Hospital consultants take action over bank loan

SEVERAL HOSPITAL consultants are among 11 investors who have brought a Commercial Court action claiming a bank cannot pursue them over sums outstanding on loans issued to them in 1998 to buy a property in Dublin for about £12 million (€15.2 million).

About €8.7 million is outstanding under the 13-year loan agreements and the plaintiffs have been advised the current market value of the property – Block S, East Point Business Park, Dublin 3 – is between €3 million and €4 million, leaving a likely shortfall of between €4.7 million and €5.7 million which Investec Bank contends the plaintiffs are liable to pay, Adrian Wrafter, one of the investors, said.

The plaintiffs claim the April 1998 mortgage between them and the bank stipulated the bank’s recourse is limited to the net proceeds of sale of Block S as long as the liability of each plaintiff has been brought under a specified sum and interest repayments were up to date when the loan agreements expired last August. Those conditions were met, he said.

The plaintiffs want to sell the property but the bank is refusing to consent to that, he added.

The plaintiffs are Denis Cregan, Lisdara, Oak Park, Tralee, Co Kerry; Dr John Crowe, Ailesbury Road, Ballsbridge, Dublin; Marcus Daly, Dalkey Avenue, Dalkey, Co Dublin; John O’Hanlon, Claremont Road, Howth, Co Dublin; Dr Declan Magee, Knapton Road, Monkstown; Dr Hugh McCann, Waltham Terrace, Blackrock, Co Dublin; Brian McCarthy, Fexco Ltd, Killorglin, Co Kerry; Michael Meagher, Wellington Road, Dublin; Dr Declan Sugrue, Mount Merrion Avenue, Blackrock, Co Dublin; Dr Oscar Traynor, Orwell Road, Rathgar, Dublin; and Adrian Wrafter, Riverside Drive, Rathfarnham, Dublin.

They are suing Investec Bank (Irish Branch) arising from 13-year term loans issued to them individually in various amounts in 1998 for the purchase of Block S.

The case was transferred on consent to the Commercial Court yesterday by Mr Justice Peter Kelly, who made directions for exchange of legal documents and adjourned the matter to March.

It is claimed, under a mortgage dated April 1st, 1998, the bank’s recourse is limited to net proceeds received from sale of the property. The plaintiffs want an order requiring the bank to sell the property or a declaration they are entitled to sell it and remit the net sale proceeds to the bank. They are also claiming damages for alleged negligence, breach of contract and breach of duty.

In an affidavit, Mr Wrafter said the attraction for the plaintiffs in purchasing Block S was they could avail of capital tax allowances of 25 per cent in year one (1998) and 4 per cent in subsequent years provided they held the property for 13 years from the date of purchase.

Finance was obtained for the purchase from Woodchester Credit Lyonnais bank, now Investec, with each of the plaintiffs entering into a term loan facility dated March 27th, 1998, he said. Under that, the bank agreed to make loan facilities available to each of them for a 13-year term in a sum reflecting the percentage interest each was acquiring in the Block S property.

The intention was to hold Block S for 13 years, using rental income from it to make capital and interest payments, and to sell it when the 13 years expired.

The loan agreement also required each plaintiff to provide security, including a first legal charge over the property and an assignment to the bank of rental income.

Recourse to the plaintiffs was also limited in a manner set out in the mortgage, Mr Wrafter said. The total sum recoverable by the bank against the plaintiffs could not exceed the net proceeds received from enforcing the bank’s security.

Those net proceeds were to be attributable to each plaintiff in proportion to their percentage ownership of the property and, if they were insufficient to meet a plaintiff’s liability, the bank had no recourse to other assets of that plaintiff, Mr Wrafter said.

By August 31st last, all of the plaintiffs had brought their liability to the bank to either the resource threshold amount of €8.7 million or below that amount, Mr Wrafter said. Under the loan agreements and the mortgage, the bank therefore had no further recourse to the plaintiffs for capital or interest but the bank refused to accept that was the position, he said.

The plaintiffs contended the loan agreements and mortgage had matured on August 31st last but the bank was continuing to seek repayment of capital and interest “in perpetuity”.