Court Hears Claims of Threats by Executive Over Loan Agreements

The Commercial Court has been informed of serious allegations involving Paul Dowling, chief executive of Real Estate Loan Management (RELM) Ltd, who reportedly threatened to collapse property firms associated with businessman Patrick McKillen jnr unless new loan agreements and leases were finalized. This claim was made during legal proceedings in which McKillen jnr is seeking judicial declarations regarding the legitimacy of agreements made under alleged duress.

On Monday, Mr Justice Mark Sanfey accepted McKillen jnr’s application to fast-track the case, which involves the plaintiff companies and RELM. While the defendant firms, including joint receivers Ken Fennell and Brendan O’Reilly, consented to the case being entered into the commercial list, the judge noted that this should not be interpreted as an admission of the allegations by RELM. Notably, Dowling is not a defendant in these proceedings.

In a detailed affidavit, McKillen jnr described the plaintiff companies as special purpose vehicles exclusively engaged in borrowing from RELM, owning properties, and leasing them to tenants. He highlighted the impact of rising interest rates, driven by Central Bank policies in the post-COVID-19 environment, which significantly increased the loan interest rates between RELM and the borrowing companies.

McKillen jnr suggested that Dowling and RELM encountered pressure from their senior lenders, specifically Bawag Group AG and its owner Avenue Capital. He alleged that this pressure may have led to breaches of their lending covenants, which necessitated the enhancement or assurance of security for the loans provided to the plaintiff companies.

The affidavit states that Dowling approached McKillen jnr to negotiate amendments to the existing loan agreements. McKillen jnr refused, believing that any alterations would be detrimental to the companies. Following this, he claims that Dowling began to make threats of appointing receivers over the companies unless they complied with his demands to improve RELM’s position.

Included in these threats were references to Dowling’s knowledge of other business ventures being pursued by McKillen jnr, including the sale of hotel assets. McKillen jnr asserted that this constituted coercion and intimidation, leading to the execution of certain deeds of variation under pressure.

Some tenant companies have already initiated legal proceedings against the joint receivers regarding the enforceability of the leases and deeds of variation. McKillen jnr noted that if any excess payments arise from these variations, his companies would be entitled to indemnity due to the alleged coercion and undue influence exerted by the defendants.

The plaintiff companies are now seeking court declarations that the deeds of variation are null and void, along with damages for alleged duress, coercion, and misrepresentation. The situation highlights ongoing tensions in the property finance sector, exacerbated by shifting economic conditions and rising interest rates.