Contested Cases

 

Cases

ADM Londis Plc -v- Arman Retail Ltd

[2006] IEHC 309 (12 July 2006)

 

 

APPROVED JUDGMENT OF MR. JUSTICE CLARKE

DELIVERED ON WEDNESDAY, 12TH JULY 2006

THE HEARING RESUMED AS FOLLOWS ON WEDNESDAY, 12TH JULY

 

JUDGMENT WAS DELIVERED AS FOLLOWS

 

MR. JUSTICE CLARKE: This matter comes before
the court as an application

for summary judgment as against the second and

third-named Defendants on foot of guarantees relating

to the liability of the first named Defendant.

The second and third-named Defendants were the

proprietors of the first named Defendant company and

judgment has already been obtained in relation to the

first named Defendant company which, it is agreed, is

insolvent, in the full sum claimed of €162,110.37. The

liabilities arise from a course of trading between the

Plaintiff and the first named Defendant company, which

ran a retail outlet under the Londis banner in respect

of which goods were supplied. The liability having

been established as against the first named Defendant,

the Plaintiff seeks judgment as against the second and

third-named Defendants on foot of a guarantee.

 

Five separate issues are raised by the Defendants as

suggesting that there are substantial grounds for

defending the proceedings which should, it is said,

allow the matter to go to plenary hearing. I will turn

to those matters in early course, but it is necessary,

firstly, to refer to the legal principles by reference

 

to which an application such as this needs to be

determined.

 

Firstly, it is well settled that the hurdle which a

Defendant needs to meet in order to be given leave to

defend is not a very high hurdle. The most recent

decision of the Supreme Court is to be found in Aer

Rianta -v- Ryanair, 2001, 4 IR 607 and the judgment of

Hardiman J. in that case. In the recent case of

McGrath -v- O’Driscoll (2006) IEHC, 195 I considered

the judgment of the Supreme Court in Aer Rianta -v-

Ryanair and other authority and expressed the following

views at paragraphs 3.4 and 3.5:

“So far as factual issues are concerned
it is clear, therefore, that a mere
assertion of a Defence is insufficient.
But any evidence of fact which would,
if true, arguably give rise to a
Defence will, in the ordinary way, be
sufficient to require that leave to
defend be given so that that issue of
fact can be resolved.

So far as questions of law or
construction are concerned the court
can, on a motion for summary judgment,
resolve such questions, including,
where appropriate, questions of the
construction of documents, but should
only do so where the issues which arise
are relatively straightforward and
where there is no real risk of an
injustice being done by determining
those questions within the somewhat
limited framework of a motion for
summary judgment.”

It seems to me that that is the appropriate test that I

need to apply to the issues of defence raised. Can it

be shown, insofar as the Defences raised are based on

 

facts, that the Defendant has put forward facts which,

if true, might arguably give rise to a Defence? And

insofar as issues of law or construction are concerned,

are those issues straightforward and capable of

resolution on a motion such as this or are they complex
and should await a full plenary hearing?

 

Five specific matters are relied upon by the

Defendants. I propose dealing with each in turn. The

first Defence put forward is a Defence of non est

factum. The factual basis for such a Defence is a

contention on the part of the Defendants that they were

unaware of the contents of the guarantee, having signed

a series of documents at the time when the contractual

relations between the Plaintiffs and the various

Defendants were entered into.

 

The law in relation to a Defence of non est factum is

now, in my view, well settled and is to be found in

Tedcastle McCormack & Co Ltd -v- McCrystal, a judgment

of Morris J. of 15th March 1999 in which, relying on

Saunders -v- Anglia Building Society, 1971 AC 1,004, it

is stated that the following factual matters require to

be established in order that the Defence be proven:

 

A. That there was a radical or fundamental difference

between what was signed and what it was thought was

being signed.

B. That the mistake was as to the general character of

 

the document as opposed to its legal effect.

C. That there was a lack of negligence. That is, that

the person concerned took all reasonable precautions in

the circumstances to find out what the document was.

 

On the facts of this case it is manifestly clear that

the Defendants signed a document which is clearly, on

its face, a guarantee. In those circumstances, even a

cursory reading of the document would have brought to

the Defendants’ attention the fact that they were

signing a guarantee. In those circumstances, it seems

to me that the Defendants could not be said to have

established any Defence under the non est factum

doctrine. On that basis, it does not seem to me that

that ground gives rise to any possible Defence or

should lead to liberty to defend.

 

A second ground relied upon stems from a change in the

legal nature of the Plaintiff company. However, I am

satisfied that no change that has occurred is such as

would give rise to any disentitlement to the now

Plaintiff to pursue claims in respect of contracts and

guarantees entered into by the same entity in its

previous manifestation. In those circumstances, I am

not satisfied that that issue gives rise to a Defence.

 

 

I will pass for a moment from the third ground, which

concerns a potential counterclaim, as that is the issue

 

which gives rise, in my view, to the greatest

difficulty in this case.

 

Fourthly, certain specific items which question the

amount of the principal liability are raised. It seems

to me that it is reasonable to take the view on the

evidence that the Defendants have established a

potential Defence to the extent of the sum of €12,000

under those items. In those circumstances, it seems to

me the Defendant is entitled to liberty to defend so

far as €12,000 is concerned under those headings.

 

The fifth issue concerns the fact that there is

undoubtedly in place a form of second guarantee through

a financial institution which might lead to an

independent means (separate from these proceedings) of

the Plaintiff recovering some of its liabilities which,

in turn, might lead to liabilities being placed

indirectly upon the second and third-named Defendant.

However, it seems to me that the fact that there may be

a different basis upon which the Plaintiff might also

recover the same sum of money does not disentitle the

Plaintiff in principle to recovery against the

Defendants if it is otherwise appropriate that the

Plaintiff should so recover.

 

It is frequently the case that in appropriate

circumstances the court grants judgment jointly and

severally against two individuals. It is axiomatic in

 

such circumstances that a Plaintiff cannot recover the

full sum against both Defendants and it equally

follows, therefore, that to the extent that the

Plaintiff may recover against one Defendant in those

circumstances, it is precluded from executing as

against the other Defendant for a sum which would

amount to double recovery.

 

But that fact does not prevent the Plaintiff from

getting judgment against both Defendants jointly and

severally for the full sum. By analogy, it seems to

me, that the fact that the fact that the Plaintiff may

have the ability to recover some of these monies from

another source does not prevent the Plaintiff from

being entitled to also obtain judgment against these

Defendants. It is clearly the case that, to the extent

that the Plaintiff may actually recover the same monies

by some other route, it would be precluded from issuing

execution as against these Defendants for the relevant

sums.

 

Therefore, so far as those four matters are concerned,

the only matter of defence which, it seems to me, has

been established is a Defence to the extent of €12,000

in relation to the calculation of the principal sum

due.

 

The final matter which arises is a contended for

counterclaim. The circumstances surrounding the

 

counterclaim are difficult from two points of view;

firstly, there is a legal issue as to whether it is

open to a surety such as the second and third-named

Defendants to rely upon a counterclaim which, of

course, is not their own claim but would be a claim

which the principal debtor, the first named Defendant,

would, if it be a good claim, have been entitled to

maintain as against the Plaintiff.

 

I have been referred to limited United Kingdom and more

detailed Australian authority on the issue. I have

come to the view that the issue concerned raises

important and difficult questions of law which, in the

terms which I used in McGrath -v- O’Driscoll, are not

capable of resolution on a motion for judgment without

there being a real risk of an injustice. Therefore,

for the purposes of this application I am prepared to

accept that it is arguable that a surety is entitled to

rely, at least in some circumstances, upon a

counterclaim which might have been available to the

principal debtor.

 

In particular, it seems to me that such an argument

arises in circumstances where the counterclaim, if it

had been pursued by the principal debtor, might have

amounted to a Defence by way of set off in equity under

the principles identified by the Supreme Court in

Prendergast -v- Biddel, an unreported judgment of 31st

July 1957, which establishes that where a counterclaim

 

arises out of event which are closely connected to

those giving rise to the amount claimed on foot of a

summary application, the counterclaim can amount to a

Defence in addition to being a counterclaim so as to

justify the entinguishment in whole or in part of the

claim.

 

That the counterclaim arises out of a closely connected

series of transactions involving the business between

the Plaintiff and the first named Defendant company is

more than arguable. However a number of other matters

arise.

 

The two particular difficulties that arise are,

firstly, that there appears to be evidence to suggest

that the franchise agreement which, it is alleged, was

breached and the breach of which, it is suggested,

gives rise to the counterclaim seems to be with a

different company within the group operating under the

Londis banner. It may well be that that will cause

difficulties for the Defendants in establishing that

there is a sufficient counterclaim maintainable against

the Plaintiff to extinguish the Plaintiff’s claim in

whole or in part so as to lead to the second and

third-named Defendants escaping from liability.

 

However, I am not at this stage persuaded that that

matter is clear. Firstly, it is arguable that where a

group of companies choose to do their business in a

 

manner whereby one company within the group sells

products on foot of an arrangement and on foot of the

same arrangement another company within the group

enters into other commitments, that there is a

sufficient connection between the set of contractual

arrangements entered into so as to give rise to

collateral obligations.

 

I should emphasise that I am by no means deciding that

that is so, but merely indicating that there is an
argument to that effect. In those circumstances, while

undoubtedly the court at a plenary hearing would be

required to deal with that difficult question, I am not

prepared to hold that the Defendants could not succeed

in persuading the court that some form of collateral

arrangement must be impliedly taken to exist which

would entitle them to rely on any breaches which they

could establish of the franchise agreement to

extinguish in whole or in part the claim of the

Plaintiff in these proceedings.

 

The second matter concerns the fact that very limited

evidence has been placed before the court to establish

the possible quantum of any counterclaim that might be

pursued. It is clear on the evidence of the second

named Defendant that the underlying cause of the

difficulties encountered by the business was the

establishment of a competing outlet in very close

proximity to that being operated by the first named

 

Defendant.

 

In those circumstances, it does not seem to me to be

credible to suggest that the entirety of the

difficulties encountered by the first named Defendant

could be attributable to wrongful actions on the part

of the Plaintiffs or companies connected with the

Plaintiffs.

 

The Defendants have not put forward any detailed

evidence from which the court could reach a conclusion

as to the highwater mark of any counterclaim that might

be maintained. However, I am mindful of the fact that

the only proceedings in which it would be open to the

second and third-named Defendants to raise these issues

are these proceedings. They clearly would not be able

to maintain an independent counterclaim, not being the

party who suffered damage, that party being the first

named Defendant.

 

In those circumstances, notwithstanding the fact that

there is no clear evidence as to the precise amount of

the counterclaim that might, on a best case scenario

from the Defendant’s point of view, be established, it

seems to me that the justice of this case would be met

by making an approximate estimation of the extent to

which a counterclaim might arise.

 

For the reasons which I have outlined, the claim is for

€162,000 and there is an admitted arguable Defence so

far as individual items are concerned of €12,000. That

would leave a balance of €150,000. In the

circumstances, it does not seem to me that even at its

most optimistic, from the Defendant’s point of view,

the counterclaim could amount to more than 50% of that

sum.

 

In those circumstances, I would propose giving judgment

to the Plaintiff against the second and third-named

Defendants in a sum of €75,000 and giving the second

and third-named Defendants liberty to defend, including

defend by way of counterclaim, in respect of the

balance.

 

THE JUDGMENT WAS CONCLUDED

 

Ulster Bank Ireland Ltd v Fortune

[2014] IEHC 272
JUDGMENT of Ms. Justice Barton delivered on the 16th day of May, 2014
1. This is an action brought by the plaintiff bank against the defendants by way of summary summons to recover the sum of €1,130,652.99, on foot of two joint and several mortgage loan accounts and a joint and several current account. The plaintiff seeks liberty to enter summary judgment for this sum together with costs.

2. The plaintiff claims to be entitled to judgment against the defendants on the basis that money was lent by it to the defendants by way of two term loan facilities and also on foot of a joint and several current account.

3. By a facility letter dated 27th April, 2004, the plaintiff bank offered to advance to the defendants the sum of €190,000 subject to the bank’s usual terms and conditions and which were summarised and stated to be enclosed with that letter together with a default schedule. The purpose of the loan was to enable the defendants to purchase and renovate property at Rathdowney at an interest rate of 3.9% per annum variable over a term of 24 months with repayments commencing on 30th May, 2004, in the sum of €609.04 per month and with a review date of 10th March, 2005.

4. There were a number of special conditions set out in the letter of offer including a provision that in the first year repayments to the plaintiff bank would be by way of interest only with a further year of interest only payments subject to satisfactory review at the end of the first year and that thereafter, repayments would be of capital and interest over a term of 15 years. The loan was to be secured in the manner set out in that letter.

5. The summary of the terms and conditions enclosed with the letter of offer provided, by clause 3, that the plaintiff reserved the right to require repayment on demand in the event of the occurrence of any of the events specified in an accompanying schedule, described as a default schedule, and which included the following:-

“1. If any of the repayment instalments are not provided for by the due date;
2. If any interest is not provided for by the due date;

3. If the borrower dies;

4. If the borrower shall default in the performance of any term, condition, covenant or agreement contained in the letter of sanction and such default shall continue un-remedied after written notice thereof shall have been given by the bank to the borrower.”

6. In all there were fourteen events set out in the schedule.
7. It is not in dispute in these proceedings that the defendants availed of the facilities offered to them by the plaintiff bank by the facilities letter of 27th April, 2004 and that they drew down the loan amount of €190,000.

8. By a further facility letter dated 4th April, 2006, the plaintiff bank offered to make available to the defendants a term loan in the sum of €912,000 repayable on demand for a term of one year together with a variable rate of interest which, at the time of the letter of offer, was 4.550% and otherwise subject to the terms and conditions set out in that letter and in documentation accompanying that letter.

9. Although the term of the loan was specified to be one year, the interest provisions of the letter of offer provided for the interest only period of the loan to be extended to two years with an annual review after year one and that in the absence of demand, the defendants would repay the loan in full within the term. As to the repayment of capital it was specified that the bank had agreed to a 24 month capital moratorium on the loan which was to be secured in the manner set out in the letter. It was a further term of the repayment provisions that:-

“Loan is to be repaid within one year from sale of serviced sites or suitable repayment schedule put in place.”
10. The facility letter further provided that any demand or notice was required to be made in writing, signed by an officer of the bank and that that was to be served on the borrowers either by personal delivery or by post to the borrowers at the address last known to the bank.
11. The letter also contained general conditions applicable to all facilities and these included the following:-

“4. The above facilities and the terms and conditions attaching thereto are subject to annual review with the first review to be conducted no later than 31st August, 2006.”
5. In the event that this facility or any or all of these facilities shall become due and payable to the bank, whether following formal demand by the bank or otherwise, interest shall accrue and be payable on such facilities on a compound basis until its/their discharge.

6. Notwithstanding anything heretofore contained in this letter, the facility/ies with interest accrued thereon shall become immediately due and payable on demand being made by the bank on the occurrence of any of the events on the attached form.”

12. The facility letter contained specific provisions in relation to default and in that regard provided:-
“On the occurrence of any of the events specified on the attached enclosure, the bank may, by giving notice to the borrower, cancel any outstanding commitments and treat the borrowings as being repayable on demand without prior notice and may exercise its rights under any security which it holds.”
13. A schedule of events entitling the bank to require repayment on demand was enclosed with the facility letter in terms identical to the schedule enclosed with the facility letter of 27th April, 2004, save that the schedule of events enclosed with the letter of offer dated 4th April, 2006, referred to a facility letter dated 28th March, 2006.
14. The defendants accept that they availed of the facility, drew down the funds and that, as with the loan the subject matter of the facility letter of 27th April, 2007, the loan amount remains unpaid. It is also accepted by the defendants that the bank provided current account facilities to them and that the balance on foot of that account claimed by the bank remains unpaid.

15. The defendants got into serious financial difficulties and were unable to meet their repayment commitments. What appears to have happened is that the plaintiff bank reviewed the loans on a yearly basis and maintained these in place on an interest only basis but with an adjustment being made with regard to the interest rate increasing to a rate sufficient to cover the funding of costs. It appears that some repayments were made by the defendants, the last of which was on 20th July, 2009. Thereafter, it appears the plaintiff’s Mr. McNally sought from credit control a capital moratorium on the loan facilities until the end of 2010. He notified the defendants that the credit department of the bank were agreeable to that request but subject to a number of conditions, none of which were agreed to or complied with by the defendants and which ultimately led to the plaintiff’s Mr. McNally writing to the defendants on 11th October, 2010, notifying them that they were in default and reserving the bank’s position in relation to all rights and remedies available under the terms of the facility letter. In addition, formal demand was made for the repayment of €7,973.51, in respect of the current account loan and to be paid by the defendants to the plaintiff within 21 days from the date of that letter. No payments were made and the default of the defendants ultimately resulted in the bank’s solicitors, Lyons Dermody, issuing a formal letter of demand dated 3rd December, 2010, for repayment of both term loans and the balance then due on the current account and the aggregate of which totalled €1,130,652.99.

16. It appears on the affidavits filed that as a result of the financial circumstances in which they found themselves the defendants, together with their three young children, emigrated to New Zealand.

17. In late June or early July 2011, after the commencement of these proceedings, the defendants instructed their chartered accountants, Thomas P. Fox and Company, to write to the plaintiff’s solicitors, Lyons Dermody, with a view to outlining some proposals for repayment of the loans. Thomas P. Fox and Company wrote to the plaintiff’s solicitors on 21st July, 2011, and repeated the content of a proposal contained in a letter sent by them and dated 4th July, 2011, to Brian Lawlor, an employee of the plaintiff bank attached to its Athlone office. That letter contained the following proposal:-

“Seán and Pauline will sell the property known as ‘the Barracks’ in Rathdowney. They have received a very strong expression of interest in the property, with the potential purchasers even carrying out surveys on the property. It is felt that the property could be sold for in the region of €370,000 – €390,000.
Seán and Pauline have also received a very strong expression of interest in part of the site at Errill, Co. Laois, on which there is an old disused house. The local auctioneer feels that this should sell for in the region of €30,000 – €40,000 with the price closer to the latter if a deal is closed soon with the party that is currently interested in it.

Ulster Bank would receive the net proceeds, after selling costs and any taxes are deducted, from the sale of ‘the Barracks’ and that part of the site on which the old disused house is situated.

Seán and Pauline would then hand full title of the site with planning permission for 50 units (planning permission No. 06-1886) in Errill, Co. Laois, back to Ulster Bank for them to sell it or hold onto it as they see fit.

All of the above will then be used to settle the debt owed to Ulster Bank in full.”

18. The penultimate paragraph of that letter of 21st July, 2011, stated:-
“Unfortunately, if the above offer is not accepted by Ulster Bank, then Seán and Pauline will have no other means of meeting their repayments and will have no other options to try to remedy their current situation. I hope you will view this offer in a favourable light and see it as a very genuine attempt on the part of Seán and Pauline to honour the commitments to Ulster Bank in the current economic circumstances.”
19. The plaintiff has by two separate motions on notice sought liberty to enter final judgment against the defendants. On each occasion, the Master of the High Court struck out the proceedings. From the first Order the plaintiff appealed and the result of that was that the Master’s Order was varied to provide that the original notice of motion be struck out, consequent upon which the plaintiff brought a further motion for liberty to enter final judgment which resulted in the Master making a further Order dated 26th June, 2013, again striking out the summons and from which the plaintiff has appealed to this Court on notice of motion dated 13th July, 2013.
20. At the outset of the hearing before me, it was acknowledged by counsel for both parties that the real issue for determination was whether the plaintiff should be given liberty to enter final judgment or the defendant should be given leave to defend the proceedings.

21. In relation to the plaintiff’s application for liberty to enter final judgment, a number of affidavits were sworn by or on behalf of the defendants. Both the affidavit of the defendants’ solicitor, Peter Dempsey, which was sworn on 31st May, 2012, and the defendants’ affidavit sworn on 1st June, 2012, were highly critical of the plaintiff and its behaviour in seeking to recover judgment by way of summary proceedings. Moreover, it was averred that the plaintiff was not entitled to either the sum claimed or any sum in these proceedings.

22. A number of affidavits were sworn on behalf of the plaintiff and subsequently the first defendants swore an affidavit on behalf of himself and his wife, the second named defendant, on 28th January, 2014, which contained the essence of what the defendants say is their defence to the plaintiff’s claim. The defendants challenged the facility letters which were exhibited in the affidavit of Eoin O’Shea, sworn on behalf of the plaintiff on 1st October, 2012, on the grounds that these appeared to be draft documents and in this regard the defendants made the case that they dealt with a Mr. David Kavanagh, an employee of the plaintiff bank and whom they maintain would corroborate their account of what had been agreed by them with him. The defendants maintain that the documents produced by Mr. Kavanagh, at the time and signed by them in connection with the loan for €912,000, were amended, and altered in their presence by Mr. Kavanagh who also initialled certain terms. In this regard, specific reference was made to what purported to be the facility letter of 4th April, 2006, as initially exhibited by the plaintiff’s Eoin O’Shea in his affidavit of 1st October, 2012. The defendants maintain that contrary to what appeared in that letter it had been specifically agreed between the plaintiff and the defendants that a house on two acres would not be part of the security to be held by the bank and that, moreover, there were other discrepancies between that letter and the documentation signed by them. As to the actual loan itself, it is accepted by the defendants that the sum of €921,988.77, was advanced but the defendants say that what was agreed between them and the plaintiff was that this sum was to be repaid within one year from the sale of serviced sites on the property at Errill, Co. Laois or the putting in place of a repayment schedule. It was the defendants’ contention that David Kavanagh was a party to the making of the arrangements between the plaintiff and the defendants and that he would be in a position to confirm that any monies advanced by the plaintiff were for the purposes of purchasing the sites and were to be repaid on the expiry of one year from the sale of those sites. That, however, had not occurred and the sites had remained unsold due to planning difficulties to which the plaintiff bank itself had contributed in dealing with the defendants’ affairs. Moreover, it was contended for by the defendants that no agreement had been reached between the plaintiff and the defendants in relation to a repayment schedule. As far as the defendants are concerned, no question of repayment, therefore, arises because the sites had remained unsold and that no agreement has been entered into between the plaintiff and the defendants in relation to putting in place a repayment schedule. Furthermore, the defendants say that no lawful demand was made of them by the plaintiff.

23. The defendants also claim that the approach of the plaintiff prior to the commencement of the proceedings was confusing at the time and was rendered more confusing by the paperwork advanced in support of the plaintiff’s claim and exhibited in a number of the plaintiff’s affidavits. It was asserted that the approach of the plaintiff was a major factor in forcing the defendants to emigrate. Otherwise, complaint is made by the defendants that the plaintiff’s affidavit had been sworn by persons other than those with whom the defendants had dealt and that the paperwork which was exhibited was incomplete, inconsistent with the agreements actually entered into and were otherwise self contradictory. Finally, a complaint was made as to the manner in which the plaintiff delayed in the proceedings and then withheld from the defendants’ legal advisers, the costs which had been awarded against the plaintiff on the original motion for liberty to enter final judgment.

24. By way of supplemental affidavit sworn by Eoin O’Shea on behalf of the plaintiff on 24th February, 2013, the plaintiff exhibited true copies of the original facility letters showing the amendments and initials which the first named defendant had referred to in his affidavit as having been made by David Kavanagh on the documents which they had signed. It is now accepted by the plaintiff that the defendants’ family home and an area of two acres was, as had been contended for by the defendants, to be excluded from the security provided by the defendants to the plaintiff for the loan, the subject matter of the facility letter of 4th April, 2006.

25. The defendants had also contended that the schedule of events of default accompanying the original letter of 4th April, 2006, was questionable and contradictory. It was said that the schedule of events of default could not be relied upon as it referred to a letter of offer of 28th March, 2006. No letter of offer of 28th March, 2006, was produced nor was a schedule of events of default referable to a letter of offer of 4th April, 2006. The explanation of the plaintiff is that the reference in the schedule of events of default to a letter of offer of 28th March, 2006, was incorrect and should have been a reference to 4th April, 2006, being the date upon which the facility letter issued and which was in fact the facility letter signed and dated by the defendants themselves at that time.

26. The plaintiff’s response to the contention of the defendants that the loan was to be repaid within one year of the sale of serviced sites or a suitable repayment schedule being put in place is that what was intended was that if the loan was not repaid from the sale of serviced sites after one year from the commencement of the loan then a suitable repayment programme was to be put in place. That had not occurred, the defendants were in default, and accordingly, all money due on foot of the loan was repayable forthwith.

27. In legal argument, counsel for the plaintiff, Mr. Rudderdale, submitted that there was no factual basis for any defence to the plaintiff’s claim in relation to the monies due on foot of the current account or monies due on foot of the loan account, the subject matter of the facility letter of 27th April, 2004. With regard to the facility letter of 4th April, 2006, he submitted that it was now clear from the copy of the original letter of offer exhibited in the supplemental affidavit of the plaintiffs, Eoin O’Shea that this was the agreement actually signed and entered into by the defendants and that irrespective of the meaning of the provision relating to the repayments of the loan from the sale of serviced sites, as the defendants had failed to pay the interest in accordance with the interest only provision of the loan a default had occurred entitling the bank to call in the loan.

28. In response, counsel for the defence, Mr. O’Floinn, submitted that there was no proper demand in accordance with the terms of the facility letter of 4th April, 2006, namely that no demand in writing had been signed by an officer of the bank. In this regard, there was a difference between the terms relating to demand contained in the facility letter of 4th April, 2006, and those contained in the facility letter of 27th April, 2004. There were also contradictions with regard to the loan comprised in the facility letter of 4th April, 2006, with separate references to periods of one year and 24 months respectively. In addition, there could not be certainty that the schedule of events purported to have been enclosed with the facility letter of 4th April, 2006, was in fact applicable at all and noted that the only schedule of events exhibited purported to be relating to a letter dated 28th March, 2006. Of critical importance, counsel for the defendants submitted, was the fact that the loan was not due because the agreement which had been entered into between the plaintiffs, Mr. Kavanagh on the one hand and the defendants on the other was that the loan would in fact be repayable within a year of the sale of serviced sites or in default in accordance with a repayment schedule but which had never been agreed to between the parties and which was required to be put in place.

29. Not surprisingly, counsel for the plaintiff submitted that the wording of the relevant clause in the facility letter was not open to that construction or interpretation, moreover, the loan was in any event repayable because the term had expired.
The Law
30. There was broad agreement between the parties as to the legal principles applicable in relation to an application for liberty to enter summary judgment. These have been the subject matter of a number of decisions which in modern times can conveniently be said to commence with the decision of the Supreme Court in First National Commercial Bank Plc v. Anglin [1996] 1 IR 75.

31. In that case, the plaintiff had issued a summary summons seeking judgment on foot of a personal guarantee allegedly given by the defendant; the Master of the High Court directed that the case should be placed in the judges’ list. Costello J. refused to give the defendant leave to defend the action on the basis that there was no credible evidence of a real bona fide defence to the plaintiff’s claim and granted summary judgment to the plaintiff. On appeal by the defendant, the Supreme Court, in a judgment delivered by Murphy J. stated that:-

“For the court to grant summary judgment to a plaintiff and to refuse leave to defend it is not sufficient that the court should have reason to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action…
In my view the test to be applied is that laid down in Banque de Paris v. de Naray [1984] 1 Lloyd’s Law Rep. 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank Plc v. Daniel [1993] 1 W.L.R. 1453. The principle laid down in the Banque de Paris case is summarised in the headnote thereto in the following terms:-

‘The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the Court had to look at the whole situation to see whether the defendant had satisfied the Court that there was a fair or reasonable probability of the defendants having a real or bona fide defence.’

In the National Westminster Bank case, Glidewell L.J. identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:-

‘I think it right to ask, using the words of Ackner L.J. in the Banque de Paris case, at p. 23, ‘Is there a fair or reasonable probability of the defendants having a real or bona fide defence?’

The test posed by Lloyd L.J. in the Standard Chartered Bank case, Court of Appeal (Civil Division), Transcript No. 699 of 1990 is what the defendant says credible?, amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence.”
32. This statement of the principles was followed by the Supreme Court in Aer Rianta CPT v. Ryanair Limited [2001] 4 IR 607. In her judgment, McGuinness J. endorsed the test laid down in First National Commercial Bank Plc v. Anglin and summarised it as follows:-
“Thus it is for this Court to decide whether in the instant case the defence set out in the affidavits of Mr O’Leary, together with the documents exhibited therewith, is credible, or in other words, whether there is a fair or reasonable probability of the defendant having a real or bona fide defence…. The Court does not ask whether Mr O’Leary’s account of events is probable, or likely to be true; nor does it ask whether Mr Byrne’s account of events is more likely. The question is rather whether the proposed defence is so far fetched or so self contradictory as not to be credible.”
33. Hardiman J. delivered a concurring judgment in which he engaged in a comprehensive review of the authorities relating to the jurisdiction to grant summary judgment. Having reviewed the case law he expressed his own view in the following terms:-
“In my view, the fundamental question be posed on an application such as this remains: is it ‘very clear’ that the defendant has no case?; is there either no issue to be tried or only issues which are simple and easily determined?; do the defendant’s affidavits fail to disclose even an arguable defence?”
34. In Harrisrange Limited v. Duncan [2003] 4 IR 1, McKechnie J., enumerated the principles to be applied by a court in deciding whether to grant summary judgment or give a defendant leave to defend in the following way:-
“(i) The power to grant summary judgment should be exercised with discernible caution,
(ii) In deciding upon this issue the Court should look at the entirety of the situation and consider the particular facts of each individual case, there being several ways in which this may best be done,

(iii) In so doing the Court should assess not only the Defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the Plaintiff, being mindful at all times of the unavoidable limitations which are inherent on any conflicting Affidavit evidence,

(iv) Where truly, there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use,

(v) Where however, there are issues of fact which in themselves are material to success or failure, then their resolution is unsuitable for this procedure,

(vi) Where there are issues of law, this summary process may be appropriate but only so, if it is clear that fuller argument and greater thought, is evidently not required for a better determination of such issues,

(vii) The test to be applied, as now formulated is whether the Defendant has satisfied the Court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the Defendant says credible?’, which latter phrase I would take as having as against the former an equivalence of both meaning and result,

(viii) This test is not the same as and should be not be elevated into a threshold of a Defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence,

(ix) Leave to defend should be granted unless it is very clear that there is no defence,

(x) Leave to defend should not be refused only because the Court has reason to doubt the bona fides of the Defendant or has reason to doubt whether he has a genuine cause of action,

(xi) Leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally,

(xii) The overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter Judgment or leave to defend, as the case may be.”

35. This annunciation of the approach to be taken by the court in connection with an application for liberty to enter a summary judgment was cited with approval by Finlay Geoghegan J., in her judgment in Bank of Ireland v. Walsh delivered on 8th May, 2009.
36. In relation to the test to be applied, she observed:-

“As appears from sub-paragraph (vii) above, the threshold is one of an arguable defence and is, in relative terms, a low threshold. However, in making that determination, the Court should have regard to whether what the defendant is saying is mere assertion and whether the proposed defence is credible in the sense explained by Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607.”
37. With regard to the approach to be adopted in relation to factual issues, Clarke J. in McGrath v. O’Driscoll [2007] 1 ILRM 203, referring to the decision in Aer Rianta v. Ryanair stated at para. 3.4:-
“So far as factual issues are concerned it is clear, therefore, that a mere assertion of a defence is insufficient but any evidence of fact which would, if true, arguably give rise to a defence will, in the ordinary way, be sufficient to require that leave to defend be given so that that issue of fact can be resolved.”
38. In applying the test, the court must be mindful that the completeness of the defence available to a defendant may only be available as a result of the adoption of certain court procedures such as discovery, inspection or interrogatories. However, a general assertion that a defence may well become available as a result of the adoption of these procedures would clearly be insufficient. In GE Capital Woodchester Limited v. Aktiv Kapital Asset Investment Limited [2009] IEHC 512, Clarke J. observed:-
“However, it seems to me that where a defendant satisfies the court that there is a credible basis for asserting that a particular state of facts might exist which state of facts, if same were in truth to exist, could be established by appropriate discovery and/or interrogatories, then such defendant should be entitled to liberty to defend. It should, again, be emphasized that mere assertion is insufficient. A credible basis for the assertion needs to be put forward even if it is not, at the stage of the motion for summary judgment, possible to put before the court direct evidence of the assertion concerned.”
39. With regard to the approach that should be adopted in relation to legal issues on a motion for summary judgment, Clarke J. in McGrath v. O’Driscoll stated:-
“So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
40. Whilst it may well be open to a court on a motion for summary judgment to resolve a question of law or to construe a document there is no obligation on the court to do so. Rather the question is whether the defendant has established an arguable defence. (See Danske Bank v. Durkan New Homes [2010] IESC 22 and Bussoleno Limited v. Kelly [2011] IEHC 220.)
Decision
41. Applying these principles and having read and considered the affidavits filed and the submissions made by counsel, I am not satisfied that the defendants have met the low threshold of an arguable defence to the plaintiff’s claim in respect of the sums due on foot of the current account facility nor in respect of the term loan, the subject matter of the facility letter of 27th April, 2004.

42. As to the loan, the subject matter of the facility letter of 4th April, 2006, I am, however, satisfied that there is an issue for determination in relation to the construction and true meaning of certain terms and conditions of that letter which it would not be appropriate for the court to attempt to resolve on an application for summary judgment. In coming to this conclusion, I have not overlooked the fact that the defendants, through their accountants by letter dated 27th April, 2011, acknowledged that they were indebted to the plaintiff. However, this was without specifying in what amount such acknowledgment was being made and moreover, may well have been made without the benefit of legal advice nor have I overlooked the fact that the defendants do not dispute but that the loan amount, the subject matter of the facility letter of 4th April, 2006, was drawn down by them. The defendants contend, however, that they had a very specific understanding and agreement with the plaintiff and that this agreement is reflected in what they say is the correct interpretation and construction to be placed on certain terms of the facility letter, particularly those relating to repayment of the loan. That proposition the plaintiff disputes and contends that irrespective of that the monies are due by reason of the non-payment of the interest on the monies borrowed. The defendants, however, contend that no valid demand was made in accordance with the terms of the demand provision contained in the facility letter of 4th April, 2006. In this regard, I note that the demand provisions differ from the provisions of the facility letter of 27th April, 2004. I am satisfied there is in fact an issue as to whether or not the demand made on behalf of the plaintiff by the plaintiff’s solicitors complies with the express provisions in that regard and comprised in the facility letter of 4th April, 2006. Moreover, there is also a conflict of evidence in relation to the issue as to whether or not a default schedule relied upon by the plaintiff is in fact referable at all to this particular facility. That there are such issues and that such a conflict as to the true meaning and interpretation to be placed on certain terms and conditions of the agreement exists confirms me in the view that if resolved in the defendants’ favour, it would offer a defence to the plaintiff’s claim and consequently, is more properly to be dealt with by plenary hearing. That being so, I direct that aspect of the plaintiff’s claim be dealt with accordingly.

43. I will discuss with counsel the form of the orders to be made on foot of the notice of motion of 31st July, 2013.

 

Irish Bank Resolution Corporation v McCaughey

,[2014] IEHC 230
Kelly J.

JUDGMENT delivered by Mr. Justice Kelly on the 29th day of January, 2014
The Case
1. This is an application for summary judgment for a sum of €7,730,102.18. That sum is allegedly due by the defendant to the plaintiff on foot of a series of credit agreements and facility letters executed between 1st September, 2006 and 28th March, 2007. These facilities are conveniently described and the amount due in respect of them as of 20th January, 2014, in the table which is contained at para. 7 of an affidavit of Conor Nestor sworn on 22nd January, 2014.

2. There is no dispute but that the defendant executed all of the relevant facility letters and drew down and has had the benefit of the funds described in them.

3. The plaintiff contends that the defendant has no defence to these proceedings and that it ought to be granted summary judgment in respect of the sum claimed in its entirety.
The Test
4. Before considering the defendant’s answer to this application, I ought to sketch out the test which I am obliged to apply on applications of this sort. That is what I did in my decision in Bank of Scotland Plc v. Mansfield [2011] IEHC 463, where I said:-

“8. The test to be applied by this Court on an application for summary judgment is well established. It has been stated and restated by the Supreme Court and this Court on many occasions in particular in recent times where applications for summary judgment, very often in respect of large amounts, are a commonplace.
9. The most recent statement from the Supreme Court on the topic is to be found in the judgment of Denham J. (as she then was) in Danske Bank A/S trading as National Irish Bank v. Durkan New Homes & Ors [2010] IESC 22.

10. Having recited the provisions of O. 37, r. 7 of the Rules of the Superior Courts that judge went on as follows:-

‘Several cases were opened before the Court which have addressed this jurisdiction. These included Bank of Ireland v. Educational Building Society [1999] 1 IR 220 where Murphy J. emphasised that it was appropriate to remit a matter for plenary hearing to determine an issue which is primarily one of law where a defendant identified issues of fact which required to be explored and clarified before the issues of law could be dealt with properly. He stated at p.231:-

‘Even if the position was otherwise, once the learned High Court Judge was satisfied that the defendant had ‘a real or bona fide defence’, whether based on fact or on law, he was bound to afford them an opportunity of having the issued tried in the appropriate manner.’

In Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, Hardiman J. reviewed Irish cases and concluded at p.623:-

‘In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?’

11. At para. 22 of her judgment Denham J. stated as follows:-

“As stated in Banque de Paris v. de Naray [1984] Lloyd’s Rep. 21, by Ackner L.J. at p.23:-
‘It is of course trite law that O. 14 proceedings are not decided by weighing the two affidavits. It is also trite that the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendants having a real or bona fide defence.’’

12. In Bank of Ireland v. Walsh [2009] IEHC 220, Finlay Geoghegan J. set out the principles applicable to the determination of an application such as this by reference to a decision of McKechnie J. in Harrisgrange Limited v. Duncan [2003] 4 IR 1. It is not necessary for me to repeat yet again the twelve considerations which he set out in that judgment but I do call attention to one of them where he said:-

‘the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’, which latter phrase I would take as having as against the former an equivalence of both meaning and result.’

13. Finlay Geoghegan J. said in relation to this:-

‘As appears from sub-paragraph (vii) above, the threshold is one of an arguable defence and is, in relative terms, a low threshold. However, in making that determination, the Court should have regard to whether what the defendant is saying is mere assertion and whether the proposed defence is credible in the sense explained by Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607.’”

The Agreements
5. The first facility letter is dated 1st September, 2006 and was granted to part fund the defendant’s investment in the AIAC Woolgate Exchanged Geared Property Fund. The second facility was dated 10th October, 2006 and had as its purpose the part funding of the defendant’s equity investment in an entity called Peninsula Real Estate Fund which has been given the nomenclature for the purpose of these proceedings of the New York Hotel Fund. That is how I will refer to it.
6. The third facility was dated 17th November, 2006, and was broken down into three different elements. They were described as Facility A, B and C. Facility A was to increase the defendant’s investment in the Woolgate Exchange Geared Property Fund. Facility B was to part fund the defendant’s investment in the AIAC European Geared Property Fund (E.G.P.F.). Facility C was to fully fund the defendant’s investment in Riverdeep. The fourth facility was dated 2nd January, 2007 and was used to provide the defendant with a €5m investment line of which €1,737,000 was drawn down.

7. The fifth facility was dated 28th March, 2007 and was to part fund the purchase of two units at the Rockefeller Plaza in New York.

8. There are a number of features which were common to all agreements. First, each had a letter of facility setting out specific terms to which I will turn in a moment. Each of them was executed by the defendant. Each of them expressly provided that the facility granted was to be repayable on demand and that that demand might be served at any time by the Bank at its sole discretion without stating any reason for such demand. Without prejudice to the demand nature of each of the facilities they were all expressly stated to be repayable on or before a specified date, the latest of which was March 2008. Each of the facilities was also granted subject to the Bank’s general conditions governing personal loans. All provided that if there was any conflict between the terms of the facility letter and the general conditions, the terms of the facility should prevail. As is clear, the backstop date for the payment of the facilities has long since expired.

9. The facility letters were signed by Mr. McCaughey and in many cases were witnessed. Immediately, above his signature on each facility letter is to be found, the following:-

“I have read the conditions set out above and in the general conditions and in the credit agreement each of which form part of this agreement (the agreement) and agree to be bound by the provisions of the agreement. I am fully aware of, and understand, the nature of the agreement and have been advised to take and have been given due opportunity to take, separate independent legal advice on the effect of the agreement and have taken/waived (delete as appropriate) the opportunity to take such legal advice.”
In no instance was the appropriate deletion made in the latter clause of that last sentence. Amongst the general conditions under the heading “representations and warranties”, one finds the following:-
“the borrower represents and warrants to the bank that:-
(a) on execution, the agreement and any security documents executed pursuant thereto, constitute the borrowers legal, valid and binding obligations enforceable in accordance with their respective terms.”

10. It is common case that the defendant was an experienced businessman at the time when he executed all of these agreements.
11. The arguable defence which the defendant contends he has to these proceedings really falls into two parts. In truth, only one part can be considered a defence properly so called. The other part is a possible counterclaim. I will deal with the defence issue first.
The Defence
12. The defendant contends that he has led evidence sufficient to meet the threshold which he must achieve on an application for summary judgment. That evidence he says demonstrates a triable issue that, notwithstanding the clear terms of the written agreements executed by him, there was nonetheless a collateral contractual arrangement to the effect the term of the agreement would be “for the duration of the funds”. If correct this means that the facilities were not demand facilities nor were they repayable by March 2008 at the latest.

13. This issue is dealt with from para. 7 onwards in the defendant’s replying affidavit of 26th November, 2013. This is what he says:-

“7. Anglo Irish Bank (hereinafter referred to Anglo) had a model of lending that was based on its short term access to funds. It would agree to lend to customers on the basis of a longer term but would expressly provide for a 12 month or shorter facility on the documentation. The shorter periods would then be rolled over for the duration of the fund.
8. I can tell the court that the first agreement, the second agreement, the third agreement, facility A and facility B and part of the fourth agreement were for the purpose of investing in funds offered by the Anglo Irish Bank. All of these loan agreements were provided to me on the explicit confirmation from the Anglo Irish Bank that the term would be for the duration of the funds so that any provision to the contrary was subject to such representation and/or agreement.

9. In this regard, I beg to refer to an affidavit of Jason Drennan sworn on 23 May, 2013, when produced, which confirms that he explicitly confirmed to me that the loans were for the duration of the investment. I confirm that Mr. Drennan was an employee of Anglo and manager who had the role of raising equity from investors for investment opportunities. As is clear from his affidavit, he approached me in relation to the Woolgate fund, the New York Hotel fund, the European Geared Property Fund and the M&A Fund.”

14. The first thing to notice about these averments advancing this defence of a collateral contract is that they are limited to some of the facilities only. Facility C of the third agreement known as Riverdeep and the fifth agreement in its entirety are excluded. Thus, this line of defence does not extend to those facilities.
15. The second thing to note is reference to the affidavit of Jason Drennan. In fact, Mr. Drennan’s affidavit was not sworn in these proceedings and only became evidence as a result of being exhibited in a later affidavit of Mr. McCaughey sworn on 14th January, 2014. During the course of the hearing, counsel for the defendant indicated that he wished to have Mr. Drennan swear an affidavit in these proceedings in the precise terms of the exhibit. Counsel on behalf of the plaintiff sensibly indicated that I could treat Mr. Drennan’s affidavit as though it were sworn in these proceedings so as to avoid an adjournment of the application midstream. This is what Mr. Drennan says:-

“(1) I qualified in 1992 from Dublin City University with a business degree. I have worked for IFSRA, Davy Stockbrokers and IIB Private Bank. I joined Anglo Irish Bank Corporation (Anglo) in 2002. I left my employment with Anglo Irish Bank in 2007.
(2) I was a manger for Anglo Irish Private Bank and part of my role was to raise equity from investors for investment opportunities for Anglo private banking.

