Businessmen ‘liable’ for unpaid loans of €8m to Zurich Bank

ZURICH Bank has secured an €8.15 million summary judgment orders at the Commercial Court against five people over unpaid loans issued in 2007 to buy properties in Bantry, Co Cork. The combined value of those properties in late 2009 was €2.5m.

Ms Justice Mary Finlay Geoghegan yesterday rejected arguments by the defendants that the true nature of the loan agreement involved the bank having no recourse to the defendants personally and its recourse was limited to the properties.

It was “beyond argument” the express written terms of the facility letter of December 6, 2007, as varied by another letter of January 21, 2009, made the defendants personally liable for repayment of the principal and interest on the loan, she said. Both those letters were accepted in writing by the defendants after legal advice, she noted.

Claims by the defendants they were advised by an official of the bank on a strategy to “deceive” the bank’s credit committee into falsely believing they had raised the €550,000 deposit required for the loan did not amount to an arguable defence to the bank’s claim entitling the defendants to a plenary hearing, she also ruled.

She entered summary judgment for €8.15m jointly and severally against Richard Coffey, Avoca Park, Blackrock, Co Dublin; Brian O’Hagan, Talbot Lodge, Grove Avenue, Blackrock, Co Dublin; Donal Hunt, Golf Course, Cahir, Bantry; Rory O’Callaghan, Snave, Ballylickey, Bantry, and Viv O’Callaghan, Blackrock Road, Bantry, all trading as Seafield Holdings Partnership.

The partnership had purchased Vickery’s Hotel, New Street, Bantry, for €4.5m with a €3.6m loan from AIB. It also agreed to purchase adjoining properties, Kiddycare and World Choice Travel, and had an agreement with the Dix family to buy another property with the intention of redeveloping all four properties to construct a large mixed use development.

To facilitate that proposed development, Zurich advanced a €7.9m term loan to the defendants in December 2007 for a period of 12 months from the date of drawdown, later extended. When the loan was not repaid by October 2009, the bank demanded repayment.

Zurich alleges its loan included €1.25m to buy Kiddycare, €1.42m to buy World Choice Travel and €4.15m to refinance the borrowings with AIB on Vickery’s Hotel. The loan was secured by mortgages and charges over the hotel, Kiddycare and World Choice Travel properties. The bank appointed joint receivers over the properties in June last year.

The defendants had argued the bank’s own actions in relation to advising his clients disentitled it summary judgment. They claimed the bank was always aware the five did not have enough cash assets to meet the loan.

The five had claimed they were told the bank’s credit committee required them to produce a €550,000 deposit for the loan, which they could not raise. However, they claimed, a lending manager with the bank advised them they could “get around” this by artificially inflating the figures for professional fees put before the credit committee. This was done with the result the bank ended up itself loaning them the deposit monies required, they claimed.