A HIGH Court judge has ruled National Irish Bank is entitled to judgment for some €8.87 million against financier Niall McFadden arising from his personal guarantees over an overdraft facility provided to a company of developer Paddy Kelly.

NIB had last August secured summary judgment orders for €8.5 million against Mr Kelly and a businessman, Paul Pardy, over their guarantees for the same overdraft facility for RQB Ltd (formerly known as Redquartz Boundary Ltd). Some €12 million had been made available to RQB for the purpose of acquiring certain properties “pending injection of investor equity”.

The bank secured summary judgment against the company itself in September 2009. RQB Ltd is now in liquidation.

Mr McFadden, a director of RQB from 2005, had argued the bank was not entitled to summary judgment against him, and that case went to a full plenary hearing before Mr Justice Brian McGovern.

In his reserved judgment yesterday, Mr Justice McGovern rejected Mr McFadden’s claims he was not bound by a personal guarantee provided by him in December 2005, and ruled the bank was entitled to judgment in the €8.87 million sum.

The central issue in the case was whether the December 2005 guarantee had been replaced by another guarantee of September 2008, and, if so, whether Mr McFadden was bound by that later guarantee.

Mr McFadden had argued the 2005 guarantee had been replaced, and any liability he had was under the 2008 guarantee.

The 2008 guarantee arose in the context of the overdraft facility being restructured at the request of Redquartz.

The restructuring of the facility involved creating a €2 million overdraft to June 30th, 2009, to fund business restructuring costs and a loan of €8 million to restructure existing borrowings for three years, expiring in June 2011. It was to be secured by the continuation of personal guarantees.

A manuscript entry at the end of the facility agreement also stated the bank should have no recourse to the family homes of Niall McFadden, Paddy Kelly and Paul Pardy.

The facilities were not drawn down by September 30th, 2008, the date up to which the offer was open, and NIB had argued this meant the provision of facilities would have to be renegotiated.

During the hearing, the court heard evidence from Kenneth Dobson, head of corporate banking in Ireland with NIB, relating to the circumstances of the two guarantees. Mr McFadden did not give evidence.

The judge said he accepted the evidence of Mr Dobson that NIB had agreed the 2008 guarantee would supplant the 2005 guarantee, but only when the restructured facilities had been drawn down and all the security was put in place.

That seemed “entirely plausible and, indeed, likely as it represented sound business and common sense”, the judge said.

As the restructured facilities never became operative, it followed that the 2005 guarantee remained in place, and Mr McFadden was bound on foot of that guarantee, he ruled.

The NIB proceedings were brought against RQB Ltd, Flemings Place, Dublin 4; Paddy Kelly, Clonmore, Shrewsbury Road, Ballsbridge, Dublin 4; Niall McFadden, Avoca Wood, Blackrock, Co Dublin; and Paul Pardy, Dunsandle Court, Castleknock, Dublin 15.

The bank demanded repayment from RQB of the €8.5 million sum, plus interest, in July 2009. Shortly afterwards, it sought payment from the other defendants under the guarantee. It claimed no payment was made relating to either facility.