(3) In that capacity, I approached Gerard McCaughey and Gary McCaughey who ultimately entered into the Woolgate fund, the New York Hotel fund, the European Geared Property Fund and the M&A Fund all of which were sold by me. I understand that they also invested in a Taurus fund through a colleague of mine, Mr. Phillip Ahern. I can confirm that both Gerard and Gary McCaughey were provided with loan facilities by Anglo to invest into these funds. The basis on which these loans were provided were explicitly confirmed by me to them as being for the duration of the investment. This is part of the Anglo model. I explained to them that the loan offers would issue on a yearly basis and would roll over each year which was as per the Anglo model at the time.

(4) I have no hesitation in confirming my understanding as the person who sold the McCaugheys into these funds and who arranged the loan facilities. The McCaugheys fully understood that the loans were inextricably linked with the investment funds.”

16. The defendant relies on his own averments as to his understanding and the material sworn to by Mr. Drennan in support of his allegation of a collateral contract which overrides the demand nature of the facilities as specified in the facility letters executed by him. He says that his averments as to his belief and the testimony of Mr. Drennan find support in internal bank documents which he has obtained on foot of data access requests. These documents are all applications which were prepared for the Bank’s credit committee. In each case, they specify the amount and source of repayment as involving payment of interest and then a “bullet repayment from liquidation of fund”. Furthermore, in all cases but one they specify that what is being proposed to the credit committee represents an exception to credit policy. This material, the defendant says, justifies him in contending for the existence of a collateral agreement. He puts it this way at para. 12 in his affidavit of 26th November, 2013:-
“In any event, I can tell the court that, whilst the loan agreements purport to be for a defined term and provide for the repayment of capital, this was not the agreement between the parties but was a model used by Anglo for the purpose of their sourcing funds to lend to customers. Therefore, insofar as it is alleged that I am in default from the expiry of the terms in the loan agreements, this is not the case and I believe and am advised that his provides me with a full defence to the plaintiff’s claim. In this regard also, the plaintiff is estopped from maintaining this claim on the representations of Anglo and its employees.”
17. During the hearing, counsel on behalf of the defendant began argument in support of that latter assertion of promissory estoppel but that was abandoned by him. Thus, the only issue that falls for determination is whether or not the defendant has demonstrated a triable issue on his allegation of collateral contract.
Collateral Contract
18. Collateral contracts are dealt with by Chitty at para. 12.103 as follows:-

“Even though the parties intended to express the whole of the agreement in a particular document, extrinsic evidence will nevertheless be admitted to prove a contract or warranty, collateral to that agreement. The reason is that ‘the parol agreement neither alters nor adds to the written one, but is an independent agreement’.
Such evidence is certainly admissible in respect of a matter on which the written contract is silent. In a number of older cases it was stated that evidence of such a contract or warranty must not contradict the express terms of the written contract. However, more recently the courts have admitted evidence to prove an overriding oral warranty or to prove an oral promise that the written contract will not be enforced in accordance with its terms. Thus, in City Westminster Properties (1934) Limited v. Mudd, the draft of a new lease presented to a tenant contained a covenant that he would use the premises for business purposes only and not a sleeping quarters. The tenant objected to this covenant and the landlords gave him an oral assurance that if he signed the lease, they would not enforce it against him. The tenant signed the lease, but later the landlord sought to forfeit the lease for breach of this covenant. Harman J. held that the oral assurance constituted a separate collateral contract from which the landlords would not be permitted to resile. The collateral contract or warranty may be formal or informal even though the main contract is one which is required by law to be in or evidenced by writing.”

19. In Tennants Building Products Limited v. O’Connell [2013] IEHC 197, Hogan J. neatly summarised the modern case law on this topic as follows:-
“The effect of this case-law may be said to be that while the courts will permit a party to set up a collateral contract to vary the terms of a written contract, this can only be done by means of cogent evidence, often itself involving (as in Mudd and in Galvin) written pre-contractual documents which, it can be shown, were intended to induce the other party into entering the contract. By contrast, generalised assertions regarding verbal assurances given in the course of the contractual negotiations will often fall foul of the parol evidence rule for all the reasons offered by McGovern J. in Deane.”
20. Reference was also made to the decision of Finlay Geoghegan J. in AIB Plc v. Galvin [2011] IEHC 314 where she said:-
“I am using ‘collateral contract’ in the sense explained by Cooke J., in the Supreme Court of New Zealand in Industrial Steel Plant Ltd. v. Smith [1980] 1 N.Z.L.R. 545, at p. 555, quoting with approval from Cheshire and Fifoot on Contracts:

‘The name is not, perhaps, altogether fortunate. The word ‘collateral’ suggests something that stands side by side with the main contract, springing out of it and fortifying it. But, as will be seen from the examples that follow, the purpose of the device usually is to enforce a promise given prior to the main contract and but for which this main contract would not have been made. It is rather a preliminary than a collateral contract. But it would be pedantic to quarrel with the name if the invention itself is salutary and successful.’

It is clear that not every statement or promise made in the course of negotiations for a contract may give rise to a finding that a collateral contract exists. To be so treated, a statement must be intended to have contractual effect.”
21. All of these cases were, of course, decided on full oral hearings and not on applications for summary judgment.
22. It is clear that the courts have over the years on occasions accepted that in appropriate circumstances the terms of a written agreement may be affected by the existence of a collateral contract or warranty made between the parties. That is the case which is sought to be made here. Counsel for the plaintiff in reply sought to analyse very thoroughly the precise wording of the affidavit evidence from Mr. McCaughey and Mr. Drennan on this topic so as to demonstrate that it falls short of the “cogent evidence” referred to by Hogan J. and could better be characterised as general assertion. He also sought to raise the ability of Mr. Drennan to bind the Bank. Whilst ultimately these criticisms may well prove to be correct, it does not appear to me that I can, at this juncture, say that it is very clear that the defendant has not demonstrated a triable issue in respect of this allegation of collateral contract. There is his own sworn testimony, bolstered by Mr. Drennan’s and fortified by the material which was presented to the credit committee which material antedates the signing of the formal contracts in each case.

23. Given the low threshold of proof that is required to be established at this stage of the proceedings, I am of opinion that a triable issue has been raised as to the possible existence of a collateral agreement to the effect that the term of the agreements would be “for the duration of the funds”.

24. This line of argument could have been entirely precluded by the plaintiff by having in its contractual terms an “entire agreement” clause. These clauses have been commonplace for years and provide that the written agreement contains the entire and only agreement between the parties and supersedes all previous agreements and understandings respecting the subject matter of the contract. Furthermore, such clauses commonly contain an acknowledgement that when entering into the agreement, the borrower has not relied on any representation or undertaking whether oral or in writing save such as are expressly incorporated into the written document. Had such an “entire agreement” clause been incorporated into the conditions of the plaintiff, this line of argument would not have been available at all to the defendant.

25. Having concluded that a triable issue as to existence of a collateral contract which provided that the term would be for the duration of the funds thus not making the monies advanced repayable on demand, I now consider the consequences of that conclusion.

26. This collateral contract on the terms contended for by the defendant has its limitations. First, he accepts in his affidavit that it only applies to the first agreement, second agreement, third agreement, facility A and facility B and part of the fourth agreement. It has no relevance in relation to other parts of the claim.

27. Second, the term of the agreement under the collateral contract contended for was to be “for the duration of the funds” pace Mr. McCaughey or “the duration of the investment” pace Mr. Drennan.

28. The uncontroverted evidence is that the duration of some of these funds or investments has come to an end. Thus, insofar as the first agreement and facility A of the third agreement relating to the Woolgate is concerned, a receiver was appointed and the properties were sold as of February 2012. Insofar as the second agreement dealing with the New York Hotel Fund is concerned that fund has closed and from an economic and practical point of view is at an end. It is not, however, technically liquidated, a point to which I will return in a moment. Facility B of the third agreement EGPF still exists. The fourth agreement M&A Fund closed in September 2012. The fourth agreement EGPF Fund remains open as does the fourth agreement investment in Taurus Funds. Thus, even on the terms of the collateral agreement contended for, the defendant is liable to repay monies advanced in respect of those funds which have closed.

29. Counsel for the defendant in a valiant effort to try and avoid this conclusion sought to rely upon the reports to the credit committee which utilises the term “liquidated” in respect of such funds. He argued that until an actual liquidator was appointed to the fund, the loans did not become due. Apart from the fact that that is to put words into the mouth of Mr. McCaughey who made no such assertion in his affidavit nor indeed did Mr. Drennan, it is in my view in any event untenable and unrealistic and defies economic and business commonsense. It fails to meet even the low threshold of proof required at this stage of the proceedings.
Counterclaim
30. The defendant also asserts that he has a counterclaim, the existence of which provides a basis to set off any judgment obtained against him or alternatively, a basis for staying any judgment until such time as the counterclaim comes to trial.

31. It is in the replying affidavit of Mr. McCaughey sworn on 26th November, 2013, that one finds the principal basis for this counterclaim. The counterclaim asserts negligence, misrepresentation, negligent misstatement, breach of duty and breach of contract against the plaintiff. Powerful criticism was made, inter alia, of the paucity of information and lack of specificity in support of this assertion. However, there was a potential knock out point made by the plaintiff in respect of the alleged counterclaim.

32. Counsel for the plaintiff pointed out that even if one assumes the existence of such a counterclaim, it is time barred. The limitation period in respect of the series of wrongdoings alleged by the defendant is six years. Because the assertion is sought to be made in these proceedings, the defendant gets the benefits of s. 6 of the Statute of Limitations 1957, which provides:-

“For the purposes of this Act, any claim by way of set-off or counterclaim shall be deemed to be a separate action and to have been commenced on the same date as the action in which the set-off or counterclaim is pleaded.”
33. These proceedings commenced in July 2013. The last agreement in suit was on 28th March, 2007, and accordingly, any claim in respect of that should have been brought by March 2013. Thus, the purported counterclaim is time barred.
34. Counsel for the defendant was unable to refute that assertion other than in respect of the allegations of wrongdoing in the management of the funds. But that is clearly a complaint that can only be made against the manager of the funds. The manager was not this plaintiff but rather an insurance company, Anglo Irish Assurance Company. Thus, I am satisfied the plaintiff’s contention as to such counterclaim as there may be being statute barred is correct. Thus, even if there is a triable issue as to the existence of a counterclaim, it makes no sense to allow it to proceed when it is plainly statute barred and the defendant was unable to contend otherwise. That is sufficient to dispose of this aspect of the case. Nonetheless, I will consider the merits of the alleged counterclaim lest I am wrong on the limitation question.

35. Turning then to the substance of the counterclaim, it is to be found principally in the replying affidavit of the defendant sworn on 26th November, 2013.

36. Insofar as the first agreement and Facility A of the third agreement i.e. the Woolgate agreement is concerned, the defendant says at para. 20:-

“20. I maintain that the Woolgate Fund was mis-sold to me and it is my intention to defend the first loan and the third loan Facility A and to counterclaim on the basis that the plaintiff is guilty of, inter alia, breach of contract, negligence and breach of duty including breach of statutory duty, misrepresentation and negligent misrepresentation.
21. In particular, I would highlight the fact that it was represented to me prior to entering into the fund that the only mechanism by which I could invest into the fund was through a direct investment with the plaintiff. This is wrong and, in fact, a percentage of the fund was held by a joint venture partner of the plaintiff in the European Geared Property Fund which invested into the Woolgate Fund or at least the building itself.

22. In addition to this, the non recourse bank balance associated with the Woolgate Fund was stated to be 83.6% of the purchase price of the property. In fact, the actual purchase price of the property was GB£311m as opposed to GB£325m so that the debt level associated with the property was 87.5% instead of 83.6%. This is because there was a finder’s fee of GB£10.5m included as part of the acquisition costs. This had an effect on the fund as the loan covenant specified a maximum loan to value ratio 84% and the breach of the said covenant entitled the lenders to take control of the property and to act to protect their own interest such that the Woolgate Fund lost its control of the investment. Therefore, from the outset, the investors were not properly protected and this was a risk that was not expressed when it clearly existed. In addition to this, the senior financiers, Credit Suisse provided borrowings of €240m, which facility expired on 18th July, 2011, which was approximately five years of the investment when the fund was described to be for a term of between five and seven years.”

37. Insofar as these averments are concerned, it is important to point out that at no stage is there the slightest attempt made to indicate when, where, by whom and in what manner the representations contended for were made. Neither does the defendant attempt to say what the consequences of this alleged misrepresentation was. That is remarkable given the observations made by Birmingham J. in the defendant’s last piece of litigation before the courts where the defendant brought suit against the plaintiff in respect of the New York Hotel fund. There, that judge said:-
“I do not, at all, believe that Mr. McCaughey has been intentionally untruthful in making the statement that he has, but I do believe that statement is the product of hindsight and indeed of wishful thinking. This statement is undermined by the fact that Mr. McCaughey has also said that had he known about the interest rate strategy and about the long term tenants and the status of the renovation budget that he would not have invested. Indeed, it must be said the phrase ‘I would not have invested’ became something of a mantra. In my view no reasonable prudent investor who found the proposed investment otherwise attractive, is likely to have been dissuaded from investing by being told about the reality of the zoning issue.”
38. Even that mantra is not employed by the defendant in his evidence here.
39. As to para. 22, it is notable that the contract in question which is alluded to there was entered into with Anglo Irish Assurance Company which in the very brochure which is exhibited made it clear that it could not accept responsibility for any errors in the reports which were reproduced in that from external reports. Furthermore, that brochure made it clear that the defendant should get his own legal, financial and tax advice and it also contained a risk disclaimer. I am satisfied that the contents of these paragraphs in the defendant’s affidavit are mere assertion and that is not sufficient to tee up the counterclaim even to the low threshold of proof that has to be achieved.

40. Insofar as the second agreement is concerned i.e. the New York Hotel Fund this, as I have made clear, has already been the subject of litigation pursued unsuccessfully by the defendant. The claim was dismissed in ringing tones by Birmingham J. and upheld by the Supreme Court. This aspect of the alleged counterclaim is to be found from paras. 23 onwards in the affidavit.

41. In the earlier proceedings, the defendant in this action sought a declaration that the loan agreement in respect of the New York Hotel Fund should be rescinded. Notwithstanding his lack of success in that action, he seeks to rely on alleged mis-selling of the fund as a defence to the instant proceedings. This is what the defendant says:-

“23. The second facility letter dated 10th October, 2006, related to a facility of €620,000 to part fund my equity investment in the Peninsula Real Estate Fund No. 1 LP (hereinafter referred to as the New York Hotel Fund) for $1m of which €602,280.86 was drawn down. The security for this agreement was the same as the first agreement except that there was an additional assignment over my investment in the Anglo New York fund. Anglo’s Peninsula Real Estate Fund was the vehicle by which they structured the investment into the New York Hotel Fund.
24. The New York Hotel Fund was offered by Anglo and related to the acquisition of two hotels in New York being the Beekman and Eastgate and I beg to refer to the brochure upon which I have signed my name prior to the swearing hereof.

25. In relation to this fund, I issued proceedings entitled Gerard McCaughey v. Irish Bank Resolution Corporation and Mainland Ventures Corporation which proceedings were issued on 7th October, 2009 (hereinafter referred to as the defendant’s proceedings). In the defendant’s proceedings, I allege, amongst other things that I had been mis-sold investments and that Anglo was guilty of fraud and negligence on the part of the Bank. My claim against the Bank was dismissed by order of Mr. Justice Birmingham of the High Court on 27th July, 2011 and my appeal was unsuccessful and the Supreme Court delivered judgment on 13th March, 2013.

In the defendant’s proceedings, the plaintiff maintained a counterclaim which claim did not include the claim herein pursuant to the second loan. Separate to this, and by way of a final demand dated 10th March, 2010, the plaintiff sought to call in my facilities in relation to the second agreement.”
42. He then goes on to reproduce a letter from his solicitor of 12th March, 2010, and asserts that it, combined with para. 19 of the special endorsement of claim, gives rise to an estoppel because the plaintiff in these proceedings did not advance the claim on foot of the loan in that action. It is difficult to understand how this contention is made. Mr. Nester, the Bank’s witness in a replying affidavit makes it clear that arrears had arisen on the New York Hotel Fund loan and the Bank asked the defendant to pay these arrears which he did. In those circumstances, there was no basis to call in the loan or to seek judgment. I am satisfied that this estoppel point is of no substance.
43. Going on then to the second and alternative contention which is made, this is what the defendant says at para. 28 of his affidavit:-

“28. It is my intention to counterclaim as against the plaintiff for, inter alia, breach of contract, negligence and breach of duty (including breach of statutory duty), misrepresentation and/or negligent misstatement in relation to the New York Hotel Fund. There are issues that arose in the High Court proceedings and/or hearing and were not pleaded as issues and no determination was made in relation to them. In particular, I have learned since issuing the defendant’s proceedings that Anglo were involved in the manipulation of figures for the purpose of increasing the rate of return, which increased figures were then relied upon by Anglo for the purpose of selling the New York Hotel Fund to me.”
44. Over then next three paragraphs of the affidavit, the defendant alludes to matter which in my view quite clearly was dealt with by Birmingham J. in the course of his judgment. True it is that these issues were apparently raised without being pleaded or any notice of them being given in advance of the opening of that case. But it is quite clear from the terms of that judge’s judgment that, although objections were taken to them being raised at that late stage, he decided to allow them to be dealt with. Indeed, he dealt with the evidence and dismissed them. That is clear from the terms of his judgment. I do not propose to add to the length of this ruling by reciting at length from the judgment of Birmingham J. save to comment that he clearly gave great leeway to the defendant to run these points although not pleaded or notified to the other side in advance because he took the view that they had the potential to be of significance. When he reached his conclusions on them, he said:-
“While the diligence of the plaintiff and his legal team in locating the entries in the documentation which have been relied upon to advance these topics is to be commended, it must be said that some of the issues which appeared to have the potential to be of the greatest significance in fact turned out to be balls of smoke.”
45. I am of opinion that these averments cannot be the basis of a counterclaim having already being decided upon by Birmingham J. whose decision was affirmed by the Supreme Court.
46. At para. 35, a further issue is sought to be raised about the sale of the Beekman Hotel which it is difficult to understand and certainly in my view does not amount to a basis for any counterclaim.

47. This attempt to relitigate a matter already dealt with by the courts cannot form the basis for a counterclaim.

48. As to the third agreement, the defendant says at para. 38 of his affidavit that he has serious complaints in relation to the European fund. He says the fund was an investment for the purpose of acquiring investment properties throughout Europe and he refers to the brochure. All of these allegations which are contained at paras. 38 and 39, amount to assertion. Insofar as they amount to claims concerning the fund, it has to be borne in mind that the plaintiff was only involved at the point of sale of the investment or at the time when the investors went into it. Thereafter, the fund was operated by Anglo Irish Assurance Company. The defendant and other investors contracted with that entity and it was that entity that was the manager and custodian of the funds. Thus, insofar as there are complaints made about the manner in which they were managed or invested, they are not complaints which lie against the plaintiff.

49. Finally, insofar as the fourth agreement is concerned, there is a complaint which appears to be one of mis-selling but again it amounts in my view to mere assertion without any of the necessary detail being forthcoming.

50. I therefore conclude that the defendant has not demonstrated even on the low threshold of proof required, the basis for a counterclaim in respect of the various complaints which he has identified.

51. Even if I am wrong in that, as I have already made clear, such claims are in any event already statute barred.

52. Even if I am wrong in both of those conclusions and he does indeed have the basis for a counterclaim which is not statute barred, I would not in any event permit this counterclaim to be utilised for the purposes of staying execution on foot of the judgment to which the plaintiff is entitled.

53. The approach of the court on this topic has been dealt with by Clarke J. in Moohan v. S&R Motors (Donegal Limited) [2008] 3 IR 650. In my view, this is a case in which judgment should be entered on that part of the claim to which no defence has been demonstrated. Judgment should be refused in respect of the part of the claim to which a defence has been demonstrated. There should be no stay on the judgment to which the plaintiff is entitled. In exercising my discretion on this aspect of the matter, I take into account the factors identified by Clarke J. and conclude that the equities would not justify the plaintiff being deprived of the fruits of its judgment.

54. The net effect of this is as follows. The defendant’s alleged defence only applies to the first and second agreements and facilities A and B of the third agreement and part of the fourth agreement. So there will be judgment on facility C of the third agreement and the Riverdeep part of the fourth agreement and the fifth agreement in full. So, there will be judgment for €560,265.83, on facility C of the third agreement and judgment for €112,000 plus interest accrued in respect of the Riverdeep monies. There will be judgment for €1,266,319.62 on foot of the fifth agreement. This gives a grand total of €1,938,585.45.

55. The defence on the terms alleged by the defendant has no application once the duration of the investment has expired. That has happened in the case of closed funds. Thus, there will be judgment for a combined total of €1,885,028.94 in respect of the first agreement and facility A of the third agreement (the Woolgate facility). There will also be judgment on the second facility i.e. the New York Hotel Fund in the sum of €631,561.51 and there will also be judgment in favour of the plaintiff on the M&A part of the fourth agreement being €750,000 plus interest accrued. In respect of the balance of the claim, it will be adjourned to plenary hearing so as to enable the defendant to prosecute the line of defence pertaining to the existence of a collateral agreement. There will be judgment for €5,205,175.90.

Irish Bank Resolution Corporation (in special liquidation) v Gerard McCaughey

[2014] IESC 44

Judgment of Mr. Justice Clarke delivered the 11th July, 2014.
1. Introduction
1.1 This case raises yet again questions about the exercise of the summary judgment jurisdiction of the High Court in bank debt cases. Given the large amount of applications for summary judgment in such cases which have come before the High Court, not least in recent years, and given the not insignificant number of appeals to this Court, it can I think, be said that the general principles for the exercise of the Court’s jurisdiction are well settled. I will turn to those principles in early course for they were not a matter of any significant controversy between the parties on this appeal. I do, however, propose to make a number of minor observations for the purposes of seeking to bring some additional clarity to the proper approach.

1.2 The plaintiff/respondent is, of course, now in special liquidation. As the events which give rise to the issues on this appeal occurred before its name change, I will, in this judgment, refer to the plaintiff/respondent as “Anglo”. There is no dispute but that Anglo lent significant sums of money to the defendant/appellant (“Mr. McCaughey”). Neither is there any dispute that the relevant sums have not been repaid and that interest also falls to be charged in respect of the accounts concerned.

1.3 However, when Anglo sued for the sums said to be due and, an appearance having been entered, brought a motion for summary judgment in accordance with the rules, Mr. McCaughey suggested that he had an arguable defence based, in very general terms, on two propositions. Some of the relevant monies had been advanced for the purposes of investments made by Mr. McCaughey in various projects which had been put together and promoted by Anglo. The relevant loan agreements provided that the sums advanced were to be repayable on demand and in any event by, at the very latest, March 2008, a date which had long since passed before any demand was made or any proceedings issued. On that basis, Anglo asserted that the monies were due. Mr. McCaughey’s case on the summary judgment motion suggested that there was a collateral agreement entered into between him and Anglo at the time of the advance of each of the relevant loans, which was to the effect that the monies would not be repayable until the investment project for which the relevant monies were advanced came to an end, or, until the relevant funds into which the monies were placed were liquidated. Other legal defences were proposed based on the same facts as were said to give rise to such collateral contracts. In addition, Mr. McCaughey asserted that he had a counter claim arising essentially out of an allegation of the mis-selling of the various investment projects.

1.4 In a detailed judgment (Irish Bank Resolution Corporation Limited v. McCaughey, [2014] IEHC 230) Kelly J. held that Mr. McCaughey had established an arguable defence in relation to some but not all of the loans. Insofar as the claims referable to those loans were concerned, the proceedings were remitted to plenary hearing. This Court was told that the pleadings in that regard have now closed and discovery is under consideration. However, Kelly J. was not satisfied, for reasons which it will be necessary to address in due course, that an arguable case had been made out in respect of the remaining loans. In respect of those parts of the claim final judgment was granted. As will appear later it is against certain aspects only of the order of Kelly J. that Mr. McCaughey has appealed to this Court. In order to understand the precise issues which fell for this Court to decide on this appeal it is necessary to start by considering the background facts and, thereafter, the ruling made in the High Court.
2. Background Facts and Issues
2.1 A series of credit agreements and facility letters between Mr. McCaughey and Anglo were executed between the 1st September, 2006 and 28th March, 2007. Kelly J. helpfully described the various facilities at paras.5, 6 and 7 of his judgment as follows:-

“5. The first facility letter is dated 1st September, 2006 and was granted to part fund the defendant’s investment in the AIAC Woolgate Exchanged Geared Property Fund. The second facility was dated 10th October, 2006 and had as its purpose the part funding of the defendant’s equity investment in an entity called Peninsula Real Estate Fund which has been given the nomenclature for the purpose of these proceedings of the New York Hotel Fund. That is how I will refer to it.
6. The third facility was dated 17th November, 2006, and was broken down into three different elements. They were described as Facility A, B and C. Facility A was to increase the defendant’s investment in the Woolgate Exchange Geared Property Fund. Facility B was to part fund the defendant’s investment in the AIAC European Geared Property Fund (E.G.P.F.). Facility C was to fully fund the defendant’s investment in Riverdeep. The fourth facility was dated 2nd January, 2007 and was used to provide the defendant with a €5m investment line of which €1,737,000 was drawn down.

7. The fifth facility was dated 28th March, 2007 and was to part fund the purchase of two units at the Rockefeller Plaza in New York.”

2.2 Thereafter Kelly J. identified a number of common features of each of the facilities in the following terms:
“First, each had a letter of facility setting out specific terms to which I will turn in a moment. Each of them was executed by the defendant. Each of them expressly provided that the facility granted was to be repayable on demand and that that demand might be served at any time by the Bank at its sole discretion without stating any reason for such demand. Without prejudice to the demand nature of each of the facilities they were all expressly stated to be repayable on or before a specified date, the latest of which was March 2008. Each of the facilities was also granted subject to the Bank’s general conditions governing personal loans. All provided that if there was any conflict between the terms of the facility letter and the general conditions, the terms of the facility should prevail. As is clear, the backstop date for the payment of the facilities has long since expired.”
2.3 By the time the matter came before the High Court there had been significant developments in respect of many of the loans. In particular, of relevance to the issues which arise on this appeal, it should be noted that the investments in respect of the Woolgate Exchange Geared Property Fund (which was the subject of the first facility and Facility A of the third facility) had run into significant difficulties. Likewise, the investment in certain New York hotels, which were the subject of the second facility, were suffering similar difficulties. It will be necessary to explain the position in respect of both of those investments in more detail, in due course, for the purposes of assessing the applicability to those loans of the defence put forward on behalf of Mr. McCaughey which suggested that, on various legal bases, Anglo had committed itself not to call in each of the relevant facilities until such time as the investments in question had come to an end.
2.4 As already noted it was also asserted on behalf of Mr. McCaughey that, in substance, various of the facilities were mis-sold in the sense that statements were made concerning the investments to which the facilities related which were incorrect. A number of different legal bases for suggesting that Mr. McCaughey was entitled to defend these proceedings by asserting a cross claim in that regard were put forward. As against that background it is next necessary to turn to the approach of the trial judge.
3. The High Court Judgment
3.1 Having set out the nature of the application and the sums claimed, Kelly J. addressed the test to be applied in such applications. No dispute was raised on this appeal as to the relevant test. Having detailed the various agreements and facilities involved, Kelly J. went on to assess whether Mr. McCaughey had an arguable defence, in accordance with that jurisprudence. First, the trial judge considered the “collateral contract” defence and addressed the law regarding such contracts. In finding that “it is clear the courts have over the years on occasions accepted that in appropriate circumstances the terms of a written agreement may be affected by the existence of a collateral contract or warranty made between the parties” (para.22), Kelly J. concluded that a triable issue had been raised in that regard, given the low threshold of proof required at this stage of the proceedings.

3.2 Having concluded that there was a triable issue on the collateral contract argument, Kelly J. went on to consider the consequences of that conclusion. It should be noted that the collateral contract defence only applied to those loan agreements which were for the purpose of investing in funds offered by Anglo as was accepted by Mr. McCaughey in his replying affidavit of 26th November, 2013. It was, therefore, accepted that the collateral contract argument only applied to the first facility, the second facility, the third facility, (facility A and facility B) and what was referred to as the M & A part of the fourth facility.

3.3 In any event the term of the alleged collateral contract was said to preclude those loans to which it was said to apply from being called in, “for the duration of the funds” or “the duration of the investment”. Taking this into consideration, Kelly J. came to the conclusion that it was clear that the duration of some of the relevant funds and investments had come to an end, and thus, even on the terms of the alleged collateral contract, Mr. McCaughey was found not to have raised arguable grounds of defence in respect of those loans so far as a defence was suggested on the basis of the alleged collateral agreement.

3.4 Next, the trial judge considered the second argument of Mr. McCaughey, which took the form of a counterclaim. Mr. McCaughey asserted negligence, misrepresentation, negligent misstatement, breach of duty and breach of contract against Anglo. Kelly J. concluded that any such claims were statute barred, but nonetheless, considered their merits. The trial judge concluded that Mr. McCaughey “had not demonstrated, even on the low threshold of proof required, the basis for a counterclaim in respect of the various complaints” (para.50). Kelly J. found no evidence pointing to the assertions made and in some respects noted that the issues had been dealt with comprehensively in previous litigation. It will be necessary to refer to that litigation in due course.

3.5 Kelly J. determined the effect of these findings was that judgment should be given on facility C of the third agreement and the Riverdeep part of the fourth agreement and the fifth agreement in full (being those aspects of the facilities to which the collateral agreement did not, even on the basis of Mr. McCaughey’s case, apply).

3.6 Due to fact that the collateral contract defence could not apply once the duration of any relevant investment has expired, Kelly J. determined that judgment should be given in respect of the first agreement and facility A of the third agreement (“the Woolgate loan” and where relevant the “Woolgate Fund”) and on the second facility (“the New York Hotels loan” and where relevant “the New York Hotels Fund”) and also in respect of the M & A part of the fourth agreement. He also determined that the balance of Mr McCaughey’s defence should go to plenary hearing.

3.7 Having delivered his judgment, Kelly J. adjourned the matter to the following day, 30th January, 2014 when he made the order which is the subject of this appeal. In the order, having recited the judgment delivered on 29th January, 2014 and that the Court had indicated that it was prepared to grant judgment in favour of Anglo against Mr. McCaughey in the sum of €5,205,175.90 and that on 30th January, 2014 the Court was told the parties had agreed that the judgment sum should be reduced to €2,516,590.45 and had agreed terms for the discharge of the balance, namely, €2,723,612.93, with liberty to Anglo to apply in the event of that agreement not being complied with by Mr. McCaughey for the purpose of obtaining judgment in the event of such default, it was ordered that:-

(a) Anglo recover against Mr. McCaughey the sum of €2,516,590.45; and
(b) the balance of Mr. McCaughey’s claim be adjourned to plenary hearing.

The judgment was, on that basis, in respect of the Woolgate Fund and the New York Hotel Fund only.
4. The Appeal
4.1 Mr. McCaughey challenged the finding of the trial judge that the duration of the Woolgate Fund had come to an end because a Receiver had been appointed and the relevant properties sold. Mr. McCaughey also contended that the trial judge erred in finding that the New York Hotels Fund had closed and that it was, from an economical and practical point of view, also at an end. The finding that the counter-claim was statute barred was also appealed as was the finding that no arguable basis had been put forward in support of the respective cross claims relating to both relevant loans.

4.2 It follows that the two loans with which this appeal is concerned are those described by the High Court, and in this judgment, as the Woolgate loan and the New York Hotels loan. It is also of some importance to mention that the matter first came before this Court on an application for a stay. In all the circumstances of the case, it appeared to the formation of the Court which was dealing with the stay application that it would be both in the interests of the parties and in the interests of the allocation of scarce court time if the substantive appeal could be readied for hearing as a matter of urgency. In substance the Court would have been required to consider, at least to some material extent, the merits of the appeal itself in order to apply the well established jurisprudence in respect of the grant or refusal of a stay. For that reason, in the circumstances of this case, it seemed unlikely that the hearing of the appeal itself would take much longer than the hearing of the stay application. It will be necessary to make reference in due course to some additional facts which had been placed before the Court, on affidavit, in the context of the stay application.

4.3 Before going on to analyse the grounds of the appeal in respect of the Woolgate and New York Hotels loans it is, as I indicated earlier, appropriate to say just a little about the proper approach of the courts in summary judgment applications.
5. Summary Judgment Applications
5.1 The underlying test is as set out in the judgment of Hardiman J., speaking for this Court, in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607. As Hardiman J. pointed out, at p.623:-

“… the fundamental question to be posed on an application such as this remains: is it “very clear” that the Defendant has no case?; is there either no issue to be tried or only issues which are simple and easily determined?; do the Defendant’s affidavits fail to disclose even an arguable defence?”
5.2 It is also important, as Finlay Geoghegan J. pointed out in Bank of Ireland v. Walsh [2009] IEHC 220, to keep clearly in mind that the use of the term “credible” in relation to a defence has, for the reasons also addressed by Hardiman J. in Aer Rianta v. Ryanair, a very narrow meaning. The issues of credibility, which had formed the basis of a conclusion that a defendant had not put forward an arguable defence, in cases such as National Westminster Bank v. Daniel [1993] 1WLR 1453, Banque de Paris v. de Naray [1984] 1 Lloyds Rep. 21 and First National Commercial Bank v. Anglin [1996] 1 IR 75, arose, as Hardiman J. put it, “rather starkly”. In Daniel, the defence affidavits were mutually contradictory. In de Naray, there was clear evidence, not challenged, from a private detective, which flatly contradicted the plaintiff’s case. In Anglin, the chronology asserted was entirely inconsistent with commercial documentation which was not, in itself, disputed.
5.3 Denham J., speaking for this Court in Danske Bank v. Durkan New Homes [2010] IESC 22, also approved a passage from a judgment which I delivered in the High Court in McGrath v. O’Driscoll [2007] I.L.R.M. 203, where, at p. 210, I said the following:-

“So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
Hardiman J. had expressed a similar view in his judgment in Aer Rianta, in the passage already cited, where he made reference to issues which were simple and easily determined.
5.4 It is important, therefore, to reemphasise what is meant by the credibility of a defence. A defence is not incredible simply because the judge is not inclined to believe the defendant. It must, as Hardiman J. pointed out in Aer Rianta, be clear that the defendant has no defence. If issues of law or construction are put forward as providing an arguable defence, then the Court can assess those issues to determine whether the propositions advanced are stateable as a matter of law and that it is arguable that, if determined in favour of the defendant, they would provide for a defence. In that context, and subject to the inherent limitations on the summary judgment jurisdiction identified in McGrath, the Court may come to a final resolution of such issues. That the Court is not obliged to resolve such issues is also clear from Danske Bank v. Durkan New Homes.

5.5 Insofar as facts are put forward, then, subject to a very narrow limitation, the Court will be required, for the purposes of the summary judgment application, to accept that facts of which the defendant gives evidence, or facts in respect of which the defendant puts forward a credible basis for believing that evidence may be forthcoming, are as the defendant asserts them to be. The sort of factual assertions, which may not provide an arguable defence, are facts which amount to a mere assertion unsupported either by evidence or by any realistic suggestion that evidence might be available, or, facts which are in themselves contradictory and inconsistent with uncontested documentation or other similar circumstances such as those analysed by Hardiman J. in Aer Rianta. It needs to be emphasised again that it is no function of the Court on a summary judgment motion to form any general view as to the credibility of the evidence put forward by the defendant.

5.6 Finally, I should touch on one matter which turned out to be of some specific relevance in the circumstances of this case. As was pointed out by this Court in Lopes v. Minister for Justice, Equality and Law Reform [2014] IESC 21, in the context of an application to dismiss as being bound to fail under the inherent power of the Court first identified in Barry v. Buckley [1981] 1 I.R. 306, the courts, in hearing such applications, must be mindful of the fact that a party may, by a successful application, be shut out from having their claim determined at full trial, be required to be more flexible in relation to the consideration of arguments or materials brought forward on appeal (see para 9.1 of the judgment). It seems to me that like considerations potentially arise in the context of a summary judgment motion for precisely the same reason in that, if successful, the defendant will be shut out from having a full trial of the issues raised by his defence. While it remains important that a defendant put forward his full case on the summary judgment motion, and while it follows, therefore, that the courts will be reluctant to allow a different or additional case (backed up by evidence) to be run on appeal, nonetheless, some proportionality between the consequences of granting summary judgment and the rigour with which the rules applicable to new evidence on appeal ought be enforced, needs to be achieved. Counsel for Anglo quite properly accepted in that context that it was appropriate for this Court, in reaching its overall conclusions on this appeal, to have regard to additional affidavit evidence which had been filed by the parties in the context of a motion which had been brought before this Court on behalf of Mr. McCaughey seeking a stay.

5.7. Against the background of that jurisprudence, I propose to deal separately with the case made in relation to, respectively, the Woolgate and the New York Hotels loans. I will deal first with the issues concerning the New York Hotels loan.
6. The New York Hotels
6.1 While I earlier mentioned two separate grounds of defence put forward on behalf of Mr. McCaughey in respect of each of the loans, it is, strictly speaking, necessary to subdivide the first such set of grounds. As already noted, part of the case made on behalf of Mr. McCaughey, both before the High Court and this Court, concerned statements allegedly made to him by Anglo to the effect that, it was said, the relevant loans would not become repayable until the respective investments had come to an end. It was said that clear statements to that effect were made in the context of the first such loan, which was the Woolgate loan. It is also said that, in respect of each of the other (and subsequent) relevant loans, statements were made that the same terms and conditions applied as had been applied to Woolgate. On that basis it was argued that there existed a collateral contract in respect of each of the loans in question, which was to the effect that, notwithstanding the “on demand” nature of the written loan contract in each case, Anglo would not call in the loan until the investment fund, to which each respective relevant loan related, had come to an end. It is important to recall that Kelly J. concluded that there was an arguable case to the effect that such collateral contracts existed. The reason why Kelly J. remitted the issues arising in respect of some loans to plenary hearing but did not adopt the same course of action in respect of the New York Hotels loan and the Woolgate loan, stemmed from an assessment of whether there was an arguable basis for suggesting that those latter loans were in respect of funds which were not yet at an end. Clearly, if there was no arguable basis for suggesting that the respective funds were not at an end, then the existence of a collateral contract to the effect that the relevant loans would not be called in until the funds were at an end, could not provide an arguable defence.

6.2 Therefore, one of the issues which arises both in respect of the New York Hotels loan and the Woolgate loan is as to whether Kelly J. was correct to conclude that there was no arguable basis for suggesting that the respective loans were not at an end. I will return to that question shortly in the context of the New York Hotels loan.

6.3 However, for completeness it is necessary to add that, in respect of both loans, additional arguments were put forward on behalf of Mr. McCaughey based on misrepresentation and estoppel. However, the factual basis for those assertions in each case was the same as the factual basis which had been put forward for the alleged collateral contract. On that basis counsel for Mr. McCaughey accepted, in the course of argument, that such additional potential defences did not, in the circumstances of this case, add anything to the collateral contract argument. If, in all the circumstances, the asserted collateral contract could not avail Mr. McCaughey of an arguable defence because the relevant fund must be said to be at an end, then equally any defence based on misrepresentation (or indeed any other variation of such a claim based on, for example, promissory estoppel) could not succeed on exactly the same basis. However advanced as a matter of law, the net effect of the contention argued on behalf of Mr. McCaughey under this heading was that there was a legal obligation on Anglo, which prevented the relevant loans from being called in until such time as the corresponding fund was at an end. That was so whether the legal obligation was couched as arising from a collateral contract, as a result of a misrepresentation, or, as a result of an estoppel. If there was no arguable basis for suggesting that either or both of the relevant loans were not at an end, then, however the matter was argued on the law, the factual basis for the defence could not be sustained. On that basis, it does not seem to me to be necessary to give separate consideration to the differing legal bases on which it was suggested that the statements attributed to Anglo might convert into a legal obligation on the part of Anglo not to enforce the loan until the relevant funds had come to an end.

6.4 The key question under this heading, to which I will shortly turn, is, therefore, as to whether Mr. McCaughey has established an arguable case that the New York Hotels Fund has not come to an end. If he has, then it follows that it is arguable that Anglo is not entitled to call in that loan on one or other of the legal bases put forward. It follows that the question of any liability of Mr. McCaughey in respect of the New York Hotels loan would, in those circumstances, have to be remitted to plenary hearing.

6.5 However, before going on to consider that aspect of the potential defence in relation to the New York Hotels loan, I propose to deal briefly with the alternative defence sought to be put forward in respect of those loans, which amounts to a counterclaim arising out of what was said to be a mis-selling of the New York Hotels loan and the project which underlay it. In that context, it is important to point out that Mr. McCaughey mounted previous proceedings in which he claimed relief in respect of the New York Hotels loan arising, in substance, out of an allegation of mis-selling. It is of some importance to note that these proceedings related only to the New York Hotels loan. Those proceedings were dismissed after a full trial by Birmingham J. (Gerard McCaughey v. Anglo Irish Bank Corporation Limited and Mainland Ventures Corp [2011] IEHC 546). An appeal to this Court was also dismissed (McCaughey v. Irish Bank Resolution Corp Ltd & Anor [2013] IESC 17). It, therefore, follows that allegations of mis-selling the New York Hotels investment to Mr. McCaughey have already been dismissed after a full hearing before the courts. In addition, as was accepted by counsel, any refinement of the argument or the evidence, which might now be sought to be put forward, would almost certainly amount to an abuse of process in the sense in which that term is used deriving from the jurisprudence following on from Henderson v. Henderson 3 Hare 100. No factual or legal basis was put forward as providing an arguable ground for suggesting that it would not be an abuse of process to seek to recast the mis-selling claim (which had failed in the previous proceedings) as a defence or counterclaim in respect of the New York Hotels loan aspect of these proceedings. In those circumstances it does not seem to me that, so far as the New York Hotels loan aspect of the claim is concerned, the counterclaim could provide either a defence or cross-claim which might properly be taken into account by the Court in deciding what to do with the substantive claim. On that basis, the question of whether the New York Hotels loan aspect of this case should be remitted to plenary hearing turns solely on the question of whether it can be said that the underlying fund is at an end. If it is at an end then the collateral contract, representation, or promise (even it be established) could not afford any defence. If it is arguable that it is not at an end, then, in the light of the finding by Kelly J. that there was an arguable basis for the proposition that Anglo’s entitlement to call in the loan is postponed until after the fund is at an end, there is clearly an arguable case to defend the New York Hotel loan aspect of this claim.

6.6 It is in that context that the additional evidence put before the Court on the stay application (which updated the position in respect of the New York Hotels loan) is of potential relevance.

6.7 In order to understand the factual position, it is necessary to start by noting that the New York Hotels Fund invested, in substance, in two hotels. The investors (including Mr. McCaughey) became partners in a U.S. limited partnership called Peninsula Real Estate Fund LP (“Peninsula”). Peninsula in turn owned 100% of two further U.S. limited partnerships, which respectively directly owned the two hotels in question, being the Beekman Hotel and the Eastgate Hotel. Each of those later limited partnerships had significant borrowings from Anglo. As part of a larger sale of Anglo’s loan book in the United States, Anglo’s interest in those respective loans was sold to Lone Star. An agreement was reached between the specific partnership which owned the Beekman Hotel and Lone Star whereby, in 2012, the hotel was handed over to Lone Star in settlement of its liabilities. In substance, a significant balance (being the excess of the loan then owed to Lone Star over the value of the hotel at the relevant time) was written off. This would appear to have been of some relevance to Peninsula for there were cross guarantees between the loan owed in respect of the Beekman Hotel and that owed in respect of the Eastgate Hotel. As a result of that transaction the two hotels effectively became decoupled, with the Beekman Hotel disappearing out of the fund and the Eastgate Hotel remaining in the fund, burdened only with its own debt.

