The year was 2005, the high point of a golden age for Irish overseas property investors. Three businessmen formed a partnership and decided to make a play in the Romanian capital, Bucharest. They drew down a €3 million Ulster Bank loan and invested in an ultra-modern office complex called Neocity Towers.

Or at least that is how the story appears to go. But one of the three, Andrew Sheehy, has called foul on the deal claiming his signature was forged on the loan documents.  This has led to not one, but three High Court disputes, two of which are still live, 15 years on from the issuing of the original loan facility.

Promontoria Aran, an offshoot of US vulture fund Cerberus, is seeking judgment against Sheehy for over €4.1 million on the back of the arrangement. Promontoria acquired the alleged debt as part of a €1 billion plus distressed loan book it bought from Ulster Bank at a discount. The loan transfer took place in February 2015.

Sheehy has just scored a preliminary legal win against Cerberus. The Court of Appeal has upheld a High Court ruling that the fund must discover documents indicating how much Promontoria paid for the Romanian property loan.

The trial is expected to last five weeks.

Separately Sheehy is suing the two men who are alleged to be his former investment partners, Dublin publicans and property investors, Noel Tynan and Brian Moloney. Sheehy claims they drew down the loan and used the money for their own purposes. However, the case, initiated in March of last year, has seen little activity and zero court filings.

From Manhattan to Guineys

Neocity Towers, Bucharest

Publicans Tynan and Moloney own the Celt bar and Celtic Lodge on Talbot Street.

Offaly born Tynan is the more high profile of the two. He has previously been linked in a business capacity to former taoiseach Bertie Ahern’s Drumcondra set including Paddy Reilly, better known as “Paddy the Plasterer” who Ahern said gave him a dig out in the 1990s.

Sheehy says Promontoria has already settled with his erstwhile partners who he claims diverted approximately €2.1 million to a company called Irish Holdings

Over a decade ago, Tynan was also involved in the €40 million development of a Romanian ski resort.  As the landlord of a famed New York piano bar Bill’s Gay Nineties, he featured in American press reports in 2012 when a dispute led to the tenant’s lease was not being renewed. The New York Times ran the headline: “A bar that survived prohibition is set to be uprooted over a lease.” 

There were other property investments. During the downturn, Noel and his wife Clare Tynan bought Guineys on Talbot Street after the landmark drapery store shut its doors in 2012. Initially, the couple was refused planning permission for a boutique hotel, craft beer hall and seafood restaurant but persistence paid off and last year the vacant store was put on the market with full planning approval and a price tag north of €4 million.

Sheehy says that by being held liable for the Neocity loan, his credit rating and reputation has been damaged

Sheehy is best known for donating a €1000 to the campaign of former Fine Gael TD Lucinda Creighton in 2007 and for running Melot Properties with his developer brother Coleman Sheehy. This became an issue after Coleman, known as Frankie Sheehy, was appointed by the Fine Gael led coalition to the board of Irish Water in 2013. 

In 2015, Melot was fined €3,000 for failing to file corporate tax returns. Receivers were subsequently appointed to the company.

Unjust enrichment

So what is at issue in the Promontoria case?

The fund claims the three men were issued with €3 million by Ulster Bank in 2005 to buy commercial property in Romania. This loan was then replaced by a 2009 facility, providing for an annual review and repayment on demand. No new money was advanced.

Having issued a letter of demand seeking full repayment of the loan in May 2018, Promontoria is now seeking judgment against Sheehy in the sum of €4.1 million for alleged breach of contract. Alternatively, the fund is seeking damages and an equitable lien on the Neocity office towers on foot of a claim of unjust enrichment against the businessman. 

Sheehy is fighting the case with vigour. He maintains he received no benefit from the €3 million Ulster Bank loan. He says his signature was forged on the 2005 loan agreement by Moloney and that he was not a party to the 2009 refinancing facility, a fact he claims the bank was aware of in advance. 

A High Court ruling from last year notes that the 2009 agreement was not signed by, or on behalf, of Sheehy who claims that he was, in effect,  released from the 2005 agreement.

The legitimate purpose of discovery is to obtain litigious advantage

Justice Robert Haughton

Promontoria says that Sheehy was a shareholder in the company which acquired the Romanian commercial property with the benefit of the advances made and accordingly that it is not open to him to deny having received the benefit of the loan.

As part of his defence, Sheehy says Promontoria has already settled with his erstwhile partners who he claims diverted approximately €2.1 million to a company called Irish Holdings. This appears to be a Romanian company. He alleges approximately €1.9 million was used to purchase land in Romania. 

Sheehy claims the bank loan was advanced to an account only used by Tynan and Moloney and that it was some months before he was informed of what was going on. This gave rise to an earlier set of High Court proceedings brought by Sheehy against the two businessmen back in 2006. 

He also claims the bank was aware of the partnership dispute, the alleged forged signature, and diverted funds. He says this did not stop the bank from issuing further loans to Tynan and Moloney. By contrast, Sheehy says that by being held liable for the Neocity loan, his credit rating and reputation has been damaged.

Another element of his defence is that he challenges the legitimacy of the transfer of the loan facilities to Promontoria Aran.

Confidential and commercially sensitive

An interesting pre-trial battleground has centred on Promontoria’s plea of unjust enrichment. In the High Court, Sheehy sought discovery of all documents indicating how much the fund paid to acquire the partnership loan from Ulster Bank in 2015.  

It is Sheehy’s case that in order for Promontoria to succeed in its claim of unjust enrichment, it has to prove it suffered an identifiable loss.

While it is accepted by the fund that the loan book in question was acquired at a price below the par value of the loans, Sheehy claims in his defence that the discount was such that “no payment of substance” was made by Promontoria.

Promontoria’s lawyers A&L Goodbody refused to discover the relevant information asserting, without evidence, that the requested information about Ulster Bank’s loan book was confidential and commercially sensitive. The failure by the fund to back up this claim with any sworn testimony was later criticised on appeal by Justice Robert Haughton in the Court of Appeal.

The fund argued that the facilities in the Ulster loan book were not individually priced. It claimed Sheehy only wanted to get his hands on the documents to leverage a settlement. 

Instead of issuing the requested documents, the fund offered to swear an affidavit setting out the relevant financial information. 

Sheehy prevailed, not only in the High Court but also in the Court of Appeal which upheld the lower court’s decision. Both courts found, in the context of discovery, that the loan price information was directly relevant to the defence case as pleaded. 

Haughton rejected Promontoria’s submission that the discovery order would give unfair litigious advantage to Sheehy and that it was only sought for the purpose of strengthening his hand in negotiating a settlement. “The legitimate purpose of discovery is to obtain litigious advantage,” he said in his judgment earlier this month.

The private documents will be for Sheehy and his lawyers’ eyes only. 

Having jumped this first hurdle, the businessman still has to convince the trial judge that the cost paid by Promontoria should have any bearing on the outcome of the case.