The High Court refused Breccia’s applications to stay orders setting loan redemption figures or to require two borrowers to pay disputed additional sums into escrow while Breccia appeals. It said those measures could prevent the borrowers from redeeming their loans and cause them serious, potentially irreparable harm.
The combined judgment, delivered by Mr Justice Haughton on 4 March 2016, dealt with follow-up applications in proceedings brought by Joseph Sheehan and, separately, John Flynn and Benray Limited. Earlier judgments had set the sums payable to redeem loans held by Breccia and rejected Breccia’s claims to add 4% default surcharge interest and certain enforcement costs.
Breccia argued that its intended appeals were genuine and that, if successful, it could struggle to recover the additional sums after its security over shares in Blackrock Hospital Limited was released. It sought payment of the disputed amounts into escrow, security for them, or stays of the redemption orders. The judge accepted that the appeals had possible prospects of success and were bona fide in that sense; he did not decide their merits in this supplemental judgment.
The borrowers argued that a stay or escrow requirement would jeopardise funding they had arranged to redeem at the court-ordered figures. The judge accepted that alternative funding had been difficult and that funders were unlikely to wait through appeals expected to take a year to 18 months. He also found it very unlikely that the borrowers could raise the additional €4 million to €5 million Breccia sought in each case. A stay or escrow payment would therefore risk keeping the loans and share security in place and, for Flynn, delay his release from a personal guarantee.
Weighing those risks, the judge refused the requested stays and escrow payments. He also considered Breccia’s past conduct, including earlier findings that its handling of surcharge interest had placed obstacles in the way of redemption. He concluded that the current applications were tactical and designed to create further obstacles to the borrowers’ efforts to obtain ownership of their shares.
The court did, however, identify a possible form of temporary security. If each borrower undertook to grant Breccia a second mortgage over the relevant shares immediately after redeeming the loans, behind the new funder’s first charge, and to maintain it pending the appeal and any resulting liability, the judge would refuse Breccia’s requested stay. If the undertakings were given, he would grant only a short stay to allow Breccia to apply to the Court of Appeal for a longer one. If they were not, he would consider whether to impose other terms. The judgment does not record whether either undertaking was given or resolve that subsequent step.
The judge stayed entry and execution of the costs awards until the appeal-notice period expired, or, if an appeal was filed, until it was disposed of; taxation could proceed. In Sheehan’s case, costs enforcement was also stayed until the remainder of the action was determined. He made no equivalent further stay in Flynn’s case, where he considered the modular hearing likely to dispose of the action.