6.8 As a result of arrangements entered into in July 2012, a new venture was formed involving Peninsula and certain third parties with a view to converting the Eastgate Hotel into a residential property. The specific limited partnership which owned the Eastgate Hotel was then placed in bankruptcy and the hotel itself transferred to the new venture. It would appear that Peninsula, as one of the members of that new venture, has some possibility of achieving a return depending on the performance of the venture.

6.9 It is important to note that much of this information was not before Kelly J. It is true that the original structure of the New York Hotels investment is no longer in place. Both of the limited partnerships which owned the respective hotels are out of the picture. One of the hotels has been sold. However, it remains the case that Peninsula (which is, after all, the vehicle into which Mr. McCaughey placed his funds), still has a form of interest in the Eastgate Hotel through the new venture to which reference has been made. It appears that this venture carries with it the possibility of some return.

6.10 On that basis, it is argued on behalf of Mr. McCaughey that the New York Hotels Fund is not at an end. It seems to me that there is an arguable basis for that proposition based on the new information which is now available to this Court. It is important to emphasise that the case made on behalf of Mr. McCaughey is not to the effect that there is a real possibility that sufficient funds will be forthcoming from the new venture to clear his liabilities. Given the limited interest which Peninsula has in the new venture that would seem highly improbable. The point made, however, is different. It is argued that the legal consequences of what was said by Anglo at the relevant time is such that the loan in respect of the New York Hotels Fund does not become payable at all until the fund itself comes to an end. On that basis it is argued that it is really a question of timing. Once there remains some prospect that the fund will have some return (however minor) the fund cannot be said to be at an end, and therefore, the argument goes, whether as a matter of collateral contract or misrepresentation or promissory estoppel, Anglo is not yet entitled to call in the loan.

6.11 It seems to me that an arguable case has been put forward on behalf of Mr. McCaughey for that proposition. On the basis of the additional evidence now available I am not satisfied that it can be concluded that there are no arguable grounds for the proposition that the New York Hotels Fund is not at an end. It follows that, in my view, Mr. McCaughey should have leave to defend the claim in respect of the New York Hotels aspect of the loan on that basis, and that that matter should, therefore, be remitted to plenary hearing. I should emphasise that, for the reasons already analysed, I do not believe that it is legitimate for Mr. McCaughey to seek to defend or counterclaim in respect of the New York Hotels loan on the basis of mis-selling, for to do so would be an abuse of process in the light of the previous failed proceedings. So far as the New York Hotels loan are concerned, the matters which should, in my view, be remitted to plenary hearing are those concerning the question of whether the loan is now properly due in the light of the alleged statements made by Anglo and in the light of the argument as to whether it can properly be said that the New York Hotels Fund is at an end. As separate considerations apply in relation to the Woolgate loans I now turn to those questions.
7. The Woolgate Loans
7.1 As with the New York Hotels loan the first question is as to whether there is an arguable case that it can be said that the relevant fund is not at an end. There was some debate at the hearing before this Court as to what might precisely be meant by the fund being “at an end”. Reference was made to the contents of certain internal banking documents, which made reference to “liquidation”. However, those banking documents do not appear to have ever been made available, at any material time, to Mr. McCaughey. Those documents do not, therefore, form part of any potential collateral contract between Mr. McCaughey and Anglo or form the basis of any representation or promise made to him. Those documents may, indeed, be relevant at trial for the purposes of assessing the evidence as to what may actually have been said to Mr. McCaughey. But they do not, in and of themselves, amount to contractual documents. Insofar as it may be open to Mr. McCaughey to place reliance on collateral contracts, representations or promises then it is what was said to him by relevant Anglo officials that matters. The content of internal Anglo documentation will only be relevant insofar as same might be said to corroborate evidence of what was actually said.

7.2 On the other hand, it is important to emphasise that some care should be taken, in the context of a summary judgment motion, in over-analysing the precise wording used in affidavits and in ensuring that affidavits are not treated as if they were contractual documents which required to be very finely analysed. Experience has shown that the precise state of the evidence at the end of a plenary trial often shows at least some nuanced differences from the evidence put forward on affidavit. That is hardly surprising. Affidavits are drafted by lawyers on the basis of instructions and at an early stage of the proceedings. While it is, of course, essential that the true basis of any defence sought to be put forward is accurately reflected in any affidavits filed for the purposes of opposing a summary judgment motion, nonetheless it is not, in my view, appropriate to engage in an excessive parsing and analysing of the contents of affidavits at that stage. Rather, the issue is as to whether, in substance, facts have been deposed to which might arguably provide a defence. If it is possible that a clearer view of the precise and detailed facts may emerge at a plenary trial, then the Court, on a summary judgment motion, should, as it were, give the benefit of the doubt to the defendant. Different considerations would, of course, clearly apply where the legal rights and obligations of relevant parties are defined by documents which have been placed before the Court. In such circumstances the Court can, provided that to do so would not run the risk of injustice, interpret the documents, which task may well involve a careful analysis of the precise wording.

7.3 Against that background it should be emphasised that, in the event that a court of trial is ultimately satisfied that there was either a collateral contract or an operative representation or promise made affecting Anglo’s entitlement to call in its loans from Mr. McCaughey, it will be for the Court, in the light of all the evidence, to come to a conclusion as to the precise event or events which would trigger such entitlement. Against that background, it seems to me that this Court needs to consider whether there is any realistic basis for asserting that, in the light of any possible conclusion as to the events that would trigger the entitlement of Anglo to call in the loan, the Woolgate Fund could be said not to be at an end.

7.4 The facts in respect of Woolgate seem clear. The investment structure was complex in that investors, such as Mr. McCaughey, took out unit linked policies with an Anglo associated assurance company. That company in turn subscribed for shares in a Luxembourg company called Woolgate Exchange SA, which in turn subscribed equity to a German limited partnership which owned the property in question. The uncontested evidence was that a liquidator had been appointed to the Luxembourg company which was insolvent and that there was no prospect of any monies being paid by that Luxembourg company into the unit linked fund. On that basis, I am not satisfied that any arguable grounds have been made out for the suggestion that the Woolgate Fund is not at an end however that term might ultimately be defined or considered in the light of whatever evidence might be tendered at trial. Investors hold unit linked policies in an assurance company where the value of the policy is dependent on the value of the insurance company’s investment in a company which has now been liquidated without any prospect of any monies being available to the fund. On any, even generous, interpretation of the relevant criteria for treating the fund as being at an end, the Woolgate Fund meets that requirement.

7.5 On that basis I am satisfied that Kelly J. was correct to conclude that the Woolgate Fund was clearly at an end and that, even if a collateral contract, representation or promise existed or was made, which would have precluded Anglo from calling its loans until the fund was at an end, same would not avail Mr. McCaughey so far as the Woolgate Fund is concerned, for that point in time has undoubtedly already been reached.

7.6 In relation to Woolgate loan, it remains to consider whether the mis-selling argument put forward could give rise either to a defence in the sense of providing a claim which would amount to a set off in equity, or alternatively to a counterclaim in the shape of a cross claim, which would require the Court to consider the proper course of action to adopt in the light of the principles identified by this Court in Prendergast v. Biddle (Unreported, Supreme Court, 31st July 1957).

7.7 There was some debate between counsel at the hearing of this appeal as to the proper application of the principles, building on Prendergast v. Biddle, which I identified in Moohan v. S. & R. Motors (Donegal) Ltd. [2008] 3 IR 650. I see no reason to depart from those principles. However, in order for those issues to have any application it would be necessary that an arguable case had been made out for a claim of mis-selling in the first place. In that context, it is necessary to identify the allegation of mis-selling which was first put forward by Mr. McCaughey in his replying affidavit to the summary judgment motion.

7.8 In the written submissions filed on behalf of Mr. McCaughey before this Court, two allegations of mis-selling concerning the Woolgate fund are referred to. The first, which is referred to at para. 22 of Mr. McCaughey’s replying affidavit, concerns a suggestion that, as a result of a mis-statement of the recourse element of the relevant loan, the debt level associated with the property was actually 87.5% instead of 83.6%, as said to have been represented at the time of the investment. The loan covenants specified a loan to value ratio of 84% so that the lenders were entitled to call in the loan if the loan to value ratio exceeded that percentage and if remedial action to reduce it to that percentage were not taken. A second allegation is made to the effect that the senior financiers to the fund, Credit Suisse, provided funding of approximately five years, where the fund was described to be for a term of between five and seven years.

7.9 What is particularly striking about Mr. McCaughey’s replying affidavit is that there is no statement made by him at all as to what the consequences would have been had, accepting his case on mis-selling, the true position been pointed out. This is of particular importance in the context of this case. If it were asserted that Mr. McCaughey would not have entered into the investment at all in the absence of those representations, then one would have thought that he would have said so. Doubtless, if such an assertion were made and the matter went to plenary hearing, then the same issues of reliance which arose in the context of the proceedings brought by Mr. McCaughey in respect of the New York Hotels Fund would have arisen again, not least because of the highly marginal extent to which it is said that the true position deviated from that represented. But Mr. McCaughey has made no such contention in his affidavits.

7.10 Insofar as it might be contended that Mr. McCaughey would have gone ahead with the investment but has now suffered loss because the true position was less advantageous than was represented, the truly disastrous performance of the investment makes it clear that the loans would have been called in in any event, whichever loan to value ratio was initially specified and however long the loan from Credit Suisse was provided for. In other circumstances, if the investment did not perform disastrously but nonetheless did not perform as well as expected, then the differences between a loan to value ratio of 87% and 83% and senior finance of 5, as opposed to 5 to 7, years might conceivably have made a difference. In the circumstances of this case they could have made no conceivable difference. There is, therefore, just no factual basis put forward for asserting that the performance of the investment, in the events that happened, was in any way, let alone a significant way, affected by the issues raised. The only basis on which a defence or counterclaim could be mounted in those circumstances was if there was an assertion that, despite the highly marginal nature of what are said to be inaccurate representations, Mr. McCaughey would just not have invested at all. As noted earlier, no such contention is made in the affidavits.

7.11 In those circumstances, I am satisfied that Kelly J. was correct in determining that no arguable basis had been put forward for a claim of mis-selling in respect of the Woolgate at all. It follows that the question of whether such a claim could properly be characterised as a defence or a counterclaim does not arise. Likewise, it is unnecessary to consider the issues relating to the statute of limitations which were addressed in the High Court judgment.

7.12 For those reasons, it seems to me that Kelly J. was correct to permit judgment to be entered in respect of that aspect of the claim which related to the Woolgate loans.
8. Conclusions
8.1 For the reasons which I have sought to analyse, I am satisfied that, in the light of the additional information now available to this Court, the appeal should be allowed in part, insofar as it relates to the New York Hotels loan. The claim in that regard should be remitted to plenary hearing but on the clear basis that Mr. McCaughey is confined to making a case that the loan is not yet due because of a collateral contract, representation or promise made to the effect that the loan would not become due until the relevant investment was at an end. For the avoidance of doubt it should be made clear that Mr. McCaughey is not entitled to defend or raise a counterclaim in respect of the New York Hotels loan on the basis of any allegation of mis-selling.

8.2 So far as the Woolgate loan is concerned the appeal will be dismissed.

8.3 The Court proposes to hear counsel further on the precise form of order which should follow in the light of those findings.

ADM Londis plc v Gorman’s Supermarket Ltd

[2014] IEHC 95

 

Neutral Citation: [2014] IEHC 95

THE HIGH COURT
[2012 No. 715 S]

 

BETWEEN

AGM LONDIS PUBLIC LIMITED COMPANY
PLAINTIFF
AND
GORMAN’S SUPERMARKET LIMITED

AND

PATRICK KERRIGAN

DEFENDANTS

JUDGMENT of Mr. Justice Barrett delivered on the 28th day of February 2014.
1. The issue arising in this case is whether the plaintiff, AGM Londis plc, should be allowed to recover various debts by way of summary proceedings or whether the matter should go to plenary hearing. Any views expressed in this judgment are therefore tentative in terms of the strength or weakness of the case that either party might make at a plenary hearing.
Facts
2. Londis has demanded certain monies of the second named defendant, Mr. Kerrigan. His alleged liability to pay those monies arises out of his operation of a Londis-branded shop in Athboy, initially through the medium of the first named defendant, Gorman’s Supermarket Limited and latterly in a personal capacity. Londis has already obtained judgment against Gorman’s Supermarket. Now it is demanding money of Mr. Kerrigan pursuant to a personal guarantee that he allegedly gave in respect of the liabilities of Gorman’s Supermarket on 28th May, 2002. Londis is also demanding monies owed pursuant to a franchise agreement of 21st July, 2010, and a product purchase agreement of 21st July, 2010, both executed directly with Mr. Kerrigan after Gorman’s Supermarket found itself in financial difficulties.
Principles to be Applied
3. The hurdle to be surmounted by Mr. Kerrigan as regards obtaining leave to defend is a low one. As Hardiman J. stated in the Supreme Court in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607 at p. 623:

“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
4. In Harrisrange Ltd. v. Duncan [2003] 4 IR 1 at p. 7, McKechnie J. summarised the relevant principles when a court approaches the issue of whether to grant summary judgment or leave to defend:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…

(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…

(viii) this test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment is the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”

Guarantee of 28th May, 2002
5. Mr. Kerrigan in his affidavit evidence denies that he ever signed the personal guarantee of 28th May, 2002, stating that “this is borne out by a comparison of the other agreements…which I did sign”. A superficial consideration of the guarantee and the other contracts exhibited in evidence suggests that the signature on the guarantee is rather different, though the court is neither competent to, and does not, offer a view as to who signed the guarantee. The court considers, having due regard to the Aer Rianta and Harrisrange tests, that whether Mr. Kerrigan signed and is liable under the guarantee of 28th May, 2002, is a factual issue that will require determination at a plenary hearing.
Franchise Agreement of 21st July, 2010, and Product Purchase Agreement of 21st July, 2010
6. Mr. Kerrigan avers that the signatures on the two agreements of 21st July, 2010, “appear to be” his, then describes how he came to sign them. The court concludes on the basis of Mr. Kerrigan’s own affidavit evidence that the two agreements were in fact signed by Mr. Kerrigan. What is less clear is whether Mr. Kerrigan knew what he was signing. He avers that:

“[A Londis representative] came to Navan…and produced the two Agreements to me while I was sitting in his car. I say that [he]…did not explain the nature of the Agreements to me and I completed these and signed them in his presence. As far as I was concerned I was simply signing Agreements to extend the credit limit of the first named Defendant. I say that I was not aware until my solicitor explained the nature of these Agreements to me, that I was in effect from that date, trading in my personal capacity with the Plaintiff until such time as it ceased trading.”
7. Londis contends that Mr. Kerrigan signed the agreements and thus he is bound by them. Counsel for Londis referred the court to a number of cases in this regard. The first was L’Estrange v. F. Graucob Limited [1934] 2 K.B. 394. In that case the buyer of a slot machine brought an action against the sellers claiming, inter alia, breach of an implied warranty. On this point the sellers pleaded that the contract with the buyer expressly provided for the exclusion of all warranties. The buyer contended that she had not read and understood the contract documentation. The King’s Bench Division was not receptive to this argument. Scrutton L.J. at p. 404 stated that:
“… [T]he plaintiff has signed a document headed ‘Sales Agreement,’ which she admits had to do with an intended purchase, and which contained a clause excluding all conditions and warranties. That being so, the plaintiff, having put her signature to the document and not having been induced to do so by any fraud or misrepresentation, cannot be heard to say that she is not bound by the terms of the document because she has not read them.”
8. In a similar vein, Maugham L.J., at p. 406, stated it to be a true rendering of the law that:
“[W]here a party has signed a written agreement it is immaterial to the question of his liability under it that he has not read it and does not know its contents.”
9. However, Maugham L.J. goes on in his judgment to indicate that there are limits to the apparently steely rule that he had just propounded. Later case-law has borne this out. In the course of argument before the court, reference was made by the plaintiff to the recent case of Noreside Construction Limited v. Irish Asphalt Limited [2011] IEHC 364, in which Finlay Geoghegan J., confronted with a ‘battle of the forms’ between a construction company and one of its suppliers quoted, at para. 31, with approval from the English case of Curtis v. Chemical Cleaning and Dyeing Company [1951] 1 K.B. 805 at p. 808 in which Denning L.J. stated that:
“If the party affected signs a written document, knowing it to be a contract which governs the relations between them, his signature is irrefragable evidence of his assent to the whole contract, including the exempting clauses, unless the signature is shown to be obtained by fraud or misrepresentation…”
10. Notably, in Curtis, which was another case concerned with an exclusion clause, an entirely innocent misrepresentation by a shop assistant as to the effect of the terms embodied in a receipt and containing an exclusion clause was held to preclude reliance by the assistant’s employers on that exclusion clause. So, to the extent that the ‘signature rule’ is forged in steel, it seems often to founder on fact.
11. Irish case-law suggests that there are limits in Ireland as to the extent to which the ‘signature rule’ will be applied. The cases of Regan v. Irish Automobile Club Ltd. [1990] 1 I.R. 278 and O’Connor v. First National Building Society and Others [1991] I.L.R.M. 208, which were both concerned with the effectiveness of exemption clauses, suggest that a signature will not necessarily suffice to incorporate such a clause. The case of Western Meats Limited v. National Ice and Cold Storage Co. and Another [1982] I.L.R.M. 99 indicates that similar reasoning will apply in non-consumer cases. The case now before the court is not of course concerned with an exclusion clause. However, to the extent that the plaintiff seeks to rely on L’Estrange and Curtis as establishing or affirming the all but unvarying potency of a signature, a closer consideration of both those cases and of Irish precedents such as Regan, O’Connor, and Western Meats, suggests that a more nuanced approach has historically pertained.

12. Mr. Kerrigan asserts in his affidavit evidence that he thought, even after the agreements of 21st July, 2010, were signed, that Gorman’s Supermarket was the party with which Londis continued to trade. It could perhaps be contended that he had good reason for doing so. In Mr. Kerrigan’s affidavit evidence he avers as follows:

“I further say that I believed that the First Named Defendant was continuing to trade with the Plaintiff as opposed to me personally because no new accounts were opened, or requested to be opened in my name personally….I say that I received no confirmation of the termination of the First Named Defendant’s trading account with the Plaintiff and I further say that I received no request for new trading bank account details or other documentation for opening a new trading account with the Plaintiff. Therefore I say at all times it was the situation that the Plaintiff continued to trade with and be paid by the First named Defendant.”
13. Londis, in its affidavit evidence, acknowledges that the calculation of the sums due by Gorman’s Supermarket and Mr. Kerrigan is “complicated” because of the failure to close the existing running accounts and open new running accounts when Mr. Kerrigan took over the franchise personally. It asserted, at least initially, that this complication was academic because the total liability owed by the defendants to Londis fell to Mr. Kerrigan to discharge because of his purported personal guarantee of Gorman’s Supermarket and his obligations as a personal franchisee. However, this no longer remains the case because the issue as to whether Mr. Kerrigan in fact signed the guarantee is a matter that will have to go to plenary hearing. Londis contends in its later affidavit evidence, in effect, that there was an express or implicit acknowledgement in Mr. Kerrigan’s affidavit evidence that he knew himself to be trading in a personal capacity following the execution of the agreements of 21st July, 2010. The court considers that a scrutiny of the affidavit evidence suggests this contention to be arguable.
14. It could perhaps be contended that there was a considerable imbalance in the relative commercial sophistication of Londis on the one part and Mr. Kerrigan on the other, an imbalance akin to that which pertains in consumer transactions where there is a strong commercial entity on the one part and a vulnerable consumer on the other. Mr. Kerrigan was not a vulnerable consumer in his dealings with Londis. However, in instances where a significant degree of uncertainty arises in the dealings between parties and that uncertainty is accentuated by the actions of a stronger party, it seems consistent with basic principles of fairness and justice, with the approach implicit in Irish cases such as Regan, O’Connor and Western Meats, and the broad thrust of the English case-law to which the court was referred, to acknowledge that circumstances can arise in which a less than rigorous application of the ‘signature rule’ is merited. This does not mean that a person must be allowed to resile from the consequences of his signature, merely that it can be argued that a signature cannot be treated ipso facto in all instances and every circumstance, and without further consideration, to bind a significantly weaker party to every detail of contractual dealings which he genuinely purports not to understand and which the stronger counterparty admits were complicated by its own actions.

15. Mr. Kerrigan additionally contends that, among the monies sought of him, is an amount for goods that he allegedly bought from direct delivery suppliers whose invoices were settled in the first instance by Londis. Londis contends that Mr. Kerrigan should have reconciled goods received against invoices sent to him. Mr. Kerrigan appears to consider that Londis itself should have done a reconciliation of invoices and delivery documents before paying the monies it now claims from him. Mr. Kerrigan also contends that he was not given credit for stock on the premises when a successor entity took over the running over the premises; this is denied by Londis. There is also a dispute between the parties as to Mr. Kerrigan’s entitlements under a lease arrangement that arose in respect of the supermarket premises after a new occupant took over the running of same.

16. Having regard to the above and to the criteria propounded by Hardiman J. in Aer Rianta v. Ryanair, it is not clear that Mr. Kerrigan has no case as regards disputing the amounts which Londis claims are owed by him personally. There are issues to be tried and they are not simply and easily determined; oral evidence is required. Mr. Kerrigan’s affidavits do not fail to disclose even an arguable defence to the amounts claimed. The court is conscious of McKechnie J.’s observation in Harrisrange that the power to grant summary judgment should be exercised with discernible caution and considers that the achievement of a just result between the parties requires that all of the sums which are the subject of the present proceedings be adjudicated upon at plenary hearing.
Order
17. The court refuses the application of Londis for summary judgment and grants Mr. Kerrigan leave to defend all of the amounts claimed in the present proceedings at plenary hearing.

Ulster Bank Ireland Ltd v Healy [2014] IEHC 96

JUDGMENT of Mr. Justice Barrett delivered on the 28th day of February, 2014
1. These are summary proceedings in which Ulster Bank Ireland Limited is seeking €612,712.96 plus interest and costs from Mr. Healy. Any views expressed herein are tentative in terms of the strength or weakness of the case that either party might seek to make at plenary hearing. The central issue arising in the proceedings is whether a person who borrows money to invest in a number of investment properties is engaged in the business, trade or profession of property investor, and thus loses the protection of the Consumer Credit Act 1995, being no longer a consumer within the meaning of that Act.
Facts
2. Mr. Healy, an accountant, is an employee of a company that manufactures construction materials. He has availed of a number of loans from Ulster Bank. He has defaulted on his loans and the bank has commenced summary proceedings seeking the recovery of amounts that it claims are owed to it under the applicable loan agreements, along with interest and costs. The affidavit evidence of Ulster Bank indicates that there are several loans in issue, being an overdraft facility and various continuing loan facilities. The purpose of these last facilities was apparently to enable Mr. Healy to purchase certain investment properties in the United Kingdom. The total amount sought to be recovered in the proceedings is clearly a significant sum so far as Mr. Healy is concerned. However, it is not of a scale that would suggest him to be a major player on the property market. In his affidavit evidence, Mr. Healy asserts that the loans in issue:

“were sought so that I could purchase property and shares with a view to them being held as a long term pension type investment to be realised upon or subsequent to my retirement from employment, for my benefit or that of my family”.
3. Mr. Healy seeks leave to defend the proceedings at a plenary hearing. He claims that he is a “consumer” for the purposes of the Consumer Credit Act 1995 (as amended) and that Ulster Bank has not acted in compliance with that Act. Ulster Bank contends that, insofar as the loans in issue are concerned, Mr. Healy is what Ulster Bank describes in its affidavit evidence as a “business customer” or “commercial customer” and thus not entitled to the protections that the law extends to consumer-borrowers.
Leave to defend
4. The hurdle that must be surmounted by Mr. Healy as regards obtaining leave to defend is a low one. As Hardiman J. stated in the Supreme Court case of Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607 at 623:

“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
5. In Harrisrange Limited v. Michael Duncan [2003] 4 IR 1 at 7, McKechnie J. summarised the principles that he considered to be relevant when a court approaches the issue of whether to grant summary judgment or leave to defend, viz:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…

(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…

(viii) the test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”

Who is a ‘Consumer’?
6. Section 2(1) of the Consumer Credit Act 1995, as inserted by Part 12 of Schedule 3 of the Central Bank and Financial Services Authority of Ireland Act 2004, provides that a “consumer” is:-
“(a) a natural person acting outside the person’s business, or
(b) any person, or person of a class, declared to be a consumer in an order made under subsection (9).”

7. So for Mr. Healy to be a “consumer” within the meaning of the Consumer Credit Act he must, when borrowing the loan monies from Ulster Bank, have been acting outside his business, which term includes his trade and profession, or else be a person or class of person declared to be a consumer.
8. It does not appear that Mr. Healy is a person or class of person who has been declared to be a consumer. So the sole issue arising for the purposes of determining whether he was a “consumer” when he borrowed the loan monies from Ulster Bank is whether, when borrowing those monies, he was acting outside his business, trade and profession. It is of course possible for a person to be both a consumer and a non-consumer in different circumstances. This was acknowledged in Allied Irish Bank plc v. Higgins and Others [2010] IEHC 219 at 28, Kelly J. stating:

“The self same person can be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others”.
9. For his part, Mr. Healy has engaged in some property side-investments to provide for his retirement and his family. In this he is not unusual. Many prudent people are concerned to provide for their retirement income. Some may invest in stocks and shares. Some may invest in property. Some may use saved or borrowed monies to avail of these investments in the hope of funding a better quality of retirement for themselves or a better quality of life for their families. The court does not consider that a consumer who on one or more occasions places saved or borrowed monies in a particular form of investment, such as property, with a view to making a profit therefrom necessarily becomes a person whose business, trade or profession is that of professional investor or property investor and thus no longer a “consumer” for the purposes of the Consumer Credit Act. Of course there must come a point when a person crosses the Rubicon from consumer to professional. However, it could be contended that a man such as Mr. Healy who has invested not insignificant but not extravagant sums in property in order to provide for his retirement and to benefit his family has not necessarily crossed this line.
10. In the Higgins case, summary proceedings were commenced against the defendants for over six million euro in respect of monies loaned by AIB to the defendants’ partnership for the purpose of acquiring and developing lands in County Meath. The scale of the borrowings and the venture in which the defendants in that case were engaged is quantitatively and appears qualitatively different from the level and form of speculation engaged in by Mr. Healy. Of interest in the present context is Kelly J.’s analysis of the European Court of Justice’s decision in Benincasa v. Dentalkit (Case C-269/95) [1997] E.C.R. I-03767. Having considered the judgment of the court in that case, Kelly J. concluded, at 28:

“The European Court of Justice clearly envisaged that the concept of the consumer was confined to a person acting in a private capacity and not engaged in trade or professional activities….Only contracts concluded for the purpose of satisfying an individual’s needs in terms of private consumption are protected by the Directive. There is nothing in the [Consumer Credit] Act suggesting that the legislature here sought to go further than the Directive”.
11. It seems to the court that it could be argued that a good example of a person satisfying their individual needs in terms of private consumption is a man such as Mr. Healy engaging in personal investments, using either saved or borrowed monies, so as to meet the retirement or other future requirements of himself or his family.
12. Much of the argument in this case concerned how Ulster Bank classified Mr. Healy in its dealings with him, whether he was treated as a business customer or served by a commercial manager. The court has had close regard to this argument but considers that Ulster Bank’s view of Mr. Healy, while of interest, is not of determinative significance in the assessment of whether he is a consumer for the purposes of legislation such as the Consumer Credit Act.
Conclusion
13. For the reasons stated above, the court considers that it is arguable that: Mr. Healy has never had the additional business, trade or profession of professional or property investor; and thus that he was acting outside his business, trade and profession, and so as a consumer, when he borrowed from Ulster Bank the loan monies that have led to the current proceedings. Ulster Bank contends that Mr. Healy was not a “consumer” within the meaning of the Consumer Credit Act when he borrowed the monies. This raises the possibility that Ulster Bank may have acted in contravention of the Consumer Credit Act when it extended the loans to Mr. Healy by mis-classifying him as a non-consumer and treating him accordingly. As contravention of the Consumer Credit Act can lead in some instances to a loan agreement being unenforceable, or being enforceable on such basis as the court considers fit to impose, the defence raised by Mr. Healy in these proceedings that he is a “consumer” for the purposes of the Consumer Credit Act and has not been treated as such appears significant.

14. Having regard to the criteria propounded respectively by Hardiman J. and McKechnie J. in the Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607 and Harrisrange Limited v. Michael Duncan [2003] 4 IR 1 cases, the court considers that Mr. Healy satisfies the low hurdle that arises for a defendant seeking leave to defend and grants Mr. Healy leave to defend these proceedings at plenary hearing.

AIB v Fahy

[2014] IEHC 244

Judgment of Ms. Justice Iseult O’Malley delivered the 2nd May, 2014.
Introduction
1. In this case the plaintiff seeks liberty to enter final judgment in the sum of approximately €1.6m on foot of a loan of €1.3m made to the defendant on the 30th June, 2006. The defendant, who is a solicitor, makes the case that in her dealings with the plaintiff in relation to this loan she was a consumer and that the terms of the Consumer Credit Act, 1995 were not complied with. As a separate issue she contends that certain sums included in the overall figure represent surcharge interest which, she says, is not recoverable in her case.

2. The plaintiff says that it was a commercial loan to which the Act did not apply. It also contends that any surcharge interest charged was justified by reference to the terms and conditions of the loan.
Summary of facts
3. Before dealing with the circumstances of the 2006 loan, it is necessary to set out something of the previous history between the parties.

4. Prior to 2006 the defendant had banked with the plaintiff for some time and had taken out a number of loans. Her relationship manager from 2003 until 2008 was a Ms. Carmel Hayes, who dealt with both her personal and business banking. In late 2004 or early 2005 the defendant also brought the banking business of her practice to the plaintiff.

5. Apart from the ordinary business of her practice (principally litigation and conveyancing), the defendant had also, in 2004, established a business called Home Law Direct. This involved the franchising of a fixed-price conveyancing service to other solicitors. Franchisees paid a stipulated sum to join and also paid 10% of their conveyancing fees plus €600 per month to a separate company called Home Law Direct Marketing Ireland.

6. Separately, the defendant was the beneficial owner of two property development companies called Trezglen Holdings Limited (“Trezglen”) and SPF Corporate International Limited (“SPF”).

7. In 2005 the defendant had four mortgages on her family home in County Limerick, with a total outstanding balance of about €643,000. Ms. Hayes has said that she believes that about €275,000 of the sums thus borrowed and secured on the home had been related to business and property investment. This was denied by the defendant, who says that the “vast majority” of the money related to personal spending. Neither side has produced any documentation relating to these mortgages. The defendant paid interest on the loans at the bank’s normal home loan rate.

8. In June of that year she entered into an agreement to borrow the sum of €950,000 from the plaintiff. According to the plaintiff, it was understood that the purposes of the loan was to clear the four mortgages and to invest the remainder in the expansion of Home Law Direct.

9. The defendant does not accept that it was intended that any substantial portion of this loan was to be used for business purposes. Her evidence is that, in addition to clearing the mortgages, she required €270,000 to repay loans from family members, made in connection with the completion of a purchase of lands in Ballysimon, Co. Limerick. She asserts that she had spent about €40,000 on Home Law Direct and that, because of its business model, it did not require much more capital. She says that the bank was aware of this and of the necessity to repay the family loans.

10. The period of the loan was agreed to be 15 years. Monthly repayments were €5,686. The cost of the credit was €73,501.60. The security was the assignment of various insurance policies and legal charges over the offices of the defendant’s practice and an investment property owned by the defendant in Castletroy, Limerick. The defendant’s home was not part of the security.

11. At the request of the defendant, the loan account was to be set off against her client account. So long as there were sufficient funds in the client account to cover the loan- i.e. €950,000- the interest on the loan account would be 1 per cent. If the funds in the client account fell below that figure, the interest rate on the loan would be 1 per cent of whatever figure was to the credit of that account, with the rate on the difference rising to the bank’s Prime rate plus 1.5 per cent.

12. In applying for this facility on behalf of the defendant, her bookkeeper described what was being sought as a commercial loan, secured against the office building. The purpose of the loan was to clear the current liabilities on the defendant’s home, stated to be approximately €650,000

”and the balance for Siobhan & Homelawdirect project.”
13. The letter also says that if it would be quicker to process the additional €300,000 first, and leave the mortgage as it was for the time being, that option would be preferred.
14. In making the agreement the plaintiff decided to treat the defendant as a consumer within the meaning of the Consumer Credit Act, 1995. The agreement is clearly drawn up as a consumer contract, with provision for an optional 10- day “cooling off’ period. Ms. Hayes’s evidence is that this approach was taken because home mortgages were being cleared and she did not want “any ambiguity around it later on.”

15. This loan was drawn down on the 27th July, 2005. On the same day €643,000 was applied to clearing the defendant’s home loans and the sum of €307,193.65 was lodged to the Home Law Direct account. However, a payment of €270,000 was then immediately made out of the latter account to Denis McDwyer & Co., a solicitor’s firm. According to the defendant, this represented the repayment of the family loans relating to the purchase of the lands at Ballysimon. The remaining sum of just under €40,000 was left in the Home Law Direct account for “ongoing administration costs”.

16. The defendant says that this was effectively a personal loan and that is the reason why she was treated as a consumer.

17. Payments were made by the defendant in accordance with the terms of this Joan agreement and the balance had been reduced to €900,000 before the next relevant development.
The 2006 facility
18. On the 28th March, 2006 the defendant’s accountants wrote to Ms. Hayes, advising her that the defendant intended to liquidate Trezglen and SPF. For this purpose it would be necessary to put the companies in funds in the amount of €400,000 to repay sums owed by the defendant to SPF and to deal with capital gains tax liabilities. It was anticipated that this would eventually result in a distribution of €200,000 to the defendant.

19. It was not suggested by the plaintiff that the €200,000 was to be used to repay any part of the loan but Ms. Hayes says that she believed that this money would be reinvested in the defendant’s business. She accepts, however, that she was not told that by the defendant. Mr. Kieran O’Regan, the Head of Business Banking at the time, has said in evidence that he believes that he did have a meeting with the defendant in June, 2006. On the basis of his notes of the meeting he says that he was told that the €200,000 would go into Home Law Direct. The defendant’s evidence is that she was not present at such a meeting. She denies having represented to anyone from the bank that the money would be put into the franchise. She says that she received approximately €247,000 from the liquidation, that this was paid into her personal account and that she used it to discharge her personal income tax.

20. The defendant also sought an alteration in the terms of the 2005 loan, to interest-only for a period of one year. This was agreed.

21. An alteration was also proposed in relation to the security for the loan, with the Castletroy investment property being removed and replaced by the lands in Ballysimon. The plaintiff says that this proposal came from the defendant. She denies this and says that she queried the necessity for it, but was told that she would not get the loan unless she agreed.

22. A letter of sanction for a facility of €1.3m (being the sum of €900,000 outstanding on the 2005 loan plus the €400,000 now requested) issued and was signed by Ms. Hayes and the defendant on the 30th June, 2006. The document states the purpose of the loan as being

“Reimbursement of funds owed to SPF Corporate Int and subsequent reinvestment into Home Law Direct Franchise.”
23. The defendant says that she did not take issue with this because she never saw the letter and indeed she claims that she was not given an opportunity to read it. She signed it because she would not otherwise get the loan.
24. A similar arrangement as described above was put in place regarding the defendant’s client account, which was now required to have a minimum of €1.3m in it to set off against the loan funds.

25. The rate of interest was provided for as follows:

“1% set off against funds on client’s current account no 18130088 and in the event of there being insufficient funds in same the Banks Prime rate varying, plus 1.500% per annum, will apply currently 4.875% per annum.”
26. The monthly repayments were stated to be as follows:
“Interest only payments of EUR 1,084 pm to be provided year one with capital & interest repayments of EUR 8,294 pm thereafter over remaining 14 years assuming sufficient funds in Solicitor’s clients account for duration of loan.”
27. Ms. Hayes has said that the defendant was not treated as a consumer in relation to this loan because she believed it to be a business facility. She did not refer to the home loans because they had been cleared. However she accepts that the outstanding €900,000 of the 2005 loan was encompassed in the new facility.
28. The defendant contends that the original €950,000 was effectively included in this loan, and that since a large proportion of that sum had been for the purpose of clearing home mortgages, it was incorrect to treat the later facility as being purely business-related. She further states that she had never intended to use the loan for investment in Home Law Direct, since its business model entailed very little in the way of expenditure. She does say that she may have told the plaintiff that Home Law Direct had a “short term need” for about €40,000 or €50,000, and there might have been a “vague mention” of putting in this amount after the tax arising from the liquidations had been paid.

29. The loan was, in the first sentence of the letter of sanction, expressed to be subject to the Bank’s General Terms and Conditions governing business lending, as set out in a booklet dated March 2006. The relevant part of this booklet is the section dealing with the calculation of interest. Under the heading “Surcharge Interest” it reads as follows:

“Unscheduled or unauthorised borrowings by a Customer oblige the Bank to arrange impromptu funding in the money market and generate additional administrative activities. This gives rise to costs, expenses and risk to the Bank which are covered by the application of surcharge interest. Surcharge interest, in addition to the interest applicable to the facility, will be charged:

(i) where the balance (or the net aggregate balance) on any account(s) exceeds the relevant limit or an account is overdrawn without a sanctioned limit (“excess balances’}; and
(ii) where any residual debit balance remains unpaid after the Bank has demanded payment or after the expiry of the review date or the repayment period of a facility, without the Bank’s agreement to extend or renew the facility (“residual balances’).

30. The booklet states that the surcharge rate of interest is subject to change from time to time. Changes are to be notified by publication in at least one national newspaper and information regarding the rate is at all times available in the bank.
31. Mr. O’Regan, the head of the business banking section, says that surcharge interest is calculated automatically once a customer is outside his or her loan agreement. In a set-off situation, where the credit funds were less than the amount of the loan that would attract higher interest “and possibly a surcharge.”

32. Ms. Hayes has said that a copy of the booklet was furnished to the defendant.

33. On the 30th June, 2006, the day the letter of sanction was signed by both parties, Ms. Hayes gave the defendant a draft for €290,000 for SPF. This company had its account in a different bank. The sum of €110,000 was lodged to the account of Trezglen.

34. Ms. Hayes says that the lodgement to Trezglen was made on the defendant’s instructions – this is denied by the defendant, who says that for tax reasons she did not want it to happen. No lodgement docket has been produced by the bank. The defendant has said in evidence that she “can only assume” that it was arranged by her accountant and the bank, but she does not know if this was so. She did not make any complaint about it because she did not see the relevant bank statements, being too busy with other matters.

35. The defendant’s evidence is that after the liquidations, approximately €180,000 was paid in respect of tax liabilities. About €14,500 of the Trezglen monies and about €32,000 of the SPF monies “came back into the office”. Approximately €246,000 “came back” to her. This was lodged in her personal account.

36. The defendant has put into evidence certain internal memoranda obtained by her from the bank under the Data Protection Act. Some of these post-date the loan agreement and contain the views of bank officials and their advisors on the issues between the parties. These do not appear to me to be relevant.

37. There are three pages of memoranda which were presented to the court in booklet form as being three separate items but were on occasion treated in evidence as a single document. It is difficult to contextualise them since there is no apparent beginning or ending, whether they are read singly or cumulatively. They are not dated or paginated, but appear to have been created by Ms. Hayes.

38. The first page states that no accounts were yet available for Home Law Direct but cites management figures for the periods ended July 2005 and July 2006. Projections are given for 2007 and 2008. Notes in relation to the drawings and income of the franchise indicate that the defendant had invested €350,000 of her own funds in it in 2005. There is also reference to the fact that a legal dispute had arisen in relation to the Ballysimon purchase, whereby the defendant

“incurred substantial cost & EUR270k to repay family loan”.
39. It seems to me that this document could not have been written in 2005, having regard to the 2006 figures in it. It does not, therefore, support the contention that the purposes of the 2005loan included repayment of the €27,000.
40. The second page is headed “Report and Recommendations”. It gives a brief description of the defendant and the Home Law Direct project. Under the heading “Proposal” there is the following passage:

“Client is now seeking a loan facility of 950k over 15 years on a 1% set off against clients funds.
She will utilise 639 of this facility to clear existing home mortgage on her PDH …

The balance of 311k is required to further fund expansion of the Home LA Direct Franchise and to cover Working Capital pending inflow of client fees.

To date client has spent 70k on this project which was utilised to fund marketing, stationery, consultancy fees and web site set up.”

41. I think it is obvious that this was written in contemplation of the 2005 loan.
42. The third page refers to the fact that the bank holds a charge over the office premises and goes on to say that there is an offer of a charge over the Ballysimon lands, which the writer regards as a valuable property. The following quotation comes under the heading “Recommendation”:

“Siobhan Fahy to date has spent significant time and money (EUR350k to date) into setting up the Home Law Direct Franchise. As can be seen she has sold the franchise to 11 firms already well spread all over the country and she is currently working on 4 other locations. These franchises have to provide a minimum of EUR 20k pa to Homelaw Direct Ireland. This income stream has only started to come on line since 03/06.
We are dealing here with a woman of substantial legal experience whose initiative is now being recognised as a market leader. She has incurred significant start up costs in Homelaw Direct but the potential is now being recognised …Ultimately client intends to build the franchise further and sell on the business at some future date.

Client and Accountants have met with Kieran O’Regan & discussed this case indepth. As a result we are supportive of this additional facility…”

43. In my view this document must have been written in 2006.
44. The defendant made payments on foot of the loan until January 2011, when she terminated all relevant standing orders.
Relevant statutory provisions
45. It is common case that if the defendant was in fact acting as a consumer in taking out the 2006 loan, the contract falls foul of the provisions of the Consumer Credit Act, 1995 and the plaintiffs claim must fail. This is because of the mandatory nature of s. 30, which stipulates that a “cooling off’ period must be provided. Non-compliance with the section may not be overlooked by the court and results in the contract being unenforceable.

46. Section 2 of the Act (as amended by Part 12 of Schedule 3 of the Central Bank and Financial Services Authority of Ireland Act, 2004) defines the term “consumer” ins. 2 as “a natural person acting outside the person’s business.”

47. “Business” is defined as including “trade and profession”.
Submissions on the consumer contract issue
48. Counsel for the parties are agreed upon the following propositions – that the court cannot split the loan into constituent elements; that a person may have more than one business, trade or profession and that the defendant bears the burden of establishing that she was a consumer.

49. It is also agreed that the issue to be determined by the court cannot be decided by reference to the security given for the loan or to the applicable interest rate.

50. The plaintiff relies on the authority of Allied Irish Bank v Higgins and submits that the loan related, either in its entirety or to a significant extent, to purposes inconsistent with the defendant acting in the capacity of a consumer. If the purpose was mixed, it is submitted in reliance on Gruber that it could be treated as a consumer contract only if the commercial aspect was negligible.

51. On behalf of the defendant it is submitted that her business was conveyancing and the Home Law Direct franchise and that in taking out the loan she was acting outside these areas. The purposes of the monies advanced in 2005 were, it is argued, to clear the home loans and to repay family loans. Both of these are described as personal. Since the bank treated her as a consumer for that transaction, she remained a consumer in relation to it. The 2006 loan was, and was treated by the parties as, a top-up to the 2005 facility and she should therefore have continued to be treated as a consumer.

52. The defendant relies on Standard Bank London v Apostalakis [2002] CLC 933 as an example of persons entering into a contract for the purposes of profit but nonetheless being held to be acting outside their trade or profession.
Authorities on consumer contracts
53. The leading Irish judgment on the issue as to the applicability of the Act in this context is Allied Irish Bank Plc v Higgins [2010] IEHC 219. In that case the defendants had formed a partnership with the intention of acquiring lands for development. The plaintiff had advanced a number of loans to them for this purpose. In resisting an application for summary judgment, the defendants all adduced evidence that they were not professionally involved in the business of property development. They therefore contended that they had an arguable defence by virtue of the provisions of the Act, in that they were acting outside their business when they borrowed the money. The bank said that it was a commercial transaction.

