The Court of Appeal has allowed Breccia’s appeal in a dispute over loans secured on Benray’s shares in Blackrock Hospital Limited, setting aside several High Court declarations and a permanent injunction that had restricted enforcement of the security.
In a judgment delivered on 8 March 2017, Ms Justice Finlay Geoghegan said the shareholders’ agreement did not prevent Breccia from acquiring Benray’s loan from National Asset Loan Management Ltd (NALM), or from demanding repayment and enforcing the related security after Benray defaulted. The appeal concerned the High Court’s 2015 interpretation of the agreement and the terms it had implied into it.
Benray borrowed from Anglo Irish Bank to buy shares in Blackrock Hospital Limited. After the loan was assigned to NALM, Breccia acquired it under a loan sale deed dated 23 May 2014, for €9,104,616.41. Breccia demanded €8,744,853 from Benray in August 2014 and appointed Michael McAteer as receiver over Benray’s shares. Benray did not pay.
The High Court had found the loan acquisition valid but ruled that Breccia could not demand repayment or enforce a sale of the shares outside specified procedures in the shareholders’ agreement. It also found that the agreement included a restriction on enforcement and mutual duties of good faith and fair dealing. The Court of Appeal rejected those interpretations. It held that the agreement did not include the specific enforcement restriction or a general implied duty of good faith and fair dealing.
The appeal court said the agreement gave non-defaulting promoters an option to pay a defaulting promoter’s debt in certain circumstances; it did not give the defaulting promoter a right to have others consider rescuing it. The court also concluded that the agreement’s ordinary share-sale procedure did not apply where a receiver sells shares to realise security, because Benray had not decided it wished to sell them.
The court held that Breccia’s repayment demands were not invalid and that McAteer’s appointment as receiver was not invalid. It also set aside the High Court declaration that Breccia could not benefit from Benray’s waiver of pre-emption rights granted to Anglo. The court concluded the waiver’s benefit had passed with the loan and related security.
The Court of Appeal vacated the High Court declarations concerning enforcement, the demands, the receiver appointment and the waiver, as well as the injunction restricting a sale or other disposal of Benray’s shares. It awarded Breccia judgment against the plaintiffs on its counterclaim for €8,744,853 plus interest, with the parties to be heard on the date or terms of interest. The court said it was unnecessary to decide the remaining appeal issues.