A High Court judge has ruled that Breccia, a company linked to businessman Larry Goodman, is entitled to judgment for some €19 million against Dr Joseph Sheehan, a co-founder of Dublin's Blackrock Clinic.
In the latest stage of marathon litigation concerning control of the clinic, Mr Justice Michael Quinn dismissed a range of claims by Dr Sheehan, including that Breccia had conspired with another clinic co-founder, Dr George Duffy, and others to damage Dr Sheehan's interests concerning purchase of loans made to buy shares in the clinic.
He refused to grant declarations that Breccia was not entitled to acquire the relevant loans and guarantee and granted a counterclaim by Breccia for judgment for some €19 million against Dr Sheehan.
That comprises some €17.5 million, plus some €1.5 million interest, due on loans made by Anglo Irish Bank in 2006 to acquire shares in Blackrock Hospital Ltd (BHL) owner of the share capital of Blackrock Clinic Ltd.
Anglo also made loans to Dr Duffy to acquire shares in BHL.
After Anglo’s takeover by State-owned IBRC, the loans involving both men were ultimately sold to Breccia which also bought shares in BHL.
Mr Sheehan's action was initiated in 2014 and Wednesday's 125-page judgment concerned one module addressing conspiracy and other claims against Breccia, Irish Agricultural Development Company, Dr Duffy, his wife Rosaleen Duffy and Tullycorbett Ltd, a company controlled by Dr Duffy.
Outlining the background, the judge noted JCS Investment Holdings, controlled by Dr Sheehan, initially successfully bid for the Sheehan/Duffy loans, having sourced funding for the purchase, on conditions, from Talos Capital Ltd.
On April 4th 2014, the same day JCS executed the loan sale deed, Dr Duffy repaid his loan using funding from Breccia.
When Talos later learned Dr Duffy’s loan was redeemed in full before the loan sale deed became effective and before a deposit of €2.4 million was paid, it declared JCS to be in default and in breach of the funding conditions.
This meant JCS was unable to complete the loan purchase and Talos later got judgment for the deposit sum against Dr Sheehan and John Flynn, whose company Benray Ltd was also a shareholder in BHL.
IBRC again put the relevant loans up for sale and Breccia purchased them later in 2014.
In late 2014, Breccia notified Dr Sheehan of the acquisition of his loan and demanded repayment of some €22.8 million, comprising some €16.1 million concerning that loan facility and some €6.7 million under a guarantee of a loan to Benray.
Arising from those events, Dr Sheehan brought proceedings alleging, among various claims, the repayment of Dr Duffy’s loan on April 4th, 2014, with funding from Breccia, followed later by Breccia’s purchase of Dr Sheehan’s loans, amounted to a conspiracy between Dr Duffy and Breccia and others as a result of which he suffered loss.
The defendants denied the claims and Breccia counterclaimed for €19 million.
Mr Justice Quinn concluded Dr Sheehan’s claim should be dismissed and the counterclaim should be granted.
Sequence of events
He said one can recognise how Dr Sheehan may, from a sequence of events, have developed a perception the defendants conspired to injure his interests.
Dr Duffy had engaged with Dr Sheehan from time to time to find a solution for payment of their loans and both men, and others, had had a discussion at lunchtime on April 3rd, 2014.
That same evening, Mr Goodman made an offer to Dr Duffy to provide the funding to repay his loan, which offer did not come “out of the blue” but followed previous discussions. Next morning, Dr Sheehan arranged for JCS to sign the loan sale deed and that afternoon Dr Duffy repaid his loan using funds from Breccia.
The judge said he could not exclude other evidence which showed Dr Sheehan was pursuing a scheme in which he himself would get control of BHL by using a structure which excluded Dr Duffy as a participant.
Dr Duffy had no obligation to decline the Breccia offer, his acceptance of it was consistent with his “openly stated objective” of repaying his debt and the court accepted his intent was to repay his loan and not to cause injury or loss to Dr Sheehan.
The judge also accepted it was not Breccia’s intent to injure Mr Sheehan’s interests. If Breccia intended to increase its shareholding with a view to ultimately securing a controlling interest in BHL, that was “not an unlawful commercial objective”.
Dr Sheehan has failed to prove any of the defendants acted unlawfully or under an agreement predominantly intended to injure the plaintiff’s interest, he ruled. Dr Sheehan had also failed to establish, in relation to repayment of Dr Duffy’s loan and the acquisition of Dr Sheehan’s loans by Breccia, the defendants acted negligently, in breach of contract or duty.
Other issues in the litigation have yet to be decided, including whether an alleged change of control of Breccia triggers the application of certain transfer provisions in the BHL shareholders’ agreement.