A family-owned pub has seen off a fast-tracked order for possession, requested by AIB, after the manager said he had been encouraged by the bank to invest in a “no-brainer” high-risk product, which was “an absolute failure”, writes Helen Bruce.
Judge Nessa Cahill ruled that there must be a full hearing of all arguments in the case concerning The Coopers Bar in Bird Hill, Co. Tipperary.
Denis Ryan told the court his parents had run the pub since 1985, and he took it over in 1994.
He said he lives there with his wife and two daughters, both aged 23.
The loan at the centre of the case, for just under €200,000, was taken out in 2010 to restructure pre-existing loans, and AIB has claimed that €350,000 is now due to be repaid.
It applied for summary judgment, claiming that it should be allowed to sell the pub, in a vacant state, to repay the debt.
Judge Cahill said Mr Ryan’s evidence was that in 2005, the company behind the pub, Dragons Head Ltd, had been in a position to pay off a mortgage.
“Mr Ryan and his wife, as directors of the company, attended at the offices of AIB with the intention of clearing that loan and vacating the mortgage,” she said.
“Mr Ryan states on affidavit that, instead of discharging the existing loan, he was advised by AIB to restructure the loan for the purpose of making an investment in a specific and high-risk, illiquid product that was then being promoted and marketed by AIB, called the Belfry Investment.”
In the sworn statement, Mr Ryan said his local AIB branch manager, and a second employee of the bank, “had strongly endorsed” the Belfry 5 investment product, which was described as being a “no-brainer” investment.
He continued: “I was also advised that the bank’s earlier Belfry investment products had generated massive returns for investors.”
He said that at no point was he told the true position, namely that Belfry 5 was an extreme high-risk, “illiquid and massively geared investment in UK commercial property”.
Judge Cahill said: “Mr Ryan confirms in his affidavit that the Belfry Investment was “an absolute failure” and that he and his wife are still pursuing a claim for compensation against AIB.”
She said Mr Ryan claimed that the money he believed was due to him from AIB could be deducted from the total amount owed to AIB by Dragons Head Ltd.
The judge said it appeared the Belfry investment was made by Mr Ryan and his wife, but it was unclear how the money loaned to Dragon’s Head was involved.
She said AIB had argued that the Belfry compensation claim was “entirely distinct” from its application for summary possession, and had stated that the company had no claim arising from the Belfry investments.
However, Judge Cahill responded: “I consider that the affidavit of Mr Ryan does present a credible defence to AIB’s claim for possession and that the responses by AIB are insufficient.
“While his evidence is not complete or clear, Mr Ryan does advance several specific facts on affidavit which point to AIB having played a significant role in the company’s decision not to clear its existing indebtedness and to instead restructure same to facilitate the Belfry investment.”
She said there was a need for a court to explore facts of the matter further.
The loan at the centre of the case, for just under €200,000
The company behind the pub had also claimed that as the property was Mr Ryan and his family’s home, the mortgage and loan fell within the Central Bank’s Code of Conduct for Mortgage Arrears.
This was denied by the bank, which said the debt should be viewed as a commercial loan.
Judge Cahill said this was another issue on which further evidence and submissions were required.
She said she would remit the case for a full hearing at a later date, and it was her provisional view that the bank should pay the legal costs for both sides of its failed application.
