The High Court has ruled that Breccia is entitled to dividends declared on Joseph Sheehan’s shares in Blackrock Hospital Limited (BHL), after finding that the mortgage securing his loan entitled the lender to receive them following default.
The judgment, delivered by Mr Justice Quinn on 6 June 2019, concerns the first of three modules in long-running proceedings between BHL shareholders. Sheehan, a registered holder of a 28% shareholding, sought payment directly to him of dividends attributable to those shares. Breccia said it held the relevant rights under a mortgage transferred to it by the special liquidators of IBRC, formerly Anglo Irish Bank.
About €4.1 million in dividends declared for 2014 to 2017 was being held in escrow pending the outcome of this module. BHL said it was willing to pay once the dispute was determined, but did not consider itself able to decide the parties’ legal entitlement.
The mortgage was executed in 2006 to secure borrowing used to acquire BHL shares. It covered the shares, dividends and a bank account into which dividends were to be paid. The bank or its nominee was never registered as holder of Sheehan’s shares. The court held that the mortgage’s definition of “Shares” included shares issued after BHL’s 2009 reorganisation, and that the charge over dividends was equitable pending registration but effective between the parties.
The loan’s principal was not repaid by its 30 December 2010 maturity date. The court found that the default triggered clause 10.1(c) of the mortgage, giving the bank the right to receive dividends and apply them against the secured liabilities. That right passed to Breccia with the loans and security. The closure of the designated account in 2013 ended that payment mechanism, but did not extinguish the separate charge over dividends.
Sheehan argued, among other things, that the charge did not cover the redesigned shares, that closing the account undermined the arrangement, and that later facility letters had waived the dividend security. The court rejected those arguments, finding no express written release of the charge. It also held that earlier correspondence from BHL’s solicitors did not bind the company to Sheehan’s position.
The court refused the reliefs sought in the plenary summons and declared that BHL should pay the dividends to Breccia. It did not make any other orders in the judgment, stating that counsel would be heard on what further orders should be made. The conspiracy claim and Breccia’s repayment counterclaim were assigned to a later module and were not determined here.