Banks’s demand for €1.06m repayment within 45 mins not reasonable, judge rules

Bank of Scotland's demand that a Dublin businessman's company repay €1.06 million within 45 minutes to a nominated bank account on a Friday evening, after which it appointed a receiver, was not realistic, reasonable or made in good faith, a High Court judge has ruled.

Even if Seán Foley's bank was open when he got the demand at 4.15pm on March 22nd, it would be "a heroic feat of efficiency" for him and his bank to have ensured the money was actually received in an account by Bank of Scotland by 5pm as anyone who ever tried to effect "even the simplest banking transaction" would immediately understand, Mr Justice Gerard Hogan remarked.

The bank handed the demand to Mr Foley, whose company Belohn Ltd operates Foley's Bar and restaurant on Dublin's Merrion Row, just hours after the High Court ruled that its October 2012 appointment of a receiver to Belohn was invalid because the receiver was not appointed by a deed under the bank's seal.

The holding company for Belohn is Merrow Ltd and both companies owe the bank some €5.7 million. The bank's €1.068 million demand related to Merrow's debt.

While the bank also served a demand on March 22nd for the €4 million Belohn debt, it did not then move to appoint a receiver to that company.

Court protection
After the High Court discharged the Belohn receiver's appointment, the next day, March 23rd, Mr Foley secured court protection for that company and an interim examiner was appointed. When seeking that examinership, he was unaware the bank had appointed a receiver to Merrow on March 22nd. When he learned that on Sunday, March 24th, his lawyers applied to the High Court that night for an interim examiner to be also appointed to Merrow.

Bank of Scotland subsequently applied to set aside the appointment of the interim examiner to both companies on grounds including alleged failure to disclose relevant matters.

In his judgment yesterday, Mr Justice Hogan ruled the decision appointing an interim examiner ex parte to Belohn may be justified in the very special circumstances here, that a receiver had been appointed for six months before being discharged. At the full hearing of Belohn's petition for examinership, there would have to be an entirely fresh application for examinership on notice and the court would have to be satisfied it was appropriate to appoint an examiner, the judge said.

Not realistic
He ruled that the 45 minutes allowed for the repayment of the €1.068 million loan by Merrow before a receiver was appointed to that company some time after 5pm on March 22nd was neither realistic nor reasonable. It was hard to see how any demand for repayment within minutes could be reasonable although, in certain conditions, it might be reasonable to demand repayment within hours, he said.

The failure, due to a bona fide error, to disclose to him when hearing Merrow’s examinership application, email correspondence showing the bank’s receiver was willing to hand over documents necessary for preparation of an independent accountant’s report for examinership, was “highly material” to the exercise of his discretion whether to appoint an interim examiner, he ruled.

In those circumstances, he set aside his March 24th order related to Merrow, made ex parte under section 3A of the Companies Act, granting it interim court protection until the following day.