to the entire return. In fact, one half of the return amounting to in excess of €827,000 was remitted by Avestus to the Bank, as is disclosed on the indorsement of claim on the summary summons on the Debt Proceedings. 15. By letters dated 24th March, 2011, A. & L. Goodbody, on behalf of Avestus, informed the Bank and Mr. McQuillan and Mrs. McQuillan that they were not in a position to resolve the dispute arising from the competing claims of those parties in respect of the balance of the proceeds of sale which were currently held by Avestus and, in the circumstances, if the dispute was not resolved within twenty one days, interpleader proceedings would issue. In fact, the Interpleader Proceedings issued on 17th June, 2011. 16. Separately, by letter dated 14th July, 2011 from McCann Fitzgerald, Solicitors, to Mr. McQuillan, McCann Fitzgerald demanded, on behalf of the Bank, immediate payment of the amount outstanding pursuant to the terms of the Loan Agreement, which was stated to be capital of €667,586.50 together with interest of €5,768.05, being in total €683,354.55. It was stated that interest was accruing at the daily rate of €63.92. In that letter, it was made clear that the Bank was relying on Clause (o) of the Default Appendix to the Loan Agreement, in that it was stated:
Mr. McQuillan’s opposition to the motion for judgment 19. In that affidavit, Mr. McQuillan also made the following points:
(b) The Bank cannot “pray in aid” the provisions of the Pledge Agreement to seek to appropriate the proceeds of the joint investment, which were never intended to be the subject of the Pledge Agreement. (c) The Pledge Agreement was not included in the documents listed in the power of attorney and the Bank cannot rely on the provisions of the Pledge Agreement, as it was not validly executed. Alternatively, the attorney “overreached himself by pledging securities which were never intended to be pledged”. (d) The Bank has incorrectly sought to call in the balance of the loan under the Loan Agreement, which was not due to be terminated until 31st July, 2012. (e) Quinlan/Avestus was on notice that the STG£1m which he and Mrs. McQuillan invested in the Knightsbridge Scheme came from a source other than the Bank and the joint investment financed from a separate source should never have been, and was not, encumbered, secured or made subject to the Pledge Agreement. (f) The Bank did not believe, nor was it its understanding, that it would have security over the STG£2m worth of securities and it is an abuse of process for the Bank to claim reliance on a representation which it never relied on when advancing the funds. (g) Quinlan/Avestus were on actual and/or constructive notice of the joint investment with Mrs. McQuillan in the Scheme and, by extension, the Bank is on actual and/or constructive notice thereof. In the Interpleader Proceedings, Quinlan/Avestus have sought the guidance of the Court to determine the ownership of the funds retained by Avestus. Ownership of those funds should be determined in the Interpleader Proceedings.
(b) He made the point that the Pledge Agreement was governed by, and was to be construed in accordance with, the laws of Luxembourg, but no evidence of Luxembourg law had been put before the Court by the Bank. (c) The Bank has no entitlement to invoke “the material adverse change clause” (i.e. Clause (o) of the Default Appendix) in the Loan Agreement, in circumstances where it is alleged that a foreign law governed the security agreement which has been breached. (d) In defending the Debt Proceedings Mr. McQuillan intends to pursue the plaintiff for damages for breach of contract and damages to his professional reputation which the Debt Proceedings which are described as “unlawful proceedings”, have caused. 22. Finally, by letter dated 29th August, 2012, McCann Fitzgerald, on behalf of the Bank, having referred to Clause 3 of the Loan Agreement, under which it was provided that full and final repayment of the facility was due on 31st July, 2012, stated that the Bank was then entitled to full and final repayment of the sums due pursuant to the Loan Agreement, being principal of €663,160.02 and interest of €29,857.65. There followed a demand that Mr. McQuillan arrange to make full and final repayment of those sums without delay. The response of Beauchamps dated 6th September, 2012 was that the demand was irrelevant, as the Court would adjudicate the issues before it based on the pleadings already submitted. It was asserted that the letter was an attempt “to remedy defects” in the Debt Proceedings. Overview of contractual liability of Mr. McQuillan 24. Mr. McQuillan also contracted to give the Bank security for the loan. His obligations in that regard are to be found in Clause 5 of the Loan Agreement, as amended. The extent to which the Bank has recourse to the assets over which it obtained security from Mr. McQuillan is to be determined primarily by reference to Clause 5. Notwithstanding that Mr. McQuillan’s personal liability to the Bank under the Loan Agreement has been reduced to the extent that the Bank has recovered part of the monies owing by Mr. McQuillan out of the realisation of its security, the Debt Proceedings and the Interpleader Proceedings raise different issues. Accordingly, it is necessary to consider each separately. I propose considering the Debt Proceedings first. The Debt Proceedings
There the test postulated by Hardiman J. was summarised by him by posing the question “is it very clear that the defendant has no case?”. If the answer is in the affirmative the motion succeeds. If not, it does not. That is the test I propose to apply here.
