Cerberus subsidiary secures €8m in judgments against ex-bankers

A fund has obtained summary judgment orders totalling almost €8 million against a former head of business banking at AIB in Eyre Square, Galway, his wife and a former Anglo Irish Bank executive director.

Mr Justice Max Barrett granted the orders to Promontoria (Aran) Ltd, a subsidiary of Cerberus, against John Hughes, his wife Margaret, and Tom Browne after finding, apart from a sum of about €500,000, there was no arguable defence to the claim for summary judgment in the amounts sought.

He directed a full hearing in relation to liability for that €500,000 sum, part of a €1.6 million claim by the fund in its case against Mr and Mrs Hughes, but granted summary judgment for the remaining €1.1 million.

In the fund’s two other cases, one for €3.5 million against Mr Hughes individually, and the second against Mr Hughes and Mr Browne for €3.3 million, the relevant debts were effectively acknowledged, the judge noted. He granted summary judgment in those amounts.

Stay refused

He refused to stay the judgment orders to allow for any decision by the Financial Services Ombudsman on complaints by the three alleging the fund had “withdrawn” an offer made on August 1st, 2016, to settle their debts.

That offer, described by the judge as “notably generous”, required them pay the fund €500,000 by August 8th, 2016, and execute powers of attorney for the fund to sell secured assets and use the proceeds to reduce their debts.

The three said the offer came “out of the blue” and they were unable to pay the €500,000 within the short time allowed but should be permitted do so now.

The judge noted the ombudsman stood over his preliminary view he should not investigate the complaints as the defendants had, within the High Court cases, a remedy for the complaints.

While the defendants complained to the ombudsman the fund “withdrew” its offer, the offer was never withdrawn but instead lapsed because it was not satisfied on its own terms, he said.

While the ombudsman can direct a financial services provider to review or rectify conduct complained of, the notion the ombudsman would seek to resurrect a lapsed offer because the recipients could not accept it at the time, but wished to do so now, “is just not credible”, the judge said.

While he had sympathy for the defendants, that was not a basis for staying judgment pending any decision by the ombudsman.

Property loans

The judgment orders arose from loans made for property and development purposes. The claim for €3.5 million against Mr Hughes arose from loans purchased from Ulster Bank in 2015, linked to properties in Galway and Dublin.

The claim for €3.3 million against Mr Hughes and Mr Browne was linked to property at Lisobán in Galway and the Quayside Shopping Centre in Sligo.

In the case against Mr and Mrs Hughes, they argued they had an arguable defence to the claim for €1.6 million arising from loans linked to a residential property at Ailesbury Wood in Dublin 4, sold in 2014. The claim alleged €1.1 million was owing under a loan facility and some €503,000 on a business current account.

While Mr Hughes maintained there was a verbal agreement with Ulster Bank that any shortfall between the proceeds of sale of the Dublin property and the sum owed by the couple would be written off, the judge said there was insufficient evidence for an arguable defence based on that claims.

However, the fund’s papers were not in order for its claim concerning the current account sum of €503,000, he held. The Hughes denied they had ever opened a current account and that issue would have to be decided at a full hearing.

John Hughes had debts of between €85 million and €95 million in 2015, with most of the money due to the National Asset Management Agency or the Irish Bank Resolution Corporation. He had a range of residential and commercial investment properties and was an employee Samson Trust Limited.