Summary Procedure Issues
Cases
Corrib Oil Company Ltd -v- Murray
[2017] IECA 102 (29 March 2017)
JUDGMENT of Mr. Justice Gerard Hogan delivered on the 29th day of March 2017
1. This is an application brought by the defendant, Mr. Martin Murray, pursuant to the provisions of Ord. 13, r.11, to have a default judgment entered against him in September 2011 in the sum of €72,615 set aside. In a reserved judgment delivered in the High Court on 4th February 2016 Barrett J. refused this application and the defendant now appeals to this Court against that decision. The matter arises in the following way.
2. On 23rd April 2009 the plaintiff, Corrib Oil Co. Ltd. (“Corrib”), commenced proceedings by way of summary summons against the defendant. The claim was, in essence, that the defendant had failed to pay for fuel oil supplied to him by Corrib. Following one unsuccessful attempt to effect service on 30th April 2009, Corrib claimed that service was finally effected by way of personal service upon Mr. Murray on 10th September 2009, although this is strongly disputed by the defendant. Apart from an affidavit of debt sworn on 26th April 2010, no further steps were taken in the proceedings until 23rd March 2011 when the plaintiff sought to serve a notice of intention to proceed on the defendant by way of registered post.
3. The defendant’s address as given in both the summary summons and the notice of intention to proceed is “Crimblin, Moneygall, Co. Offaly”. Mr. Murray maintains that his correct address is “Crimlin Little, Moneygall, Co. Tipperary.” Moneygall is, of course, a village which straddles the borders between Offaly and Tipperary.
4. At all events, the notice of intention to proceed was returned as marked “not called for”. Corrib then applied to the High Court for an order for substituted service and Peart J. made an order to this effect on 30th May 2011. The notice of intention to proceed was then served by post by way of substituted service, but Mr. Martin denies that he ever received this notice. Judgment was then subsequently obtained in default on 28th September 2011.
5. According to Mr. Murray the first he heard of these proceedings was when he received a copy of a summons for the attendance of a debtor in the District Court under the Enforcement of Court Orders Acts 1926-1940 on 10th October 2014. That summons was addressed to him at “Crimblin, Moneygall, Co. Offaly”, but the accompanying letter from Corrib’s solicitors (which enclosed the District Court proceedings) was addressed to him at “Crimblin, Moneygall, Co. Tipperary.” Mr. Murray acknowledges that he received this notification which had been enclosed with the cover letter and he contends that he then immediately took steps to have the High Court order set aside. The District Court proceedings stand adjourned pending the outcome of this set aside application.
6. The essential question, therefore, is whether the defendant was appropriately served such that it would be unfair not to have the default judgment set aside. The Court is thus confronted with the question of whether a default judgment should be allowed to stand where the defendant’s address is incorrectly described in court documents designed to give notice to a defendant. This is a topic on which there is a somewhat surprising dearth of authority and the Court is, to some degree, at least, proceeding from first principles.
The judgment of the High Court
7. In his judgment Barrett J. concluded, based on a review of the affidavits and the surrounding facts, that it was “overwhelmingly likely” that all the pleadings were in fact delivered to the defendant. He also noted that there was no evidence that:
“any correspondence to the Offaly address was ever ‘returned to sender’. If it was not returned, then the court considers that as a matter of probability it was delivered. Such a conclusion chimes with general experience.”
8. Barrett J. also noted that the defendant had (apparently) signed a delivery docket at the address “Crimblin, Moneygall, Co. Offaly”. He added that:
“when a defendant signs delivery dockets and writes on them an address that he later avers does not exist, that, with respect, colours the credibility of his later averment that someone else is telling an untruth.”
9. These comments prompt two observations. First, there was no evidence to the effect that the defendant had ever written his address on the docket. In any event, perhaps too much should not be read from the fact that someone signs a delivery docket which is incorrectly addressed. Quite often individuals scarcely glance at these addresses when they sign these dockets and, even if they do notice a mistake, they are not always bothered to insist upon a correction. That, however, is a somewhat different question as to whether an incorrectly addressed letter is likely to be delivered by the postal system.
10. Second, it is important to stress that the defendant emphatically denied that he had ever seen the Offaly address on any delivery note that he had signed and that he had never “at any time received a delivery from the plaintiff company to my home address.” Barrett J. nevertheless purported to resolve the conflict of fact as between the plaintiff’s delivery driver and the defendant as to whether the latter had in fact been served in September 2009 by reference to the affidavits which the respective deponents had filed. In the absence of any cross-examination of the respective witness, I am bound to think that the trial judge fell into error in this respect. As Hardiman J. observed in Boliden Tara Mines v. Cosgrove [2010] IESC 62:
“It cannot be too strongly emphasised that, where evidence is presented on affidavit, a party who wishes to contradict such evidence must serve a notice of intention to cross-examine. In a case tried on affidavit, it is not otherwise possible to choose between two conflicting versions of facts which may have been deposed to. In a case where there is no contradictory evidence an attack on the evidence which is before the Court must include cross-examination unless the contradicting party is prepared to rely wholly on a submission that the plaintiff has not made out its case, even taking the evidence it has produced at its height.”
11. In any event, I consider that for the reasons I am about to set out, the trial judge focussed on the issue of service in September 2009 when, by reason of the later events, the real question was whether a notice of intention to proceed was properly served on the defendant in May 2011. As will shortly become clear, I am not satisfied that there was such proper service of the order for substituted service given that the address of the defendant contained two errors and given further that the regularity of the default judgment ultimately rests on proof of the adequacy of substituted service. In these circumstances, it is no longer necessary to determine the factual issue of whether the defendant was personally served in September 2009.
The purpose of the service requirements
12. As Costello P. observed in Fox v. Taher, High Court, 24 January 1996, the object of the service rules provided for the in the Rules of the Superior Courts is “to bring home to defendants the nature of the proceedings and the documents related to the claim being made against them.” In a similar vein Dixon J. had previously stated in Royal Bank of Ireland v. Nolan (1958) 92 I.L.T.R. 60 that the fundamental objective of service “was to give the defendant notice and sufficient warning of the proceedings he might have to contest.” It is precisely for this reason that “it is vital that proper service be effected and the Rules of the Superior Courts contain detailed requirements in this regard”: see Delaney and McGrath, Civil Procedure in the Superior Courts (Dublin, 2012) at 209.
The order for substituted service
13. It is true that in the High Court Barrett J. placed a great deal of emphasis on the question of whether in fact Mr. Murray had been personally served in September 2009. In some ways, however, that is really beside the point so far as the facts of this case are concerned because the regularity of the default judgment in the present case ultimately depends not on whether Mr. Murray was ever served with the original proceedings in September 2009, but rather on whether Mr. Murray was validly served with the notice of intention to proceed which accompanied the order for substituted service in May 2011.
14. Had Corrib Oil proceeded to mark judgment in the 12 months after what it claimed was valid personal service in September 2009, then, of course, the question of whether there had been such personal service at that time would have been crucial in any subsequent set aside application. Since, however, for whatever reason Corrib did not immediately proceed further with the proceedings, but instead waited for over a year before taking a step in the proceedings, it was obliged by the requirements of Ord. 122, r.11 to serve a notice of intention to proceed prior to taking any further steps in those proceedings. The validity of the default judgment which it subsequently obtained in September 2011 accordingly depends in turn on proof that the notice of intention to proceed had been validly served by pre-paid post as permitted by the order for substituted service.
15. The curial part order of the High Court dated 30th May 2011 was to the following effect:
“…the service of the notice of intention to proceed here to be effected by serving a copy thereof, together with a copy of this order, by ordinary pre-paid post on the defendant at Crimblin, Moneygall, Co. Offaly be good and sufficient service of the said notice and any future documents requiring personal service upon the said defendant.”
16. The plaintiff does not really dispute but that this address is incorrect and, indeed, this was admitted by the plaintiff’s solicitors in correspondence in November 2014 when the defendant through his solicitor protested that he had never been served with the default judgment and that he had not known anything about it. The plaintiff, however, maintained that this was simply a harmless clerical error which had no bearing on the validity of regularity of the default judgment. The defendant contends, however, that these errors were fatal because it was precisely these errors in the address meant that he did not receive notice of the intention to proceed.
How should the courts approach the question of the errors regarding the defendant’s address in the order for substituted service?
17. How, then, should the Court approach this question of an error in the address? Some guidance is, I think, to be found in other areas of the law where variants of this problem have also been encountered.
18. In the case of planning notices, the courts have, on the whole, asked whether the error was of a kind that might mislead. Thus, for example, in Crodaun Homes Ltd. v. Kildare County Council [1983] I.L.R.M. 1 the relevant planning notice published in a newspaper referred simply to “Leixlip Gate, Co. Kildare”, but omitted the reference to Celbridge, Co. Kildare. The question was whether this incomplete address was nonetheless sufficient to ensure that the relevant statutory notice was valid.
19. The lands in question were part of the well known Castletown Estate in Celbridge, Co. Kildare and the lands were situate in the townland of Kilmacraddock Upper. The local general practitioner in Leixlip, the local postman in Leixlip and a resident of Leixlip all gave evidence that they would have known where Leixlip Gate was without any further description.
20. A majority of the Supreme Court held that the notice was insufficient although it would have been sufficient if either a reference to Castletown Estate or Celbridge or Kilmacraddock Upper had been included. In his judgment Griffin J. stated ([1983] I.L.R.M. 1, 3):
“The primary object of the publication in a newspaper is to ensure that adequate notice is given to enable those members of the public who are interested in the environment, or who may be affected by the proposed development, to ascertain whether they may have reason to object to the proposed development. In my view to satisfy the requirement of stating “the location of the land” both the letter and the spirit of the regulations require that in the case of land and in particular land which is not in an urban area, the site on which it is proposed that development should take place must be correctly and accurately so described in relation to the district in which the land is situate for example by the estate of which it forms part, or the townland, or the neighbouring village as to be readily and reasonably identifiable.”
21. A different problem arose in Walsh v. Kildare C.C. [2000] IEHC 103, [2001] 1 IR 483. Here the applicant (who had been living with his sister following the breakdown of his marriage) gives his name and her address to the planning authority in the course of his application for planning permission. While the applicant did receive certain letters from the authority at that address by registered post, the authority could not locate his address when they endeavoured to serve him with an objection just as a particular statutory time period was about to expire. Finnegan J. held that the address given was insufficient ([2001] 1 IR 483, 489):
“Having regard to the circumstance that the address given is for a dwelling situate in a rural area and the fact that notwithstanding reasonable efforts on his part, [the planning official] was unable to effect delivery of the notice I hold that the address given by the applicant in his application for planning permission was inadequate and accordingly that his application for planning permission was bad.”
22. Another variant on this theme can be seen in the case law dealing with the misdescription of the addressee of a search warrant. A good example is supplied by the decision of the Court of Criminal Appeal in The People (Director of Public Prosecutions) v. Mallon [2011] IECCA 29, [2011] 2 IR 544, a case where the warrant referred to “4 Marrowbone Close, Dublin 8”, rather than “4 Marrowbone Lane Close, Dublin 8.”. In his judgment for the Court O’Donnell J. said of the argument advanced by the defendant who contended for the invalidity of the warrant that ([2011] 2 IR 544, 570-571):
“Everything in this argument depends on the characterisation of the warrant as being for a premises that does not exist. It seems that the more natural way of approaching the warrant is to ask if it adequately describes a premises that does exist – namely the premises searched. What was involved here can be properly described as a mere misdescription. Indeed, it can only be described as a misdescription in the sense that it is not a complete and full address. It does, in the Court’s view, describe these premises, although it could do so more completely. But in the words of the decided cases, it was not calculated to mislead, and perhaps just as tellingly, did not mislead. If before the execution of the warrant an issue had arisen as to what premises was described in it, the Court does not believe that anyone knowing of the existence of 4 Marrowbone Lane Close, whether postman, taxi driver, a member of the Garda SÃochána or occupier, would have had difficulty in pointing out the premises. In that sense it is telling that the interpretation of the warrant advanced by the [defendant] is that it must be read as authorising the search of nowhere – a premises that simply does not exist. It seems more natural to understand the warrant as being directed to premises which do exist and to see this as an adequate, if imperfect, description of it. Taking the three words that make up the full address of the premises, there is no doubt that the word omitted, “Lane”, is the least important in identifying these premises. “Marrowbone” identifies the cluster of streets which are in Dublin 8 and “Close” the particular street. If the choice is therefore to understand the word as referring, albeit imperfectly and incompletely, to the premises searched, or as referring to nowhere, then the conclusion seems obvious and even unavoidable.”
23. It is important to stress that Mallon was not a case where there was any suggestion that there was any real doubt about the identity of the dwelling which was the subject of the search warrant. Nor was there any element of misdescription: Mallon was rather a case where the address was incomplete, albeit that the key components of the address had been stated.
24. The only contemporary Irish case where the issue of a possible error in the address for service by way of an order for substituted service has been examined is that of the judgment of Laffoy J. in Danske Bank v. Meagher [2014] IESC 38. In that case Laffoy J. accepted that the order for substituted service at a particular address constituted good service even though it was accepted that the order incorrectly described the property in question as the defendant’s residence. But that decision clearly turned on the Court’s conclusion that it had been reasonable for the High Court to have inferred:
“from the totality of the evidence that there was an arrangement in place between [from the person residing at that address] and the appellant whereby the appellant would be apprised that correspondence and documents had been sent to him by post at the address in Milltown, and that the appellant could ascertain the contents of the correspondence and documents, so that, in the case of documents for the initiation and prosecution of legal proceedings, the appellant would have an opportunity to respond thereto in whatever way he thought fit.”
25. Other than confirming the importance of ensuring that a defendant receives due notice of proceedings, the decision in Meagher is not otherwise of direct relevance to the present case. In particular, Meagher did not involve a case where the address in the order for substituted service was itself in some respects incomplete or erroneous.
26. While there may well be nuances between the judicial approaches in respect of errors in the address in all these instances, there is, I suggest, one unifying theme between the case-law on planning notices, search warrants and addresses contained in orders for substituted service, namely, the need for a high degree of accuracy. It is only in those instances where the courts are satisfied that the error was essentially harmless and was most unlikely to mislead that such errors will be excused. It may be noted, for example, that in Crodaun Homes the Supreme Court felt that the reference to Leixlip Gate in itself insufficient, even though the local postman had given evidence that he could have identified the property without any further description, precisely because third parties reading the notice in the newspapers might have been misled by the misdescription. On the other hand, in view of the postal evidence in Croadaun Homes, it may be that an order for substituted service of an individual residing at that Leixlip Gate property would have been sufficient if such an incomplete address had been used in view of precisely the same postal evidence to the effect that a letter bearing that incomplete address would nonetheless have been safely delivered to the addressee.
27. In the present case there appears to be two errors in the address, namely, the reference to “Crimblin” rather than to “Crimlin Little” and to describe the premises as being in Co. Offaly rather than Co. Tipperary. The real question is whether it can be said that the Court can be satisfied with a high degree of assurance that these errors were immaterial and harmless in the context of a letter sent by ordinary pre-paid post where such has been sanctioned by an order for substituted service. Not without considerable hesitation I find myself obliged to conclude that this Court cannot be so satisfied.
28. It is true that, as Barrett J. himself acknowledged, the majority of letters containing partial errors or misdescriptions of the address of the addressee of kind at issue here are in fact delivered safely. But we all have had experiences of where even apparently minor or mundane errors – such as inserting “Avenue” instead of “Road” or “1A” instead of “1” – have led to the post going astray. Given the importance of ensuring proper service – especially when what is at issue is a default judgment resting itself upon an order for substituted service – the court must, generally speaking, at least, err on the side of caution. This is particularly the case where the registered post containing the notice of intention to proceed addressed to “Crimblin, Moneygall, Co. Offaly” was returned as not called for, where the defendant maintains that he was unaware of both the order for substituted service and of the default judgment and that immediately he was notified of the District Court proceedings, he took steps to have the High Court default judgment set aside.
Conclusions
29. In summary, therefore, I cannot be satisfied that the defendant was served with the notice of an intention to proceed given that the address given in the order for substituted service contained two errors and I cannot say that these errors were simply trifling or harmless. Given that the validity of the subsequent default judgment rests on such proof of service, I fear that I have little alternative but to allow the appeal and to set aside that default judgment. For the avoidance of any possible doubt, I would wish to make it clear that as the defendant is now fully aware of the proceedings and as any possible prejudice to him has been rectified with the setting aside of the default judgment, it will no longer be necessary for the High Court to resolve any further questions in relation to service. It will now be a matter for the plaintiff to pursue and for the defendant to defend the substantive merits of the claim
30. I reach this overall conclusion with not a little hesitation and with considerable sympathy for the position of Corrib Oil. I propose nevertheless to set aside the judgment on terms. I will accordingly require the defendant to file any replying affidavit to the original proceedings within four weeks of the delivery of this judgment. At that point it will be a matter for the plaintiff to take such further steps as it may be advised to seek judgment afresh in the High Court.
Abbey International Finance Ltd v Point Ireland Helicopters Ltd
[2012] IEHC 374
NOTE OF A JUDGMENT delivered by Mr. Justice Kelly on the 27th day of July, 2012
Foreword
1. This is a note of a judgment which I delivered ex tempore. As the judgment dealt with a number of important procedural issues, I indicated to the parties that I would reproduce that part of it in the form of a written judgment. This I now do.
Background
2. The plaintiff is a limited company registered in Ireland. It is engaged in the leasing of aircraft. The profits derived from that activity are used by it to support various charities.
3. The first defendant is an Irish company and is described as a special purpose vehicle which was established in order to effect the leasing transactions the subject of this litigation. The second defendant is an Italian company and is a member of the Point Aircraft group of companies.
4. This litigation concerns three aircraft and a medical kit. All three aircraft are helicopters. Lease agreements were entered into in respect of them between the plaintiff and the first defendant on 25th August, 2008, 25th March, 2009 and 29th September, 2009. The medical kit lease is dated 21st October, 2008. There were then subleases entered into as between the defendants in respect of the helicopters and the medical equipment. Two of the helicopters are, at present, in Kosovo and the other is in Italy.
Plaintiff’s Case
5. It is the plaintiff’s case that there has been default in respect of rental obligations under the leases and subleases. That much was conceded by counsel on behalf of the defendants who accepted that arrears of €3,195,000 are owing. That is a remarkable situation, given the importance which the lease attributes to the payment of rent. For example, clause 4.5 says:-
“The lessee’s obligation to pay rent and other amounts due hereunder shall be absolute and unconditional.”
6. The lease goes on to say:-
“The lessee acknowledges and agrees that its obligation to pay all amounts to rent due and owing under the terms hereof for so long as this lease is continuing shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including without limitation, any set off or counterclaim or defence or other right which the lessee may have, any lack or invalidity or defect in title, condition, design or operation of the aircraft, any charge or lien on the aircraft, any invalidity or unenforceability or lack of power of the lessee to enter into this lease, or any insolvency event against the lessor, the lessee or any other person.”
7. Clause 4.6 of the lease contains an express proviso that:-
“The lessee shall pay the rent and other amounts without set off or counterclaim and free of any deductions or withholdings other than those required by law.”
8. The lease also contains a “hell and high water” clause at para. 4.13 which is in the following terms:-
“The lessee’s obligation to pay rent and make other payments in accordance with this agreement shall be absolute and unconditional irrespective of any contingency whatsoever, including, but not limited to:
(a) any right of set off, counterclaim, recoupment, defence or other right.
(b) any unavailability of the aircraft for any reason.
(c) any failure or delay on the part of either party hereto, whether with or without fault on its part in performing or complying with any of the terms or conditions of this agreement.
(d) any insolvency, bankruptcy, administration, reorganisation, arrangement, readjustment of debt, dissolution, liquidation or similar proceedings by or against the lessor or lender.
(e) any lack of due authorisation of, or other defect in this agreement.”
9. It is difficult to conceive more watertight obligations to pay rent in accordance with the terms of the lease. Yet it is a fact that almost from the very beginning there has been default on the part of the first defendant in respect of the discharge of those obligations.
10. Given that situation, it is hardly surprising that on 11th June of this year, the plaintiff served notice of termination of the leases and subleases and went about exercising its rights under the security assignments. Shortly thereafter, on 14th June, 2012, it commenced these proceedings.
11. In this action, the plaintiff seeks both liquidated amounts and substantive relief in respect of the aircraft. In particular, it seeks an order for specific delivery up of the aircraft and the medical kit to the plaintiff. Given that mix of reliefs, the plaintiff opted to proceed by way of plenary summons.
12. The plaintiff contends that there is no defence to any aspect of this claim and it has brought the present motion seeking judgment for the entire of its claim. It thus seeks summary judgment for the monies due and delivery up of the aircraft. Alternatively, it seeks injunctive relief.
13. The first issue which arises is whether or not it is open to the plaintiff to bring a claim for summary judgment in respect of non-liquidated sums.
Jurisdiction
14. This court is all too familiar with the situation where a liquidated sum of money is the subject of an action commenced by summary summons. The rules of court specifically provide for judgment being marked in the Central Office of this court in default of appearance in such a case. An application can be made to the Master or the Court for summary judgment in respect of that type of claim when an appearance is entered. It is equally clear that if one brings a claim for a liquidated sum on a plenary summons, judgment for that sum can be obtained in the Central Office in the absence of any appearance being entered. In the event of there being an appearance, an application can be made to the Court for summary judgment in respect of the liquidated part of the claim.
15. But is it open to a plaintiff to seek summary judgment in respect of the un-liquidated claims?
16. I am satisfied that the answer to that question is in the affirmative. I come to that conclusion by reference to both the inherent jurisdiction of the court and the specific rules which apply to cases transferred to the Commercial List.
17. I can see no reason in either law or logic why a defendant who has no defence to a liquidated claim may be subject to an application for summary judgment, but, not be so in the case of an action seeking unliquidated damages or other substantive reliefs.
18. In proceedings seeking liquidated sums, a defendant has to put his defence on affidavit within a short period of time and have it judicially tested by reference to the – admittedly low – standard of proof which has to be achieved in order to avoid summary judgment. In the absence of an ability to seek summary judgment in a non-liquidated claim an unmeritorious defendant can procrastinate for months or perhaps years. That would be an obvious injustice to a plaintiff in such a case.
19. I believe there to be an inherent jurisdiction in the court to enable a plaintiff to seek summary judgment in such circumstances. It is true that there is no specific provision in the Rules of the Superior Courts to enable such an application to be brought, save in respect of cases in the Commercial List to which I will turn in due course. But the absence of a specific rule should not deny a meritorious plaintiff from speedy relief against an unmeritorious defendant in an appropriate case.
Inherent Jurisdiction
20. In Barry v. Buckley [1981] I.R. 306, Costello J. held that the court has an inherent jurisdiction to strike out or stay proceedings which are frivolous or vexatious or have no reasonable prospect of success. He said:-
“But, apart from order 19, the Court has an inherent jurisdiction to stay proceedings and, on applications made to exercise it, the Court is not limited to the pleadings of the parties but is free to hear evidence on affidavit relating to the issues in the case: see Wylie’s Judicature Acts (1906) at pp. 34-37 and The Supreme Court Practice (1979) at para. 18/19/10. The principles on which the Court exercises this jurisdiction are well established. Basically its jurisdiction exists to ensure that an abuse of the process of the Courts does not take place. So, if the proceedings are frivolous or vexatious they will be stayed. They will also be stayed if it is clear that the plaintiff’s claim must fail.”
21. In this case, it is argued that a similar jurisdiction exists so that a plaintiff can obtain summary judgment without having to proceed to plenary hearing if a defendant does not have a statable defence. This proposition was alluded to by McCarthy J. in Sun Fat Chan v. Osseous Limited [1992] I.R. 425. At p. 428 he referred to the decision of Costello J. in Barry v. Buckley and commented as follows:-
“In Barry v. Buckley Costello J. referred to the notes on that sub-section as set out in Wylie on the Judicature Acts. Since the matter has not been debated, I express no view upon the decision in Barry v. Buckley save to comment that applying the underlying logic, a defendant may be denied the right to defend an action in a plenary hearing if the facts are clear and it is shown that the defence is unsustainable. This appears to have been the net effect of the decision in the High Court (Dixon J.) in Dolan v. Neligan (1959) reported in its second phase in [1967] I.R. 247.”
22. That obiter statement of McCarthy J. accepts the logic and the justice in providing a mechanism for a plaintiff to obtain relief in all proceedings if the facts are clear and it can be demonstrated that there is no sustainable defence. Indeed, that position appears to have been accepted since at least 1959 having regard to the decision to which he refers in Dolan v. Neligan.
23. The mere fact that the Rules of the Superior Courts do not expressly provide for an application of this type is no bar to it being made successfully. The rules of court are the servants of justice, not its master. Support for this view can be obtained from the judgment of Geoghegan J. in Dome Telecom Limited v. Eircom Limited [2008] 2 IR 726. There, a question arose as to whether the defendant could be compelled by an order for discovery in respect of electronic data to create documents for the purpose of complying with the order. In the course of his judgment, Geoghegan J. said:-
“My starting point would be that I would reject any idea that the right to discovery of documents should be exclusively based on an interpretation (literal or otherwise) of the relevant rule of court….
In modern times, courts are not necessarily hidebound by interpretation of a particular rule of court. More general concepts of ensuring fair procedures and efficient case management are frequently overriding considerations. The rules of court are important and adherence to them is important but if an obvious problem of fair procedures or efficient case management arises in proceedings, the court, if there is no rule in existence precisely covering the situation, has an inherent power to fashion its own procedure and even if there was a rule applicable, the court is not necessarily hidebound by it.”
24. This quotation lends support to the plaintiff’s contention. If there is an inherent jurisdiction to strike out proceedings which have no reasonable prospect of success then, in the interests of justice, why should there not, in an appropriate case, be a jurisdiction to adjudicate summarily upon a purported defence? If the defence offered is alleged to be lacking any reasonable prospect of success then the plaintiff should have the ability to seek to recover judgment regardless of the type of proceedings. I believe that there is no good reason why such an application cannot be brought and considered by the court.
Commercial List
25. Quite apart from the inherent jurisdiction, it has to be borne in mind that this litigation is in the Commercial List. The purpose of setting up that list was, as I indicated in IBB Internet Services Limited v. Motorola Limited [2011] 2 ILRM 326, to achieve the objective of “speedy, efficient and just determination of commercial disputes”.
26. Order 63A, rule 5, gives a wide discretion to make directions and orders as part of the case management of proceedings. It provides that:-
“A Judge may, at any time and from time to time, of his own motion and having heard the parties, give such directions and make such orders, including the fixing of time limits, for the conduct of proceedings entered in the Commercial List, as appears convenient for the determination of the proceedings in a manner which is just, expeditious and likely to minimise the costs of those proceedings”.
27. That rule is supplemented by rule 6(1) which provides that, in order to facilitate the determination of proceedings in a manner which is just, expeditious and likely to minimise costs, a judge either or his own motion or on the application of a party can give directions in relation to a wide range of matters. These include whether proceedings shall continue to be heard without formal pleadings or to be heard on affidavit without oral evidence. The judge is also entitled to fix any issues of fact or law which fall to be determined in the proceedings.
28. These rules have been utilised in many cases to grant directions and make orders which facilitate the expeditious and cost effective management and disposition of commercial proceedings. Such directions have included the identification of issues so that evidence can be confined to the matters actually in dispute between the parties (P.J. Carroll & Company Limited v. Minister for Health and Children [2005] 1 IR 294); the directing of a modular trial (McCann v. Desmond [2010] 4 IR 554); the staying of proceedings where the court considers it just to do so as part of the case management of related proceedings, (Kalax Fund Limited v. HSBC International Trust Services (Ireland) Limited [2009] IEHC 457); the “telescoping” of the leave and substantive hearing in judicial review applications, (Sweetman v. An Bord Pleanála [2009] IEHC 174).
29. Given these wide powers, I am of opinion that it is open to a plaintiff in plenary proceedings being heard in the Commercial List to seek a summary disposal of them in circumstances where a defendant is alleged to be unable to demonstrate a real or bona fide defence. The ability to bring such an application promotes the objectives for which the Commercial List was established.
The Test
30. The test which the court has to apply on applications for summary judgment in relation to liquidated claims has been the subject of many decisions in this Court and the Supreme Court. The number of these decisions has increased substantially in recent years given the collapse of the Irish economy.
31. The leading case on the principles to be applied is the decision of 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 v. Anglin [1996] 1 IR 75 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.”
32. Hardiman J. in a concurring judgment formulated the test to be applied in the following terms:-
“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?”
33. I am of opinion that a similar test falls to be applied on an application for summary judgment in respect of a non-liquidated debt claim. Thus, a defendant has to surmount the same low threshold of proof in order to avoid summary judgment.
Afterword
34. As this note has been prepared only in respect of the general procedural question, it is not necessary to deal with what occurred in this case in any detail. It is sufficient to record that summary judgment was given in respect of the liquidated claim for arrears of rent and conditional leave to defend was granted in respect of the other aspects of the claim.
Danske Bank A.S. (t/a Danske Bank) -v- Macken & anor
[2017] IECA 117 (05 April 2017)
Composition of Court:
Irvine J., Hogan J., Hedigan J.
Judgment by:
Hogan J.
Status:
Approved
Result:
Allow and set aside
THE COURT OF APPEAL
Neutral Citation Number: [2017] IECA 117
Record No. 597/2015
Irvine J.
Hogan J.
Hedigan J.
BETWEEN/
DANSKE BANK A.S. (TRADING AS DANSKE BANK)
PLAINTIFF / RESPONDENT
– AND –
MICHAEL MACKEN AND PATRICIA WATSON
DEFENDANTS/ APPELLANTS
JUDGMENT of Mr. Justice Gerard Hogan delivered on the 5th day of April 2017
1. In what circumstances should the High Court be prepared to countenance exercising its own set aside jurisdiction under Ord. 36, r. 33? This is the issue which is presented on this appeal from the decision of Cross J. on 7th December 2015 whereby he refused to entertain the defendants’ application to set aside an earlier judgment of 2nd November 2015 on the ground that he was functus officio. At the hearing of the appeal on 23rd March 2017 the Court announced that it would allow the defendants’ appeal and would remit the matter to the High Court for a determination of this issue. The Court also indicated that it would set out its reasons in written form at a later date. I now set out these reasons in this judgment.
The Background to the Application
2. Ord. 36, r.33 provides that:
“Any verdict or judgment obtained where one party does not appear at the trial may be set aside by the court, upon such terms as may seem fit, upon an application made within six days after trial.”
3. In the present case the plaintiff Bank had commenced special summons proceedings against the defendants (who are husband and wife) on 3rd January 2013 seeking possession of the plaintiff’s family home in Co. Roscommon. The couple represent themselves in person, but it is probably fair to say that Mr. Macken has undertaken responsibility for the defence of the proceedings on behalf of both defendants.
4. Following a lengthy exchange of affidavits and some sixteen appearances by Mr. Macken in person before the High Court on a variety of occasions, the hearing of the Bank’s application for possession was scheduled to come before the High Court for hearing on 2nd November 2015. On that occasion, however, there was no appearance by or on behalf of the defendants at the first calling of the list and the matter was put back until the afternoon. When the matter was ultimately called, the hearing proceeded in the absence of the defendants. After a ten minute hearing and having heard from counsel for the Bank, Cross J. made an order for possession of the defendants’ family home, together with a stay on that order for a three month period.
5. How, then, did it come to pass that the defendants were not present at that hearing? As it happens, the evidential material concerning this issue which is before the Court is rather sparse. In a subsequent affidavit sworn on 9th November 2015 Mr. Macken deposed to the fact that he was unable to attend the High Court on the 2nd November due to what he described as a “major personal difficulty” and he stated that he sent an email to the solicitor for the Bank requesting an adjournment. As it happens, the solicitor in question was on vacation on that day, 2nd November 2015, and she only received the email on the following day.
6. The only independent evidence offered by Mr. Macken in support of this claim of a “major personal difficulty” is a letter from his general practitioner dated 10th November 2015 which states, somewhat laconically, that this was “to confirm that this patient attended here at the surgery” at a particular location in Co. Offaly on 2nd November 2015. This letter does not even state in terms that Mr. Macken received treatment on the day in question, still less state the nature of his medical condition on the day in question. Before this Court Mr. Macken maintained that his medical practitioner had concluded that he was in no fit state to attend court on 2nd November 2015. The transcript of the digital audio recording of the hearing of the 7th December 2015 also shows that Mr. Macken informed Cross J. that he had been ill on November 2nd, 2015.
7. Immediately after the hearing on 2nd November 2015, Mr. Macken made contact by email on the following morning with the Bank’s solicitor who had now returned to work. He was taken aback and dismayed to learn that a possession order had been made in respect of his family home and he sought the Bank’s agreement – which was not forthcoming – to have the possession order set aside. Mr. Macken moved with commendable speed, however, and he applied by motion dated the 9th of November 2015 to have the order made on the previous Monday 2nd November 2015 set aside. As it happens, that motion was issued in time in view of the provisions of Ord. 122, r. 10 which provides:
“In any case in which any particular number of days, not expressed to be clear days, is prescribed by these Rules, the same shall be reckoned exclusively of the first day and inclusively of the last day.”
