Court of Appeal allows estoppel claim, preventing Breccia from charging surcharge interest due to prior representations.

THE COURT OF APPEAL

Neutral Citation Number: [2018] IECA 286

2016 No. 197

Finlay Geoghegan J.

Peart J.

Hogan J.

BETWEEN/

JOSEPH SHEEHAN

PLAINTIFFS /

RESPONDENTS

- AND -

BRECCIA, IRISH AGRICULTURAL DEVELOPMENT COMPANY, BLACKROCK HOSPITAL LIMITED, GEORGE DUFFY, ROSALEEN

DUFFY AND TULLYCORBETT LIMITED.

DEFENDANTS /

APPELLANTS

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 30th day of July 2018

1. The basic facts of this dispute have already been set out by Finlay Geoghegan J. in the judgment which she has just delivered

dealing with the question of surcharge interest. I gratefully adopt those statements of facts, supplementing them where necessary

with specific details particular to the discrete issue of estoppel by conduct with which this judgment is solely concerned.

2. I should add that I have had the opportunity of reading in advance the judgment which Finlay Geoghegan J. has just delivered

dealing with the question of surcharge interest and I agree with it. This judgment deals solely with the separate question of whether

even if Breccia was entitled in principle to charge surcharge interest, it is, in any event, estopped from doing so.

3. In the two judgments which he delivered in this matter, Flynn v. Breccia [2016] IEHC 68 and Sheehan v. Breccia [2016] IEHC 129

Haughton J. found in both instances that Breccia was estopped from endeavouring to charge surcharge interest prior to the 19th June

2015. This finding was made independently of his conclusions that the surcharge interest was unenforceable as a penalty clause.

Breccia have now appealed to this Court against these findings.

4. This particular judgment deals only with the Sheehan appeal and it is supplementary to the judgment which I have just delivered in

the Flynn appeal. The two judgments should really be read together, but in this judgment it is perforce necessary to repeat some of

the detailed facts already set out in the accompanying Flynn judgment.

The Sheehan appeal: background facts to the estoppel claim

5. The plaintiff in this appeal, Mr. Joseph Sheehan, is a well known consultant surgeon who resides in the United States of America.

He is one of the founding shareholders of Blackrock Hospital Ltd. (“BHL”). Breccia is a private unlimited company controlled by the

well-known businessman, Mr. Lawrence Goodman, and its directors are Mr. Goodman and Ms. Catherine Goodman. In 1983 the British

health insurer, BUPA, in conjunction with four doctors, namely, brothers Joseph Sheehan (the plaintiff in this appeal) and James

Sheehan, George Duffy and the late Maurice Neligan, put together an investment package to build and develop the Blackrock Clinic,

which in due course became vested in BHL.

6. In 2006 BUPA agreed to sell its shareholding of approximately 56% of BHL to, inter alia, the plaintiffs and Breccia. Financing for the

purchase of the shares was obtained from Anglo Irish Bank (“Anglo”). As an integral part of the purchase of the BUPA shareholding the

parties, including all existing shareholders and two guarantors, entered into a shareholders’ agreement dated the 28th March 2006. As

part of the shareholders’ agreement it was agreed that an annual dividend would be declared which would be used to pay the interest

on the Anglo loans until they matured, whereupon the entire facility would become immediately due and payable.

7. On the 28th March 2006 Mr. Joseph Sheehan, Mr. John Flynn and Dr. George Duffy also borrowed money from Anglo, on similar

terms, to purchase shares in BHL. A company controlled by Mr. Flynn, Benray Ltd., furnished a further guarantee dated the 28th

March 2006 in respect of the borrowers’ liabilities under those further loans (“the “cross guarantee”). Similar cross guarantees were

entered into by the other shareholders concerned, save that Breccia did not enter into a cross guarantee, but instead executed a

deed of covenant dated the 28th March 2006. The relationship between the shareholders and BHL and the shareholders inter se was

governed by a shareholders’ agreement also dated the 28th March 2006 (“the shareholders’ agreement”).

