The Court of Appeal (CoA) has upheld a High Court decision granting summary judgment of €22 million against three brothers over their failure to repay loans advanced to allow them buy lands earmarked for a data centre.

Ulster Bank, and two receivers it appointed over the lands, had sued Brian McDonagh, Dromin House, Dromin East, Delgany, Co Wicklow, Kenneth McDonagh and Maurice McDonagh, both of Charleston Road, Ranelagh, Dublin.

The action arose out of their failure to repay a 2007 loan for €21.8 million advanced to the brothers to buy an 80-acre site in Kilpedder, Co Wicklow.

Planning permission was obtained for a data centre on the land, but the proposed centre was never built.

In his 2020 judgment, Mr Justice Michael Twomey granted judgment for €22 million against the defendants.

The court also found that the brothers had breached a 2014 agreement to deal with their debt, and that the receivers were validly appointed over the lands.

The judge also agreed with Ulster Bank that there was an attempt to deceive it, involving a company which the bank described as “a front” for one of the brothers to buy the land for just €1.5 million.

The bank had also claimed that under the agreement designed to deal with their debt, the McDonaghs were to sell the land by the end of July 2014.

They failed to do so but instead purportedly entered into an agreement to sell the land for €1.5 million to a company called Granja Ltd without the knowledge of the bank and in breach of the 2014 settlement agreement, it was claimed.

Granja brought High Court proceedings in 2014 claiming the bank failed to specifically perform an agreement between them.

The bank claimed that it became clear in those proceedings, which were discontinued, that Granja was “in fact ‘a front’ for Brian McDonagh” for the purpose of acquiring the land without the knowledge of the bank and therefore writing off all outstanding debt.

Claims denied

The brothers denied the claims and opposed the bank’s application for judgment against them.

They claimed that the bank was precluded from claiming some or all the brothers’ debts after it entered into a settlement agreement with real estate firm CBRE.

The bank had separately sued CBRE alleging negligence in the preparation of the valuation of the Kilpedder lands.

That action was settled in 2016 when CBRE, whom the brothers claimed was a concurrent wrongdoer, agreed to pay €5.3 million to the defendants’ loan account with the bank.

The brothers appealed the High Court’s findings against them to the  CoA.

In their appeal, Kenneth and Maurice McDonagh argued that the High Court was wrong to dismiss their arguments regarding the settlement agreement with CBRE and had erred in relation to that court’s findings about breaches of the 2014 agreement.

They also questioned if the High Court was entitled to deploy certain adverse findings against Brian McDonagh against them.

Brian McDonagh’s appeal was brought on similar grounds, and he sought to have put additional evidence before the CoA that was not before the High Court.

The plaintiffs opposed the appeals and said the High Court’s decision should remain undisturbed.

In its judgment, the Court of Appeal, comprising Mr Justice Brian Murray, Mr Justice Maurice Collins and Ms Justice Teresa Pilkington, dismissed the appeals and declined to set aside the judgment made against the McDonaghs.

Giving the CoA’s judgment, Mr Justice Murray and Mr Justice Collins said that in their view there was “absolutely no basis on which it could be suggested that CBRE could have any such liability to the defendants”.

The CoA added it found it “impossible to see a basis on which CBRE could be required to make any contribution to the defendants, given that the effect of such contribution would be to relieve the defendants of a contractual obligation freely undertaken by them and confer a windfall benefit on them insofar as they would be relieved, at least in part, from the obligation to repay monies of which they had had the benefit.”

Failed to establish

The CoA added that in their appeal Maurice and Kenneth McDonagh failed to establish that the bank breached the 2014 compromise agreement.

The breaches of the agreement by the defendants on which the bank relied could not be attributed to any breach by the bank, the CoA added.

The CoA also dismissed all grounds of Brian McDonagh’s appeal, including his claims that he was wrongfully excluded from calling witnesses from the bank when the case was before the High Court.