8. As the time period envisaged in Order 36, r.33 is measured in days, this means that the first day – November 2nd – is to be excluded, so that the six days expired on November 9th, the day the motion was issued.
9. The defendant’s principal complaint, however, relates to what happened when the motion came back before the High Court on 7th December 2015. It is accepted by both sides – and borne out by the transcript – that on that occasion Cross J. took the view that he was functus officio and that the defendant’s only remedy was to appeal the re-possession order to this Court. The following exchange may be taken as representative as what occurred at that hearing:
“Judge: …I think that you should go to the Court of Appeal if you’re unhappy with what I have done.
Mr. Macken: Okay, so I can take it then you’re refusing me the right to bring forward the motion?
Judge: Yes, correct.
Mr. Macken: So you’re dismissing the motion?
Judge: I am.”
10. This exchange, therefore, is at the heart of the defendant’s appeal to this Court. He maintains that Cross J. ought to have entertained this set aside motion on the merits and at least considered whether, pursuant to Ord. 36, r.33, the judge ought to have set aside the order in view of the defendant’s explanation for his absence on the previous Monday.
The finality of litigation and the doctrine of functus officio
11. There is a clear public interest in the finality of a judicial determination, subject only to an appeal. It is, moreover, generally understood and accepted that where a High Court judge has pronounced judgment in a given matter, that judgment is final and the only remedy open to the disappointed litigant is to appeal. This point is so firmly embedded in our system of civil procedure that it is actually difficult to find direct authority on the point.
12. This issue did, however, arise in U. v. Minister for Justice, Equality and Law Reform [2011] IERHGC 95, [2011] 1 IR 749, even if the context of that decision is quite different from that presented in this appeal. In that case I had delivered judgment as a judge of the High Court upholding the validity of a particular deportation order. After that judgment had been delivered, but before the question of costs or the grant of a certificate of leave to appeal to the Supreme Court pursuant to s. 5 of the Illegal Immigrants (Trafficking) Act 2000 could be considered, the applicant applied to me to amend the pleadings so to permit the constitutionality of s. 3(1) of the Immigration Act 1999 (i.e., the sub-section providing for the deportation power in the first place) to be challenged.
13. I rejected that argument, saying that I was functus officio in the matter so far as the validity of the deportation order was concerned:
“In my view, however, these proceedings are no longer current before me. I accept that the order still remains to be perfected and, as we have noted, the issues of costs and a certificate remain outstanding. But the proceedings so far as they concern the validity of the deportation order have been disposed of by this Court and they cannot be said to be current in any real or meaningful sense. It follows, therefore, that I have no jurisdiction to permit an amendment at this juncture which would bear on the validity of the deportation order given that I am functus officio on that very issue. It is true that, in the event that the appropriate certificate for leave to appeal was given and there was an appeal to the Supreme Court, that Court would have a jurisdiction to amend the pleadings, but this power would derive from Ord. 58, r.2 and not from Ord. 28, r.1.”
14. Such is clearly the general rule. But Ord. 36, r.33 may, however, be regarded as a minor derogation from that rule, designed as it is to deal with the special contingency of where a litigant, whether by reason of oversight or what amounts to force majeure, is prevented from actually attending court on the day in question. Every legal practitioner has had experience of where – whether through oversight, listing difficulties, transport failures, sudden indisposition or a medical or family emergency – a litigant went unrepresented and judgment was entered against them in their absence. Order 36, r. 33 is designed to deal with these types of difficulties and to ensure that justice is fairly done as between the parties where events of this kind occur. In particular, it allows the trial judge to set aside the judgment (on terms, if needs be) and proceed to determine the matter where both sides are represented without the necessity for an actual appeal.
15. It is, of course, important to stress that a party who deliberately elects not to participate at a particular hearing may not invoke r. 33, at least in the absence of quite particular extenuating circumstances. If it were otherwise, then as Leggatt L.J. observed in Shocked v. Goldschmidt [1998] 1 All E.R. 372, 382:
“….a party who chose not to be present at trial could afterwards change his mind and provided that he was prepared to pay the costs thrown away could always procure a rehearing of the matter, however much time of the court had been wasted by his decision, whatever the inconvenience to his opponent and however little his own conduct merited indulgence. That is not the law.”
16. In Shocked Leggatt L.J. also observed ([1998] 1 All E.R. 372, 381):
“Where judgment has been given after a trial it is the explanation for the absence of the absent party that is most important: unless the absence was not deliberate but was due to accident or mistake, the court would be unlikely to allow a rehearing.”
17. In that case a former agent had sued a musician for breach of contract. Although the defendant was aware of the proposed hearing date, she did not take steps to apply for an adjournment. She had admittedly encountered difficulties with her solicitors and in the lead-up to the trial she was on tour in Australia. The case then proceeded for four days in her absence and judgment was given against her. Ms. Shocked then applied almost one year later under the equivalent provisions of Ord. 36, r. 33 which were contained in the English Rules of the Supreme Court. She was successful in this application at first instance, but the English Court of Appeal took a different view of the matter and allowed Mr., Goldschmidt’s appeal against the successful set aside order.
18. Leggatt L.J. stressed that Ms. Shocked had deliberately elected not to attend the trial; that she had no real prospects in any re-trial; that she had delayed in setting the judgment aside; that her conduct both before and after the judgment had been undeserving; that the other party would be incommoded by a re-trial and that it had been estimated that any further re-trial would take another ten days. Leggatt L.J. stressed that in these circumstances it would not be right to set aside the judgment.
19. These principles were applied by Dunne J. in Nolan v. Carrick [2013] IEHC 523, another case where the defendant had deliberately absented himself from his trial. As Dunne J. explained:
“It seems to me that the purpose of Ord. 36, r. 33 of the Rules of the Superior Courts is not to deal with circumstances such as those which arose in this case. This is not a case of inadvertence, mistake or surprise. It is not the case that the defendant was unaware of the fact that the proceedings were in a list for hearing. As I have said, it appears that a deliberate decision was made by the defendant not to attend court. The defendant did not instruct a new solicitor to attend court, even for the purpose of renewing the application for an adjournment, nor did anyone else, such as a family member, attend court on behalf of the defendant. Therefore it seems to me Ord. 36, r. 33 of the Rules of the Superior Courts, is not applicable to the facts of this case. Order 36, r. 33 is there to avail those parties who by accident or mistake or for some similar reason were not aware of the trial date and consequently suffered a judgment being given in their absence. In the circumstances of these cases, I refuse the application pursuant to Ord. 36, r. 33 of the Rules of the Superior Courts.
For the sake of completeness, I would add that I do not think there is any doubt but that the court could enlarge the time for making an application pursuant to Ord. 36, r. 33 of the Rules of the Superior Courts in appropriate circumstances. Given that I am not satisfied that this is an appropriate case in which to grant an application pursuant to Ord. 36, r. 33, it is not necessary to consider whether or not it would have been appropriate to extend the time within which to bring the applications herein.”
20. If one applies these principles to the present case, it can be seen that Mr. Macken’s application for a set aside order should at least have been entertained on its merits by the High Court. He had, after all, moved immediately to have the order set aside and it cannot be said, for example, that the inconvenience to the Bank from the re-hearing of a matter which was a ten minute hearing heard on affidavit puts Mr. Macken’s case into the same category of the four day action which was at issue in Shocked. Most importantly of all, if, moreover, his explanation for his absence were to be accepted – namely, that he was prevented by illness from attending and that he had endeavoured to communicate this to the Bank’s solicitor by e-mail that morning – the case would have come within the rubric of Ord. 36, r. 33, although this is not to say that the Court would necessarily have set aside the first judgment.
Whether there was an estoppel by election on the part of the defendants?
21. It is true that, as counsel for the Bank, Mr. Neuman, observed, Mr. Macken had immediately appealed the first decision of Cross J. to this Court. This was, of course, in addition to the application which he sought to make pursuant to Ord. 36, r. 33. The plaintiff Bank accordingly contended that the lodging of a right of appeal amounted to an election for this particular remedy and that in view of that election he could not now be heard to object to Cross J.’s treatment of the Ord. 36, r. 33 issue at the second hearing on December 7th, 2015.In effect, the argument was that Mr. Macken was estopped by his conduct in now seeking to have the judgment set aside pursuant to Ord. 36, r. 33.
22. It is true that a litigant is normally bound by a knowing election in the course of a trial and cannot thereafter pursue a remedy inconsistent with that election: see, e.g., Corrigan v. Irish Land Commission [1977] I.R. 317 and The State (Byrne) v. Frawley [1978] I.R. 326. Both of those cases concerned the deliberate election on the part of the litigant in question to object to the regularity of one aspect of the hearing or even – as in the case of Byrne – the constitutionality of the manner in which a particular jury had been empanelled during a criminal trial. In both cases the litigants elected with full knowledge to continue with the hearing and they were later held to be estopped by their conduct from thereafter raising their objections. I do not think, however, that the present case comes with that particular category of election.
23. The defendants’ family home was at stake in the proceedings and Mr. Macken was doubtless frantic with worry lest an order for possession of that property might have been made by the High Court in his absence. It was only natural that he would wish to have the judgment set aside in accordance with Ord. 36, r.33. But he equally cannot be faulted for seeking to appeal to this Court the first judgment granting possession to the Bank. Of course, from Mr. Macken’s perspective an appeal against the making of a judgment in undefended proceedings was less attractive than having that judgment set aside. Yet if the Ord. 36, r. 33 remedy was not to be available to him, the right of appeal to this Court against the making of the first order was nonetheless better than nothing.
24. Having regard, therefore, to the special facts of this case, the two remedies should be regarded are really complementary rather than – as was the case in both Corrigan and Byrne – exclusive. In effect, Mr. Macken was saying that in the event that the judgment could not be set aside, it should nonetheless be appealed. In the particular circumstances of this case, this was a course of action which, in justice, he was fully entitled to take. I would accordingly reject the argument that this conduct amounted in the circumstances to an election as between otherwise inconsistent remedies.
Conclusions
25. In all these circumstances, I have come to the conclusion that Cross J. fell into error in failing to consider whether he should have exercised the discretion conferred by Ord. 36, r. 33 and in holding that he was entirely debarred by the functus officio doctrine from even considering Mr. Macken’s application to have the November 2nd, 2015 order set aside. It is important to stress, however, that since the High Court never came to adjudicate on the merits of that application, it would be inappropriate for this Court to do so by way of appeal or, indeed, to express any view as to how the High Court should now approach this matter. It is sufficient for present purposes to state that it will be now a matter for the High Court to consider afresh this application pursuant to Ord. 36, r. 33 to have the judgment of 2nd November 2015 set aside, aided perhaps by reference to some of the principles and authorities which I have set out in this judgment.
26. I would accordingly allow the appeal and remit the matter to the High Court to consider and determine Mr. Macken’s application under Ord. 36, r.33 on its own merits.
AIB plc v Tobin
[2013] IEHC 7
NEUTRAL CITATION 2013 [IEHC] 7
THE HIGH COURT
[2011 No. 735 S.]
BETWEEN
ALLIED IRISH BANKS PLC
PLAINTIFFS
AND
JOHN TOBIN
DEFENDANT
[Approved] JUDGMENT of Mr Justice Ryan delivered the 17th January 2013
This is an application by the bank for summary judgment. The summons lists six different accounts in respect of which the claim is brought and amounting in total to some €4.2 million. The issue that arises at this stage is whether the defendant has established a sufficient basis of defence that entitles him to have the matter referred to plenary hearing. The relevant law is in Aer Rianta v. Ryanair [2001] 4 IR 607, where the Supreme Court laid down the principles that I have to apply.
In respect of three accounts, which comprise the bulk of the funds advanced by the bank to the defendant, issues arise that do not apply to the other loans. I propose to deal with them first.
By letter of the 10th December 2008, headed “Letter of Sanction” the bank offered three facilities which the defendant accepted. They are respectively for €2.751 million, €780,000 and €170,000. As to the first loan account, for €2.751 million, the repayment terms specified in the letter is as follows:-
“Interest only for 4 months to 30/03/2009, pending full review at that stage with capital reduction from the nett sale proceeds at The Paddocks, Newcastlewest, Co. Limerick, during that period. Full borrowing to be restructured/refinanced at that stage.”
In respect of the loan for €780,000, the corresponding terms says:-
“Interest only for twelve months with full review/refinance at that stage”.
The third loan, for €170,000, says:
“Interest only for three months with full review/refinance at that stage”.
Each of the loans also has an express provision that the instalments will not be adjusted for changes in the interest rate, which means that the instalments may not actually be sufficient to meet the actual rate of interest applicable at that particular time. Nothing turns on this term.
The bank wrote to the defendant on the 23rd December 2009, and this letter and the sanction letter are crucial documents for this application, at least in regard to the three loans that were sanctioned in December 2008. Confusingly, this letter is captioned by a reference to the letter of offer dated the 10111 December 2008 but it actually refers to six loans rather than the three that were comprised in the letter of sanction of that date. The letter is as follows:-
“Dear Mr. Tobin,
We refer to the above letter of offer, pursuant to which the bank has agreed to make the facilities therein available to you.
Without prejudice of the terms and conditions contained in the letter of offer, the bank has agreed as follows:-
(i) To extend the level of facilities to incorporate the above quoted balances, and
(ii) To extend the term applicable to the facilities detailed therein on and subject to the existing terms and conditions contained in the letter of offer. The facilities shall be deemed to have been extended by the bank, and shall now expire on the 28th February 2010, whereupon, the facilities, together with all other outstanding amounts then due and owing under the letter of offer, shall become immediately repayable by you in full.
Please note that this letter is supplemental to and not in replacement of the letter of offer dated the 10th December 2008, and save as varied by the terms of this supplemental letter, all other terms and conditions applicable to the facilities remain unchanged.
Should you require any additional information in connection with this please contact the undersigned.
Yours sincerely.”
By letter of the 7th February 2011, the bank’s solicitors demanded payment on foot of the six accounts, including the three that were covered by the sanction letter of the 12th December 2008.
The defendant claims to have made out a sufficient case to warrant reference to plenary hearing. Mr Tuite, SC submits that the money is not now due and has not been validly demanded. The repayment terms in the three agreements are no more than agreements to reach agreement and are accordingly ineffective. He cited authorities to establish the proposition that an agreement to reach an agreement is of no legal impact. If there was ambiguity in the terms that applied to each of the three loans, oral evidence would be required to establish the factual circumstances in which the agreements were made. That process would give rise to findings as to the meaning and effect of the agreements. It was clear, on any basis as counsel submitted, that the loans did not and could not have become payable immediately on the expiration of the interest-free periods. It followed that the letter of the 23rd December 2010 was not able to alter the terms of the 2008 agreement in the manner in which it purported to do so or at all and that letter was accordingly ineffective.
Counsel for the bank, Mr Lewis, argued that no reasonable basis had been put forward by way of defence. He submitted that the letter of the 23rd December 2009 was effective to fix a new date for repayment, the 28th February 2010, for each of the three loans and that the defendant failed to repay and was accordingly indebted to the bank from that date in the full amount of the various loans. He referred to the the bank’s general conditions which provided that, subject to any specific agreement in a loan, any facility advanced was payable on demand. His point was not that that overrode the provisions in the loans as contained in the letter of sanction of December 2008, but rather that immediate payment was the default arrangement. In circumstances where the terms of the loan as to repayment were absent or ineffective, then the general conditions came into operation. If the defendant was successful in his contention that the agreement was no more than an ineffective agreement to make an agreement, then the general conditions became operative and the bank was accordingly entitled.
The test is laid down by the Supreme Court in Aer Rianta v. Ryanair. Has the defendant made out some rational and credible basis of defence on which he might succeed? Obviously, I do not have to be satisfied that the defendant has an answer to the claim, but merely that he has some grounds for contending that he might successfully resist the bank’s claim.
In respect to these accounts, the defendant may be able to make out a defence. He does not have to establish that he might have a case on the merits in the sense of not owing any money to the bank. It is sufficient if he is in a position to argue that the bank was not entitled to make its demand through its solicitors in the letter of the 7th February 2011, because the money was not then due. He can argue that the letter of the 23rd December 2009 did not and could not validly establish a deadline of the 28th February 2010, for the full discharge of all outstanding amounts by the defendant to the bank including all liabilities under the three loans in question that arose from the December 2008 letter of sanction.
The defendant can argue that it was not envisaged that the three loans would become repayable in full at the end of the interest free period. Something was going to happen at the end of those periods but the precise nature of that something was not specified and may be a matter of debate. The purpose of the new arrangement that was to come into effect at the end of the interest-free periods of months was to refinance the loans. It is probably obvious that the bank was going to do that refinancing, assuming agreement could be reached between the parties. The question is on what terms the money to refinance the loans was going to be provided. One way or another, it is clear that the letter of sanction envisaged that there would be a further arrangement made between the parties at the end of the periods.
It seems to me it is at least arguable that the parties envisaged that there would be negotiations at the end of the interest free period to deal with the arrangement that would then be put in place. But without more, the loans did not thereupon become repayable. The process that was envisaged might lead to agreement or it might be that the bank and the customer failed to agree. What was to happen in that situation? Did the loan become immediately repayable? Or would a term be implied as to a reasonable period for repayment or refinancing by another lender. I do not know. It is not necessary to know the answer at this stage. I think the defendant is right is saying that there is an issue to be determined or a question to be answered as to whether the bank was entitled to declare the loans to be repayable as of a particular date as the bank did in its letter of December 2010.
I am also of the view that oral evidence may be required although I am certainly not saying that such is the case. The defendant has alluded to facts and circumstances in his third affidavit which may be considered relevant to the issues in the case. The extent to which evidence of the parties is admissible in the circumstances of an agreement like this is of course a matter of debate in many cases. I do not want to indicate any particular view on that question. The point I make is that I cannot out rule at this stage the possibility that such evidence might be relevant. That is another reason for refusing summary judgment on these three accounts.
The three accounts that were not included in the letter of sanction dated the 10th December 2008 are as follows:-
1. Account No. 79876047, 15th December 2003, overdraft facility to limit of €125,000.
2. Account No. 79877797, 24th December 1004, letter of sanction re loan €200,000. The purpose of this loan was to purchase property and as I understand the loan was to be paid off on the maturity of a pension policy on the 30th August 2022; premiums of €2,000 per month were to be paid over a period of 18 years (2004 to 2022) plus interest which was to be funded quarterly at €2,375 per quarter.
3. Account No. 79877011, 23rd February 2007, overdraft facility credit limit €100,000.
In respect of loan No. 2 above, the defendant deposes in his third affidavit dated the 16th November, 2012, that he has cleared this loan in full. That is a clear statement of fact and given the information provided by the defendant at para. 4 of that affidavit and the terms as to repayment and the absence of any specific basis of claim arising out of alleged default in payment of interest or insurance premiums, it would not be possible for the plaintiff to obtain judgment on that account. In his affidavit of the 3rd December, 2012 Mr David Ryan provides details of outstanding amounts in five accounts, not including 7797, which is implicit confirmation of repayment. Whatever about that understanding, there is a proposed defence with some particulars of payment and the least it does is to raise a defence and thereby prevent judgment on a summary application.
I turn to loan No. 6047, which was the subject of a letter of the 15th December 2003, authorising an overdraft up to a maximum of €125,000. The defendant refers to this at para. 6 of his third affidavit. He claims that the bank has not particularised its calculations in regard to how it arrived at the total amount of some €120,000 that is due on foot of this account as claimed by the bank. However, in a previous affidavit Mr. David Ryan for the bank exhibited the statements of this current account, which would of course have gone to the defendant. Even if they had not, these account sheets set out the amount due from February 2011 and how the interest was added. Mr. Tobin says that “Whereas I acknowledge an indebtedness to the plaintiff in respect of this account, I say that it is not possible for me to examine the figures presented by the plaintiff when they have failed to particularise the balance that it alleges I owe”. I do not think that this amounts to a denial of the debt or that it sets up a possible defence. If the plaintiff had any doubt or confusion about the account he could have raised it with the bank and instead of setting out any particular query he has simply chosen to express doubt as to the correctness of the amount claimed. I am not satisfied that he has any reasonable possibility of making a defence on his part of the claim and I propose to give judgment accordingly. I do not think that the general statements by the defendant that he disputes the amounts claimed are sufficient to deprive the bank of judgment.
There remains Account No. 7011, in respect of this account no basis of defence was put forward by the defendant. There is no reference in any of his affidavits to this account or to any defence that he might have. He does say in general in his second affidavit that he accepts that he owes the bank some money but he queries the exact amounts. However, no specific answer is proposed to the bank’s claim on this account and the bank is entitled to judgment thereon.
I will therefore give judgment in favour of the plaintiff in respect of Account Nos. 6047 and 7011 in the amounts due and owing, namely, €499,963.01 and refer the balance of the bank’s claim to plenary hearing.
ACC v Heffernan
[2013] IEHC 557
Neutral Citation: [2013] IEHC 557
THE HIGH COURT
[2011 No. 2085 S]
BETWEEN
ACC BANK PLC
PLAINTIFF
AND
THOMAS HEFFERNAN AND MARY HEFFERNAN
DEFENDANTS
JUDGMENT of Mr. Justice Hogan delivered on 4th November, 2013
1. Where a plaintiff commences proceedings by summary summons seeking a liquidated debt and thereafter applies to the Master of the High Court for summary judgment and it is concluded that the proceedings ought instead to have been commenced by plenary summons, is the Master nonetheless entitled to strike out the summary summons proceedings and require the plaintiff to recommence by way of plenary action? This, in essence is the issue which is presented in this appeal pursuant to O. 63, r. 9 from a decision of the Master to this effect.
2. The present proceedings were commenced by summary summons on 18th May, 2011. The plaintiff, ACC Bank, contends that it advanced the sum of €3,360,000 to the defendants, Mr. and Ms. Heffernan, in September 2007 following the acceptance of a loan offer by them. In February 2011 the plaintiff demanded repayment of the principal and interest in the sum of €4,152,755 which it contended was due under the loan agreement. Appearances were entered by the two defendants a few weeks thereafter and on 28th June, 2011, the plaintiff issued a motion for liberty to enter final judgment in the sum of €4,244,749 (including further interest). The defendants filed three replying affidavit by way of defence.
3. This matter was then listed before the Master of the High Court on 12th July, 2012. On that occasion counsel for the plaintiff submitted that as this was a contested matter, the case should be transferred into the High Court in accordance with O. 37, r. 6. The defendants’ solicitor submitted that as the plaintiff was aware at the proceedings had been commenced that the defendants had a substantive defence to the proceedings, the proceedings ought to be struck ought. In a reserved decision delivered on 18th October 2012 the Master acceded to this latter application and struck out the proceedings on this ground, adding that the plaintiff could always start again by way of plenary summons. The plaintiff bank now appeals to this Court against that decision.
The provisions of Order 37, rr. 4 and 6
4. The procedure governing the hearing of proceedings commenced by summary summons is set out in O. 37 of the Rules of the Superior Courts 1986. Order 37, r. 1 provides that every summary summons endorsed with a claim for a liquidated sum “shall be set down before the Master by the plaintiff on motion for liberty to enter final judgment for the amount claimed”. Order 37, r. 2 provides that, generally speaking, any motion for liberty to enter final judgment shall be heard on affidavit. Order 37, r. 3 provides that the defendant “may show cause against such motion by affidavit.”
5. Order 37 next distinguishes between the powers of the Master in uncontested cases on the one hand and those which obtain in contested cases on the other. Order 37, r. 4 deals with the power of the Master in uncontested cases:
“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 judgement 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. It is thus plain that in uncontested cases the Master may deal with the matter summarily and give liberty to enter final judgment.
7. Order 37, r. 6 deals, however, with contested cases and this rule provides:
“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.”
8. It will accordingly be seen that the Master has no jurisdiction to enter final judgment in contested cases. His task in such cases is rather to the transfer the matter to the High Court for hearing when the case is “in order” for hearing by the Court. The reference to “in order for hearing” means nothing more than that the case is administratively ready for hearing so that, for example, all appropriate affidavits have been sworn and filed. This phrase does not gave the Master a jurisdiction to strike out contested cases on the ground that the pleadings are in some way irregular or that the proceedings ought to have been commenced by plenary action rather than by way of summary summons: see here by analogy the comments of Laffoy J. to like effect in ACC Bank plc v. Tobin [2012] IEHC 348. In that case she held that the Master had no jurisdiction to strike out a special summons on the grounds that the papers were not in order for the purposes of O. 38, r. 5.
9. While it may seem curious that the provisions of O. 37, r. 4 and O. 37, r. 6 (and their pre-1986 predecessors) have heretofore received comparatively little judicial scrutiny, there can nonetheless be little enough doubt regarding the meaning and effect of these provisions. In Grace v. Molloy [1927] IR 405 the plaintiff issued a summary summons claiming a fixed sum by way of arrears of rent. The defendant filed a replying affidavit claiming that he had an arrangement with the plaintiff to the effect that the plaintiff was to continue to pay rent to the head landlord under the lease and to remain as tenant under that lease and that it was only on the plaintiff making such payments that the defendant was obliged to recoup him in respect of the same amount. The defendant stated that the plaintiff had not paid the rent due to the head landlord and claimed that until such payments were made in the first instance he was not liable. The Master made an order for final judgment on the ground that the defendant’s affidavit did not disclose the fact entitling him to defend.
10. The defendant’s appeal against that decision of the Master succeeded before this Court. As O’Byrne J. observed ([1927] IR 405, 405) Order XIII, r. 5 of the Ru1es of the High Court and Supreme Court 1926 gave the Master power to make certain orders, including an order for final judgment in uncontested cases. It was, however, otherwise in the case of a contested case. On this point O’Byrne J. stated:
“The present is admittedly a contested case, and therefore the Master had no power under that Rule to make the order for judgment, nor has he such jurisdiction under any order of the Rules of the High Court and Supreme Court.”
11. It is clear, therefore, that the Master has no jurisdiction to determine contested cases. In the case at hand everything turns on the meaning of the words “contested case” and “uncontested case.” For my part I would interpret the reference to “an uncontested case” in its ordinary sense as meaning one where the defendant offers no opposition to the application over and above the entry of an appearance. The mere entry of an appearance is not in itself sufficient to bring a case into the category of a contested case, since this is simply the administrative mechanism which (subject to some exceptions not here relevant) acknowledges due service of the proceedings and fulfils the function of either permitting a solicitor to come on record or, where the litigant is acting in person, allowing for address for service to be thereby given.
12. But where – as here – the defendants oppose the application for liberty to enter final judgment under O. 37, r. 1 by the filing of affidavits disputing the plaintiffs claim, then the case falls into the category of a contested case. In those circumstances, as the comments of O’Byme J. in Grace make clear, the Master’s task-is simply either to transfer the case into the High Court for adjudication once satisfied that the papers are in order and the matter is ready for determination or, should the parties so consent, adjourn the case for plenary hearing. Specifically, the Master has no function to resolve a conflict of fact or to make an assessment of the likely strength of the case made by either the plaintiff or the defendant or to determine that the case ought to have been commenced by Plenary summons.
Conclusions
13. For the reasons just stated, the plaintiff’s appeal must be allowed. The case was plainly a contested case in that the defendants have elected to defend the proceedings by filing affidavits setting out that defence. In these circumstances the Master had no jurisdiction but to transfer the case to the judge’s list of the High Court in accordance with O. 37, r. 6 once the case was administratively ready for this purpose.
14. The case can now accordingly proceed to a consideration of the separate question Of whether the plaintiff is entitled to summary judgment.
National Asset Loan Management Ltd v Crosbie
[2014] IEHC 342
JUDGMENT of Mr. Justice Keane delivered on the 18th June 2014
Introduction
1. In these proceedings, the plaintiff seeks summary judgment against the defendant in the sum of €77,095,090.59, together with interest and costs.
2. The plaintiff is a company formed by the National Asset Management Agency (“NAMA”), in accordance with the powers conferred on NAMA under the National Asset Management Agency Act 2009 (“the NAMA Act”).
3. The defendant is a company director.
4. The defendant acknowledges that the sum at issue remains outstanding in respect of a number of personal loan facilities he received from, and personal guarantees he executed in favour of, Allied Irish Banks plc (“the bank”). The bank is a “participating institution”, as s. 4 of the NAMA Act defines that term, and the debts due by the defendant to the bank pursuant to those loan agreements and guarantees have been transferred to the plaintiff, as a subsidiary of NAMA.
5. By letter dated the 10th March 2014, the plaintiff demanded payment by the defendant of the various sums due.
6. The defendant avers that he has a full defence to the plaintiff’s claim. His defence is that he entered into a solemn and binding written agreement with the plaintiff in August 2012, under which it was agreed that – in consideration of the defendant providing security interests in certain assets to the plaintiff, and of his divesting himself of certain other assets – the plaintiff would no longer have recourse to the defendant’s remaining assets, including the defendant’s family home, his son’s home and a business carried on by the defendant’s wife.
The test for summary judgment
7. There is no issue between the parties on the test to be applied.
8. In First National Commercial Bank v Anglin [1996] 1 IR 75 at 79, the Supreme Court (per Murphy J., Hamilton C.J. and Denham J concurring) endorsed the following test laid down in Banque de Paris v de Naray [1984] 1 Lloyd’s Law Rep 21, which had been 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 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.”
9. Murphy J. continued:
“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.’ ”
10. Murphy J. prefaced the Court’s adoption of that test by stating (at pp. 78-9 of the report):
“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 (see Irish Dunlop Co. Ltd. V Ralph (1958) 95 I.L.T.R. 70).”
11. In considering the Anglin test in Aer Rianta cpt v Ryanair Ltd [2001] 4 IR 607, McGuinness J. pointed out that it is not for the Court to weigh the affidavit evidence adduced by the parties or to attempt to resolve any factual contradictions contained within it, before stating (at p.615):
“In deciding whether the defendant may have a “credible” defence, the court must concentrate its attention on the matters put forward in the defence itself. The court does not ask whether [the defendant’s] account of events is probable, or likely to be true; nor does it ask whether [the plaintiffs] 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.”
12. In the same case, Hardiman J. examined the historical antecedents of the present summary judgment procedure, locating the origin of its modern form in the Judicature Acts. Hardiman J. cited the following passage from the judgment of Lord Esher in Sheppards and Co. v Wilkinson and Jarvis (1889) 6 T.L.R. as the most clear expression of the criteria for the exercise of the power (at p. 13 of the report):
“…The rule which had always been acted upon by this Court in considering cases under [the relevant Order] was that the summary jurisdiction conferred by that order must be used with great care. A defendant ought not to be shut out from defending unless it was very clear indeed that he had no case in the action under discussion. There might be either a defence to the claim which was plausible, or there might be a counter-claim pure and simple. To shut out such a counter claim if there was any substance in it would be an autocratic and violent use of [the relevant Order]. The Court had no power to try such a counter-claim on such an application, but if they thought it so far plausible that it was not unreasonably possible for it to succeed if brought to trial, it ought not to be excluded.”
13. Hardiman J. found Lord Esher’s statement of the rule to be perfectly consistent with the following observation of Lavery J. in Prendergast v Biddle (Unreported, Supreme Court, 31st July, 1957):-
“The procedure by summary summons was 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.”
14. Hardiman J. also quoted, with approval, the following statement of O’Brien C.J. in Crawford v Gillmor (1891) L.R. Ir. 238:
“I think, however, that final judgment should not be given on a motion for final judgment in any case where any serious conflict as to matter of fact or any real difficulty as to matter of law arises.”
15. Considering these cases in conjunction with more recent Irish authority, Hardiman J. noted (at p. 621) “that the defendant’s hurdle on a motion such as this is a low one and that the jurisdiction is to be used with great care”, before concluding (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 case?”
16. A very helpful distillation of the principles to be derived from the jurisprudence is set out in the judgment of McKechnie J. in Harrisgrange Ltd. v Duncan [2003] 4 IR 1 (at pp. 7-8):
“From these cases, it seems to me that the following is a summary of the present position:-
1. the power to grant summary judgment should be exercised with discernible caution;
2. in deciding upon this issue the court should look at the entirety of the situation and consider the facts of each individual case, there being several ways in which this may best be done;
3. 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;
4. where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;
5. where however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;
6. 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;
7. 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 defendants says credible?”, which latter phrase I would take as having against the former an equivalence of both meaning and result:
8. the 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 that there is an arguable defence;
9. leave to defend should be granted unless it is clear that there is no defence;
10. 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 case of action;
11. 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:
12. 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.”
17. Mindful of the test the court is required to apply, I now proceed to consider the facts of this particular case.
Background
18. Much of the evidence adduced on behalf of the plaintiff for the purpose of the present application is uncontroverted by the defendant.
