ZURICH BANK is entitled to recover €32 million against a shopkeeper over unpaid loans made in 2007 to develop a shopping centre in Castleblayney, Co Monaghan, the Commercial Court has ruled.
The centre is now valued at between €1 million and €2 million and all concerned should have known from late 2006 this was “not a project free of risk”, Mr Justice George Birmingham said.
Mr Justice Birmingham yesterday found Jim McConnon (40), Main Street, Castleblayney, had failed to make out any arguable defence to the bank’s claim allowing the case go to a full hearing. Mr McConnon has previously said he cannot repay the €32 million loan.
Viewed today, the decision to advance such huge loans in 2007 “seems extraordinary, even bizarre”, the judge said. The speed with which the bank indicated to Mr McConnon it would give him the money – within 24 hours of first meeting him in April 2007 – “seems quite remarkable”.
However, this was not a question of a bank “forcing funds on a reluctant but gullible borrower”. Even before Zurich entered the scene, Mr McConnon had embarked on the shopping centre project and spent €10 million – wholly financed by Allied Irish Banks – on acquiring sites.
The fact AIB, Mr McConnon’s long-term bankers, refused in late 2006 to provide any further funding on the basis that the project was unviable, and other banks approached by Mr McConnon also seemed disinterested, “must have indicated to all concerned this was not a project free of risk”. Mr McConnon decided to proceed, borrowed the money and there was “no arguable basis” for suggesting he could be absolved from liability to repay. This was “one of the rare cases” where the bank was entitled to summary judgment.
Represented by the New Beginning’s group of lawyers, Mr McConnon had argued he had a defence on several grounds to the bank’s claim but the judge disagreed.
Claims by Mr McConnon that, before advancing the loans, the bank should have carried out a detailed analysis of €30 million valuations by estate agents CBRE of the sites for the shopping centre were not supported by the terms of the loan facility letter, the judge found.
Mr McConnon had argued the €30 million valuations were “off the scale” and involved development costs akin to justifying “a single development in Dublin of over €10 billion”.
It was Mr McConnon who first caused CBRE to become involved in the matter and his claim he could rely on alleged failure by the bank to subject those valuations to scrutiny was “fanciful”, the judge said.
He also dismissed claims the bank was not entitled to judgment on grounds of “a radical and cataclysmic change of circumstances” due to the collapse in property values.
Mr McConnon had claimed the true intention of himself and the bank was to develop a shopping centre and the leasing of the centre at rental levels indicated by CBRE, but that view misunderstood the relationship between the parties, the judge said.
The bank’s interest was loaning money, expecting it would be repaid and would make a profit, while Mr McConnon’s purpose was to get funds to proceed with the project, he said. The proposition the sides had agreed to enter into a risk-sharing partnership was “unstateable”.
Essentially, Mr McConnon was seeking to escape from a “bad bargain” and clearly, with the benefit of hindsight, the project was “overly ambitious” but he could not invoke the legal doctrine of frustration to do so, the judge ruled.
The judge also ruled Mr McConnon had no arguable defence under the Consumer Protection Code. Mr McConnon had alleged several breaches by the bank of the code, including failure to investigate the CBRE valuations.
Mr McConnon was “emphatically” not a consumer, the judge said. It was difficult “to take seriously” that suggestion when Mr McConnon operated a business in Castleblayney for some years and the project here involved an extension, “albeit on a dramatic scale”, of what he was already involved in.
This was one of the crazier developments during the boom. But there are many like it scattered throughout the country!