54. Kelly J. noted that the object of the partnership, in buying and developing the lands, was to make a profit. Having regard to the evidence of the defendants he accepted that property investment was not their principal or main business. However, he rejected the proposition that for the purposes of the Act a person could have only one business or trade or profession, outside of which any borrowings must be made as a consumer. He referred to the following definition of a consumer in Council Directive 87/102/EEC, as amended by Council Directive 90/80/EEC:

“a natural person who, in transactions covered by this Directive, is acting for purposes which can be regarded as outside his trade or profession”,
noting that it did not materially differ from that in the Act.
55. Having had regard to the fact that s. 18 of the Interpretation Act, 2005 provides that, unless the context otherwise requires, the singular imports the plural, Kelly J went on:

“Second, the interpretation urged by these defendants would have the most profound consequences in business and commercial life. It would mean that every person who belonged to a trade or profession and who decided to borrow money to invest it in promoting another business with a view to profit would have to be treated as a consumer under the Act. The legislature could never, in my view, have so intended. If it did it would have said so in clear and unequivocal terms.”
56. The judgment also refers to the decision of the European Court of Justice in Benincasa v Dentalkit (Case C-269/95). In that case, a franchising agreement had been entered into for the use of Dentalkit’s equipment and trademark in a dental practice. A dispute having arisen, the claimant argued that he had not made the contract in the course of or for the purpose of his trade or profession because it was only in contemplation of such trade or profession.
57. In the course of its judgment the Court, having referred to the Directive definition cited above, said:

“As far as the concept of ‘consumer’ is concerned, the first paragraph of Article 13 of the Convention defines a ‘consumer’ as a person acting ‘for a purpose which can be regarded as being outside his trade or profession’. According to settled case-law, it follows from the wording and the function of that provision that it affects only a private final consumer, not engaged in trade or professional activities.
It follows from the foregoing that, in order to determine whether a person has the capacity of a consumer, a concept which must be strictly construed, reference must be made to the position of the person concerned in a particular contract, having regard to the nature and aim of that contract, and not to the subjective situation of the person concerned. As the Advocate General rightly observed in point 38 of his Opinion, the selfsame person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others.

Consequently, only contracts concluded for the purpose of satisfying an individual’s own needs in terms of private consumption come under the provisions designed to protect the consumer as the party deemed to be the weaker party economically. The specific protection sought to be afforded by those provisions is unwarranted in the case of contracts for the purpose of trade or professional activity, even if that activity is only planned for the future, since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character.”

58. It is important to note also that Kelly J. considered that, since “the subjective situation of the person concerned” was not the decisive factor, the subjective view of the plaintiff bank, whether right or wrong, was of no relevance.
59. In his conclusions on the issue, Kelly J. said

“These defendants acted as partners in a partnership which borrowed money from AIB. They did so with a view to investing in property and its development for profit. In so doing they engaged in business and the Act had no application to them.”
60. Gruber v BayWa AG (Case C-464/01) concerned the applicability of the consumer provisions of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968. The claimant sought damages for defective tiles used to reroof a building which was used partly as his dwelling house and partly for his farming purposes. The issue was whether he had contracted for goods for a purpose outside his trade or profession, which would entitle him to rely upon special jurisdictional rules.
61. On a reference from the national court, the European Court of Justice held that where a person concluded a contract relating to goods intended for purposes which were in part within and in part outside his trade or profession, he could only rely upon the special rules for the protection of consumers if the “trade or profession” element was so limited as to be negligible. In determining the issue, a court should take into account the content, nature and purpose of the contract and the circumstances in which it was concluded.

62. Standard Bank London Ltd v Apostolakis [2002] CLC 933 is a judgment of the English Commercial Court on certain preliminary issues in an application for summary judgment, one of which was whether or not contracts entered into between the parties were consumer judgments. The defendants, a Greek married couple, were a civil engineer and a lawyer. They entered into and agreement with the plaintiff bank whereby the latter was to purchase ECUs on their behalf in exchange for drachmas. Unilateral action by the bank taken on foot of a devaluation of the drachma resulted in litigation in both the Greek and English courts.

63. In holding that the contracts were consumer contracts, Longmore J. ruled that despite the size of the contracts the defendants had been acting outside their trade, business or profession. They were not engaged in the trade of foreign exchange contracts as such, but were simply disposing of income in the hope of making a profit.

64. Longmore J. distinguished Benincasa on the basis that the factual situation was very different. He doubted whether the Court of Justice had intended to substitute the words “for the purpose of satisfying an individual’s own need in terms of private consumption” for the definition in the Directive.
Discussion on the consumer contract issue
65. The primary issue for determination is the position of the defendant in entering into the loan agreement, having regard to the nature and aims of that agreement.

66. I find that much of the defendant’s evidence in relation to the nature and aims of the agreement is unsatisfactory and unsupported by either documentation or, as might be expected, evidence from her financial advisors. To take one example, she disputes the assertion by the plaintiff that she had invested or intended to invest significant sums in Home Law Direct. Where the plaintiff refers to her having spent €350,000, she says that it was €40,000. She has not produced accounts or bank statements to back this up.

67. I do not accept her evidence that she was not given an opportunity to read the letter of sanction. I find it highly unlikely that a person of her legal and business experience would accept such treatment at the hands of a bank with which she was, at the time, doing a lot of business. If in fact she did not read it, I consider that she would nonetheless be bound by her signature.

68. However, I do not consider it necessary to go through the evidence in detail because, in my view, the most important consideration is this: the initial application made on her behalf for this facility was made for what were unquestionably business purposes. The defendant was the full beneficial owner of two property companies. She was engaged in the property business, through them and, it seems, in her own personal capacity- the court is not definitively aware of who the legal purchaser of the Ballysimon lands was. She wished to liquidate the companies and funds were needed to this end.

69. Further, the bank was told in the application that at least some portion of the proceeds would be invested in Home Law Direct.

70. These were business purposes, and in making the application she was acting in the course of business. There has been no suggestion that her accountants were not authorised to put the application in these terms. The funds advanced were, as a matter of fact, paid to the two companies. I note here the defendant’s evidence that she did not authorise the payment to Trezglen – again, one would expect some evidence from the persons who dealt with the bank on her behalf in this regard.

71. It is not clear which party proposed that these funds should be advanced by way of a new facility encompassing the existing one. However, whether she asked for, or was offered, the option to transfer her existing loan into the new arrangement, she was in my view still in the position of a person seeking a business facility. She did not cease to act in a business capacity in making the decision to incorporate the old loan. As the Court of Justice said in Gruber,

“Where a contract simultaneously serves both private and trade or professional needs, it may be possible to determine the proportion of the contract within each category. It is not however possible to deem the customer to be, in that proportion or indeed in any other proportion, both in a weaker position than the supplier and on an equal footing with him in relation to one and the same contract.”
72. The defendant was not in any way disadvantaged by not being treated as a consumer- any rights that she had in that capacity had been fully respected in the 2005 transaction, and she was not taking on any new liabilities in respect of any consumer aspect of the existing loan.
The surcharge interest
73. The plaintiffs claim includes a sum of €94,602.06 by way of surcharge interest. Such interest was levied for four separate quarters between December 2008 to March 2010 at a rate of 12% of the net balance. After March 2010 no surcharge interest was charged.

74. According to the evidence of Ms. Jean Ryan on behalf of the plaintiff,

“The net balance is arrived at by taking the debit balance on the loan account less the credit funds.”
75. The “credit funds” in this instance were the monies in the client account. Ms Ryan stated that the interest was calculated on a daily basis and was charged to the loan at the end of the quarter.
76. What appears to have happened is that, at a time after the expiry of the “interest only” period, the level of funds in the client account began to fall below the loan level and the surcharge figure of 12% then came into play. However, at a certain stage a “no surcharge” flag was placed on the account. This appears to have been on foot of representations made by the defendant.

77. Ms Ryan was not in a position to say what the basis for the 12% rate was, simply stating that it was the applicable rate and that surcharge interest was provided for in the general terms and conditions.
Submissions on interest
78. The defendant’s complaint is that there is no evidence as to how the rate came to be set at 12%. It is argued that there is therefore no evidence as to whether it was a genuine pre-estimate of the cost to the plaintiff of default on the part of the defendant, and that it should in the circumstances be regarded as an unenforceable penalty. In this respect reliance is placed on the judgment of Finlay Geoghegan J in ACC Bank v Friends First Managed Pension Funds Limited [2012] IEHC 4325.

79. The defendant also says that there is no evidence that the plaintiff informed her of the applicability of the rate of 12%, whether by notification in the branch premises or by advertisement in a national newspaper.

80. In ACC Bank v Friends First, part of the plaintiff bank’s claim depended on a clause in its General Conditions providing that if the borrower defaulted in the payment on the due date of any sum payable under a facility, this would give rise to a liability to pay interest at 0.5% per month above the rate otherwise applicable to the facility. This rate was therefore applicable not just to default in relation to the principal sum, but to any default in relation to interest, costs or charges. The issue was whether this was a penalty, intended as a deterrent against default, or a genuine pre-estimate of loss, within the meaning of the principles established in Dunlop Pneumatic Tyre Company Ltd v New Garage and Motor Company Ltd [1915] AC 79.

81. It should be noted that Finlay Geoghegan J. considered that the burden of establishing that the imposition of the surcharge interest was a penalty rested on the defendant.

82. Both parties called expert evidence on the matter. The witnesses were agreed on a number of issues, including the fact that banks were obliged to attach a “probability of default” factor to each loan that they make and that default on a facility carried cost implications for a bank, because of the need to set aside an increased level of capital for the anticipated loss. The plaintiffs expert considered that 6% per annum was a “minimal reflection” of this cost. The defendant’s expert, whose evidence was accepted by Finlay Geoghegan J., was that a generic pre-estimate of additional loss, covering all types of default, was not possible. The learned judge stated that she was further influenced by the fact that the charge increased the agreed margin in the facility letter by a factor of three. She therefore held that the charge could not be considered as a genuine pre-estimate of its loss or of the additional costs to the plaintiff of providing capital in the event of default.

83. The plaintiff in the instant case points to the reference in the letter of sanction to the general terms and conditions document and argues that the terms relating to surcharge interest therein form part of the contract. It says that the defendant’s account was in default after the expiry of the interest only period of the facility and the entitlement to levy the charge arose because of that default.
Discussion on surcharge interest issue
84. I accept that the onus is on the defendant to establish that the claimed charge amounts to a penalty. I further accept that a bank is entitled in principle to charge surcharge interest where a borrower is in default. However, the borrower is entitled to challenge the bank’s evidence as to the basis for the charge with a view to undermining the contention that it is a genuine pre-estimate of loss.

85. In this case the plaintiff has offered no evidence at all as to the basis for the rate of 12%. The contractual terms as set out in the booklet of terms and conditions refer only to the factual situations in which surcharge interest will be charged but give no guidance as to how it will be calculated.

86. Having regard to the fact that the interest rate in the letter of sanction, set out in paragraph 22 above, already made provision for an increase in a situation where the credit funds were insufficient (and thus had already made provision for the increased possibility of impairment of the loan), and having regard to the absence of evidence in relation to the surcharge rate, I do not consider that the level of 12% can be seen as a genuine pre-estimate of loss. It appears to be more in the nature of a penalty and therefore unenforceable.
Conclusion
87. The plaintiff is entitled to judgment in the amount claimed, less any element related to surcharge interest.

 

 

Promontoria (Aran) Ltd v Tiernan

[2016] IESC 67

Judgment of Ms. Justice Laffoy delivered the 16th day of November, 2016
The appeal and its procedural background
1. The High Court proceedings the subject of this appeal were initiated by a summary summons issued on 3rd September, 2009 by Ulster Bank Ireland Limited (Ulster Bank), as plaintiff, against the appellant (Ms. Tiernan), as defendant. In the special endorsement of claim Ulster Bank claimed the sum of €1, 731,774.47 representing principal and interest alleged to be due by Ms. Tiernan to Ulster Bank in respect of money lent and advanced by Ulster Bank to Ms. Tiernan at her request and for further interest from 29th August, 2009 to the date of judgment. An appearance was entered on behalf of Ms. Tiernan to the summary summons.

2. Subsequently on 10th November, 2009 Ulster Bank filed a motion in the summary proceedings for liberty to enter final judgment in the terms of the special endorsement of claim. The first affidavit filed on behalf of Ulster Bank to ground the motion for summary judgment was filed on 17th December, 2009. That was an affidavit sworn by Gerry Duignan (Mr. Duignan), the Manager of Ulster Bank’s Business Centre in Drogheda, which was sworn on 14th December, 2009. The contents of that affidavit will be addressed later.
3. A peculiar aspect of this case is that when the motion for summary judgment came on for hearing in the High Court before MacMenamin J. (the trial judge), there were before the Court some affidavits which bore the record number of other proceedings brought by Ulster Bank against Ms. Tiernan. Those proceedings were proceedings by way of special summons (Record No. 1149/2009 SP), which I understand were proceedings wherein Ulster Bank sought to enforce security it held over certain properties created by solicitor’s undertakings alleged to have been given to it on foot of irrevocable letters of authority given by Ms. Tiernan. The only relevance of those proceedings to the appeal being addressed in this judgment is that some of the affidavits filed in the High Court on the motion for summary judgment were apparently affidavits which were filed in the special summons proceedings and bear the record number of the special summons proceedings. A pragmatic and sensible approach was adopted by counsel on both sides in relation to those affidavits on the hearing of the appeal, in that neither side raised any point in relation to those affidavits, being considered by this Court. Apart from the grounding affidavit already referred to, the following affidavits are, accordingly, before this Court on the appeal:

(a) an affidavit sworn by Mr. Duignan on 28th January, 2010;
(b) an affidavit sworn by Ms. Tiernan on 25th March, 2010;

(c) an affidavit sworn by Mr. Duignan on 11th May, 2010; and

(d) an affidavit sworn by Ms. Tiernan on 1st July, 2010.

The foregoing affidavits will require to be considered in some detail later.
4. The motion for summary judgment came on for hearing in the High Court on 20th January, 2011. The outcome was that Ulster Bank obtained summary judgment in the sum of €1,798,267.02 with interest thereon at the statutory rate and the costs of the proceedings against Ms. Tiernan. An ex tempore judgment was delivered by the trial judge on 20th January, 2011. While counsel for both sides did not agree a note of the judgment, there is before this Court on the appeal a note of the judgment prepared by counsel for Ulster Bank and approved of by the trial judge. Once again, adopting a pragmatic and sensible approach, counsel for the appellant on this appeal has made his case on the basis of that approved note.

5. Having obtained an order from this Court (Murray C.J., Denham J. and Hardiman J.) on 6th May, 2011 to extend the time for service of notice of appeal, Ms. Tiernan served notice to appeal from the judgment and order of the High Court. Later, in 2013 a motion was brought on behalf of Ms. Tiernan to this Court for –

(a) liberty to file an amended notice of appeal; and
(b) liberty to adduce further evidence for the hearing of the said appeal.

That motion having been heard by this Court (Fennelly J., O’Donnell J. and McKechnie J.), by order dated 12th July, 2013 it was ordered that –
(i) Ms. Tiernan be at liberty to file the amended notice of appeal as sought, but subject to the qualification that the Court hearing the appeal would have the right not to admit any ground of appeal; and
(ii) the further evidence aspect of the motion would stand adjourned to the hearing of the appeal.

6. The position, accordingly, when the appeal came on for hearing was that, in addition to addressing the appeal against the judgment and order of the High Court, this Court might have had to consider whether or not to admit any new ground of appeal set out in the amended notice of appeal and would have had to adjudicate on the application on behalf of Ms. Tiernan to adduce further evidence. As it happened, at the commencement of the hearing, counsel for Ms. Tiernan informed this Court that those two additional matters were not being pursued on the appeal and no objection was raised on behalf of the respondent referred to in the next paragraph to that approach being adopted.
   7. Finally, before the appeal came on for hearing in this Court, by order of the High Court made on 4th February, 2016, the title of the proceedings was amended by the substitution for Ulster Bank of Promontoria (Aran) Limited (the respondent) as plaintiff, and, consequently, as respondent on the appeal. On the hearing of the appeal it was made clear that no issue was being raised on behalf of Ms. Tiernan in relation to that amendment.
   The issue on the appeal
   8. In the light of the foregoing the only issue on the appeal is whether the order of the High Court giving judgment against Ms. Tiernan should be set aside, so that the proceedings can proceed to plenary hearing and be defended on behalf of Ms. Tiernan. That issue is to be determined on the basis of the affidavits itemised earlier which were before the High Court and the contents of which will be outlined by reference to the submissions made on the hearing of the appeal. Although the affidavit evidence is outlined in some detail, it is not to be inferred that the Court has formed any view as to the credibility of the evidence put forward by either deponent, as distinct from whether, insofar as is necessary, a general view is formed as to the credibility of the defence put forward by Ms. Tiernan in line with the proper approach as laid down by this Court, having regard to the judgment of Clarke J. in what is referred to later as the IRBC case, which approach was reiterated more recently in the judgment delivered in this Court by Clarke J. in Camiveo Limited v. Dunnes Stores [2015] IESC 43 (at para. 3.2).
   Outline of evidence before the High Court
   Grounding affidavit of Mr. Duignan
7. The grounding affidavit of Mr. Duignan was, as counsel for Ms. Tiernan pointed out, very bare. However, Mr. Duignan corrected an error in the special endorsement of claim on the summary summons as to the amount claimed to be due by Ms. Tiernan to Ulster Bank. It was averred that the corrected sum, €1,738,942.32 was then due and owing by Ms. Tiernan to Ulster Bank on foot of the loan account referred to in the special endorsement of claim. Further, it was averred that Ms. Tiernan had no bona fide defence to the action. The only document exhibited in the grounding affidavit was a so-called “Statement of Liability”, being a table showing the amount alleged to be due by Ms. Tiernan to Ulster Bank as at 22nd October, 2009.

Mr. Duignan’s affidavit of 28th January, 2010

10. The affidavit sworn by Mr. Duignan on 28th January, 2010 contained an averment that on or about 28th November, 2007 Ms. Tiernan was advanced the sum of €1,747,000.00 by Ulster Bank repayable on demand with a moratorium on repayment of principal and interest for a period of seven months from the date of the said advance. A copy of the facility letter outlining the terms of the said advance was exhibited. The facility letter was dated 28th November, 2007 and it was addressed to Ms. Tiernan. It gave the name of the borrower as Ms. Tiernan. The facility was described as a “Demand Loan Facility” and the amount was given as €1,747,000.000. The purpose of the facility was outlined as being for the sole purpose of assisting with: repayment of a Bank of Scotland loan facility of €850,000; the purchase of a residential property at Gallery Quay, Grand Canal, Dublin, costing €710,000; and payment of various amounts in respect of stamp duty, legal fees, bank fees and fund bank interest. The facility also provided that the Bank would get security by way of first legal charge over licensed premises trading as “The Milestone” situate at Carlingford, County Louth and also security by way of first legal charge over the residential property situate at Gallery Quay. The fourth page of the facility letter contained the acceptance by Ms. Tiernan. It was signed by Ms. Tiernan and dated 28th November, 2007.
11. Mr. Duignan also averred that Ulster Bank had received, as security for the advance to Ms. Tiernan, two undertakings, both dated 5th December, 2007, from “Messrs. Traynor & Company” (Traynors), Solicitors, with an address in Dundalk, County Louth agreeing to register both properties which were to be given as security to Ulster Bank in the name of Ms. Tiernan and to hold the title deeds of both properties to the order of Ulster Bank. Mr. Duignan averred that, although called upon to do so, Traynors had failed to comply with the terms of the undertakings to Ulster Bank. Mr. Duignan averred that neither of the properties was a family home within the meaning of the Family Home Protection Act 1976 by reference to certificates on the solicitors’ undertakings, copies of which were exhibited, which it was alleged were signed by Ms. Tiernan on 5th December, 2007. The affidavit also exhibited a copy of a letter dated 13th August, 2009 from Ulster Bank to Ms. Tiernan demanding repayment of the amount due on foot of the loan agreement. The correction of the amount claimed as being due in the grounding affidavit was explained on the basis of “one payment of €14,646.62 having been received on 18th August, 2009” after that letter.

Ms. Tiernan’s affidavit of 25th March, 2010

12. In her affidavit sworn on 25th March, 2010 in reply to Mr. Duignan’s affidavit sworn on 28th January, 2010, Ms. Tiernan averred that three of the signatures purporting to be her signatures which appeared on the documents exhibited by Mr. Duignan, that is to say, the loan facility and the two solicitors’ undertakings, were not made by her. However, she did not deny that the signature on the acceptance portion, that is to say the fourth page, of the facility letter was her signature. However, she averred that she had no recollection of seeing the first three pages of the facility letter prior to 28th November, 2007, that is to say, the date on which she signed the acceptance. She then made the following averment, which is crucial to the defence she advances to the claim of Ulster Bank:

“I state and believe that [Ulster Bank] and its agents and in particular the deponent [Mr. Duignan] is fully aware of the identity of the person who negotiated, arranged and obtained the loan subject matter of these proceedings from [Ulster Bank] and that person is my father. [Ulster Bank’s] managers, including the said Mr. Duignan were engaged in a subterfuge to disguise the fact that they were advancing further monies to a person who had already received substantial advances from [Ulster Bank]. At the time of the transactions referred to in the affidavit of the said Mr. Duignan I had only recently qualified as a solicitor and was still in the course of an apprenticeship with a firm of solicitors in Dublin. The idea that [Ulster Bank] would have considered me for a loan of €1,713,774.47 simply flies in the face of common sense.”
13. Ms. Tiernan pointed out in her affidavit that Mr. Duignan in his affidavit had not directly stated by whom the payment of €14,646.62 was made and she continued:
“[Ulster Bank] is well aware that I was not in a position to make any payment of such magnitude. I state and believe that [Ulster Bank] is fully aware of the identity of the person who made such payment. [Ulster Bank] is exploiting the fact that I was prepared to help my father from time to time in his dealings with the Bank. In e-mails and certain documents he requested from me Mr. Duignan maintained the subterfuge that he was dealing with me as a principal contracting party. At all stages he knew that the person with whom he was dealing was my father.”
14. As regards the undertakings given by Traynors to Ulster Bank, Ms. Tiernan averred that she had not authorised any such undertaking, that she had not had and, at the time of swearing the affidavit, did not have any beneficial interest in the properties in question. Finally, she averred that she had a full defence to the proceedings commenced by summary summons and in relation thereto she averred that Ulster Bank –
“. . . well knew that they were contracting with my father and my limited involvement would not have been sufficient to have my part deemed to be that of an agent.”
Although it has to be acknowledged that the rather strangely worded last statement in that quotation appears to be at variance with the position now adopted by Ms. Tiernan, I have come to the conclusion that it should not detract from the position now being adopted by Ms. Tiernan.
Mr. Duignan’s affidavit of 11th May, 2010

15. Ulster Bank’s reply to Ms. Tiernan’s affidavit was in the affidavit sworn by Mr. Duignan on 11th May, 2010. Addressing Ms. Tiernan’s averment that the signatures on a number of documents were not hers, Mr. Duignan averred that, in circumstances where she “negotiated the loan advance” from Ulster Bank and had subsequently entered into extensive correspondence with Ulster Bank in relation to the loan and her business affairs, Ulster Bank was astonished by that “contention now being raised for the first time”. He averred that Ulster Bank did not accept the same. Mr. Duignan expressed further astonishment in relation to the other averments made by Ms. Tiernan, for example, that the identity of the person who negotiated, arranged and obtained the loan was known to him and that he and his colleagues were engaged in subterfuge, suggesting that the averments were a desperate attempt on the part of Ms. Tiernan to avoid her obligations to Ulster Bank. Mr. Duignan then averred:

“I say that there is no substance whatever to the averments made by [Ms. Tiernan] in her affidavit sworn on 27th March, 2010.”
16. Mr. Duignan then went on to make certain averments which may be summarised as follows:
(a) that Ms. Tiernan’s father, Francis Tiernan, was known to Ulster Bank and that he had been advanced loan facilities by Ulster Bank Limited in Northern Ireland but had defaulted and judgment had been entered by Ulster Bank Limited against him on 2nd May, 2007 for the sum of €94,133.65 together with costs;
(b) that a recent article published in the Irish Times, a copy of which was exhibited, related to Mr. Tiernan’s dealings with ACC Bank;

(c) that from Ulster Bank’s point of view, the security to be provided by Ms. Tiernan for the advance to her was “a valuable security relative to the size of the advance and further, that repayment was to be made within a short period from the proceeds of the sale of the . . . licensed premises” at Carlingford; and

(d) that in the period subsequent to the disbursement of the loan to Ms. Tiernan, Ulster Bank had extensive e-mail correspondence with her during all of which it was abundantly clear that she was “dealing with [Ulster Bank] in her own right as borrower and not on behalf of anybody else”, a sample of the correspondence being exhibited.

One of the letters exhibited was a letter to Mr. Duignan signed by Ms. Tiernan, which was headed “Loan for Milestone Bar, Carlingford”, in which Ms. Tiernan confirmed that she authorised Mr. Duignan “to speak openly with my father Frank Tiernan regarding the above matter, as he is speaking with you on my behalf”. While the letter was undated, it would appear that it was sent by facsimile on 8th April, 2009.
17. Mr. Duignan also averred that it was clear from the loan and the security documentation and from the correspondence that Ms. Tiernan was at all times fully cognisant of the issues involved and was the borrower of the advances. However, he did not address her contention that the three signatures on the undertakings were not her signatures. He continued:

“It is notable that the outlandish contention that she was in some way acting as a conduit or agent for her father is proffered for the first time in her Affidavit. Not once in all her dealings with [Ulster Bank] did she make reference to such a scenario. The allegation that I, in concert with a number of my colleagues, was engaged in a subterfuge is a very serious allegation for [Ms. Tiernan] to make, particularly as she is a Solicitor. Such an allegation is particularly outrageous given that [Ms. Tiernan] neither provides nor points to any evidence, documentary or otherwise, to substantiate same.”
18. Another point made by Mr. Duignan in his affidavit was that Traynors, who were described as the “Solicitors representing [Ms. Tiernan] in her dealings with [Ulster Bank]”, at all times headed their correspondence on the basis that Ms. Tiernan was their client and never mentioned the involvement of Frank Tiernan as the loan recipient.
19. The final matter averred to by Mr. Duignan related to a meeting held on 5th May, 2009 in Ulster Bank’s premises in Dundalk, which was attended by Frank Tiernan and by Ms. Tiernan’s then recently appointed solicitor, Danny McNamee, three officials of the Bank including Mr. Duignan and a solicitor representing the Bank. Mr. Duignan averred that at no stage during the meeting was it ever alleged that Ms. Tiernan was not the proper recipient of the advance by Ulster Bank. Mr. Duignan exhibited what he referred to as “a comprehensive note of the discussions which took place” prepared by Paul Cumiskey (Mr. Cumiskey), an official of Ulster Bank.

Ms. Tiernan’s affidavit of 1st July, 2010

20. The final affidavit which was before the High Court and which is before this Court is the affidavit sworn by Ms. Tiernan on 1st July, 2010. In that affidavit Ms. Tiernan reiterated that Ulster Bank and its agents and, in particular, Mr. Duignan, were fully aware that the person “who negotiated, arranged and obtained the loan . . . from [Ulster Bank]” was her father. She averred that she did not at any time negotiate the loan advance from Ulster Bank and that the loan advance was negotiated by her father, Francis Tiernan, with Mr. Cumiskey, representing Ulster Bank. Ms. Tiernan averred that at the time that the arrangement was being negotiated, the officials of the Bank, Mr. Duignan and Mr. Cumiskey, whom she averred had dealings with her father when they worked for ACC Bank, could not have reported to their superiors that they were involved in lending further monies to her father because they were aware of certain matters to which she then averred.
21. The first matter was her father’s indebtedness to ACC Bank which, as has been outlined, had been obliquely referred to in Mr. Duignan’s affidavit sworn on 11th May, 2010 by reference to what was described as “a recent article published in the Irish Times relating to Mr. Tiernan’s dealings with ACC Bank”. Ms. Tiernan commented that Mr. Duignan did not need to rely on press reports to know the extent of her father’s alleged indebtedness to ACC Bank and knew “that the figures involved allegedly exceeded 10 million euro”. The second matter was the judgment obtained by Ulster Bank Limited against Mr. Tiernan which had been averred to by Mr. Duignan.
22. Ms. Tiernan also disputed Mr. Duignan’s reliance on the underlying “valuable security”, pointing out that at the time of the advance she was a trainee solicitor in receipt of income of €23,000 per annum and that, despite the fact that it was a condition precedent of the loan facility that the facility would not be available for drawdown without prior receipt from “client accountant of a net worth statement”, as far as she was aware no such statement was prepared in relation to her “net worth”. She averred that it would have been apparent from any such statement that once the seven month moratorium on repayment had passed, it would have been impossible for her to have serviced the loan.
23. Ms. Tiernan went on to connect the first purpose for the facility as set out in the facility letter (repay Bank of Scotland loan facility of €850,000), to the Milestone Bar at Carlingford and the undated letter which appears to have been sent by facsimile on 8th April, 2009 referred to earlier. She averred that she had helped her father in relation to a company known as Fieldore Limited, a company of which she apparently was a director, which was indebted to Bank of Scotland in relation to that property. She averred that her understanding was that her father had acquired the Milestone Bar through Fieldore Limited as an investment. The main purpose of the loan facility was to clear the indebtedness to Bank of Scotland so that “the said premises would be made available by my father to [Ulster Bank] as security”. Referring to the note of the meeting on 7th May, 2009 exhibited by Mr. Duignan, she averred that –

“. . . [it] shows that when [Ulster Bank] wished to sort out the problems in connection with the purported loan herein it referred to my father who alone had information in relation to dealings with the said ‘Milestone Bar’.”
She also averred that Mr. Duignan pressed her to furnish him with authority to speak to her father, as she did in the undated letter, adding that, with the benefit of hindsight, she saw that the said request “was a ploy to maintain the pretence that I was the borrower in question”.
24. Referring to the meeting of 7th May, 2009, Ms. Tiernan averred that her solicitor, Mr. McNamee, attended the meeting in purely a fact-finding role to ascertain on her behalf any potential liability which might have attached to her in relation to the loan facility. She averred that at a subsequent meeting between herself and Mr. Duignan attended by Mr. McNamee, “the issue of who had signed what documentation was raised”. Further, she averred that she had a clear recollection that at a meeting between herself and Mr. Duignan in March 2009 she had made it clear to Mr. Duignan that the loan was between Ulster Bank and her father and that the responsibility for satisfying any liabilities on the loan fell to her father. Ms. Tiernan, having stated that she realised that she could be criticised for not making it clearer that her father was the borrower from Ulster Bank, averred that she genuinely believed that –

“. . . [Ulster Bank’s] servants or agents knew well that I was merely the nominal borrower and that the monies the subject matter of these proceedings were paid to my father to refinance his dealings with the ‘Milestone Bar’.”
25. Ms. Tiernan also averred that Mr. Joseph Traynor had been her father’s solicitor for many years, but that she had never met or seen him prior to May 2009. She also averred that the officials of Ulster Bank knew, from previous dealings, that he was her father’s solicitor.
26. Her contention that she has “a full defence” to the claim by Ulster Bank was reiterated by Ms. Tiernan at the end of her final affidavit. She averred once again that Ulster Bank well knew that it was contracting with her father and that her involvement was “a pretence” operated by Ulster Bank’s officials and her father’s solicitor to allow her father to borrow monies to finance various dealings in circumstances where, because of her father’s indebtedness to Ulster Bank Limited and other institutions, it would not have been viable to present him as a borrower. She stated positively that she did not receive any of the monies claimed by Ulster Bank. She also averred that her name had not appeared on the title to the properties referred to in the loan facility, which appears to have been true when she swore the final affidavit on 1st July, 2010 but which, as regards the Gallery Quay property, seems to have changed subsequently.
The judgment of the High Court
27. As has been recorded earlier the judgment delivered by the trial judge on 20th January, 2011 was an ex tempore judgment. For present purposes, I propose to advert to the aspects of the judgment to which counsel for Ms. Tiernan drew attention. While the trial judge pointed to the peculiarity that some of the affidavits before him bore the record number of the special summons proceedings, consistent with the approach outlined earlier, counsel for Ms. Tiernan informed this Court that he accepted that the trial judge was not ruling out the affidavit evidence in the special summons proceedings which was before him.

28. Referring to the affidavit evidence of Ms. Tiernan, the trial judge recorded that it was stated that the officers of Ulster Bank operated the loan in a way in which Ms. Tiernan was used “as a conduit for her father, Frank Tiernan”. The trial judge observed that when one examined her affidavit evidence thoroughly, Ms. Tiernan did not deny that she was “a de facto conduit”. Counsel for Ms. Tiernan submitted that “de facto conduit” was not a correct characterisation of Ms. Tiernan’s status.
29. The trial judge pointed out that it was not in controversy that the meeting of 7th May, 2009 took place and that Ms. Tiernan acknowledged that it was attended by her solicitor. He described as a noteworthy feature that Mr. Duignan had exhibited in his affidavit of 11th May, 2010 the letter written by the defendant, which, on the assumption that it was sent by facsimile on 8th April, 2009, he correctly identified as having been written prior to the meeting of 7th May, 2009. While the trial judge noted that Ms. Tiernan criticised Ulster Bank for being selective in exhibiting e-mails, he emphasised that what was not in controversy was that Ms. Tiernan had authorised Ulster Bank to speak to her father and that her father would be speaking with Ulster Bank on her behalf.
30. Counsel for Ms. Tiernan takes issue with what is stated by the trial judge about a number of factual matters: that none of the essential matters were in controversy, save that Ms. Tiernan alleged that Ulster Bank knew that she was a conduit, which was denied by Mr. Duignan on affidavit; that at no stage prior to the filing of her affidavit in the proceedings did she make her case in any substantive way; and the analysis of what is described as “the uncontradicted minute” of the meeting of 7th May, 2009. The position of counsel for Ms. Tiernan is that those matters are in controversy, giving as an example that Ms. Tiernan’s evidence is that she made the case she has now made on affidavit at least twice before the affidavit in question was sworn. As regards what happened at the meeting on 7th May, 2009, counsel for Ms. Tiernan submitted that the trial judge had embarked on a credibility analysis. In particular, he referred to the statement by the trial judge that it was repeatedly stated in the memorandum “that the loan was to [Ms.] Tiernan”. That was Ulster Bank’s version, it was submitted, and the note prepared by Mr. Cumiskey was Ulster Bank’s memorandum.
31. The trial judge stated that it could not be said with any degree of credibility that Ms. Tiernan could say that she did not receive the money and he outlined his reasons for that conclusion. Counsel for Ms. Tiernan disputed a number of those reasons. Consistent with what he had submitted earlier, counsel stated that it was not very late in the day that any third party involvement was raised by Ms. Tiernan, pointing to the two occasions on which she had raised the point before she swore the first affidavit. He disputed that statements made by Ms. Tiernan’s solicitor at the meeting of 7th May, 2009 could “bind her to the agreement”. The trial judge’s last reason was in the following terms:

“Critically in this dispute, it is not denied that [Ms. Tiernan] received the money whether as a conduit or on her own behalf.”
Counsel for Ms. Tiernan re-emphasised that Ms. Tiernan has explicitly denied that she received the money and he submitted that this is critical to the issue this Court has to decide.
32. Counsel for Ms. Tiernan also commented on the fact that there was no reference in the judgment to the allegation of forgery made by Ms. Tiernan, although it had been made clear in Mr. Duignan’s affidavit of 11th May, 2010 that Ulster Bank was putting everything in issue.
Legal principles invoked on behalf of Ms. Tiernan in relation to the defence of the substantive action and the respondent’s response
33. The position adopted by counsel for Ms. Tiernan was that the evidence which is before this Court shows that she was not a conduit for her father, as characterised by the trial judge, but she was an agent for a disclosed principal, namely, her father, who negotiated the loan and was advanced the money by Ulster Bank. Counsel referred this Court to the commentary in Bowstead & Reynolds on Agency, 20th Ed., (London, 2014) and, in particular the following passage at para. 9 – 001:

“In the absence of other indications, when an agent makes a contract, purporting to act solely on behalf of a disclosed principal, whether identified or unidentified, he is not liable to the third party on it. Nor can he sue the third party on it.”
It was submitted that Ms. Tiernan will have a complete defence to the claim of Ulster Bank if what she contends is borne out on the facts at the hearing, if the matter goes to plenary hearing. Counsel submitted that, having regard to the state of the evidence before the High Court, the High Court should have ordered that the matter go to full trial.
34. Counsel for the respondent submitted that the hearing before this Court was the first occasion on which the concept of agency had been raised. In response counsel for Ms. Tiernan referred the Court to the first ground in the original notice of appeal in which it was asserted that the High Court erred in law and in fact –

“in holding that [Ms. Tiernan’s] admission that she was a nominal borrower and acted as a mere conduit for the loan amounts made her liable for the debt even though she was agent for a disclosed principal.”
I should make it clear that my understanding of the position of the parties is that, if this Court on this appeal allows the matter to go to plenary hearing, in the absence of consent between the parties, or an order allowing the filing of an amended notice of appeal, the action will proceed on the basis of the original notice of appeal, not the proposed amended notice of appeal.
35. Counsel for the respondent disputed that Ms. Tiernan could, on the evidence before this Court, seek to defend on the basis that she had the status of an agent. He emphasised that counsel for Ms. Tiernan had not pointed to any authority to the effect that, where a person signs a facility letter accepting its terms, he or she may not be liable to repay the debt. The position of the respondent was that only the signature of the borrower named on a loan agreement, or in this case on the acceptance of the terms of the facility letter, determines who is liable to pay the lender back and the lender can only pursue that person. It was also emphasised that Ms. Tiernan did not aver that she entered into the contract on behalf of her father; rather she averred that she entered into the contract instead of her father. It was submitted that Ms. Tiernan had a clear understanding that her father was not creditworthy and entered into the loan agreement instead of him. Even if Ulster Bank declined to lend to Ms. Tiernan’s father, but instead agreed to lend to her, that was alternative borrowing. It was not an agency situation.
Legal principles applicable to a contested application for summary judgment
36. As is pointed out in Delany and McGrath Civil Procedure in the Superior Courts 3rd Ed., (Dublin, 2012) (at para. 26 – 44), the test for deciding whether liberty to enter judgment or leave to defend should be granted are essentially the same because if judgment is not granted upon the motion, leave to defend is impliedly given to the defendant. The authors then outline a number of authorities decided over the last twenty years in which the test was considered including, what they describe as a “clear and helpful synthesis of the principles to be applied” as provided by McKechnie J. in the Harrisrange Limited v. Duncan [2003] 4 IR 1. One of the principles set out by McKechnie J. is that leave to defend should be granted unless it is very clear that there is no defence.

37. More recently, the test was analysed in judgment delivered in this Court in Irish Bank of Resolution Corporation (in Special Liquidation) v. McCaughey [2014] 1 IR 749 (the IBRC case). In a judgment delivered by Clarke J., with which the other judges concurred, it was stated as follows (at para. 19 et seq.):

“The underlying test is as set out in the judgment of Hardiman J., speaking for this Court, in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607. As Hardiman J. pointed out, at p.623:-

‘… the fundamental question to be posed on an application such as this remains: is it ‘very clear’ that the Defendant has no case?; Is there either no issue to be tried or only issues which are simple and easily determined?; Do the Defendant’s affidavits fail to disclose even an arguable defence?’

[20] It is also important, as Finlay Geoghegan J. pointed out in Bank of Ireland v. Walsh [2009] IEHC 220 (Unreported, High Court, Finlay Geoghegan J., 8th May, 2009), to keep clearly in mind that the use of the term ‘credible’ in relation to a defence has, for the reasons also addressed by Hardiman J. in Aer Rianta v. Ryanair [2001] 4 IR 607, a very narrow meaning. The issues of credibility, which had formed the basis of a conclusion that a defendant had not put forward an arguable defence, in cases such as National Westminster Bank v. Daniel [1993] 1W.L.R. 1453, Banque de Paris v. de Naray [1984] 1 Lloyds Rep. 21 and First National Commercial Bank v. Anglin [1996] 1 IR 75, arose, as Hardiman J. put it, ‘rather starkly’. In National Westminster Bank v. Daniel, the defence affidavits were mutually contradictory. In Bancque de Paris v. de Naray, there was clear evidence, not challenged, from a private detective, which flatly contradicted the plaintiff’s case. In First National Commercial Bank plc v. Anglin, the chronology asserted was entirely inconsistent with commercial documentation which was not, in itself, disputed.
[21] Denham J., speaking for this Court in Danske Bank a/s (t/a National Irish Bank) v. Durkan New Homes [2010] IESC 22 (Unreported, Supreme Court, 22nd April, 2010), also approved a passage from a judgment which I delivered in the High Court in McGrath v. O’Driscoll [2007] I.L.R.M. 203, where, at p. 210, I said the following:-

‘So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.’

Hardiman J. had expressed a similar view in his judgment in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607, in the passage already cited, where he made reference to issues which were simple and easily determined.
[22] It is important, therefore, to reemphasise what is meant by the credibility of a defence. A defence is not incredible simply because the judge is not inclined to believe the defendant. It must, as Hardiman J. pointed out in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607, be clear that the defendant has no defence. If issues of law or construction are put forward as providing an arguable defence, then the Court can assess those issues to determine whether the propositions advanced are stateable as a matter of law and that it is arguable that, if determined in favour of the defendant, they would provide for a defence. In that context, and subject to the inherent limitations on the summary judgment jurisdiction identified in McGrath v. O’Driscoll [2006] IEHC 195, [2007] 1 ILRM 203, the court may come to a final resolution of such issues. That the Court is not obliged to resolve such issues is also clear from Danske Bank a/s (t/a National Irish Bank v. Durkan New Homes [2010] IESC 22, (Unreported, Supreme Court, 22nd April, 2010).

[23] Insofar as facts are put forward, then, subject to a very narrow limitation, the court will be required, for the purposes of the summary judgment application, to accept that facts of which the defendant gives evidence, or facts in respect of which the defendant puts forward a credible basis for believing that evidence may be forthcoming, are as the defendant asserts them to be. The sort of factual assertions, which may not provide an arguable defence, are facts which amount to a mere assertion unsupported either by evidence or by any realistic suggestion that evidence might be available, or, facts which are in themselves contradictory and inconsistent with uncontested documentation or other similar circumstances such as those analysed by Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607. It needs to be emphasised again that it is no function of the Court on a summary judgment motion to form any general view as to the credibility of the evidence put forward by the defendant.”

The foregoing principles, insofar as they are relevant, will now be applied to determine whether the summary judgment in favour of Ulster Bank against Ms. Tiernan should be allowed to stand.
Application of legal principles
38. At the heart of the contest between the respondent, as successor of Ulster Bank, which contends that it is very clear that Ms. Tiernan has no defence to its claim in the summary proceedings, on the one hand, and Ms. Tiernan, whose case is that she has demonstrated that she has a defence, on the other hand, is the factual and legal dispute which has emerged from the affidavits filed in support of and in response to the motion for summary judgment as to the status in which Ms. Tiernan accepted the terms of the facility letter. The crucial question is whether her acceptance was as agent for her father as a disclosed principal, as she contends, or as principal borrower, as the respondent contends. Looking at the factual component of that dispute by reference to the approach suggested by Clarke J. in para. 23 of the reported judgment in the IBRC case, I am satisfied that Ms. Tiernan has demonstrated in her two affidavits filed in response to Ulster Bank’s claim that the factual matrix within which the transaction entered into by her with Ulster Bank took place may support the defence she puts forward, namely, that she entered into the transaction as an agent for a disclosed principal. In particular, I am satisfied that, notwithstanding the existence, and the terms, of the acceptance portion of the facility letter as executed by Ms. Tiernan, Ms. Tiernan has given evidence on affidavit from which it can be deduced that there is a credible basis for concluding that she may be able to defend the claim of the respondent, as successor of Ulster Bank, on the basis she asserts, namely, that she entered into the transaction as an agent for a disclosed principal.