19. Mr. Bernard McLoughlin, an asset recovery manager with NAMA, swore an affidavit on behalf of the plaintiff on the 19th March 2014. He avers that the bank made a number of loan facilities available to the defendant and companies connected with him for the purpose of the acquisition and development of various properties, including the Bord Gáis Energy Theatre (formerly, the Grand Canal Theatre) and the development of a commercial, retail and residential development known as the Point Village. Mr. McLoughlin refers to the defendant and those companies collectively as “the Connection.” Mr. McLoughlin avers that, as of the 16th February 2014, the Connection’s indebtedness to NAMA totalled €431,535,659.59.
20. The defendant’s personal indebtedness to NAMA under the facility agreements and guarantees that he entered into with the bank is limited in a number of respects, including by reference to assets secured by him and the Connection.
21. That indebtedness derives from four distinct sources. The first is a letter of sanction dated the 3rd May 2011 (“the personal facility letter”), consolidating eleven separate loan facilities, upon which the total sum of €55,175,508.35 was outstanding on the 16th February 2014. The second is a facility agreement dated the 27th January 2010 (as amended by a letter of amendment dated the 29th March 2011), primarily associated with the construction and start up of the Grand Canal Theatre (“the GCT facility letter”), upon which a total sum of €13,369,774.51 was outstanding on the 16th February 2014. The third source comprises a guarantee executed by the defendant, dated the 27th June 2000 (“the Shoal guarantee”), up to a limit of Ir£1,000,000 (or €1,270,000) in respect of monies loaned to a company named Shoal Trading Ltd, the indebtedness of which stood at over €3 million on the 16th February 2014. The final source of the defendant’s indebtedness is a guarantee executed by the defendant, dated the 2nd May 2008 (“the OPML guarantee”), in respect of monies loaned to a company named Ossory Park Management Limited, the indebtedness of which stood at €7,279,807.73 on the 16th February 2014.
22. Each of the relevant facilities has expired, such that each of the sums identified above is now due and owing by the defendant to the plaintiff.
23. Mr. McLoughlin avers that the bank also advanced a facility for a sum of €353,720,957.45 to the defendant in connection with the development of the Point Village by a facility agreement dated the 14th January 2008 (as amended and restated) (“the Point Village facility”). The plaintiff’s recourse against the defendant under that facility is limited to certain assets granted as security and an additional personal recourse amount. Mr. McLoughlin goes on to aver that significant realisations from the security granted have been applied against the defendant’s indebtedness under the Point Village facility, including the sum of €27,005,582 from the sale of the defendant’s shareholding in a company named Amphitheatre Ireland Limited, which operates the Bord Gáis Energy Theatre and the 02 venue. The plaintiff does not seek judgment against the defendant in respect of any outstanding liabilities under the Point village facility.
24. Mr. McLoughlin divides the engagement that has taken place between the plaintiff and the defendant into four broad phases. The first phase began in May 2010, prior to the acquisition by NAMA of the defendant’s loans but in anticipation of that event. NAMA agreed to provide the defendant with additional funding to complete the Point Village development, thereby hoping to protect and enhance the value of those assets, which formed part of the security for the Point Village facility. NAMA requested the submission of a business plan by the defendant on or before the 30th September 2010, although it did not receive one until February 2011. In accordance with its normal procedures, NAMA engaged an independent business reviewer (“IBR”) to assess the plaintiff’s business plan. The IBR was critical of the defendant’s strategy for the secured assets and NAMA concluded that it was not in a position to support the plan. That decision was communicated to the defendant at a meeting on the 19th July 2011. Nevertheless, NAMA chose not to take enforcement action at that point. Instead, it decided to attempt a consensual development and disposal of the relevant assets.
25. The second phase of engagement commenced with extensive correspondence between NAMA and the defendant between June 2011 and January 2012, the purpose of which was to establish the commercial terms that would govern the continuing relationship between the parties. Mr. McLoughlin avers that the deficit between the forecast value of the secured assets and the amount owing by the Connection was such that, in NAMA’s view, any consensual strategy had to be based on the defendant granting additional security over his unencumbered assets in exchange for NAMA’s on-going support. That phase culminated in the execution of a memorandum of understanding between NAMA and the defendant in January 2012, which was subsequently amended in March 2012. The memorandum provided that NAMA would consider, at its sole discretion, forbearing from enforcement action for a stipulated period; would release certain security; and would provide remuneration to the defendant for his services, in exchange for the defendant granting certain additional security and committing to continued co-operation in the work-out strategy for the realisation of the secured assets. The memorandum was expressed to be subject, inter alia, to the continuing and on-going full and complete disclosure by the Connection of all of its assets and of all financial information in relation to it.
26. The third phase of engagement began when, by letter dated the 3rd August 2012, NAMA’s solicitors wrote to the defendant’s solicitors notifying the defendant of the termination of the memorandum of understanding. This was based on the asserted failure of the defendant to comply with his obligation to make full and complete disclosure of his assets to NAMA. Specifically, NAMA relied upon eleven enumerated instances of alleged non-disclosure and one instance of non-cooperation, each of which was described in that letter.
Mr. McLoughlin avers that “[n]othwithstanding the termination of the [memorandum], NAMA afforded the Connection a further opportunity to reduce its indebtedness through the consensual disposal of secured assets.” It is the plaintiff’s case that in the period from August 2012 to February 2013, NAMA met with the defendant and his professional advisers on several occasions and engaged in extensive correspondence, in an attempt tore establish the working relationship that existed between the parties prior to the termination of the memorandum.
27. The fourth phase of engagement began in February 2013 when, still dissatisfied with the defendant’s level of co-operation and engagement, NAMA concluded that the assets might be better managed and developed through the appointment of receivers. After an exchange of correspondence between the parties in February 2013 on that contemplated course of action and further exchanges in March and April of that year, the plaintiff appointed receivers over various assets of the Connection, including certain assets of the defendant, in April and May 2013.
28. One of the assets in respect of which receivers were appointed was the defendant’s shareholding in Amphitheatre Ireland Limited. The receivers subsequently arranged to sell it to the other shareholder in the company for €35 million. The sale realised the sum of €27,005,582 net of tax, which was duly applied to reduce the defendant’s indebtedness under the Point Village facility. As already noted above, that indebtedness is separate and distinct from the indebtedness that is the subject of the present proceedings.
29. Mr. McLoughlin avers that, although the receivers have now taken control of all of the secured assets to which they were appointed, it is clear that there will be a significant shortfall between the realisations from the secured assets and the Connection’s indebtedness.
30. On the plaintiff’s case, this was the background to the letter of demand, dated the 10th March 2014, for payment of €77,095,090.59; that being the aggregate sum due and owing by the plaintiff to the defendant, as of the 16th February 2014, on foot of the personal facility, the GCT facility, the Shoal guarantee and the OPML guarantee.
31. Mr. McLoughlin specifically avers that the plaintiff is anxious to obtain judgment against the defendant “with a view to securing the judgment against those assets owned by the defendant, whether in this country or abroad, which are not currently secured in favour of any third party.” Mr. McLoughlin goes on to aver to NAMA’s understanding that: there is equity in defendant’s interest in the “Vicar Street” music venue; that the defendant owns valuable antiques; that the defendant has an interest in unencumbered properties located in France; and that the defendant made voluntary transfers of €2,945,700 in cash during the period from 2008 to 2011 that the plaintiff would be better placed to investigate having first obtained judgment in respect of the defendant’s indebtedness.
The defence advanced
32. The defendant swore an affidavit in response on the 23rd April2014. He contends that he has a full defence to the plaintiffs claim “based on the fact that [he] and NAMA, and by extension the plaintiff, entered into a solemn agreement in August 2012…under which it was agreed inter alia that, in consideration of his providing the plaintiff security interests in certain assets, in respect of which the plaintiff has no legal or equitable interest or claim, and control over a number of companies (trading and non-trading), the plaintiff agreed that it would no longer have recourse over [his] remaining assets, including his interest in his family home, his son’s home and a business carried on by his wife.”
33. The defendant contends that the terms of what he describes as a “comprehensive agreement” between him and the plaintiff are to be found in the text of a letter dated the 241h August 2012 from his solicitor, Mr Liam McCabe, a partner in the firm of solicitors acting for the Connection, to Mr Tom Dane, a partner in the firm of solicitors acting for NAMA (“the McCabe letter”). That letter commences in the following terms:-
“I refer to recent meetings and negotiations concerning the above.
As requested by your client, I now attach the following documentation which is furnished to you based on our client’s understanding which is summarised in the points set out below. Accordingly, your client may not use or rely on these documents if it is of the view that the summary below is incorrect or does not accurately reflect the agreement.”
34. There follows an itemised list of documents, evidencing the resignation and replacement of the defendant, his wife and his son as directors of 12 identified companies that formed part of the Connection, together with a list of documents relevant to the defendant’s shareholding in Amphitheatre Ireland Ltd and his interest in Point Village Development Ltd. The text of the letter then continues:
“Our client Harry Crosbie has instructed us to confirm that subject as stated above, he will on or before 31 August 2012 appoint both Auke VanderWerff and Pearse Farrell jointly as his attorneys (subject of course to their willingness to act as such) with power to assist NAMA in the development and disposal of those of Mr. Crosbie’s assets as are charged to NAMA. We are instructed to agree the text of this with [NAMA’s solicitors] within that time frame.
We are instructed that in consideration of the delivery ofthe enclosed documents, NAMA has agreed as follows with Harry Crosbie:-
1. On or before 1 March 2014 will release its charge and any claim to Mr. Crosbie’s home at Hanover Quay, Dublin 2 and the property at 126 Booterstown Avenue, Blackrock, Co. Dublin, being the home of Simon Crosbie.
2. The business of Storecon Limited and Automation Transport Limited will be transferred to Simon Crosbie for nominal consideration within a month of this date subject to the prior sale by Storecon Limited of its site in Dublin Port with the proceeds of sale (net of any taxes payable thereon) being paid to NAMA. We understand that NAMA has agreed that the entire share capital in Storecon and Automation Transport will be transferred to Simon Crosbie free from encumberance for nominal consideration. In the interests of certainty, we are requiring that this also be done within a month of the date hereof.
3. Harry Crosbie agrees to sell his property in Dublin Port to Dublin Port Company by way of contract for sale the draft of which has already been furnished to [the defendant’s solicitors]. Please note that Edward Spain of this office has confirmed comments on this documentation earlier today to [NAMA’s solicitors] and these points would require to be negotiated with Dublin Port in good faith over the coming days. We do not anticipate any difficulty in resolving any of these points as they are really matters of detail in the overall context.
4. Mr Crosbie agrees to have no further engagement with Dunnes Stores or Margaret Heffernan concerning the ongoing litigation at the Point Village.
5. Without prejudice to Mrs Rita Crosbie’s claim to full ownership of the property in Eze, France, Harry Crosbie will endeavour to procure a sale of a 50% interest in the apartment within 18 months from the date hereof. NAMA will not object to the proceeds of such sale being applied in discharge of any indebtedness relating to Mrs. Crosbie’s house in Wexford.
6. NAMA will endeavour to settle Harry Crosbie’s indebtedness to both KBC Bank and ABN AMRO on a pari passu basis upon the value of the assets that would be available for a distribution on an assumption that Mr. Crosbie was on this date declared bankrupt.
7. We understand that NAMA has no interest in the property or business of Cafe H and will cooperate in procuring the unencumbered transfer of the lease(s) of that premises to its current operator, Fastwell Limited or Mrs Rita Crosbie or her nominee (excluding Harry Crosbie). We appreciate that this may require the consent of the landlord which is of course a matter that Rita Crosbie will have to deal with.
8. As regards the three interlinked apartments in Villefranche sur Mer, France, Harry Crosbie agrees to appoint a sales agent to dispose of these properties on terms that the agent is required to disclose all relevant information to NAMA and will have a duty of care to NAMA. Harry Crosbie agrees that he will procure that 45% of the sales proceeds (net oftaxes and costs) in his hands shall be remitted to NAMA. This represents Mr Crosbie’s shareholding in the company that owns the apartments.
You will appreciate that Harry Crosbie is concerned that the disposal of his assets may give rise to tax liabilities for him personally. We appreciate that this will be managed sensibly such that these are minimised. However, we require your client’s confirmation that such liabilities are (sic) will be discharged out of the proceeds of sale. We trust that this is all in order and you might please confirm accordingly. If any query arises, please let me know and feel free to contact me …at any stage.”
35. The defendant avers that the McCabe letter “sets out the basis of an agreement between the parties in respect of my indebtedness, which was understood by all of the parties to preclude the plaintiff from seeking to enforce against me in the manner envisaged in these proceedings.” The defendant points to subsequent correspondence from the plaintiffs solicitors confirming agreement with the proposals in the McCabe letter and avers that “this correspondence evidences the existence of the Comprehensive agreement determining the parties mutual obligations and entitlements and gives rise to a full Defence to the proceedings against me.”
36. Later in the same affidavit, the defendant refers to the text of the McCabe letter as demonstrating “the full and wide ranging nature of the final agreement come to between the parties in respect of my indebtedness.” Later still, the defendant avers that the plaintiff accepted the contents of the letter as “an operative, effective and legally binding compromise between the parties.”
37. The defendant has sworn that it is his intention to file a full defence and counterclaim seeking declaratory relief regarding the status of the “Comprehensive agreement” and injunctive reliefs or specific performance of the “Comprehensive agreement”, or both, against the plaintiff. The defendant contends that, in bringing the present application for summary judgment (which he refers to as “enforcement proceedings”) against him, the defendant in resiling from the legal obligations imposed upon it pursuant to the terms of the “Comprehensive agreement.”
38. Mr Liam McCabe swore an affidavit on the 31st March 2014 in support of the defendant’s case. In that affidavit, Mr McCabe asserts that the plaintiff is not entitled to bring these proceedings by reference to the terms of the agreement evidenced by the McCabe letter. Mr McCabe avers that the present application for summary judgment is brought “in the teeth of [that] agreement.”
39. Mr Ciaran Fitzpatrick, a senior manager in the firm of accountants engaged by the defendant to advise him, swore an affidavit on the 23rd April 2014, in support of Mr McCabe’s affidavit. Mr Fitzpatrick avers that he was part of the process of negotiation that culminated in the McCabe letter, which – according to Mr Fitzpatrick- captures the consensus and agreement between the parties. Having in substance stated that the agreement set out in that letter speaks for itself, Mr Fitzpatrick then asserts:
“I say and believe that the context of this agreement was that, in consideration of the Defendant agreeing to divest control of and charge the assets in question in favour of the Plaintiff, that it was my understanding the Plaintiff had come to a settlement with the Defendant in respect of the Defendant’s indebtedness.”
40. Mr. Fitzpatrick further avers:
“I say and believe that it was an essential component of the Defendant’s interaction with the Plaintiff leading up to the offer in question that financial certainty would be achieved for the Defendant such that the Plaintiff would not pursue proceedings against the Defendant or any other enforcement proceedings against him in respect of the family and other third party secured assets to be retained by him.”
41. In a second affidavit sworn by Bernard McLoughlin on the 12th May 2014, the plaintiff joins issue with the defendant on whether NAMA agreed to give up its discretion to deal with the defendant’s significant indebtedness by waiving any recourse that it had to him personally beyond the assets that he had secured in its favour. Mr McLoughlin avers that the McCabe letter evidences an agreement on the part of NAMA to do no more than to forbear from taking immediate enforcement action against the plaintiff and that it emphatically does not evidence an agreement between the parties in full and final settlement of NAMA’s claims against the defendant, whereby NAMA was to take no further steps in any circumstances to pursue the defendant personally. Mr McLoughlin asserts that, in view of the significant shortfall between the sum that is likely to be realised from the disposal of the assets charged as security for the defendant’s indebtedness and the amount of the outstanding debt, an overarching compromise- whereby NAMA agreed not to pursue the defendant personally- could only have been reached on the clearest possible terms. The acceptance of any such proposal would have required formal authorisation at the appropriate level within NAMA, but no such internal authorisation was ever requested because debt forgiveness was never sought by the defendant and was never contemplated by NAMA.
42. The defendant swore a further affidavit in response on the 13th May 2014 in which he reiterates his claim that the purpose of the agreement evidenced by the McCabe letter was to achieve a “defined settlement” between the parties. In the concluding paragraph of that further affidavit, the defendant reaffirms his contention that “there is a valid and subsisting dispute between the parties in relation to the meaning and import of the Comprehensive agreement.”
The arguments
43. As noted earlier in this judgment, the test to be applied on an application for summary judgment is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence to the plaintiff’s claim. The defendant submits that he has a full defence to the plaintiff’s claim which is that there is an agreement in force between the parties, in the terms set out in the McCabe letter, that precludes the plaintiff from seeking judgment against the defendant in the sum at issue.
44. In the course of argument, the defendant placed some reliance on the existence of an issue of fact concerning whether the agreement set out in the McCabe letter is still in force between the parties. The defendant pointed to the averment at paragraph 28 of Mr McLoughlin’s second affidavit that it is the plaintiff’s position that the defendant did not perform that agreement. The defendant also directed the court’s attention to a letter written by the plaintiff’s solicitors on the 18th March 2014, which refers to the “purported agreement” between the parties. On behalf of the defendant, it was submitted that these assertions demonstrate the existence of a clear controversy of fact between the parties- specifically, one concerning whether that agreement continues in force or has been discharged by the breach of one or more of its conditions – that the summary judgment procedure is plainly unsuitable to resolve.
45. However, on behalf of the plaintiff it was expressly conceded, for the purpose of the present application only, that the terms of the agreement set out in the McCabe letter continue to bind the parties. The plaintiff’s argument on the present application is that the terms of that agreement cannot, on any possible construction, give rise to a fair or reasonable probability of a real or bona fide defence to the plaintiff’s claim. Whether that is so is therefore the question that the Court has to consider.
46. Before addressing that question, it is appropriate to digress briefly to deal with a number of other arguments and assertions that have featured in the application. The first of those concerns the status of the parties. In opening the application, it was suggested on behalf of the plaintiff that, in considering the test for summary judgment, the Court should have regard, inter alia, to the fact that the plaintiff is a public body being financed from the public purse. Presumably, this submission rests on the proposition that the objectives of expeditiousness and cost effectiveness in the administration of justice take on greater weight in the balance where public monies are at issue. In response on this point, the defendant submitted that any such consideration is completely immaterial to the test the court must apply and should not influence the court in any way. As Counsel for the defendant put it, the fact that the plaintiff is a state agency and has important work to do is irrelevant. I accept the defendant’s submission on this point and would add only that, just as I do not think the identity of the plaintiff and the nature of its activities are relevant to the question of whether monies are properly due and owing to it by the defendant, I also do not believe that the identity of the defendant or the nature of his prior commercial activities are relevant to the question of whether there is a fair or reasonable probability that he has a real or bona fide defence to the plaintiffs claim.
47. Several other issues have been raised in the context of the present application. They include: whether the defendant was in breach of the memorandum of understanding entered into between the parties by failing to make full and frank disclosure of his assets; whether the plaintiff or NAMA, or any of their servants or agents, acted inappropriately or inconsistently in their dealings with the defendant; and whether there can be any legitimate concern about the designation of Grand Canal Theatre loan facility as within one of the classes of bank asset (eligible for acquisition by NAMA) within the terms of s. 69 of the NAMA Act 2009. However, none of those issues is relevant to the single ground advanced by the defendant as establishing a fair or reasonable probability that he has a real or bona fide defence to the plaintiffs claim and it is therefore unnecessary – indeed, it would be inappropriate – to consider any of those issues further for the purposes of the present application.
48. I now return to deal with the single ground of defence advanced on behalf of the defendant, viz that there is an agreement in force between the parties, in the terms set out in the McCabe letter, that precludes the plaintiff from seeking judgment against the defendant for the sum at issue.
49. The first observation that I would make in considering the unique facts of this particular case is that the question of whether there is a fair or reasonable probability of a real or bona fide defence is one that is clearly illuminated by – to borrow the phrase used by Hardiman J. in Aer Rianta v Ryanair Ltd (supra at p. 623) to describe the circumstances in which the same issue arose in First National Commercial Bank v Anglin – “the indisputable documentation of a commercial transaction.” Indeed, the affidavits filed on behalf of the defendant in this case are replete with repeated references to the terms of the McCabe letter as constituting “a solemn and binding written agreement”, “a comprehensive agreement”, a “final agreement”, and “an operative, effective and legally binding compromise.” It follows that whether the defendant can establish a fair or reasonable probability of a real or bona fide defence is, in the particular circumstances of this case, a matter of construction of the terms of the agreement set out in the McCabe letter.
50. In McGrath v O’Driscoll [2007] 1 ILRM 203, Clarke J. identified the correct approach as follows (at p. 210 of the report):
“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 no real risk of injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
51. This dictum was endorsed by the Supreme Court (per Denham J., Hardiman and Finnegan JJ. concurring) in Danske Bank a/s v Durkan New Homes [2010] IESC 22 (at para. 16), subject to the significant clarification (at para. 20) that there is no obligation to resolve issues of law (or, presumably, issues of construction) on an application for summary judgment and that the test remains whether the defendant has established an arguable defence. The Supreme Court was satisfied that, by reference to the particular factual matrix in which the parties specifically negotiated the contract in that case, an arguable defence arose on the construction of the loan agreement between the parties.
52. I am satisfied that the issue of construction that arises in this case is relatively straightforward. As defined by the defendant, it is whether there is a fair or reasonable probability of establishing as a real or bona fide defence that there is an agreement in force between the parties, in the terms set out in the McCabe letter, that precludes the plaintiff from seeking judgment against the defendant for the sum at issue. Accordingly, I propose to address that issue by reference to the principles that govern the construction of express and implied contractual terms. In doing so, I propose also to consider whether there is any real risk of injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment
53. In considering the applicable principles of law on the interpretation of express contractual terms, I have derived great assistance from the relevant portions of the judgments of both Fennelly J. and O’Donnell J. in ICDL v European Computer Driving Licence Foundation Ltd [2012] 3 I.R. 327. Both of those judgments confirm that the best modern statement of those principles is to be found in the following passage from the judgment of Lord Hoffman in I.C.S. Ltd v. West Bromwich B.S. [1998] 1 WLR 896 at pp. 912-3:
“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as ‘the matrix of fact’ but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of the document is what the parties using those words against the relevant background would reasonable have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must for whatever reason have used the wrong words or syntax; See Mannai Investments Co. Ltd v. Eagle Star Life Assurance Co. Ltd [1977] A.C. 749.
(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one nevertheless concludes from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Campania S.A. navierav. Salen Rederiena A.B. [1985] A.C. 191,201:-
‘if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense’.”
54. Fennelly J. prefaced his endorsement of the foregoing principles by noting that they had been approbated in the judgment that Geoghegan J. delivered on behalf of the Supreme Court in Analog Devices B.V v. Zurich Insurance Company [2005] IESC 12, [2005] 1 IR 274, which had also referenced the well known ‘matrix of fact’ dictum of Lord Wilberforce in Reardon Smith Line v. Young Hansen-Tangen [1976] 1 W.L.R. 989. Fennelly J. then commented (at pp. 350-1 of the report). :
“[66] These various dicta are notable for their emphasis on the potential admissibility of background knowledge or what Lord Wilberforce famously described as the ‘matrix of fact’. Emphasis on those admissible aids to interpretation should not, however, mislead us into forgetting that a contract is, in the first instance, composed of the words used by the parties. It is of note that Geoghegan J. in his judgment in Analog Devices B.V v. Zurich Insurance Company [2005] IESC 12, [2005] 1 IR 274 cited at p. 280 a passage from the judgment of Griffin J. in Rohan Construction v. I.C.I [1988] I.L.R.M. 373 at p. 377, a case concerning an insurance policy, to the following effect:-
‘It is well established that in construing the terms of a policy the cardinal rule is that the intention of the parties must prevail, but the intention is to be looked for on the face of the policy, including any documents incorporated therewith, in the words in which the parties have themselves chosen to express their meaning. The court must not speculate as to their intention apart from their words, but may, if necessary, interpret the words by reference to the surrounding circumstances. The whole of the policy must be looked at and not merely a particular clause’.
[67] Geoghegan J. went on to note that Griffin J. had explained his reference to ‘surrounding circumstances’ and that he had cited the following passage from the speech of Lord Wilberforce in Reardon Smith Line v. Young Hansen-Tangen [1976] 1 W.L.R. 989 at p. 996:-
‘When one speaks of the intention of the parties to the contract, one is speaking objectively- the parties cannot themselves give direct evidence of what their intention was – and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties. Similarly, when one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have had in mind in the situation of the parties….What the court must do is place itself in thought in the same factual matrix as that in which the parties were.’
55. Having endorsed Lord Hoffman’s five principles, Fennelly J. then added the following helpful gloss (at p. 352):-
“[69] This passage, particularly para. 4, should not be misunderstood as advocating a loose and unpredictable path to interpretation. A court will always commence with an examination of the words used in the contract. Moreover, words will, as Lord Hoffman emphasises, normally be interpreted in accordance with their “natural and ordinary meaning…”. Business people will be assumed to know what they are doing and will normally be bound by what they have signed. The exercise is to be conducted objectively. The parties are not permitted to give evidence of their subjective intentions or of the negotiations leading to the conclusion of the contract. Keane J. summarised the law briefly but comprehensively in the High Court in Lac Minerals Ltd. v. Chevron Mineral [1995] 1 I.L.R.M. 161.
[70] Evidence of the surrounding circumstances, but not of subjective intentions, may be admitted to explain the subject-matter and even what particular words should be understood as referring to. Such evidence will not normally be allowed to alter the plain meaning of words.”
56. I find myself in respectful disagreement with the headnote to the report of the Supreme Court decision in ICDL v European Computer Driving Licence Foundation Ltd. (supra) insofar as it suggests that O’Donnell J. was dissenting from the view of the majority in addressing the principle of interpretation contra proferentem when he stated (at p. 377 of the report):
“I also agree that the principle of interpretation, contra proferentem, may usefully be applied not just to exemption clauses but to a contract in general but normally only as a last resort in the case of ambiguity and not as a general approach. As has been observed, the purpose of the principle is to resolve ambiguity, not to create it.”
57. It is clearly the position that Fennelly J. (for the majority) was also satisfied that the principle applies only to the extent that there is ambiguity in a disputed contractual provision. It might, I suppose, be suggested that the majority was satisfied that the principle should be applied as a primary tool of construction, rather than as a measure of last resort, although it is by no means clear to me that the judgment of Fennelly J. must be read in that way. However, as will become evident, nothing turns on the point in the circumstance of the present case.
58. I now turn to apply the principles I have just described to the evidence in the case at hand.
59. Both sides accept that the agreement at issue forms part of a substantial train of commercial and legal correspondence between the parties. That correspondence and the history of the engagement between the parties summarised earlier in this judgment encapsulate the background knowledge that would have been available to them. Therefore, that is the background against which the Court can decide what the McCabe letter would have conveyed to the reasonable person equipped with that knowledge.
60. What must be excluded from a proper consideration of the background are the contents of the previous negotiations of the parties and their declarations of subjective intent. Thus I cannot have regard to any of the various averments of Mr McLoughlin on behalf of the plaintiff, or of the defendant himself, Mr McCabe or Mr Fitzpatrick on the defendant’s behalf concerning the negotiating stance or subjective intent of either of the parties prior to the conclusion of the agreement recorded in the McCabe letter.
61. Before turning to that part of the background that forms an admissible aid to interpretation, I must first consider the words used by the parties, since the words in which the parties have themselves chosen to express their meaning are the first place I must look in seeking to establish the intention of the parties, and the cardinal rule is that the intention of the parties must prevail.
62. The defendant submits that he has established an arguable defence that the McCabe letter can be construed as an operative, effective and legally binding compromise between the parties that precludes the plaintiff from seeking judgment in respect of the sum at issue, which sum the defendant accepts is otherwise lawfully due and owing to the plaintiff by him.
63. There are no words in the McCabe letter to the effect that it records either a full and final settlement or compromise of all claims between the parties; or a comprehensive agreement between the parties (in the same sense); or any equivalent form of agreement. While the court is not entitled to consider the substance of the previous negotiations between the parties as an aid to interpretation, the plaintiff points out that the prior train of correspondence between the parties establishes that the defendant (through his legal advisors) was well familiar with the significance of phraseology such as ‘an agreement in full and final settlement of the defendant’s loans’. Even if words could be identified in the McCabe letter – and they have not been- that on one possible interpretation might express or imply that the agreement was intended to represent a comprehensive settlement, those words would have to be construed contra proferentem in circumstances where it is common case that the letter was prepared by the defendant’s legal advisors.
64. In response to the plaintiff’s submission that the McCabe letter is incapable of being construed as a debt forgiveness agreement or one releasing the defendant from his guarantees, Counsel for the defendant argued that the defendant’s does not make such a case. Rather, the defendant submits that the McCabe letter evidences an agreement whereby, in various formulations assayed on the defendant’s behalf, the plaintiff bound itself “not to sue or to bankrupt the defendant”; “not to enforce the defendant’s personal liability in the manner being attempted in these proceedings”; or “that the defendant’s remaining assets would not be attacked and would be set aside.”
65. However, there are no words in the McCabe letter to the effect that the plaintiff will refrain, or forbear, from seeking a money judgment against the defendant in respect of the monies lawfully due and owing by the defendant to the plaintiff under the facility letters or the guarantees, or both, or that the plaintiff will refrain, or forbear, from taking enforcement action against the plaintiff generally.
66. There are no words in the McCabe letter to the effect that the plaintiff is to have no personal recourse to the plaintiff, beyond that represented by the security thereby (or previously) obtained by the plaintiff from the defendant.
67. Taking the relevant provisions of the agreement at their high water mark from the defendant’s perspective, as I must for the purpose of the present application, it seems to me they are capable of establishing the following binding obligations on the part of NAMA and the plaintiff (although, of course, I must not and do not express any concluded view in the matter):
(a) That, on or before the 1st March 2014, NAMA was to release its charge over, and any claim to, the defendant’s home and the property in which the defendant’s son resides. I am prepared to accept (indeed, I believe I am obliged to accept for the purpose of the present application) that this term implies as its corollary that neither NAMA nor the plaintiff would seek to take any enforcement action against the defendant or his son involving either property, for as long as they were bound by that agreement.
(b) That certain businesses were to be transferred, respectively, to the defendant’s son and the defendant’s wife. Again, I must accept, for the purpose of the present application, that this term implies as its corollary that neither NAMA nor the plaintiff would seek to take any enforcement action against the defendant, or his wife or son in respect of the assets represented by those businesses, for as long as they were bound by that agreement.
(c) That NAMA was to make no objection to the application of the defendant’s interest in the proceeds of sale of a property in France to discharge any indebtedness in relation to a house in Ireland owned by the defendant’s wife. I am prepared to accept for the purpose of the present application that this term implies as a necessary corollary that neither NAMA nor the plaintiff would seek to take any enforcement action in respect of the defendant’s interest in that French property, or in respect of the funds resulting from the sale of that interest, for as long as they were bound by that agreement.
(d) That NAMA would endeavour to settle [the defendant’s] indebtedness to two specified banks on a pari passu basis based upon the value of assets that would be available for distribution on an assumption that the defendant was at the 24th August 2012 declared bankrupt.
68. I have considered this last provision most carefully, not least because significant reliance was placed upon it on the defendant’s behalf in opposing the present application. In binding NAMA to use its best endeavours to settle the defendant’s indebtedness (as between itself and two other significant creditors of the defendant) on a pari passu basis by reference to an assessment of the defendant’s available unsecured assets were he to be declared bankrupt that day, I am prepared to accept, for the purpose of the present application, that the term concerned implies a further term, as a necessary corollary, that neither NAMA nor the plaintiff would petition for the defendant’s bankruptcy, at least during the currency of the agreement or until NAMA had used its best endeavours to settle with those two creditors concerning the appropriate division between them of the defendant’s available assets.
69. However, I cannot accept that the terms of the McCabe letter are capable of conveying to any reasonable person who considers them, with the benefit of the background knowledge available to the parties, that any broader or wider agreement in the defendant’s favour is established thereby. In particular, I do not accept that, taking the agreement at its high water mark as an agreement not to seek enforcement against certain identified assets and not to petition for the defendant’s bankruptcy for as long as the agreement applies, it is capable of being construed as an agreement not to seek a money judgment against the defendant.
70. I am reinforced in that view by the averments of Mr. McLoughlin concerning the purposes for which the plaintiff is seeking judgment in this case, which averments I have already summarised at paragraph 31 supra. Those averments disclose that the plaintiff has identified, correctly or not, a number of other unsecured assets of the defendant, quite separate from those referred to in the McCabe letter, that the plaintiff wishes to secure judgment against. In response, the defendant has averred, in substance, that since these matters were known to NAMA and the plaintiff prior to the agreement at issue, they can have no relevance to the present application and amount to no more than a ‘rehash and recycle of old information.’
