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Hotelier Johnny Moran fails in court in alleged breach of rights in appointment of receiver

A NUMBER of companies of hotelier Johnny Moran have failed in their bid to ask a court to decide whether their property and equality rights were breached when the former Anglo Irish Bank appointed a receiver over hotels and restaurants they operated.

The companies owned and managed the Holiday Inn in Pearse Street, Dublin, two restaurants in Dublin including Tante Zoe's in Temple Bar, and the Blarney Inn in Kildare Street with its associated nightclub "Club Nassau."

A receiver was appointed last year to Citywide Leisure Ltd, Blarney Inn Ltd, BCGM Ltd, JRM Hotels Ltd after Anglo, now the Irish Bank Resolution Corporation (IRBC) called in loans which the companies could not pay.

Mr Moran is a director and shareholder of the companies.

The companies, and a fifth linked company, Aspere Property Investments Ltd, brought a High Court challenge to the appointment of the receiver claiming it was in breach of contract and their statement of claim was lodged in November last year. IRBC fully defended the claim.

Subsequently, the companies asked the court to amend their statement of claim in which they made a number of new allegations including that the bank had materially altered documents concerning security for the loans and that it (bank) had unlawfully given loans for the purchase of their

(companies') own shares.

These amendments were not contested by the bank and were permitted by the court.

However, they were not permitted to amend the claim to allege their constitutional property rights had been breached because similar borrowers to them had had their loans with IRBC taken over by NAMA, whereas theirs had not been taken over and remain on the books of IRBC.

They claimed that had their loans been taken over by NAMA, they would have obtained continuing support for their business, the loans would not have been called in and a receiver would not have been appointed.

Among further new claims, they said IRBC knew or ought to have known that by appointing a receiver, he (receiver) would not act in the companies' best interests. IRBC had also failed to give any or adequate consideration to business plans they had submitted, caused the closure of businesses, dismissal of employees and permitted the loss of the "Holiday Inn" brand, it was claimed.

Yesterday, Mr Justice Brian McGovern ruled the companies could not make an amendment to their statement of claim on these matters.

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He agreed with submissions from IRBC that the companies' argument about their property rights being improved if the loans had gone to NAMA was not something that could be laid at the door of the bank.

The judge agreed with that bank that the companies were, in effect, making an constitutional challenge to the Act setting up of NAMA and therefore their action would have to be against Ireland and the AG, not against the IRBC.

He noted that while NAMA may have paid a discounted price to IRBC for the transfer of a loan, the full amount of that loan remains due and owing to NAMA.

The claim made under this amendment to the statement of claim is bound to fail because there is no right to have an asset acquired by NAMA, the judge said.

The judge said the companies' lawyers had argued IRBC had decided to appoint a receiver before the demand to repay the loan was made and that there was misrepresentation at the heart of the loan agreement because the true financial state of IRBC was not known in 2008.

The commercial relationship between the bank and the companies gave rise to rights and obligations on both sides, the judge said. No factual allegations had been made that would sustain a claim against the bank for a breach of the companies' constitutional rights, he said.

The judge also said the companies had failed to show any special circumstances as to why they (companies) should not provide security for the legal costs of the action.

He rejected the companies' argument that there should not be a security of costs order because of these proceedings were of exceptional public importance.

He did not accept this case mirrored separate proceedings being brought by IRBC against Mr Moran arising out of guarantees he allegedly gave on the loans.

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