39. Having regard to the evidence before the Court, it is reasonable to predict that, if the claim of the respondent, as successor of Ulster Bank, and the defence which Ms. Tiernan wishes to advance goes to plenary hearing, the core issue to be determined, namely, whether Ms. Tiernan entered into the transaction with Ulster Bank to its knowledge as an agent, not as a principal, as she contends and thus avoids liability to the respondent, as successor of Ulster Bank, for the monies advanced on foot of the facility letter, will be a mixed question of law and fact and will probably involve construction of one or more documents. It is also reasonable to predict, against the background of the complexity of the underlying transaction in the overall context of the dealings of Ulster Bank with Ms. Tiernan and her father, as discernible not only in Ms. Tiernan’s affidavits but also in Mr.Duignan’s affidavits, that the resolution of that core issue will be anything but straightforward. What can be said definitively is that, assuming that to be the core issue, this Court is not required to consider its resolution.
40. Having regard to the evidence before this Court as outlined earlier, this is not a case in which one can conclude that it is “very clear” that Ms. Tiernan has no defence to the claim of the respondent, as successor of Ulster Bank. That being the case, Ms. Tiernan must be afforded an opportunity to defend the claim. The evidence put before the Court by Ms. Tiernan, in my view, points to there being a real risk of an injustice being done to her if she is not afforded the opportunity to defend the claim.
    Order
    41. Accordingly I propose that the order of the High Court made on 20th January, 2011 giving summary judgment to Ulster Bank against Ms. Tiernan be discharged and that the matter be remitted to the High Court to go to plenary hearing.

 

 

AIB v McNamara

[2016] IEHC 160

JUDGMENT of Mr Justice Max Barrett delivered on 5thApril, 2016.
Part 1

Overview
1. AIB has lost Mr McNamara’s title documents, and Mr McNamara is considerably aggrieved. Mr McNamara has defaulted on his AIB loan, and AIB wants to recover the monies now owed. AIB has come to court by way of summary proceedings. Mr McNamara maintains that the matters arising are more appropriately dealt with at full plenary hearing.

Part 2

A Brief Chronology of Events
A. The Debt Outstanding.

2. By loan agreement made in writing on or about 24th August, 2009, AIB agreed to lend Mr McNamara close on €116,000. This was repayable over 13 months by quarterly repayments of €1,185.64, commencing on 30th September, 2009, with a final repayment of just over €112,000 due on 30th September, 2010. Just over €111,000 was advanced to Mr McNamara under the loan agreement on 31st August, 2009 at an APR of 5.22%. Thereafter, Mr McNamara defaulted on the loan. By notice of 6th January, 2015, AIB terminated the loan facility and demanded repayment of all amounts owing there under. At the present time, the amount owing is just in excess of €113,000 for which summary judgment is now sought.
3. AIB Loses the Title Deeds.
4. By way of security, Mr McNamara was to provide a charge over certain lands in County Clare. As part of his doing so, Mr McNamara had his solicitor provide certain Registry of Deeds documents and land registry certificates to AIB. In what was not a shining moment for AIB, it has since lost all of these title documents. Eventually, and not until a suitably assertive letter issued from Mr McNamara’s solicitor, AIB admitted that it had lost the documentation – though (perhaps a point for all solicitors to note) no admission was forthcoming until that solicitor, clearly a prudent gentleman, was able to produce the An Post certificate for the registered parcel by which he sent the title documents in question to AIB.

Part 3

The Law as Regards Recovering Debt by Summary Proceedings
4. Mr McNamara contends that in all the circumstances arising, adjudication on his debt ought to go to plenary hearing. The hurdle that he must cross to succeed in having matters sent to plenary hearing is low. As Hardiman J. stated in the Supreme Court in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, 623:

“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
5. In Harrisrange Ltd. v. Duncan [2003] 4 IR 1, 7, McKechnie J. summarised the relevant principles when a court approaches the issue of whether to grant summary judgment or leave to defend:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…

(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…

(viii) this test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment is the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”

6. It does not appear that there is any disagreement between the parties as to the above-stated law. Where they do disagree is that, by virtue of AIB’s having lost the title documents, Mr McNamara claims that he has a cross-claim that gives rise to a defence in equity in these proceedings. AIB disputes this.
   Part 4

Set-Off in Equity.
7. The best recent statement of applicable principle as regards the issue of set-off in equity is that of Clarke J. in Moohan & Anor v. S & R Motors (Donegal) Ltd [2007] IEHC 435, his judgment in this regard being grounded in part on the seminal decision of Kingsmill Moore J., almost sixty years ago, in Prendergast v. Biddle (Unreported, Supreme Court, 21st July, 1957). Having considered matters at some length, Clarke J. summarises the applicable approach as follows, at para.4.6 of his judgment:

“[1]…It is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross claim to amount to a defence as such, it must arguably give rise to a set off in equity, and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set off…
[2] If, and to the extent that, a prima facie case for such a set off arises the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim…

[3] If the cross claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast…”.

Court Note:
[4] The principles referred to in [3], might be summarised as follows. A judge in exercising her or his discretion may take into account, inter alia, (i) the apparent length of the counter claim, (ii) the answer suggested to it, (iii) the conduct of the parties, (iv) the promptitude which they have asserted their claims, (v) the nature of their claims, and (vi) the financial position of the parties.
[5] To all of the foregoing might be added, and some reference is made to this by Clarke J., at para.4.5 of his judgment in Moohan, that the right of set-off is equitable in nature and thus the maxims and rules of equity come in play as regards determining the availability of this equitable relief, like any other.

Part 5
Application of Principle
8. As the court understands Mr McNamara’s case concerning the lost property documents, it is as follows. In the event that someone should offer to buy Mr McNamara’s property, perhaps for an amount in excess of that owed to AIB, his property has been rendered largely unsaleable or would likely need to be sold at a reduced price given the title concerns now presenting. AIB has commenced setting about ‘reconstructing’ the title and this may prove a straightforward matter, but it is not unknown for problems to present when it is sought to effect such a ‘reconstruction’.

9. Turning then to the tests as identified above:

– as to [1], it seems that the court can view matters in one of two ways. It can view (a) the loan and security arrangement as a single set of circumstances, or (b) the debt, and it is solely the debt that is being sued upon at this time, as separate from the security arrangement (and thus issues arising in connection with the security documentation as arising from a related but different arrangement). It seems to the court, however, that it would be artificial and inequitable to follow the line of logic suggested by (b). The provision of the loan was conditional on the provision of the security and thus the loan and the security are inexorably linked. Pursuant to a condition of the loan agreement, the security documentation went to AIB, and was lost by AIB. It would not therefore be inequitable to allow the asserted set-off. It is not clear to the court that, at least to this time, there will be much by way of set-off but that seems more a matter for the court at plenary hearing, than for the court deciding whether the matter should go to plenary hearing.
– as to [2], there is no dispute between the parties that AIB has lost the title documents and, in consequence, a prima facie basis on which to ground a claim of the type identified by Mr McNamara appears to present. Coupled with the court’s conclusions re. [1], Mr McNamara falls to be treated as having established a defence and hence liberty should be given to him to defend the claim.

– as to [3] and [4], given the court’s conclusion re.[1], these does not apply.

– as to [5], it does not appear to the court that Mr McNamara has offended against the principles of equity in any way that would justify the court in refusing to send this matter to plenary hearing.

Part 6

Conclusion
10. For the reasons stated above, it appears to the court, by reference to Moohan, that Mr McNamara has asserted a form of cross-claim that arguably gives rise to a set-off in equity, and hence established an arguable defence to these summary proceedings. Consequently, by reference to Aer Rianta, AIB’s application for summary judgment in the within proceedings must be declined. In this regard the court is mindful, inter alia, of McKechnie J.’s observation in Harrisrange that the power to grant summary judgment should be exercised with discernible caution. The court will therefore remit this matter to plenary hearing.

11. Notwithstanding that the court considers itself to be coerced by law to refer these proceedings to plenary hearing, it would respectfully encourage each of AIB and Mr McNamara to consider, even now, whether some compromise cannot be arrived at between them. It really does not seem in anybody’s interest that a debt of €113,000 – which, though very large, is not the largest of debts – should be the subject of costly High Court proceedings when, for example, a consent to judgment, conditional upon and with due allowance for resolution of the issue presenting as regards the title documentation, might better serve all. However, it is, of course, entirely a matter for the parties as to how they now proceed.

ACCLM v Sheehan

[2016] IECA 343

JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 21ST DAY OF NOVEMBER 2016
1. In these proceedings the appellant bank seeks judgment against the defendant in the sum of €166,746 and interest on foot of his personal guarantee and indemnity which he executed on the 12th March 2008. This guarantee was one of a number of conditions of a loan sanctioned by the bank to Newmarket Foods Limited (“the company”) by a facility letter dated 5th March 2008. The loan was for a term of ten years and was repayable on demand, and until any such demand was made it was repayable by monthly instalments.

2. In due course the company defaulted on its loan repayments, and on the 19th June 2013 the bank sent a letter of demand to the defendant calling upon him to discharge the amount owing by the company on foot of his guarantee. He failed to do so, and on the 7th October 2013 the bank issued these proceedings by way of summary summons.
3. Following the entry of appearance by solicitors acting for the defendant, the bank issued a motion seeking liberty to enter final judgment for the amount claimed to be due by the defendant on foot of his guarantee and indemnity. That motion came before the Master of the High Court in the normal way pursuant to the procedure provided for in Ord. 37, r.1 of the Rules of the Superior Courts. The defendant filed a replying affidavit to this motion in which he raised a number of issues by way of defence to the bank’s claim, and sought to have the proceedings adjourned for full plenary hearing so that those issues could be determined.
4. The Master of the High Court transferred the motion to the court list in view of the contested issues disclosed on the affidavits, as he is required to do under Ord. 37, r.6 RSC, and that is how the bank’s motion came to be determined by Ms. Justice Murphy who gave her judgment on the 17th December 2015 in which she concluded that an arguable defence was raised by the defendant which required to be determined by way of plenary hearing. Having then adjourned the matter for mention to the 9th February 2016, she made an order of that date directing a plenary hearing, and also gave the usual directions as to further pleadings to be delivered. It is against that order that the bank now appeals.
5. The company to which the loan was made was principally owned and operated by the defendant’s brother, Vincent Sheehan. It manufactured and distributed sauces throughout Ireland. In fact the defendant owned a 5% shareholding in the company, but was unaware of that fact until it was revealed during the course of these proceedings in an affidavit filed on behalf of the bank. He was also a director of the company though in his first replying affidavit he stated that he did not become aware of that fact either, until his solicitor made a search in that regard. According to his replying affidavit he never participated in the affairs of the company qua director, and that his brother never consulted him in relation to the running of the company.
6. In his first affidavit at para. 6 he gives some detail of how he first became involved in the business and the nature of that involvement. He states the following:-

“ … My dealings with the company arose when my brother Vincent Sheehan approached me in 2008 and indicated that he was in financial difficulty and was anxious to save his business. At that time my brother Vincent had a manufacturing facility in Northern Ireland. He then obtained the old Castlemahon Chicken Factory in Castlemahon, County Limerick. I believe that Vincent may have leased this property. He then borrowed money from ACC Bank and needed it to develop the plant further by way of upgrading its fabric and buying appropriate machinery and the payment of wages/working capital.[Vincent], prior to this, when he was manufacturing the sauces in Northern Ireland, with my permission, built a shed/warehouse on my property at Gorteen, Dromcollogher, County Limerick. I recall that I was paid €500.00 per week by way of rent for the premises and for my dealing with [deliveries] from the manufacturing plant. I would unload the [deliveries] into the warehouse. I would then receive orders and I would make up the orders and Vincent would arrange for couriers to call to me to deliver the various orders to various people. That was the full extent of my dealings with Newmarket Foods Limited. I say that I ceased receiving the said payments of €500.00 a week from Newmarket Foods Ltd on 31st July 2014”.
7. In his second affidavit he made a clarification to what he had stated in this regard by stating at para. 4 thereof:-
“I say that there is a slight error in my earlier affidavit when I averred that I received payments of €500 per week by way of rent the premises at Gurteen, Dromcollogher in the County of Limerick up to the 31st July 2014. For the purpose of clarifying the position, I did receive payments of €500 per week from Newmarket Foods Ltd up until the date that the company went into liquidation which occurred on or about 6 July 2010”.
8. In addition to requiring a personal guarantee and indemnity from the defendant, the bank’s facility letter specified another security condition, namely “a first legal mortgage and charge over the 1625 sq. ft warehouse and 2 acres at Gorteen, Dromcollogher, Co. Limerick”. This warehouse and two acres of land were part of lands owned by the defendant which were comprised in Folio 3690F Co. Limerick. To facilitate the creation of a mortgage and charge over the warehouse and 2 acres, that part of the defendant’s lands were transferred out of that folio and into a new folio comprising only those lands, namely Folio 61958F, Co. Limerick.
9. The defendant says that he was informed by his brother that the extent of his personal liability under the guarantee and indemnity that he being asked to sign was the warehouse and 2 acres which were the subject of the mortgage and charge. He says that if he had known that by providing this guarantee he was putting his entire farm at risk he would not have agreed to provide the guarantee. He says that while David O’Connor, solicitor, advised him about providing a charge over the warehouse and 2 acres of land, he was never advised by him, nor informed by his brother, that he was putting his entire farm at risk. Mr. O’Connor was the solicitor who was acting for the defendant’s brother and the company in relation to the provision of security for the loan.

10. Shortly after the issue of the facility letter to the company, the bank wrote to David O’Connor, solicitor on the 7th March 2008. This letter stated that the bank understood that Mr. O’Connor was acting for the company in relation to a commercial loan to the company and gives some details of that loan. It then states that the bank’s security will comprise a guarantee and indemnity from Vincent Sheehan to be supported by the assignment of a life policy in his name, and a guarantee from the defendant which was to be supported firstly by a first legal mortgage and charge over the warehouse and 2 acres of land, and secondly by an assignment of a life policy in his name.
11. The letter went on to state that the Bank was prepared to release the loan funds to Mr. O’Connor upon receipt of 16 specified items, one being:-

“13. Letter from Guarantor Solicitor confirming Guarantor received independent legal advice prior to execution of Guarantee & Indemnity document”.
12. By letter dated 8th March 2008 to the bank David O’Connor, solicitor stated:-
“We are acting [for the] Guarantors for Newmarket Foods Limited. We confirm that Vincent Sheehan and Gerard Sheehan were offered independent legal advise [sic] and they waived same. We confirm that the Guarantee and Indemnity was explained to them in full and they understand the nature and effect of same but nevertheless they decided to waive their right to independent legal advise [sic].”
13. The defendant has stated on affidavit that nobody from the bank ever met him or ascertained his status vis-à-vis the company, or advised him that independent legal advice would be appropriate. He says that he knew that his brother was in some financial difficulty, and that he felt pressurised into providing the guarantee but that he was assured by his brother that the extent of his liability under the guarantee was the value of the warehouse and the 2 acres of land over which the charge was being created.
14. While those averments were made in the context of a plea that he executed the guarantee under the undue influence of his brother, that particular defence was rejected by the trial judge. It is implicit in her judgment that she considered that it did not meet the threshold for plenary hearing. Nevertheless the averments are relevant also as background facts to his defence that the bank failed to comply with its own condition for the drawdown of the loan of letter confirming independent legal advice to Guarantors by simply accepting at face value the statement by the company’s solicitor that the defendant had waived his entitlement to independent legal advice, and that accordingly the guarantee is unenforceable against him. He claims that there was an onus on the bank to seek a confirmation of waiver directly from the defendant before permitting a drawdown of the loan, and that it was not appropriate to simply accept at face value a letter in that regard from the company’s solicitor. He states that if it had been explained to him that by executing the guarantee he was putting not only the warehouse and two acres at risk but also his entire farm of land, he would never have agreed to same. He says also that he was unaware that Mr. O’Connor had written his letter dated 8th March 2008 to the bank, and denies that the contents of that letter reflect the nature of the advice given to him by Mr. O’Connor. In any event he makes the point that as Mr. O’Connor was acting for the borrower company, any advices which he gave to the defendant cannot be considered to be independent legal advice. I should add that Mr. O’Connor witnessed the execution of the guarantee by the defendant.

15. The bank on the other hand submits that it was entitled to rely upon Mr. O’Connor’s confirmation that the defendant had waived his entitlement to get independent legal advice, and to allow drawdown. It is noteworthy that in an affidavit sworn on the bank’s behalf by David Phillips on the 13th January 2015 he states the following in relation to the contents of Mr. O’Connor’s letter dated 8th March 2008:-

“9. I say and believe that there was clearly some discussion between the defendant and his solicitor, Mr David O’Connor, with respect to limiting the charge to the warehouse and 2 acres of lands rather than providing a charge over his entire lands. This is evident from Mr. O’Connor’s letter to the defendant dated 11th of March 2008.
10. However I say and believe that it is clear that there was no discussion in terms of limiting his guarantee to provide that it was only enforceable against the secured property.”

16. It would appear therefore that the bank accepts that the defendant did not receive advice in relation to the contents of the guarantee and indemnity document prior to signing it.
    17. As I have indicated, and as noted by the trial judge, the replying affidavits filed by the defendant on the motion for judgment sought to raise two matters by way of defence to the bank’s claim, namely undue influence by his brother, and secondly, the legal advice provided to him by Mr. O’Connor was not independent legal advice, and was in any event wholly deficient in that he was never advised that his entire farm and livelihood was potentially being put at risk under the guarantee. On this appeal we are concerned with only the second proposed defence. It seems clear from the judgment of the trial judge that she did not consider that the first ground was sufficiently arguable to be permitted a plenary hearing, and there is no cross-appeal by the defendant against that conclusion.
17. Having concluded that there was no evidence to support an arguable defence on the basis of undue influence, the trial judge moved on to address the second proposed defence. At paras. 36 – 37 she expressed her conclusion as follows:-

“36. It is in the interests of those who seek to rely on [contract of guarantee] to ensure that all formalities have been properly complied with. In this case, the plaintiff wrote to the borrower’s solicitor on 7th March 2008, indicating that as a requirement of drawing down the funds the Bank wished to be provided with a ‘letter from Guarantor Solicitor confirming Guarantor received independent legal advice prior to execution of Guarantee & Indemnity document’. This is an eminently sensible approach. After all, the sureties are exposing themselves to liability for the borrower’s debts and it is in the bank’s interests to ensure that the sureties are fully aware of the consequences of executing the guarantee so that in the event that it is necessary to call in the guarantee there can be no dispute as to the sureties’ liability thereunder.
37. In this case, having stipulated that, as a condition of releasing the funds, the plaintiff required confirmation that the sureties had received independent legal advice, the plaintiff altered its position and decided to accept the borrower’s solicitors’ word that the sureties had waived their entitlement to independent legal advice. One might have expected that, as a minimum, they would have required signed waivers from the proposed sureties, but they did not do so. They chose to rely on an assurance from the borrower’s solicitor that such an entitlement had in fact been waived. It seems irrelevant to the Court that the sureties were, in fact, unaware of the Bank’s stipulation to the borrower’s solicitor until after the letter of demand on foot of the guarantee. The fact remains that the Bank waived its own requirement without notice to the sureties. Now, as they seek summary judgement on foot of the guarantee, that which they sought to avoid by insisting on independent legal advice, has come to pass. The defendant guarantor maintains that the advice given to him by the borrower’s solicitor was deficient and that had he realised the scope of the guarantee, which he was required to execute, he would never have signed the guarantee. The Court notes that no evidence, one way or the other, has been adduced from the borrower’s solicitor, as to the nature or extent of the advice given by him to the defendant. It may transpire, on a full hearing, that the advice was perfectly adequate. However, as matters stand, it seems to the Court that the defendant has an arguable defence that he should not be bound by the terms of the guarantee entered into by him on 12th March, 2008. On that basis, the Court refuses the plaintiff’s motion for liberty to enter final judgment against the defendant.”

19. The Court’s order adjourning the case to plenary hearing, as drawn, and giving directions as to the delivery of the statement of claim by the plaintiff and a defence by the defendant, does not specify that the defence to be delivered must be confined to the issue of independent legal advice and/or its adequacy.
    20. The bank’s notice of appeal points to a number of grounds upon which it contends that the trial judge fell into error. They can be summarised as follows:-

(a) That she erred in her conclusion that the defendant required legal advice or independent legal advice if the guarantee is to be valid and enforceable, given that he was a director and shareholder of the borrower company, and had a commercial arrangement with the company.
(b) It was perfectly satisfactory for the bank to the borrower company and the defendant to be represented and advised by the same solicitor where the defendant was a director and shareholder of the company.

(c) The trial judge was incorrect to conclude that the bank was on notice of the deficiencies in the legal advice given to the defendant given the contents of Mr. O’Connor’s letter to the bank dated 8th March 2008.

(d) That the adequacy of any legal advice given to the defendant was a matter between the defendant and Mr. O’Connor, and not a matter for the plaintiff.

(e) The conclusion of the trial judge that the letter from the bank to Mr. O’Connor dated 7th March 2008 was part of the agreement between the bank and the defendant, in circumstances where the condition regarding confirmation that the defendant received independent legal advice prior to drawdown by the company was not part of the loan agreement, and where in fact the defendant was unaware of the letter dated 7th March 2008 until 2014.

(f) The bank did not in fact breach the condition referred to as to independent legal advice, and was entitled to rely upon the letter dated 8th March 2008 which it received from the defendant’s solicitor which informed it that such advise had been waived by the defendant. It is submitted that this was an acceptable means of complying with the condition.

(g) Where the trial judge rejected the proposed defence of undue influence because there was no evidence to support it being an arguable ground, the presence or absence of independent legal advice and the adequacy of any advice received by the defendant from Mr. O’Connor was irrelevant to the bank’s claim for judgment under the guarantee.

(h) The trial judge failed to apply, or have regard to, the correct test when adjourning the case to a plenary hearing, without limiting the trial to the sole ground of defence which she considered to be arguable.

21. The defendant’s notice pleads that the trial judge was correct in the conclusions she reached. He submits that the guarantee is void. He points to the fact that the bank itself knew that the defendant was not in receipt of independent legal advice and that he ought to receive such before entering into this guarantee. He submits that in circumstances where it had identified that the defendant was someone who needed to be independently advised it was obliged to ensure that this happened, and it therefore included it as a requirement before drawdown could take place. It is submitted that where the bank did not comply with its own requirement it would be unconscionable for the bank to succeed in obtaining judgment on foot of the guarantee.
    22. He submits that the condition as to legal advice was one that was for the benefit of both parties and not just for the bank so as to ensure that the defendant would not be able to raise this sort of defence in the event that proceedings had to be brought against him if the company defaulted on its loan. He reiterates that it was for his benefit too, and that the bank realised that this was the case, and hence included the condition because it knew that the loan was solely for the benefit of the company, and that the defendant had little or no direct involvement in the company. He submits that the importance of the requirement that he receive independent legal advice is clear from the events that unfolded where, contrary to what he had understood to be the extent of his exposure under the guarantee as informed by his brother, and where no information or advice was given by Mr. O’Connor, at least according to the plaintiff, his entire farm was placed at risk in the event of default by the company.
22. In its oral submissions to this Court the bank has submitted that in so far as the defendant makes a complaint that his solicitor failed to advise him as to the extent of the guarantee, contrary to what is stated in the letter dated 8th March 2008, it is a matter between the defendant and that solicitor, and does not affect the enforceability of the guarantee. It submits that even having specified the condition as to independent legal advice, it was entitled to rely upon Mr. O’Connor’s letter in reply stating that the defendant had waived his entitlement to same, and to permit the loan to be drawn down by the company. It also submits that Mr. O’Connor should be considered to be independent in the sense that he was not acting for the bank, and even though he was acting for the company, the defendant and his brother were directors and shareholders of the company.
23. The bank has asserted its disbelief that the defendant did not understand the nature and scope of the guarantee he gave, and that in any event the guarantee itself which the defendant freely signed without undue influence contains no limitation as to its scope, and the defendant must be taken to have understood the document that he signed. In the bank’s submission, the guarantee makes it clear that the defendant’s liability extends to all the liabilities of the company and is not limited in any way, and in particular, to the assets over which the defendant was agreeable to have a charge registered, i.e. the warehouse and two acres of land.
24. The bank also notes that the defendant did not seek to defend the proceedings on the basis of a unilateral mistake. It submits that this is unsurprising since it has not been alleged that the bank represented to the defendant that the guarantee was in any way limited as to recourse.
25. The bank submits that there is no general requirement that before a guarantee is enforceable the bank must have satisfied itself that the guarantor has received legal advice, be it independent advice or otherwise, and that if a proposed guarantor is uncertain as to what he/she is undertaking by executing a guarantee, it is a matter for that person to seek advice. If that advice turns out to have been deficient in any way, that, it is submitted, is an issue between them and the legal adviser, but does not affect the validity and enforceability of the guarantee. In this regard the bank has referred to what is stated by Birmingham J. in Allied Irish Banks plc v. McKenna [2014] IEHC 122 as follows:-

“So far as independent legal advice or more specifically the alleged lack of it is concerned, there is no requirement in law that an adult entering into a guarantee on behalf of the company of which he is a director and shareholder should have independent legal advice”.
I would just note in passing that it does not appear from the judgment of Birmingham J. that the bank had itself made it a condition for drawdown that it must receive a confirmation that such advice had been provided to the guarantor.
27. In so far as the bank’s letter to Mr. O’Connor dated 7th March 2007 contained a condition for drawdown that the bank would receive confirmation that the defendant had received independent legal advice, the bank points also to the fact that the guarantee document itself expressly warns the proposed guarantor in the following terms: “Before you sign this guarantee and indemnity, you should obtain independent legal advice”. It also submits that the defendant does not seem to have been aware of the letter from the Bank to the solicitor prior to executing the guarantee.

28. The bank has also sought to rely upon what is stated by Laffoy J. in ICC Bank v. Gorman [1997] IEHC 47 where on very different facts, Laffoy J. stated:-

“The requirement that [the borrower’s wife] should state that she obtained independent legal advice, in my view, merely evidences an abundance of caution, not an infirmity in the mortgage”.
29. Again, I would just note the different context in which that was stated. In ICC Bank v. Gorman the bank had sought possession of a family home on foot of a mortgage executed in favour of the bank by the husband. The husband sought to resist a possession order on the basis of certain alleged deficiencies, one of which was that his non-owning wife had not signed her consent to the mortgage prior to the execution of same by him as required by s. 3 of the Family Home Protection Act, 1976. What was stated by Laffoy J. above was stated in the context of a submission that there was no evidence that the wife had consented prior to the execution of the mortgage by the husband, and secondly that there was no evidence that prior to signing her consent she had received independent legal advice. By the time the case was heard the wife had left this country to reside in England. Laffoy J. found that the consent signed by the wife stated in its own terms that it was a prior consent, and also noted that her signature had been witnessed by a solicitor. She stated that there was no requirement under s. 3 of the Act of 1976 that the wife must have received independent legal advice before giving her consent, and that what was required was a fully informed consent, and that having regard to the fact that her signature was witnessed by a solicitor and “.in the absence of evidence to the contrary the Court was entitled to assume that [the wife] gave her consent voluntarily and on the basis of adequate knowledge of what she was doing” [emphasis added]. In the present case, quite apart from the very different context of ICC Bank plc v. Gorman, I would emphasise the words “in the absence of any evidence to the contrary”. The defendant in the present case has sworn that he did not receive advice as to the extent of the guarantee he was being asked to sign. It seems to me that ICC Bank v. Gorman does not provide any support to the bank’s argument in the instant case.
30. I am satisfied that the trial judge approached her task of deciding if a prima facie defence was made out in relation to the absence of legal advice in accordance with the correct legal principles. She referred to the leading cases in which these principles are set forth. That is not really in controversy, though I appreciate that the bank would say that in reaching her conclusion she misapplied those principles. Having referred to these cases, she stated:-

“Adopting the wording of Hardiman J. at p. 623 of Aer Rianta, the Court in the present case must ask itself … ‘is it very clear that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
31. In my view the trial judge was correct to conclude that the defendant had done enough to establish a prima facie defence in relation to legal advice to the required level. What is critical in this case, and central to the finding that such a prima facie defence had been made out, is the fact that it was the bank itself that specified that it was a requirement for drawdown that it receive a “letter from Guarantor Solicitor confirming Guarantor received independent legal advice prior to execution of Guarantee & Indemnity document”. The bank need not have imposed such a precondition to a drawdown of the loan. Had it not done so, the Court might very well have concluded that there was no obligation upon it to ensure that the guarantor received such advice prior to drawdown, even though on the guarantee document itself it urges the guarantor to get legal advice prior to executing same. That encouragement to seek legal advice may well be given out of an abundance of caution so as to avoid possible difficulties with enforcement down the road.
32. But where, as in this case, the bank itself decided that it required that confirmation, and subsequently waived its own requirement unilaterally in the light of what Mr. O’Connor stated in his letter dated 8th March 2008, that is arguably at least something which may at trial be found to provide the defendant with a defence to the bank’s claim on foot of the guarantee. The opposing arguments in this court focused in part on the question as to whether the condition imposed by the Bank was or was not for its benefit alone such that it might unilaterally waive same. The resolution of that issue depends upon an assessment of all the relevant evidence.

33. If I ask myself as suggested by Hardiman J. in his judgment in Aer Rianta v. Ryanair, whether it very clear that the defendant has no case or arguable defence to the plaintiff’s claim, I find myself answering it in the negative. That is not to indicate any probability as to the outcome of the case following a plenary hearing. The Court at that stage, unlike this Court or indeed the Court below, will have the benefit of hearing oral evidence from the parties and their witnesses before reaching a final determination. Nothing in my judgment should be taken as a concluded view or even a tentative view on the ultimate merits of the case being made by either party. But I consider the defendant’s case on this one issue to be at least an arguable issue on the evidence adduced on affidavit.
34. For these reasons I would dismiss the appeal.
35. However, I would vary the order made in the High Court, if necessary, so as to clarify that the defendant’s defence is confined to the defence found to be arguable by the trial judge, thus making it clear that the defence of undue influence is not in the case. The Court was informed that a statement of claim and a defence which did not include undue influence had already been delivered so it may not be necessary to amend the High Court order. The Court will hear the parties on this question.
36. However it is important to emphasise that on a motion for summary judgment, and where not all of the issues raised by way of defence on affidavit meet the required threshold, that the order adjourning the case to plenary hearing should clearly identify the issue(s) found to be arguable and limit the defence to be delivered to those issues which have been found to pass the threshold, as was done by Finlay Geoghegan J. in Bussolino Ltd v. Kelly [2011] IEHC 220, and by this Court in NAMA v. Kelleher [2015] IECA.

Allied Irish Banks Plc v Counihan

[2016] IEHC 752

JUDGMENT of Mr Justice Max Barrett delivered on 21st December, 2016.

1. Introduction
   1. Mr Peter Counihan is a farmer. Ms Mary Counihan is his wife; she is a homemaker and does not work outside the family home. AIB comes to court seeking to enforce summarily a loan agreement of 5th February, 2009, that was executed between it and Mr and Ms Counihan. The loan agreement appears to have been a refinancing of previous borrowings that were extended to enable the Counihans to buy additional frontage to their existing farmstead. It is contended by the Counihans that each of them was acting as a consumer within the meaning of the Consumer Credit Act 1995 when they executed the loan agreement.
2. The Consumer Credit Act
   2. The loan agreement between AIB and the Counihans is documented as a business loan. Notwithstanding that it was executed with two parties, both of whom now claim to be consumers within the meaning of the Act of 1995, the loan agreement does not purport to comply with the requirements of that Act. So, for example, notwithstanding that the loan agreement appears to be a ‘housing loan’ within the meaning of the Act of 1995, the statement of important information required under s.129 and the Third Schedule of the Act is entirely absent. Such a breach, if it arises, may have consequences for AIB under s.12 of the Act. However, it does not appear that any direct consequences flow under the Act of 1995 as regards the enforceability of the loan consequent upon such a breach, if such a breach arises.

III. The Unfair Terms in Consumer Contract Regulations
i. Overview.

3. Where a bank’s customer is a consumer, the provisions of the applicable banker-customer relationship fall to be construed, inter alia, by reference to the European Communities (Unfair Terms in Consumer Contracts Regulations) 1995, as amended. These Regulations were adopted in the first instance to implement into Irish law Council Directive 93/13/EEC of 5th April, 1993 on unfair terms in consumer contracts (O.J. L95/29, 21.4.1993). They apply, per reg. 3(2), “to any term in a contract concluded between a seller of goods or supplier of services and a consumer which has not been individually negotiated”. A “consumer”, per reg. 2 of the Regulations of 1995 is “a natural person who is acting for purposes which are outside his business”, the term “business” being further defined, again in reg. 2, as including “a trade or profession”.
   4. Regulation 3(4) of the Regulations of 1995 provides that a term shall always be regarded as having not been individually negotiated where it has been drafted in advance and the consumer has not therefore been able to influence its substance, particularly in the context of a pre-formulated contract. Regulation 6(1) provides that an unfair term in a contract concluded by a seller of goods or supplier of services with a consumer is not binding on the consumer. However, under reg. 6(2) a contract containing an unfair term continues to bind the parties thereto if it is capable of continuing in existence without the unfair term.
4. The term “services” is not defined in the Regulations of 1995. However, the court finds it difficult to see how credit institutions, being among the principal actors in the financial services sector, could convincingly contend, if they sought to contend, and AIB has not sought so to contend in the within application, that in their retail deposit-taking and lending activities they are not providing services to their customers within the meaning of the Regulations.
5. The Aziz case.
   6. The court proceeds now to consider the Aziz case (Aziz v. Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa) (Case C-415/11, Judgment of 14th March, 2013), to which it has been referred by counsel for Mr and Ms Counihan.
   7. On 19th July, 2007, Mr Aziz concluded with Catalunyacaixa, a Spanish bank, a loan agreement secured by a mortgage on his family home. Clause 15 of the mortgage loan agreement, which made provision in relation to defaults, stated that Catalunyacaixa had the right to bring enforcement proceedings to reclaim any debt arising, and, for the purpose of those proceedings, could quantify the amount due by submitting an appropriate certificate. Mr Aziz defaulted on his loan obligations and, on 11th March 2009, Catalunyacaixa instituted recovery proceedings against him. Those proceedings were successful, Mr Aziz was sent an order for payment, but he neither complied with nor objected to this order. So matters moved to the enforcement stage, and now Mr Aziz took action. He applied to court for a declaration seeking (a) the annulment of cl. 15 of the mortgage loan agreement on the grounds that it was unfair (by reference to the applicable Spanish legislation implementing Directive 93/13/EEC), and (b) the consequent annulment of the enforcement proceedings.
6. The court before which Mr Aziz brought his application referred a number of questions to the Court of Justice for preliminary ruling. It is the first question that is of particular interest in the context of the within application, and the Court of Justice’s comments and observations in the context of same, at paras. 43 to 46 of its judgment:

“43 By its first question, the referring court wishes to know, essentially, whether Directive 93/13 must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which, while not providing in mortgage enforcement proceedings for grounds of objection based on the unfairness of a clause contained in a contract between a consumer and a seller or supplier, does not allow the court before which declaratory proceedings have been brought, which does have jurisdiction to assess whether such a clause is unfair, to grant interim relief in order to guarantee the full effectiveness of its final decision.
44 In replying to that question, it should be noted first that the system of protection introduced by the directive is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge….

45 As regards that weaker position, Article 6(1) of the directive provides that unfair terms are not binding on the consumer. As is apparent from the case-law, that is a mandatory provision which aims to replace the formal balance which the contract establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them….

46 In that context, the Court has already stated on several occasions that the national court is required to assess of its own motion whether a contractual term falling within the scope of the directive is unfair, compensating in its own way for the imbalance which exists between the consumer and the seller or supplier, where it has available to it the legal and factual elements necessary for that task…” .

[Emphasis added].
9. A number of points appear to the court to arise from the above-quoted text.

10. First, the Court of Justice’s observations appear to contemplate a court, even in an adversarial system of justice, acting in an inquisitorial manner.
11. Second, counsel for AIB suggested that the above-mentioned duty ought to be construed by reference to the particular facts of Aziz. However, it appears to the court that this, with respect, cannot be so. As is apparent even from the above-quoted text, Aziz is but the latest case in which the above-mentioned duty has been iterated. So the duty is clearly of more general application.
12. Third, a summary application for debt seems to the court to afford a classic example of proceedings in which the potentially ruinous consequences for a consumer of the court’s judgment (Mr and Ms Counihan have indicated that the effect of judgment against them at this time would render them all but destitute) on the basis of relatively limited argument, requires that the above-mentioned task be undertaken if consumers are to be protected in the manner contemplated by Directive 93/13/EEC (as now implemented).
13. Fourth, given the low threshold identified, for example, in Aer Rianta (considered below) for sending matters to plenary hearing and the limited form and scope of summary proceedings generally, it seems to the court that to conform with, inter alia, the decisions in Aer Rianta and Aziz, a three-part version of the task identified in Aziz necessarily arises whereby (i) the court faced with the summary application should identify whether it sees any terms of the loan agreement which may be unfair for the purposes of the Regulations of 1995, as amended, and which were they to be proven unfair and so not binding would, to borrow from the phraseology of Aer Rianta, yield an arguable defence to the summary claim presenting, (ii) to the extent that the court identifies any potential arguable defence which has not been the subject of argument at the summary application, it should invite the parties to make any further submissions that they may have to make concerning same, and (iii) assuming that (a) the answer to (i) is that there are one or more such potential arguable defences and (b) after hearing any further submissions as are referred to at (ii) it appears to the court that such potential arguable defences as it has posited to arise do in truth present, the matter ought to go to plenary hearing, it then being for the court at plenary hearing to decide, inter alia, (I) whether such terms as are identified by the court at summary hearing or other terms (‘or other terms’ because the court at plenary hearing likewise operates in the shadow of Aziz) are unfair, and (II) what consequences, if any, such a finding has as regards the debt recovery application before it.
14. Fifth, of some concern when it comes to the application of Aziz is how the task identified by the Court of Justice falls to be discharged in a common law system grounded upon, inter alia, the rules of precedent. If, for example, the court at summary hearing reviews particular terms and conditions and identifies clauses A, B, and C as potentially unfair, is a later court of equal or lesser jurisdiction precluded from finding that clauses X, Y and Z in the same terms and conditions present a difficulty in this regard? It seems to this Court that they could reasonably be contended not to be so bound because (a) each case will be decided to a great extent on its own facts, and/or (b) ultimately even the demands of precedent must yield to the supremacy of European Union law, where applicable, and/or (c) because of the precedential weight to be ascribed a judgment following summary hearing, as opposed to a judgment given after full plenary hearing.

iii. What is ‘unfair’?
15. Regulation 3(2) of the Regulations of 1995 provides that a contractual term shall be regarded as unfair if, “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer, taking into account the nature of the goods or services for which the contract was concluded and all circumstances attending the conclusion of the contract and all other terms of the contract or of another contract on which it is dependent.”
16. Under reg. 3(3), in determining whether a term satisfies the requirement of good faith, regard must be had to the matters specified in Schedule 2 to the Regulations, viz. (i) the strength of the bargaining position of the parties, (ii) whether the consumer had an inducement to agree to the term, (iii) whether the goods or services were sold or supplied to the special order of the consumer, and (iv) the extent to which the seller or supplier has dealt fairly and equitably with the consumer whose legitimate interests must be taken into account.

17. In essence, the requirement of good faith mandates fair and open dealing, with the result that contractual terms must be expressed fully, clearly, and legibly by a seller/supplier, with suitable prominence being given to any disadvantageous terms, and all concealed pitfalls and traps avoided, in effect adherence to what might be described as good standards of commercial practice. A significant issue arising in this regard is whether a seller/supplier, dealing fairly and equitably with a consumer, could reasonably assume that the consumer would have agreed to an impugned term in individual contract negotiations. As for fair and equitable dealing, what this requires in effect is that a seller/supplier should not take advantage of, inter alia, a consumer’s necessity, indigence, inexperience, unfamiliarity with the subject-matter of a contract, or like characteristics or traits, and must take a consumer’s legitimate interests into account.
18. One challenging issue that arises, and which is not answered in the Regulations, is whether a term is to be adjudged unfair merely because it operates prejudicially in particular circumstances, or whether something more is required before it is imbued with the quality of unfairness for the purposes of the Regulations. The court does not have to resolve this issue in the within application. It must merely decide whether or not to send the within application to plenary hearing. In this context it appears to the court that it is most consistent with the low threshold for referring matters to plenary hearing that is identified e.g., in Aer Rianta, for it to apply what might be styled the ‘lesser’ test of prejudice and thus to consider simply whether there is a term that appears to operate prejudicially in the context of the particular circumstances presenting, and not to look for anything more.
19. The ‘grey list’.
    19. Schedule 3 to the Regulations identifies what, per reg. 3(7), is an “indicative and non-exhaustive list of the terms which may be regarded as unfair”. This is sometimes referred to as the ‘grey list’, a phrase borrowed from the case-law of our neighbouring jurisdiction (see Office of Fair Trading v. Abbey National plc [2010] 3 W.L.R. 1215). It is important to note that the so-called ‘grey list’ is non-exhaustive. Indeed, in Aziz, the Court of Justice, in referring to Art. 3(3) of Directive 93/13/EEC, the provision that generates the annex from which the so-called ‘grey list’ derives, emphasised this point, stating, at para. 76 of its judgment that:
    “Article 3(3) of the directive must be interpreted as meaning that the annex to which that provision refers contains only an indicative and non-exhaustive list of terms which may be regarded as unfair.”
    20. So the ‘grey list’ needs to be treated with caution: it is helpful, but it is neither definitive nor complete. Of the classes of term referred to in the ‘grey list’, class (a) seems unlikely to be of much relevance in the consumer credit context. Of especial relevance in the context of the within proceedings is ‘grey listed’ term (g):
    “enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so”.
    21. This term is not, per para. 2(c) of Schedule 3 to the Regulations of 1995, ‘grey-listed’ when it applies to certain categories of transaction of which the transaction in issue in the within proceedings is not one. Nor, per para. 2(a) of Schedule 3 to the Regulations of 1995, is it grey-listed where “a supplier of financial services reserves the right to terminate unilaterally a contract of indeterminate duration without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof immediately”. [Emphasis added].
    IV. Consideration of the Contract at Hand
    22. If one or each of the Counihans is a “consumer” within the meaning of the Regulations of 1995, are there any terms of their loan arrangement with AIB which, it appears to the court in undertaking the task identified in Aziz, may offend against the Regulations of 1995, as amended? The court respectfully agrees with counsel for the Counihans that, on the facts presenting, the answer to this last-posed question is ‘no’. Separately, so far as there is any (if any) breach of the Act of 1995, for example under ss. 128 and/or 129 of same, such breach is punishable under that Act and does not yield a further difficulty under the Regulations of 1995.
    V. Estoppel?
    23. Mr Counihan has averred in his affidavit evidence that he believes AIB to be estopped from enforcing the loan against him. He maintains that he was advised by certain management-level employees of AIB that the full debt owing by himself and his wife would not be enforced, specifically that AIB would not seek to enforce such security as it enjoys over the Counihans’ family home. Mr Counihan maintains that he and his wife relied on these representations in their dealings with AIB. He wishes to argue that a promissory, High Trees House-style estoppel now exists between AIB and him that prevents AIB from asserting its full contractual rights against him. Nor is this claim to estoppel some wild flight of fancy. Mr Counihan avers, inter alia, in his affidavit evidence under the heading “Issues of fact to be determined”:

“19. Central to our defence to the plaintiff’s claim are the statements by Mr David Brosnan, the manager of the Airside branch of AIB in Swords and those of Mr Gerry Fanning. Both men represented to me that my wife and I would not lose out home, yet the effect of the plaintiff’s application in this case would be just that. I have been advised by my legal advisors that I have the defence of estoppel against the plaintiff.
20. Further, Mr Fanning represented that the plaintiff would accept about €1 million to settle the debt.