8. The plaintiff entered into two facilities with Anglo, the first on the 28th March 2006 (“the 2006 facility letter”) and the second on

the 12th November 2008 (“the 2008 facility letter”). I propose to term them collectively as the facility letters. The plaintiff’s

borrowing was secured by a mortgage of his shareholding in BHL (“the mortgage”); a deed of covenant entered into between Breccia

and Anglo, deeds of ‘cross guarantee’ and indemnity entered into by the other shareholders (Benray Ltd., James Sheehan, Rosemary

Sheehan and George Duffy), all dated the 28th March, 2006; and a mortgage dated the 24th August 2006 of a house in Ballyheigue,

Co. Kerry. The plaintiff also entered into a guarantee on the 28th March 2006, cross guaranteeing the financial obligations of the

other shareholders who took out Anglo loans.

9. The plaintiff was advanced the principal amount of €11,188,256 pursuant to the terms and conditions of the 2006 facility letter,

and a further €6,342,000 pursuant to the terms and conditions of the 2008 facility letter. The facility letters provided for an annual

interest rate varying between 1.75% and 2.75% above the three month EURIBOR. Clause 5.1 of the facility letters provided for the

payment of surcharge interest in the case of default.

10. It is agreed that the loans under the facility letters all fell due for repayment on the 31st December 2010. On the 21st January

2009 following the enactment of the Anglo Irish Bank Corporation Act 2009 Anglo re-registered as a private limited company. Although

the facility letters had fallen due on the 30th December 2010, Anglo did not in fact demand repayment or initiate any proceedings

against the plaintiff.

11. By special resolution dated the 3rd October 2011 the name of Anglo was changed to that of the Irish Bank Resolution Corporation

Ltd. (“IBRC”). The Irish Bank Resolution Corporation Act 2013 (“the 2013 Act”) provided for a mechanism whereby IBRC itself could be

liquidated. On the 7th February 2013 the Minister for Finance made the Irish Bank Resolution Corporation Act (In Special Liquidation)

Order 2013, providing for the appointment of Mr. Kieran Wallace and Mr. Eamonn Richardson of KPMG as joint Special Liquidators of

IBRC (“the Special Liquidators”) for the purpose of winding up IBRC.

12. On the 29th May 2013 IBRC wrote to Mr. Sheehan notifying him that the loan facilities under the 2006 facility letter were in

default and that IBRC were reserving their rights. They wrote again on the 31st October 2013 notifying him of the Special Liquidators’

decision to sell his loans, and those of the fourth named defendant, Dr. George Duffy. On the 8th November 2013 the plaintiff wrote

to the Special Liquidators advising them that he wished to redeem his loans. The Special Liquidators responded on the 12th November

2013 indicating that he could redeem “at par at any time in the sale process”.

13. In March 2014 the plaintiff made a bid to IBRC to buy his loans, and the loan of Dr. Duffy. This attempt to purchase these loans

was unsuccessful, and, it is understood, is the subject matter of other pleas in these proceedings. These issues are, however, not

before this Court.

14. As it happens, the plaintiff’s loans did not sell in March 2014, so later that year the Special Liquidators initiated a further sales

process in respect of the plaintiff’s loans (but not those of Dr. Duffy, as these loans had been redeemed in the meantime). The

plaintiff bid to purchase his own loans, but he was outbid by Breccia. The validity of the purported purchase by Breccia of the

plaintiff’s loans is also apparently challenged in these proceedings, but this issue is again not before this Court. In the High Court

Haughton J. assumed for the purposes of the surcharge interest and estoppel issues that the purchase of the plaintiff’s loans by

Breccia was valid. I propose to make a similar assumption for the purposes of this judgment.

15. Breccia acquired the loans by assignment from IBRC on the 10th December 2014. By letter dated the 18th December 2014 Breccia

wrote to the plaintiff notifying him of the acquisition, inter alia, of the plaintiff’s loans under the facility letters. In that letter Breccia

demanded the “immediate payment and discharge of the sum of €16,144,572 under the BHL Loan Agreement and the 2008 Loan

Agreement and the sum of €6,734,852 under the Guarantee, being in total the sum of €22,879,424.” The letter indicated that Breccia

reserved the right, inter alia, to appoint a receiver in the event of non-payment and this was stated to be without prejudice to “any

other rights or remedies we may have including….the right to make further demands in respect of sums owing to us”.

16. Following receipt of this letter these proceedings were initiated by Mr. Sheehan by way of plenary summons issued on the 22nd

December 2014. On that date the plaintiff applied for and obtained an interim injunction from the High Court (Noonan J.) restraining

Breccia from acting on foot of the letter of demand of the 18th December 2014, or from seeking to enforce any of the security held,

or appointing a receiver.

