The High Court has given Allied Irish Banks judgment for €2.4 million against Daragh Heagney, who guaranteed borrowing by Balmain Ltd, the company that bought the Bailey Court Hotel in Howth.
The bank’s claim was based on three guarantees. Heagney’s liability under them was capped at €2.4 million, while Balmain owed the bank about €7 million. The guarantees’ validity and the capped amount were not disputed.
Heagney argued that the bank and its agents had allowed the hotel to deteriorate after a receiver was appointed in June 2009. He sought an equitable allowance or set-off against his guarantee liability, alleging inadequate security and maintenance, water damage, vandalism and the loss or damage of contents and fittings.
After Balmain went into liquidation, the bank became mortgagee in possession and the receiver, James Luby, continued managing the property as the bank’s agent. The hotel was not sold. The court heard that it had already ceased operating as a hotel and was open mainly at weekends before the receivership. Its licences had not been renewed from September 2008, and fire-safety work was estimated to cost about €125,000.
Evidence described break-ins and substantial damage, including water ingress, damp and vandalism. The bank and Luby said they had secured the building, arranged marketing and increased security after serious trespass incidents. In 2010, the bank declined a conditional €1.45 million offer. Luby and the auctioneer considered it worthy of acceptance, but the bank decided to mothball the property while retaining the prospect of future redevelopment.
President Kearns found that the bank became mortgagee in possession after the liquidation and assessed the relevant duty of care by reference to the higher standard applicable to Luby’s roles. He concluded that neither the bank nor Luby breached that duty. The hotel was already in less than good condition when Luby took charge, and the court accepted that the poor market and the property’s condition made a sale difficult.
The judge found that breaking the exterior glass panels was an act of waste by the security company, and that they could have been removed without being smashed. He said this did not meaningfully assist Heagney’s claim. The court also found no duty to spend €125,000 on fire-compliance work and held that rejecting the conditional offer was not negligent, despite evidence that accepting it might have been wiser.
Separately, the judge concluded that even a sale at the offered price would have left Balmain owing close to €6 million after receivership costs. He also accepted the bank’s submission that the guarantee barred set-off. As Heagney had not made out his defence and the amount due under the guarantee was agreed, the court entered judgment for the bank for €2.4 million.