The High Court ordered Richard McKenna and Vera McElwaine to give Allied Irish Banks possession of the Percy French Hotel in Ballyjamesduff, County Cavan, after rejecting their applications to strike out the proceedings or send them to a plenary hearing.
Ms Justice Laffoy found that the bank’s possession claim was established despite an error in an affidavit about the terms of the loan. She ruled that the mistake was not dishonest, but said the bank’s failure to preserve the correct signed loan document amounted to gross negligence.
The case arose from a mortgage over the hotel, which the defendants bought and renovated after borrowing from the bank in 2001. Their loans were restructured in August 2003. The court found that the accepted agreement was a letter dated 15 August, providing for monthly interest payments of €2,500 from September and a review by November. The defendants understood the arrangement to include a two-year interest-only period, and the court found that the loan account was operated in line with that understanding for two years.
The bank’s original possession affidavit instead relied on a July 2003 letter stating that the loan was repayable over 15 years, with monthly payments of €5,300. After the defendants challenged that document, a bank manager filed what the judge found was a copy of the August letter with the wrong second page. The original August letter was not produced.
Justice Laffoy accepted the bank employees’ explanations for how the mistaken document came to be used. She found no evidence that either had knowingly misled the court. She said the error could and should have been avoided through proper handling of the branch file. The judge also found that the defendants had failed to maintain the agreed monthly interest payments during 2005 and that, even on their understanding of the agreement, the bank was entitled to enforce its security by January 2006.
The defendants had alleged other misconduct, including that a bank manager induced them to inflate the hotel company’s earnings. They also claimed the bank’s conduct prevented completion of a 2007 sale for €1.7 million. The judge said those allegations, even if true, did not prevent a possession order; the defendants could bring separate proceedings if they wished, subject to time limits.
The court ordered possession and said the bank should review the loan statements in light of apparently improper surcharge interest debits. It did not decide whether enforcement should be stayed or for how long, and said it would hear submissions on that question.