Remember ICC Bank? It was set up in 1933 by perhaps our greatest pragmatic politician Sean Lemass; originally called the Industrial Credit Company, it is akin to what the Labour party has been promising for more than two years, a strategic investment bank to loan to, and support businesses. In later years, it changed its name to the Industrial Credit Corporation PLC but by 2001 it was known simply as “ICC” when the Irish government sold it to Bank of Scotland.
A serious problem has arisen for Bank of Scotland with enforcing loans originally advanced by ICC. It seems that some, if not all, property loans from ICC could only be enforced if a seal was placed on the deed of the property, by the bank. But guess what? The rules under which BoSI operates – set out in its Memorandum and Articles of Association – don’t require the bank to have a seal and it seems it doesn’t have one!
This whole mess was recently aired in the High Court in Dublin – judgment here just now published. It relates to Foley’s Bar at 1 Merrior Row Dublin 2 which was security for a loan originally advanced by ICC in 1981. About €4m is now outstanding to BoSI which bought ICC in 2001 from the Irish state. BoSI had a receiver appointed late last year, and the pub was marketed for sale by CB Richard Ellis – brochure here – but the borrowers went to court to claim the appointment was invalid. And after six months, a court judgment means David O’Connor, the receiver, has been “stood down” and the borrowers have recovered possession of their pub.
Because the judge in the case, Judge Gilligan ruled that the term of the original loan between The Merrow Limited/Belohn Limited and ICC relating to foreclosure, required that foreclosure be effected through placing the ICC seal on the deed. BOSI hadn’t done this and the reason? BOSI said its “Memorandum and Articles of Association it is not required to have a seal and therefore it is not possible for the Bank to have executed the Deed of Appointment of the Receiver under seal, as to do so would be in breach of its Memorandum and Articles of Association.”
Now, BOSI seems to have two remedies, it may appeal the High Court decision and/or it may alter its Memorandum and Articles of Association, but for the time being, BOSI is exposed to a wave of legal action from other borrowers to whom it has had receivers appointed and current receiverships may be doubtful, though it should be remembered that this issue has arisen in the context of ICC’s loans only.
The pub owners, ultimately Sean Foley and his wife Sherry Yan who control the two companies, The Merrow Limited and Belohn Limited, have taken back possession, have succeeded in having an interim examiner appointed to the pub and the matter returns to the courts shortly where full examinership will be sought. The judgment in March 2013 was reported in the old media – for example here and here – but its implication for other ICC loans was not examined.
The borrowers were advised by Lansdowne Francs, accountants and debt advisers, based in Dublin and Belfast, and Seamus Sutcliffe from Lansdowne has said that he believes in 2012 alone, 15 companies may have had receivers appointed based on ICC loans and debentures. The judgment in March 2013 is believed to be the first time in the Irish courts that a receivership was successfully overturned, though as we have seen with the original NAMA appointment of receivers to the Grehans, it is not the first time that receivers have been stood down.