The High Court has dismissed a claim by Eoin and Anne Doohan, representative plaintiffs for 214 investors, over losses on Irish Life’s Austin Friars Geared Property Fund. The court ruled for Irish Life on the liability issues it had been asked to decide, including whether the fund’s loan structure and the 2013 property sale breached duties to investors. It did not assess damages because it found no liability.
The fund bought 23 Austin Friars, a City of London office building, in 2007. Irish Life financed about 68% of the purchase with a loan from its sister company, Permanent TSB (PTSB), with the balance coming from investors. The investment was expected to run for five years. The loan also had a five-year term, with the possibility of an extension of up to three years only at the lender’s discretion.
The plaintiffs argued that Irish Life’s investment documents gave it discretion to extend the fund’s term depending on market conditions, but its loan arrangement left that decision to PTSB. They said the structure was a breach of duty and that the fund would not have been sold in July 2013 if Irish Life had secured a loan with an appropriate term. They also maintained that they would not have invested had they known the loan had no express right to extension.
The court found that “market conditions” included the availability of finance as well as conditions in the London property market and the strength of the tenant, Avanta. It concluded that Irish Life had taken reasonable care in structuring the fund: the plaintiffs had not shown that a seven-year loan for a five-year investment, or a loan giving the borrower an express extension right, was available in the Irish market in 2007. The court accepted evidence that refinancing at loan maturity was then a general market expectation.
PTSB declined to extend the loan beyond January 2013, apart from a six-month extension granted in 2012. Irish Life explored refinancing, but none was available. The property was sold in July 2013 for £27.975 million. The court accepted expert evidence that this represented market value at the time. It found that the sale followed consideration of the tenant’s financial position, the property market and financing options, and that Irish Life had acted reasonably and in investors’ interests within the contractual arrangements.
The court also rejected the plaintiffs’ account that they would have declined the investment if they had known there was no express extension right. It relied on evidence of their experience with other geared property funds and the market’s reliance on refinancing. The judgment recorded that investors lost an average of 78% of their capital, while Irish Life suffered no financial loss. The court did not determine the amount recoverable because it dismissed the claim.