71. It seems to me that it would be a strained- indeed, an untenable construction of the McCabe letter to assert that, in agreeing to release the security that it held over certain identified assets of the defendant, the plaintiff was also agreeing sub silentio not to seek security over any other unsecured personal assets of the defendant during the currency of that agreement and, therefore, not to seek a money judgment against the defendant whether as the basis for seeking such security or to confer standing upon NAMA or the plaintiff to further investigate the defendant’s assets.
72. I pause here to consider briefly the legal test by reference to which terms may be implied into a commercial agreement, independently of any statutory requirement. As Murphy J. put the matter in Sweeney v. Duggan [1997] 2 I.R. 531 (at 538):
“There are at least two situations where the courts will, independently of statutory requirement, imply a term which has not been expressly agreed by the parties to a contract. The first of these situations was identified in the well known case, The Moorcock (1889) 14 P.D. 64 where a term not expressly agreed upon by the parties was inferred on the basis of the assumed intention of the parties. The basis for such a presumption was explained by MacKinnon L.J. in Shirlaw v. Southern Foundries (1926) Ltd. [1939] 2 K.B. 206 at p. 227 in an expression, equally memorable, in the following terms:-
‘Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common “Oh of course”.’
In addition there are a variety of cases in which a contractual term has been implied on the basis, not of the intention of the parties to the contract but deriving from the nature of the contract itself. Indeed in analysing the different types of case in which a term will be implied Lord Wilberforce in Liverpool C.C. v. Irwin [1977] AC 239 preferred to describe the different categories which he identified as no more than shades on a continuous spectrum.”
73. A common reformulation of the test just described in the context of commercial contracts is the ‘business efficacy’ test, specifically; is it necessary to imply the term contended for into the contract at issue in order to give the contract the business efficacy that both parties must have intended for it?
74. In Meridian Communication v. Eircell Ltd. [2002] 1 IR 17, O’Higgins C.J. set out the following synopsis of the principles that emerge from the applicable jurisprudence and the commentary upon it:
• “before a term will be implied in a contract and must be necessary to do so, and not merely reasonable;
• the term must be necessary to give business efficacy to the agreement;
• it must be a term which both parties intended, that is, a term based on the presumed common intention of the parties;
• the court will approach the implication of terms into a contract with caution;
• there is a presumption against importing terms into a contract in writing and the more detailed the terms agreed in writing the stronger is the presumption against the implication of terms;
• if the term sought to be implied cannot be stated with reasonable precision, it will not be applied.”
75. I am satisfied that, in applying either the ‘officious bystander’ or the ‘business efficacy’ test to the agreement set out in the McCabe letter, as informed by the principles just described, it is not possible to imply any term into it of the sort contended for on behalf of the defendant in this case.
Conclusion
76. Having considered the entirety of the situation and the facts of this particular case in the manner set out above, while being conscious of the obligation on the court only to exercise the power to grant summary judgment with discernible caution, I have come to the conclusion, for the reasons I have already set out, that the issue of construction on which the sole ground of defence advanced on behalf of the defendant depends is relatively straightforward and does not require fuller argument than I have heard in the context of the present application. Accordingly, I do not believe that there is any real risk of injustice being done by determining that question within the framework of a motion for summary judgment.
77. In all of the circumstances, the defendant has failed to satisfy me that he has a fair or reasonable probability of having a real or bona fide defence. Bearing in mind the constitutional basis of the right of access to justice of both plaintiff and defendant, I therefore conclude that the plaintiff is entitled to liberty to enter judgment in the terms of the endorsement to the Summary Summons herein.
McNamee v Estherfield
[2014] IEHC 205
JUDGMENT of Mr. Justice Barrett delivered on the 1st day of April, 2014
1. This is an application for summary judgment brought by the plaintiffs, Mr. and Ms. McNamee, in respect of rent that they claim is owed to them jointly and severally by Estherfield Limited, the first named defendant, and Hickey’s Pharmacy Limited, the second named defendant, under a lease and license arrangement pursuant to which Hickey’s Pharmacy Limited operates a pharmacy on the plaintiffs’ premises at the junction of Grafton Street and Duke Street in Dublin City.
Facts
2. By Indenture of Lease dated 26th March, 1992, Dublin City Properties Limited, as landlord, and Spellbound Limited, as tenant, entered into a 35-year lease in respect of the premises referred to above. The plaintiffs acquired the premises from Dublin City Properties Limited on 28th January, 2003. The second-named defendant is currently in occupation of, and operates a pharmacy on, the premises. By virtue of the lease and a subsequent licence entered into between the plaintiffs, Spellbound Limited and the defendants, on 3rd April, 2003, the defendants are jointly and severally liable for rents owing under the lease. Certain rents not having been paid, the plaintiffs have commenced the instant proceedings. The defendants have raised a number of defences to the claim and contend that this is a matter that ought to be remitted to plenary hearing. In essence, the defences raised are as follows: first, the defendants dispute the amounts claimed; second, the defendants contend that an allegedly unauthorised development by the plaintiffs at a premises that does not adjoin the demised premises will adversely affect the business operated at the demised premises; and third, they dispute that they can be found liable in these proceedings for amounts of rent that became owing after the notice of motion grounding these proceedings issued.
3. Based on the evidence contained in the pleadings, the court finds that the various amounts sought by the plaintiffs by way of outstanding rent are correctly accounted for. That means of the three defences raised to these summary proceedings, only those as to planning and the recovery of post-notice of motion sums survive for consideration.
The planning law issue
4. The hurdle that must be surmounted by the defendants as regards obtaining leave to defend at plenary hearing is a low one. As Hardiman J. stated in 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.”
6. In the present case, the planning law issue raised by the defendants is more in the nature of a cross-claim or counterclaim, rather than a defence to the summary proceedings. What is the court to do in a case where a defendant raises a cross-claim in defence to a motion for summary judgment? The classic precedent in this regard is the Supreme Court decision in Prendergast v. Biddle (Unreported, Supreme Court, 31st July, 1957), the principles identified therein having been recently amplified upon in Moohan v. S & R Motors (Donegal) Limited [2008] 3 IR 650. In that later case, Clarke J. summarises the approach to be adopted by a court where a defendant raises a cross-claim as follows at 656:-
“(a) …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 entire proportion of) the claim …
(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 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 v. Biddle…”
7. Clarke J. concluded in Moohan that a set-off was available there, the default position being that a party is entitled to a set-off in equity in relation to any cross claim arising out of the same contract. In the present case, the court finds that no such set-off is available. The cross-claim in these proceedings is concerned with a matter that has nothing to do with the rents owing under the lease. Taking the defendants’ case at its height, even if a claim in respect of a purportedly unauthorised development at a property owned by the plaintiffs but not adjoining the demised premises was entirely successful, this is a matter so unconnected to the issue of rent owing under the lease pertaining to the demised premises as not to yield any right of set-off in equity. This is not a case where, as in Moohan, a single construction contract has yielded a claim for monies due and a counterclaim for defective works. In truth, the court struggles to see that there is any substantive connection between the issue of the rents claimed by the plaintiffs and the planning issue raised by the defendants except for the somewhat tenuous connection that the various relevant properties are ultimately in common ownership. The cross-claim here amounts to an entirely independent claim and that, per Clarke J. in Moohan, has the result that judgment should be entered on the plaintiffs’ claim with the question as to whether execution ought to be stayed falling to be determined by reference to the principles set out in Prendergast. In that earlier case, Kingsmill Moore J., at 7, stated that:-
“If… the Defendant, while admitting that he has no direct defence to the claim, puts forward a plausible counterclaim a difficult problem must arise. Though the necessary evidence to support the claim is already before the Court and judgment on the claim can be given at once, there must usually be delay in formulating the counterclaim in a pleading, in preparing the evidence to support it at a hearing (if it be contested), and in waiting for a trial. On the one hand it may be as/red why a Plaintiff with a proved and perhaps uncontested claim should wait for judgment or execution of a judgment on his claim because the Defendant asserts a plausible but improved [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. To such questions there can be no hard and fast answer. 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.”
8. The starting-point of Kingsmill Moore J’s observations is that a defendant has a plausible counterclaim. It is not at all clear that in the present case the defendants in fact have a plausible counterclaim. Certainly there is little evidence on affidavit to assist the court as to the strength of the counterclaim and there is no evidence to suggest that it would succeed. Nor is there any attempt to quantify the loss alleged. Indeed, it might perhaps be contended that the counterclaim raised in these proceedings is nothing more than a last-ditch effort on the part of the defendants to construct a defence that is adequate to satisfy the low hurdle identified in Aer Rianta and Harrisrange for remittal of summary proceedings to plenary hearing. However, the court considers that even the low hurdle identified in Aer Rianta and Harrisrange has not been satisfied. Moreover, even if the defendants’ counterclaim was plausible, the court does not consider that the Prendergast principles require that any entitlement of the plaintiffs to recover the outstanding rent monies be postponed until the conclusion of plenary proceedings in which the substance and strength of an as yet barely formulated counterclaim of uncertain plausibility is tested.
Claims for rents arising after proceedings commenced
9. The defendants have disputed that they can be found liable in these proceedings for amounts of rent that became owing after the notice of motion grounding these proceedings issued. A consideration of the recent jurisprudence of the court, in particular the decision of Clarke J. in Dublin Docklands Development Authority v. Jermyn Street Limited and Black Tie Limited [2010] IEHC 217 and O’Neill J. in Quarryvale Two Limited and Quarryvale Three Limited v. Stephen Beere and Graeme Beere [2012] IEHC 546 indicates that the defendants are mistaken in this contention.
10. In Jermyn Street, the Dublin Docklands Development Authority brought proceedings seeking to recover rent and other charges against Jermyn Street and in relation to the guarantee of that rent and other charges against Black Tie. With regard to the Authority’s claim in respect of continuing, and rising, arrears of rent and other charges, the defendants claimed, much as the defendants in this case, that it is not permissible to maintain a claim in respect of ongoing rent or charges in summary proceedings. Writing in this regard Clarke J. stated, at 12, that:-
“The basis for that contention is that it is said that each failure to pay rent (or indeed other charges) as they fall due, gives rise to a separate cause of action. Thus, it is argued, sums due in respect of rent which have not arisen as of the time of issuing of proceedings relate to causes of action not then extant such that the same cannot be maintained in the same proceedings. It was accepted on behalf of Jermyn Street that ….continuing interest can be claimed in summary summons proceedings where the interest is provided for and ascertainable under the terms of the relevant contract or is fixed by statute. It is clear, therefore, that continuing interest can be claimed even though that interest accrues after the date when a summary summons is issued. It seems to me that there is no reason in principle why continuing rent cannot be claimed on the same basis.”
11. In Quarryvale, O’Neill J. approved the reasoning in Jermyn Street and allowed a claim for amounts additional to those contained in the original summary summons, stating, at paras. 23 and 24, that:-
“The additional claims sought to be made in these proceedings are so closely associated with the original claims made in the summary summons that it makes complete sense, both in terms of procedural efficiency and the avoidance of unnecessary cost, to have these claims dealt with in the one set of proceedings. Indeed, the converse, namely that as each quarter of rent and/or services charges fell due and into arrears, afresh set of proceedings was required, offends any sensible notion of procedural efficiency and would lead to much greater and unnecessary cost in making these types of claims.
…I am quite satisfied that within the summary summons procedure, where serial or sequential claims arise out of circumstances similar to and closely associated with the causes of action raised in the endorsement of claim on the summary summons, additional claims can be the subject matter of the application for liberty to enter final judgment if such additional claims are appropriately set out and supported by affidavit evidence. Needless to say, these additional claims could only be for liquidated sums.”
12. This Court respectfully agrees with the reasoning adopted respectively by Clarke J. and O’Neill J. in the Jermyn Street and Quarryvale cases. To borrow from the phraseology of O’Neill J., the claims for post-notice of motion arrears made in the instant proceedings clearly arise out of circumstances similar to and closely associated with the causes of action raised in the endorsement of claim on the summary summons: what is being sought is simply more rent owing under the same lease and licence arrangements. In terms of procedural efficiency and the avoidance of unnecessary cost, it would be absurd if the court was to hold that only rent owing at the time of issuance of these proceedings could be claimed and that the commencement, hearing and determination of fresh proceedings in which precisely the same issues as have arisen before this Court would need to take place before later- owing rents could be recovered by the plaintiffs.
Conclusion
13. For the reasons stated above, the court does not consider that these summary proceedings should be referred to plenary hearing and grants judgment to the plaintiffs for the amount sought, being €557,780.93 plus interest and costs.
AIB Mortgage Bank v Tracey
[2015] IECA 49
UDGMENT OF THE COURT DELIVERED BY MR JUSTICE MICHAEL PEART ON THE 13th DAY OF MARCH 2015:
1. By order of the High Court dated 20th March 2013 AIB Mortgage Bank (“the bank”) obtained judgment against Mr and Mrs Tracey for the sum of €3,364,961.00 on a joint and several basis, and the costs of these proceedings when taxed and ascertained.
2. Mrs Tracey alone has appealed against that order. She asks this court to set aside that judgement and to refer the proceedings to plenary hearing on the grounds that she has established on affidavit a reasonable probability that she has a real or bona fide defence to the Bank’s claim against her.
Background
3. There is an unfortunate background to the parlous position in which Mrs Tracey now finds herself. Sadly, her marriage broke down in March 2004, whereupon Mr Tracey left the family home and moved to a house he had bought in Mullingar, leaving Mrs Tracey and their two children in the family home in Foxrock, Co. Dublin.
4. Mr Tracey was a property developer, and had for many years enjoyed a good relationship with AIB who assisted him with funding for the many properties he purchased over the years. According to his own affidavit filed in the High Court, he had been dealing with AIB for over 20 years, and had established a reputation as a customer who always met his obligations to the Bank in relation to his business activities. His affidavit goes on to describe how, as with many property developers, difficulties arose between him and the Bank after 2008, and how between then and 2011 he tried unsuccessfully to rescue the situation.
5. Thereafter a number of proceedings were issued by the bank who sought to recover the outstanding borrowings, including those the subject matter of the present proceedings.
6. The present proceedings were commenced against both Mr Tracey and Mrs Tracey in respect of the recovery of monies borrowed by them, on a joint and several basis, for their purchase as co-owners of a substantial house on Westminster Road, Foxrock known as ‘Hillside’, into which Mrs Tracey and the two children moved when that purchase was completed at the end of 2006. Their previous family home in Foxrock was sold yielding net proceeds of sale of circa €1.8 million which assisted with the purchase of Hillside which was bought at auction for the sum of €6.6 million. The bank approved a loan of €3.7 million for this purchase which is evidenced by a Letter of Loan Offer dated the 15th September 2006.
7. This loan facility is expressed to be for a term of 8 years. A condition of the loan was that mortgage protection insurance was required in respect of the lives of both Mr and Mrs Tracey in the amount of the loan and covering a period of 8 years. However, a special condition contained in the same loan facility letter stated:
“Please note that the Bank is agreeable to forgo it’s requirement for life cover On Mrs Karen Tracey subject to receipt of a written request of all parties to the borrowing and an acknowledgement that borrower(s) are aware of all possible implications arising from this request [sic]”.
8. Mr and Mrs Tracey wrote to the Bank to that effect by letter dated 14th September 2006.
9. It appears that Mr Tracey already had existing life cover in place for 8 years, and the Bank agreed to accept that policy for the purpose of this facility, given that he had difficulty obtaining 20 year life cover. Accordingly, while the loan specified that it was to be an 8 year term it was agreed also that following the drawdown of the loan, it would revert to a 20 year facility which resulted in the loan repayments reducing pro rata. Mrs Tracey places some reliance upon this aspect of the loan arrangements and it is referred to in the High Court’s judgment.
10. The trial judge concluded that there was no doubt that when Mr Tracey agreed to purchase Hillside at auction, he did so with the intention that it would provide secure accommodation for Mrs Tracey and the children. Mrs Tracey has averred to that also in her supplemental affidavit which she filed in the High Court. She also stated that Mr Tracey had assured her at the time of the purchase that he would transfer Hillside into her sole name as part of the settlement of their marital difficulties in due course.
11. Mrs Tracey relies on the fact that what she describes as her equity from the sale of the previous family home was put towards the purchase of Hillside after she and her husband separated, and it appears that she has commenced her own proceedings against her husband in which she seeks, inter alia, a declaration that she is the sole beneficial owner of Hillside on an unencumbered basis. Those proceedings have not yet concluded.
12. In her replying affidavits in the High Court, Mrs Tracey also stated that the purchase of Hillside was just one of many properties purchased by her husband, and that in relation to Hillside “the various papers in respect of the purchase of the property were simply put in front of me for my signature, including the acceptance and consent dated 15th September 2006”. She made the point also that her husband made all the repayments and that when the bank sent letters to Hillside (which were addressed to both Mr and Mrs Tracey) she brought them to her husband’s attention, and that having done so she would hear no more about the matter.
13. Mrs Tracey also states that the bank was at all times aware that it was Mr Tracey who was going to be responsible for making the loan repayments, and that this was agreed between her and Mr Tracey also.
14. In her supplemental affidavit Mrs Tracey states that in or around the 15th September 2006 she attended her husband’s solicitor’s office, and signed the loan acceptance, but that she did not obtain any independent legal advice before doing so, even though she accepts that she had by that time consulted her own solicitor in relation to her separation. She says that the bank never advised her that she should obtain her own independent legal advice before signing the loan acceptance, even though the bank was fully aware that she had no capacity to service the loan being given for the purchase of Hillside.
15. She went on to state that during her marriage she was a housewife and mother and that she was not involved in her husband’s business and financial dealings, and that she trusted her husband in relation to such matters, knowing that he was a good businessman who made sound investments. She stated that she allowed her husband look after the purchase of Hillside and the sale of her previous family home, and that she had no discussions with the bank in relation to such matters. She signed all documents which she was asked to sign in the belief that, as promised by her husband, Hillside in due course would be transferred by him unencumbered into her sole name.
16. She has averred in her supplemental affidavit that prior to the completion of the purchase of Hillside her own solicitors, McCann Fitzgerald (who she says she consulted in relation to her separation) had by letter dated 5th September 2006 addressed to Mr Tracey’s solicitor, sought to have him sign a Declaration of Trust in her favour in respect of his interest in Hillside, but that never materialised. That letter is exhibited. It refers to the proposed purchase of Hillside as a home for Mrs Tracey and the children. It refers to the fact that the existing family home was to be sold and the proceeds used as part of the financing arrangements. It refers also to the fact that while the property would have to be purchased in joint names, it was nevertheless understood by Mrs Tracey that the mortgage would be paid off by the end of 2007 at which stage the property would be transferred to her sole name. The letter suggested the Declaration of Trust already referred to, and that she would cooperate with the sale of the existing family home on this basis.
17. In this Court’s view, it is clear that while the bank may not have specifically advised and required that Mrs Tracey obtain her own independent advice in relation to these matters, the fact is that she did so. In this regard, the trial judge, having noted that she signed the loan acceptance, stated:
“While Ms Tracey says that she was not independently legally advised, it cannot be overlooked that she signed a family home declaration which had been prepared by Michael Campion & Co [her husband’s solicitors], in which she is described as a client along with Mr Tracey. She also signed a retainer and authority form on the same day authorising this firm to act for her”.
18. While that is undoubtedly so, it is also clear from the aforementioned letter of the 5th September 2006 that Mrs Tracey had consulted her own solicitor concerning the implications for her arising from the sale of the existing family home and the intended purchase of Hillside. Insofar as that letter refers to the financial and legal basis upon which Hillside was to be purchased it must be assumed that Mrs Tracey had available to her any independent legal advice which she required in order to make a fully informed decision in relation to those transactions, and their implications for her.
19. As noted by the trial judge in his judgment, these proceedings relate only to whether the bank is entitled to obtain judgment against Mr and Mrs Tracey for the amount which they borrowed, and therefore, to the extent that the present appeal is by Mrs Tracey alone, it relates only to whether the trial judge was incorrect in concluding that the basis on which she seeks to defend the bank’s claim against her does not amount to a bona fide defence which would entitle her to a full plenary hearing.
20. The trial judge concluded that while the bank may have been well aware that it was Mr Tracey who alone had the capacity to service the loan, and that Mrs Tracey had no means to do so, and that part of the financing of Hillside was emanating from the sale of the previous family home, and that the parties had separated, none of this could avail Mrs Tracey by way of a defence to the bank’s claim for judgment. He concluded in that regard:
“The stark fact remains, however, that Ms. Tracey knowingly executed the loan transactions in circumstances where, it bears repeating, no suggestion has been made that the Bank misrepresented its terms and effects or that she entered into this agreement by reason of some inducement or promise on the part of the Bank or by reason of some form of collateral contract on foot of such a misrepresentation. She assumed at the time that Mr Tracey would make good on his promise to assign the property to her on an encumbrance free basis, as, indeed, a letter from her then solicitors McCann Fitzgerald to her husband’s solicitors, Lavelle Coleman on 5th September 2006 makes clear. It is probably fair to assume further that Mr Tracey would have done just that had financial circumstances so permitted.”
21. The trial judge concluded that none of the matters upon which Mrs Tracey relied could deny the bank an entitlement to obtain judgment for the amount of the loan outstanding, and that the case should not be sent to a full plenary hearing. He specifically referred to the point relied upon in relation to the waiver by the Bank of the requirement for life cover in respect of Mrs Tracey, and to the fact that following drawdown the loan reverted to a 20 year loan as opposed to the 8 year term specified in the facility letter. But he concluded, correctly in this Court’s view, that “[he could] not see how this affects the bank’s entitlement to recover the sums in respect of this property which are now long since overdue”.
22. On this appeal, Counsel for Mrs Tracey has contended that the trial judge erred in his conclusion that the grounds of defence put forward by her could not amount to a defence to the bank’s claim for judgment. He submits that there are a number of features of the loan which distinguish it from a normal residential home loan. He refers first of all to the sheer size of the loan – €3.7 million. He refers also to the fact that the term of the loan as set forth in the facility letter was 8 years, something which is said to be unusual and inconsistent with this being a normal home loan, albeit that it reverted to a 20 year loan following drawdown.
23. Reliance is placed also on the fact that Mrs Tracey signed all the legal documentation in connection with the loan and purchase at the offices of Mr Tracey’s solicitor.
24. Counsel has referred also to the fact that the Bank was at all times aware that Mrs Tracey could never herself service the loan repayments, and advanced the monies in full knowledge of that fact. In these circumstances it has been submitted that the loan should be seen as non-recourse to Mrs Tracey, and that this should be considered to constitute a sufficient bona fide defence at this stage of the proceedings in order to permit the matter to go to a full plenary hearing.
25. Counsel has submitted that in reality this loan was simply one of a number of purely commercial loans being made by the bank to Mr Tracey in the course of his business as a property developer, and that recourse should be to him alone, just as it was in relation to his other commercial loans. In Counsel’s submission, the fact that life cover was required only in respect of Mr Tracey supports the contention that at all times the bank knew that its recourse was only against Mr Tracey.
26. It is quite clear from cases such as Aer Rianta v. Ryanair [2001] 4 IR 607 that before concluding that summary judgment should be given to the plaintiff, the Court must be satisfied that it is “very clear” that the defendant has no defence to the claim. Otherwise the matter should be adjourned to plenary hearing. It is also clear that the threshold of arguability which a defendant must surpass to achieve a plenary hearing is a low one. Nevertheless it is a threshold that amounts to more than mere assertion or stateability. There must be some perceivable potential substance to it. It must be based upon facts which if true and established would amount to a defence. It must be a credible defence.
27. Counsel for the bank has referred in this regard to a passage from the judgment of Clarke J. in Irish Bank Resolution Corporation v. Gerard McCaughey [2014] IESC 44 where, commencing at paragraph 5.4 of his judgment, Clarke J. stated:
“5.4 It is important therefore to re-emphasise 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. In so far 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.”
28. This Court considers that the trial judge was correct in concluding that the matters put forward by Mrs Tracey by way of defence did not meet the threshold for the purpose of sending the matter to plenary hearing. He clearly considered the matters put forward as amounting to a possible defence. He was entitled to view the fact that she had accepted that she signed the acceptance of the loan agreement as being a critical factor. This Court is satisfied that she took her own advice on the sale of her existing family home and the purchase of Hillside from her own solicitor who she was consulting in relation to her separation. That is clear from her solicitor’s letter to her husband’s solicitor dated 5th September 2006, which pre-dated her acceptance of this loan. For her to now assert that it was always understood by her and the bank that the loan would be non-recourse to her is inconsistent with the terms of the facility letter which she signed, and which makes no reference to such non-recourse.
29. The various matters to which she refers and relies upon, such as the fact that the loan was stated to be for 8 years, but reverted to being a 20 year loan in the absence of any 20 year life cover on her husband’s life, or that she signed the legal documentation at her husband’s solicitor’s office, or indeed that she at all times trusted her husband in relation to his business matters and simply signed such documentation as she was asked to sign, cannot in this Court’s view amount to even a possible defence to the bank’s claim against her for the full amount of the loan advanced for the purchase of Hillside. Neither is there any reality to her contention that this loan was not a residential loan. The facility states clearly that the loan’s purpose is to purchase Hillside. The bank knew that this was a house in which she and her children would be residing. The bank wrote to her and to her husband at that address when seeking repayments. The fact that her husband lived elsewhere does not alter the matter. It is a loan to both her and her husband. This distinguishes it from other commercial loans which he obtained from time to time either in his own name or the name of some corporate entity that he might own or have an interest in, such as those to which the two other proceedings determined by Hogan J. in his judgment referred, and in which Mrs Tracey was not involved in any way and was not named as a defendant.
30. This Court is satisfied that the evidence before the High Court met the test advised by the Supreme Court in Aer Rianta in that it demonstrated that it was very clear that Mrs Tracey did not have a defence, that there were no issues to be tried and that her affidavits had failed to disclose even an arguable defence. In such circumstances this Court must uphold the judgment of the High Court,
31. and dismiss the appeal.
BOI Mortgage Bank v Heron
[2015] IECA 66
Judgment of the Court delivered on the 26th day of March 2015
Introduction
1. On the 9th March, 2015, this Court allowed an appeal against an order of the High Court (O’Hanlon J.) made on the 1st December, 2014. These are our reasons for so doing. By her order, the judge refused the plaintiff’s application for summary judgment and remitted the litigation to plenary hearing.
2. The plaintiff bank appealed to this Court on two grounds. They were:
(a) that the trial judge erred in law in finding that the defendants had established a fair and reasonable probability of having a real or bona fide defence to the claim and
(b) that the defendants had failed to establish a stateable defence to the plaintiffs claim.
The Proceedings
3. On the 12th September, 2012, the plaintiff bank commenced proceedings seeking judgment against the defendants for €162,102.15 together with interest thereon, on foot of a loan agreement concluded between the parties.
4. The usual application for leave to enter final judgment followed. By the time the notice of motion seeking such relief issued, the sum outstanding had grown to €171,699.92 taking account of interest which accrued in the meantime.
5. The motion was transferred to the judge’s list where it was heard on the 1st December, 2014.
The Hearing before the High Court
6. This Court has been provided with a transcript of what took place before the High Court judge. It is clear that the affidavits exchanged between the parties were opened to the court as were the relevant legal principles to be applied on an application for summary judgment.
7. Counsel for the plaintiff maintained its entitlement to summary judgment and submitted that the affidavit filed on behalf of the defendants did not demonstrate that they had a real or bona fide defence to the claim notwithstanding the seven purported grounds of defence contained in it.
8. Counsel on behalf of the defendants submitted to the High Court judge that the defendants’ single affidavit raised sufficient matters to justify the case being adjourned to plenary hearing. He argued that only in the context of such a hearing would the defendants have the opportunity of testing the validity of the plaintiff’s claim and of pursuing their own allegations of negligence in respect of the plaintiffs alleged failure to notice alleged problems with the title to the property which the defendants purchased with the monies advanced to them by the plaintiff.
The judgment of the High Court
9. The transcript revealed that at the conclusion of the argument in the High Court, the judge simply announced as follows:
“All right. What I am going to say is the following, it would benefit with a plenary hearing. It should go to plenary hearing so that at the end of the day I am erring on the side of caution and giving the defendants that full opportunity.”
10. The trial judge did not give any reasons to support her decision. That is not a satisfactory situation from the point of view of either the parties or this Court. This issue will be addressed later in this judgment.
The jurisdiction of the High Court under O. 37
11. Order 37, r. 6 of the Rules of the Superior Courts requires the Master of the High Court, in contested summary cases, to transfer the proceedings for determination by a judge.
12. On a contested application for summary judgment, the High Court judge may do one of three things. He may (a) dismiss the action, (b) grant judgment for the sum to which he believes the plaintiff is entitled or (c) grant leave to the defendant to defend the proceedings in whole or in part unconditionally or subject to terms (O. 37, rr. 7 and 10 RSC).
13. Any decision made by a judge on an application for summary judgment will have significant repercussions for the parties to the litigation. For a plaintiff whose claim is remitted to plenary hearing, there will be substantial delay encountered in their efforts to recover the sum claimed. Such a plaintiff will also incur additional costs in bringing the action to a full trial.
14. On the other hand, if judgment is granted against the defendant, the consequences of that decision may be very serious indeed. Such a defendant is denied the opportunity of a full trial because of a failure to reach the low threshold of proof of an arguable defence.
15. A failure on the part of a judge to give reasons for deciding to take whichever option is available under the provisions of O. 37 means that the parties to the litigation cannot make an informed decision as to whether the order may be successfully challenged on appeal or not.
Need to give reasons
16. For many years the Superior Courts have held that administrative bodies making judicial or quasi judicial decisions must give reasons for so doing. Such bodies must satisfy the criteria identified by Murphy J. in O’Donoghue v. An Bord Pleanála [1991] ILRM 750 where he said in the context of a decision given by the Planning Board that it:
“. . . must be sufficient first to enable the courts to review it and secondly, to satisfy the person having recourse to the Tribunal that it has directed its mind adequately to the issues before it.”
17. That line has been followed in many subsequent decisions including Grealish v. An Bord Pleanála [2006] IEHC 310, Mulholland v. An Bord Pleanála [2006] ILRM 287, and Deerland Construction Limited v. Aquaculture Licences Appeals Board [2008] IEHC 289. Given that administrative bodies are required to give reasons for their decisions, no lesser standard can be required of courts exercising judicial functions.
18. That such is the case cannot be doubted having regard to the decision of McCarthy J. in Foley v. Murphy [2008] 1 IR 619.
19. In that case McCarthy J. considered a number of Irish and English authorities in favour of the proposition that reasons must be given for judicial decisions. In Foley’s case, Her Honour Judge Murphy, a Circuit Court judge, had failed to give reasons for refusing an award of the applicant’s costs. On judicial review McCarthy J. granted certiorari to quash her decision because of the failure to give reasons for it. He remitted the matter back so that the question could be determined in accordance with law.
20. In the course of his judgment he cited with approval the judgment of the Court of Appeal in England in English v. Emery Reimbold and Strick Limited [2002] WLR 2409. In the course of that judgment the Court of Appeal quoted with approval from the judgment of Henry L.J. in Flannery v. Halifax Estate Agencies Limited [2000] 1 WLR 377. There that judge said in respect of the duty to give reasons as follows:-
“(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties – especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know . . . whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.
(2) The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself.
(3) The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject-matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases.
(4) This is not to suggest that there is one rule for cases concerning the witnesses’ truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise). The rule is the same: the judge must explain why he has reached his decision. The question is always, what is required of the judge to do so; and that will differ from case to case. Transparency should be the watchword.”
21. In English’s case Lord Phillips M.R. put it succinctly when he said:-
“The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the Judge’s decision.”
22. The majority of judgments in the High Court are delivered ex tempore. Such judgments cannot be expected to include anything like the same degree of detail as might be expected in a reserved judgment. They do not have to be discursive. But even an ex tempore judgment must comply with the essential requirement identified by Lord Phillips namely, that it should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge’s decision.
23. The court is sympathetic to the predicament of a High Court judge faced with a lengthy motion list on every Monday of the legal term. The present case was just such a motion listed on Monday the 1st December, 2014. But a judge cannot be relieved of the obligation to set out briefly the principal reasons underlying a decision on that account. If a judge is unable to deliver a judgment ex tempore because of the complexity of the facts or legal issues, then judgment should be reserved. But it is never sufficient to do as was done in the present case and merely announce a decision without giving any reasons for it.
This Appeal
24. Despite seven issues identified in the replying affidavit which was placed before the High Court judge, we were fortunate that on this appeal it was accepted that there was really only one possible defence which fell to be considered. The court will turn to that presently, but before doing so, ought to identify the legal test which has to be applied on an application for summary judgment. The parties to this litigation were not in dispute concerning it and so it is sufficient to refer to just two relevant authorities. The first is Aer Rianta v. Ryanair [2001] 4 IR 607, where Hardiman J. stated that the court should ask itself the following question on a summary judgment application:-
“Is it very clear that the defendant has no defence? 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?”
Only if those questions are answered in the affirmative should judgment follow.
