Promise of cash and property to neighbours undid €3.3m loan, court hears

A couple’s promise of cash and property to neighbours as part of a Waterford housing development on their land undid a €3.3 million loan agreement they had with ACC, the Court of Appeal heard.

Thomas and Mary Heffernan had pledged €100,000 and a €200,000 house to each of the two neighbours in question as part of their quest to get planning permission for land on the outskirts of Waterford.

The appeal court ruled ACC Loan Management was entitled to pull out of a separate €100,000 loan arrangement – which the Heffernans needed in their efforts to win planning permission for the land on a Waterford farm they owned – after it found its security for the other €3.3 million could have been compromised due to the couple’s promises to their neighbours.

As a result of being unable to sell the Waterford farm to pay off the loan, ACC sought and obtained judgment against them for €3.3 million in 2013.

The €3.3 million loan had already been used to pay off another loan on another farm in Wexford which the Heffernans had also bought for agricultural purposes.

The Heffernans counter-sued ACC for damages for alleged breach of contract over the refusal to allow them to draw down the €100,000 in 2008.

After the High Court rejected their case, they appealed.

Dismissing their appeal, the Court of Appeal said ACC was entitled to say its security over the €3.3 million mortgage was endangered by the agreement made with the neighbours.

Zoned

The court heard the Heffernans had a farm at Kearney Bay, Glenmore, Co Kilkenny, and had decided in 1992 to buy another 14-hectare farm at Slieverue, on the outskirts of Waterford city. That farm was zoned for development and a number of developers approached the couple to buy it.

The Heffernans decided they would first obtain planning permission which would make it even more valuable.

To do so, they needed the consent of two neighbours to allow pipes and other services for any new development go over the neighbours’ land.

They agreed with the two neighbours, in exchange for €100,000 each, plus a house each on the new development worth an estimated €200,000, the Heffernans could have “way leave” permission over their properties to route the services for the development.

Around 2005, the Heffernans bought another 77-hectare farm, for agricultural purposes, at Park, Bree, Enniscorthy, Co Wexford, costing a total €3.1 million. The loan for that, obtained from AIB, was to be paid off from the sale of the Waterford lands.

They got a €3.36 million loan from ACC, to be paid off in two years and secured on the Waterford lands and Wexford farm. They also needed another €100,000 from ACC to meet the upfront costs of getting planning permission, in particular for making payments to the neighbours for permission to access their lands.

Concerns

ACC raised concerns the agreement with the neighbours would mean ACC’s security over the €3.3 million loan might be put in second place to any claim the neighbours might have.

ACC would have compromised with the Heffernans over this, but the Heffernans believed any further approach to the neighbours would "unhinge the whole arrangement", Mr Justice Sean Ryan said in the appeal court judgment.

While he found himself in "considerable sympathy" with the Heffernans, he did not see how their appeal could succeed, he said. The general conditions of the €100,000 loan, under which the bank was entitled to withdraw from the loan agreement, were "simply insurmountable". Mr Justice Michael Peart and Ms Justice Mary Irvine agreed.