The Court of Appeal has ruled that a 4% surcharge-interest clause in loan agreements between Benray Limited and Anglo Irish Bank was an unenforceable penalty. It dismissed Breccia’s appeal on that issue and varied the High Court’s decision on enforcement costs, while leaving the precise changes to the order for a further hearing.
The dispute arose from loans Benray took out in 2006 and 2008 to buy shares in Blackrock Hospital Limited, the company operating Blackrock Clinic. Breccia later acquired the loans and associated security from National Asset Loan Management Limited. It sought to include surcharge interest and enforcement costs in the amount required to redeem the loans.
The High Court had found that clause 5.1 of Anglo’s general conditions formed part of the loan contracts but that its 4% surcharge was a penalty and unenforceable. The Court of Appeal upheld that ruling. It said the clause applied regardless of the loan amount or security, and the contractual terms did not specify when surcharge interest became payable or allow it to be debited to Benray’s account. The court concluded that the provision was not a genuine estimate of the bank’s loss from default.
Because the clause was unenforceable, the appeal court said it did not need to decide the estoppel issue. It added that, if required, it would dismiss Breccia’s appeal against the High Court’s estoppel decision.
On enforcement costs, the court said costs incurred before the proposed redemption date could be included, including costs whose liability or amount remained contingent, provided a reasonable estimate was used. Litigation costs could be recovered only where a court had made an order in Breccia’s favour, subject to any appeal.
The court said Breccia could include its costs of defending earlier proceedings brought by John Flynn and Benray, but only on the party-and-party basis awarded by the courts. It could not include €680,448.59 paid to the receiver for defending those proceedings: Breccia had not established a factual basis for including that sum under the loan agreements, and the courts had made no costs order in the receiver’s favour.
The High Court had set the redemption figure at €9,394,974.93 as of 18 February 2016, with a daily accrual rate. The Court of Appeal directed that the order be varied to permit qualifying enforcement costs incurred before the proposed redemption date. It said the parties would be heard on the precise variations required.