The chief executive of a group of finance companies threatened to collapse property firms related to businessman Patrick McKillen jnr unless Mr McKillen agreed to new loan agreements and leases, it has been claimed in Commercial Court proceedings.
Paul Dowling, chief executive officer of Real Estate Loan Management (RELM) Ltd and of a group of other RELM firms, made explicit threats to appoint receivers over the McKillen jnr companies, Mr McKillen jnr said in an affidavit.
On Monday, Mr Justice Mark Sanfey admitted proceedings by Mr McKillen jnr and the companies to the fast track commercial list following an application from Jarlath Ryan SC, for the plaintiffs.
There was consent to the case being entered by the RELM defendant firms and defendant joint receivers Ken Fennell and Brendan O’Reilly.
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However, the judge was told RELM did not want that consent to be deemed an acceptance of any of the allegations by Mr McKillen jnr. Mr Dowling is not a defendant in the case.
In his affidavit, Mr McKillen jnr said the plaintiff companies were special purpose vehicles that did not carry on any business other than borrowing from RELM, owning properties and leasing them to tenant companies.
In the high inflationary conditions of the post Covid-19 pandemic, interest rates were significantly and rapidly increased by the Central Bank, he said. This resulted in an increased rate on loan interest between RELM and the plaintiff borrower companies.
He believed Mr Dowling and/or RELM Ltd came under pressure from their (RELM’s) senior lenders, Bawag Group AG and their owner Avenue Capital. This, Mr McKillen believed, may have been in breach of their lending covenants which required them to enhance and/or ensure the security of loans by the RELM companies, particularly to the plaintiffs.
He said Mr Dowling approached him seeking variations and /or amendments to the relevant contractual documents. In response on behalf of the companies, Mr McKillen jnr refused as this would have been to the detriment of the companies.
He said Mr Dowling then began making threats to collapse the group of companies unless steps were taken to improve the position of the RELM firms.
He said Mr Dowling used his knowledge of other commercial projects being pursued by other group companies to coerce the plaintiffs to agree to variations of the loan agreements and leases.
This included Mr Dowling’s knowledge of efforts being made by Mr McKillen jnr to sell hotel assets. Included in the intimidation were explicit threats to appoint receivers over the plaintiff borrower companies, he said.
It was under these circumstances and threats that certain deeds of variation of the agreements were entered into, he said.
Some of the tenant companies had already issued proceedings against the joint receivers in relation to the alleged validity and/or enforceability of the leases and/or deeds of variation, he said.
Mr McKillen jun also said that in circumstances where an excess payment arise directly from those variations, and therefore from “threats, coercion, duress and/or undue influence” of one or two of the defendant companies on the plaintiffs, his side is entitled to an indemnity in relation to any claim made by the tenant companies.
Mr McKillen jnr and the plaintiff companies seek declarations including that the deeds of variation are null, void and of no legal effect and ought to be set aside by the court. They also seek damages for, among other things, alleged duress, coercion and misrepresentation.