25. In Harrisrange Limited v. Duncan [2003] 4 IR 1 McKechnie J. set out the approach to be adopted on an application for summary judgment by reference to twelve different considerations (see p. 7). This Court takes into account each of those factors.
The affidavit evidence
26. The plaintiff bank’s grounding affidavit set out and exhibited the loan offer of the 24th August, 2005, whereby the plaintiff agreed to advance to the defendants a loan of €152,000 for a term of 25 years repayable by instalments. The first default on those obligations occurred in August 2007. By August 2012, there were arrears of €29,112.36. In that month the plaintiff made demand of both defendants for repayment of the outstanding sum which as of then was €162,102.15.
27. The only ground sought to be raised on this appeal by way of defence was an assertion that the plaintiff’s solicitors having examined the title to the property which the defendants purchased with the loan monies, had failed to notice a problem with it. The defendants asserted that they had relied on the inspection by the bank’s solicitors when they purchased the property and had they known that the title was defective, they would never have entered into the loan.
28. This is how the matter was dealt with in the defendants’ affidavit:-
“I say that the plaintiff bank’s solicitors conducted an examination of the title of 27 Doran Close, Bundoran, Co. Donegal, as part of the mortgage approval process. I say that the plaintiff bank’s solicitors failed to notice the problems with the title to the said property. I say that we relied upon the plaintiff bank to carry out a proper investigation of the title of 27 Doran Close, Bundoran, Co. Donegal, and that we would not have proceeded with the loan had we known that the title was defective. I say that my wife and I want to have these proceedings remitted to plenary hearing so we can enter a defence to all, or part of the plaintiff bank’s claim against us based on the plaintiff bank’s solicitors failure to notice the problems with the title to the said property. I say that we are unable to provide further details of the nature of that defence at present due to the nature of the proceedings instituted against us by the plaintiff bank and failure to seek discovery from the plaintiff bank.”
29. The response to that averment was contained in a supplemental affidavit sworn on behalf of the bank. This is what the deponent said:-
“Insofar as the first named defendant states that the defendants relied upon the plaintiff to carry out a proper investigation of the title of 27 Doran Close, Bundoran, in the County of Donegal, I say and believe and I am informed that the plaintiff did not engage solicitors to act either on its own behalf or on the defendants behalf with respect to the conveyance of the charged property at issue in these proceedings, namely 27 Doran Close, Bundoran in the County of Donegal. Mr. Aidan Kelly of John McGale Kelly & Co. solicitors, provided a solicitors undertaking on behalf of his then clients, the defendants, on the 12th December, 2005, wherein he undertook inter alia to ensure that the defendants were acquiring good marketable title to the property. Mr. Kelly subsequently provided a certificate of title to the plaintiff on the 28th May, 2010, confirming that the defendants had good marketable title to the property. The said solicitors undertaking and the certificate of title were expressly given by Mr. Kelly as the solicitor for the borrowers namely the defendants herein. Mr. Kelly was at all times the agent of the defendants. Accordingly, the plaintiff relied upon the said solicitors undertaking and certificate of title furnished by Mr. Kelly when it advanced the loan monies the subject matter of these proceedings to the defendants and the plaintiff continues to rely on same.”
30. The affidavit then exhibited the undertaking and the certificate of title furnished by the solicitor. Although that affidavit was sworn on the 13th March, 2014, and the motion for summary judgment was not dealt with until the 1st December, 2014, no affidavit was sworn by the defendants controverting in any way that averment. Neither was any notice to cross examine the deponent of the bank’s affidavit served.
31. The exhibits contained in the replying affidavit of the bank consist of the undertaking given by Mr. Kelly whereby he promised to acquire good marketable title to the property on the defendants’ behalf. The undertaking is signed by both defendants. It acknowledges that the solicitor was retained and authorised by them to deal with the bank on their behalf. The certificate of title furnished by Mr. Kelly in May 2010, confirms that the defendants had acquired good marketable title to the property.
32. It is clear in the light to this material that the relevant part of the defendants’ affidavit which is relied upon as demonstrating an arguable defence is mere assertion. Furthermore it is not credible. The supplemental affidavit sworn on behalf of the bank together with its exhibits demonstrates that the bank did not engage solicitors to act on its behalf in relation to the title to the property. Rather it relied upon the undertaking furnished by the defendants own solicitor, that he would obtain good title to the property on behalf of the defendants. No arguable defence has been shown.
33. It is of some concern to this Court that when swearing his affidavit, the first defendant must have known the true state of affairs particularly since he himself is a solicitor in Northern Ireland.
Disposal
34. This Court is satisfied that the defendants did not meet even the low threshold required to justify the case being adjourned to plenary hearing. The trial judge erred in making the order which she did. It is for these reasons that this Court allowed the appeal and entered judgment in favour of the plaintiffs.
Danske Bank A/S v Tinney
[2015] IEHC 770
JUDGMENT of Mr. Justice McDermott delivered on the 4th December, 2015
1. The plaintiff’s claim is for summary judgment in the sum of €3,474,972.77 against the defendant due under a Deed of Guarantee and Indemnity dated 12th September, 2011 pursuant to which the defendant inter alia guaranteed to discharge in full all liabilities of Tinney Investment Services (the borrower) due on foot of a facility letter dated 20th January, 2011. By letter dated 29th May, 2012 the plaintiff wrote to the defendant and called upon him to pay the sum of €3,353,225.15 pursuant to the terms of the guarantee having written to the borrower on the same date to the same effect. An appearance was entered on the 12th June, 2013.
2. The Recital in the Guarantee states that the loan agreement provides that the bank would not be obliged to advance any monies to the borrower pursuant to the facility letter unless at the time of doing so it was satisfied that a guarantee in satisfactory terms had been given by the defendant to the bank and was duly executed and enforceable against him.
3. Under the heading “Guarantee” it states:-
“Unconditionally and irrevocably
2.1.1 Guarantees to the bank the payment and discharge in full of the guaranteed obligations; and
2.1.2 Agrees as a primary obligation to indemnify the bank from time to time on demand from and against;
(1) Any loss incurred by the bank as a result of any of the obligations of the borrower expressly guaranteed hereunder being or becoming void, voidable, unenforceable or ineffective as against the borrower for any reason whatsoever, whether or not known to the bank, the amount of such loss being the amount which the bank would otherwise have been entitled to recover from the borrower;
(2) Any loss or damage which may be incurred or suffered by the bank as a result of the breach of any covenant, undertaking or agreement on the part of the guarantor….
2.3 All sums payable hereunder will become due forthwith on demand for them being made on the guarantor.”
4. Paragraph 13 of the Guarantee states:
“13.1 The Guarantor acknowledges that it has not relied on any warranty or representation made by or on behalf of the bank to induce it to enter into this Guarantee and that it has made and will continue to make, without reliance on the bank, its own independent investigation of the financial condition and affairs of the borrower and assessment of the credit worthiness of the borrower, and the Guarantor further acknowledges that the bank has no duty or responsibility either now or in future to provide the Guarantor with any information relating to the financial condition or other affairs of the borrower.
13.2 The insolvency of the borrower or any judgment obtained against the borrower in respect of the guaranteed obligations will not affect or determine the liability of the Guarantor under this Guarantee, and such liability will continue in full force and effect and interest will continue to accrue until the bank has been repaid all sums due under this Guarantee and interest thereon.”
5. The defendant signed the Guarantee and Indemnity which was executed as a Deed on 12th September, 2011.
6. Mr. Tinney signed the loan facility agreement in favour of the borrower on behalf of the borrower company which was an unlimited liability company owned by him. At page 14 of the loan facility letter he acknowledged as guarantor of this facility that he had read and understood the facility letter and its terms of conditions and that he was guaranteeing the performance by the borrower of its obligations to the bank under the agreement. He also indicated that he had been given the opportunity to take independent legal advice on the effect of the agreement and had “taken/waived” the opportunity to take such legal advice. On the first page of the Guarantee Mr. Tinney was advised that before he signed it he should get independent legal advice.
Background
7. Mr. Tinney was a partner in Bloxham Stockbrokers from 2006 until May 2012. Bloxham was a limited partnership within the meaning of the Limited Partnerships Act 1907 and until 25th May, 2012 carried on a business of stock-broking and the provision of investments services.
8. In or about 2011 Bloxham underwent a restructuring process involving the addition of seven unlimited corporate partners to the partnership. The purpose of this restructuring included:
(a) The extraction of profits from Bloxham in a more tax efficient manner through the unlimited corporate partners,
(b) To increase the debt repayment capacity of Bloxham and
(c) To give the partners a greater scope for funding pensions whilst ensuing that sufficient capital was retained within Bloxham to satisfy the requirements of the Central Bank.
9. Bloxham retained Delaney Locke & Thorpe to advise them on this restructuring. A presentation was made to Mr. Tadhg Gunnell, his fellow partner, which recommended that each partner should form an incorporated unlimited company to be owned and controlled by that partner. Each company would then join the partnership. Seven individual partners pursued this course. Each partner made an offer to sell his investment in the partnership to the newly formed company.
10. According to the affidavit of Kieran Wallace of KPMG (later appointed as official liquidator and administrator of Bloxham) each partner sold his asset investment in Bloxham to a separate company. Danske Bank A/S then trading as National Irish Bank confirmed that it was willing to advance a loan facility to the defendant to enable the purchase of his interest by the borrower Tinney Investment Services, the company vehicle created for this purpose. The purpose of the loan facility of the 20th January, 2011 is expressed to be:
“to fund the acquisition by the borrower from Niall Tinney … of part of Mr. Tinney’s interest in the Bloxham Partnership (including its successors the Bloxham Partnership) and to discharge in full the indebtedness of Mr. Tinney under loan reference numbers 52091 and 52039.”
11. A partnership agreement was signed on the 9th August, 2011 which facilitates this restructuring and sets out the provisions governing the restructured partnership to which Mr. Tinney and Tinney Investment Securities were parties. The unlimited corporate partners (and FPBD Securities Ltd.) would derive the benefit from all profits earned by Bloxham which they could then extract.
12. On the 23rd May, 2012 the partners became aware that the capital position of Bloxham had been overstated by a sum in excess of €5 million. It appeared that based on financial returns previously prepared and submitted to the Central Bank of Ireland, Bloxham was obliged by the Central Bank to hold regulatory capital of €5,600,000.00. The circumstances uncovered on 23rd May, 2012 suggested that Bloxham was in breach of its obligations. By order of the High Court on 31st May, 2012 (Cross J.) Mr. Wallace was appointed as provisional liquidator of Bloxham pursuant to a petition presented by Bloxham and by further order made 25th June (Laffoy J.) Mr. Wallace was appointed as official liquidator and administrator.
13. It is clear that the plaintiff acted as banker for the purpose of the financing of this restructuring. Mr. Tinney in a series of four affidavits advanced a number of different propositions as the basis for his proposed defence to these proceedings. For the most part, the proposed defence focuses upon what he alleges the bank knew or ought to have known about alleged fraudulent behaviour by his partner Mr. Tadhg Gunnell.
14. Mr. Tinney deposes that Mr. Gunnell prepared the accounts of Bloxham upon which his decision to participate in the proposed restructuring was based. He claims to have signed the guarantee based “on these knowingly misstated accounts”. Though he specifically disavows any allegation of dishonesty or fraud on the part of the plaintiff, he claimed that the plaintiff knew or ought to have known that the guarantee was entered into by him as a result of fraudulent misrepresentation contained in the accounts.
15. Mr. Tinney relies upon an Irish Times report dated 17th October, 2015 in which it is stated that the Central Bank of Ireland was concluding an investigation into the actions of Deloitte who were the auditors of Bloxham Stockbrokers, because they allegedly failed to make known errors in the accounts prepared by Mr. Gunnell. Furthermore, it is alleged that the Chartered Accountants Regulatory Board (CARB) intends to launch an investigation once the Central Bank investigation is concluded. Mr. Tinney also states in his affidavit that when initially appointed as liquidator, Mr. Wallace and a Mr. Shaun Murphy were of the opinion that “while the initial fraud of Mr. Gunnell was well hidden in the accounts, subsequent acts of fraud by Mr. Gunnell were quite obvious, and they were surprised Deloitte had not identified them”. Mr. Tinney states that if the fraud was obvious from the accounts of Bloxham at the time when the plaintiff provided the financing to Tinney Investment Services this would make it more likely that the plaintiff could or should have known of such fraud at the time the finance was provided or at the time when the guarantee was procured. He emphasises that he was not involved in the process of establishing the financial arrangements entered into, the negotiations for which were conducted entirely, he alleges, between the plaintiff and Mr. Gunnell and presented to him as a “fait accompli” for signature. He states that he remains unaware of the due diligence process, if any, undertaken by the plaintiff on Bloxham Stockbrokers.
16. In his fourth affidavit he alleges that the events surrounding the financing arrangement the subject matter of these proceedings “clearly suggest that Mr. Gunnell was in fact acting as the agent of the plaintiff”. He refers to an affidavit of Peter Costigan in proceedings entitled “Danske Bank A/S v. Peter Costigan 2013/1574S”, in support of this proposition which was not produced.
17. The defendant also asserts that it is his “understanding” that the plaintiff gave investment advice through Mr. Gunnell, in relation to the restructuring including the related financial arrangements. He claims that this gave rise to a statutory and common law duty by the plaintiff to him concerning the risk associated with the restructuring and in particular, the giving of a personal guarantee. He maintains that the bank failed to advise him to carry out proper due diligence before providing the guarantee. In that regard, Mr. Wallace’s affidavit (exhibited by the defendant) states that Bloxham retained the firm of Delaney, Locke & Thorpe to advise on the restructuring of the partnership and the advantages to each partner of the restructuring in a presentation made to Tadhg Gunnell and a letter dated 5th July, 2010 to the Financial Regulator.
18. The plaintiff for its part, rejects the allegation that it induced the defendant to enter the guarantee. Mr. O’Reilly on behalf of the bank states that neither the bank nor anyone acting on its behalf is a party to the misstatement in Bloxham’s accounts. It had no knowledge of any fraudulent misrepresentation now alleged by the defendant in respect of Bloxham’s accounts by Mr. Gunnell. There may have been wrongdoing by Mr. Gunnell or negligence and breach of duty as alleged against Deloitte concerning its auditing of the Bloxham’s accounts, but I am not satisfied that sufficient evidence has been produced to enable the defendant to argue that the bank knew or ought to have known of any fraud or misrepresentation perpetrated by Mr. Gunnell, or negligence and breach of duty on the part of Deloitte in auditing Bloxham’s accounts.
19. Mr. Tinney was for five years prior to the 2011 restructuring a partner in Bloxham Stockbrokers and was presented with a restructuring project for his benefit by Mr. Gunnell with the advice of Delaney, Locke & Thorpe. There is no evidence to support the proposition that the bank was in anyway a promoter of this scheme or did anything more than provide the finance sought by the partners for this restructuring. The condition for the provision of this finance under loan facility agreement to the newly formed company was the furnishing of a Guarantee and Indemnity by the defendant. There is nothing to suggest that the bank was aware of any untoward behaviour on the part of Mr. Gunnell or as alleged against Deloitte. Fraud is not alleged against the bank. There is no evidence to suggest that the bank was aware of any such alleged fraud or misrepresentation and failed to reveal any such knowledge to the plaintiff.
20. The affidavits submitted by Mr. Tinney lack detail in a number of important respects. He provides little or no information as to how and why the restructuring was proposed; the dates, the times and circumstances of any meetings held by the partners concerning the proposals; a precise statement of the alleged fraud in Bloxham’s accounts; the extent of the commercial and financial knowledge or information furnished to him before and at the time of the restructuring of the partnership by his accountants, or the auditors; the advice if any, he sought or obtained from his own solicitors, tax advisors or accountants in relation to the restructuring; the extent of his knowledge and engagement in the affairs of Bloxham Stockbrokers over this period and the correspondence, if any, concerning the restructuring with any relevant party. Furthermore, the Court has not been informed as to how or by whom the loss of €5 million or the failure to obey the Central Bank regulatory capital minimum requirement was discovered in or about 23rd May, 2012.
The Law
21. I am satisfied that the principles to be applied in this case are summarised in the judgment of McKechnie J. in Harrisrange Ltd. v. Michael Duncan [2003] 4 IR 1 as follows :
“(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.”
22. These principles, of course, derive from a number of Supreme Court decisions including Aer Rianta v. Ryanair [2001] 4 IR 607 in which it was emphasised that the standard of proof for a defendant at this stage must as a matter of principle be regarded as low and that the onus of proving lack of “credibility” is on the plaintiff (see also Allied Irish Banks Plc. v. Farrell [2014] IEHC 395).
Points of Defence
23. The defendant claims that on the 29th May, 2012 immediately after the fraud became public knowledge, the plaintiff demanded payment under the guarantee and unilaterally created a loan account in the name of the defendant. This liability was referred to in a letter of the 14th August, 2012 from National Irish Bank to the defendant as arising under loan account number 95182320016357 drawn down on 31st May, 2012. This is claimed to be a new liability not covered by the guarantee. It is clear from the affidavits that a demand was made on foot of the guarantee. The Plaintiff claims that when the defendant failed to answer this demand the plaintiff collapsed the loan and transferred it into its internal debt collection system. Mr.O’Reilly states that this was “purely a step in the internal accounting system of the plaintiff and in no way alters the defendant’s liability to the plaintiff”. The liability under the guarantee was created in September 2011. Money was advanced under the loan facility covered by the guarantee and has not been re-paid. I am not satisfied that the defendant has raised any point of substance in relation to this matter either by way of suggested conflict of evidence or any potential point of law.
24. The defendant also submits that he was “induced” to enter the guarantee by the plaintiff in some unspecified way. Apart for the assertion that he was so induced there is no evidence of any misrepresentation made by the bank to him of any matter of fact as a result of which the bank, its servants or agents caused him to enter a guarantee. It is clear from the terms of the loan facility that it would only be granted to the borrower if the guarantee was in place from the defendant. There is no evidence other than an assertion that Mr. Gunnell acted as an agent of the plaintiff bank in procuring the guarantee. This suggestion appears to be based on an allegation to the same effect by a Mr. Peter Costigan, another of the partners, in separate proceedings brought against him by the Plaintiff which were not produced. There is no credible evidence that the bank retained Mr. Gunnell as its agent. It is clear that Mr. Tinney was a businessman who entered into a very detailed restructuring of his partnership in Bloxham and its sale to a company owned by him which sought and obtained finance from the plaintiff. His affidavits contain very little detail on this aspect of the proposed defence which lacks the particularity and cogency required to pass the low threshold of an arguable defence.
25. He then seeks to ascribe knowledge or constructive knowledge of the fraud he alleges against Mr.Gunnell and the professional negligence alleged against Deloitte, to the bank without any evidence whatsoever. I regard the propositions advanced as amounting to little more than assertions or opinions. There is no detail or description of the fraud allegedly perpetrated by Mr. Gunnell. There are no details of the alleged professional negligence against Deloitte. There are no details of how or what precisely the bank was or could have been on notice in respect of these matters. Furthermore, it is clear from the express terms of clause 13 of the guarantee that the defendant acknowledged that he had not relied on any inducement made by the bank to enter into the guarantee, had done so without reliance on the bank or its own independent investigation of the financial condition and affairs of the borrower and the assessment of the credit worthiness of the borrower. The defendant further acknowledged that the bank had no duty or responsibility to provide the guarantor with any information relating to the financial condition or other affairs of the borrower. I am satisfied that this does not provide the defendant with an arguable or credible basis for a defence.
26. The defendant also contends that in proceedings bearing record number 2012/291/COS the validity of the loan to the company and to the appointment of the receiver by the plaintiff over the company has been challenged by the liquidator. In those proceedings Mr Wallace states that on 6th November 2012 the receivers wrote to him claiming that certain assets may be owned by the unlimited companies now in receivership including Tinney Investment Services(in receivership) and may not be assets that fall within the Bloxham Partnership, including the goodwill of the Bloxham Partnership. Issues arose between the liquidator and the Irish Stock Exchange concerning the Bloxham Partnership’s entitlement to a portion of the disbursement of the ISE’s accumulated reserves under a scheme of re-organisation under heads of agreement dated 19th September, 2011 and the proposed revocation of the Partnership’s membership of the ISE., as set out in a letter of the 13th December, 2011. Membership was revoked on the 19th December. The motive for the revocation was stated by Mr.Wallace to be “questionable”. The liquidator made an application pursuant to section 231 of the Companies Act 1963 seeking sanction to issue judicial review and plenary proceedings against ISE in respect of these matters. Liberty was granted to do so but the court directed the liquidator to examine the overall position of Danske Bank A/S and the receivers relating to the asset being pursued in the main proceedings. The proceedings against the ISE were determined in favour of ISE and that matter is now on appeal to the Court of Appeal. The receivers claimed that any benefit from the demutualisation of the ISE and the value of the goodwill of the Partnership or the sale of its private client business were captured by the bank’s security. The liquidator then applied for an order directing that the following legal issues be determined between the liquidator and the receivers as set out in Mr. Wallace’s affidavit sworn 25th March, 2015 at paragraph 55. The relevant issues are stated to be:
(a) Whether the debenture entered into by (inter alios) Tinney Investment Services (in receivership) in favour of Danske Bank A/S did not have the effect of charging any of the assets of Bloxham (in liquidation) in favour of Danske Bank A/S;
(b) Whether the appointment by Danske Bank A/S on 24th October, 2012 of receivers to (inter alios) Tinney Investment Services (in receivership) had any effect upon the liquidation of Bloxham;
and
(c) Whether the receiver of (inter alios) Tinney Investment Services (in receivership) does not enjoy priority in respect of all or any of the assets under the control of the official liquidator.
27. I am satisfied that the discrete issues raised in those proceedings are completely separate from the issue raised in these proceedings which arises directly from a loan given to the borrower and a guarantee entered into personally by the defendant. I am not satisfied that these matters give rise to a credible or arguable defence to a claim made on foot of the guarantee.
28. I have considered all of the points advanced on behalf of the defendant in this matter and all facts set out in the affidavits submitted. I am not satisfied that there is any realistic or identifiable issue of fact which is material to the success or failure of these proceedings apparent from the affidavits. The defendant does not have a fair or reasonable probability of having a real or bona fide defence. There is a complete lack of cogency in the evidence and materials advanced such that I cannot be satisfied that the low threshold required has been reached in this case. I have considered the commercial background to the case and the paucity of first hand or primary evidence advanced by the defendant concerning his assumption of liability under the guarantee including meetings and correspondence, or any or any adequate explanation for the absence thereof and which normally might be expected in a matter of such complexity and value. I am mindful of the caution that must be exercised before granting summary judgment but it seems to me that the reliance placed upon conjecture and assertions, reports in a journalist’s copy and the hearsay claim of the partner whose affidavit is not produced, does not provide a sufficient basis to conclude that there is a credible or arguable defence available to the defendant on any of the points raised.
29. I am satisfied that the Plaintiff has established an entitlement to an order for summary judgment in the amount claimed.
Walek & Co. K.G. v. Seafield Gentex
O’Higgins C.J.; Henchy J. [1978] IR 167
O’Higgins C.J.
21st July 1978
I have read the judgments about to be delivered in this matter, and I agree with them.
Henchy J.
The plaintiffs have been given judgment in the High Court for £25,586.56 with interest at 15% from the 11th September, 1975. The claim arose on foot of two bills of exchange of which the defendants were acceptors. The bills, which were payable to the plaintiffs and were dishonoured by the defendants, were to be in payment for yarn supplied by the plaintiffs to the second defendants. The defendants’ case is that the yarn supplied under the contract contained a twist which made the cloth woven from it defective in quality and, therefore, of reduced value. This, they say, was a breach of contract. The defendants say that, in an effort to minimise the loss resulting from that breach, they sold, in its undyed state, the cloth woven from the defective yarn at prices which on average were 12p. per metre lower than would have been realized if the yarn supplied had been up to standard. Even after such sales, they assess their loss resulting from the breach of contract at “approximately £21,907.05.”
When the plaintiffs’ claim came before the President of the High Court, counsel for the defendants submitted that there should be a stay of execution so as to enable the defendants to raise, by way of counterclaim, the question of their entitlement to damages for breach of contract. The President refused to accede to that submission and entered judgment for the plaintiffs. The defendants now appeal against that order.
If a stay were to be put on the judgment so as to enable the defendants to put forward, by way of counterclaim, their alleged loss from a breach of contract, it is clear that the counterclaim would be for an unliquidated sum which the defendants’ affidavit puts at “approximately £21,907.05.” If that counterclaim could be pursued in this action (and there is a contention, as yet unresolved, that such a dispute as this under the contract must be litigated by arbitration), it would require, in the absence of agreement, a full investigation of the relevant circumstances before the correct amount of the counterclaim could be ascertained.
Therefore, it is clear that the counterclaim which the defendants wish to put forward in this action is one for an unliquidated amount. I am satisfied that a counterclaim for unliquidated damages under a contract of sale cannot be raised against a claim on a bill of exchange. The text-books and the cases are all of that opinion: see Byles on Bills of Exchange (22nd ed. at p. 236), Chalmers on Bills of Exchange (13th ed. at p. 105), and the cases there mentioned. The most recent authoritative exposition of the law on the point is to be found in the decision of the House of Lords in Nova (Jersey) Knit v.Kammgarn Spinnerei 8 where, at p. 720 of the report, Lord Wilberforce says:
“I take it to be clear law that unliquidated cross-claims cannot be relied upon by way of extinguishing set-off against a claim on a bill of exchange ( Warwick v. Nairn 11 ; James Lamont & Co. Ltd. v.Hyland Ltd. 6 ). As between the immediate parties, a partial failure of consideration may be relied upon as a pro tanto defence, but only when the amount involved is ascertained and liquidated: Warwick v.Nairn 11 ; Agra and Masterman’s Bank v. Leighton 12 ; James Lamont & Co. Ltd. v. Hyland Ltd. 6 ; Brown, Shipley & Co. Ltd. v. Alicia Hosiery Ltd. 7 ”
See also to the same effect the speeches of Viscount Dilhorne at p. 722 of the report, of Lord Salmon at p. 726, of Lord Fraser of Tullybelton (agreeing with Lord Wilberforce), and of Lord Russell of Killowen at p. 732 of the report. An argument that the rule should not be applied in circumstances which I find essentially indistinguishable from those in the present case was
rejected by the Court of Appeal in England in Cebora v. S.I.P. 1 Therefore, I am of the opinion that a stay was correctly refused in the High Court and that this appeal should stand dismissed.
Griffin J.
I agree with the judgment delivered by Mr. Justice Henchy. It is well established that a claim for unliquidated damages under a contract of sale is not a defence to a claim under a bill of exchange accepted by the purchaser nor, unless there are exceptional circumstances, will judgment be delayed or execution stayed by reason of a set-off or counterclaim. The authorities are all the one way. The most recent decision when this matter came before the President was Cebora v. S.I.P. 1 , which he followed. Since then the authority of the decision of the House of Lords in Nova (Jersey) Knit v. Kammgarn Spinnerei 8 , to which Mr. Justice Henchy refers, has been added to that of the Court of Appeal in the Cebora Case1 .
The rule makes good sense. It was sought to show that there were exceptional circumstances in this case, in that the plaintiffs are a foreign company and any claim against them would involve difficulty or hardship in pursuing the counterclaim; but this is not an exceptional circumstance. Bills of exchange are international instruments for the payment of obligations and it is important in the interests of businessmen, whether they be exporters or importers, that the negotiability of such bills be maintained so that they are”equivalent to cash.” As Sir Eric Sachs said so trenchantly in the Cebora Case 1 at p. 278 of the report:
“Any erosion of the certainties of the application by our Courts of the law merchant relating to bills of exchange is likely to work to the detriment of this country, which depends on international trade to a degree that needs no emphasis. For some generations one of those certainties has been that the bona fide holder for value of a bill of exchange is entitled, save in truly exceptional circumstances, on its maturity to have it treated as cash, so that in an action upon it the Court will refuse to regard either as a defence or as grounds for a stay of execution any set-off, legal or equitable, or any counterclaim, whether arising on the particular transaction upon which the bill of exchange came into existence or, a fortiori, arising in any other way.”
Those words apply equally to this country to-day although, by comparison with that of Great Britain, our international trade is of relatively recent origin. Our membership of the European Communities makes it imperative that the importance of the negotiability of bills of exchange and their equivalence to cash should be maintained. I would dismiss this appeal.
Kenny J.
I have had the advantage of reading the judgment prepared by Mr. Justice Henchy and I agree with it. It has been established by a line of cases, beginning in 1806 with Morgan v. Richardson 13 and ending in 1977 with the decision of the House of Lords in Nova (Jersey) Knit v. Kammgarn Spinnerei 8 ,that an unliquidated claim for damages cannot be set off or be the subject of a counterclaim against a claim based upon a negotiable instrument. These authorities also establish that the existence of such an unliquidated claim is not a ground for staying execution on a judgment given on a negotiable instrument, even when it was given in connection with the transaction out of which the counterclaim arises.
This is not a procedural rule or a mere survival from the past: it is based or the reason which was well expressed by Pollock C.B. in Warwick v. Nairn 11 where he said (p. 764) that “the payment by a bill of exchange is to be taken as the payment of so much cash: the defendant ought to satisfy the bill and proceed upon the remedy for the breach of warranty.” This is also expressed by saying that it has always been the policy of the common law that bills of exchange are equivalent to deferred instalments of cash.
There is Irish authority on this matter but unfortunately, the decision has not been reported anywhere. The whole question of whether judgment should be given for a liquidated sum when the defendant has counterclaimed for an unliquidated amount was discussed in Prendergast v. Biddle 10 [No. 36 of 1957] in which the former Supreme Court gave judgment on the 31st July, 1957. In that case the plaintiff sued the defendant for a liquidated sum which she admitted was due; but she counterclaimed for an unliquidated amount in connexion with the sale by the plaintiff of a brood mare in which she claimed an interest. The question at issue was whether judgment should be entered for the plaintiff, or whether the claim and counterclaim should be sent forward for plenary hearing. In the course of his judgment Kingsmill Moore J. said:”. . . it seems to have been established on the balance of authority that, when the claim was for payment on a negotiable instrument, leave should ordinarily be given to mark judgment even though there appeared to be a good counterclaim: Newman v. Lever 4 ; Jackson v. Murphy 14 ; James Lamont & Co. Ltd.v. Hyland Ltd. 6 and the cases therein cited. This practice depends at least partly on the necessity of fostering the use of negotiable instruments as a species of currency: Warwick v. Nairn 11 ; Jackson v. Murphy 14 “.
Parke J.
I agree with the judgment given by Mr. Justice Kenny.
Danske Bank A/S v Crowe
[2015] IEHC 567
JUDGMENT of Kearns P. delivered on the 9th day of September, 2015
The plaintiff is a bank with its registered office situate at 3, Harbourmaster Place, IFSC, Dublin 1. The defendants are a married couple who reside at Moynehall, Cavan, Co. Cavan.
In these proceedings, commenced by summary summons issued on the 28th March, 2013, the plaintiff’s claim is for the total sum of €1,206,719.65 on foot of various loans made available by the plaintiff to the defendants by facility letters dated 22nd June, 2006, 1st March, 2007 and 18th December, 2007.
By affidavit sworn on 29th August, 2013, Mr. Niall O’Reilly, an officer of the plaintiff bank, deposes that the defendants failed to make the necessary repayments in accordance with the terms and conditions of the loan facility letters, whereupon by letter dated 18th January, 2013 the plaintiff wrote to the defendants demanding payment of the sum of €1,221,621.32 in respect of both principal and interest then due and owing in respect of the advances made. Interest on the sums due was waived as and from 8th March, 2013.
The first named defendant filed an affidavit in response on the 12th March, 2014 in which he raised what might be described as multiple technical objections, the principal ones being that the plaintiff bank was not entitled to judgment because (a) it had securitised its loan receivables and (b) that the plaintiff bank has never been issued a licence in this country by the Central Bank of Ireland and therefore cannot maintain the present proceedings.
It should be noted that all sums advanced in this case were business related. The defendants conducted their own defence when the matter came before this Court on the 31st July, 2015.
The Court pointed out that the issue of securitisation had been dealt with in a number of High Court decisions including Freeman v. Bank of Scotland [2014] IEHC 284, Wellstead v. Judge White & Ors. [2011] IEHC 438, and Harrold v. Nua Mortgages Ltd. [2015] IEHC 15. However, the defendants made clear that the sole focus of their defence in these proceedings was their assertion that the plaintiff bank was not duly licensed within this jurisdiction and as such could not maintain the present proceedings. There was no denial that the sums claimed had been advanced, or that same had become due by reason of the failure on the part of the defendants to make repayments in accordance with the terms of the facility letters.
In an affidavit sworn on the 4th June, 2015, the first named defendant deposed as follows:-
“I say that both I and my wife, the second named defendant, did execute a mortgage in favour of National Irish Bank (i.e. in respect of the advances made).”