17. A statement of claim was delivered by the plaintiff on the 9th February 2015. The first and second named defendants’ defence

and counterclaim were delivered on the 26th February, 2015. The counterclaim contains a claim for the two sums demanded in the

letter of the 18th December 2014.

18. By letter dated the 25th May 2015 Arthur McLean, the plaintiff’s solicitors, wrote to Matheson, solicitors for Breccia, requesting a

redemption figure in respect of the facility letters as “our client is in the process of refinancing his loans”. The reply dated the 9th

June 2015 indicated that the figure of €19,663,673.88. It further stated that interest was continuing to accrue at a daily rate of

€3,059.29. As this figure greatly exceeded the amount in the demand letter in respect of the plaintiff’s loans, Arthur McLean sought a

breakdown. In response by a letter of the 19th June 2015 Matheson explained that the sum of €16,198,273.71, excluding surcharge

interest, was due under the facility letters at the date of acquisition of the loans by the defendant. The letter further stated that

surcharge interest at a rate of 4% was due from the 31st December 2010. This sum for surcharge interest amounted to

€2,822,957.05 and it was was due under clause 5 of the General Conditions up to the date of acquisition. The letter also stated that

further accrued interest gave a subtotal of €19,359,220 as of the 31st March 2015; and that further interest in the sum of €211,090

between the 31st March to the 8th June 2015 was also due. Matheson stated that the interest was currently accruing on the total

amount due at a daily rate of €3,059.29. In addition they indicated that the plaintiff would also have to pay all costs, charges and

expenses incurred in connection with the enforcement of the facility letters pursuant to clause 6.2 of the General Terms and

Conditions.

19. The plaintiff continues to wish to redeem his loans under the facility letters. In the High Court he asserted that he has secured

and continues to have in place refinancing to enable him to achieve this, but on the basis that the redemption figure does not include

the 4% surcharge interest charged up to the date of the Matheson letter of the 19th June 2015.

The estoppel issue: relevant legal principles

20. Before considering the evidence on this point, it is necessary briefly to rehearse again the relevant legal principles governing the

estoppel issue which are, in any event, set out in my judgment in Flynn. For an estoppel to arise there must first be an express or

implied representation amounting to a “clear and unambiguous promise or assurance which was intended to affect the legal relations

between them and to be acted on accordingly”: see Doran v. Thompson Ltd. [1978] I.R. 223, 230, per Griffin J. In that judgment

Griffin J. proceeded to articulate what was required in respect of the second limb of the test ([1978] I.R. 223, 230):

“….and the other party has acted on [the promise or assurance] to his detriment, it is well settled that the one who gave

the promise or assurance cannot afterwards be revert to their previous legal relation as if no such assurance or promise

had been made by him, and that he may be restrained in equity from acting inconsistently with such promise or

assurance.”

21. It is these principles which I now propose to apply.

Was there a representation?

22. The claim for surcharge interest is based on clause 5.1 of Anglo’s general terms and conditions. This clause provides:

“5.1. Any monies due by the borrower to the Bank and for the time being unpaid will bear a surcharge interest at the rate

of 4% over the facility interest rate or at the Bank’s discretion at a rate equivalent to the aggregate of 4% over the

facility interest rate on the due date calculated on a daily basis from the due date to the date of actual payment after as

well as before any demand is made, any judgment obtained hereunder or the bankruptcy or insolvency of the borrower….”

23. The first question is whether there was a representation. In the High Court Haughton J. found that there was no evidence that

any express representation was ever made by Anglo/IBRC or by the Special Liquidators or, indeed, by Breccia, that surcharge interest

would not be applied to the loans. One can only agree with this conclusion, so that the next question is whether the existence of

such an implied representation may be inferred from the general course of dealing between the parties.

24. The first thing to note in that context is that, if one assumes for this purpose that the application of surcharge interest was

indeed lawful, one would have expected to see a reference to it in the various loan account balances at any time after the 31st

December 2010 when the default was triggered. As Haughton J. noted, it is apparent from the bank statements supplied by

Anglo/IBRC, that no question of the application of any surcharge was ever mentioned in these statements and nor was such a figure

for such interest ever added to the amounts stated to be due. The bank statements instead simply showed that ordinary interest was

debited and applied to all outstanding balances, i.e., the EURIBOR rate, plus the relevant marginal rate. These bank statements

further record any change in this normal interest rate.