21. If Mr Brosnan had not represented to me that I would not lose my home, and if this had not been repeated by Mr Fanning in addition to his other representations our approach to negotiations with the plaintiff over the past number of years would have been very different. In order to fully raise this defence I need to give oral evidence under oath and have both Mr Brosnan and Mr Fanning give oral evidence.
22. My financial advisor, Mr Jacob, rang Mr Fanning on or about the 5th day of October 2015 and during that conversation Mr Fanning confirmed that he did in fact make these representations. I do not know if the plaintiff accepts or rejects that these representations were in fact made.”
23. It may turn out the above is eventually proved to have involved but the ebb and flow of banker-customer negotiations which did not reach fruition. But, having regard to the above averments, the court cannot say that Mr and Ms Counihan do not, to borrow from the wording of Hardiman J. in Aer Rianta (considered below) have even an arguable defence by virtue of the alleged promissory estoppel arising.
24. The Test for Summary Relief
    25. The hurdle to be surmounted by Mr and Ms Counihan as regards having this matter sent to plenary hearing is a low one. As Hardiman J. stated in the Supreme Court in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, 623:

“[T]he fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
26. In Harrisrange Ltd. v. Duncan [2003] 4 IR 1, at 7, McKechnie J. summarised the relevant principles when a court approaches the issue of whether to grant summary judgment or leave to defend:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…

(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…

(viii) this test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment is the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”

VII. Conclusion
27. As the court has reached the conclusions that it has reached under heading V above, it considers, having due regard to the principles identified in Aer Rianta and Harrisrange, that the within application ought to go to plenary hearing. As a result, the court respectfully declines to grant the reliefs sought of it at this time by AIB.

AIB Mortgage Bank v Van Eeden

[2016] IEHC 163

JUDGMENT of Mr Justice Max Barrett delivered on 5th April, 2016.
Part 1

Key Issue Presenting
1. AIB Mortgage Bank (AIB) seeks summary judgment for the balance that remains outstanding on a loan following the sale by AIB of the property that was mortgaged by way of security for that loan. Dr and Mrs Van Eeden, the relevant borrowers, contend that the dispute now arising is a matter that ought to go to plenary hearing.

Part 2

Background Facts
2. In January 2007, AIB Mortgage Bank (AIB)agreed to advance €1.65m to Dr and Mrs Van Eeden for the purchase of a residential property in Malahide. On 7thFebruary, 2007 the advance was made. In June 2007, the Van Eedens entered into a form of ‘all sums due’ mortgage with AIB, which mortgage covered the property in Malahide. In or about August 2008, the Van Eedens defaulted on their loan repayments. In October 2009, AIB demanded repayment of all that was owing to it. In March 2010, the Circuit Court granted AIB possession of the Malahide property. In May 2012, the property was sold for the remarkably low sum of €305k. In May 2015, AIB issued a summary summons in respect of the balance of the amount owing under the loan agreement.

Part 3

Contentions Made
3. The Van Eedens contend that this case is not a matter which ought to be dealt with by way of summary summons but ought instead to go to a full hearing. They offer a number of reasons why this is so.

4. First, the Van Eedens contend that the loan agreement makes no reference to the totality of the sum owing becoming payable upon default. This is not so. Clause 8 of the “General Terms and Conditions of Offer of Mortgage Loan”, under the Heading “DEMAND FOR MORTGAGE LOAN REPAYMENT” states as follows:

“The Bank may, subject to due compliance with any statutory requirements, if applicable exercise the right to demand early repayment of the Mortgage Loan balance outstanding and accrued interest thereon…”
5. The term “Mortgage Loan” is defined in clause 1 of the said terms and conditions as “the Loan offered to the Customer in Part 1”, and when one turns to Part 1 of the loan agreement entered into with the Van Eedens, the “Loan offered” is the €1.65m loan and the “Customer” is defined as both Dr and Mrs Van Eeden.
6. Second, the Van Eedens contend that pursuant to the ‘all sums due mortgage’ AIB sought enforcement of amounts that were owing under other credit arrangements between them and AIB. This seems an irrelevance to the within proceedings, in which recovery of the amount under the mortgage loan agreement is all that has been sought. It appears to the court from what it has seen, read and heard that upon default under the home loan, all applicable credit accounts were treated as being in default and the full sum owing was quite legitimately rolled into the amount in respect of which the particular ‘all sums due’ mortgage applied. Be that as it may, this aspect of matters, for the reason just stated, appears irrelevant to the present proceedings.

7. Third, the Van Eedens make objection to the fact that a document entered into between them and AIB makes mention in clause 2.3 to the “other Lender”. It is eminently clear from the “Letter of Offer of Mortgage Loan” and the “Particulars of Offer of Mortgage Loan” that the Lender is AIB and these proceedings are being brought by AIB, which is the “Bank” referred to in the General Terms and Conditions and the “Bank” referred to in clause 8 of same (as quoted above). The court sees nothing wrong in the fact that clause 2.3 of generic General Terms and Conditions would state that “The Customer acknowledges that, where appropriate and required, the Bank may enforce the terms of this Offer document on behalf of both itself and the other Lender.” [Emphasis added]. In this case, it is neither necessary nor appropriate that AIB plc (the only possible “other Lender” within the terms of the General Terms and Conditions) be a party to these proceedings – and indeed it is not party to these proceedings.
8. Fourth, the Van Eedens make objection to the fact that, per clause 5.4 of the General Terms and Conditions, “Without prejudice to the rights conferred by Condition 8” AIB is entitled to charge an interest surcharge on arrears throughout the period of default. With respect, it is a little late for the Van Eedens to be making objection to clause 5.4 now. Whenever one is minded to enter a loan agreement, that is always the best time to consider, and usually the opportune – and invariably the best – time for a prospective borrower to make objection, and amendment, to the provisions relating to what is to happen when and if default occurs, not sometime after – here well after – default has occurred. The Van Eedens contracted into clause 5.4 and that clause now applies.
9. Fifth, the next objection made by the Van Eedens is that if there was some structural deficiency in the property in Malahide which led to the slide in value, that is a matter for AIB as it was satisfied to take a mortgage of the property. If only. Absent contrary agreement (of which there is none), the fact that the bank was satisfied to take a mortgage over the Malahide property as security for its debt does not relieve the Van Eedens of liability for the balance of the debt outstanding when the proceeds of sale of that property prove insufficient to discharge the entirety of the debt outstanding.
10. Sixth, the Van Eedens object that AIB did not get a better price for the Malahide property when it was sold. They are undoubtedly disappointed – who would not be? – that their house saw a remarkable 82 per cent drop in value between 2007 and 2012. However, there is some suggestion in the papers, as indeed there was in court, that this drop in value may not just have been due to the crash in property values circa. and post-2008, but also because of some structural difficulty that was found to be presenting in the property. Plus the notion that a bank would not seek the best price for a property that it sells as mortgagee in possession is perhaps a little suspect when it is likely inmost cases, and may well be the case here, that the greatest part of the debt that is readily recoverable by the bank will depend on the sale price obtained for the property it sells as mortgagee. Certainly the court does not see in the foregoing any ground for contending, as has been contended, that AIB is estopped by its own actions from seeking to recover the difference between the sale price obtained and the balance of debt now outstanding.
11. Seventh, the Van Eedens contend that the within proceedings are out of time, that AIB had six years to commence proceedings for the debt owing from the date of default, that this six-year period expired sometime in 2014, and that the summary summons that commenced the within proceedings issued in May 2015. Here AIB, to borrow a phrase, ‘hits rocky ground’. Whereas an issue as to the applicable limitation period should be an issue to which there is a simple and easy answer, here such an answer does not present. This issue could readily and firmly been ‘hit on the head’ by AIB, for example, in the affidavit evidence that was placed before the court. But it was not. Circuit Court proceedings for possession were commenced, it appears, within time. However, apart from the eventual order for possession that issued from the Circuit Court, this Court has no idea as to the detail of the Circuit Court summons, or as to what was pleaded before the Circuit Court. The court, in truth, knows little more than that there was a default in 2008, at which point AIB became entitled under clause 8 of the “General Terms and Conditions of Offer of Mortgage Loan”, as quoted above, to demand the entirety of the balance outstanding, AIB has contended before the court that despite that initial default having occurred the greater part of a decade ago, there continued and continues to be a repeat default each time a monthly payment went or goes un-paid under the subsisting loan agreement, and that this means that the present application has been brought within time. Where the truth of all this lies seems properly a matter for a trial judge at plenary hearing – and AIB has no-one but itself to blame that this lack of clarity on what should be a straightforward point has not been properly addressed and thus continues to arise in what seems otherwise to the court to be a relatively straightforward summary application.

Part 4

Applicable Law
12. The hurdle that the Van Eedens must cross to succeed in having matters sent to plenary hearing is low. As Hardiman J. stated in the Supreme Court in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, 623:

“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
13. In Harrisrange Ltd. v. Duncan [2003] 4 IR 1, 7, McKechnie J. summarised the relevant principles when a court approaches the issue of whether to grant summary judgment or leave to defend:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…

(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…

(viii) this test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment is the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”

Part 5

Conclusion
14. To borrow from the terminology of Hardiman J. in Aer Rianta, when it comes to the statute of limitations point raised by Dr and Mrs Van Eeden, it is not very clear that they have no case or that there is no issue to be tried and – despite the fact that a limitations point ought to be simple and easily determined – for the reasons stated above, it is not as simple as it should be and cannot easily be determined at this time. In this respect, it appears to the court that the Van Eedens have not failed to disclose even an arguable defence. Bearing all of the foregoing in mind, and bringing that “discernible caution” to matters to which McKechnie J. refers in Harrisrange, the court will refer this matter to plenary hearing. For the avoidance of doubt, the court notes in passing that while it is referring matters to plenary hearing by reference to the limitations point only, nothing in this judgment is intended to, or does, restrict the Van Eedens from raising any and all such lines of argument as they may wish to raise at that plenary hearing.

AIB v Casey

[2016] IEHC 193
JUDGMENT of Mr. Justice Barr delivered on the 15th day of March, 2016
Introduction
1. In this application, the plaintiff seeks summary judgment against the second named defendant in the sum of €1,470,181.05. This indebtedness is alleged to have arisen on foot of six loan agreements entered into by the defendants between June 2005 and November 2011.

2. The first named defendant did not enter an appearance to the proceedings and judgment was marked against him in the Central Office.
3. The second named defendant is the former wife of the first named defendant. She resists judgment essentially on the following grounds: she stated that in the course of acrimonious separation proceedings in the Circuit Family Court, she became aware that there was a significant amount of documentation upon which her signature was forged. While it is not expressly stated, the inference is that the forgeries were carried out by her ex-husband, or by someone acting at his behest. In this case, she has had five of the six loan agreements examined by an independent forensic handwriting expert. It is his expert opinion that the signature of the second named defendant appearing on two of the loan agreements, are not the genuine signatures of the second named defendant. Of the remaining four loan agreements, one was not addressed by him and in the case of three loan agreements, the second named defendant’s expert has stated that it is his opinion, that the signature of the second named defendant appearing thereon, is the genuine signature of the second named defendant.
4. The second named defendant submits that as forgery is such a serious matter, it is necessary to examine this issue in depth at the trial of the action and, in those circumstances, the second named defendant seeks to have the matter remitted to plenary hearing.
5. The second named defendant has also put up a secondary line of defence, to the effect that the plaintiff failed to explain to her the extent and nature of the liabilities under the various credit agreements and loan facilities. It is also alleged that the plaintiff was guilty of negligent misrepresentation to the second named defendant and it is alleged that the plaintiff failed in its duty to properly advise the plaintiff to get independent legal advice prior to signing the loan agreements. The second named defendant has further stated that she intends to cross examine the bank’s witnesses and in such circumstances, it is necessary to remit the matter to plenary hearing.
   The Plaintiff’s Claim
   6. The plaintiff’s application for summary judgment is based on the affidavit of Ms. Jo Ann Shannon, a case manager with the plaintiff bank, sworn on 20th January, 2015. The first loan agreement was contained in a letter dated 17th June, 2005, which was accepted by the defendants in or around 21st June, 2005. Under that loan agreement, the plaintiff agreed to make available to the defendants a loan facility in the sum of €102,000.00 on the terms set out in the loan agreement. The loan was to be secured, inter alia, by means of legal charges over certain properties held by the defendants and by assignments of certain life assurance policies of the defendants.
6. The 17th June, 2005, loan agreement provided that the loan was to expire on 30th May, 2013, with ninety-five repayment instalments at the date of offer of €305.25 (interest only) and a single repayment of €102,305.00 on 30th May, 2013, scheduled to be made by the defendants plus interest accrued to the date of repayment not already provided.
7. Ms. Shannon states that the defendants agreed to the 17th June, 2005, credit agreement and drew down funds pursuant to the facility as outlined above. She exhibited a copy of the said credit agreement dated 17th June, 2005, together with the defendants’ written acceptance of same and also exhibited account statements recording the draw down of the loan and the management of the loan thereafter.
8. Ms. Shannon stated that interest was charged on the facility in accordance with the terms of the 17th June, 2005, credit agreement and is continuing to accrue at a rate of €4.40 per day. She further stated that the defendants failed to abide by the terms of the 17th June, 2005, credit agreement in relation to repayment thereof and the loan account went into arrears. She submitted that this represented an event of default under the terms of 17th June, 2005, credit agreement, entitling the plaintiff to demand payment of the principal and interest due and all monies and liabilities owing on foot of the said credit agreement.
9. By separate letters dated 6th February, 2014, addressed to each of the defendants, the plaintiff formally notified the defendants that the said loan account was substantially in arrears and that the aggregate sum due on the loan account as of 6th February, 2014, was €105,473.46. Demand was made on behalf of the plaintiff for payment of the said sums within seven days of the date of the service of the letter. Ms. Shannon exhibited copies of the said letters of demand.
10. Ms. Shannon went on to outline the second loan agreement in the following terms: by letter of offer dated 28th March, 2007, issued by the plaintiff and accepted by the defendants and pursuant to certain terms and conditions attaching thereto as agreed to by the defendants, the plaintiff agreed to make available to the defendants a loan facility in the sum of €250,000.00 secured, inter alia, by means of legal charges over certain properties held by the defendants, assignments of certain life assurance policies on the lives of the defendants and a letter of lien over credit funds with AIB Group. She exhibited a copy of the said letter of offer, together with the applicable terms and conditions attaching thereto.
11. Ms. Shannon stated that the 28th March, 2007, loan facility provided that the loan was to expire on 30th March, 2011, with sixteen repayment instalments at the date of offer of €3,359.38 and a single repayment of €250,000.00, on 28th March, 2011, scheduled to be made by the defendants plus interest accrued to date of repayment not already provided. Ms. Shannon further stated that the defendants agreed to the 28th March, 2007, loan facility and drew down funds pursuant to the facility. She exhibited account statements recording the said draw down of funds. She stated that interest was charged on the said facility in accordance with the terms of the 28th March, 2007, loan facility at a rate of €11.11 per day.
12. Ms. Shannon stated that the defendants failed to abide by the terms of the 28th March, 2007, loan facility in relation to repayment thereof and the loan account went into arrears. She stated that this represented an event of default under the terms of the said facility, entitling the plaintiff to demand repayment of principle and interest due and all monies and liabilities owing on foot of the 28th March, 2007, loan facility.
13. By separate letters dated 11th February, 2014, addressed to each of the defendants, the plaintiff formally notified the defendants that the loan account was substantially in arrears and that the aggregate sum due on the loan account as of 11th February, 2014, was €265,930.28, with unpaid interest of €762.27 accrued making an aggregate sum of €266,692.55 due and owing. The plaintiff demanded payment of the said sums within seven days of the date of service of the letter. She exhibited copies of the letters of demand.
14. Ms. Shannon outlined the position in relation to the third loan agreement in the following way: by letter of offer dated 31st May, 2010, issued by the plaintiff and accepted by the defendants in writing in or around 16th August, 2010, and pursuant to certain terms and conditions attaching thereto as agreed to by the defendants, the plaintiff agreed to make available to the defendants two loan facilities in the amounts of €100,000.00 and €612,765.00, secured, inter alia, by means of legal charges over certain properties held by the defendants and assignments of certain life assurance policies on the lives of the defendants. She exhibited a copy of the said letter of offer together with the applicable terms and conditions attaching thereto. As appeared therefrom, the 31st May, 2010, loan facility provided for repayment/refinance of the facility on 30th April, 2011, subject to extension at the plaintiff’s discretion. The interest rate was stated to be base lending rate varying plus 3% per annum (3.666% at the time of offer) including a funding premium of 1.4%.
15. Ms. Shannon stated that the defendants agreed to the 31st May, 2010, loan facility and drew down funds pursuant to the facility as outlined above. She exhibited account statements recording the draw down and the management of the account. Ms. Shannon stated that interest was charged on the said facility in accordance with the terms of the 31st May, 2010, loan facility and was accruing at a rate of €9.75 per day on account 93638301852658 and at a rate of €59.87 per day on account 93638306456141.
16. Ms. Shannon stated that the defendants failed to abide by the terms of the 31st May, 2010, loan facility in relation to repayment thereof and the loan account went into arrears. She stated that this represented an event of default under the terms of the said facility, entitling the plaintiff to demand repayment of principal and interest due on all monies and liabilities owing on foot of the 31st May, 2010, loan facility.
17. She stated that by separate letters dated 6th February, 2014, addressed to each of the defendants, the plaintiff formally notified the defendants that the loan account was substantially in arrears and that the balance due on the loan account as of 6th February, 2014, was €797,867.88, with unpaid interest of €3,900.10 accrued, making an aggregate sum of €801,767.98, due and owing. The plaintiff demanded payment of the said sums within seven days of the date of the service of the letter. Copies of the said letters of demand were exhibited to the affidavit.
18. Ms. Shannon outlined the details of the fourth loan agreement in the following terms: by letter of offer dated 21st March, 2011, and accepted by the defendants in writing in or around 1st May, 2011, the plaintiff agreed to make available to the defendants the sum of €121,088.00, secured, inter alia, by means of legal charges over certain properties held by the defendants and assignments of certain life assurance policies on the lives of the defendants. She exhibited a copy of the said letter of offer, together with the applicable terms and conditions attaching thereto.
19. Ms. Shannon stated that the 21st March, 2011, credit agreement provided for repayment of the facility by means of four specific repayments with the final repayment of €121,088.00, due on 28th February, 2012, plus interest accrued and not charged at that date (APR 4.12939%). Ms. Shannon stated that the defendants agreed to the 21st March, 2011, credit agreement and drew down funds pursuant to the facility. She exhibited statements recording the said draw down of funds. She stated that interest was charged on the facility in accordance with the terms of the 21st March, 2011, credit agreement and was then accruing at a rate of €11.21 per day.
20. Ms. Shannon stated that the defendants failed to abide by the terms of the 21st March, 2011, credit agreement in relation to the repayment thereof and the loan account went into arrears. She stated that this represented an event of default under the terms of the said agreement, entitling the plaintiff to demand payment of the principal and interest due and all monies and liabilities owing on foot of the 21st March, 2011, loan facility.
21. By separate letters dated 6th February, 2014, addressed to each of the defendants, the plaintiff formally notified the defendants that the loan account was substantially in arrears and that the balance due on the loan account as of 6th February, 2014, was €128,458.38, with unpaid interest of €627.92, accrued on the said sum, making an aggregate sum of €129,086.30 due and owing. The plaintiff demanded payment of the said sums within seven days of the date of the service of the letter. Ms. Shannon exhibited copies of the said letters of demand.
22. Ms. Shannon gave an outline of the fifth loan agreement in the following terms: by letter of sanction dated 24th November, 2011, and accepted by the defendants in writing in or around 9th January, 2012, and pursuant to certain terms and conditions attaching thereto as agreed to by the defendants, the plaintiff agreed to make available to the defendants a loan facility in the amount of €8,452.00, secured, inter alia, by means of legal charges over certain properties held by the defendants and assignment of life assurance policies on the lives of the defendants. She exhibited a copy of the said letter of sanction together with the applicable terms and conditions attaching thereto.
23. Ms. Shannon stated that the 24th November, 2011, loan facility provided for repayment of the facility by way of a single payment equivalent to principal plus interest accrued and not yet paid on 12th October, 2012. The interest rate was stated to be base lending rate varying plus 3% per annum (4.563%) at the time of offer. Ms. Shannon stated that the defendants agreed to the 24th November, 2011, loan facility and drew down funds pursuant to the facility as outlined above. She exhibited account statements recording the said draw down. She stated that interest was charged on said facility in accordance with the terms of the 24th November, 2011, loan facility and was then accruing at a rate of €0.77 per day.
24. Ms. Shannon stated that the defendants failed to abide by the terms of the 24th November, 2011, loan facility in relation to repayment thereof and the loan account went into arrears. She stated that this represented an event of default under the terms of the said facility, entitling the plaintiff to demand repayment of principle and interest due and all monies and liabilities owing on foot of the 24th November, 2011, loan facility.
25. Ms. Shannon stated that by separate letters dated 6th February, 2014, addressed to each of the defendants, the plaintiff formally notified the defendants that the loan account was substantially in arrears and that the balance due on the loan account as of 6th February, 2014, was €8,877.37, with unpaid interest of €43.39 accrued on the said sum, making an aggregate sum of €8,920.76 due and owing. The plaintiff demanded payment of the said sums within seven days of the date of service of the letter. She exhibited copies of the letters of demand.
26. Ms. Shannon gave details concerning the sixth and final loan agreement as follows: by letter of offer dated 25th November, 2011, issued by the plaintiff and accepted by the defendants in writing in or around 9th January, 2012, and pursuant to certain terms and conditions attaching thereto as agreed to by the defendants, the plaintiff agreed to make available to the defendants a loan facility in the amount of STG£129,683.00, secured, inter alia, by means of legal charges over certain properties held by the defendants and assignment of a life assurance policy on the lives of the defendants. She exhibited a copy of the said letter of offer together with the applicable terms and conditions attaching thereto.
27. Ms. Shannon stated that the 25th November, 2011, loan facility provided for repayment of the facility on 12th October, 2012, by means of a single repayment equivalent to principal plus interest accrued and not yet paid at that date. The interest rate was stated to be market related rate plus 1% per annum. She further stated that the defendants agreed to the 25th November, 2011, loan facility and interest was then accruing at a rate of €5.20 per day.
28. Ms. Shannon stated that the defendants failed to abide by the terms of the 25th November, 2011, loan facility in relation to repayment thereof and the loan account went into arrears. She stated that this represented an event of default under the terms of the said facility, entitling the plaintiff to demand repayment of principle and interest due and all monies and liabilities owing on foot of the 25th November, 2011, loan facility.
29. Ms. Shannon stated that by separate letters dated 9th September, 2014, addressed to each of the defendants, the plaintiff formally notified the defendants that the loan account was substantially in arrears and that the balance due on the loan account as of 8th September, 2014, was STG£126,389.79. The plaintiff demanded payment of the said sum within seven days of the date of service of the letter. A copy of the said letter was exhibited to her affidavit.
30. Ms. Shannon stated that on or about 21st November, 2014, the plaintiff converted the 25th November, 2011, loan facility to Euro as it was entitled to do under the terms of the said facility. On 21st November, 2014, the amount demanded in the letter of 9th September, 2013, STG£126,389.79 converted to €158,240.00 at a conversion rate of 0.798722 and the facility was duly converted at that rate. On this basis, Ms. Shannon stated that €158,240.00 was due and owing from the defendants to the plaintiff under the 25th November, 2011, loan facility.
31. Ms. Shannon stated that despite each of the letters of demand as set out above and exhibited to her affidavit, the defendants and each of them had failed, refused or neglected to pay the sums demanded, or any sum, in satisfaction or reduction of their liabilities to the plaintiff or to engage with the plaintiff in any, or any meaningful, way. The sums demanded in the said letters of demand remained due and owing together with daily interest accruing thereon in respect of each agreement.
32. Ms. Shannon stated that the proceedings were commenced by way of summary summons issued on 24th September, 2014. An appearance was entered in person by the second named defendant on 23rd October, 2014. She stated that it was her belief that the second named defendant did not have any bona fide or arguable defence to the claim made by the plaintiff in these proceedings and that the said appearance had been entered by the second named defendant solely for the purpose of delaying the plaintiff in obtaining judgment. She prayed for the reliefs as set out in the notice of motion.
    The Defendants’ Case
    34. The second named defendant has filed a number of affidavits in response to the plaintiff’s claim herein. In her first affidavit sworn on 11th February, 2015, she outlined that she was engaged in extremely acrimonious and hostile proceedings with her estranged husband in the Circuit Family Court in Cork. She stated that there were ten properties as far as she was aware, owned jointly by her estranged husband and her. She stated that her signatures on the documents exhibited by the plaintiff as JAS4, and JAS10, were simulated. She said that the remaining documents may contain her signature, but that the copy provided by the plaintiff was of such poor quality, that she could not be definite as to this. She said that the issue required further investigation. She stated that in the course of the aforementioned Circuit Court family law proceedings, she had come to learn that numerous documents upon which her husband was relying in those proceedings, were not signed by her, but her signature had been forged thereon. She exhibited a copy of a preliminary report from a forensic handwriting expert, Mr. David Madden.
33. The second named defendant swore a supplemental affidavit on 16th April, 2015. She stated that it was only in the course of the extremely acrimonious and hostile divorce proceedings with her estranged husband, that she came to learn of the existence of a number of documents upon which she believed her signature had been forged.
34. In relation to the credit agreement dated 17th June, 2005, she alleged that her signature thereon had been “wholly simulated”. She said that despite repeated requests, the plaintiff had failed to provide her solicitors with the original of this document, or even a facility to inspect the document.
35. In relation to the loan facility dated 28th March, 2007, she stated that the plaintiffs had failed to provide her solicitors with the original of this document, or even a facility to inspect same. She stated that she was concerned that her signature may have been simulated on same. She further stated that she never received any benefit of the said funds and on this account, she suspected that the first named defendant may have diverted the said monies from the purpose for which they were originally allegedly acquired.
36. The second named defendant stated that in relation to the loan facility dated 31st May, 2010, in the letter of sanction which had been addressed to Mr. William Casey, the last sentence read:- “A copy of this letter of sanction is being forwarded to Victoria Casey”. The second named defendant stated that she was a stranger to this transaction and to the letter of sanction exhibited. She had no knowledge of the transaction. She stated that despite repeated requests, the plaintiffs had failed to provide her solicitors with the original of this document, or even a facility to inspect same. She stated that she was concerned that her signature may have been simulated on the document. She stated that she never received any benefit from the said funds, which were allegedly drawn down pursuant to this loan facility. The second named defendant further stated that she was a stranger to the property listed in the particulars of the facility letter dated 31st May, 2010, and she had no knowledge of the property described in the said loan facility, more particularly a Portuguese property consortium (Castre Verde) for which the facility purports to have been sanctioned to finance. She stated that as she was a stranger to the transaction, she needed to examine and inspect all original documentation dealing with the said transaction in order to ascertain the authenticity of same.
37. The second named defendant also referred to the credit agreement dated 21st March, 2011, and stated that her alleged signature thereon had been “wholly simulated”. She again stated that despite repeated requests, the plaintiff had failed to provide her solicitors with the original of the document, or provide a facility to inspect same. She stated that she was concerned that her signature may have been simulated on the relevant documents and in the circumstances the plaintiff should be required to make available to the second named defendant the original of the document to be examined and inspected to test the authenticity of her signature thereon.
38. The second named defendant also referred to the credit agreement dated 24th November, 2011. She stated that she was a stranger to this transaction and had no knowledge of it. She stated that the copy of the document which had been furnished to her solicitors, was a poor and illegible copy and in the circumstances, neither the second named defendant, nor her handwriting expert, were able to determine if the said document contained her genuine signature or not. She again stated that despite repeated requests, the plaintiff had failed to provide her solicitors with the original documents or even a facility to inspect same.
39. The second named defendant went on to refer to the credit agreement dated 25th November, 2011. She noted that in the letter of sanction which was addressed to Mr. William Casey, the last sentence read: “A copy of this letter of sanction is being forwarded to Victoria Casey”. The second named defendant stated that she was a stranger to the transaction and to the letter of sanction, which had been exhibited and had no knowledge of the transaction. She stated that the copy of the said credit agreement, which had been furnished to her solicitors, was a poor and illegible copy and neither she, nor the handwriting expert, was able to determine if the said document contained her genuine signature. She said that despite repeated requests, the plaintiffs had failed to provide her solicitors with the original of the document, or even a facility to inspect same.
40. The second named defendant stated that in the course of addressing matters for her family law proceedings, it had come to her attention that numerous documents upon which her husband was relying in the said family law proceedings, were not signed by her, but her signature had been simulated thereon. Further to the discovery of the simulation of her signature on these various documents, she became very concerned in respect of same and caused her solicitor to engage a forensic handwriting expert, one David Madden, for the purposes of addressing these concerns. Mr. Madden was furnished with copies of the documents which had been made available to the plaintiff. He issued a preliminary report which she exhibited to the affidavit.
41. The second named defendant stated that as a result of the discovery of simulated signatures on legal documentation associated with various alleged borrowings, it was necessary to have a comprehensive examination of all the original documentation relied upon by the plaintiff herein. She stated that the nature of summary proceedings did not allow such an examination to take place. She stated that she had a bona fide defence to the within proceedings and such defences rely upon a thorough examination of any documents allegedly executed by the second named defendant.
42. The second named defendant said that in the light of these findings, it was necessary that all of the original loan and security documentation should be examined by her handwriting expert. To that end, her solicitor had, by letter dated 11th February, 2015, requested the defendants to make voluntary discovery of the relevant documents. The second named defendant further stated that it was her intention to seek to cross examine the plaintiff’s deponent, Ms. Jo Ann Shannon. She stated that in such circumstances, this matter was not suitable for summary disposal.
43. The second named defendant also stated, without prejudice to any other defences which may be available to her, that the plaintiff had failed to explain the extent and nature of the liabilities, or any liability under the various credit agreements and loan facilities as described in the within proceedings and that the plaintiff breached its duties to the second named defendant, as a wife to a seasoned businessman, and as such failed in its duty of care to her, in particular it had failed to properly advise her to get independent legal advice and to wholly ensure that any of the documentation pertaining to these loan facilities, would only be signed with her fully informed consent and knowledge.
44. The second named defendant stated that the plaintiff was purporting to rely on documents which, to the best of the second named defendant’s knowledge, information and belief, contained simulated signatures of the second named defendant. She stated that the plaintiff should not be permitted to enforce the purported agreements against her.
45. The second named defendant also stated that the plaintiff failed to act with the utmost good faith during the course of its dealings with her. She stated that in these circumstances she had been advised that affidavit evidence alone would not suffice to prove her defence to this action. She stated that having regard to the nature of the allegations contained in her defence to the claims herein, a plenary hearing was required to try all the issues in dispute between the parties.
46. Furthermore, she stated that she had been advised, that she required discovery of all loan and security documentation and further required to cross examine bank officials, in order to properly establish the extent of the plaintiff’s dealings with her now estranged husband and documents alleged to have been created in her name, in order to fully defend the allegations as against her by the plaintiff herein. She stated that as a result of the proceedings herein being in a summary format, that this could not be done in the course of such proceedings. She, therefore, asked the Court to refuse the reliefs set out in the notice of motion and either dismiss the plaintiff’s action, or in the alternative, to remit the matter to plenary hearing.
47. An affidavit was sworn by Mr. Fergus Appleby, the solicitor acting for the second named defendant on 12th June, 2015. In the affidavit, he stated that the plaintiff had consented to making available for inspection all the original and ancillary borrowing and security documents herein. However, they had not specified a date for the carrying out of such inspection.
48. Mr. Appleby further stated that the case had very many serious issues to be tried and the issues involved were neither simple nor capable of being easily determined by way of summary motion. Furthermore, he said that there may be a number of bona fide defences to the plaintiff’s application for judgment, which rendered this application inappropriate for summary disposal. He stated that it was his belief that affidavit evidence alone would not suffice to prove the defence to this action and, as such, a plenary hearing was required to try all of the issues in dispute between the parties.
49. He further stated that discovery of bank documentation and cross examination of bank witnesses, would be required to consolidate the defence of the second named defendant herein. He stated that this could not be done in the course of summary proceedings. He stated that it was necessary and just that these issues should be tried together by way of plenary hearing and that it was not a suitable matter to be tried by affidavit.
50. The second named defendant swore a second supplemental affidavit on 9th December, 2015. In the affidavit, the second named defendant stated that on 14th July, 2015, her expert, Mr. David Madden, had attended at the offices of the solicitors acting for the plaintiff and had carried out an inspection of the originals of various documents. As a result of that inspection and analysis, Mr. Madden had been in a position to issue a comprehensive report, which was exhibited to this affidavit.
51. It would appear that in relation to the six agreements which are in issue in the proceedings herein, Mr. Madden came to the following conclusions: he did not reach any conclusion in relation to the agreement dated 17th June, 2005, as this was not made available to him on the day of the inspection. In relation to the agreement dated 28th March, 2007, he was of opinion that the signature thereon purporting to be the signature of the second named defendant, was not her genuine signature. In relation to the agreement dated 31st May, 2010, he was of opinion that the signature appearing thereon, was the genuine signature of the second named defendant. In relation to the agreement dated 21st March, 2011, he was of opinion that the signature appearing thereon purporting to be that of the second named defendant, was not, in fact, her genuine signature. In relation to the agreements dated 24th November, 2011 and 25th November, 2011, he was of opinion that the signatures appearing thereon were the genuine signatures of the second named defendant.
52. The second named defendant further stated that a mortgage deed appearing to be dated 13th June, 2007, relating to a property at 96, Alderbrook, Cork, contained a forgery of her signature. She had instructed her solicitor to write to the receiver appointed over a number of properties including the property covered by this mortgage deed. She stated that neither the plaintiffs, nor the solicitor for the plaintiffs, or the receiver, had addressed the fact of confirmation of her simulated signature on a number of these financial documents in any meaningful way to date. She stated that such was the nature of the findings made in Mr. Madden’s report, that the issue of her simulated signatures on various documents, should be explored fully in open court. She stated that the plaintiff should not be allowed to attempt to force through obtaining a judgment herein in complete disregard of the issue, more particularly when it pertained to some base documents in respect of charges which were registered against some of these properties, which involved an issue of criminal fraud, which required to be addressed by both the Court and other relevant authorities.
53. She again stated that it was her intention to seek to cross examine the plaintiff’s deponent, Ms. Jo Ann Shannon. She stated that the plaintiff had failed to reply to her solicitor’s letter in this regard and had not stated anything in relation to the availability of Ms. Shannon for cross examination. She stated that this was a further reason why the application was not suitable for summary disposal.
54. The plaintiff went on in the affidavit to state that she wished to draw the following matters to the attention of the court:-

(a) That the plaintiff acting through its servants or agents, failed to explain to the defendant the extent and nature of the liabilities under the various credit agreements and loan facilities.
(b) The plaintiff was guilty of negligent misrepresentation to the second named defendant and was therefore estopped in equity from enforcing the said alleged liabilities as against her.

(c) The plaintiff breached its duties to the second named defendant as a wife (who was in grave marital difficulties) to a seasoned businessman/investor, and as such, failed in its duty of care to her, in particular, it had failed in its duty to properly advise her to get independent legal advice and to ensure that any of the documentation pertaining to these loan facilities, would only be signed with her fully informed consent and knowledge. The second named defendant stated that the plaintiff had wholly failed to ensure these matters and instead was purporting to rely on documentation which, to the best of the second named defendant’s knowledge, information and belief, contained simulated signatures of the defendant and the plaintiff should not be permitted to enforce the purported agreements against her.

(d) The second named defendant stated that in the alternative, the plaintiff bank had failed, refused and/or neglected to advise the second named defendant to obtain independent legal advice prior to executing the aforementioned loan facilities and credit agreements and it in fact was wholly lacking in ensuring the second named defendant was aware of the extent of her ultimate liabilities.

57. The second named defendant stated that it was her belief and she had been so advised, that affidavit evidence alone would not suffice to prove her defence to the action and as such a plenary hearing was required to try all of the issues in dispute between the parties. Furthermore, she stated that she required to cross examine the bank’s witnesses to consolidate her defence. This could not be done in the course of summary proceedings. In the circumstances it was therefore necessary and just that these issues should be tried together by way of a plenary hearing and that it was not a suitable matter to be tried by affidavit.
    Submissions on behalf of the plaintiff
    58. The plaintiff’s counsel stated that in relation to the credit agreement dated 17th June 2005, which was not addressed by Mr Madden, he accepted that this agreement had been stipulated by the solicitors acting for the second named defendant in their letter dated 28th June, 2015, as one of the documents in respect of which they required their expert to have access. The plaintiff’s counsel stated that his instructions were that unfortunately the original of that document was not available on the day of the inspection. The other five agreements were examined by Mr Madden at the inspection held on 14th July 2015.
58. The plaintiff’s counsel noted that in relation to some of the alleged loan agreements, the defendant had put in a very wide denial. For example in relation to the loan agreement dated 31st May, 2010, the second named defendant stated that she never received any letter from the bank about that loan and was a stranger to the loan itself. She stated that she never received any funds and did not know anything about the property in Portugal. She said that she never received any benefit from the funds concerned. Counsel noted that the second named defendant would make wide denials in respect of some loans, such as this one, but not in respect of other loan agreements. He pointed out that ironically this particular loan agreement was one in respect of which Mr Madden was of the opinion that the second named defendant’s signature was genuine.
59. Counsel further submitted that it did not matter whether the document was in fact signed, if the plaintiff received the benefit of the funds under the agreement. Signature was not necessary to make the contract enforceable. Where she does not deny having the benefit of a transaction, she must be taken as having received the benefit of the loan.
60. In relation to the allegation of negligent misrepresentation, the plaintiff submitted that it was not sufficient for the second named defendant to make a bare allegation in this regard. She had not stated what was the content of the alleged misrepresentation, nor by whom it was made, or when it was made. Nor had she stated that she was misled or acted to her detriment as a result of any such misrepresentation. In the circumstances, it was submitted that this was not sufficient to enable the second named defendant to have this matter remitted to plenary hearing.
61. It was also noted that the second named defendant made allegations, that the bank should have ensured that she had independent legal advice prior to entering into any of the loan agreements. Counsel for the plaintiff stated that he would rely on the responses which had been given in the previous set of proceedings against the second named defendant. These were to the effect that, there was no obligation on the bank to ensure that its customer had independent legal advice prior to entering into a loan agreement. If the plaintiff had asserted that she had acted under the undue influence of her husband in entering into the agreement and that this fact was known, or ought to have been known, by the bank, then she may have been in a position to argue that the bank should have ensured that she had independent legal advice prior to entering into the contract. However, in this case, there was no such assertion made by the second named defendant. There was merely a bare assertion that the bank owed her a duty of care to ensure that she had independent legal advice prior to entering into any of the agreements. The plaintiff submitted that the bank did not owe any such duty to the second named defendant.
    Submissions on behalf of the Second Named Defendant
    63. Counsel for the second named defendant stated that she was a housewife and mother who had to look after her two children, who were aged twelve years and ten years respectively. The first named defendant had been an employee of an airline and had extensive business dealings. The second named defendant only learnt of these dealings in the course of the family law proceedings.
62. The second named defendant contended that she was a stranger to the loan transactions and this was supported by the evidence of the handwriting expert in respect of two of the agreements.
63. The second named defendant also stated that there were two further documents, which were not part of the present proceedings, that were relevant. They were the documents identified in Mr. Madden’s report at Q. 12 and Q. 15. These were two mortgage documents. Mr. Madden was of the opinion that the second named defendant did not sign these mortgage documents. These mortgage documents referred to a number of properties, which had been cross charged. The signatures on the mortgage documents would appear to have been witnessed by a solicitor. It was submitted that this was a very serious matter and was an issue of grave concern, which ought to be fully investigated by the court.
64. The second named defendant stated that the first named defendant had left the family home in 2012 and ceased to be an employee of the airline. However, he did work for the airline through a company. The second named defendant had no knowledge of this company. She had been in the dark for over three and a half years. The first named defendant was being paid through the limited company.
65. It was stated that the second named defendant was a stranger to the agreements the subject matter of these proceedings. She stated that, as far as she could ascertain, she did not get the benefit of any of the funds. She could not say where the money had gone. She surmised that the money may have been diverted by her ex-husband into his own various accounts.
66. The second named defendant noted that the plaintiff had got judgment in the Central Office as against the first named defendant. The second named defendant did not know what arrangements had been entered into between the bank and the first named defendant. She had been left in the dark about the business dealings of her husband and where money had gone. In these circumstances, she needed plenary hearing to discover the true facts.
67. It was submitted that this case came within the dictum of Baron J. in Bank of Ireland v. Educational Building Society [1999] 1 IR 220, where the learned judge stated as follows at p. 233:-

“This Court does not have to decide whether these submissions or any of them will ultimately succeed. It is sufficient that the defendant should not be shut out from making a bona fide case: see First National Commercial Bank plc v. Anglin [1996] 1 I.R.
Usually, liberty to defend is sought upon the ground that there is an issue of fact to be determined. When the issue is solely one of law, then the court may determine that issue and give final judgment. Where, however, the court would be in a better position to determine the issue of law after a closer and fuller examination of the facts, then the defendant should be given liberty to defend.”

70. It was submitted that in this case, the second named defendant should be given the opportunity to have a full plenary hearing, because there were serious issues of fact to be decided, in particular, was her signature forged and in the case of two mortgage documents, was the purported signature witnessed. Given the serious nature of the factual issues, it was submitted that there was a serious issue to be tried and, on this account, the action should be remitted to a full plenary hearing. It was stated that, if the matter were remitted to plenary hearing, there would be no prejudice to the bank, as there was a receiver in place over a number of the properties and he was getting ongoing rent thereon.

The Applicable Law
71. The defendant relied on the decision in Bank of Ireland v. Educational Building Society [1999] 1 IR 220, and in particular to the following portion of the judgment of Barron J. at p. 233:-

“This Court does not have to decide whether these submissions or any of them will ultimately succeed. It is sufficient that the defendant should not be shut out from making a bona fide case: see First National Commercial Bank plc v. Anglin [1996] 1 I.R.
Usually, liberty to defend is sought upon the ground that there is an issue of fact to be determined. When the issue is solely one of law, then the court may determine that issue and give final judgment. Where, however, the court would be in a better position to determine the issue of law after a closer and fuller examination of the facts, then the defendant should be given liberty to defend.”

