The High Court ruled that Breccia could not include retrospective default surcharge interest in the amount required to redeem Benray Limited’s loans, finding that the 4% surcharge provision was an unlawful penalty. The ruling followed a modular hearing on the redemption issues; the judge left the final order and the hearing’s costs to be determined after further submissions.
The dispute concerned loans Benray had taken from Anglo Irish Bank to buy shares in Blackrock Hospital Limited, operator of the Blackrock Clinic. Breccia later acquired the loans and associated security. In June 2015, it claimed a redemption balance of more than €13 million, including surcharge interest and enforcement costs. The plaintiffs disputed both additions.
The judge found that the loan terms gave the lender a contractual right to charge surcharge interest after default. But, applying the Irish High Court approach in earlier cases, he concluded that the 4% provision was a penalty and unenforceable. He cited the rate’s scale in relation to ordinary interest, its application regardless of the length or circumstances of default, and evidence that the surcharge had not been applied to the accounts before Breccia sought to add it retrospectively.
The judge also addressed waiver and estoppel as alternative grounds, relevant only if the surcharge clause were lawful. He found that information supplied by the prior lender, NALM, in March and April 2014 represented the redemption balances without surcharge, and that the plaintiffs relied on those figures when pursuing refinancing. He further found that Breccia’s August 2014 demands and its later counterclaim did not identify a surcharge claim. On that alternative basis, Breccia was estopped from adding surcharge for the period up to 19 June 2015. The judge said surcharge could have been claimed from that date only if the clause were lawful.
Breccia had also sought more than €2 million in enforcement costs, including costs connected with earlier proceedings between the parties. The judge held that enforcement costs can in principle be recoverable under the loan terms, but Breccia could not add costs from those earlier proceedings to the redemption figure because the court had already dealt with costs there and made no order in Breccia’s favour. Possible future costs, including costs of the appeal or this modular hearing, could not be added as contingent liabilities. Costs of this hearing could be included only if awarded to Breccia.
The plaintiffs’ calculation put the balance at €9,342,716.21 on 20 October 2015, excluding surcharge and enforcement costs. The judge said it should be updated to the date of his order using EURIBOR plus 1.75%, with a daily accrual figure until EURIBOR next changed. The parties were to try to agree the figures or make further submissions. The court did not then grant or refuse an order requiring release of all security, noting that some security might continue to cover other loans. It granted no injunction at that stage and was to hear further submissions before perfecting the order and deciding costs.