25. Haughton J. also accepted the plaintiff’s evidence that there had been no verbal demand for surcharge interest or any inclination

that it might be charged. It was not until the letter of the 29th May 2013 that IBRC wrote formally notifying the plaintiff of the

default and reserving IBRC’s rights in that regard. That letter related only to the 2006 facility letter and it made no reference to any

surcharge interest. The loan accounts and the bank statements nonetheless continued to operate as previously.

26. As I have already mentioned, the Special Liquidators then informed the plaintiff by letter dated 31st October 2013 of a decision

that they had taken to sell his loans, together with the loan of Dr. George Duffy. The plaintiff then wrote to the Special Liquidators on

the 8th November 2013 indicating that he wished to redeem his loan. The Special Liquidators replied by letter dated the 12th

November 2013 in which they stated:

“We note that you say you wish to redeem your loan in full. That is always available to you and you can redeem this at

par at any time in the sales process. If you wish to pay off your loan in full please contact [X]…who will provide the

amount outstanding by you.” [Emphasis added]

27. Having quoted this letter, Haughton J. then stated (at para. 146 of his judgment):

“Although the plaintiff did not seek to redeem his own loan at that time, this letter is none the less significant. The

reference to “par” was a reference to the amount due on foot of the loan accounts without reference to any surcharge

interest. This I did not take to be disputed, and is how it would be understood by a reasonable person reading that letter.

The Special Liquidators’ letter of 12th November 2013 was therefore a clear and unambiguous representation that the

plaintiff could redeem his loan at par, i.e., at the level of the balances set out in the bank statements that he received

from IBRC from time to time, without reference to any surcharge interest. Can it be inferred from this that IBRC/the

Special Liquidators would not be charging any surcharge interest? In my view it can, given the history of the accounts

since 31st December, 2010 and the absence of any indication of surcharge in the intervening period. The plain meaning of

this representation was obvious - it was saying to the plaintiff that you only have to pay par in order to redeem your

loans, and nothing further is required. Moreover, following on from this in the mounting of an offer of €24 million in

March/April, 2014 through a special purpose vehicle company to purchase his loan and that of Mr. Duffy from IBRC, I am

satisfied from the evidence that the plaintiff actually based the amount of his bid on combined loan balances without

including any surcharge interest.”

28. For my part, I entirely agree with this reasoning. As Haughton J. noted, this letter amounted to a representation that the loans

could be redeemed at par. If IBRC had ever intended that surcharge interest should be charged, this was certainly the time to say it.

Judged, therefore, by the terms of this letter and the entire course of dealing between the parties, the silence of Anglo/IBRC

amounted to an implied representation that no surcharge interest would be charged. One could equally describe this as estoppel by

silence or as a form of acquiescence.

Was it intended that the plaintiff could rely on this implied representation?

29. In the High Court Haughton J. held (at para. 148) that it was intended that the plaintiff could rely on the implied representation:

“Was this representation intended to be relied upon by the plaintiff? Undoubtedly it was, as the representation that the

plaintiff could redeem at par was immediately followed by the sentence “if you wish to pay off your loan in full please

contact [X]…who will provide the amount outstanding by you.” It should also be noted that this letter was in response to

the plaintiff’s letter of 8th November 2013 indicating his wish to redeem his loans.”

30. Again, I can but agree with this analysis. The letter amounted in substance to a formal statement of the sums that were due

under the facility letter and a statement as to the mechanism whereby these loans could be redeemed. It follows, therefore, that the

two elements of the first limb of the Doran test have been satisfied. There was a representation (albeit an implied representation)

which was intended to affect the legal relations between the parties to the effect that no surcharge interest would be charged. Of

course, the defendants as purchasers of the loans from IBRC stand in the shoes of the previous owners so far as these

representations are concerned and they are, in principle, at any rate, equally bound by them.

Whether the plaintiff acted to his detriment in reliance on the loans

31. This brings us to the further question of whether the plaintiff acted to his detriment such that it would now be inequitable for the

defendants to resile from these representations. In the High Court, Haughton J. held with the plaintiff on this point:

“While it is true that the plaintiff did not proceed to redeem his loans in the manner contemplated by this correspondence

[with IBRC], I am satisfied that he did place reliance on it in assembling and mounting the bid of €24m. for the combined

loans and security, and the work and expense involved in raising alternative finance to support his bid.”

