The High Court has ruled that a 2013 fee agreement does not apply where a group of companies proposes to redeem its loans at par, including all interest due. The court answered a discrete issue directed for an expedited hearing; it did not decide the separate argument that the agreement was void as a clog on the plaintiffs’ equity of redemption.
The plaintiffs are companies in the Rhatigan Group and Padraic Rhatigan. Their loans were originally advanced by Ulster Bank Ireland Limited and later sold, together with the fee agreement, to Beltany Property Finance Limited. The agreement was made by Luxor Investments Limited and Luxor Leisure Limited with UBSIG (ROI) Limited, a subsidiary of the bank, as part of a 2013 restructuring.
The agreement provided for a fee linked to disposal of the hotel or a termination date, with a minimum fee of €1 million. The defendant maintained that the fee remained payable even if the loans were repaid at par. The plaintiffs said they had secured financial backing that would enable them to repay the hotel and non-hotel facilities in full, including interest. The parties could not agree on the amount to be placed in escrow while the dispute was determined.
Justice Brian J. McGovern said the evidence showed that the parties had not expected the loans to be repaid at par when they entered the agreement. Evidence included a former bank employee’s account that the restructuring assumed sales of non-hotel assets, and a 2014 letter describing the fee as a way for the bank to capture some potential future equity value in the hotel and offset losses.
The judge found the agreement’s wording clear but said it did not address the unforeseen situation in which the loans would be redeemed at par. He concluded that requiring full repayment with interest as well as a substantial additional fee was not what the parties had envisaged. On the evidence and the agreement’s commercial context, he answered the directed question by ruling that the agreement was “not applicable or enforceable” in those circumstances.
Because of that answer, the judge did not consider whether the fee agreement was void as a clog on the plaintiffs’ equity of redemption. The judgment, delivered on 13 May 2015, resolves the discrete issue identified for the expedited hearing.