72. The defendant also referred to the decision in Aer Rianta v. Ryanair Limited [2001] 4 IR 607, and in particular to the following portions of the judgment of Hardiman J. at p. 621:-
    “More recent Irish authority, in my view, supports the impression gleaned from authorities from the early days of the summary judgment jurisdiction, that the defendant’s hurdle on a motion such as this is a low one and that the jurisdiction is one to be used with great care.”
    73. Having reviewed certain Irish authorities, Hardiman J. continued as follows:
    “In light of these authorities, I believe that the test for obtaining summary judgment has not changed since the early days of the procedure in the late nineteenth and early twentieth centuries. The formulation used in First National Commercial Bank plc. v. Anglin [1996] 1 IR 75 and the cases cited in that judgment are useful and enlightening expressions of the test, but I do not believe that this formulation expresses an altered criterion which is more favourable to a plaintiff than that derived from the other cases cited. The ‘fair and reasonable probability of the defendants having a real or bona fide defence’, is not the same thing as a defence which will probably succeed, or even a defence whose success is not improbable.”
    74. Further on, Hardiman J. stated as follows at p. 623:-
    “In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence”
    75. Finally, the defendant referred to Harrisrange Limited v. Duncan [2003] 4 IR 1, where McKechnie J. commented on the conclusions reached by Hardiman J. in the Aer Rianta case and stated as follows at p. 7:-
    “In his analysis of the law, Hardiman J. surveyed what might be described as the historical cases as well as the most modern authorities on this topic. His conclusion was, I think, that leave to defend should be granted unless it was ‘very clear’ that the defendant had no defence, not even one which could be described as arguable.
    From these cases it seems to me that the following is a summary of the present position:-

(i) the power to grant summary judgment should be exercised with discernible caution;

(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case, there being several ways in which this may best be done;

(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff, being mindful at all times of the unavoidable limitations which are inherent on any conflicting affidavit evidence;

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’, which latter phrase I would take as having as against the former an equivalence of both meaning and result;

(viii) this test is not the same as and should be not elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”

The plaintiff did not disagree that the authorities cited represented an accurate statement of the law in this area.
Conclusions
76. In respect of three of the agreements, being the agreements dated 31st May, 2010; 24th November, 2011; and 25th November, 2011, the second named defendant’s handwriting expert, Mr. Madden, has stated that in his opinion, the signature of the second named defendant appearing on the said agreements, is her genuine signature. It seems to me that in respect of those agreements, the second named defendant has not established even an arguable defence. Her primary line of defence is that she did not sign these agreements. However, her own expert, has come to the conclusion that she did, in fact, sign the documents. In these circumstances, the plaintiff cannot elect to accept only those findings made by Mr. Madden, which are favourable to her case. It seems to me that once she puts his report in evidence, she is bound to accept both the positive and negative findings therein.

77. It seems to me that the plaintiff is entitled to judgment in respect of the sums claimed under these three agreements.
78. The plaintiff has also raised a number of ancillary defences. Firstly, she argues that the servants or agents of the plaintiff failed to explain the extent and nature of the liabilities under the various credit agreements and loan facilities. I do not accept there was any such obligation on the plaintiff bank. The plaintiff was dealing with adult customers of the bank, who were entering into a commercial transaction. I do not see how there can be any obligation on the bank to explain the extent and nature of any liabilities that may have been undertaken by the second named defendant in the circumstances.
79. Secondly, the second named defendant alleges that there was negligent misrepresentation made to her by the plaintiff and the plaintiff was therefore estopped in equity from enforcing the alleged liabilities as against her. I accept the submissions of counsel on behalf of the plaintiff, to the effect that it is not sufficient for the second named defendant merely to make an allegation in this regard. She has not identified what actual misrepresentation was allegedly made, by whom it was allegedly made or when it was made. In the circumstances, I do not see this as being an arguable defence to the plaintiff’s action.
80. Thirdly, the second named defendant argued that there was a duty on the plaintiff to advise her to get independent legal advice prior to entering into the loan agreements. No authority was cited by the second named defendant to support this proposition. It may have been that if the second named defendant had been a vulnerable person, or had been acting under the undue influence of her husband, which fact was known or ought to have been known to the plaintiff, then it could be argued that there was a duty on the bank to ensure that she had independent legal advice prior to entering into the contracts. However, no such assertion is made by the second named defendant in these proceedings. In the circumstances, I do not see that the plaintiff was under any duty to ensure that the second named defendant had independent legal advice prior to entering into the contracts.
81. Finally, the second named defendant has resisted judgment on the basis that she wishes to cross examine the plaintiff’s deponent, Ms Jo Ann Shannon. It seems to me that the second named defendant cannot just state that she wishes to cross examine a witness and that this is sufficient to prevent the plaintiff from obtaining summary judgment against her. She must establish that she has an arguable defence and that cross examination is necessary to determine the issues of fact that arise as part of the arguable defence put forward by the second defendant.
82. I am satisfied that in relation to the agreements where the signature of the second named defendant has been held by Mr. Madden as being genuine, the plaintiff is entitled to judgment on foot of these agreements. Accordingly, the plaintiff is entitled to the sum of €801,767.98, as against the second named defendant pursuant to the loan agreement dated 31st May, 2010. In addition, the plaintiff is entitled to interest on the sum of €801,767.98, at the base lending rate varying plus 3% per annum, including a funding premium of 1.4% from 6th February, 2014, to today’s date. Under that agreement, interest on account No. 93638301852658, was accruing at the rate of €9.75 per day and at the rate of €59.87 per day on account No. 93638306456141. For the period, 7th February, 2014 to 15th March, 2016, that gives a total figure for interest of €53,398.54. This gives rise to a total sum of €855,166.52 due under the agreement dated 31st May, 2010. The plaintiff is entitled to judgment in respect of this sum.
83. The plaintiff is entitled to the sum of €8,920.76, against the second named defendant in respect of the loan agreement dated 24th November, 2011. In addition, the plaintiff is entitled to interest on the sum of €8,920.76, at the base lending rate varying, plus 3% per annum from 6th February, 2014 to today’s date. Interest was accruing at the rate of €0.77 per day. For the period 7th February, 2014 to 15th March, 2016, the amount of interest due is €590.59. This gives a total sum of €9511.35, due under the agreement dated 24th November, 2011. The plaintiff is entitled to judgment for this sum.
84. Finally, the plaintiff is entitled to the sum of €158,240 against the second named defendant pursuant to the loan agreement dated 25th November, 2011. In addition, the plaintiff is entitled to interest on the sum of €158,240.00, at market related rate plus 1% per annum from 8th September, 2014, to today’s date. Interest was accruing at the rate of €5.70 per day. For the period 9th September, 2014 to 15th March, 2016, the amount of interest due is €3,157.80. This gives a total sum of €161,397.80, due under the agreement dated 25th November, 2011. The plaintiff is entitled to judgment for this sum.
85. In total, the plaintiff is entitled to judgment against the second named defendant in the sum of €1,026,075.67.
86. I will remit the plaintiff’s action in respect of the remaining agreements, being the agreements dated 17th June, 2005; 28th March, 2007; and 21st March, 2011, to plenary hearing. While I appreciate that in respect of the first of these agreements, being the agreement dated 17th June, 2005, Mr. Madden did not have the opportunity to examine the original of the agreement, it is nonetheless appropriate that the claim under this agreement be remitted to plenary hearing. It is my opinion that in respect of the latter two agreements, the plaintiff has raised an arguable defence, to the effect that her signature was forged on the relevant agreements. Therefore, it is appropriate to remit the proceedings on foot of these agreements to plenary hearing.

NALM v Kelleher

[2016] IECA 118
JUDGMENT delivered on the 15th day of April 2016 by Ms. Justice Finlay Geoghegan
1. This appeal raises an important point of procedure which does not appear previously to have been the subject of a written judgment. Further it is agreed between the parties that the point was not expressly adverted to in submission to the trial judge before judgment.

2. The point is as follows. Where, on an application by a plaintiff for summary judgment the defendant seeks leave to defend upon two grounds: (i) a pure defence and (ii) a defence by way of set off of a counterclaim for damages and the judge determines that the pure defence meets the arguable threshold, but the defence in reliance on the counterclaim does not, has the court in remitting the matter to plenary hearing with leave to defend upon the pure defence jurisdiction to preclude the defendant raising the counterclaim and if so, what are the criteria according to which such a decision should be made.
3. The issue arises in this appeal, upon the following facts. The plaintiff issued a summary summons seeking judgment for €46,834,472.35 pursuant to guarantees given by the defendant originally to Irish Bank Resolution Corporation Limited of facilities advanced to companies of which the defendant was the ultimate beneficiary.
4. The plaintiff brought a motion seeking entry to the Commercial List and summary judgment against the defendant in the usual way. The proceedings were entered in the Commercial List and a significant number of affidavits were exchanged on the application for summary judgment.
5. The defendant does not dispute the guarantees entered into nor the amounts owing on the guaranteed facilities. He asserted two defences to the claim against him:

(i) the plaintiff is estopped from enforcing the guarantees by reason of representations made that if the defendant cooperated with the plaintiff, which he maintains he did, that it would not enforce the guarantees. This defence was referred to as the estoppel defence.
(ii) the defendant as the ultimate beneficiary of companies collectively referred to by the plaintiff as the “Shelbourne Connection” has a counterclaim against the plaintiff for damages by reason of certain actions of the plaintiff which diminished the value of assets held by companies within the Shelbourne Connection such that the companies were unable to discharge the amounts due on the facilities and also the defendant as ultimate beneficiary is unable to discharge the amounts due under the guarantees. Alternatively it was contended that the amount of the damages recoverable on the counterclaim exceeded the value of the claim against which it might be set off.

High Court hearing and judgment
6. The summary judgment application was heard over two days in the High Court by Fullam J. upon significant affidavit evidence and exhibits. It was not in dispute that the defences sought to be raised had to meet the threshold of arguability or a bona fide defence in accordance with cases such as Aer Rianta v. Ryanair [2001] 4 IR 607.
7. Fullam J. delivered a written judgment on the 24th February, 2015, in which he identified the two defences raised and having analysed the estoppel defence, concluded that the defendant had an arguable defence on that ground. That finding was not in dispute before this Court.

8. The position in relation to the second ground of defence in reliance upon the counterclaim relating to the Chicago Spire is more complex.
9. The trial judge at paras. 42 and 43 of his judgment set out the defence being advanced and his initial analysis of same in the following terms.

“42. The defendant’s case is that the plaintiff recklessly sold the Spire loan at a gross undervalue for a price of $35 million when the face value of the loan was in excess of $90 million. He says that had the matter been handled properly the site would have realised the sum of $350 million which would have enabled him to clear his indebtedness in respect of the Spire loan and also his liabilities under the Cratloe and Modillion guarantees. Instead, as a result of the sale of the Spire loan in June, 2013, he has been deprived of the opportunity to clear his indebtedness under the Spire loan and the Cratloe and Modillion guarantees.
43. The effect of the plaintiff’s contention is that he has a counterclaim for damages which is more than sufficient to offset against any liability under the guarantees in these proceedings. To succeed with such a counterclaim, the defendant acknowledges that he has to establish that ss.10, 11 and 12 of the Act of 2009 impose obligations on NAMA which are more onerous than the normal duties of a mortgagee as set out in Silven Properties Limited v. RBS plc [2004] 1 WLR 997 and approved by the Supreme Court (sic) in Dellway.”

It was common case on appeal that the trial judge intended to refer to the High Court judgment of the Divisional Court in Dellway Investments Limited v. NAMA [2011] 4 I.R. 1 and in particular pp. 76 to 77 rather than the Supreme Court. Nothing turns on this.
10. The trial judge appears to have treated the second defence as one dependent on a counterclaim. He first considered the counterclaim asserted in reliance upon ss. 10, 11 and 12 of the National Assets Management Agency Act 2009 and at para. 49 of his judgment stated:-

“In my view, these provisions do not impose additional duties on NAMA towards debtors, guarantors or mortgagors over and above the duties of an ordinary mortgagee in respect of the management and realisation of bank assets.”
11. A question has arisen as to whether in the light of the above conclusion that issue is or is not to be considered res judicata between the plaintiff and the defendant herein. This was referred to rather than argued before this Court and it is not necessary to express any view on it for the purposes of the appeal. I only wish to indicate that for the purposes of deciding the appeal I am treating the decision of the trial judge as being that the defendant did not reach the Aer Rianta threshold of arguability on the issue as to whether ss.10, 11 and 12 of the Act of 2009 impose obligations on NAMA (or the plaintiff) which are more onerous than the normal duties of a mortgagee as set out in Silven Properties Limited.
12. Notwithstanding his conclusion on the 2009 Act, the trial judge then continued to consider the affidavit evidence in relation to the alleged sale of the Spire loan at an undervalue. Having done so at para. 56 of his judgment, he concluded:-

“. . . It is clear from the evidence that, even if the Court accepted the defendant’s submission, that the Act imposed additional obligations on the plaintiff, the sale of the Spire loan in June, 2013 could not have generated sufficient monies to enable the defendant clear his indebtedness arising from the guarantees subject of these proceedings.
In the circumstances, there is no reality in this defence.”
13. The final conclusion of the trial judge was:-

“57. Using the test prescribed by Hardiman J. in Aer Rianta v. Ryanair Ltd. [2001] 4 IR 607:

‘Is it very clear the defendant has no case?”

58. I answer that in the negative in respect of the estoppel defence and in the affirmative in respect of the counter claim for damage to assets.
    I will remit the case for plenary hearing on the first issue, namely that of estoppel.”
    14. The defendant on the 25th March, 2015, sought clarification, from the trial judge as to his entitlement to pursue in the plenary proceeding the counterclaim seeking damages for the alleged wrongful actions of the plaintiff. Counsel on his behalf informed this Court, as is apparent from the transcript of a hearing before the trial judge of the 25th March, 2015, that clarification was sought because they did not want to appear to be going behind his judgment on the summary judgment application in pleading a counterclaim. The submission made on behalf of the defendant was that the counterclaim was a claim which he was entitled to pursue pursuant to his constitutional right of access to the courts and that he could pursue it by a separate writ issued but wished to do so by way of counterclaim in the proceedings remitted for plenary hearing. On behalf of the plaintiff it was contended that the second defence advanced was always dependent on the counterclaim; hence even if the defendant were now permitted to pursue the counterclaim the plaintiff would be pleading that it was res judicata. The plaintiff further submitted that the only live issue permitted to remain in the proceedings was the defence of estoppel.
59. The trial judge agreed with the latter submission of counsel for the plaintiff that “on the basis of the judgment given on the 24th February, the only matter that can be pleaded either in defence or by way of counterclaim . . . is the question of estoppel”.
60. It appears that following that hearing on the 25th March, the order of the 24th February, 2015, was perfected and provides:-

“It is ordered that this action insofar as the point of estoppel is concerned do stand adjourned for plenary hearing as if these proceedings had been commenced by plenary summons.”

Appeal
17. The defendant in the notice of appeal and in the written submissions contended that the High Court does not have jurisdiction to limit the defences which may be raised by a defendant once the court has made an order remitting the entire of the claim to plenary hearing. He did so primarily in reliance upon a judgment of Charleton J. in the High Court in Galvin v. Souter Enterprises Limited [2010] IEHC 215, in which at para. 19, he stated that he was “not entitled to confine the defendants to particular defences”. Nevertheless in doing so Counsel for the defendant recognised that a different view had been taken by Clarke J. in the High Court in G.E. Capital Woodchester Limited v. Aktiv Kapital, Asset Investment Limited and Aktiv Kapital ASA [2009] IEHC 512 and by me in the High Court in Bussoleno Limited v. Kelly [2011] IEHC 220; [2012] 1 ILRM 81 and by Cooke J. in IBRC v. Halpin [2013] IEHC 492.
18. The point, whilst not pressed was not abandoned at the oral hearing and I have therefore reconsidered the issue having regard in particular to the view expressed by Charleton J. in Galvin v. Souter Enterprises which I think may not have been drawn to my attention when I decided Busoleno Limited v. Kelly [2011] IEHC 220; [2012] 1 ILRM 81, in the High Court.

19. Having reconsidered the matter I remain of the view that where on an application for summary judgment the court decides that the defendant has raised an arguable defence to the entire claim such that the court decides to adjourn the full claim for plenary hearing the court may also limit the defences which may be pleaded to those which have met the threshold identified by the Supreme Court in Aer Rianta v. Ryanair and the judgments referred to therein. This conclusion stems from the nature of summary proceedings and the provisions of O. 37, of the Rules of the Superior Courts.
20. The summary summons procedure, in general, may be used where a plaintiff seeks to recover a debt or liquidated demand. As stated by Lavery J. in Prendergast v. Biddle (Unreported, Supreme Court, 31st July, 1957) the procedure “is provided in order to enable speedy justice to be done in particular cases where there is either no issue to be tried or the issues involved are simple and capable of being easily determined”. Peart J. more recently has explained the procedure in Motor Insurers Bureau of Ireland v. Hanley [2006] IEHC 405, [2007] 2 I.R. 591, as being one which provides “a simple, informal, expeditious and inexpensive method of obtaining a final judgment”. Whilst the procedure in Order 37 and case law relating thereto provides for such speedy justice or expeditious method of obtaining a final judgment in those cases where there is no issue to be tried, they also set out a procedure which permits a plenary hearing in relation at least to certain issues where a defendant, in the initial procedure raises a bona fide or arguable defence to part or all of the claim. The motion for liberty to enter final judgment or for summary judgment is the filter mechanism through which such balance is achieved.
21. Order 37, r. 1, requires the motion for summary judgment to be supported by “an affidavit sworn by the plaintiff or by another person who can swear positively to the facts showing that the plaintiff is entitled to the relief claimed and stating that in the belief of the deponent there is no defence to the action”. A defendant who wishes to show cause against such motion is required to do so pursuant to rule 3 by affidavit and such affidavit must state “whether the defence alleged goes to the whole or part only, and (if so) to what part, of the plaintiffs claim”.
22. Order 37, r. 7 and 10, are most relevant to the Court’s general jurisdiction on hearing the motion for summary judgment. These provide:

“7. Upon the hearing of any such motion by the Court, the Court may give judgement for the relief to which the plaintiff may appear to be entitled or may dismiss the action or may adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings or discovery or settlement of issues or otherwise as may be appropriate, and generally may make such order for determination of the questions in issue in the action as may seem just.
. . .

10. Leave to defend may be given unconditionally or subject to such terms as to give security, or time and mode of trial or otherwise as the Court may think fit.”
11. Rule 8 makes express provision for the granting of judgment for part of a claim and permitting a defendant to defend only as to the residue of the plaintiff’s claim. Rule 9 expressly permits judgment to be given against one defendant only and to remit a claim against other defendants who set up a good defence. Notwithstanding that rules 8 and 9 make express provision for those two situations it appears to me that the general jurisdiction given to the Court to give directions under rule 7 and under rule 10 to grant leave to defend “subject to such terms as to . . . or otherwise as the court may think fit” gives the Court discretion to grant leave to defend subject to terms which provide for a fair and efficient hearing for all parties of the issues in dispute having regard to the claim in the summary summons and any bona fide defence raised by the affidavits. Such an approach is in the interests of the good and fair administration of justice. Where a defendant in the affidavit sworn pursuant to O. 37, r. 3, purports to “show cause” in the sense to indicating the availability of two or more arguable or bona fide defences and upon the hearing of the motion the Court decides that only one defence is arguable or bona fide, then it is consistent with Order 37 and the filter procedure envisaged for claims permitted to be commenced by summary summons and the fair, efficient and cost effective administration of justice that the Court may impose terms restricting the defence to that which meets the bona fide or arguable threshold. They are the issues which have been determined to be in dispute in the proceedings and which require a plenary hearing. To conclude otherwise would undermine the balance sought to be achieved by the procedure of Order 37.
    24. Accordingly, in my view the trial judge herein was entitled on adjourning the plaintiff’s claim to plenary hearing to impose a term as a condition of the leave to defend, that the defendant might only plead the defence which he decided met the bona fide threshold.
12. The further question is where, as in this instance, leave to defend in relation to one defence which is a pure defence is granted but a second defence in reliance upon an alleged entitlement to set off a counterclaim is not considered to meet the bona fide threshold may the Court not only preclude the second defence being pleaded but also impose a term precluding the defendant from raising the counterclaim as a pure counterclaim?
13. Counsel for the defendant submitted that even if the Court on hearing the motion for summary judgment may in remitting a summary claim for plenary hearing restrict the defences to a single defence it had no jurisdiction to preclude the bringing of the counterclaim by the defendant. He submits that pursuant to Order 37 the plaintiff’s claim has now been remitted for plenary hearing “as if it had been commenced by plenary summons”. Accordingly, he contends that the defendant may pursuant to O. 19, r. 2, plead with his defence a counterclaim. O. 19, r. 2 provides:

“A defendant in an action may set-off, or set up by way of counterclaim against the claims of the plaintiff, any right or claim, whether such set-off or counterclaim sound in damages or not, and such set-off or counterclaim shall have the same effect as a cross action, so as to enable the Court to pronounce a final judgement in the same action, both on the original and on the cross claim. But the Court may, on the application of the plaintiff before trial, if in the opinion of the Court such set-off or counterclaim cannot be conveniently disposed of in the pending action, or ought not to be allowed, refuse permission to the defendant to avail himself thereof.”
27. Counsel for the defendant acknowledges that the Court would have jurisdiction pursuant to O. 10, r. 2, to preclude the pursuit of the counterclaim in the present proceedings but submits that any such decision would have to be made subsequent to the delivery of the counterclaim and different considerations apply. Further he recognises that an application could be made by the plaintiff to strike out the counterclaim on the grounds that it discloses no reasonable cause of action pursuant to O. 19, r. 28 or the inherent jurisdiction of the court, but again it is submitted that different principles apply.
28. The real question appears to me to be whether the jurisdiction given to the court upon the hearing of an application for summary judgment pursuant to O. 37, r. 10 is sufficiently wide to permit it to make an order, as a condition of leave to defend, precluding a defendant setting up a counterclaim. My conclusion is that the court does have such a jurisdiction.

29. Order 19, sets out the rules which apply, in general, to pleadings. Order 37 applies specifically to summary proceedings. Further, O. 37, r. 7, whilst providing that the court may adjourn the case for plenary hearing “as if the proceedings had been originated by plenary summons” also expressly gives the court jurisdiction to make “such directions as to pleadings . . . as may be appropriate” and also more generally to make “such order for determination of the questions in issue in the action as may seem just”.
30. In my judgment O. 37, rules 7 and 10, together give the Court a wide discretion to make orders in relation to pleadings including orders which both restrict defences which may be raised and also restrict the pursuit of a counterclaim where this appears appropriate for the fair determination of the plaintiff’s claim having regard to the real or bona fide issues in dispute as determined by the claim in the summons and the decision made by the court at the time of the motion for summary judgment on the affidavit evidence in relation to the claim and any defence and counterclaim sought to be advanced by the defendant. In particular, where as in this instance the defendant has sought to advance a defence which is dependent upon an asserted entitlement to set off of a counterclaim and on the motion for summary judgment the High Court judge has determined that the substance of the counterclaim does not meet the Aer Rianta threshold then the Court has jurisdiction and is properly entitled to conclude that the plaintiff is entitled to have its claim against the defendant determined in proceedings where the only issues in the proceedings should be those which are required to be determined by reason of a bona fide defence which has met the requisite Aer Rianta threshold. Such an approach is consistent with the general powers given to the court pursuant to O. 37, r. 7 and 10 which appear aimed at ensuring that a claim which is of a type which may be brought by summary summons proceeds to final determination in an efficient and cost effective manner whilst having regard to the right of a defendant to pursue in a full plenary hearing either a defence which meets the bona fide threshold or in certain circumstances a counterclaim which also meets the same threshold both as to its substance and as to its entitlement to be set off against the plaintiff’s claim.
31. The Court was referred to applicable principles set out by Clarke J. in the High Court in Moohan v. S. & R. Motors (Donegal) Limited [2007] IEHC 435, [2008] 3 IR 650 at p.656 where on an application for summary judgment the single defence advanced is one to set off a counterclaim or cross claim. Whilst those principles do not determine the questions at issue on this appeal nevertheless the judgment is of assistance. It indicates, I would respectfully say correctly, that when as in these proceedings a defendant contends for a bona fide defence which is to set off a counterclaim or cross claim there are two separate questions which the court must address in considering whether the defence meets the Aer Rianta threshold. A court must consider both whether the connection between the plaintiff’s claim and the counterclaim or cross claim of the defendant is such as to establish a prima facie entitlement of the defendant to set off in equity the amount recoverable on the counterclaim and also whether or not the substance of the counterclaim itself reaches the arguable or bona fide threshold. Both questions must be answered in favour of the defendant to establish a bona fide defence. Unless the counterclaim or cross claim itself meets the Aer Rianta threshold irrespective of the position in relation to set off it cannot constitute a prima facie defence.
32. In his judgment Fullam J. considered the substance of the counterclaim and concluded (at minimum) that it did not meet the Aer Rianta or bona fide threshold. In those circumstances it was unnecessary for him to consider in any detail the entitlement to set off any amount which might be recoverable pursuant to the alleged counterclaim.
33. The parties accept that they did not make submissions to the trial judge as to the consequences of his finding that the estoppel defence met the Aer Rianta threshold, but concluding that the defence reliant upon the counterclaim did not. Obviously, it would have been preferable that the parties had considered and made submissions on such an outcome at the first hearing. If that had been done the trial judge would have had the opportunity of considering explicitly what is undoubtedly a separate and distinct question as to whether in addition to restricting the defences to the single estoppel defence he should also make an order precluding the defendant from making any counterclaim in the proceedings and in particular the counterclaim which he had rejected as meeting the Aer Rianta threshold.
34. The parties indicated to this Court, that if it found that there was jurisdiction to make an order pursuant to O. 37, preventing the defendant raising a counterclaim in the proceedings, that the question of whether such a restriction should be imposed on the facts herein should not be remitted to the High Court but that this Court should now determine the issue on this appeal.
35. In summary the defendant submits that the facts upon which he proposes relying for the estoppel defence includes facts relating to the sale of the Chicago Spire loan and that there is therefore a significant potential overlap between the factual basis of the defence he is permitted to pursue and the counterclaim in respect of which he submits he has a constitutional right of access to the courts and which he could now pursue in separate proceedings. The plaintiff disputes this and refers not only to the issues raised by the 2009 Act and the position of the plaintiff but also to further objections it made in the High court to the counterclaim being sought to be advanced by the defendant. These include that the assets which it is alleged were diminished in value are not assets personally owned by the defendant but by companies which are separate legal persons and in whom any such alleged claim vests.
36. In my judgment, the counterclaim which the defendant seeks to pursue raises a significant number of issues both legal and factual which do not arise on the estoppel defence as pleaded and the Reply delivered thereto. It appears probable that if the defendant were permitted to pursue the counterclaim in the proceedings it would greatly increase the issues, both legal and factual and hence increase the costs and time required to hear and decide the proceedings. In circumstances where the trial judge concluded, at minimum, that the substance of the counterclaim did not meet the Aer Rianta threshold and having regard to the nature of the counterclaim and the nature of the plaintiff’s claim and the fact neither the guarantees nor the amounts are in dispute I have concluded that it is in the interest of justice that the plaintiff’s claim be determined in proceedings where the only issues which may be pursued are those pursuant to the estoppel defence which is considered to have met the Aer Rianta threshold.
37. Accordingly, I would dismiss the appeal.

JUDGMENT OF MR JUSTICE MICHAEL PEART DELIVERED ON THE 15TH DAY OF APRIL 2016

1. This is an appeal against an order made by Fullam J. in the Commercial Court on the 24th February 2015 when he adjourned these summary summons proceedings to a plenary hearing, but limited to the single issue as to whether NAMA is estopped from enforcing certain guarantees against Mr Kelleher by virtue of alleged representations made and assurances given to him after the underlying loans had been transferred into NAMA and while he was engaging with NAMA in relation to the security assets.
2. In the proceedings NAMA seeks to recover a sum in excess of €46 million plus interest from Mr Kelleher on foot of his guarantees which were executed as part of the security provided for certain loans advanced by former Anglo Irish Bank to corporate entities, together known as the ‘Shelbourne Connection’ of which Mr Kelleher is in reality the beneficial owner.
3. The guarantees were given firstly in respect of a loan facility dated 16th June 2005 granted to CWD Properties Ltd to assist with its development of lands at Cratloe, Co. Limerick (‘the Cratloe Facility’), and secondly in respect of loan facilities granted to certain entities within the Shelbourne Connection to assist with their development projects in Dublin and in Belgium (the ‘Modillion Facilities’). The total indebtedness of these corporate entities on foot of these facilities runs to almost €260 million. However, the liability of Mr Kelleher on foot of his guarantees is capped at €50 million.
4. The issue on the appeal is whether the defendant ought to have been permitted by the trial judge to raise by way of a counterclaim one of the issues which he had raised by way of defence in his replying affidavits, but which was found by the trial judge not to meet the test in Aer Rianta v. Ryanair [2001] 4 IR 607, or to put it another way, whether the trial judge was entitled to preclude the defendant from pursuing what he now submits is essentially a counterclaim rather than a defence, and therefore not an issue which requires to pass the Aer Rianta test at all.
5. That issue sought to be raised by way of counterclaim is whether NAMA breached its duty as mortgagee and in particular the duty imposed upon NAMA by sections 10 and 11 of the NAMA Act, and by doing so wrongly exposed the defendant to a liability on foot of his guarantees. In general terms Mr Kelleher argued before Fullam J. that NAMA sold what has been referred to as the Chicago Spire loan at a fire sale price, and that by failing to maximise the real potential value of the proposed Chicago Spire development which, if achieved, would have enabled all of the Shelbourne Connection loans to be repaid in full, he was left with a liability under his guarantees which he ought not and would not have otherwise had.
6. For the avoidance of any doubt I should make clear that the guarantees on foot of which Mr Kelleher is sued in these proceedings did not form part of the security for any of the loans made in respect of the Chicago Spire development, and were confined to the Cratloe facility and Modillion facilities.
7. NAMA’s motion for summary judgment was heard on affidavit over three days. The transcripts of those days’ hearings have been made available on this appeal. It is clear from a reading of those transcripts that the issue arising from the sale of the Chicago Spire loan at an undervalue was argued as being a ground of defence. It was not referred to as being a counterclaim before the trial judge until after judgment had been given, and only when counsel for the defendant sought a clarification from Mr Justice Fullam as to whether his ruling was intended to limit the plenary hearing to the estoppel issue alone, and that he was precluding the defendant from bringing a counterclaim for damages arising from the sale of the Chicago Spire loan. The trial judge made it clear that this was his intention. In his written judgment, having examined the ground put forward in respect of this issue, he had concluded that “in the circumstances there is no reality in this defence”, and by reference to the Aer Rianta test – is it very clear the defendant has no case? – he answered this question in the negative in respect of the estoppel issue but in the affirmative in relation to the Chicago Spire loan issue.
8. It is accepted on both sides that when the matter was argued in the High Court the question of how the counterclaim should be dealt with in the event that the matter was being sent forward to plenary hearing on the estoppel defence was not addressed specifically, though in written submissions reference had been made to cases such as Prendergast v. Biddle, unreported, Supreme Court, 31st July 1957, and to the judgment of Clarke J. in the High Court in Moohan v. S & R Motors (Donegal) Limited [2008] I.R. 650. Nevertheless, the trial judge was clearly alert to the fact that in reality the Chicago Spire issue is a claim for damages (i.e. a counterclaim) rather than a defence to the plaintiff’s claim on the guarantees, as he stated at the outset of his consideration of it in his judgment at para. 43:-

“43. The effect of the plaintiff’s [sic] contention is that he has a counterclaim for damages which is more than sufficient to offset against any liability under the guarantees in these proceedings. To succeed with such a counterclaim, the defendant acknowledges that he has to establish that ss. 10, 11 and 12 of the Act of 2009 impose obligations on NAMA which are more onerous than the normal duties of a mortgagee as set out in Silven Properties and approved by the Supreme Court in Dellway.”
9. During the course of his judgment, Fullam J. referred to the valuation evidence put forward by the defendant which put the potential value of a completed Chicago Spire development at $350 million, and to the evidence put forward by NAMA’s valuer, which included an averment that even if the defendant’s valuations were accepted in full and on a gross basis i.e. $350 million for the Chicago Spire development and $50 million for the secured assets of the Shelbourne Connection, there would still remain a nett liability of €98 million, which would still leave the defendant exposed to the maximum liability under his guarantees. It was in such circumstances that the trial judge expressed his conclusion that “there was no reality in this defence”, and following the delivery of judgment made it clear that he was refusing to allow the issue to be raised even as a counterclaim.
10. The defendant submits that the trial judge erred in concluding that there was no reality to the counterclaim, and in excluding it as an issue in the plenary hearing. He emphasises on this appeal that the Chicago Spire issue is not a defence as such to the plaintiff’s claim, but is rather an independent claim or cross-claim for damages which, if successful, would entitle him to an equitable set-off against any sum found to be due to the plaintiff. As such, it is submitted, it is a separate claim which could, if necessary, be brought against the plaintiff in separate proceedings without any leave of the court. However it is submitted that since it is closely linked to the plaintiff’s claim, and the evidence supporting the estoppel defence will be relevant to the Chicago Spire loan issue, at least in part, it would be convenient, including by way of saving in court time and costs, for it to be litigated as part of the plaintiff’s proceedings which have in any event been sent forward to plenary hearing on the estoppel issue.

11. The defendant has submitted that where the Court hears a contested motion for judgment in summary proceedings, the question to be determined on that motion is confined to whether the defendant has established the probability that he has a bona fide defence, or, as it is put in Aer Rianta “whether it is very clear that the defendant has no defence”. It is submitted that this does not involve any engagement with the merits or otherwise of any counterclaim which the defendant may wish to bring, whether it is raised on the replying affidavits or not, and that where a plenary hearing has been directed with appropriate directions as to delivery of statement of claim (if required) and defence (in this case on the issue of estoppel) the defendant may include a counterclaim as of right, since in any event he could bring that claim in separate proceedings without any leave to do so from the Court.
12. The plaintiff has made it clear that in the event that new separate proceedings are issued in order to litigate the counterclaim, it will argue that the issues raised by way of counterclaim are res judicata as a result of the finding of Fullam J. that there is no reality to the claims and his refusal to permit it to be litigated in these proceedings. Indeed at para. 3 of its Reply to Defence delivered on 13th April 2015 in answer to the defendant’s Defence (limited to the estoppel, but nevertheless referencing the Chicago Spire issue) the plaintiff has pleaded that the defendant is precluded from relying in any way upon matters related to the Chicago Spire because they are res judicata. The defendant submits that these issues could not be considered res judicata given the very limited consideration of them which can take place on a motion for judgment heard only on affidavit evidence, but that in the light of that plea made by the plaintiff, it is all the more necessary that the defendant be permitted to make his case for damages by way of counterclaim in the present proceedings, rather than be met with a res judicata plea in any new proceedings. In reality, however, even if this matter is permitted to be pleaded in these proceedings by way of counterclaim, the plaintiff could still bring a motion to have the counterclaim struck out on the basis that the issue is res judicata, since if this Court was to permit the counterclaim to be pleaded it would be doing so on a jurisdictional basis only, and not by concluding as to the merits of that counterclaim, or expressing any view as to whether it is res judicata.
13. The defendant accepts that if new proceedings were issued, the plaintiff might decide to bring an application to strike out the claim on the basis of abuse of process or that the claim is one that is bound to fail. Equally, he accepts that if he is successful in this appeal to the extent that he ought not to have been prevented from pleading the counterclaim with his Defence on the estoppel issue, he might be faced with a similar motion to strike out the counterclaim. However, while that may be something to be faced, he points to the fact that on any such application the plaintiff seeking to have the claim struck out would have to satisfy the court that taking the defendant’s case at its highest it was bound to fail or disclosed no reasonable cause of action – a test which the defendant submits is a different and more onerous test to the Aer Rianta test applied by the trial judge when excluding the counterclaim from the ambit of the plenary hearing.
14. The defendant submits that any question of assessing the merits of a defendant’s counterclaim arises only in the event that the plaintiff obtains judgment on a motion for judgment and thereafter the defendant seeking a stay on that judgment until such time as the counterclaim is determined. The Court in such circumstances would be entitled to assess the merit of the counterclaim as part of the exercise normally to be undertaken when deciding whether or not to grant a stay, but that it does not arise where the plaintiff’s claim is being adjourned to a plenary hearing in any event, as in the present case.
15. In this regard, Michael Cush SC for the defendant has referred to the judgment of Clarke J. in Moohan v. S & R Motors (Donegal) Limited [supra] where he considered how a cross-claim which might give rise to an equitable set-off was to be treated in a case where there was no defence as such found to pass the Aer Rianta test, and where the plaintiff was entitled to judgment on his claim against the defendant. That consideration involved a consideration of the judgment of Kingsmill Moore J. in Prendergast v. Biddle [supra]. Commencing at para. 9 of his judgment, Clarke J. stated the following:

“9. Where the nature of the defence put forward amounts to a form of cross-claim slightly different considerations may apply. In those circumstances the court has a wide discretion. Where the defendant does not establish a bona fide defence to the claim as such, but maintains that he has a cross-claim against the plaintiff, then the first question which needs to be determined is as to whether that cross-claim would give rise to a defence in equity to the proceedings. It is clear from Prendergast v. Biddle (unreported, Supreme Court 31st July 1957) that the test as to whether a cross-claim gives rise to a defence in equity depends upon whether the cross-claim stems from the same set of facts (such as the same contract) as gives rise to the primary claim. If it does, then an equitable set-off is available so that the debt arising on the claim will be disallowed to the extent that the cross-claim may be set out.
10. On the other hand if the cross-claim arises from some independent set of circumstances then the claim (unless it can be defended on separate grounds) will have to be allowed, but the defendant may be able to establish a counterclaim in due course, which may in whole or in part be set against the claim. What the position is to be in the intervening period creates a difficulty as explained by Kingsmill Moore J. in Prendergast v. Biddle … in the following terms at p. 24:-

‘On the one hand it may be asked why a plaintiff with a proved and perhaps uncontested claim should wait for judgment or execution of judgment on his claim because the defendant asserts a plausible but unproved and contested counterclaim. On the other hand it may equally be asked why a defendant should be required to pay the plaintiff’s demand when he asserts and may be able to prove that the plaintiff owes him a larger amount.’

11. The court’s discretion is to be exercised on the basis of the principles set out by Kingsmill Moore J. later in the course of the same judgment in the following terms at p. 25:

‘It seems to me that a judge in exercising his discretion may take into account the apparent strength of the counterclaim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims, the nature of their claims and also the financial position of the parties. If, for instance, the defendant could show that the plaintiff was in embarrassed circumstances it might be considered a reason why the plaintiff should not be allowed to get judgement, or execute judgement on his claim until after the counterclaim had been heard, for the plaintiff having received payment might use the money to pay his debts or otherwise dissipate it so that judgment on the counterclaim would be fruitless. I mention only some of the factors which a judge before whom the application comes may have to take into consideration in the exercise of this discretion.’

12. It seems to me that it also follows that a court in determining whether a set-off in equity may be available, so as to provide a defence to the claim itself, also has to have regard to the fact that the set-off is equitable in nature and, it follows, a defendant seeking to assert such a set off must himself do equity.
    13. On that basis the overall approach to a case such as this (involving, as it does, a cross-claim) seems to me to be the following: –

(a) it is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set-off in equity and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set-off;
(b) if and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);

(c) if the cross-claim amounts to an independent claim then judgment should be entered on the claim but the question of whether execution of such judgments should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle … ”.

16. Mr. Cush Submits accordingly that the merit or strength of the cross-claim comes into play only when the Court is being asked to consider the question of a stay on a judgment to which the plaintiff is otherwise entitled to, and that it is clearly envisaged that even though the defendant may not be permitted to defend the plaintiff’s claim, he may nevertheless litigate a counterclaim, the only question then remaining being whether or not the plaintiff’s judgment should be stayed in the meantime, that being a matter for the Court’s discretion. However, as Mr Cush emphasises, there is no question of a stay in the present case as it has been adjourned to plenary hearing on the estoppel issue in any event, so the Court is not concerned as to how to exercise that discretion, and is confined to considering whether the defendant can be shut out from having the cross-claim litigated as a counterclaim in the present proceedings.
    17. Declan McGrath SC for NAMA submits first of all that throughout the hearing of the motion for judgment in the High Court the Chicago Spire issue was dealt with only as a point of defence and not dealt with as a counterclaim, and that the defendant ought not now be entitled to argue on a different basis now. In a strict sense that is correct. However, I noted on going through the transcripts of the hearing in the High Court that towards the end of his submissions moving the motion, Brian O’Moore SC for NAMA, having made reference to Prendergast v. Biddle and to Moohan v. S & R Motors, and to what he considered to be the weakness of the Chicago Spire issue, stated the following at page 60, Day 2:

“So even if, I have given many reasons why he shouldn’t be, but even if Mr Kelleher is in a position to assert either directly or through SDWS some entitlement in relation to the Chicago Spire the appropriate order is summary judgement and then some directions as to a counterclaim that may be, or an independent claim that may be pursued. But in truth I don’t press that, judge, because it seems in our submission clear that nothing in relation to the Chicago Spire stacks up as a defence, still less as a counterclaim. It is simply extending the procedure to facilitate a claim being made in that regard even if summary judgement is granted against Mr Kelleher now, that option may be open to the Court but we say on the facts and on the legal status, sorry, on the legal authorities that that would not be the preferred option as far as NAMA is concerned.”
18. In the immediate aftermath of that submission, he went on at the judge’s invitation to expand further on that matter, and said:
“Well if the Court was of the view that a claim in relation to the Chicago Spire could be maintained taking into account all of the provisions set out by Mr Justice Clarke and Mr Justice Kingsmill Moore, then the appropriate step would be to enter judgment against Mr. Kelleher and then hear the parties about the circumstances and directions required for the maintenance of the counterclaim, or sorry the claims. It is not in truth a proper counterclaim. But what Prendergast v. Biddle makes clear is that the giving of any such directions in no way prevents execution on the summary judgment. That is why the status of the plaintiff is important. Because if the plaintiff was not meant to be a mark on the independent claim there may be some restriction on the summary judgment being executed but here that simply isn’t the case, because NAMA is clearly a mark on any view.”
19. That exchange with the trial judge, however, did not consider the possibility that the estoppel defence would be found to be arguable and what, in such circumstances, should become of the Chicago Spire issue in the context of it being a counterclaim as opposed to a potential defence. It was immediately thereafter that Mr Cush commenced the defendant’s submissions. He identified two issues which would be submitted to constitute prima defences, namely the estoppel issue and the Chicago Spire issue. The latter was at no stage addressed on the basis that it was in the nature of a counterclaim. At the conclusion of his own submissions which were confined to the estoppel defence, Mr Cush informed the trial judge that Shane Murphy SC would address the Court “on the detail of that second line of defence” (emphasis added) i.e. the alleged reckless sale of the Chicago Spire loan at what the defendant argues was in the order of just 10% of what he considers to have been the full potential value of that development, if its value had been maximised. The issue was then addressed by Mr Murphy solely on the basis that this issue was a potential point of defence. In fact, what is now stated to be the reality of the issue, namely that it is a counterclaim and not a defence as such to the claim on the guarantees, was not referred to at all during Mr Murphy’s submissions.
20. It is hardly surprising therefore that the trial judge examined whether that issue passed the Aer Rianta test as a bona fide defence being advanced by the defendant. In the event, he decided that while the estoppel issue met the test, the Chicago Spire issue did not. As I have mentioned already, it was only after judgment had been handed down, but before the order adjourning the case to plenary hearing on the estoppel issue was perfected that the defendant sought to raise the question of whether the order to be made excluded the possibility for the defendant to raise the Chicago Spire issue as a counterclaim. As stated already, the trial judge made it clear that on that occasion that he was not permitting the issue to be raised as a counterclaim. The order as drawn makes no reference to any counterclaim. It simply refers to the case being adjourned to plenary hearing on the single issue of estoppel.