27. In short, the only ground of defence advanced to challenge Mr. McQuillan’s personal liability was that, when the summary proceedings were issued, the balance of the principal had not become due to the Bank because the stipulated repayment date, 31st July, 2012, had not arrived, and the Bank was not entitled to accelerate the repayment date as it purported to do by the letter of demand dated 14th July, 2011. Even if Mr. McQuillan is correct in that assertion, the reality of the situation is that prior to the hearing of the motion for judgment on 31st October, 2012, the date for full and final repayment, 31st July, 2012, had passed and Mr. McQuillan had become personally liable to repay the balance outstanding to the Bank. The balance was automatically repayable without any demand. In reality, all that is left in Mr. McQuillan’s defence is his assertion that the letter of demand dated 14th July, 2011 constituted a breach of contract, in respect of which he intends to pursue a claim against the Bank for damages for breach of contract and damage to his professional reputation caused by the Debt Proceedings. 28. The manner in which Mr. McQuillan has drawn the alleged joint ownership of half of the proceeds of the secured assets into the Debt Proceedings is quite ingenious and is based on the manner in which the Bank has set out the basis of its claim on the special indorsement of claim on the summary summons. The Bank has justified the invocation of Clause (o) of the Default Appendix in the indorsement on the following basis:
29. The Bank’s answer to Mr. McQuillan’s resistance to judgment contains two elements. 30. The first is addressing the question whether, to the extent that the Court is required to consider the Pledge Agreement, the Court can do so without evidence of foreign law and, if it cannot, who bears the burden of adducing evidence of foreign law? In this connection, counsel for the Bank relied on the following passage from the judgment of Walsh J. delivering judgment in the Supreme Court in Kutchera v. Buckingham International Holdings Ltd. [1988] I.R. 61 (at p. 68):
32. I have come to the conclusion that Mr. McQuillan has no prospect of successfully defending the Debt Proceedings. The Loan Agreement is governed by Irish law. Mr. McQuillan is contractually bound by the provisions of the Default Appendix, including Clause (o). In determining whether the Bank was entitled to invoke clause (o), the question which arises is whether the Bank’s opinion that, by 14th July, 2011, circumstances had altered materially since the loan was advanced to Mr. McQuillan or such new information had come to light as would justify requesting the immediate repayment of the loan, was reasonable. I consider that that question can be answered in the affirmative without having to consider the provisions of the Pledge Agreement. In the Loan Agreement, Mr. McQuillan expressly contracted that the Bank would have by way of security for the advance to be made to him a “first ranking fixed security over all securities” held by or to be acquired by Quinlan in Carraig Investments and Carraig Beag as his nominee. He had clearly resiled from that position approximately a year before the demand dated the 14th July, 2011 was made. That being the case, the opinion of the Bank that circumstances had altered materially was reasonable and justified. 33. In my view, it was not necessary for the Bank to invoke the provision in Clause 6.1.1 of the Pledge Agreement as the basis for a material alteration in the circumstances which arose. However, even if it was so necessary, the burden of proving that Clause 6.1.1 means something in Luxembourg law other than its plain meaning, namely, that it was a representation by Mr. McQuillan that he was the beneficial owner of the “assets” as defined, lay on Mr. McQuillan. Mr. McQuillan adduced no evidence to discharge that burden. 34. Applying the appropriate test, in my view, it is very clear that Mr. McQuillan has no case in defence of the Debt Proceedings. Therefore, the Bank is entitled to summary judgment. There will be an order for judgment for the amount now due by Mr. McQuillan to the Bank on foot of the Loan Agreement for principal and interest when the figures are updated. The Interpleader Proceedings
(b) that the applicant does not collude with any of the claimants; and (c) that the applicant is willing to pay or transfer the subject-matter into Court or to dispose of it as the Court may direct. 37. However, the question which remains, on the basis of submissions made on behalf of the Bank, is whether the Court can go further and determine who is entitled to the balance of the proceeds of the realisation of the Knightsbridge Scheme held by Avestus: whether it is the Bank or, alternatively, Mr. McQuillan and Mrs. McQuillan jointly. 38. The outcome of that issue, in my view, turns primarily, albeit perhaps not exclusively, on –
(b) whether the Pledge Agreement was properly executed on foot of the power of attorney given by Mr. McQuillan, the date of which is unclear; (c) if the power of attorney was properly executed, the construction of the Pledge Agreement and, in particular, the identification of the assets pledged; (d) whether, with the authority of Mr. McQuillan, the undertaking dated 9th June, 2010 given by Avestus to the Bank replaced the pledge; and (e) the proper construction of the undertaking.
41. Therefore, I propose making an order directing Avestus to pay the monies in question into Court. Further, I propose directing that an issue be tried as between the Bank, as plaintiff, and Mr. McQuillan and Mrs. McQuillan, as defendants, to determine who is entitled to the monies lodged in Court. I would propose case managing the issue to ensure that it is dealt with expeditiously. 42. A decision on the Interpleader Proceedings will not impact on any claim which either the Bank or Mr. McQuillan and Mrs. McQuillan may wish to pursue against Avestus and the position of the parties is reserved in that regard. However, I consider that it would not be appropriate to join Avestus as a party to the issue. Summary of orders 44. In relation to the Interpleader Proceedings, Avestus will be granted the interpleader relief sought and directed to pay the subject matter of the dispute into Court, as indicated at para. 41 above. There will also be directions as to the trial of an issue between the Bank and Mr. McQuillan and Mrs. McQuillan on the lines indicated at para. 41 above. 45. Both proceedings will be adjourned for a short period to enable the parties consider the implications of the orders which are to be made. |
