Minister settles €1.9m nursing home case

MINISTER FOR Health Dr James Reilly, Fine Gael councillor Anne Devitt and others have consented to judgment orders for €1.9 million being made against them at the Commercial Court under a settlement of proceedings over an alleged contract to buy a nursing home in Co Tipperary.

The case came before Mr Justice Peter Kelly at the Commercial Court yesterday when Bernard Dunleavy, for the plaintiffs, said it was settled on confidential terms.

Charles Meenan SC represented Dr Reilly, while the other defendants were also represented by counsel.

When the judge said the settlement required a number of orders which had to be made in public court, Mr Dunleavy said he had been asked to inform the court it was confidential.

The judge, reiterating that the orders sought had to be made in public, made those orders but said other terms of the settlement, which did not require any orders, could remain confidential.

Under the settlement, Dr Reilly and the other defendants have all consented to judgment for €1,904,607 being entered against them jointly and severally, plus interest and costs, with a stay on execution of judgment applying until April 30th, 2012.

They have also consented to indemnify the plaintiffs concerning any liability to Bank of Ireland under a co-ownership agreement relating to the nursing home.

The orders are against Dr Reilly, South Shore Road, Rush, Co Dublin; Paul Kelly, Mountjoy Square, Dublin; Dilip Jondhale, Pococke Upper, Johnswell Road, Kilkenny; Ciarán Flanagan, Grattan Court, Inchicore Terrace South, Dublin, and Anne Devitt, Swords, Co Dublin.

In their action, the plaintiffs had alleged, under an agreement of November 2000, Dr Reilly and four others were to buy the Greenhills nursing home for €1.95 million plus VAT.

They were also to secure the release of the plaintiffs – who include doctors and solicitors – from all liabilities to Bank of Ireland concerning the property.

It was claimed notices served in April and May 2011 requiring that agreement to be performed had expired and the defendants were in default. The nursing home was a commercial success and a valuable business asset, the plaintiffs claimed.

The proceedings were transferred to the Commercial Court list last July but were adjourned to facilitate mediation.

The plaintiffs are solicitors Michele Mellotte, Tullamore, Co Offaly, and Orla Higgins, Ashfield Road, Ranelagh, Dublin; John Caulfield, Belgrove Road, Clontarf, Dublin; Dr John McGreevy, Mount Prospect Avenue, Clontarf, Dublin, Dr John Whately, Ardee Road, Dundalk, Co Louth; Garry Smyth, a civil engineer, Ailesbury Grove, Dundrum, Dublin; Tom Murphy, an IT consultant, Wynestown, Oldtown, Co Dublin, and Michael Morris, Chelmsford, Celbridge, Co Kildare.

In an affidavit, Ms Higgins said Dr Jondhale and a medical colleague, Dr Vasudha Jondhale, promoted the development of a residential care facility for elderly persons as a tax-efficient investment in summer 2000.

By autumn 2000, the parties who were to take the lead role in the project were substantially identified and the defendants, except Ms Devitt, were denominated the recourse co-owners.

Ms Higgins said that Mr Kelly, in November 2000, transferred to the plaintiffs and other defendants an interest in a portion of property at Greenhills, on which the 54-bed nursing home was to be built, for shares of €55,000 and also transferred the balance of the property in shares for a consideration of €220,000.

The parties later entered into a building agreement with Conclan Ltd for €1,598,350, plus a lease agreement, with Dr Dilip Jondhale and Dr Vasudha Jondhale to operate the nursing home.

To fund the development, the parties entered into a credit agreement in November 2000 with Bank of Ireland to provide for borrowings of £1.5 million (€1.95 million).

As those borrowings were insufficient to discharge the whole sum required for the development, the plaintiffs made an investment in the project, Ms Higgins outlined.

Mr Murphy invested £30,000 while the other plaintiffs all invested £60,000 each. The nursing home was built and leased as agreed and had successfully operated since April 2001.

The parties also entered into a co-ownership agreement governing the investment which identified the defendants as the recourse co-owners, she said. That meant the bank had greater recourse to them concerning the relevant borrowings.

The intention was that the nursing home would not be sold until after the 10th anniversary of its first use as a nursing home, she added.

Under a put-and-call option agreement of November 2000, the defendants were to buy the nursing home for €1.95 million, plus VAT, and to release the plaintiffs from all liabilities to the bank concerning the property.

The nursing home was first used in April 2001 and the put-and-call option agreement was exercisable from April 2011, Ms Higgins said. It was served on the defendants from last April and the period for compliance had expired.