He deposed that neither his wife nor himself gave consent for the mortgage to be transferred to the present plaintiff. Insofar as the plaintiffs sought to rely on the provisions of S.I. No. 29 of 2007, the defendants submit that this statutory instrument is void and of no legal effect as the then Minister was relying on s.33 of S.I. No. 24 of 1971 to make the transfer. That statutory instrument contained no provision for such a transfer, as the section only permitted the Minister to approve transfers from a transferor entity holding a licence issued from the Central Bank of Ireland to a transferee entity holding a licence issued from the Central Bank of Ireland. As the plaintiff had never been issued a licence by the Central Bank of Ireland, the transfer and order were null and void.
By affidavit in response sworn by Mr. O’Reilly on the 11th June, 2015, Mr. O’Reilly confirms that the loan facilities the subject of the within proceedings were granted originally by National Irish Bank to the defendants. He states that under the provisions of S.I. No. 29 of 2007, the then Minister for Finance approved a scheme of transfer whereby the business of National Irish Bank Ltd. was transferred to Danske Bank A/S, the plaintiff in these proceedings. The scheme of transfer thereby approved was contained in an agreement made between National Irish Bank and Danske Bank A/S on the 30th November, 2006 and under which the effective date for the transfer of the business occurred on the 1st April, 2007. The business that was transferred under the scheme was the banking business of National Irish Bank, including the assets and liabilities of that business.
He further deposes that the three loan facilities the subject of these proceedings, were part of the banking business of National Irish Bank that was transferred to Danske Bank. They were not part of the “excluded business” that was specified in schedule 3 to the agreement.
The deponent then addresses the assertion that s.33 of the Central Bank Act 1971 only applies where the particular bank holds a banking licence from the Central Bank of Ireland. He deposes that the requirements of s.33 of the 1971 Act were superseded and expanded by the European Communities (Licensing and Supervision of Credit Institutions) Regulations 1992 (S.I. No. 395 of 1992) which Regulations were introduced into law by the Oireachtas in order to permit any credit institution already licensed in another member state to undertake banking business in Ireland without the necessity of a licence from the Central Bank of Ireland. Denmark was such a member state. Accordingly, by 1992 it was no longer necessary for each bank that was party to a scheme of transfer of banking business to hold a licence in order to come within the scope of s.33 of the 1971 Act and for that reason the Minister was entitled to approve the scheme of transfer from National Irish Bank to Danske Bank A/S in 2007 on the basis that the plaintiff herein was a credit institution authorised by a competent authority of another member state and ‘having and acting’ through a branch in Ireland.
The first named defendant in turn filed a further affidavit in response on the 26th June, 2015 which challenges the plaintiff’s interpretation of the powers contained in the 1992 Regulations. He asserts that there is nothing contained in that instrument which allows the Minister to approve a scheme of transfer to take place between an Irish licensed bank and some other entity.
DECISION
I have carefully considered the submissions of both parties and am satisfied that the plaintiff is entitled to the relief sought.
Section 33 of the Central Bank Act 1971 relates to the approval of the Minister of the transfer of a bank’s business and provides as follows:-
“33.—(1) Whenever the holder of a licence (in this Part referred to as the transferor) agrees to transfer, in whole or in part, to another holder of a licence (in this Part referred to as the transferee) the business to which the licence relates—
(a) the transferor and transferee may, not less than four months before the date on which the transfer is intended to take effect (in this Part referred to as the transfer date), submit to the Minister for his approval a scheme for the transfer,
(b) the transferor and transferee shall, not less than one month before the transfer date, publish notice of the transfer in at least one daily newspaper published in the State,
(c) the Minister, after consultation with the Bank, may, not less than two months before the transfer date, either approve of or decline to approve of the scheme by order,
(d) if the Minister approves of the scheme under this section, the provisions of sections 34 to 39 and 42 of this Act shall, if, and to the extent only that, the scheme so provides, have effect in relation to the transfer,
(e) the Minister may, at the request of the transferor and transferee, include in an order approving of the scheme under paragraph (c) of this subsection such incidental, consequential and supplemental provisions as he thinks appropriate for facilitating and implementing the transfer and securing that it shall be fully and effectively carried out, including provisions for substituting the name of the transferee for the transferor or otherwise adapting references to the transferor in any statute or instrument made under statute.
(2) An order under subsection (1) of this section or under this subsection may, after consultation with the Bank and with the consent of the transferor and the transferee to whom it relates, be amended by the Minister by order.”
While this provision indicates that a ‘transferee’ will hold a licence from the Central Bank of Ireland, the Court accepts the submission of the plaintiff that the requirements of s.33 were superseded and expanded by the European Communities (Licensing and Supervision of Credit Institutions) Regulations 1992 (S.I. 395 of 1992). The explanatory note to the Regulations provides:-
“The purpose of these Regulations is to give effect to the EEC Second Council Directive (89/646/EEC) of 15 December, 1989, on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions.
The mutual recognition of banking services will allow any credit institution already licensed in another Member State to undertake banking business in the State without the need for a licence from the Central Bank or prudential supervision by the Bank. Such institutions will be supervised by the home Member State. The same arrangements will apply to Irish institutions seeking to provide banking services in other Member States. The Regulations do not impinge on the legal owners of the Bank in regard to monetary policy.”
Regulation 11(1) of the Regulations, which came into operation on 1st January, 1993, provides as follows:-
“11. (1) Any provision of the supervisory enactments or any other enactment which has the effect of requiring a credit institution to seek or to hold an authorisation from the Bank to establish or carry on business in the State shall not apply to a branch of such a credit institution if the credit institution is authorised to so carry out such business in another Member State and the authorisation is in accordance with the Directive:
Provided that Regulation 20 (2) shall apply to every such branch established in the State.”
Regulation 20(2) states:-
“A credit institution referred to in paragraph (1) shall, in so far as its operations or proposed operations within the State are concerned, comply with all relevant requirements of these Regulations and with the provisions of any enactment relating to the activities set out in the Schedule.”
‘Authorisation’ as it appears in the Regulations is defined as “authorisation by the Bank to carry on the business of a credit institution in accordance with the provisions of any of the supervisory enactments”. The term ‘supervisory enactments’ is defined in the Regulations as relating to, inter alia, the Central Bank Acts 1942 to 1989, which include the requirements of having a licence issued by the Central Bank.
The Court is satisfied therefore that, as a result of the Regulations, by 1st January, 1993 it was no longer necessary for each bank that was a party to a scheme of transfer of banking business to hold a licence issued by the Central Bank of Ireland in order to come within the scope of s.33 of the 1971 Act. As set out in the provisions of S.I. 29 of 2007, the plaintiff Bank is “authorised to act as a credit institution in the State by virtue of the European Communities (Licensing and Supervision of Credit Institutions) Regulations 1992 (S.I. 395 of 1992)”.
I am satisfied that the submission of the defendants as to the validity of S.I. 29 of 2007 is misconceived and that the Minister was entitled to approve the scheme of transfer from National Irish Bank to the plaintiff bank under the provisions of S.I. 29 of 2007.
In light of the foregoing, the plaintiff is entitled to judgment in the sum claimed.
Allied Irish Banks Plc v Aughey
[2015] IEHC 751
JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 1st day of December, 2015
1. This is an application for summary judgment brought by the plaintiff against the defendant for the sum of €1,514,158.44. This sum represents the total monies lent on foot of four facilities referred to in the grounding affidavit as facility 2, 3, 4 and 5. It is important to record that these proceedings are not brought in respect of a facility in the amount of €14,015,089, lent by the plaintiff to the defendant in relation to Monaghan Retail Park (the “Monaghan Retail Park facility letter”). The significance of this will be referred to in the course of this judgment. Both letters of sanction were issued on the same date, namely, 28th April, 2009. The facility letter in respect of facility 2, 3, 4 and 5, reflected the refinancing of earlier loans and was in substitution for (and not in addition to) the earlier facilities. This is reflected in the facility letter. The Monaghan Retail Park facility letter was for the purpose of refinancing two earlier loans and was also stated to be in substitution of all previous letters of offer.
2. The test to be applied by the courts in application for summary judgment is now well established and is to be found in Danske Bank v. Durcan New Homes [2010] IESC 22, Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607; and First National Commercial Bank Plc v. Anglin [1996] 1 IR 75. From these cases and later jurisprudence, a number of principles can be discerned. If the court is satisfied that the defendant has a real or bona fide defence, whether based on fact or on law, the case should be remitted for plenary hearing. In order to grant summary judgment, the court must ask itself the question: “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. It is not sufficient for a defendant to make mere assertions on affidavit in order to meet the threshold of establishing a real or bona fide defence. The court is entitled to look for some evidence in support of assertions made on affidavit and has to look at the whole situation to see whether a defendant has satisfied the test that there is a fair or reasonable probability of establishing a real or bona fide defence. These are the principles which I apply in this case.
3. The defendant does not deny that he signed the facility letters and that he received the monies lent by the plaintiff on foot of those letters. Notwithstanding that, the defendant states in an affidavit sworn on 13th November, 2015, that “…the terms of the said 2009 facility letter were never agreed between myself and the bank”. The facility letter he is referring to is exhibit “LA1” in the affidavit of Ms. Lynne Allan sworn on behalf of the plaintiff on 13th October, 2015. That is the facility on foot of which these proceedings have been brought.
4. The basis of his defence, as set out on affidavit, is that he was in negotiation with the plaintiff with a view to restructuring his entire indebtedness and while he signed the facility letters or letters of sanction, he returned a copy to the plaintiffs stating that the proposed terms set out were not accepted by him and that his acceptance was conditional upon a satisfactory position being achieved in relation to:-
(i) a cap on the level of proposed personal recourse to him;
(ii) an alteration to the interest rates; and
(iii) a moratorium on repayments.
5. He refers to an exchange of emails and correspondence between himself and the plaintiff but accepts that no final agreement was reached. But all of this took place after he had signed the facility letter and accepted its terms.
6. In a supplementary affidavit sworn by Ms. Miriam Galvin on 23rd November, 2015, she exhibited the letter of sanction in respect of the Monaghan Retail Park facility which is not the subject matter of these proceedings. This letter of sanction is signed on behalf of the bank and by the defendant but also contains in the defendant’s handwriting the words “subject to facility remaining as interest only up to end of Dec 2011 as per original letter of sanction and agreed. B.A.”. The plaintiff does not dispute that there were negotiations between it and the defendant on the level of recourse available to the plaintiff in respect of that facility. But the plaintiff argues that those discussions never came to fulfilment in the form of an agreement and the defendant accepts this. In any event, this only relates to the Monaghan Retail Park facility letter which is not a part of this dispute.
7. When this matter came on for hearing, the defendant sought to rely on a further affidavit which had not been filed in the Central Office or stamped. Because this was an application for summary judgment, I granted a short adjournment to allow the defendant’s solicitor to stamp the affidavit and I then permitted it to be filed in court. I also permitted the plaintiff to file in court an affidavit from Mr. Willy Dollard sworn on 26th November, 2015, which authenticated some of the exhibits relied on by the plaintiff and confirmed that they had been reproduced directly from the records of the plaintiff.
8. In the course of the hearing, the defendant’s counsel raised, for the first time, a suggestion that some handwritten note was appended to the letter of sanction which is the subject matter of these proceedings and that this amounted to a variation of the facility letter. This was not stated in any affidavit filed on behalf of the defendant and was not supported by any credible evidence. The existence of such a handwritten note was denied by the plaintiff. Such a statement made by counsel on behalf of the defendant cannot be regarded as anything more than a “mere assertion” as understood in the case of Banque de Paris v. de Naray [1984] 1 Lloyds Law Rep 21, as approved by Murphy J. in First National Commercial Bank Plc v. Anglin. But in any event, the defendant accepts that he signed the letter of sanction and that no subsequent discussions developed into an agreement. The defendant has not put forward any credible evidence to support his contention that the letter of sanction relied on by the plaintiff in these proceedings was varied in any way.
9. The defendant also raised an argument that the plaintiff was estopped from obtaining summary judgment on the basis of the negotiations between the defendant and the bank. Again, this was raised for the first time at the hearing. There is no evidence on affidavit of any representation, let alone a clear or unambiguous representation made by the bank. Furthermore, insofar as he contends for some altered position flowing from the negotiations between him and the plaintiff, these arose after the facility letter was signed so he could not have been induced to enter into the loan agreement by virtue of such negotiations. The defendant accepts that there was never any concluded agreement on foot of these negotiations. There is no credible evidence that such negotiations, as did take place, related to anything other than the Monaghan Retail Park facility letter which is not relied on by the plaintiff in these proceedings.
10. The burden on a defendant in arguing that a matter should not be disposed of summarily is not an onerous one and there are good reasons why this should be so. But in the face of prima facie evidence that the defendant entered into an agreement with the plaintiff for a loan and drew down that loan, the defendant must establish something amounting to a real, bona fide or arguable defence. The summary judgment procedure is rooted in public policy principles which require that scarce court time and resources are not wasted on plenary hearings where there is no credible defence. It also acts as a protection to litigants who should not have to incur unnecessary costs of a full hearing in circumstances where no real or bona fide defence has been established.
11. I am satisfied that in the circumstances of this case, the plaintiff has proved that it is entitled to summary judgment and the defendant has failed to meet the test required to have this matter remitted for plenary hearing.
12. The plaintiff is entitled to judgment in the sum claimed.
LSREF III Stone Investments Ltd v Sweeney
[2015] IEHC 713 McGovern J.
JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 3rd day of November, 2015
1. This is an application for summary judgment in the sum of €28,792,326.80, with continuing interest on the principal sum of €28,604,863.64, from 25th June, 2015, to date of judgment.
2. The legal principles applicable to an application for summary judgment are well established and are to be found in the following cases:-
Danske Bank v. Durcan New Homes [2010] IESC 22;
Bank of Ireland v. Education Building Society [1999] 1 IR 220;
Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607;
McGrath v. O’Driscoll [2007] 1 ILRM 203; and
First National Commercial Bank Plc v. Anglin [1996] 1 IR 75
3. From these cases, the following principles can be discerned. Once a judge is satisfied that the defendant has a real or bona fide defence, whether based on fact or on law he is bound to afford the defendant an opportunity of having the issue tried. The judge must ask himself the question “…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? (per Hardiman J. in Aer Rianta v. Ryanair at p 623). The mere assertion of facts in an affidavit stated to be the basis of a defence is not of itself sufficient to allow leave to defend. The court has to look at the entire situation to see whether the defendant has satisfied the court that there is a fair or reasonable probability of the defendant having a real or bona fide defence. Those are the legal principles which I apply in considering the plaintiff’s application for summary judgment in this case.
4. The plaintiff’s claim arises out of a number of guarantee and indemnity agreements entered into by the defendant whereby he unconditionally and irrevocably covenanted to Anglo Irish Bank Corporation plc (Anglo) to pay and guarantee payment on demand from IBRC of all the obligation’s indebtedness and liabilities whether actual or contingent which may be due owing or incurred by the following limited liability companies:-
(a) Andounia Properties Limited (Andounia), a company incorporated in Cyprus;
(b) Mayenne Investments Limited (Mayenne), a company incorporated in Jersey;
(c) Pavilion Leisure Complex Limited (Pavilion), a company incorporated in Ireland;
(d) Sandreed Investments Limited (Sandreed), a company incorporated in Ireland; and
(e) Mead Investments Limited (Mead), a company incorporated in Jersey.
In July, 2011, Anglo Irish Bank Corporation plc and Irish Nationwide Building Society were merged to form the IBRC.
5. Counsel for the defendant accepts that for the purpose of this application, the terms of each guarantee and indemnity agreement, so far as they affect the liability of the defendant, are, broadly speaking, the same and it is not necessary to refer to each agreement separately. Counsel for the plaintiff argues that the terms of the various agreements are clear and unambiguous and that having entered into these agreements, the defendant is liable for the sum claimed. The defendant argues that he has a bona fide defence to the claim or, at least, a claim to the extent that the court is required to remit the dispute to plenary hearing.
6. Before exploring in more depth the terms of the guarantee/indemnity agreements relied on by the plaintiff, it is necessary to look at the nature of the defence put up by the defendant to see if it meets the threshold requiring the claim to be remitted to plenary hearing.
7. At the end of an affidavit sworn by the defendant on 30th July, 2015, he summarises his defence. He states that his defence has a number of strands which he describes in the following terms at para. 76 of the affidavit:-
“—-These proceedings are, inter alia, in breach of agreements entered into for consideration and binding on the plaintiff, made at the time of the entry into the guarantees:
—-Guarantees would only be enforced if there was a shortfall following the completion of the sale of all assets:
—-The plaintiff had accepted a ‘co-operation fee’ in return for its agreement that it would work with and co-operate with the Borrower Companies until sales have been completed:
—-The plaintiff refused to co-operate with the Borrower Companies in the sales process and was in breach of these agreements:
—-Procurement of the default of the Borrower Companies by the plaintiff, inter alia, in refusing to consent to sales and unilaterally (and unlawfully) raising interest rates and margins giving rise to:
—-Alteration of the underlying circumstances of the loan the subject of the guarantees leading to the vitiation of the guarantees:
—-Prejudice caused to the guarantee leading to the guarantees being rendered invalid.”
The defendant also states that he has a counterclaim under the heading of overcharging of interest on all accounts and misselling and overcharging arising out of interest rate swaps that the Borrower Companies were forced to enter into.
8. By loan sale deed dated 31st March, 2014, and a deed of transfer dated 11th July, 2014, each made between IBRC, Kieran Wallace and Eamon Richardson (as joint special liquidators of IBRC) and Stone Investments ( the Plaintiff ), Stone Investments purchased a portfolio of loans and related security from IBRC which included the Borrower Companies referred to in paragraph 4.
9. The deed of transfer provides:-
“…the Assignor (IBRC) unconditionally, irrevocably and absolutely transfers, conveys and assigns to the Assignee (Stone) all such rights, title, interests, benefits, liabilities, duties and obligations as the Assignor may have in and to the Assets (subject to and with the benefit in each case of the related Finance Agreement) with effect from the date of this Deed.”
10. In moving this application for summary judgment, the plaintiff lays emphasis on the fact that the defendant is liable on foot of a guarantee and indemnity agreement whereby he is the sole or primary “obligor” and that the loans are repayable on demand. The effect of this guarantee/indemnity agreement is to make the defendant liable for the debts of the Borrower Companies as though he, himself, had borrowed the funds. The plaintiff also relies on the fact that in the guarantee/indemnity agreement, the defendant has waived his right to interpose any defence based on set-off or counterclaim and has also agreed that the Bank has full and unfettered right to assign the debt owned by the Borrower Companies.
11. The affidavits sworn for the purpose of this application establish a conflict on a number of issues. These may be broadly stated as follows:-
(i) whether or not the defendant co-operated with the plaintiff;
(ii) whether there was an agreement that the plaintiff would only act upon the guarantee/indemnity if there was a shortfall following the sale of property;
(iii) whether the interest charged by the Bank was excessive and/or incorrectly calculated for the purpose of this claim; and
(iv) whether the plaintiff and/or the Bank or its servants or agents had frustrated the defendant and/or the Borrower Companies in their attempts to achieve the best price for the secured properties.
12. It seems to me that the defendant has gone somewhat further than merely making allegations without any supporting facts. In his affidavits, the defendant has named individual employees of the Bank and described the occasions on which various agreements and understandings were concluded and then breached by the plaintiff or the Bank. The plaintiff argues that there is nothing in writing to support the defendant’s position and there is no provision in the guarantee/indemnity agreement restricting the Bank from enforcing its claim against the defendant until the secured properties have been sold. Specifically, the plaintiff relies on the following key terms of the personal guarantee/indemnity:-
(i) the defendant is liable for all debts of the Borrower Companies to the plaintiff;
(ii) the defendant unconditionally and irrevocably covenanted to pay on demand all monies due by the Borrower Companies to the plaintiff;
(iii) the defendant agreed as a separate and independent condition that his liability is as a sole or primary obligor and not merely as surety; and
(iv) the plaintiff’s recourse to the defendant shall exclude his family home.
13. The plaintiff makes much of the fact that the defendant’s liability is as a sole or primary obligor and not merely as surety and argues that many of the complaints advanced by the defendant are complaints to be made by the Borrower Companies and should be prosecuted by them if they have a claim. The fact that the Borrower Companies may have a claim against IBRC does not provide the defendant with a defence to this claim.
14. I have to assess the plaintiff’s claim for summary judgment on the basis of the legal principles set out by me at the beginning of this judgment and ask myself is it “…very clear that the defendant has no case?”. The threshold for setting up a defence which is sufficient to have the dispute remitted to plenary hearing is a low one. In circumstances where a defendant is sued on the basis that he has stepped into the shoes of the Borrower Companies and is liable as a sole or primary obligor, the courts must exercise caution before deciding the case in a summary fashion. Such caution should be balanced against the desirability of ensuring that the court’s scarce time and resources are not wasted on a plenary hearing where, on any objective view, there is no bona fide defence to the claim. It is also undesirable that in such circumstances, the parties would incur unnecessary (and in a case such as this substantial) costs. In the case of a successful plaintiff this would often result in an inability to collect those costs.
15. Having considered the submissions made on behalf of the parties and the issues in dispute, it seems to me that the defendant has met the threshold required to have this matter remitted for plenary hearing. It seems to me that it is, at least, arguable that if the defendant is liable as a sole or primary obligor and not merely as a surety, he is entitled to make points by way of his defence that would have been open to the Borrower Companies. I am not holding that this is so but it does seem to be, at least, an arguable proposition considering the wording of the deed of transfer which ‘unconditionally, irrevocably and absolutely’ transferred, conveyed, or assigned ‘all such rights, title, interests, benefits, liabilities, duties and obligations’ that IRBC may have had in the Borrower Companies and other assets to the plaintiff.
16. I direct that the matter be remitted for plenary hearing.
Allied Irish Banks Plc v Pierse
[2015] IEHC 136
JUDGMENT of Mr Justice David Keane delivered on the 14th January 2015
Introduction
1. The plaintiff in these proceedings (“the bank”) seeks judgment in the sum of €1,986,132.55, together with continuing interest, against the defendants arising out of a loan facility provided by the bank to the defendants, as husband and wife, in April 2006. The purpose of that facility was to provide bridging finance to enable the defendants to purchase two blocks of apartments on the French island of Corsica, pending the execution of a contract for the sale of a 7 acre plot of land (“the 7 acres”) on the first named defendant’s farm (“the farm”), appurtenant to the defendants’ home at Ballinorig House, Ballinorig, Tralee, County Kerry, and the sale of a separate property owned by the first named defendant at Castlegregory, County Kerry.
2. The following facts are not in dispute between the parties. By letter of sanction dated the 6th April 2006 and addressed to the second named defendant, the bank offered the defendants a bridging loan facility in the sum of €2 million on specified terms. That letter recites that, within three months from the date upon which it was drawn down, the loan was to be repaid in full from the net sale proceeds of the land and property already described, with interest to roll up in the interim. The letter of sanction also states that the loan is subject to the bank’s “General Terms and Conditions Governing Business Lending” as set out in a booklet, dated the 4th May 2004, a copy of which was stated to be enclosed.
3. The facility was drawn down in full on the 10th April 2006. The defendants each signed the letter of sanction on the 11th April 2006. However, in circumstances addressed in greater detail below, the loan facility was not repaid in accordance with its terms. In consideration of successive extensions of the loan period and repayment terms, each of the defendants signed subsequent letters of sanction dated the 13th November 2007, the 22nd October 2008, the 23rd December 2008, and the 30th January 2009. On the 9th March 2009 the bank sent letters of demand to each of the defendants requiring repayment of the balance of €2,053,249.68 then outstanding on the loan. The defendants do not dispute that the sum now claimed by the bank is currently outstanding on the loan account at issue. However, they do contend that the bank is not entitled to judgment against them.
The history of the proceedings
4. The proceedings commenced by way of summary summons issued on the 28th May 2010. In the special indorsement of claim, the bank sought judgment in the sum of €2,053,249.68. The defendants entered a memorandum of appearance on the 28th of June 2010. Hanna J. heard the application for summary judgment on the 20th December 2012. The application was refused by the learned judge and the matter was adjourned to plenary hearing.
5. In a statement of claim delivered on the 9th January 2013 the bank seeks: judgment in the sum of €1,892,960.99 (€452,106 of the outstanding debt having been re-paid by the defendants on 21st June 2012); continuing contractual interest at current bank rates; and the costs of these proceedings.
6. A defence was delivered on the 25th February 2013. A reply to defence was delivered on the 21st June 2013, in which the bank denies each of the points of defence raised on behalf of the defendants.
7. The action was tried before me on the 6th, 7th, and 8th May 2014 and I reserved judgment in order to consider the evidence adduced and the defences raised.
The defences raised
8. While the defence delivered includes a series of general denials, including a denial of the loan agreement and an assertion in the alternative that the said agreement is unenforceable because the bank provided either no consideration or only past consideration for it, the defendants (in my view, rightly) did not rely on any of those arguments at trial.
9. The two arguments upon which the defendants did rely are the following: first, that the bank assumed, or ought to have assumed, a fiduciary duty or a duty of care to the defendants under which, in the particular circumstances of the case, the bank should not have entered into the relevant loan transaction with them; and second, that the loan agreement is invalid as between the bank and the second named defendant by operation of the relevant terms of the Consumer Credit Act 1995 (“the 1995 Act”), because the second named defendant must be considered a consumer in relation to that agreement for the purposes of the 1995 Act and did not receive the statutory protection to which she was entitled under that legislation. I propose to deal with each of those defences in turn. Just before doing so, it may be helpful to note that, since the only controversy between the parties was whether the defendants could make out any such defence, the parties agreed that the defendants should go first, and the trial before me proceeded in that way.
Background
10. The first named defendant testified that he inherited the family farm from his father in 1988. The defendants were married in 1996 and reside in the farmhouse on the farm. The farm is situated on the outskirts of Tralee and, when the first named defendant inherited it, comprised some 90 acres. The first named defendant did not see himself as a farmer and leased the farm to a cousin of his. He has earned his own modest income at various times by playing music in local pubs and hotels, by breeding dogs, and by providing gardening services, but has been otherwise effectively unemployed.
11. The second named defendant gave evidence that she had become an employee of the bank prior to her marriage to the first named defendant. She worked at different times in the bank’s Killorglin and Castleisland branches. She moved from full-time work to a job sharing arrangement in 2003, before finally resigning her position in 2010. The defendants have three teenage daughters.
12. The first named defendant gave evidence that he has supplemented the family income at various times by selling off plots of land from the farm. For example, in 2004 he sold 10 acres of land to a third party, who subsequently sold it on to two identified persons, who were then property developers in the Tralee area, for a sum of €300,000. For ease of reference, I will refer to those persons, whose role is central to the main defence advanced, as “the developers.” In 2005, the first named defendant sold a 15 acre site directly to the developers. The first named defendant asserts that, in return, they agreed to pay him €1.2 million in cash and to build two houses for him in Castlegregory, County Kerry. The first named defendant asserts that only one house was provided to him and that the developers still owe him the further sum of €550,000.
13. The first named defendant testified that, at the time of the loan agreement which forms the subject matter of these proceedings, 62 acres of the farm that he had inherited from his father remained in his ownership. Prior to entering into the loan agreement, the first named defendant had entered into two separate agreements with the developers. The first was an oral agreement with the developers to sell them the 7 acres for €1.8 million. The second was an agreement giving the developers (in conjunction with another developer) an option to purchase the remaining 55 acres of the farm for €12 million in exchange for a payment of €50,000.
14. It will be evident at once that the value attributed to the lands for the purpose of these transactions was far in excess of their agricultural value. While no evidence was adduced directly on this point, it appears to be accepted on all sides that what was anticipated in early 2006 was the construction of a ring road around the town of Tralee across the lands and the development upon the lands of a “medical campus”, comprising a hospital and nursing home.
15. Through a contact that the first defendant made when he attended an exhibition of foreign properties in Dublin in early Autumn 2005, the defendants contracted in February 2006 to purchase two apartment blocks, consisting of nine units in total, which were then under construction on the French island of Corsica, at a total cost of €2.2 million. While each of the defendants gave evidence that the Corsican transaction was solely the brainchild of the first named defendant and while the first named defendant testified to his understanding that the relevant properties were only acquired in joint names because the applicable French law does not permit the acquisition of property by a married person in his or her own sole name, it seems to me that nothing turns on that point. If the acquisition of property by married persons in joint names is, in fact, a requirement of French law, then the defendants were plainly faced with a choice whether or not to proceed with the transaction on that basis. It is clear from the evidence that they elected to proceed and that they were therefore seeking bridging finance to acquire that foreign property as joint purchasers (and joint borrowers).
16. The defendants proposed to finance the purchase of the two apartment blocks with the proceeds of sale of the first named defendant’s 7 acres, together with a further sum in cash representing the proceeds of a previous sale of land by the first named defendant.
17. Since the sale of the 7 acres had not yet been effected, the first named defendant testified that he was advised by one of the developers to approach the bank’s regional commercial lending team in Cork to apply for bridging finance. However, on doing so, the first named defendant was informed that the regional commercial lending team did not deal with transactions valued at less than €5 million and was referred by the bank to its Tralee branch. There he was referred to Mr. Patrick Laide, an assistant manager in that branch. Although Mr. Laide is a distant cousin of the first named defendant and the two men knew each other socially, there had been no prior commercial dealings between them. Similarly, while the first named defendant had transferred his accounts to the bank after his marriage to the second named defendant, the defendants had not previously dealt with its Tralee branch. Prior to the loan agreement at issue, the first named defendant had never applied to the bank for a business loan.
18. While the first named defendant was not entirely clear on this point in his evidence, I am satisfied, in particular from the evidence of Mr. Laide, that a meeting between them lasting approximately half an hour took place on the 31st March 2006, having been pre-arranged by telephone. At that meeting, the first named defendant sought to borrow €1.8 million (which sum was later increased to €2 million) as a bridging facility pending the sale of the 7 acres. He informed Mr Laide that he had come to a verbal agreement with the developers for the sale of the 7 acres. Mr Laide said that the first named defendant should obtain an unconditional written contract in that regard so that the bank could have proof of the existence of the contract. The bank received confirmation that this had been done from the defendants’ solicitors on the 7th April 2006. In his evidence, the first named defendant accepted that the urgency in relation to the completion of the loan agreement was at all material times on the defendants’ side and not on the bank’s. On the 10th April 2006, the bank effected the international transfer of the sum of €2 million on the defendants’ behalf to a firm of lawyers representing the vendors of the Corsican properties. As already noted, the properties were purchased in the joint names of the defendants.
19. Unhappily, things went badly for the defendants after they entered into the loan agreement with the bank and purchased the two apartment blocks in Corsica. There were delays in the completion or fitting out of those properties. When completed, the apartments were difficult to lease and the first named defendant asserts that, in several instances, tenants were intimidated and apartments vandalised. The first named defendant testified that, in the end, the defendants were compelled to sell the properties back to the original vendor for €500,000 payable in installments over a period of 15 years, thereby incurring a substantial loss. Under cross-examination, the first named defendant accepted that he had begun to speculate in foreign property investment in anticipation of the sale of the farm lands but had not done his due diligence properly in relation to the acquisition of the apartment blocks in Corsica.
20. Equally unhappily, the anticipated sale of the 7 acres to the developers was never completed. The lands were not rezoned in June 2006, as had been anticipated, although the first named defendant testified that the rezoning of the lands did subsequently occur in February 2007. The developers did not exercise the option to acquire the remaining 55 acres of the farm lands for €12 million. 4 acres of the farm land were subsequently made subject to a compulsory purchase order (“CPO”) (presumably, in connection with the construction of the ring road) and the first named defendant received €515,000 for them. Of that sum, the bank subsequently received the sum of €452,106 – representing the net proceeds of sale under the CPO – in part repayment of the defendants’ loan.
A fiduciary duty or a duty of care?
21. Against this background, the defendants assert that the bank owed them a fiduciary duty or a duty of care, or both, and that the bank breached that duty, or those duties, thereby disentitling it to repayment of the monies owed to it by the defendants.
22. While Counsel for the defendants did not open any law on this issue, Mr Shipsey S.C. for the bank relied upon the decision of the Supreme Court (per Hamilton C.J., nem. diss.) in Kennedy v. Allied Irish Banks plc. [1998] 2 IR 48 in which (at p. 57 of the report) the Supreme Court quoted with approval the following passage from the judgment of Scott L.J. in Lloyds Bank Plc. v. Cobb (Unreported, English Court of Appeal, 18th December, 1991) :
“If a customer applies to the bank for a loan for the purposes of some commercial project, and the bank examines the details of the project for the purpose of deciding whether or not to make the loan, the bank does not thereby owe any duty to the customer. It conducts the examination of the project for its own prudent purposes as lender and not for the benefit of the proposed borrower.”
