Monday 23 October 2017

Aircraft leasing boss Domhnal Slattery liable to pay up to €7.6m over hotel loan guarantee

Tim Healy

THE boss of an aircraft leasing firm is liable to repay up to US$10m (€7.6m) to Friends First Life Assurance Company under his personal guarantee of a loan made to help buy a hotel in Washington DC, the High Court has ruled.

The exact sum payable by Avolon chief executive Dómhnal Slattery will be decided later.


The company must also itself pay Mr Slattery €100,000 damages, including aggravated damages, for a "deliberate and conscious breach"

of his right to confidentiality involving an "extraordinary, wilful and totally inappropriate" dissemination of confidential information, Mr Justice Brian McGovern also directed.


The damages award arose from Friends First parent company, Achmea, revealing in 2010 to CVC Capital Partners, a key investor in Avolon, details of Mr Slattery's financial dealings with Friends First at a time when Mr Slattery had just launched Avolon.


Harry van den Heuvel of Achmea had conceded he expressed the view to CVC that Mr Slattery had been "underhand" in his dealings with Friends First concerning the St Regis Hotel, Washington DC, investment and described him as someone "who left the kitchen when things turned too hot".


The judge upheld Mr Slattery's claim Friends First did this to put pressure on him to agreed to correction of a deed so it could pursue him over his personal guarantee of a loan for the hotel deal. Mr van den Heuvel's claim the disclosure to CVC was justified on the basis of due diligence procedures was "a threadbare excuse and a fiction", the judge found.


Friends First permitted "improper disclosure" of confidential information to CVC for an improper purpose, the judge said. The breach of confidence was serious and deliberately intended to harm Mr Slattery's business interests if he did not become "more compliant" with Friends First wishes.


He was giving his reserved judgment on the action by Mr Slattery, Ailesbury Road, Ballsbridge, Dublin, against Friends First arising from the unsuccessful purchase of the St Regis.


Mr Slattery's private equity firm Claret Capital Ltd and Friends First were part of a consortium which bought the hotel for some $180m. To complete the deal, Friends First agreed to advance loans to two Claret Capital related companies.


Mr Slattery and other directors of Claret entered into guarantees of a $14.05m loan and also took personal loans, in Mr Slattery's case for US$1m, from Friends First Finance.


Mr Slattery alleged he was unaware one of the documents signed by him was a personal guarantee but later accepted he was bound by a guarantee signed on March 18th 2008 until the execution of a deed of pledge of July 2009.


Under a clause in that deed, he claimed Friends First recourse to him was limited to the value of 265 shares held by him in Jetbird, a new airline company launched by him.


Friends First argued it was unaware until 2010 of that clause and sought rectification of it on grounds it did not accurately reflect the common intention of the parties when the deed was executed.


In his judgment, the judge accepted neither Friends First nor its solicitors noticed the important change in the deed as a result of the insertion of the clause.


Having analysed several emails, the judge found Mr Slattery knew Mr Leon Atkins, then general counsel with Claret Capital,  intended to "slip the clause" into the deed "by sleight of hand". He also found Mr Slattery had responded with the words "Good thinking" to Mr Atkins'

suggestion of inserting the clause.


The actions of Mr Atkins and Mr Slattery prior to the deed being signed was to get it signed when it appeared clear the clause had been missed by Friends First, he said.


The facts established there was a "unilateral mistake" by Friends First concerning the deed, the judge said. He ruled it was entitled to rectification so as to give effect to the real intention of the sides before the clause was inserted.


It followed that Mr Slattery and his fellow signatories were jointly and severally liable under the personal guarantee of March 2008, the judge ruled.  A letter of demand was served under that guarantee in June 2010 on Mr Slattery and Friends First as entitled to rely on the guarantee and to recover such sums as were due under it.


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