Cave Projects v Gilhooly & Ors (Approved)

Factual and Procedural Background

The Plaintiff brought an action seeking judgment against the second named Defendant in the sum of €11,407,826.90. Originally, there were five Defendants who entered into a series of partnership agreements commencing on 27 November 2003. The partners purchased property in Athenry, County Galway, funded initially by an Ulster Bank loan in 2004, and later secured by a Bank of Ireland loan facility starting with a facility letter dated 14 October 2005. The loan facilities increased over time, with the latest relevant facility letter dated 5 September 2007, executed by all five partners except the Defendant did not execute a later 2009 loan agreement on legal advice.

The facility of 5 September 2007 included an increase of €600,000 over prior loans, with no condition precedent relating to valuations for the additional drawdown. The Bank of Ireland made a demand for immediate payment of all sums due under this facility on 5 January 2011, with no response from the Defendant.

Procedurally, the Bank of Ireland initiated summary summons proceedings in February 2011 against the Defendants. Cave Projects Limited was substituted as Plaintiff in February 2013 following acquisition of the loan assets from the Bank of Ireland. The Plaintiff entered into settlement agreements with three of the five Defendants in May 2013 and with a fourth Defendant during the trial, leaving the claim to proceed solely against the Defendant.

The Defendant filed a defence denying knowledge of the loan facility, asserting that the loans were non-recourse or limited to specific assets, and alleging breaches by the Bank of Ireland including failure to satisfy conditions precedent. The Defendant also claimed prejudice due to delay, but an application to strike out the proceedings on this basis was refused by the High Court and the Court of Appeal.

Several witnesses, including solicitors and bank officials, gave evidence regarding the loan facilities, security arrangements, transfer of loan assets to the Plaintiff, and the status of the loan account. The Plaintiff relied on documentary evidence, admissions, and the Defendant's failure to respond to demands to establish the indebtedness.

Legal Issues Presented

1. Whether the Plaintiff is entitled to judgment against the Defendant in respect of the outstanding loan sum under the facility letter dated 5 September 2007.
2. Whether the Defendant was released from liability by virtue of the settlement agreements entered into by the Plaintiff with the other Defendants.
3. Whether the Defendant's defence based on non-recourse loans, breach of conditions precedent, or delay in prosecution is sustainable.
4. The correct date of transfer of the loan assets from NAMA to the Plaintiff and its effect on the Plaintiff's standing.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff asserts the Defendant is jointly and severally liable under the loan facility of 5 September 2007 for the outstanding sum of €11,407,826.90, after accounting for funds received from other Defendants and rental income.
• The Plaintiff contends that the settlement agreements with other Defendants do not release the Defendant from liability as the Defendant was a borrower and not merely a surety, and the agreements were with different parties.
• The Plaintiff relies on documentary evidence, including facility letters, deeds of charge, letters of demand, and affidavits from bank officials, to establish the validity and enforceability of the debt.
• The Plaintiff argues that no condition precedent relating to valuation applied to the 5 September 2007 facility, distinguishing this case from precedent relied on by the Defendant.
• The Plaintiff denies any prejudice from delay and notes that the Defendant's application to strike out for delay was refused.

Defendant's Arguments

• The Defendant denies knowledge of the loan facility and the extent of the alleged loan, asserting that the loans were intended to be non-recourse or limited to specific assets.
• The Defendant claims that the Bank of Ireland improperly transferred charges to the Central Bank, undermining the Plaintiff's claim.
• The Defendant asserts breach of express or implied terms by the Bank of Ireland, including failure to satisfy conditions precedent such as valuations.
• The Defendant contends that the settlement agreements with other Defendants should release him from liability under principles relating to release of sureties or under the Civil Liability Act.
• The Defendant claims prejudice due to delay in prosecution of the claim.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court examined the documentary evidence, witness testimony, and the parties’ submissions to determine the validity of the Plaintiff’s claim and the Defendant’s defences. It was established that the Defendant was a joint and several borrower under the loan facility dated 5 September 2007, which incorporated an increase of €600,000 over prior loans. The Court found no condition precedent relating to valuations for the additional loan amount, thus distinguishing this case from precedent where such conditions were material.

The transfer of loan assets from NAMA to the Plaintiff was found to have occurred on 22 January 2013, notwithstanding a typographical error on the transfer document. This was supported by uncontroverted evidence from solicitors involved in the transaction and documentary proof of payment.

The Defendant’s argument that he was released from liability by virtue of settlement agreements with other Defendants was rejected because the Defendant was a primary borrower rather than a surety, the letters relied upon were addressed to a different entity, and the Plaintiff did not sign those letters. Furthermore, the content of the letters was an offer of settlement rather than binding terms.

The Court also found no evidential basis for the Defendant’s claims of breach of contract, mistake, or prejudice due to delay. The Defendant’s failure to respond to the letter of demand was treated as an admission against interest. The Court accepted the evidence of the bank official as reliable, applying principles relating to refreshing memory and admissibility of contemporaneous records.

The Plaintiff was credited with amounts received from other Defendants and rental income, ensuring the Defendant was not overcharged. The Court confirmed that the Plaintiff was entitled to seek judgment against the Defendant notwithstanding potential recovery from secured assets in the future.

Holding and Implications

The Court held that the Plaintiff is entitled to judgment against the Defendant in the sum of €11,407,826.90.

Costs were ordered in favour of the Plaintiff to be adjudicated upon in default of agreement.

The decision confirms that joint and several borrowers remain liable notwithstanding settlements with co-borrowers, and that conditions precedent must be clearly established to affect enforceability. No new precedent was set; the ruling applies established principles to the facts before the Court.