32. In my view, this conclusion is amply supported by the evidence. The sales process organised by the special liquidators involved an

initial screening process. Serious bidders were then admitted to the second phase of the process where they had access to what was

termed a data room which contained further information regarding the loans. Bidders with access to the data room were invited to

make what was termed as “Phase II offers” based on the “gross loan balance” as of 31st July 2014. This figure was stated to be

€16,144,572.

33. As Haughton J. observed:

“…this figure tallied with the plaintiff’s understanding at the time of what he owed on foot of the facility letters, and was

reflected in the bank statements which he received at different times quarterly or two monthly. There was nothing in the

sales documentation in the data room suggesting that any surcharge interest was included or applied to the loans, or that

any offer should take into account a surcharge interest.”

34. The term “gross loan balance” was defined in the documentation provided by the Special Liquidators as representing “all

outstand[ing] principal, interest and all other amounts due under a specific amount in local currency.”

35. On any view, this is yet a further representation as the total sum due and that this sum did not include surcharge interest. It was

clearly a representation which was intended to be relied on by the plaintiff and, as it happens, the other bidder, namely, Breccia.

36. The plaintiff bid the figure of €16,850,000 for his loans. Haughton J. accepted Mr. Sheehan’s evidence that the bid offer was

slightly greater than the par value because of the fact that the special liquidators’ costs had to be discharged and that they had put

in an additional figure just “for safety” because it “was very important to us to buy our loan [and] not [just] redeem it”. The trial

judge further accepted the plaintiff’s evidence that he had:

“….relied centrally on the representation by the Special Liquidators of a gross loan balance of €16,144,572 as of 31st July

2014, and that his bid was calculated on that basis and that he did not at that time entertain any notion that the loan

might attract surcharge interest.”

37. Haughton J. also noted Breccia had equally relied on the data room statements:

“I also note that Breccia in bidding €17 million for the loan (in addition to which they paid the administrative costs of the

Special Liquidators of €299,000 odd) paid a sum which, while it exceeded the gross loan value, was substantially less than

the gross loan value plus surcharge interest from 31st December 2010. Thus Breccia also placed reliance on the

representations of the Special Liquidators as to gross loan value in the data room, and also did not factor in any

surcharge interest. Mr. Sheeran [a witness for Breccia] in his evidence accepted that at the time of the sale he was

aware that the plaintiff was another bidder, and he agreed that because of this Breccia made an offer of €17 million that

was somewhat over the Gross Loan Balance on 31st July 2014. He agreed that “we wanted to ensure that we acquired

the loan” (Day 3 p. 51). I am satisfied that the only reason Breccia was prepared to pay approximately €850,000 over the

par value was a strong desire to acquire the loan and more particularly the security for the loan.”

38. There was an abundance of evidence before the trial judge to support those findings. It is perfectly clear that Mr. Sheehan acted

on these representations to his detriment and that he altered his position accordingly, thus satisfying the second limb of the Doran

test. He put together financing for his bid and bid accordingly for these loans based on these representations. As Haughton J.

observed in his judgment, had the gross loan balance in fact included a claim for surcharge interest “it is reasonable to presume that

the plaintiff would have pitched his bid very differently, or not made a bid at all.” Moreover, as the trial judge found, Mr. Sheehan

went to some considerable expense in arranging a team of financial and other advisers in the course of the preparation of the bid.

39. A centre feature of the Breccia defence to the estoppel claim is the contention that there was no evidence that Mr. Sheehan

would have acted differently but for the representation. This, perhaps, is but another way of saying that, in the words of Fennelly J.

in Daly v. Minister for Agriculture [2001] 3 IR 513, 530, a plaintiff “must show that he changed his position in a material way.” As

Wilken and Ghaley explained in The Law of Waiver, Variation and Estoppel (3rd ed., 2006)(at 9-82): “what is essential is that the

representee has been led to act differently from the way in which it would have done had the representation had not been made.”

40. For my part, however, I consider that Mr. Sheehan can readily satisfy that test. At all material times he acted on the basis that

he needed to raise a figure somewhat in excess of €16m. and not the figure of some €19m. later demanded of him by Breccia. His

various dealings with IBRC and various finance houses were all conducted on the basis that this was the figure he needed to raise.

That was the basis on which he engaged with IBRC and, indeed, the finance house. If, as Breccia now assert, the true position was

that he at all times needed to raise over €19m. to redeem the loans, the fact that he acted - perhaps not always successfully - on

foot of an earlier representation that he only needed to raise some €16m. is sufficient to show a material change of position.

