The High Court has ruled that Allied Irish Banks was entitled to demand repayment of most of the facilities it had advanced to Galvin Developments (Killarney) Ltd and members of the Galvin family, but that their liability for Coolegrean development borrowing was limited to 50% of the drawn debt and interest.
In a judgment delivered on 29 July 2011, Ms Justice Finlay Geoghegan found that AIB had made a binding collateral agreement to limit recourse against the Galvin side of the joint venture to half the borrowing. The agreement arose from 2006 Heads of Terms for the Coolegrean project, which set out 50% recourse to the Galvin Brothers and 50% to the other joint venture participants. The judge found that the Galvins would have sought finance elsewhere if AIB had not offered that arrangement.
The case concerned AIB’s claims for historical facilities to Galvin Developments, loans for the Coolegrean project, personal guarantees and a separate loan for an interest in a hotel in Provence, France. The Galvins argued that the facilities were not repayable on demand and disputed the extent of their liability. AIB relied on its General Terms and Conditions, which were referred to in the facility letters but, the court found, had not been enclosed.
The judge held that the facility letters’ specific repayment terms displaced the general term making loan accounts repayable on demand. However, because the agreements did not specify what would happen if interest was unpaid, other provisions in the general terms applied. As interest was in default when demands were made, AIB could demand repayment of the relevant loans. The court left open whether relief could be granted for two development bonds.
The Galvin Brothers’ guarantees of Galvin Developments’ Coolegrean borrowing were personal guarantees, capped at €21.75 million each, and were not restricted to their interest in land at Cappagh. They covered only Galvin Developments’ 50% liability, not Mowlam Residential Care Ltd’s borrowing. By contrast, the guarantees for Galvin Developments’ historical loans were restricted to the brothers’ interests in the Cappagh lands.
AIB was not entitled to recover surcharge interest applied to four accounts. The judge found that the facility letters set out the applicable interest rate and that AIB had not established that the overdraft drawings were unauthorised.
The court did not calculate the final sums due or make a final order. It gave the parties an opportunity to agree the amounts in light of the judgment, address the position on the development bonds, and agree what relief, if any, should be granted on the land-restricted historical guarantees.