Settlement talks between property developer and lender break down

Dispute relates to properties in Dublin 2

The High Court has heard that the settlement of a dispute between developer Pat Ryan and a financial fund over borrowings for a commercial site on Dublin’s south city quays has broken down.

The dispute, which centres around a loan of more than €12 million advanced to Mr Ryan and his partners who were all involved in partnerships known as the City Arts Partnership and the City Partnership to purchase property on City Quay, Moss Street and Gloucester Street in Dublin 2,will recommence before the court at a later date.

Ruling on a preliminary issue in advance of the resumed proceedings Mr Justice Michael Twomey said he was prepared to make orders directing that Mr Ryan be provided with two categories of documents sought by him.

However, he was not entitled to discovery of two other categories of materials, the judge concluded.

Anglo loans

The loans were advanced by the now defunct Anglo Irish Bank, before being acquired by financial fund Dengrove Designated Activity Company in 2017.

The judge said that the key issue in dispute is whether Mr Ryan is correct in his claim that he entitled to redeem the mortgage on the property himself for about €22 million and therefore be entitled to develop it, or if the mortgage can only be redeemed when all sums due to Dengrove have been discharged by Mr Kelly and his partners.

Dengrove claims that the borrowings are the subject to ‘all sums due’ mortgages. It claims the outstanding liability of the partnerships in relation to the purchase of the property due to it is some €22 million.

The fund further claims that the various partners in the partnerships owe it some €430 million in outstanding borrowings.

A full hearing involving the parties in 2019 had come to a halt after the court heard that an agreement had been reached, the judge noted. That settlement agreement unravelled, and the trial is due to recommence, he said.

In advance of the matter restarting, Mr Ryan had amended his claim and made an application for discovery of material from the defendant, which he says is relevant to his claim.

Mr Justice Twomey said Mr Ryan’s application arises out of certain emails that had come to Mr Ryan’s attention allegedly sent by Dengrove and its agents, and some of the plaintiff’s partners.

It is alleged that the emails dealt with interest payable on loans to Dengrove and the tax consequences for those partners.

Mr Ryan claims that Dengrove had entered into an agreement with his then partners to inflate the indebtedness on the sites, while seeking to avoid tax by altering interest rates on said loans.

Discovery applications

Dengrove denies those claims and said that the discovery applications should be dismissed on the grounds that it was an attempt to substantiate bare assertions, were too broad and mere speculation. The application the fund added, amounted to a fishing expedition.

Discovery had been ordered at an early stage in the proceedings, and any further order would breach the rights of third parties, who are not involved in the action.

In his judgement, the judge said that he was prepared to make orders directing that the defendant provide Mr Ryan with records and materials relating to any compromise agreement between Dengrove and Mr Ryan’s co-partners.

He further ordered that Mr Ryan be provided with documents or records relating to any change or proposed change of interest rates, which has been charged or secured on the City Quay Properties. The judge said these categories may be of if relevance to the proceedings.

He was not prepared to make orders in relation to documents evidencing that an amount of €430 million was secured on the properties that are subject of the proceedings.

The judge was also not prepared to order the discovery of documents or evidence, relating to communications between the partners and Dengrove regarding the indebtedness of €430 million, which the defendants claim is secured on the properties.

These were refused on grounds that the discovery of that material would breach confidentiality agreements with other persons and appeared to be a general trawl of communications between parties.