23. That passage from the judgment of Scott L.J. continues in the following terms:
“If the borrower chooses to draw comfort from the bank’s agreement to make the loan, that is the borrower’s affair. In order to place the bank under a duty of care to the borrower, the borrower must, in my opinion, make clear to the bank that its advice is being sought. The mere request for a loan, coupled with the supply to the bank of the details of the commercial project for whose purposes the loan is sought, does not suffice to make clear to the bank that its advice is being sought…people who engage in speculative commercial ventures must accept the consequences of the failure of their ventures just as they will accept the consequences of their success. They cannnot be allowed to transfer the burden of the failure of their ventures onto the shoulders of a bank lender which was never asked to and never assumed to give advice on the wisdom of the venture.”
24. In considering the point, I derive additional assistance from the decision of Ryan J. in ACC Bank plc v. Deacon & anor. [2013] IEHC 427 in which he, in turn, quoted with approval the following extract from the Encyclopaedia of Banking Law (Issue 123, April 2013 at para. 69:
“Where a bank assumes the role of financial adviser to its customer, it owes the customer a duty to exercise reasonable care and skill in the execution of that role. However, a bank does not usually assume the role of financial adviser to a customer who merely approaches it for a loan or for some other form of financial accommodation. As Scott LJ said in Lloyd’s Bank plc v Cobb (18th December 1991):
‘…the ordinary relationship of banker and customer does not place on the bank any contractual or tortious duty to advise the customer in the wisdom of commercial projects for the purpose of which the bank is asked to lend money. If the bank is to be placed under such a duty, there must be a request from the customer, accepted by the bank, or some other arrangement between the customer and the bank, under which the advice is to be given.’”
25. There is no suggestion in this case that the defendants asked the bank to act as their financial or investment adviser either in relation to the concluded agreement to purchase the foreign properties that they were proposing to finance with the loan facility that they were seeking or in respect of the concluded land sale agreement from which they anticipated obtaining the necessary funds to repay that loan. Nor is there any evidence before the Court of any other arrangement between the defendants and the bank whereby the bank was to advise them in relation to either of those two agreements (each of which, at pain of repetition, had already been concluded – though neither agreement had been executed – when the defendants first approached the bank).
26. Mr Sreenan on behalf of the defendants skillfully contends that, while the position at law may be as I have just described it, on the particular facts of this case the bank ought to be recognised as owing the defendants a duty of care. Specifically, he submits that, in requiring written confirmation from the defendants’ solicitors that an unconditional contract had been signed by the developers for the purchase of the 7 acres for €1.8 million, the bank somehow ‘crossed the line’ and entered into a fiduciary relationship with the defendants, under which it assumed a duty to provide financial advice to them in respect of that transaction. I am satisfied that there is simply no basis for that proposition, which seems to me to be an obvious non sequitur. There is nothing to suggest that, in requiring the relevant confirmation that an unconditional contract had been signed for the purchase of the 7 acres from the first named defendant and an undertaking to provide security over those lands or the proceeds of sale thereof, the bank was doing anything other than seeking to protect its own obvious commercial interest in the repayment of the bridging finance it was being asked to provide. I can see no basis for the proposition that any financial insitution that requires some obvious comfort of that sort is, somehow by implication, assuming a duty to advise the customer in relation to the commercial prudence or wisdom of the underlying transaction in which the customer proposes (or, as in this case, has already agreed) to engage.
27. Equally, I cannot accept that the fact that the first named defendant was referred to the bank’s regional commercial lending team in Cork by one of the developers who were proposing to acquire the first named defendant’s land in some way created a duty of care on the part of the bank to adopt the role of financial adviser to the defendants in respect of the already concluded agreement for the sale of the 7 acres by the first named defendant to the developers. Even leaving aside the fact that the bank’s regional commercial lending team in Cork simply referred the defendants back to its Tralee branch to apply for that bridging finance there, the suggestion that the provision of a referral to the bank by one of the developers involved in the land purchase transaction with the first named defendant creates, in and of itself, a duty of care on the part of the bank to advise the defendants on the financial prudence of that already agreed transaction is, again, a non sequitur.
28. Nor do I accept, as was suggested in argument, that the bank owed the defendants a duty of care to provide them with financial advice because the second named defendant was at that time an employee of the bank. This submission appears to derive from the assertion in evidence by the second named defendant that she trusted the bank as her employer when she signed the letter of sanction in respect of the bridging finance that the defendants were seeking. While there is obviously nothing to prevent any financial institution that wishes to provide general or specific financial advice to any of its employees from doing so, there is no obligation on any such financial institution to provide such advice that I can see or that was identified to me on behalf of the defendants in argument. Insofar as the second named defendant trusted the bank to properly consider the defendants’ application for bridging finance, that trust was evidently vindicated by the bank’s decision to make that finance available. On the other hand, insofar as the second named defendant trusted the bank to provide financial advice on the commerical wisdom or unwisdom of the agreement that the first named defendant had already entered into to sell the 7 acres to the developers concerned, I cannot see any basis upon which that expression of trust can have been warranted, as I can find no evidence that the bank had been requested to assume, or had assumed, any such duty or responsibility.
29. The argument ultimately put forward on behalf of the defendants is that the bank owed them a duty of care whereby it was obliged to refuse to provide them with the bridging finance that they were seeking. That contention is based on two propositions. The first, accepted on behalf of the bank, is that Mr. Laide was not only the contact point for the defendants’ application for bridging finance but was also both the assistant manager with responsibility for certain accounts held with the bank by one of the developers and the contact point (at certain times described as the relationship manager) for the developers in their dealings with the bank’s regional commercial lending team in Cork. The second proposition, vigorously disputed by the bank, is that the bank was, or should have been, aware when the defendants entered into the bridging finance agreement with it that the developers were unlikely to complete the purchase of the 7 acres – upon the anticipated proceeds of which the defendants were relying to repay that loan – because of the developers “poor financial position” at that time.
30. This brings me to what appears to me to be the most unusual feature of this case. In advancing the proposition that the developers were in a “poor financial position” in March or April of 2006, the defendants did not call any evidence on that point. Neither of the developers, nor any other person with any direct knowledge of the developers’ financial standing at the material time, was called as a witness. Instead, the defendants sought to establish that proposition by cross-examination of the two witnesses called by the bank, Mr. Laide, already mentioned, and Mr. Jim O’Mahony, a senior lending manager with the bank who was familiar with the commercial dealings between the bank and the developers. In doing so, the defendants sought, and were permitted, to rely upon selected references to the contents of various internal communications within the bank concerning the developers’ affairs. The Court has been given to understand that the developers obtained copies of those documents from the bank in exercise of their right to do so under the Data Protection Acts and subsequently furnished them to the defendants. However, the developers are not a party to these proceedings and were not called as witnesses at trial. For that reason, I have not identified them in this judgment.
31. Mr. Laide gave evidence that, from his own dealings with the developers on the bank’s behalf, he considered them ‘strong clients’ at the material time and understood that the bank would have no difficulty in providing them with funding. Mr. Laide stated that, as of the 31st March 2006, he was well aware of the status of the developers’ dealings with the bank and had no concern regarding their financial position. The bank’s concern in respect of the developer’s financial status first arose with the collapse of the property market in 2008. Both Mr Laide and Mr O’Mahony testified that the developers did not apply to the bank for funding in relation to their agreement to purchase the 7 acres from the first named defendant.
32. Mr Laide was questioned by reference to selected extracts from various internal communications within the bank in February and March 2006, which, it was suggested, tended to establish that the bank had some concerns in relation to the financial position of the developers at that time. First, there was an e-mail sent to Mr. Laide on the 16th February 2006 by a member of the regional commercial lending team in Cork, expressing a concern that certain required security documentation was then outstanding in respect of an existing commercial loan to the developers and warning that, if the position was not rectified over the next couple of days, the bank would start returning items drawn on the relevant loan account unpaid. However, that communication includes a reply received from Mr. Laide within an hour on the same date confirming that he had been informed by the developers that steps were then in train to rectify the position.
33. Second, there is a further e-mail exchange between the same member of the regional lending team and Mr. Laide on the 22nd February 2006, in which Mr. Laide was relaying a request on behalf of the developers for a redemption figure in respect of an earlier loan by reference to the contemplated sale of the lands against which that loan was secured (apparently part of the Ballinorig lands), to which the staff member concerned responded that the bank “would be looking for a fair chunk of the proceeds to go in debt reduction given that this was considered a high risk transaction by the bank day one.”
34. Finally, in this context, there is an e-mail to Mr. Laide, dated the 28th March 2006, in which another employee of the bank points out that the developers have recently written cheques on a current account that was then €33,000 in debit (without any approved overdraft limit) and that the developers’ loan account was “out of order.”
35. Mr. Laide did not accept that these documents, individually or together, suggest, much less establish, any underlying concern on the part of the bank about the financial position of the developers at that time. Mr Laide testified that the developers had made deposits over which the bank held a lien that could be used, if necessary, to offset the developers’ overdraft and that the bank’s concern was simply to regularise the situation in that regard. Similarly, in contemplating the return of items drawn on the developers’ account unpaid if the relevant security documentation was not put in place, the bank was simply seeking to ensure compliance with the security requirements associated with the relevant facility, rather than expressing any concern about the underlying financial position of the developers.
36. Moreover, Mr. Laide gave evidence that, subsequent to the loan transaction with the defendants (and, indeed, subsequent to the internal communications just described), the bank issued further loan facilities to the developers in 2006 and in 2007.
37. Mr O’Mahony gave evidence that the bank had no material concerns in relation to the solvency of the developers at the material time. He testified that the developers’ borrowings with the bank stood at over €5 million at the time, and that those loans were then within term, which I take to mean that there had been no default in their repayment. He further testified that the developers had a credit rating of 2A or 2B at the time, which would be considered satisfactory. The lowest score on the credit grading system in use in the bank at the time was 8. Mr O’Mahony provided details in relation to additional loan facilities approved by the bank for the developers subsequent to the loan agreement with the defendants now at issue. He testified that a €700,000 facility was approved later in 2006 and another facility of €750,000 was approved in 2007.
38. Mr. O’Mahony corroborated Mr. Laide’s evidence regarding the relevant communications within the bank, testifying that, in his view also, none of the internal e-mails relied upon by the defendants reflected any concern on the part of the bank in March or April 2006 about the underlying financial position of the developers.
39. Mr O’Mahony testified that the developers (in conjunction with a larger commercial entity) ultimately applied for funding to purchase the 55 acres in April 2008, which application for finance was declined by the bank due to concerns it had by then developed regarding the state of the economy, declining land values, and the possible cancellation of the proposed ring road scheme.
40. In the context of the uncontroverted evidence that I have just described and which I accept, I can find no basis for the conclusion that the developers were in “a poor financial position” at the material time, still less that the bank knew, or ought to have known, that that was so.
41. Accordingly, the novel argument advanced on behalf of the defendants – that a bank is under a duty to decline a customer’s application for finance in respect of any transaction in which another customer is involved if there is any basis for any concern on the part of that bank regarding the financial position of that other customer – cannot avail the defendants in the circumstances of this case, even if it were accepted as a correct statement of the position in law. For that reason, I do not propose to express any view upon it.
42. In summary, therefore, on the evidence before me and by reference to the various arguments advanced, I am satisfied that the bank did not breach any duty of care that it owed to the defendants in acceding to their application for bridging finance or, consequently, in entering into a loan agreement with them.
The alternative defence of the second named defendant
43. On behalf of the second named defendant, Mr Sreenan advanced the alternative defence that the loan agreement is invalid as between the bank and the second named defendant by operation of the relevant terms of the the 1995 Act, because the second named defendant must be considered a consumer in relation to that agreement for the purposes of that Act, yet did not receive the statutory protection to which she was entitled under that legislation.
44. The second named defendant gave evidence that, at the material time, she thought that the acquisition of the two apartment blocks on the island of Corsica would provide her husband with a project and that she was not going to stand in his way in circumstances where they both thought that the first named defendants farm lands were worth €12 million. She testified further that she entered into the transaction in the belief she shared with her husband that the money to repay the loan was going to come from a specific source, namely the proceeds of sale of the 7 acres that the developers had agreed to purchase from her husband. The second named defendant stated that she signed the letter of sanction on a wet day while sitting in her car, parked adjacent to the Tralee branch of the bank, when Mr Laide brought the relevant documentation out to her there, although she did not recall the date on which that event occurred. She acknowledged that she knew that she was signing the letter of sanction as co-borrower with her husband, although she had no discusssion with Mr Laide in that regard. Under cross-examination, the second named defendant accepted that, as a bank employee, she knew more about loans than the average person in the street, although she had never worked in the lending area. She accepted that she had signed the letter of sanction and acknowledged that the terms and conditions under which the loan was being advanced were highlighted in it. The second named defendant further acknowledged that she knew that the purpose of the loan was to facilitate the purchase of the two apartment blocks on the island of Corsica.
45. Against that background, it is submitted that the second named defendant must be considered a consumer for the purposes of s. 2(1) of the 1995 Act. That provision provides as follows:
“consumer” means a natural person acting outside his trade, business or profession”
46. The significance of this point derives from the fact that, pursuant to s. 50 of the 1995 Act a consumer is entitled to a “cooling-off period” in respect of any credit agreement, under which they are entitled to withdraw from an agreement within 10 days of receiving it by giving written notice to the creditor.
47. The decision of Kelly J. in AIB plc v. Higgins & Ors [2010] IEHC 219 is a helpful authority on the interpretation of the definition of the term “consumer” under the 1995 Act. That Act transposed Council Directive 87/102/EEC, as amended by Council Directive 90/80/EEC, into Irish law. In defining the term “consumer” the learned judge stated as follows:
“the concept of the consumer was confined to a person acting in a private capacity and not engaged in trade or professional activities. The self same person can be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others. Only contracts concluded for the purpose of satisfying an individual’s needs in terms of private consumption are protected by the Directive.”
48. The learned judge further stated that:
“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.”
49. In this case, I cannot avoid the conclusion that, in seeking and obtaining loan finance to acquire jointly with her husband two apartment blocks on the island of Corsica, the second named defendant was not concluding that contract for the purpose of satisfying her individual needs in terms of private consumption. This was a case in which the defendants jointly were acquiring those foreign properties and investing in that development for profit. In doing so, they were both engaging in business, and the 1995 Act has no application to either of them, since neither falls within the definition of consumer, properly construed, for the purposes of that Act in respect of the loan transaction at issue.
Conclusion
50. There must be judgment for the plaintiff in respect of the monies owed under the loan agreement at issue.
Bank of Ireland v Rogerson
[2015] IEHC 560
UDGMENT of Mr. Justice David Keane delivered on the 14th August 2015
Introduction
1. In these proceedings, the plaintiff seeks summary judgment against the defendants on a joint and several basis in the sum of €1,000,000, together with interest and costs.
2. The plaintiff is a bank and the defendants are a group of businessmen who in 2006 arranged to borrow the sum of €8,167,000, which they shortly afterwards drew down, to acquire certain lands at Newcastle, County Dublin for developments purposes (“the development property”). The loan was for a two-year term, with interest rolled up during that period, at the end of which it was to be cleared in full from the anticipated proceeds of the development or else refinanced. It is common case that the loan has not been repaid and it is averred on behalf of the bank that the overall debt due stood at in excess of €11 million in May 2014, whereas the value of the development property and other cross secured assets (“the secured assets”) at that time was less than €4.5 million.
3. The agreement between the parties is evidenced by a letter of commercial loan offer (“the facility letter”) dated the 13th March 2006 and accepted by the defendants on the 21st March 2006.
4. There is no dispute that, under the terms of the loan agreement, the bank is entitled to terminate the loan facility and to call for immediate repayment of the monies due on the occurrence of an ‘event of default’. An event of default is defined under the loan agreement to include not only a breach of any term governing repayment of the principal and interest but also any material adverse change in the borrowers’ circumstances. There does not appear to be any dispute that an event of default has occurred in the circumstances already outlined.
The bank’s claim
5. The bank’s claim in these proceedings is that, while the facility letter specifically provided that the bank’s recourse to each of the defendants in respect of monies due and owing was to be limited to, and satisfied from, the secured assets only, the facility letter also contains a proviso whereby the bank is entitled to have recourse to the defendants and their assets in respect of any claim made under the indemnity clause of the agreement and, in addition, in respect of a joint and several liability of the defendants for a further sum of up to €1 million. The bank wrote to the defendants on the 7th May 2013 demanding payment of the sum of €1 million. Having received no such payment, the bank now seeks summary judgment in that sum.
The defences advanced
6. The defendants who have entered an appearance in answer to the bank’s claim (comprising all but the fourth named defendant) have between them identified three lines of defence. Those defences may be shortly summarised as follows:
(a) That on a proper construction of the loan agreement, as evidenced by the facility letter, the bank’s recourse to the defendants personally for a sum of up to €1 million relates solely to the specific potential liability in respect of which they had indemnified the bank, which liability was, in fact, addressed prior to the execution of the loan agreement, so that no such recourse is now available;
(b) Further or in the alternative, that on a proper construction of the loan agreement, as evidenced by the facility letter, the bank’s recourse to the defendants personally for a sum of up to €1 million can arise only in the event of a remaining indebtedness on the part of the defendants after the realisation of the secured property by the bank, which had not occurred when the proceedings issued, so that the bank’s claim is premature; and
(c) In the event that the loan agreement, properly construed, does not limit the bank’s recourse to the defendants personally for a sum of €1 million solely to any liability arising under the indemnity provided to the bank by the defendants (and which liability was, in fact, discharged prior to the execution of the contract), then the facility letter was drawn up and executed under a mutual mistake of fact and the defendants are entitled to rectification of the loan agreement to the extent necessary to include such a term.
The relevant terms of the loan agreement
7. Under the heading “Security” in the facility letter, beneath a list setting out the security documentation that the bank required the defendants to provide, the loan agreement provides as follows:
“Subject always to the proviso below but notwithstanding any other provision of this facility letter and the security documents referred to above (“the Security Documents”), the Bank’s recourse to the Borrower in respect of all monies, obligations and liabilities now or hereafter due, owing or incurred by the Borrower (or any one or more of the Borrower) to the Bank under, pursuant to or in connection with this facility letter and/or the Security Documents whether actually or contingently, whether as principal or surety or otherwise and whether alone or jointly with another or others (the “Obligations”) shall be limited to and satisfied out of the assets secured pursuant to the Security Documents. If such assets prove to be insufficient to meet all the Obligations, the Bank agrees that it shall not insofar as the Obligations are concerned have any further recourse to the Borrower or their other assets.
Provided always that the bank shall at all times have recourse to the Borrower and all their assets in respect of costs, expenses and any claims made by the Bank under the clause headed Indemnity herein and in addition the Borrower shall be liable to the Bank for a sum of up to €1,000,000 in addition to the assets secured pursuant to the Security Documents.”
8. The facility letter contains the following clause under the heading “Indemnity”:
“In the event of any stamp duty or other Revenue duty or levy arising in respect of any of the properties secured in favour of the Bank the Borrower shall immediately pay such stamp duty, duty or levy (together with any interest and/or penalties) to the Revenue Commissioners and shall indemnify and keep the Bank indemnified against any costs, liabilities and other expenses suffered or incurred by the Bank (whether before or after the enforcement of the security) as a result of the non-payment of the Borrower of any such stamp duty, duty or levy.”
The evidence
9. There has been a significant exchange of affidavits between the parties concerning the circumstances in which the terms just quoted came to be inserted in the facility letter.
10. Briefly summarised, Mr Rogerson, the first named defendant, avers that he negotiated the loan agreement on behalf of the defendants with Des Ryan, a Senior Business Manager in the bank. According to Mr Rogerson, the particular terms at issue were tailored to the specific borrowing requirements of the defendants. In particular, the development property was to be acquired by the defendants on a “resting on contract” basis. This was a contractual mechanism, in widespread use at the time, whereby it was believed that liability to stamp duty on the transaction could be lawfully avoided. Mr Rogerson contends that, on behalf of the bank, Mr Ryan had a concern that a liability to stamp duty might arise and, should it do so, that the value of the secured property would be diminished to that extent. Mr Rogerson avers that it was for that reason that the indemnity clause quoted above was inserted into the agreement on the bank’s insistence. Crucially, Mr Rogerson goes on to aver that it was also in that context, and in that context alone, that he was prepared to agree on behalf of the defendants, that there should be personal recourse to them in a sum of up to €1 million i.e. to cover the potential liability to stamp duty on the acquisition of the secured property.
11. The defendants argue, in effect, that the admitted fact that there was a concern on the part of the bank regarding a potential exposure to stamp duty, which the bank itself then estimated in the amount of €914,000 (i.e. approaching €1 million), provides corroboration for their asserted defence that the personal recourse provision in the loan agreement was linked to the indemnity provision, rather than distinct from it, and/or forms part of the matrix of fact in the context of which the said provisions fall to be construed, further militating in favour of the construction for which the defendants contend. The parties acknowledge that, in the event, one of the vendors of the development property refused to complete the transaction on a “resting on contract” basis and the bank ultimately provided additional funds to discharge the stamp duty applicable which, less an inducement payment that would have been paid for the vendors’ participation in a “resting on contract” transaction mechanism, amounted to €458,000.
12. Mr Colman Stack, the fifth-named defendant, has sworn an affidavit for the purpose of the present application in which he avers that “in so far as the wording of the said facility letter is capable of being construed as granting [the bank] recourse to [the defendants] for the sum of €1,000,000 [other than as an indemnity up to that sum against a liability to stamp duty on the development property], the said wording does not faithfully reflect the agreement or intention of the parties, as relayed to, and understood by [the defendants] and is the result of an error.” It is on this basis that the fifth, sixth and seventh-named defendants submit that the facility letter must have been drawn up and executed under a mutual mistake of fact and that the defendants are, therefore, entitled to rectification of the loan agreement to reflect its intended meaning and effect.
13. On behalf of the bank, Mr Ryan avers to the firm intention of the parties at all times that the bank’s limited recourse to the defendants would be in addition to, rather than simply in respect of, the indemnity that they were required to provide in relation to the potential liability to stamp duty on the acquisition of the development property and their joint intention that such recourse should be available at all times, rather than solely in the event of a shortfall between the value of the security when realised and the defendants’ outstanding liability at that point. In support of that averment, Mr Ryan exhibits certain of the bank’s internal documentation referable to the negotiation of the loan transaction, which, it might be argued, really only speaks directly to the bank’s intention, rather than the common intention of the parties.
The test for summary judgment
14. There is no issue between the parties on the test to be applied.
15. In First National Commercial Bank v. Anglin [1996] 1 IR 75 at 79, the Supreme Court (per Murphy J., Hamilton C.J. and Denham J concurring) endorsed the following test laid down in Banque de Paris v. de Naray [1984] 1 Lloyd’s Law Rep 21, which had been 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 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.”
16. Murphy J. continued:
“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.’ ”
17. Murphy J. prefaced the Court’s adoption of that test by stating (at pp. 78-9 of the report):
“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 (see Irish Dunlop Co. Ltd. v Ralph (1958) 95 I.L.T.R. 70).”
18. In considering the Anglin test in Aer Rianta cpt v. Ryanair Ltd [2001] 4 IR 607, McGuinness J. pointed out that it is not for the Court to weigh the affidavit evidence adduced by the parties or to attempt to resolve any factual contradictions contained within it, before stating (at p.615):
“In deciding whether the defendant may have a “credible” defence, the court must concentrate its attention on the matters put forward in the defence itself. The court does not ask whether [the defendant’s] account of events is probable, or likely to be true; nor does it ask whether [the plaintiff’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.”
19. In the same case, Hardiman J. examined the historical antecedents of the present summary judgment procedure, locating the origin of its modern form in the Judicature Acts. Hardiman J. cited the following passage from the judgment of Lord Esher in Sheppards and Co. v. Wilkinson and Jarvis (1889) 6 T.L.R. as the most clear expression of the criteria for the exercise of the power (at p. 13 of the report):
“…The rule which had always been acted upon by this Court in considering cases under [the relevant Order] was that the summary jurisdiction conferred by that order must be used with great care. A defendant ought not to be shut out from defending unless it was very clear indeed that he had no case in the action under discussion. There might be either a defence to the claim which was plausible, or there might be a counter-claim pure and simple. To shut out such a counter-claim if there was any substance in it would be an autocratic and violent use of [the relevant Order]. The Court had no power to try such a counter-claim on such an application, but if they thought it so far plausible that it was not unreasonably possible for it to succeed if brought to trial, it ought not to be excluded.”
20. Hardiman J. found Lord Esher’s statement of the rule to be perfectly consistent with the following observation of Lavery J. in Prendergast v Biddle (Unreported, Supreme Court, 31st July, 1957):-
“The procedure by summary summons was 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.”
21. Hardiman J. also quoted, with approval, the following statement of O’Brien C.J. in Crawford v Gillmor (1891) L.R. Ir. 238:
“I think, however, that final judgment should not be given on a motion for final judgment in any case where any serious conflict as to matter of fact or any real difficulty as to matter of law arises.”
22. Considering these cases in conjunction with more recent Irish authority, Hardiman J. noted (at p. 621) “that the defendant’s hurdle on a motion such as this is a low one and that the jurisdiction is to be used with great care,” before concluding (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 case?”
23. A very helpful distillation of the principles to be derived from the jurisprudence is set out in the judgment of McKechnie J. in Harrisgrange Ltd. v. Duncan [2003] 4 IR 1 (at pp. 7-8):
“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; 8 Harrisrange Ltd. v. Duncan [2003] H.C. McKechnie J.
(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 arguments
24. Shortly put, the test the Court is required to apply on an application for summary judgment is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence to the plaintiff’s claim.
25. Two of the three defences upon which the defendants in this case seek to rely involve the proper construction of what Hardiman J. described in Aer Rianta v Ryanair Ltd as “the indisputable documentation of a commercial transaction.” It follows that whether the defendant can establish a fair or reasonable probability of a real or bona fide defence is, in significant part, a matter of construction of the relevant terms of the facility letter.
26. In McGrath v O’Driscoll [2007] 1 ILRM 203, Clarke J. identified the correct approach as follows (at p. 210 of the report):
“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 injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
27. This dictum was endorsed by the Supreme Court (per Denham J., Hardiman and Finnegan JJ. concurring) in Danske Bank a/s v Durkan New Homes [2010] IESC 22 (at para. 16), subject to the significant clarification (at para. 20) that there is no obligation to resolve issues of law (or, presumably, issues of construction) on an application for summary judgment and that the test remains whether the defendant has established an arguable defence.
28. The bank submits that the issues of construction that arise in this case are relatively straightforward and, on the plain meaning of the words used in the relevant provisions set out in the facility letter, must be resolved in its favour. In particular, the bank points to the use of the following phrases: “subject always to the proviso,” the bank “shall at all times” have recourse to the defendants in respect of the indemnity, “and in addition” the defendants shall be liable to the bank for a sum of up to €1,000,000, “in addition” to the secured property.
29. The fifth, sixth and seventh-named defendants make the same submission but to the opposite effect. They argue that, on the plain meaning of the words used in the facility letter, the proviso it contains must be construed as permitting recourse to the defendants personally only where the assets comprised by the secured property “prove” to be insufficient to meet the defendants’ obligations to the bank and, then, only “up to” a sum of €1 million, which the defendants contend necessarily implies the prior realisation of the secured property both in order to prove the insufficiency of the proceeds to meet the bank’s claim and, if that is so, to provide a starting point for the calculation of any further personal liability of the defendants up to a sum of €1 million.
30. In consequence, Mr Buttanshaw submits on behalf of the fifth, sixth and seventh named defendants that these proceedings have been commenced, and are being maintained, at a time when the bank has, as yet, no extant cause of action against the defendants, and so should be dismissed.
31. The judgments of both Fennelly and O’Donnell JJ. in ICDL v. European Computer Driving Licence Foundation Ltd. [2012] 3 I.R. 327 confirm that the best modern statement of the principles governing the interpretation of contractual terms is to be found in the following passage from the judgment of Lord Hoffman in I.C.S. Ltd. v. West Bromwich B.S. [1998] 1 WLR 896 at pp. 912-3:
“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as ‘the matrix of fact’ but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of the document is what the parties using those words against the relevant background would reasonable have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must for whatever reason have used the wrong words or syntax; See Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1977] A.C. 749.
(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one nevertheless concludes from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania S.A. naviera v. Salen Rederiena A.B. [1985] A.C. 191, 201:-
‘if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense’.”
32. Fennelly J. prefaced his endorsement of the foregoing principles by noting that they had been approbated in the judgment that Geoghegan J. delivered on behalf of the Supreme Court in Analog Devices B.V. v. Zurich Insurance Company [2005] IESC 12, [2005] 1 IR 274, which had also referenced the well known ‘matrix of fact’ dictum of Lord Wilberforce in Reardon Smith Line v. Young Hansen-Tangen [1976] 1 W.L.R. 989. Fennelly J. then commented (at pp. 350-1 of the report) :
“[66] These various dicta are notable for their emphasis on the potential admissibility of background knowledge or what Lord Wilberforce famously described as the ‘matrix of fact’. Emphasis on those admissible aids to interpretation should not, however, mislead us into forgetting that a contract is, in the first instance, composed of the words used by the parties. It is of note that Geoghegan J. in his judgment in Analog Devices B.V. v. Zurich Insurance Company [2005] IESC 12, [2005] 1 IR 274 cited at p. 280 a passage from the judgment of Griffin J. in Rohan Construction v. I.C.I. [1988] I.L.R.M. 373 at p. 377, a case concerning an insurance policy, to the following effect:-
‘It is well established that in construing the terms of a policy the cardinal rule is that the intention of the parties must prevail, but the intention is to be looked for on the face of the policy, including any documents incorporated therewith, in the words in which the parties have themselves chosen to express their meaning. The court must not speculate as to their intention apart from their words, but may, if necessary, interpret the words by reference to the surrounding circumstances. The whole of the policy must be looked at and not merely a particular clause’.
[67] Geoghegan J. went on to note that Griffin J. had explained his reference to ‘surrounding circumstances’ and that he had cited the following passage from the speech of Lord Wilberforce in Reardon Smith Line v. Young Hansen-Tangen [1976] 1 W.L.R. 989 at p. 996:-
‘When one speaks of the intention of the parties to the contract, one is speaking objectively – the parties cannot themselves give direct evidence of what their intention was – and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties. Similarly, when one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have had in mind in the situation of the parties….What the court must do is place itself in thought in the same factual matrix as that in which the parties were.’
33. Having endorsed Lord Hoffman’s five principles, Fennelly J. then added the following helpful gloss (at p. 352):-
“[69] This passage, particularly para. 4, should not be misunderstood as advocating a loose and unpredictable path to interpretation. A court will always commence with an examination of the words used in the contract. Moreover, words will, as Lord Hoffman emphasises, normally be interpreted in accordance with their “natural and ordinary meaning…”. Business people will be assumed to know what they are doing and will normally be bound by what they have signed. The exercise is to be conducted objectively. The parties are not permitted to give evidence of their subjective intentions or of the negotiations leading to the conclusion of the contract. Keane J. summarised the law briefly but comprehensively in the High Court in Lac Minerals Ltd. v. Chevron Mineral [1995] 1 I.L.R.M. 161.
[70] Evidence of the surrounding circumstances, but not of subjective intentions, may be admitted to explain the subject-matter and even what particular words should be understood as referring to. Such evidence will not normally be allowed to alter the plain meaning of words.”
34. A further aspect the Supreme Court decision in ICDL v European Computer Driving Licence Foundation Ltd. (supra), worth noting for the purposes of the present application, is the concurrence of opinion that the principle of interpretation contra proferentem may usefully be applied not just to exemption clauses but to a contract in general, though normally only as a last resort in the case of ambiguity and not as a general approach.
35. From among the various statements of principle I have just described, the bank lays emphasis on the principle that the plain words should prevail. The defendants also rely in part on that principle (though to the opposite effect) and further point to the need to have regard to the surrounding circumstances (or matrix of fact) and, where ambiguity arises, to resolve it contra proferentem.
36. The bank argues with some force that it would flout business common sense for the bank to agree not to have personal recourse to the defendants before realising the security provided and establishing a shortfall, since there may be any number of unforeseen obstacles to realising that security, one or more of which may even prove insurmountable. With equal force, the defendants point to the lack of commercial common sense from their perspective in agreeing a qualification upon a non-recourse loan whereby the bank can bypass or ignore the security it holds, even if ample to meet the bank’s claim, and instead pursue the defendants personally for €1 million, subject only to the defendants’ implied entitlement to a distribution of any surplus on the subsequent realisation of that security.
37. The bank points to the endorsement by Hardiman J. in Aer Rianta, supra, of the dictum in National Westminster Bank v. Daniel [1993] 1 W.L.R. 1453 that “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,” although it seems to me that I cannot overlook the next sentence in Hardiman J.’s judgment: “Equally, ‘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’ (First National Commercial Bank v. Anglin).”