41. It follows that as of the date of the assignment of these loans to Breccia on the 10th December 2014, IBRC was estopped from

recovering or seeking to recover default surcharge interest up to that point. It follows in turn that Breccia - who acquired the loans

and security ‘subject to the equities’ - is equally estopped from seeking to recover (or add to the redemption figure) any default

surcharge interest that might otherwise be contractually claimed for any period up to the 10th December 2014.

Whether the estoppel also extends up to the date of the Matheson letter of the 19th June 2015

42. It is next necessary to consider whether Breccia are also estopped from charging surcharge interest for the period from the 10th

December 2014 up to the date of the Matheson letter of the 19th December 2015. Mr. Sheehan relies for this period on the stated

amount of the demand in Breccia’s letter of the 18th December 2014 as establishing an estoppel. Breccia responded by saying that it

cannot amount to an estoppel as the letter ended with the following saver of rights:

“This demand is without prejudice to and shall not be construed as a waiver of any other rights or remedies which we may

have including, without limitation, the right to make further demands in respect of sums owing to us.”

43. After considered the evidence on this point Haughton J. found that:

“The letter was prepared and sent after advice had been obtained from Breccia’s solicitors. Mr. Sheeran personally signed

the letter on Breccia’s behalf. It demanded immediate payment from the plaintiff of the sum of €16,144,572 under the

facility letters (and a further sum on foot of the plaintiff’s guarantee). I have some difficulty with Mr. Sheeran’s evidence

that the reference in the final paragraph to “the right to make further demands in respect of sums owing to us” was

intended to be a reference to a right to charge surcharge interest, a subject to which I return below. I do accept his

evidence that the quantum of the demand was “pitched marginally below the par value of the loan” in order to ensure

what he described as “the integrity of the enforcement process”, and so that it couldn’t be “derailed” (Day 3 p. 74). The

clear and admitted intention of Breccia at that time was to appoint a receiver to the secured assets the principal of which

was the plaintiff’s shareholding in BHL. I am of the view that this was their primary objective in the issuance of the letter

of demand. The timing supports this - it was very soon after completion of the acquisition of the loans, and very close to

Christmas when it might be anticipated that it would be difficult for the plaintiff to organise payment or mount effective

opposition to the appointment of a receiver.

I am satisfied that the real reason for demanding €16,144,572, as opposed to any greater figure, was concern over the

calculation of normal interest by reason of the decision in IBRC v. Morrissey [2014] IEHC 460 which raised issues on the

historic calculation of normal interest which applied to these loan accounts. I am satisfied that if the plaintiff had promptly

discharged the sum of €16,144,572 on receipt of the letter dated 18th December, 2014 the loans under the facility letters

would have been redeemed (albeit that the security might not have been discharged as it still supported the cross

guarantees that the plaintiff had given in respect of the other Anglo loans), and indeed Mr. Sheeran accepted as much in

his evidence when stating that he didn’t believe that Breccia would have had any scope to rework the redemption figure if

the plaintiff had paid up on foot of the figures in the letter.”

44. Haughton J. went on to say:

“I am satisfied that any reasonable person standing in the shoes of the plaintiff as borrower and having knowledge of the

history of the account as related above with Anglo/IBRC and the Special Liquidators would, with one proviso, have

treated this letter as clearly representing the redemption figure. Knowing €16,144,572 to be the gross loan balance as of

31st July 2014 they would have wondered why additional ordinary interest since that date had not been added to the

figure. Equally they would probably and reasonably have treated the interest since 31st July 2014 as the possible subject

of further demand under the reservation of rights paragraph if the principal demand was not met. Mr. Sheeran in evidence

mentioned that the normal interest in the region of €113,000 accrued from 31st July, 2014 to the date of completion of

the purchase of the loan (10th December, 2014). This minor ambiguity does not however materially affect the clarity of

the representation in the letter.”

45. Haughton J. also found that Breccia were fully aware that no surcharge interest had been charged by either Anglo or IBRC prior to

the 31st July 2014. Again, these were all findings which the trial judge was fully entitled to make on the evidence.

46. What, then, is the consequence of this? If Breccia believed – at it apparently did - that it was entitled to surcharge interest, then

it was obliged to inform Mr. Sheehan of this fact in unambiguous terms. Its failure to do so amounted, in substance, to a

representation that it did not intend to charge surcharge interest. Like Haughton J. I find myself entirely unpersuaded by the

suggestion of Breccia that it was not under an obligation to notify the plaintiff at this juncture of the intention to charge surcharge

interest. It is true that as a matter of ordinary contract law there is a not a general duty of disclosure by the contractual parties. But

the situation is different where, as here, Breccia made a formal statement containing an implied representation that no surcharge

interest would be charged.

