Refusal By The High Court To Enforce The Terms Of A Fee Agreement

Luxor Investments Limited & Ors v. Beltany Property Finance Limited [2015] IEHC 316

Introduction

In light of the High Court judgment delivered on 13th May, 2015 by McGovern J. in Luxor Investments Limited & Ors .v. Beltany Property Finance Limited, it is clear that while the purchaser of a loan book will be bound by the terms and conditions of any agreement entered into between a borrower and the seller, a Court will not always enforce an exact interpretation of these terms but rather, where necessary, will apply the rules of construction to ascertain and give effect to the real intentions of the parties to the agreement and the underlying commercial realities.

Background

This case related to whether an agreement dated 25th October, 2013 between Luxor Investments Limited and Luxor Leisure Limited (the two first named plaintiffs in the proceedings) and UBSIG (ROI) Limited ("UBSIG"), a subsidiary of Ulster Bank Ireland Limited ("UBIL"), (the "Fee Agreement") was enforceable in circumstances where the plaintiffs subsequently proposed to redeem their loans (including all interest payments due) with the defendant at par.

The plaintiffs in the case are part of the Rhatigan Group of companies and had been clients of UBIL for approximately 17 years. In 2012, UBIL consented to a restructuring of the plaintiffs' loan facilities and as part of this, the parties entered into the Fee Agreement. Pursuant to the terms of the Fee Agreement, the first and second named plaintiffs agreed to pay a fee to UBSIG, either upon the sale of certain Rhatigan Group property, or alternatively, if no property was sold then on a specified termination date in October, 2018. The Fee Agreement clearly provided for the payment of the fee independently of the repayment of the loans.

The defendant, Beltany Property Finance Limited ("Beltany") then purchased the plaintiffs' loans and related assets, including all rights under the Fee Agreement, from UBIL, on 14 October, 2014.

Subsequently, the plaintiffs secured the assistance of a financier who was prepared to restructure their loans in such a way as to enable them to redeem the loans with Beltany in full at par, to include all interest due. However Beltany refused to consent to the redemption of the loans, maintaining that it was entitled to a fee calculated on the basis of the Fee Agreement. On the other hand, the plaintiffs maintained that the Fee Agreement was no longer applicable as, when entering into it, the parties...