The High Court has entered judgment for more than €98 million against Donatex Limited arising from financing connected with the €410 million-plus purchase of the former Irish Glass Bottle site in Ringsend, Dublin 4.
Mr Justice Kelly ruled on December 18, 2009, that Ringsend Property Limited was entitled to €98,145,905 from Donatex and €62,550,000 from property developer Bernard McNamara under his personal guarantee.
The site had been acquired through Becbay Limited by a consortium involving the Dublin Docklands Development Authority, McNamara and Derek Quinlan. Donatex, McNamara's company, held a 41% interest in Becbay.
To finance McNamara's share of the equity, Donatex issued €62.55 million in secured loan stock carrying annual interest of 14% and a 3% redemption premium. The investment was marketed through Davy Stockbrokers.
The loan agreement contained an accelerated repayment clause. It provided that the stock became immediately redeemable if, within 30 months of January 29, 2007, Becbay had neither applied for the necessary Section 25 development certificates from the DDDA nor obtained required planning permission from Dublin City Council.
It was undisputed that neither event had occurred within that period.
Donatex resisted summary judgment on several grounds. It argued, among other things, that later legal developments concerning the DDDA's Section 25 powers had frustrated the relevant contractual clause, that the contract involved a mistake of law and that a term should be implied requiring the Section 25 route to remain legally available.
Kelly J rejected each argument as incapable of providing a real or arguable defence. He held that the contract expressly allocated the risk of failure to secure or apply for the relevant development approval to Donatex and the defendants.
The judge also rejected the proposed concept of “partial frustration”, saying the repayment clause could not simply be severed while the remainder of the contract continued.
McNamara accepted that if judgment was entered against Donatex, he had no defence under his personal guarantee for the €62.55 million principal.