47. Still less am I impressed with Breccia’s entirely fanciful contention that the formal saver of rights contained in the letter ought to

have conveyed such to Mr. Sheehan. If Breccia really intended to charge surcharge interest and thereby to change the course of

dealing which had obtained for four years between Mr. Sheehan on the one hand and Anglo/IBRC, one must then ask why the letter

did not expressly say as much.

48. The long and short of it was that a formal demand was made by Breccia of Mr. Sheehan of the sums which are now said to be

now due. As Haughton J. found, this demand was a prelude to the subsequent appointment of a receiver over the pledged assets of

Mr. Sheehan. Having asserted what was then due Breccia cannot in conscience be allowed unilaterally to resile from that figure. To

put matters another way, Breccia cannot be permitted to advance one figure in a formal letter to Mr. Sheehan for the ostensible

purpose of securing a redemption of the loan figure, while reserving on to itself the right later to claim a higher figure without having

first disclosed the basis of that higher claim.

49. It is clear that Mr. Sheehan changed his position on foot of these implied representations by again making arrangements to

redeem the loan balance as stated in the letter of the 18th December 2014. As I have already noted, his solicitors, Arthur McLean,

wrote on the 18th May 2015 to Matheson solicitors indicating that he intended to redeem the loans and inquired as to the redemption

figure. It was only then that Matheson reverted on 9th June 2015 on behalf of Breccia with a figure that included surcharge interest.

Even at that stage Breccia did not explain the higher figure now suggested as the redemption figure, or set out any calculations of a

surcharge interest. This figure was only provided on the 19th June 2015.

50. So far as detrimental reliance is concerned, Haughton J. accepted Mr. Sheehan’s evidence that after losing out on the sale he set

about trying to raise funds with a view to redeeming his loan and that “this work was in progress (he had hoped to have funds in

place to redeem on or about 5th December 2014) but was incomplete or had been unsuccessful by the time he received Breccia’s

letter of the 18th December 2014.”

51. The trial judge further found that after Mr. Sheehan received the Breccia letter of the 18th December 2014 that letter was shown

to potential funders in the course of continuing efforts to raise funds. The letter also featured in discussions up to the 25th May 2015

when his solicitors sought a redemption figure as “our client is in the process of refinancing his loans.” Haughton J. also found that Mr.

Sheehan continued to rely on the terms of the Breccia letter of the 18th December 2014 so far as the final redemption figure was

concerned. It is not been suggested that this was a finding which the trial judge was not entitled to make on the evidence.

52. It follows, therefore, that, in my view, the trial judge was entirely correct to hold that the formal letter from Breccia dated the

18th December 2014 demanding payment in the sum of €16,144,572 amounted to an implied representation that no surcharge interest

was payable. Haughton J. was also entitled to hold on the evidence that the plaintiff had acted to its detriment on foot of that

representation, so that the two limbs of the Doran test are accordingly satisfied. It follows that Breccia are also estopped by their

conduct in claiming surcharge interest for the period between the 10th December 2014 (the date of the acquisition of the loans from

IBRC) and the 19th June 2015 (the date of the Matheson letter setting out the basis on which surcharge interest was claimed).

Conclusions

53. Summing up, therefore, I am of the view that Breccia as assignee is bound by the representations as to the redemption figure

given by its assignor, IBRC, to the plaintiff in the course of the bidding process for the loans in July 2014. The plaintiff acted to his

detriment in seeking to arrange finance on the basis that this was the true redemption figure. It follows in turn that Breccia is

estopped by reason of the conduct of its assignor from asserting that surcharge interest is now due on these loans up to and

including the date of the assignment on the 10th December 2014.

54. The letter from Breccia dated the 18h December 2014 setting out a formal demand for €16,144,572 also amounted to an implied

representation that no surcharge interest was payable, the formal reservation of rights contained in that letter notwithstanding. The

plaintiff also acted to his detriment in reliance on that letter by seeking to arrange funding. Breccia is accordingly estopped from

claiming surcharge interest for the period from the 18th December 2014 until the subsequent letter of Matheson dated 19th June

2015.

55. I would accordingly affirm the decision of the High Court on the estoppel issue.