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Ask Buachaill Your Own Question
Buachaill, Lawyer
Category: Republic of Ireland Law
Satisfied Customers: 10536
Experience:  Barrister 17 years experience
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Buachaill, I would very much like your consideration of the

Customer Question

I would very much like your consideration of the following - which relates to public house, associated loan matters with an Irish Bank, and proceedings brought by that bank for recovery of the loan.
The rural public house was purchased in approximately 2007 for approx' €520k- with a viable customer base and turnover figures. It traded well enough during 2007-2010, and then turnover began to suffer due to large number of the younger clientele leaving for work overseas or simply becoming unemployed. From 2010 to 2014, there was a sharp fall in turnover (more than 50%) and monthly repayments of €1800 began to become more difficult. We, with the financial evidence from our Accountants, made a case to the bank to reduce repayments as well as look for a debt re-structuring plan - that would effectively allow the business to continue trading. The bank were very aware of the reduction of turnover and had oversight of all business lodgements during this time, but continued to insist on the the €1800 payments - notwithstanding the fact that the business was behind on supplier and Revenue payments (the latter needed to be clear for licencing purposes).
On advice, we decided to withhold payment to the bank for approx' 10 months (Summer 2015-March 3016) until the re-negotation process was completed and we had evaluated new loan terms, and had paid Revenue and Creditors.
Current Position
In October 2015, a new Manager was appointed in the Bank to manage the file. We put forward a proposal to pay €1200 p.m through our Accountants. However, they disputed the figures presented to them- arguing for example - that the main partner/operator could live on less salary/without pension contributions etc, and as the Public House also has a residential unit overhead where they reside (and acts as their only/primary residence) that they were living above what they needed as a baseline salary (which was approx' €35k p.a).
In February 2016, the File Manager in the Bank mentioned that they were now sending the file to their Legal Department to start recovery procedures, and subsequently, we have been issued with a High Court Proceedings. Our Solicitor has been very active/very understanding, and has consulted both the Bank and the Bank's Solicitors to describe the reality of the situation- however, they have not seemed willing to engage him meaningfully and the case is proceeding we assume.
In the interim from March 2016-December 2016, we issued payments to the Bank of c.€20k (10k lump sum in March, and €1200 p.m thereafter) to show our willingness to engage in the process. However in October 2016, the Bank also appointed a Receiver- and when we met them in November they said that they were interested in getting "the best deal" for both parties (ourselves and the Bank), but intended to take vacant possession and sell the property using the "Red Book Valuation". We responded by mentioning that the valuation of the property had plummeted (from €520k), and that a similar property had recently sold for less than €100k. The Receiver was then asked by us whether they would entertain an offer on the property by us- which was positively responded to. In November- some 2 weeks later than the meeting- we made an offer in writing (on the basis of "full and final settlement of the loan") of €100k. The actual loan balance is some €350k.
However, we received a telephone call from the Receiver in December. They mentioned that having spoken with the Bank that they were of the view the the offer was "a good bit short", in terms of buying out the asset and the debt. When we asked what level they would see the proposal being viable at- he mentioned a figure of €300,000. I suggested that there was no one I could imagine either valuing the pub at that level, nor anyone who might pay that sort of money for the property. However, he suggested that the Bank were looking at the residual loan and the asset rather than merely the asset (the pub) only when mentioning that figure (€300k)
1. Given that we made payments of €20k since March 2016 to the Bank on the loan, it is reasonable that they would still pursue legal action through the Courts?
2. Given that the Receiver was appointed to oversee the Property sale, is it reasonable that they would diverge from the "Red Book Valuation" method they espoused- and rather- be directed by the Bank in terms of the offer that we made.
3. Is the role of the Receiver currently defined in any legislation- it seems strange that they would conduct their business by telephone whilst responding to our offer - rather than setting out their position/argument/decision in writing.
Your thoughts and assistance in this matter would be most appreciated.
Submitted: 6 months ago.
Category: Republic of Ireland Law
Expert:  Buachaill replied 6 months ago.

To answer the questions in the order you have asked them:-

1. There is nothing to prevent the bank suing you for what you owe them through the courts. It makes no difference that you might have paid over 20k during the course of the year. Once you owe them the money and a demand has been made, then they can sue you for all that you owe.

Expert:  Buachaill replied 6 months ago.

2. There is no principle of law or fact which requires the bank to have regard to the "Red Book Valuation" when assessing any offer you might make in relation to the premises. So, you are being over generous to yourselves believing that the "Red book valuation" should govern it.

Expert:  Buachaill replied 6 months ago.

3. The powers of the Receiver in this instance are governed by the terms of the debenture under which the Receiver was appointed. This essentially is laid down in the mortgage agreement you will have signed with the bank when the loan was taken out. Whilst a receiver will have additional powers governed by law, such as under the Chancery Receivers (Ireland) Act, 1856, these are only in addition to the powers given by the contractual debenture under which they were appointed. In that contractual debenture, there will be nothing which limits the receiver to writing things down. Conducting offers by telephone will merely fall within the wide ambit of powers under which the Receiver is appointed, as these always are over generous to the Receiver as to what he might do.

Expert:  Buachaill replied 6 months ago.

4. As a final word of advice, you need to realise that the appointment of a Receiver heralds the blood and guts end of the recovery process. Essentially, you need to realise that the bank can pursue you for all the monies which are owing, even if the sale of the property realises less than this sum. So, there is no incentive for the bank to settle for less. This should have been pointed out to you by your solicitor when it came to dealing with the bank. Whilst the business might only be worth 100k, if the loan amount outstanding is 350k, then the bank will seek to avoid a loss for themselves if they can at all. It would have been better to adopt the approach to paying the bank rather than the other creditors as you don't have a business if the bank pulls the plug. The banks in Ireland are not a charity, so if they believe that there might be a prospect of recovering their money, they won't settle for less.