Factual and Procedural Background
The plaintiffs are a group of companies which owned and managed several properties, including hotels and restaurants in The City. One plaintiff company held a debt with the defendant, a financial institution formerly known as Anglo Irish Bank Corporation. The debt was cross-secured on assets of all the plaintiff companies. After refinancing the loans in 2008, the defendant called in the loans pursuant to the loan agreement terms. The plaintiffs were unable to repay, leading the defendant to appoint a receiver over the plaintiff companies.
The plaintiffs initiated proceedings challenging the appointment of the receiver, seeking declarations that such appointments were breaches of contract, void, and invalid. They also claimed damages for breach of contract and requested court orders for accounts and inquiries. The statement of claim was delivered on 21 November 2011, and the defendant filed a full defence. The plaintiffs sought to amend their statement of claim to include allegations of altered security documents, breaches of the Companies Act 1963, and claims of unequal treatment relating to the National Asset Management Agency ("NAMA").
The defendant did not contest some amendments but opposed the amendment related to the "NAMA point". The plaintiffs argued that their loans were not transferred to NAMA due to size thresholds and claimed discriminatory treatment compared to borrowers whose loans were transferred. The defendant contended that the claim concerning NAMA was bound to fail, as it effectively challenged legislation and was not properly directed against the State.
The plaintiffs also sought to resist a motion by the defendant for security for costs under section 390 of the Companies Act 1963. The defendant argued that the plaintiffs were unable to pay costs and that no special circumstances existed to deny security for costs.
Legal Issues Presented
- Whether the plaintiffs should be granted leave to amend their statement of claim, particularly concerning the proposed "NAMA point" amendment alleging unequal treatment and breach of constitutional property rights.
- Whether security for costs should be ordered against the plaintiffs pursuant to section 390 of the Companies Act 1963, considering the plaintiffs' alleged inability to pay and any special circumstances.
Arguments of the Parties
Plaintiffs' Arguments
- The amendments to the statement of claim are necessary to address the real issues, including allegations of security document alterations, breaches of the Companies Act 1963, and discriminatory treatment related to NAMA.
- The plaintiffs assert they were treated unequally compared to borrowers whose loans were transferred to NAMA, resulting in a breach of their constitutional property rights.
- The plaintiffs argue that their loans were just below the threshold for transfer to NAMA, and had they been transferred, they would have received continuing support, avoiding loan call-in and receiver appointments.
- They contend that the defendant caused their financial difficulties and that the proceedings raise issues of public and legal importance.
- The plaintiffs claim that proceedings against a third party are a "mirror image" of these proceedings, justifying special circumstances against security for costs.
Defendant's Arguments
- The defendant consents to amendments related to security document alterations and breaches of the Companies Act 1963 but opposes the "NAMA point" amendment as bound to fail and irrelevant to the real issues.
- The defendant contends that the plaintiffs' claim about unequal treatment is essentially a constitutional challenge to the NAMA legislation, which must be brought against the State, not the defendant.
- Sections 99 and 102 of the National Asset Management Agency Act 2009 confirm that borrowers' obligations remain unchanged despite loan transfers to NAMA, negating the plaintiffs’ assumptions.
- The defendant asserts that the plaintiffs have not demonstrated any credible link between their inability to pay costs and any wrongdoing by the defendant.
- The defendant denies that the proceedings against the third party are a "mirror image" of the current proceedings and argues no special circumstances exist to refuse security for costs.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Director of Public Prosecutions v. Corbett [1992] ILRM 674 |
Discretion to allow amendments to pleadings where it enables real issues to be tried without prejudice. |
Used to support the principle that amendments should be allowed if they address real issues and do not unfairly prejudice the other party. |
| Woori Bank & Anor. v. KDB Ireland Ltd [2006] IEHC 156 |
Power to strike out claims that are bound to fail under Order 19, rule 28 RSC. |
Referenced in assessing whether the proposed amendment ("NAMA point") was bound to fail. |
| Porteridge Trading Ltd v. First Active Plc [2007] IEHC 313 |
Criteria for striking out claims bound to fail. |
Considered in evaluating the viability of the plaintiffs’ proposed amendment. |
| Cuttle v. ACC Bank PLC T/A ACC Bank [2012] IEHC 105 |
Test for whether a claim is bound to fail. |
Applied in assessing the proposed amendment’s prospects. |
| Cornhill v. Minister for Agriculture (Unreported, High Court, O'Sullivan J., 1998) |
Test for striking out pleadings bound to fail. |
Referenced in the context of amendment refusal. |
| Iarnród Éireann v. Ireland [1996] 3 I.R. 321 |
Corporate entitlement to constitutional property rights. |
Considered in determining whether plaintiffs, as corporations, could claim constitutional property rights. |
| Connaughton Road Construction Ltd v. Laing O'Rourke Ireland Ltd. [2009] IEHC 7 |
Requirements to prove special circumstances to resist security for costs. |
Applied to assess plaintiffs’ burden in proving special circumstances. |
| Lansford Ltd v. An Bord Pleanála [1998] 2 IR 511 |
Definition of issues of exceptional public or legal importance. |
Used to evaluate plaintiffs’ claim of exceptional public importance regarding the "NAMA point". |
Court's Reasoning and Analysis
The court first considered the plaintiffs’ application to amend the statement of claim. It allowed amendments related to alleged alterations of security documents and breaches of the Companies Act 1963, as these were uncontested and relevant to the real issues. However, the court refused the amendment concerning the "NAMA point" because it was bound to fail. The court reasoned that the plaintiffs’ claim of unequal treatment and breach of constitutional property rights was effectively a constitutional challenge to the National Asset Management Agency Act 2009, which must be brought against the State, not the defendant.
The court noted that the plaintiffs’ assumption that loan liabilities were reduced upon transfer to NAMA was incorrect, citing sections 99 and 102 of the 2009 Act. The plaintiffs had no right to have their loans acquired by NAMA, and no duty was owed by the defendant to treat them as if their loans had been transferred. The court further held that the plaintiffs’ constitutional claims were unsupported by factual allegations and thus not part of the real issues between the parties.
Regarding security for costs, the court applied the principles from Connaughton Road Construction Ltd v. Laing O'Rourke Ireland Ltd., requiring plaintiffs to prove special circumstances to avoid security. The court found that the plaintiffs failed to show any credible causal link between their inability to pay costs and any wrongdoing by the defendant. The claim that the proceedings raised issues of exceptional public importance was rejected, particularly since the "NAMA point" amendment was disallowed. Additionally, the court dismissed the argument that parallel proceedings against a third party constituted special circumstances.
On balance, the court concluded that no special circumstances existed to justify refusing security for costs, and thus ordered the plaintiffs to furnish security.
Holding and Implications
The court granted leave to amend the statement of claim to include allegations related to security document alterations and breaches of the Companies Act 1963 but refused leave to amend the statement of claim to include the "NAMA point" alleging unconstitutional discrimination and unequal treatment.
The court further ordered the plaintiffs to furnish security for costs pursuant to section 390 of the Companies Act 1963, finding no special circumstances to justify refusal.
The decision confines the scope of the plaintiffs’ claims to contractual and statutory issues with the defendant and excludes constitutional challenges related to NAMA legislation from these proceedings. It also reinforces procedural requirements for amendments and the conditions under which security for costs should be ordered. No new precedent was set beyond the application of established legal principles to the facts of this case.