21. In so far as the trial judge made it clear that his intention was to confine the plenary hearing to the single issue of estoppel, and that the counterclaim could not be pleaded as part of any Defence which the defendant would deliver, on the basis that there was “no reality in this defence”, the defendant appeals to this Court on the basis that the trial judge exceeded his jurisdiction under O. 37 RSC by reaching a conclusion on the merits of what was, according to the defendant’s submissions before this Court at least, not in fact a defence but rather a counterclaim, even if it was never presented to the trial judge on that basis.
22. In relation to the point made that the issue was never raised in the High Court as being a counterclaim (and therefore arguably is something which the defendant ought not now be entitled to argue on appeal) Declan McGrath SC for NAMA does not ask this Court to send the issue back to the High Court. I think that is the correct approach given the fact that it was ventilated, albeit late in the day, after the matter was raised with the trial judge between the delivery of judgment and the perfecting of the order.
    Discussion
    23. The availability to a plaintiff of a procedure by way of summary summons enables a plaintiff who is owed by a defendant a money debt which can be easily ascertained by means of arithmetic calculation to obtain judgment for that debt by a simplified procedure and therefore more expeditiously than if the claim was commenced by way of plenary summons. That was recognised by Lavery J. in Prendergast v. Biddle [supra] when he stated:

“The procedure by summary summons is provided in order to enable speedy justice to be done in particular cases where there is either no issue to be tried or the issues involved are simple and capable of being easily determined”.
24. Hence a defendant who wishes to defend against such a claim must, unlike a defendant to a plenary summons, must first satisfy the Court on a motion for judgment brought by the plaintiff, that he has a bona fide and arguable defence. This requirement ensures as far as possible, and in a way that ensures that justice is done to each party, that a plaintiff in such a claim is not unjustly delayed in getting a judgment by a defendant who either admits the debt, or merely asserts a denial of the debt without putting forward an evidential basis or otherwise substantiating the basis for his denial. O’Dalaigh J. (as he then was) emphasised the importance of this summary procedure in respect of liquidated claims in his judgment in Prendergast v. Biddle [supra] when he stated:
“That the Rules of 1926 permit a judge to enter up judgment for a liquidated sum admitted to be due is not a matter for surprise. The law attaches to a judgment debt several privileges. Moreover as payments of debts in certain circumstances are made in order of priority the prompt obtaining of judgment is also generally a matter of importance”.
25. The filter mechanism provided in O. 37 of the Rules of the Superior Courts whereby the Court may assess the merits of a defence put up by the defendant on affidavit to the plaintiff’s claim enables the Court to strike an appropriate balance between the plaintiff’s right to obtain an expeditious judgment for a debt claimed to be due, and the defendant’s right to have a reasonable opportunity to advance his defence to that claim by being given leave to defend.
26. Where the Court is satisfied that a bona fide defence is raised by the defendant on his affidavit(s) and that a plenary hearing should take place, the Court under O. 37, r. 3 of the Rules of the Superior Courts may give such directions as to pleadings, and also “may make such order for determination of the questions in issue in the action as may seem just”. It is clear that these provisions give the Court a wide discretion as to the manner in which the case proceeds to a plenary hearing in order to ensure that justice between the parties is done. The most usual order made when a bona fide defence is found to exist is one adjourning the case to plenary hearing and directing the plaintiff to deliver a statement of claim within, say, twenty one days, and permitting the defendant to deliver his defence within a similar period from the date of receipt of that statement of claim.

27. However, as was made clear by Finlay Geoghegan J. in Bussoleno Ltd v. Kelly [2012] 1 ILRM 81, where the defendant raises in his affidavits a number of different issues by way of defence to the plaintiff’s claim, the Court may decide that not all the issues raised are sufficiently substantiated by evidence or arguable in order to pass the test, and in such circumstances the Court may limit the defence of the claim to a specific issue or issues, as indeed happened in the present case where Fullam J. directed a plenary hearing but confined to the single issue of estoppel.
28. There can, of course, be cases where not only does the defendant raise defence to the claim, but indicates that he has in addition to a defence a counterclaim which he wishes to have heard at the same time as the plaintiff’s claim. ,Where such a counterclaim arises from, say, the same contract on foot of which the plaintiff sues, little difficulty arises in deciding that it is convenient for the counterclaim to be permitted to be determined as part of the proceedings sent for plenary hearing. ,For example, the plaintiff, a builder, may sue for money due on foot of a contract to build a house for the defendant. While, strictly speaking, there is no defence as such to the amount claimed by the plaintiff on foot of such a contract the defendant may seek to counterclaim for damages for bad workmanship, and set off those damages against the amount due under the contract. Such a counterclaim amounts to a defence by way of equitable set off. In such a case, there is little difficulty in concluding that it is mutually convenient for the counterclaim to be dealt with in the same plenary hearing as the plaintiff’s claim. But because the counterclaim is in reality a defence to the claim by way of equitable set off, an examination of the merits of such a counterclaim may be undertaken by the Court in deciding whether a plenary hearing should be directed in respect of that defence by way of counterclaim. Such situations have been considered in cases such as, inter alia, Prendergast v. Biddle [supra], Agra Trading Ltd v. Minister for Agriculture, High Court (Barrington J.) 19th May 1983, Soanes v. Leisure Corporation International Ltd, High Court (Geoghegan J.) 18th December 1992, McGrath v. O’Driscoll [200] IEHC, [2007] ILRM 203, and Moohan v. S & R Motors (Donegal) Ltd [2007] IEHC 435, [2008] 3 IR 650.
29. It is important to distinguish between a defence put forward by way of counterclaim, and which gives rise to an equitable set off, and a counterclaim which is in fact an independent claim, and not one which naturally arises from the same factual basis for the plaintiff’s claim. This is something which is specifically mentioned by Clarke J. in his judgment in Moohan v. S & R Motors (Donegal) Ltd in para. 13 in the passage quoted at para.15 above. He distinguishes between a cross-claim or counterclaim which amounts to a defence to the plaintiff’s claim giving rise to an equitable set off, and one which is simply an independent claim arising on different facts altogether. It is clear from what he states in his para. 13 that in respect of the former which is put up by way of a defence, the Court will assess its as a defence, and if it passes muster in that regard, the Court will not enter judgment for the plaintiff, and the defendant will be permitted to defend the claim in full. I think it would follow also that if it is clear that the maximum value of the cross-claim by way of equitable set off will be less than the amount of the plaintiff’s claim, then the plaintiff may be entitled to get judgment for part of the sum claimed, with the balance being adjourned to a plenary hearing.
30. But where the cross-claim amounts to an independent claim (i.e. arising from different facts) it is not considered to be a defence by way of equitable set off at all. That link between the plaintiff’s claim and the defendant’s counterclaim is absent. In such circumstances, as explained by Clarke J. in Moohan v. S & R Motors (Donegal) Ltd, where there is no other defence considered to exist to the plaintiff’s claim, the plaintiff will probably be found entitled to judgment on his claim, and the only further question arising will be whether that judgment should be stayed pending the determination of the defendant’s independent counterclaim, and whether that counterclaim can be more conveniently dealt with by adjourning the proceedings to a plenary hearing on that counterclaim alone, or whether, instead, the defendant should commence separate proceedings against the defendant in respect of the counterclaim. But in such a case, the Court will give judgment (with or without a stay thereon) and will adjourn the proceedings to a plenary hearing on the defendant’s counterclaim. The Court in such a case is not concerned with the merit of the asserted counterclaim, unless as part of its consideration as of to the exercise its discretion to grant a stay on the plaintiff’s judgment or not pending the determination of the counterclaim. But the important point is that the defendant is entitled to litigate that counterclaim (with or without a stay on the plaintiff’s judgment) either in those proceedings or in separate proceedings, without any leave of the court.
31. In none of the cases discussed thus far has consideration been given to the situation which exists in the present proceedings, namely where the Court has been satisfied that one ground of defence (estoppel) put forward meets the required test and a plenary hearing has been directed on that issue alone, and where the defendant wishes in addition to that estoppel defence raise a counterclaim, not by way of an equitable set off, but in respect of an independent claim. It is correct in my view to see the counterclaim sought to be argued in these proceedings arising from the manner in which the plaintiff sold the Chicago Spire loan as being an independent claim and not a counterclaim giving rise to a defence by way of an equitable set off. In my view, that claim does not arise from the guarantees on foot of which the plaintiff sues. Those guarantees are not backing any loan that was advanced in relation to the Chicago Spire development. The representations relied upon as giving rise to an estoppel in respect of claims made under the guarantees sued upon have nothing to do with the claims being made as to the reckless disposal of the Chicago Spire loan. Another factor is that it is certainly arguable that any claim made in relation to the sale of the Chicago Spire loan at an undervalue is a not a claim maintainable by the defendant personally, but rather by the companies involved in that development project.
32. The question remains as to how the counterclaim which the defendant indicated it wished to bring ought to have been dealt with in the court below after it was clarified by the defendant following the trial judge’s judgment (and prior to the perfection of any order) that he wished to bring it as a counterclaim, even though the point had been rejected as meeting the required test as a defence as such to the plaintiff’s claim. While I have set forth above an exchange between Mr O’Moore and the trial judge in relation to how the issue of a potential counterclaim should be dealt with, it was only discussed in a context where no defence was found to exist and where judgment was being entered for the plaintiff, and how the counterclaim would then be dealt with in accordance with Prendergast v. Biddle. There was no discussion at that stage as to what the position would be where the matter was in any event being adjourned to a plenary hearing on the estoppel defence. When the trial judge was asked by the defendant to clarify if he intended by his ruling that the defendant was prohibited from pleading his counterclaim when delivering his Defence on the estoppel issue, and he so confirmed that such was his intention, there was no elaboration of his reasons for so concluding. There is a lack of clarity as to the basis on which the trial judge excluded the defendant from pursuing his intended counterclaim.
33. But in the light of Mr McGrath’s assurance that he was not asking this Court to send the matter back to the trial judge on the issue of the counterclaim, I am satisfied that this Court should reach its own conclusion as to the defendant’s entitlement to continue to pursue the Chicago Spire issue and, if he is so entitled, the manner in which he should do so in the light of the authorities.
34. Firstly I wish to reiterate my view that since the Chicago Spire issue was raised specifically as a point of defence and not at all as being a counterclaim, the trial judge was entirely correct to consider it in that light, and to form a view that it did not amount to a bona fide defence to the plaintiff’s claim on the guarantees. I appreciate that he expressed this view in terms that there was not reality to the point, but given the manner in which the issue was argued by counsel, it is clear that what he was deciding was whether or not the issue met what I will loosely term the Aer Rianta test. It would not be fair in such circumstances to decide that the trial judge applied the wrong test.
35. This counterclaim is an independent claim which the defendant wishes to bring against the plaintiff. It is not a defence to the plaintiff’s claim. Indeed, if the estoppel issue did not exist in the proceedings, it is likely that the Court would have given judgment to the plaintiff on its motion, and in my view unlikely that the Court would have granted a stay on that judgment while the Chicago Spire issue was litigated, whether in a separate action or by way of a counterclaim in these proceedings. Such a conclusion might well have been arrived because of the evidence available, which does not appear to be in contest, that even if the value of a completed Chicago Spire development as given by the defendant is taken at its highest, success on the counterclaim would still leave the defendant exposed on these guarantees to the maximum claimable thereunder.
36. A claim on foot of a guarantee is a straightforward claim in most cases, and therefore ideally suited to a determination in summary manner on foot of a summary summons procedure. A party entitled to judgment on foot of such a claim ought to get the benefit of such a judgment as quickly as is consistent with justice also being done to the defendant. By obtaining judgment, the judgment creditor can achieve some priority of importance in some scenarios. Delay in obtaining judgment may seriously prejudice the creditor’s chances of recovery. It is for that reason that a Court will not permit a defendant to hold up the plaintiff’s entitlement to judgment by reason merely of a desire on his part to litigate by way of a counterclaim some issue that realistically has little or nothing to do with the plaintiff’s claim on foot of the guarantee. The position is put well by Jessel MR in Anglo-Italian Bank v. Wells [1878] 38 L.T. 197 when he stated in relation to summary proceedings for money due by defendants on foot of certain promissory notes:

“The defendant says, as regards the deed, that there is another covenant in that deed which you, the plaintiffs, have broken, and that by reason of your breach of that covenant, I am entitled to claim damages from you; and if I establish the breach and get the damages, I may be entitled to set-off those damages against the sum claimed in the action. I must remark that, as regards that form of defence, it is not necessarily a defence under this order. It is quite true that you may, by way of counter-claim, bring forward, under the pleading rules, a defence of set-off of damages, but even that is in the discretion of the judge. He may strike out the counter-claim when it is there,’ if in the opinion of the court or judge such set-off or counter-claim cannot be conveniently disposed of in the pending action, or ought not to be allowed’. So, that it is merely a right depending on the discretion of the judge. It is not an absolute right to set off damages against a debt; and I must say, speaking for myself, that I should hesitate long before I allowed a defendant in an action on a bill of exchange to set up a case for damages by reason of the breach by the plaintiff of some of the contract or the commission of some tort.”
37. In the present case, being a claim on foot of guarantees a plenary hearing on the estoppel defence alone will be a straightforward matter, and can be disposed of in a relatively short timeframe. The amount of the plaintiff’s claim is not in dispute. Some discovery may be necessary in relation to the estoppel, and if no agreement is reached in relation to discovery any necessary motion can be brought rapidly once pleadings are closed. Notice of trial can then be served and a date for hearing obtained.
38. By contrast, if the defendant is to be permitted to add into the present proceedings his entirely separate claim that the plaintiff, by exercising of its statutory powers of enforcement by recklessly disposing of the Chicago Spire loan at a value representing perhaps as little as 10% of what the defendant says was the true value, and in breach of its obligations under the Act of 1999, caused him to have an exposure under the guarantees sued upon that he would not otherwise have had, the plenary hearing directed will assume an altogether different profile. It will become immensely more complex, lengthy and costly both in terns of costs and court time, and its chances of getting on for hearing in early course will disappear. Given the counterclaim’s lack of relationship to the claims on foot of the guarantees, it would be unjust to require that the plaintiff should be held up in the determination of the unrelated estoppel issue while embroiled in what inevitably become a long and complex litigation of the counterclaim. In my view, it was correct to confine the present proceedings to the estoppel issue, even if the Chicago Spire issue had been addressed by the defendant in the High Court as a counterclaim and not a point of defence.

39. The defendant is perfectly free to bring his counterclaim by way of separate proceedings. He requires no leave to do so. He argues that he will be met by an argument from the plaintiff that the issue he wishes to litigate is res judicata as a result of the conclusions expressed by the trial judge on the motion for judgment herein. That may well be the case. But as I have already stated, that argument would have been open to the plaintiff in any event, even if this Court determined that justice required that the defendant be permitted to proceed by way of a counterclaim in these proceedings. Whether or not the issue is already determined by Fullam J. and is res judicata, is not something upon which this Court should express any view. That issue may arise for a determination at first instance, and will have to be addressed then on the basis of the applicable principles. It does not arise on this appeal.
40. I would uphold the decision of Fullam J. confining these proceedings to the issue of estoppel identified by him as constituting a bona fide defence to the plaintiff’s claim, and dismiss the appeal.

 

Bank of Ireland -v- Dunne & anor

[2013] IEHC 484 (08 November 2013)JUDGMENT of Kearns P. delivered on the 8th day of November, 2013

By summary summons issued on the 16th February, 2012, the plaintiff claimed liquidated sums amounting to €4,570,579.49 against each of the defendants, together with interest thereon pursuant to the terms of certain loan agreements and/or statute.

 

The summons alleges that the sums due have arisen on foot of unpaid loans.

 

The special endorsement of claim recites that by letter of loan offer dated the 27th February, 2006, the plaintiff offered to advance to the defendants a loan by way of overdraft facility in the sum of €50,000 for a term, and at an interest rate therein appearing, repayable in accordance with the terms of the said loan offer and subject to the terms and conditions set out in the letter of approval. It is claimed that this loan agreement was accepted by the defendants by an acceptance dated the 1st March, 2006.

 

A further letter of loan offer was made on the 7th August, 2009 whereby the plaintiff asserts that previous loan offers were replaced by a new loan agreement in the sum of €5,232,000, the said loan to be for a term of twelve months expiring on the 31st August, 2010 unless otherwise agreed with the bank.

 

It is claimed that this loan agreement was accepted by the defendants by an acceptance dated the 2nd October, 2009.

 

It is further claimed that pursuant to the loan agreements the plaintiff advanced to the defendants the sums specified in the loan agreements, but in breach of the loan agreements the defendants and each of them have failed to make repayments as provided for in the agreements at the specified time.

 

It is claimed that on the 21st April, 2011, the defendants and each of them were indebted to the plaintiff in the sum of €4,365,275.66 after all just credits and allowances were taken into account.

 

By letters dated the 21st April, 2011, the plaintiff demanded payment of the said monies inclusive of continuing interest thereon at the contract rates as therein appeared.

 

A further letter of demand, to incorporate additional interest, was made on the 19th December, 2011, in which the plaintiff claimed the sum of €4,616,031.01, but claims that no monies had been paid by or on behalf of the defendants, save for €135,000 received on the 21st December, 2011.

 

Accordingly, it is claimed that at the date of issue of the summons the defendants are indebted to the plaintiff in the sum of €57,113.78 plus accrued interest of €1,648.87 and surcharges of €896.03 in respect of the February, 2006 loan agreement and €4,427,709.12 plus accrued interest of €21,293.79 and surcharges of €61,917.80, amounting to a total of €4,510,920.71 in respect of the August, 2009 loan agreement. The total thus claimed to be due and outstanding by the defendants to the plaintiff is €4,570,579.49.

 

An appearance was entered to the summary summons by the second named defendant in her personal capacity on the 2nd March, 2012. An appearance on behalf of the first named defendant was entered in the High Court on the 3rd April, 2012, by Messrs. Kennedys, solicitors, of Ulysses House, Foley Street, Dublin 1.

 

Thereafter by notice of motion dated the 22nd May, 2012, the plaintiffs sought in the Masters Court an order granting liberty to the plaintiff to enter final judgment as against the defendants and each of them in the sum of €4,717,580.02 together with interest as previously outlined.

 

The notice of motion was grounded on the affidavit of Christine Dowling who is the manager employed by the plaintiff with responsibility for the accounts the subject matter of the proceedings herein. She duly deposes that she was properly authorised to make this affidavit for or on behalf of the plaintiff.

 

Having deposed to the facts already recited, she deposed as follows at para. 12 of her affidavit:-

 

“In the circumstances thereof I say the defendants have no bona fide defence to the proceedings herein and that the appearance has been entered for the purposes of delay and I therefore pray this honourable court for an order within the terms of the notice of motion herein.”

By affidavit sworn on the 15th June, 2012, the second named defendant deposed that she had a genuine defence to the claim made by the plaintiff herein which she believed had a real prospect of success. In her appearance before this Court she also adopted the reasoning employed by the Master in dismissing the bank’s claim in his decision in the case of ACC Bank plc v. Heffernan on the 18th October, 2012. Numerous grounds of defence are relied upon by the second named defendants in seeking to resist the application for summary judgment, including the assertion that the claim should have been brought by Bank of Ireland Private Banking and not the present plaintiffs.

By an affidavit sworn on the 6th November, 2012, the first named defendant also asserted that he had a full and bona fide defence to the plaintiff’s claim, deposing at para. 35 of his affidavit that significant conflicts of fact had emerged as between the parties “which can only be resolved at a plenary trial, following a detailed exchange of pleadings and the exhaustion of interlocutory procedures such as discovery”.

 

The position of both defendants therefore was unmistakable. They were fully contesting the plaintiff’s claim. By no stretch of the imagination, therefore, could this be described as an “uncontested case” as envisaged by Order 37 of the Rules of the Superior Courts. However, in adopting this position, neither defendant raised any allegations as to defects in the form of the proceedings.

 

The matter in due course came before the Master on the 7th November, 2012. Having heard the plaintiff’s counsel and on hearing the second named defendant and, in the case of the first named defendant, his counsel, he ordered that the summons be dismissed and that the plaintiff pay to the defendants the costs of the proceedings when taxed and ascertained.

 

By notice of motion dated the 12th November, 2012 the plaintiff has brought an appeal against the order of the Master herein.

 

A single point has arisen for consideration by this Court at the outset, namely, whether the Master had a jurisdiction to dismiss the proceedings, as he did, or was he compelled in the circumstances where this was a contested case, to put the matter in the Judges’ list.

 

Counsel on behalf of the bank contend he had no jurisdiction to make the order which he did and in making this submission are supported by counsel for the first named defendant. The second named defendant, who is not legally represented, only participated in this argument to the extent of maintaining that she had a full defence to the plaintiff’s claim, including a defence based on the proposition that, as the loans had been advanced by Bank of Ireland Private Banking, that the wrong plaintiff had brought the claim.

DISCUSSION

Neither a digital audio recording nor written decision from the Master exists in this case. However, all parties agreed that the rationale for the Master’s decision was that indicated by him in a written decision which he delivered on the 18th October, 2012.

 

The case in question was ACC Bank plc v. Thomas Heffernan and Mary Heffernan, also a claim brought by a lending institution for recovery of sums alleged to be due and outstanding by the defendants.

 

I propose to set out fully the reasoning of the Master in relation to his jurisdiction as elaborated at pp. 8-9 of his written decision:-

 

“Contrary to popular belief, the Master’s Court is not a Court of full and original jurisdiction. The Master can exercise quasi judicial functions but only within his remit as specified in the Rules of the Superior Courts. For example, the Master cannot determine whether service of a Summons should be deemed ‘good’ where the Rules of the Superior Courts have not been complied with. That is a task reserved for a full judge who is presumed to know where the interests of justice lie. Insofar as he does have quasi judicial functions, can it be said, as a general principle, that the Master is authorised to make determinations which might be prejudicial to a party or inimical to justice solely because the affected party may, under the Rules, simply appeal the determination. Does the appeal option quiet any claim of breach of Article 37?

In short, therefore, the Master must make some decisions and affected parties may appeal. If the issue is whether the Master should overlook or waive the rigour of one of the Rules, the safest course is to apply the rule strictly and allow a judge, on appeal, to determine whether, in any given instance, the rule is being misapplied as the master of justice and not its slave. It is not for the Master to rewrite the Rules on a whim. It is for the judges to permit deviations from their own Rules, but the Master should probably adhere to them.

 

Consequently, if the papers are not ‘in order’, the case cannot proceed past the Master’s Court stage.

 

I know of no reported decision on what the term ‘in order’ means, but in the context in which it is employed (the Rules of Court), it must mean in accordance with the Rules and the law. Special Summons proceedings are not in order if they are grounded on an affidavit which deposes to a fact which is, at a matter of law, inconsistent with the relief sought. A Summary Summons seeking a relief not listed in O. 2 (e.g. a declaration, or administration of an estate) will be struck out as ‘not in order’. The plaintiff must start again.

 

I take the view that a Summary Summons in regard to which it is patent that the plaintiff’s solicitor cannot properly advise that the defendant has no defence is a bad summons. It is not in order. Its deficiency is a matter of law: the legal implications of the facts known to the plaintiff prior to the commencement of the proceedings.

 

Where it is clear from the papers that the plaintiff’s solicitor is mistaken in his opinion that no Ryanair v. Aer Rianta defence is available to the defendant, the Summary Summons must be ruled to be not ‘in order’ and struck out. Such a case is just not appropriate for a Summary Summons. It is not necessary to consider further whether the summons should be characterised as misconceived, or worse: an abuse of process. That would be an aspect for judicial determination.

 

The mediaeval English King Edward the First is often referred to as the English Justinian. This is not quite accurate as King Edward was not a codifier like Justinian, but there were significant legal reforms during his reign, including legislation still sometimes cited such as Quia Emptores [1290] and The Statutes of Westminster I and II ‘De donis conditionalibus’. He also took great interest in the administration of ‘the King’s justice’ in the courts. In his biography of the King (Guild Publishing 1988), Professor Michael Prestwich of Durham records the King’s refusal to allow proceed a case ‘based on a dubious writ’. The biographer writes that ‘Edward himself, who was present in court rose, declaring “I have nothing to do with your disputations, but, by God’s blood, you shall give me a good writ before you arise hence’”.

 

I concur. I am striking out the Summary Summons in this case. The plaintiff can always start again with a Plenary Summons.”

 

It is apparent from the thinking processes applied by the Master that he takes the view that if a plaintiff’s solicitor cannot properly advise that the defendant has no defence, then the summons is deficient and not in order.

The second named defendant expressly adopted the Master’s line of reasoning, arguing that she did believe she had a defence to the plaintiff’s claim, that the plaintiff’s officers were aware of this and accordingly could not have, or should not have, sworn an affidavit which contained the averment in the affidavit grounding the application for summary judgment.

 

I will leave to one side for the moment the point offered to the Court by Mr. Ralston, counsel for the first named defendant, that had the plaintiff’s grounding affidavit failed to contain such an averment, it might also have been ruled “out of order” and dismissed or struck out for that reason also.

 

I am satisfied that the particular issue in this case can be resolved simply by reference to the Rules of the Superior Courts.

 

The relevant portions of Order 37 of the Rules of the Superior Courts provide:-

 

“Hearing of proceedings commenced by summary summons

1) Every summary summons indorsed with a claim (other than for an account) under Order 2 to which an appearance has been entered shall be set down before the Master by the plaintiff, on motion for liberty to enter final judgment for the amount claimed, together with interest (if any), or for recovery of land, with or without rent or mesne profits (as the case may be) and costs, and, in the case of an action for the recovery of land for non- payment of rent, to ascertain the amount of rent due. Such motion shall be for the first available day, as the Master may fix, not being less than four clear days from the service thereof upon the defendant, and shall be supported by an affidavit sworn by the plaintiff or by any person who can swear positively to the facts showing that the plaintiff is entitled to the relief claimed and stating that in the belief of the deponent there is no defence to the action. A copy of any such affidavit shall be served with the notice of motion.

 

……..

 

4) Upon the hearing of any such motion, the Master, in all uncontested cases, may deal with the matter summarily, and may give liberty to enter judgment for the relief to which the plaintiff may appear to be entitled and, for that purpose, in the case of an action for the recovery of land for non- payment of rent, may ascertain the amount of rent due, or he may dismiss the action and generally may make such order for the determination of the action as may seem just.

 

……..

 

6) In contested cases, the Master shall transfer the case, when in order for hearing by the Court, to the Court list for hearing on the first opportunity; and, for this purpose, the Master may extend the time for filing affidavits and give such directions and adjourn the case before himself as he shall think fit. The Master may also, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings, discovery, settlement of issues or otherwise as may be appropriate.”

 

These rules are clear and unambiguous. The Master’s jurisdiction to dismiss an action arises only in uncontested cases. This is not an uncontested case.

The Master has no discretion in a contested case. Where a case is contested, the Master is obliged by rules of court to transfer the case to the court list for hearing at the first opportunity. The only qualification to that requirement is that he may, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons. Further, where a case is contested and there is some inadequacy as to form, the Rules do not confer on the Master a jurisdiction to dismiss the proceedings out of hand – his jurisdiction, clearly spelt out in the Rules (Order 37, Rule 6), permits him only to go so far as to decline to transfer the case to the court list until those deficiencies are rectified and the matter thereby becomes ‘in order’. While that point does not arise specifically in this case it is nonetheless worthy of emphasis.

 

The power to dismiss a contested case is clearly reserved to the High Court by Order 37, rule 7 which provides:-

 

“Upon the hearing of any such motion by the Court, the Court may give judgment for the relief to which the plaintiff may appear to be entitled or may dismiss the action or may adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings or discovery or settlement of issues or otherwise as may be appropriate, and generally may make such order for determination of the questions in issue in the action as may seem just.”

No part of Order 37 confers jurisdiction on the Master in a contested case to analyse affidavits filed in reply by a defendant to retrospectively impugn or invalidate a grounding affidavit sworn in support of a claim for a liquidated sum so as to permit or effect a finding that it is or might be in conflict with the stated requirements of Order 37.

No objection to the form of the proceedings was taken by either of the defendants in the Master’s Court, as was confirmed by counsel for the first named defendant and by the second named defendant also. The contention by the second named defendant that the action should have been brought by the private banking division of the plaintiff company is not an allegation or assertion which goes to the correctness of the form of the proceedings, but rather is an issue which may fall to be considered if a judge decides that the matter should proceed to full plenary hearing. Even if that contention was correct I am satisfied that the Master, for the reasons outlined above, would not in any event have had power to dismiss this contested case for that reason.

 

More importantly, it appears to me that the reasoning of the Master in this instance was incorrect. It is quite inappropriate, in my view, to take from replying affidavits the notion that the plaintiff’s officers must have sworn to a known untruth when swearing the grounding affidavit. That is to misinterpret and misunderstand the relevant provisions of Order 37. It is quite wrong, in my view, to infer from the fact that issues are raised in defence by a defendant that the plaintiff’s grounding affidavit was therefore not in proper form. This view of the Master is apparently based on his view that the plaintiff’s deponent must have known that some contest was likely and that an affidavit in the particular form as filed by the defendants was also likely. This is logic working backwards from a subsequent event to an event precedent (which was carried out in accordance with the Rules) and purporting to invalidate the earlier step by reference to untested assertions made by the defendants which at this stage only go so far as to demonstrate that this is a case which they propose to contest.

 

I do not believe it is open for the Master to conduct such an exercise or to find on this basis that there is a want of form in the affidavit supporting the motion for judgment, nor do I believe he possesses the jurisdiction under Order 37 to dismiss proceedings in the manner in which he did in this particular case.

 

I would allow the appeal and direct that the matter be entered in the Judges’ list in the manner provided for at Order 37, rule 7 of the Rules of the Superior Courts.

 

Bank of Ireland -v- Dunne & anor [2013] IEHC 484 (08 November 2013)

 

 

JUDGMENT of Kearns P. delivered on the 8th day of November, 2013

By summary summons issued on the 16th February, 2012, the plaintiff claimed liquidated sums amounting to €4,570,579.49 against each of the defendants, together with interest thereon pursuant to the terms of certain loan agreements and/or statute.

 

The summons alleges that the sums due have arisen on foot of unpaid loans.

 

The special endorsement of claim recites that by letter of loan offer dated the 27th February, 2006, the plaintiff offered to advance to the defendants a loan by way of overdraft facility in the sum of €50,000 for a term, and at an interest rate therein appearing, repayable in accordance with the terms of the said loan offer and subject to the terms and conditions set out in the letter of approval. It is claimed that this loan agreement was accepted by the defendants by an acceptance dated the 1st March, 2006.

 

A further letter of loan offer was made on the 7th August, 2009 whereby the plaintiff asserts that previous loan offers were replaced by a new loan agreement in the sum of €5,232,000, the said loan to be for a term of twelve months expiring on the 31st August, 2010 unless otherwise agreed with the bank.

 

It is claimed that this loan agreement was accepted by the defendants by an acceptance dated the 2nd October, 2009.

 

It is further claimed that pursuant to the loan agreements the plaintiff advanced to the defendants the sums specified in the loan agreements, but in breach of the loan agreements the defendants and each of them have failed to make repayments as provided for in the agreements at the specified time.

 

It is claimed that on the 21st April, 2011, the defendants and each of them were indebted to the plaintiff in the sum of €4,365,275.66 after all just credits and allowances were taken into account.

 

By letters dated the 21st April, 2011, the plaintiff demanded payment of the said monies inclusive of continuing interest thereon at the contract rates as therein appeared.

 

A further letter of demand, to incorporate additional interest, was made on the 19th December, 2011, in which the plaintiff claimed the sum of €4,616,031.01, but claims that no monies had been paid by or on behalf of the defendants, save for €135,000 received on the 21st December, 2011.

 

Accordingly, it is claimed that at the date of issue of the summons the defendants are indebted to the plaintiff in the sum of €57,113.78 plus accrued interest of €1,648.87 and surcharges of €896.03 in respect of the February, 2006 loan agreement and €4,427,709.12 plus accrued interest of €21,293.79 and surcharges of €61,917.80, amounting to a total of €4,510,920.71 in respect of the August, 2009 loan agreement. The total thus claimed to be due and outstanding by the defendants to the plaintiff is €4,570,579.49.

 

An appearance was entered to the summary summons by the second named defendant in her personal capacity on the 2nd March, 2012. An appearance on behalf of the first named defendant was entered in the High Court on the 3rd April, 2012, by Messrs. Kennedys, solicitors, of Ulysses House, Foley Street, Dublin 1.

 

Thereafter by notice of motion dated the 22nd May, 2012, the plaintiffs sought in the Masters Court an order granting liberty to the plaintiff to enter final judgment as against the defendants and each of them in the sum of €4,717,580.02 together with interest as previously outlined.

 

The notice of motion was grounded on the affidavit of Christine Dowling who is the manager employed by the plaintiff with responsibility for the accounts the subject matter of the proceedings herein. She duly deposes that she was properly authorised to make this affidavit for or on behalf of the plaintiff.

 

Having deposed to the facts already recited, she deposed as follows at para. 12 of her affidavit:-

 

“In the circumstances thereof I say the defendants have no bona fide defence to the proceedings herein and that the appearance has been entered for the purposes of delay and I therefore pray this honourable court for an order within the terms of the notice of motion herein.”

By affidavit sworn on the 15th June, 2012, the second named defendant deposed that she had a genuine defence to the claim made by the plaintiff herein which she believed had a real prospect of success. In her appearance before this Court she also adopted the reasoning employed by the Master in dismissing the bank’s claim in his decision in the case of ACC Bank plc v. Heffernan on the 18th October, 2012. Numerous grounds of defence are relied upon by the second named defendants in seeking to resist the application for summary judgment, including the assertion that the claim should have been brought by Bank of Ireland Private Banking and not the present plaintiffs.

By an affidavit sworn on the 6th November, 2012, the first named defendant also asserted that he had a full and bona fide defence to the plaintiff’s claim, deposing at para. 35 of his affidavit that significant conflicts of fact had emerged as between the parties “which can only be resolved at a plenary trial, following a detailed exchange of pleadings and the exhaustion of interlocutory procedures such as discovery”.

 

The position of both defendants therefore was unmistakable. They were fully contesting the plaintiff’s claim. By no stretch of the imagination, therefore, could this be described as an “uncontested case” as envisaged by Order 37 of the Rules of the Superior Courts. However, in adopting this position, neither defendant raised any allegations as to defects in the form of the proceedings.

 

The matter in due course came before the Master on the 7th November, 2012. Having heard the plaintiff’s counsel and on hearing the second named defendant and, in the case of the first named defendant, his counsel, he ordered that the summons be dismissed and that the plaintiff pay to the defendants the costs of the proceedings when taxed and ascertained.

 

By notice of motion dated the 12th November, 2012 the plaintiff has brought an appeal against the order of the Master herein.

 

A single point has arisen for consideration by this Court at the outset, namely, whether the Master had a jurisdiction to dismiss the proceedings, as he did, or was he compelled in the circumstances where this was a contested case, to put the matter in the Judges’ list.

 

Counsel on behalf of the bank contend he had no jurisdiction to make the order which he did and in making this submission are supported by counsel for the first named defendant. The second named defendant, who is not legally represented, only participated in this argument to the extent of maintaining that she had a full defence to the plaintiff’s claim, including a defence based on the proposition that, as the loans had been advanced by Bank of Ireland Private Banking, that the wrong plaintiff had brought the claim.

DISCUSSION

Neither a digital audio recording nor written decision from the Master exists in this case. However, all parties agreed that the rationale for the Master’s decision was that indicated by him in a written decision which he delivered on the 18th October, 2012.

 

The case in question was ACC Bank plc v. Thomas Heffernan and Mary Heffernan, also a claim brought by a lending institution for recovery of sums alleged to be due and outstanding by the defendants.

 

I propose to set out fully the reasoning of the Master in relation to his jurisdiction as elaborated at pp. 8-9 of his written decision:-

 

“Contrary to popular belief, the Master’s Court is not a Court of full and original jurisdiction. The Master can exercise quasi judicial functions but only within his remit as specified in the Rules of the Superior Courts. For example, the Master cannot determine whether service of a Summons should be deemed ‘good’ where the Rules of the Superior Courts have not been complied with. That is a task reserved for a full judge who is presumed to know where the interests of justice lie. Insofar as he does have quasi judicial functions, can it be said, as a general principle, that the Master is authorised to make determinations which might be prejudicial to a party or inimical to justice solely because the affected party may, under the Rules, simply appeal the determination. Does the appeal option quiet any claim of breach of Article 37?

In short, therefore, the Master must make some decisions and affected parties may appeal. If the issue is whether the Master should overlook or waive the rigour of one of the Rules, the safest course is to apply the rule strictly and allow a judge, on appeal, to determine whether, in any given instance, the rule is being misapplied as the master of justice and not its slave. It is not for the Master to rewrite the Rules on a whim. It is for the judges to permit deviations from their own Rules, but the Master should probably adhere to them.

 

Consequently, if the papers are not ‘in order’, the case cannot proceed past the Master’s Court stage.

 

I know of no reported decision on what the term ‘in order’ means, but in the context in which it is employed (the Rules of Court), it must mean in accordance with the Rules and the law. Special Summons proceedings are not in order if they are grounded on an affidavit which deposes to a fact which is, at a matter of law, inconsistent with the relief sought. A Summary Summons seeking a relief not listed in O. 2 (e.g. a declaration, or administration of an estate) will be struck out as ‘not in order’. The plaintiff must start again.

 

I take the view that a Summary Summons in regard to which it is patent that the plaintiff’s solicitor cannot properly advise that the defendant has no defence is a bad summons. It is not in order. Its deficiency is a matter of law: the legal implications of the facts known to the plaintiff prior to the commencement of the proceedings.

 

Where it is clear from the papers that the plaintiff’s solicitor is mistaken in his opinion that no Ryanair v. Aer Rianta defence is available to the defendant, the Summary Summons must be ruled to be not ‘in order’ and struck out. Such a case is just not appropriate for a Summary Summons. It is not necessary to consider further whether the summons should be characterised as misconceived, or worse: an abuse of process. That would be an aspect for judicial determination.

 

The mediaeval English King Edward the First is often referred to as the English Justinian. This is not quite accurate as King Edward was not a codifier like Justinian, but there were significant legal reforms during his reign, including legislation still sometimes cited such as Quia Emptores [1290] and The Statutes of Westminster I and II ‘De donis conditionalibus’. He also took great interest in the administration of ‘the King’s justice’ in the courts. In his biography of the King (Guild Publishing 1988), Professor Michael Prestwich of Durham records the King’s refusal to allow proceed a case ‘based on a dubious writ’. The biographer writes that ‘Edward himself, who was present in court rose, declaring “I have nothing to do with your disputations, but, by God’s blood, you shall give me a good writ before you arise hence’”.

 

I concur. I am striking out the Summary Summons in this case. The plaintiff can always start again with a Plenary Summons.”

 

It is apparent from the thinking processes applied by the Master that he takes the view that if a plaintiff’s solicitor cannot properly advise that the defendant has no defence, then the summons is deficient and not in order.

The second named defendant expressly adopted the Master’s line of reasoning, arguing that she did believe she had a defence to the plaintiff’s claim, that the plaintiff’s officers were aware of this and accordingly could not have, or should not have, sworn an affidavit which contained the averment in the affidavit grounding the application for summary judgment.

 

I will leave to one side for the moment the point offered to the Court by Mr. Ralston, counsel for the first named defendant, that had the plaintiff’s grounding affidavit failed to contain such an averment, it might also have been ruled “out of order” and dismissed or struck out for that reason also.

 

I am satisfied that the particular issue in this case can be resolved simply by reference to the Rules of the Superior Courts.

 

The relevant portions of Order 37 of the Rules of the Superior Courts provide:-

 

“Hearing of proceedings commenced by summary summons

1) Every summary summons indorsed with a claim (other than for an account) under Order 2 to which an appearance has been entered shall be set down before the Master by the plaintiff, on motion for liberty to enter final judgment for the amount claimed, together with interest (if any), or for recovery of land, with or without rent or mesne profits (as the case may be) and costs, and, in the case of an action for the recovery of land for non- payment of rent, to ascertain the amount of rent due. Such motion shall be for the first available day, as the Master may fix, not being less than four clear days from the service thereof upon the defendant, and shall be supported by an affidavit sworn by the plaintiff or by any person who can swear positively to the facts showing that the plaintiff is entitled to the relief claimed and stating that in the belief of the deponent there is no defence to the action. A copy of any such affidavit shall be served with the notice of motion.

 

……..

 

4) Upon the hearing of any such motion, the Master, in all uncontested cases, may deal with the matter summarily, and may give liberty to enter judgment for the relief to which the plaintiff may appear to be entitled and, for that purpose, in the case of an action for the recovery of land for non- payment of rent, may ascertain the amount of rent due, or he may dismiss the action and generally may make such order for the determination of the action as may seem just.

 

……..

 

6) In contested cases, the Master shall transfer the case, when in order for hearing by the Court, to the Court list for hearing on the first opportunity; and, for this purpose, the Master may extend the time for filing affidavits and give such directions and adjourn the case before himself as he shall think fit. The Master may also, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings, discovery, settlement of issues or otherwise as may be appropriate.”

 

These rules are clear and unambiguous. The Master’s jurisdiction to dismiss an action arises only in uncontested cases. This is not an uncontested case.

The Master has no discretion in a contested case. Where a case is contested, the Master is obliged by rules of court to transfer the case to the court list for hearing at the first opportunity. The only qualification to that requirement is that he may, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons. Further, where a case is contested and there is some inadequacy as to form, the Rules do not confer on the Master a jurisdiction to dismiss the proceedings out of hand – his jurisdiction, clearly spelt out in the Rules (Order 37, Rule 6), permits him only to go so far as to decline to transfer the case to the court list until those deficiencies are rectified and the matter thereby becomes ‘in order’. While that point does not arise specifically in this case it is nonetheless worthy of emphasis.

 

The power to dismiss a contested case is clearly reserved to the High Court by Order 37, rule 7 which provides:-

 

“Upon the hearing of any such motion by the Court, the Court may give judgment for the relief to which the plaintiff may appear to be entitled or may dismiss the action or may adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings or discovery or settlement of issues or otherwise as may be appropriate, and generally may make such order for determination of the questions in issue in the action as may seem just.”

No part of Order 37 confers jurisdiction on the Master in a contested case to analyse affidavits filed in reply by a defendant to retrospectively impugn or invalidate a grounding affidavit sworn in support of a claim for a liquidated sum so as to permit or effect a finding that it is or might be in conflict with the stated requirements of Order 37.

No objection to the form of the proceedings was taken by either of the defendants in the Master’s Court, as was confirmed by counsel for the first named defendant and by the second named defendant also. The contention by the second named defendant that the action should have been brought by the private banking division of the plaintiff company is not an allegation or assertion which goes to the correctness of the form of the proceedings, but rather is an issue which may fall to be considered if a judge decides that the matter should proceed to full plenary hearing. Even if that contention was correct I am satisfied that the Master, for the reasons outlined above, would not in any event have had power to dismiss this contested case for that reason.

 

More importantly, it appears to me that the reasoning of the Master in this instance was incorrect. It is quite inappropriate, in my view, to take from replying affidavits the notion that the plaintiff’s officers must have sworn to a known untruth when swearing the grounding affidavit. That is to misinterpret and misunderstand the relevant provisions of Order 37. It is quite wrong, in my view, to infer from the fact that issues are raised in defence by a defendant that the plaintiff’s grounding affidavit was therefore not in proper form. This view of the Master is apparently based on his view that the plaintiff’s deponent must have known that some contest was likely and that an affidavit in the particular form as filed by the defendants was also likely. This is logic working backwards from a subsequent event to an event precedent (which was carried out in accordance with the Rules) and purporting to invalidate the earlier step by reference to untested assertions made by the defendants which at this stage only go so far as to demonstrate that this is a case which they propose to contest.

 

I do not believe it is open for the Master to conduct such an exercise or to find on this basis that there is a want of form in the affidavit supporting the motion for judgment, nor do I believe he possesses the jurisdiction under Order 37 to dismiss proceedings in the manner in which he did in this particular case.

 

I would allow the appeal and direct that the matter be entered in the Judges’ list in the manner provided for at Order 37, rule 7 of the Rules of the Superior Courts.