A judge has ruled Talos Capital is entitled to judgment for €2.4 million against two of the main shareholders in Dublin's Blackrock Clinic. However, Mr Justice Sean Ryan adjourned the entry of judgment for a week to allow the men seek a stay on his decision pending appeal.
Talos Capital Ltd sought summary judgment against Joseph Sheehan and John Flynn over what it claimed was "material" default on a loan agreement.
In his High Court decision, Mr Justice Ryan said the €2.4 million was provided as a 10 per cent deposit on a bid by a company, JCS, whose liabilities were guaranteed by the two men to buy out their loans relating to the Blackrock Clinic business.
The loans, originally given by the former Anglo Irish Bank, were taken taken over by Anglo's successor IBRC which put them up for sale.
Under the proposal, JCS was to get a loan of €24 million which was to be used to buy from IBRC loans charged on shareholdings in Blackrock Clinic of Mr Sheehan, Mr Flynn and Dr George Duffy.
The three together had a 56 per cent shareholding in the clinic business.
On April 7th, 2014, Talos transferred a loan for a 10 per cent deposit (€2.4 million) to IBRC, which had by then been put into special liquidation.
A week later, Talos learned the loans of Dr Duffy, who held 20 per cent of the 56 per cent shareholding in Blackrock, had been separately sold by the IBRC liquidators.
Talos argued this fundamentally changed the nature of loan agreement and said it would never have agreed to funding for such a limited acquisition of the IBRC loans.
Talos said this was a breach of the defendants’ obligations and it was entitled to immediate repayment of the €2.4 million.
The defendants argued Talos was not entitled to summary judgment as they had an arguable defence and there should be a full hearing of the matter.
Mr Sheehan said, when Talos paid the deposit, it exercised powers of corporate control over the JCS company by removing existing directors and appointing its own nominees.
He also argued Talos’s position was not undermined by the separate purchase of Dr Duffy’s loans.
Talos breached its obligations to him and Mr Flynn by prematurely calling in and accelerating the liabilities and by failing to provide necessary finance to complete the purchase of their loans from IBRC, he said.
Mr Justice Ryan accepted arguments on behalf of Talos including the loan agreement was terminated for good reason as Talos was entitled to do so in view of a breach.
The fact the entire loan agreement transaction was not completed, and that the IBRC loans had not been redeemed, cannot defeat Talos’ claim even on the defendants’ own version of events, he said.