Irish Bank Resolution Corporation Ltd (In Special Liquidation) -v- Morrissey

Factual and Procedural Background

The proceedings arise from a loan facility agreement dated February 2009 between the Plaintiff, formerly known as Anglo Irish Bank Corporation Ltd. ("the Bank"), and the Defendant, a businessman with extensive experience in property and other investments ("Mr. Morrissey"). The Bank sought judgment for sums exceeding €36 million allegedly due under various loan facilities granted since 2000, culminating in the 2009 facility letter.

The dispute focuses on two preliminary issues ordered for early trial: (a) whether the Plaintiff was entitled to demand repayment under the 2009 loan facility as it did in January 2010; and (b) whether the relationship between the parties extended beyond contract to a fiduciary relationship.

The Bank's demand for repayment was made by letter dated 19th January 2010, seeking immediate repayment of outstanding sums and reserving the right to appoint a receiver. The Defendant challenged the demand, pleading breach of contract and estoppel, and asserting the existence of a fiduciary relationship based on the conduct and representations of the Bank over the years.

The proceedings were commenced by summary summons in April 2011 and transferred to the Commercial List. After interlocutory steps, the two issues were ordered for trial in advance of other issues.

The factual background spans from 2000 to 2010, detailing the evolution of the parties' relationship, facility terms, negotiations, and communications, including several facility letters, amendments, and extensive correspondence. The Defendant was an experienced entrepreneur and borrower who negotiated terms actively with the Bank.

Following difficulties in 2008 and 2009, including disputes over rent payments and financial management, the Bank’s credit committee decided in December 2009 to appoint a receiver. The Defendant was unaware of this decision at the time. The demand for repayment and threat of enforcement followed in January 2010, leading to the current dispute.

Legal Issues Presented

1. Whether the Plaintiff was entitled to demand repayment of the loan facility under the terms of the 2009 agreement as it did in January 2010.
2. Whether the relationship between the Plaintiff and Defendant transcended a contractual relationship to establish a fiduciary relationship.

Arguments of the Parties

Plaintiff's Arguments

• The 2009 facility letter and General Conditions constituted the binding contractual terms governing the loan facilities.
• Clause 8 of the 2009 facility letter made the facility repayable on demand and required repayment by 31 July 2009, entitling the Bank to demand repayment in January 2010.
• The Bank denied any breach of contract in making the demand and rejected the existence of any collateral or implied agreements limiting its rights.
• The Bank denied any fiduciary relationship existed, emphasizing the commercial and contractual nature of the dealings.
• The Bank also denied any estoppel preventing the demand, noting no clear and unambiguous promise to refrain from demanding repayment beyond 31 December 2009.
• Following the Irish Bank Resolution Corporation Act 2013 and appointment of Special Liquidators, the Bank, through the Special Liquidators, maintained the right to continue proceedings.

Defendant's Arguments

• The Bank was not entitled to demand repayment in January 2010, having allegedly made representations and entered into arrangements that the facilities would be extended or "rolled over" if certain conditions were met.
• The Defendant relied on a "standstill agreement" reached in July 2009, whereby the Bank agreed not to demand repayment provided rent was paid into the Bank’s account, contending this arrangement extended beyond 31 December 2009.
• The Defendant pleaded estoppel based on representations by Bank officials, particularly Mr. Gilmartin, that the Bank would continue to work with him if he complied with the 2009 agreement.
• The Defendant contended that the Bank's conduct and representations gave rise to a fiduciary relationship beyond mere contractual dealings, akin to a venture capital financier relationship.
• Following the appointment of Special Liquidators, the Defendant submitted that the claim was stayed and that the Special Liquidators lacked power to continue the claim.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by emphasizing its role as a court of law, tasked with determining parties’ rights under applicable constitutional, statutory, and common law, including contract and equitable principles such as estoppel.

On the first issue, the Court found that the 2009 facility letter and accompanying General Conditions constituted the binding contractual terms governing the loan facilities. Clause 8 of the 2009 Agreement unequivocally required repayment on or before 31 July 2009, making the facility repayable on demand at the Bank’s discretion.

The Court rejected the Defendant’s contention that the facilities were “rolled over” or extended by implication or collateral agreement. It found no factual or legal basis to imply such a term, particularly as it would contradict the express terms. The Court also found no enforceable collateral agreement limiting the Bank’s right to demand repayment beyond 31 December 2009.

The Court examined representations alleged to have been made at a meeting on 23 January 2009 and found no such representations were made. Subsequent email exchanges confirmed the Bank’s entitlement to demand repayment after the repayment date.

The Court accepted that an arrangement (the "Standstill Agreement") was made in July 2009 whereby the Bank agreed not to demand repayment for an unspecified period provided rent was paid into the Bank’s account. However, this arrangement was understood by all parties to expire at 31 December 2009, and no extension or promise to forbear beyond that date was made.

Regarding estoppel, the Court applied established principles requiring a clear and unambiguous promise intended to affect legal relations, acted upon by the claimant to their detriment. The Court found that the representations made were not sufficiently clear or lasting to establish estoppel preventing the Bank’s demand in January 2010.

On the second issue, the Court considered whether the relationship was fiduciary. It noted that the parties agreed they did not fall within settled fiduciary categories and that fiduciary duties may arise only in exceptional circumstances.

The Court reviewed the extensive factual matrix, including the Defendant’s business experience, the commercial nature of negotiations, and the absence of advice or participation by the Bank beyond ordinary lending. It found no evidence that the Bank acted as a venture-capital financier or undertook duties of loyalty or trust beyond contract.

The Court relied on authoritative precedents establishing that commercial arm’s length dealings generally do not give rise to fiduciary duties and concluded that no fiduciary relationship existed between the parties.

Finally, the Court addressed procedural matters arising from the Irish Bank Resolution Corporation Act 2013 and the appointment of Special Liquidators. It held that the claim was not stayed under the Act and that the Special Liquidators had power to continue the proceedings on behalf of the Plaintiff.

Holding and Implications

The Court made the following declarations:

• The Plaintiff was entitled to make demand on the Defendant pursuant to the loan facilities granted in February 2009 as it did in January 2010.
• The relationship between the Plaintiff and Defendant did not extend beyond a contractual relationship and no fiduciary relationship existed between them.

The direct effect is that the Bank’s demand and appointment of a receiver were lawful and enforceable under the contractual terms. No new legal precedent was established beyond confirming the application of existing principles to the facts of this case. The Court declined to stay or adjourn the determination of these issues despite the statutory changes affecting the Plaintiff’s corporate status.