38. The bank invokes the decision of Birmingham J. in ACC Bank plc v. McEllin & Ors [2013] IEHC 454 in support of what it asserts is a general principle of law that a bank may exercise its rights under a loan agreement at any time. However, it seems to me that an argument may be made that the case concerned is authority only for the well-established, more narrow principle that a mortgagee is not a trustee of the power of sale for a mortgagor and does not owe the latter a general duty of care to sell only at the most propitious moment in the market cycle. That principle, though undoubtedly correct, does not seem to me to illuminate the separate issue that arises in this case of the proper construction of those provisions of the contract now at issue that deal with the circumstances in which, or event(s) upon which, the bank was entitled to have personal recourse to the defendants in the sum of up to €1 million.
39. Turning to the issue of rectification, the fifth, sixth and seventh defendants acknowledge, through Counsel, that the onus on any party seeking rectification of a contract is a heavy one, namely, to establish by convincing proof that the instrument (in this case, the facility letter) does not reflect the common intention of the parties, outwardly expressed or communicated, and that the true common intention of the parties has continued from its formation throughout the period antecedent to the execution of the contract which it is sought to rectify: Irish Life Assurance Co. Ltd. v. Dublin Land Securities Ltd [1989] I.R. 253. Those defendants further acknowledge that, in asserting a claim to rectification, they must rely on the evidence of the first named-defendant, Mr Rogerson, although he has asserted no such claim on his own behalf. They also acknowledge that Mr Ryan’s averments as to his (and, by extension, the bank’s) subjective intention, while inadmissible as an aid to the construction of the loan agreement between the parties, are probative of the issue whether or not the common intention of the parties was reflected in the express terms of that agreement. Nevertheless, they submit that, while the Court may be sceptical of their chances of discharging that onus and bringing home that defence at trial, the Court cannot and should not conclude that they have no defence to make in that regard.
40. The bank submits that the Court should attribute some significance to, what it suggests, is the absence of a shred of documentation to support the defendants’ averments concerning the construction of the contract (or the common intention of the parties) for which they contend. In doing so, the bank relies on the decision of this Court (per McGovern J.) in Ulster Bank Ireland Ltd. v. Deane [2012] IEHC 248 and, in particular, the following distinction drawn (at para. 12) between the facts at issue there and those that arose before Finlay Geoghegan J. in AIB v. Galvin Developments (Killarney) Ltd. [2011] IEHC 314:
“The facts of that case bear no resemblance to the case which I have to decide, and the defendants have simply not been able to point to any written document or any facts which go any near to establishing a collateral agreement.”
41. As the passage just quoted implies, each of those cases involved the assertion of a collateral agreement by way of defence to a contractual claim. In this case the defendants do not base their defence on the asserted existence of an undocumented collateral agreement. Rather, they base it upon what they contend is the proper construction of an extant written document, namely the facility letter recording the terms of the loan agreement between the parties, and also upon the evidence they hope to adduce concerning the common intention of the parties in respect of the relationship between the indemnity sought by the bank and the bank’s entitlement to personal recourse against the defendants, against the accepted factual backdrop of a concern on the part of the bank at the material time regarding a potential stamp duty liability in an amount in excess of €900,000.
42. Moreover, in response to the plaintiff’s argument on this point, the defendants cite the approach of McGuinness J. in the Aer Rianta case (at p. 618) whereby, despite noting the considerable weaknesses in the defence proffered (including the lack of detail provided and the lack of clarity in the documentation exhibited in support of that defence), the learned judge concluded that the probability remained open, on the affidavit evidence, that the defendant in that case had a real or bona fide defence or that what was put forward by that defendant was credible.
Conclusion
43. Notwithstanding the endorsement by both McGuiness and Hardiman JJ. in the Aer Rianta case of various dicta in Crawford v. Gillmor (1891) L.R. Ir. 238, I accept the submission made on behalf of the bank that the test to be applied to the arguments put forward in support of an application for leave to defend is qualitative rather than quantitative. In reality, I do not believe there is any real conflict on the point, since, in the earlier decision, Barry L.J. linked his conclusion that the length of time that had been occupied in argument was a material factor in the application of the test to the observation that not one moment of the court’s time had been occupied unnecessarily.
44. Similarly, I accept in principle the submission made on behalf of the bank that it is appropriate, in considering whether to grant leave to defend, to consider the proposed grounds of defence individually and to refuse leave to advance any ground that the Court is not satisfied gives rise to a fair or reasonable probability of forming the basis of a real or bona fide defence to the claim being made; Bussoleno Ltd. v. Kelly [2011] IEHC 220.
45. Having considered the entirety of the situation and the facts of this particular case in the manner set out above, and conscious of the obligation on the court only to exercise the power to grant summary judgment with discernible caution, I have come to the conclusion that the issues of construction raised are not sufficiently straightforward to be resolved in a summary manner or in the absence of fuller argument than I have heard in the context of the present application. Accordingly, I believe that there is a risk of injustice being done by purporting to determine those questions within the framework of a motion for summary judgment.
46. In considering the claim to rectification asserted on behalf of the fifth, sixth and seventh named defendants, I have had particular regard to the following guidance provided by Clarke J. in McGrath v. O’Driscoll [2007] 1 ILRM 203 (at 210):
“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 the issue of fact can be resolved.”
47. It seems to me that the averments of Mr Rogerson, in particular those at paragraphs 8-10 (inclusive) of his affidavit sworn on the 7th March 2014, constitute evidence of fact (in the form of an asserted common intention) that, if true, would arguably give rise to a defence, which evidence is sufficient to require leave to be given to assert that defence in order that the controversy of fact in that regard can be properly resolved at trial.
48. In consequence, I must refuse the bank’s application for judgment and must also refuse the application made on behalf of the fifth, sixth and seventh named defendants for an order dismissing the proceedings. Instead, I will give leave to the defendants to defend the proceedings on each of the three separate grounds that have been identified.
ACC Loan Management Ltd v Sheehan
[2015] IEHC 818
JUDGMENT of Ms. Justice Murphy delivered the 17th day of December, 2015.
1. These proceedings come before the Court as a motion for liberty to enter final judgment against the defendant, Mr. Gerard Sheehan, in the sum of €183,732.14 on foot of a guarantee entered into by the defendant on 12th March, 2008. The plaintiff seeks summary judgment on the basis that the defendant does not have a bona fide defence to the plaintiff’s claim.
2. The defendant entered into a transaction with the predecessor of the plaintiff, ACC Bank plc, in March 2012, as a director of Newmarket Foods Limited (“the Company”). Newmarket Foods Limited was a private company established by the defendant’s brother, Mr. Vincent Sheehan. The defendant asserts on affidavit that the Company was effectively owned and exclusively run by his brother. However, during the course of the proceedings documentation was produced which was registered in the Companies Registration Office indicating that the defendant owned 5% of the issued shared capital at the relevant times for the purpose of this application. The defendant disputes having any knowledge or awareness of this fact, however he does accept that he had a commercial arrangement with the company worth €500 per week up until the date of its liquidation on 6th July, 2010, whereby he unloaded deliveries at a warehouse on his lands and received and made up orders for the company.
3. By a facility letter dated 5th March, 2008, the plaintiff agreed to provide the Company with a term loan facility in the sum of €151,500 to assist with the set up costs for a new factory in Castlemahon, County Limerick. The defendant and his brother both signed the facility letter in their capacity as directors of the Company on 12th March, 2008. The facility letter stipulated inter alia that the defendant was to provide the plaintiff with a guarantee and indemnity with respect to the facility. It further provided that this was to be supported by a first legal charge over a 1625 square foot warehouse and 2 acres of land at Gorteen, Dromcollogher, County Limerick, owned by the defendant.
4. On 7th March, 2008, the plaintiff wrote to Mr. David O’Connor, the borrower’s solicitor, informing him that the Bank were prepared to release the funds to his client on receipt of a number of documents including a “letter from Guarantor Solicitor confirming Guarantor received independent legal advice prior to execution of Guarantee & Indemnity document”. By letter dated 12th March, Mr. O’Connor wrote to Mr. Graham O’Sullivan of the plaintiff where he stated:-
“We confirm that Vincent Sheehan and Gerard Sheehan were offered independent legal advice and they waived same. We conform that the Guarantee and Indemnity was explained to them in full and they understand the nature and effect of same by (sic) nevertheless they decided to waive their right to independent legal advice.”
5. The defendant executed the guarantee and indemnity on 12th March, 2008, and his signature was witnessed by the solicitor for the Company, Mr. David O’Connor, of High Street, Newmarket, County Cork. On the same date, 12th March, 2008, the defendant also executed an indenture of charge over the property at Gorteen, Dromcollogher, County Limerick and this was subsequently registered in the Land Registry on 19th January, 2009. The property over which the security was provided was part of a larger folio of lands (Folio 3690F) owned by the defendant consisting of 23.9760 hectares. A new folio was created (Folio 61958F) for the purpose of creating a first legal charge in favour of the plaintiff over a portion of the defendant’s property. The limiting of the charge to this particular piece of property, as opposed to providing it over the defendant’s entire lands, was the subject of correspondence between Mr. O’Connor and the defendant dated 11th March, 2008, where Mr. O’Connor advised the defendant:-
“…if you are giving a charge over the lands to the ACC Bank then you would want to limit it to a particular piece of the property rather than give them all your lands.”
6. Ultimately the Company defaulted in the repayment of the term loan facility as agreed and went into liquidation on or about 6th July, 2010. By letter dated 19th June, 2013, the plaintiff demanded payment of all sums due and owing on foot of the defendant’s guarantee and indemnity. Despite this demand the defendant has failed to discharge the sums due and owing resulting in these proceedings being issued by summary summons dated 7th October, 2013.
Defences
7. The defendant has raised two primary defences to the plaintiff’s claim for summary judgment. The first defence relates to potential undue influence arising from the non-commercial element to the guarantee, namely the sibling relationship between the defendant and Mr. Vincent Sheehan. The second relates to the legal advice provided to the defendant by Mr. David O’Connor, solicitor, which the defendant claims was wholly deficient.
Undue Influence
8. The defendant in his first affidavit of 18th July, 2014, avers that he felt that he was under “severe pressure” at the time of executing the guarantee. He stated that he believed from speaking with his brother that had he not entered into the guarantee it would have resulted in his brother not obtaining the loan from the plaintiff and consequently the failure of his brother’s business.
9. Furthermore, it is the defendant’s position that the Bank were on notice of potential undue influence in circumstances where the guarantee in question had a non-commercial element. The defendant argues that it would have been obvious to even the most casual of observers that both parties to the transaction shared a surname and therefore it was a strong possibility that there was some non-commercial element to the transaction being entered into.
10. The defendant relies on the House of Lords decision in Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44 where the court examined the existing jurisprudence arising form the decision in Barclays Bank v. O’Brien [1994] 1 AC 180, which dealt with undue influence between husbands and wives, and stated that there was no rational cut-off point whereby certain types of relationships could be susceptible to the O’Brien principal and others not. Lord Nicholls at p814 of his decision said:-
“…if a bank is not to be required to evaluate the extent to which its customer influence over a proposed guarantor; the only practical way forward is to regard banks as ‘put on inquiry’ in every case where the relationship between the surety and the debtor is non-commercial. The creditor must always take reasonable steps to bring home to the individual guarantor the risks he is running by standing as surety”
11. The general principle espoused by the House of Lords in Etridge was adopted by the Irish High Court in the case of Ulster Bank v. Roche [2012] 1 I.R. 765, where Clarke J. stated:-
“I am satisfied that the general principal, which underlines Royal Bank of Scotland plc v. Etridge (No. 2) [2001] UKHL 44, is to the effect that a bank is placed on inquiry where it is aware of facts which suggest, or ought to suggest, that there may be a non-commercial element to a guarantee.”
12. In Roche, the second named defendant provided a guarantee in respect of the debts of her partner, the first named defendant. The guarantor was a director of the company but took no active role in the business. The bank’s knowledge as regards the commercial relationship between the first and second named defendants was described by Clarke J. as indirect and limited but nevertheless was found to be sufficient to place the bank on inquiry requiring it to take steps to ensure the transaction was being entered into freely.
13. The defendant submits that based on the decision of the House of Lords in Etridge and on the decision of Clarke J. in Roche the plaintiff bank in the instant case was put on enquiry as to a potential claim of undue influence on the part of the defendant due to the non-commercial element to the transaction being entered into, namely the sibling relationship between the parties. As a result of this enquiry, the defendant argues that it was necessary for the plaintiff to take steps to ensure that the defendant was entering into the transaction in a free manner and in full knowledge of what he was agreeing to.
14. The plaintiff argues that from the evidence adduced in this case it is clear that the defendant did not enter the transaction under actual undue influence from Mr. Vincent Sheehan. The plaintiff submits that undue influence revolves around whether circumstances exist for improper influence to be exercised such that the will of the defendant is overborne and his entry into the transaction is not the result of a free exercise of will. In support of its contention the plaintiff relies on the dicta of Shanley J. in Carroll v Carroll [1998] 2 ILRM 218 at pp. 228-229 where he said actual undue influence arises:-
“…where no relationship gives rise to any presumption of undue influence, but the parties so alleging undue influence adduce evidence which satisfies the court, on the balance of probabilities, that the transaction was not the result of the free exercise of the will of the donor.”
15. The plaintiff submits the evidence falls well short of establishing that the defendant’s will was overborne. The defendant has stated that he was “quite close” to his brother which is to be contrasted with having a dependent relationship with his brother, or placing such trust or repose in his brother that he would simply do anything his brother asked. The plaintiff submits that far from doing anything his brother asked, the defendant clearly considered his position and the effects of his actions. At paragraph 13 of his second affidavit of 13th November, 2014, the defendant stated:-
“…I simply would not have risked my livelihood if I had understood that the Guarantee was unlimited in its scope.”
The plaintiff submits that this admission serves to underline that the defendant knew his own mind and freely exercised his will in executing the guarantee with his real complaint being that he misunderstood the scope of the guarantee which cannot be an arguable ground of defence.
16. The plaintiff argues that the present case is manifestly different to the type of case considered by Clarke J. in Roche where the second named defendant was found to have executed a guarantee in favour of the first named defendant’s business under his undue influence . In that case, the second named defendant was found to have had no material involvement with the business and “was in the sort of dependant and abusive relationship with Mr. Roche (first named defendant) at the relevant time where she would have done anything he asked”. In the present case however, the defendant was a co-director and a shareholder in the business. Furthermore, it is not disputed by the defendant that he had an involvement in the day to day running of the business in terms of receiving and filling orders for which he was paid approximately €26,000 per annum. The provision of the loan facility to the Company was clearly of the benefit to the defendant as he continued to receive the aforementioned income for a period in excess of two years after the loan facility was drawn down. Therefore the plaintiff submits that there is nothing in the circumstances to suggest that the provision of the guarantee by the defendant was manifestly to his disadvantage.
17. In relation to the defendant’s contention that the Court should presume undue influence due to the non-commercial element of the transaction being entered into, namely the sibling relationship between the parties, the plaintiff submits a number of reasons why this plea should not be accepted.
18. Firstly, it is submitted that any presumption of undue influence must be rebutted by the fact that no actual undue influence occurred in this case. It is the plaintiff’s contention that this is a case of mistake being dressed up as a case of undue influence. Secondly, whilst there are a number of relationships which automatically gives rise to a presumption of undue influence, the sibling-sibling relationship is not such a relationship. The plaintiff states that it is instructive that the defendant has not been able to cite a single case where a sibling-sibling relationship gave rise to a presumption of undue influence, either in its own right or on the particular facts of the case. In those circumstances the plaintiff submits that the defendant appears to be requesting the Court to break new ground in this case.
19. It is accepted by the plaintiff that the relationship of spouses or partners can in certain specific circumstances be such as to give rise to a presumption of undue influence which puts a third party financial institution on enquiry. However the plaintiff submits that the defendant’s reliance on his blood relationship with his brother as being sufficient, in and of itself, to give rise to a presumption of undue influence is a misrepresentation of the decision of Clarke J. in Roche. Here it was held that the personal relationship between the parties emerges as a much more significant factor:-
“… in circumstances where a person who is required to offer security is not a shareholder and where there is no evidence to suggest that the bank was aware of any active involvement of that party in the business…”
20. The plaintiff submits that whilst Clarke J. was willing to accept that the bank was placed on enquiry in Roche on the basis of the non-commercial element to the guarantee, this did not arise simply by reason of the personal relationship between the parties but also due to the particular circumstances of the case as referred to above.
Legal Advice
21. It is the defendant’s contention that the legal advice obtained by him in the instant case was wholly inadequate and that the Bank was on notice of the potential difficulties with the legal advice provided by Mr. David O’Connor. The defendant relies on the decision in Etridge which sets out that when a lender is placed on enquiry due to a non-commercial aspect to a transaction they should ensure that the guarantor has obtained independent legal advice regarding the transaction.
22. In relation to the alleged inadequate legal advice the defendant places emphasis on a letter dated 7th March, 2008, from the plaintiffs to Mr. David O’Connor, solicitor. The letter stated that the bank was prepared to release funds on the receipt of inter alia a letter from the guarantor’s solicitor confirming the guarantor received independent legal advice prior to the execution of the guarantee and indemnity document. The defendant contends that this was a term of the loan offer agreement which was not complied with.
23. In relation to the letter dated 12th March, 2008, to the plaintiff from Mr. David O’Connor, as set out in paragraph 4 of this judgment, stating that the guarantee and indemnity was explained in full to the defendant and that he understood the nature and effect of same but nevertheless decided to waive his right to independent legal advice, the defendant states that there was a conflict of interest on the part of Mr. O’Connor in that he was seeking to act for both the principal debtor and the defendant which was highly inappropriate. The defendant argues that the plaintiff was on notice to the fact that Mr. O’Connor was attempting to act for all parties to the transaction as the letter, on its face, stated that Mr. O’Connor’s client was Newmarket Foods Ltd. As a result of this the defendant submits that Mr. O’Connor was not in a position to offer him independent legal advice.
24. In support of his position that a solicitor acting for a principal debtor can never be sufficiently independent to advise a guarantor in respect of a transaction, the defendant relies on the dicta of Laffoy J. in Tynan v The County Registrar for the County of Kilkenny [2011] IEHC 250 where she stated at paragraph 4.9:-
“There is no doubt that the advice which the plaintiff got was independent, in the sense that the solicitor whom she attended and who attested her execution of the Deed of Confirmation was not acting for either the mortgagor or the mortgagee”.
25. In conclusion the defendant submits that the only way in which the plaintiff could have satisfied the steps to be taken as set out in Etridge and as required by the condition of independent legal advice prior to draw down of the facility as set out in their own letter of 7th March, 2008, was to obtain a letter from an independent solicitor confirming that the defendant had obtained independent legal advice regarding the transaction.
26. It is the plaintiff’s submission that a presumption of undue influence cannot arise on the facts of this case, however even if it is deemed to arise constructive notice has not occurred as the plaintiff has taken all reasonable steps to ensure the defendant openly and freely acquiesced to the guarantee. The plaintiff submits that the defendant was in receipt of adequate independent advice as he was represented by a solicitor in connection with the transaction thereby negating any constructive notice of undue influence that may have occurred and entitled the plaintiff to assume that the guarantee was freely and fully given.
27. In relation to the defendant’s argument that the legal advice he received from Mr. O’Connor was not independent on the grounds that the solicitor was also acting for the Company in the transaction, the plaintiff relies on the judgment of Laffoy J. in Tynan v. The County Registrar for the County of Kilkenny [2011] IEHC 250 where the Court cited with approval the following passage from the judgment of Lord Scott in Etridge in relation to legal pertaining to a transaction involving a husband and wife:-
“If the solicitor is acting also for the husband, his role presents a little more difficulty. It is, after all, the existence of the risk of undue influence or misrepresentation by the husband that requires the bank to be reasonable satisfied that the wife understands the nature and effect of the transaction. If there is some particular reason known to the bank for suspecting undue influence or other impropriety by the husband, then, in my view, the bank should insist on advice being given to the wife by a solicitor independent of the husband… But in a case in which there is no such particular reason, and the risk is no more than the possibility, there is no reason, in my opinion, why the solicitor advising the wife should not also be the husband’s solicitor. In the ordinary case, in my opinion, the bank is entitled to rely on the professional competence and propriety of the solicitor in providing proper and adequate advice to the wife notwithstanding that he, the solicitor, is acting also for the husband.” (Emphasis added)
28. The plaintiff submits that the defendant has identified no particular circumstances, save for the sibling relationship between the parties, which give rise to a presumption of undue influence. In these circumstances the plaintiff submits that there was no particular reason the same solicitor could not act for and purport to advise all the parties to the transaction. The plaintiff further states that the proposition argued for by the defendant is somewhat absurd and illogical in that three sets of legal advisors would have to be involved in what was essentially a basic loan and security transaction.
29. The plaintiff also relies on the dicta of Birmingham J. in Allied Irish Banks plc v. McKenna [2014] IEHC 122 where he stated:-
“So far as independent legal advice or more specifically, the alleged lack of is concerned, there is no requirement in law that an adult entering into a guarantee on behalf of a company of which he is a director and shareholder should have independent legal advice.”
30. It is the therefore the plaintiff’s position that as a director and shareholder of Newmarket Foods Limited, the defendant was competent to provide a guarantee for the Company’s debts without the requirement for independent legal advice. Finally the plaintiff does not accept that a letter dated 7th March, 2008, from the plaintiffs to Mr. David O’Connor, solicitor formed part of the terms of the loan agreement as the defendant only became aware of this letter when he received his former solicitor’s file in 2014.
Law & Conclusions
31. The legal principles applicable to an application for summary judgment are well established and are to be found in the cases of Danske Bank v. Durcan New Homes [2010] IESC 22, Bank of Ireland v. Education Building Society [1999] 1 IR 220, Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607 and McGrath v. O’Driscoll [2007] 1 ILRM 203.
32. Adopting the wording of Hardiman J, at p. 623 of Aer Rianta the Court in the present case must ask itself whether “…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?”. The mere assertion of facts on affidavit of a purported defence is not of itself sufficient to allow leave to defend. The Court must look at the situation as a whole in order to determine whether the defendant has raised an arguable and bona fide defence.
Decision of the Court
33. It is well established in our jurisprudence that the Court’s power to grant summary judgment should be exercised sparingly and only in cases where it is manifest that the defendant has no bona fide defence to the plaintiff’s claim. The law in this regard follows logically from the constitutional guarantee of access to the courts and the right to litigate. Summary judgment in effect denies a defendant access to litigate his claim to a defence and accordingly, should only be granted, where it is clear that he has, in fact, no such bona fide defence. It is also clear from our jurisprudence that the term “bona fide defence” means an arguable defence and not one which is likely to succeed on the balance of probabilities. In this case, the plaintiff seeks to make the defendant liable on foot of a guarantee entered into by him on 12th March, 2008 whereby he guaranteed the repayment of a loan from the plaintiff to Newmarket Foods Limited, a company of which he and his brother were directors. It is true that the defendant’s shareholding was a mere 5% but it is also true that he was engaged in the business and profited therefrom until its liquidation in 2010.
34. He has sought to advance two potential defences to the plaintiff’s claim. Firstly, he asserts that the guarantee was procured by undue influence and that the plaintiff had constructive notice of potential undue influence by virtue of the fact that the guarantors had the same surname and were in fact siblings. Secondly, he seeks leave to defend the plaintiff’s claim on the grounds that he received no independent legal advice; that the plaintiff was on notice of that fact and that the advice he did receive from the borrower’s solicitor was deficient.
35. On the facts before the Court, the Court is satisfied that there is no evidence of undue influence in this case such as would give rise to an arguable defence of the plaintiff’s claim. A desire and willingness to be of assistance to one’s brother is not evidence of undue influence, but rather a normal human reaction among siblings who are close and who are both engaged in the same business. While the defendant asserts that he felt under severe pressure to agree to the said loan and to act as surety therefor, his averment at paragraph 13 of his second affidavit, to the effect: “I simply would not have risked my livelihood if I had understood that the Guarantee was unlimited in its scope” indicates, as the plaintiff contends, that the defendant knew his own mind and freely exercised his will in executing the guarantee. Having regard to the Court’s finding that on the defendant’s own evidence there is no room for an arguable defence of undue influence in this case, the Court does not consider it necessary to express any view on the issue of whether the plaintiff had or should have had constructive notice of undue influence in the particular circumstances of this case other than to remark that it would constitute a major evolution of the principles laid down in Royal Bank of Scotland plc v. Etridge (No.2) [2001] UKHL 44 and adopted in this jurisdiction in Ulster Bank v. Roche [2012] 1 I.R. 765, to extend those principles to brothers who are both directors and participants in a commercial enterprise. The Court is satisfied therefore, that the defendant has failed to demonstrate a bona fide defence on this ground.
36. That however is not the end of the matter – contracts of guarantee, where people render themselves liable for the debts of another, always require careful scrutiny. It is in the interest of those who seek to rely on them 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 there under.
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 judgment 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 that 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.
ACC Loan Management v Browne
[2015] IEHC 722 Baker J
JUDGMENT of Ms. Justice Baker delivered on the 10th day of November, 2015
1. The plaintiff, ACC Loan Management Ltd. (the “Bank”), seeks summary judgment against the defendants in the sum of €103,997.51, together with continuing interest on the principal sum of €100,424.57, stated to be owed by the defendants, jointly and severally, by virtue of a loan agreement entered into between the parties under the terms of the facility letter dated the 9th April, 2008.
2. The defendants assert that the loan is unenforceable as certain provisions of the Consumer Credit Act, 1995 (the “Act of 1995”) were not complied with. The plaintiff denies that the defendants or either of them were consumers within the meaning of that legislation.
3. As a separate matter, the plaintiff asserts that were the defendants to be classed as consumers for the purposes of the Act of 1995, that the loan was a housing loan and as such does not fall within the Act of 1995.
4. The defendants also raise a number of other defences. In the case of the second defendant, it is asserted that the loan was unconscionable, and that the relevant documentation was not executed such that a plea of non est factum arises. Both the defendants and the plaintiff argue that an estoppel by conduct and/or representation arises.
5. I will deal with the individual elements of the subject transaction which are relevant to the defences raised in the course of the judgment and as they arise for consideration.
Background
6. The defendants are brothers. The first defendant works for a taxi company and lives in Bandon, Co. Cork. The second defendant is a retired member of the Irish Defence Forces and lives at Suncroft in Co. Kildare.
7. The facility letter which gives rise to the claim in these proceedings is dated the 9th April, 2008 and contained an offer on the part of the Bank to advance the sum of €100,000 over a period of nine years at an identified interest rate. The loan was made to the two defendants jointly and severally, and the purpose of the loan was stated as follows:
“… to refinance existing ACC loan reference 10039193; and to release equity on lands at Meenreagh, Killygordon, Co. Donegal to finance renovations to Borrowers’ primary dwelling-house.”
8. The loan was to be repaid by monthly instalments over a period of nine years in accordance with the schedule attached to the facility letter. The loan offer was accepted by the signature on the memorandum of acceptance by both borrowers on the 22nd April, 2008. The two borrowers, by their signature, also waived their right to a ten-day cooling-off period.
9. The defendants do not deny that the monies were advanced on the 23rd May, 2008, nor that they defaulted in the monthly repayments, nor that the plaintiff made demand for repayment by letters of demand, the first of which was dated the 18th April, 2012. The first default is stated to have occurred in the monthly payment due in December 2008.
10. The defendants provided security for the loan by the creation of a charge over 13 hectares of lands at Meenreagh, Killygordon, Co. Donegal, comprised in folio 2324F Co. Donegal, and the Bank, by a deed of appointment of the 4th May, 2012, appointed a receiver to those lands pursuant to the power contained in the charge. The lands were sold and the net proceeds of €28,619.40 were credited to the loan account of the defendants on the 15th May, 2013. While the defendants initially argued that the Bank had agreed to accept the net proceeds of the sale of the lands in Co. Donegal in full discharge of the liabilities due under the loan, that argument is no longer being made by either of them.
Transactions prior to the 2008 facility
11. The two defendants borrowed the sum of €40,000 from the plaintiff in or around the year 1999 for the purpose of purchasing the lands in Co. Donegal, which had been owned by their grandfather. They say that it was not their intention to develop the lands and that they bought them for “sentimental purposes only”. At that time Sean Browne, the first defendant, was involved in a number of business ventures, and one of his business associates introduced him to the Bank and, as a result he came to develop a relationship with the Bank. The evidence is that the first defendant, Sean Browne made all, or almost all, of the repayments on the 1999 facility, and that Gerald Browne, the second defendant, encountered financial difficulties almost immediately after the 1999 facility was drawn down.
12. The 1999 facility was repaid in full.
13. Separately, Sean Browne borrowed in his own name the sum of €30,000 from the Bank in 2006 for the purposes of a deposit of a premises which in the events became his primary residence at 19 Allen Square, Bandon, Co. Cork. The purchase of that property was primarily financed by a secured loan from First Active PLC, and the 2006 facility from the Bank was sought in respect of the deposit. One issue that arises for consideration in this judgment is whether the 2006 loan facility to Sean Browne was in respect of his principal private residence or, as is stated in the loan facility letter itself, for the purchase of a residential investment property. The security for that loan was to be a first legal charge over the lands in Co. Donegal, and this charge was registered on the folio and ranks in priority to the second charge registered as security for the 2008 facility, the subject matter of these proceedings.
14. The second defendant Gerald Browne provided a guarantee in respect of the 2006 loan facility for his brother Sean Browne, and that guarantee was agreed to be limited in recourse to the security provided by the charge over the lands in Co. Donegal. The guarantee executed by Gerald Browne did not in fact contain this limitation but the Bank has accepted that the terms of the guarantee were agreed to being so limited in recourse.
15. The 2006 loan facility was rolled over into the 2008 facility and, as set out above, the 2008 loan facility was, in part, to refinance the 2006 loan in the sole name of Sean Browne.
Consumer Credit Act: Were the defendants consumers?
16. The first defence raised by the defendants is that the loan was a consumer loan within the meaning of the Act of 1995, and the plaintiff denies that this is so. Both counsel agree that the case law establishes unequivocally that whether a loan is a consumer credit loan is a matter to be determined objectively and irrespective of the characterisation that the parties themselves may have applied to the loan. Thus the fact that certain internal documentation of the Bank identifies one or both of the defendants as a consumer is not determinative of the issue.
17. Counsel also agree that whether a loan is a consumer loan for the purposes of the legislation is a matter which is determined by reference to the purpose of the loan and not the trade or profession of the borrower. Thus all natural persons are consumers except when they are acting inside their business and for the purposes of his or her trade or profession. This is clear from the definition of “consumer” in s. 2(1) of the Act of 1995 as amended by Schedule 3 Part 12 of the Central Bank and Financial Services Authorities of Ireland Act 2004 which defines a consumer as:
“(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);”.
A “business” for the purposes of the Act is defined as including a trade or profession.
17. Two leading judgments of the High Court on the meaning of a consumer credit agreement were relied upon by both counsel and both accept the dicta of O’Malley J. in Allied Irish Bank Plc v. Fahy [2014] IEHC 244 at para.65 that in assessing whether a person is a consumer:
“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.”
18. A similar approach has been taken by Kelly J. in Allied Irish Bank Plc v. Higgins & Ors. [2010] IEHC 219, and both Kelly J. and O’Malley J. identified the principle as that found in a decision of the Court of Justice of the European Union (CJEU) in Benincasa v. Dentalkit (Case C-269/95) [1997] ECR I-3767 where the Court pointed out that 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”.
19. It is clear from the case law that a person may be a consumer in relation to certain transactions and an economical operator or a non-consumer in relation to others. It is the purpose of the contract and whether it satisfies an individual’s own needs that comes for consideration. As identified by the CJEU in Benincasa v. Dentalkit:-
“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.”
20. The approach of the Court in determining whether a particular loan was a consumer loan is to consider the purpose of the loan and whether that purpose was to satisfy an individual need of a private person for his or her private consumption and not for commercial benefit or gain, and not where he or she was acting as a commercial operator.
21. That it is the contract which is classified and not the person can of course have the consequence that a person who has considerable experience in business matters, and who has from time to time entered into credit agreements for the purposes of his or her business, may still be a consumer for certain credit contracts provided that the purpose is private and not commercial.
22. This is particularly significant when security is given for a loan over commercial property as was the case in Evans v. Cherry Tree Finance Ltd. [2008] EWCA Civ 331 and also in Allied Irish Bank Plc v. Fahy. In each of these cases the security for the loan was given over property that was partly private residential and partly commercial or investment property and the Court held in each case that the test of whether the loan transaction was itself a commercial or a consumer loan turned on the purpose of the loan and not the nature of the property over which security was given.
23. Thus the first question that falls to be determined is whether the purpose of the 2008 loan was commercial. Having regard to the fact that the application comes before me as an application for summary judgment, the question I must determine is whether the defendants have made out an arguable case that the loan was a consumer and not a commercial loan, and bearing in mind the low threshold the defendant must meet in resisting a claim for summary judgment.
Discussion
24. As stated above the 2008 loan was identified as being for two stated purposes, namely to refinance the existing bank loan, and to finance renovations on the borrowers’ primary dwelling house.
25. The reference to the dwelling house was to the dwelling house of both borrowers, although it is common case that the brothers at no time shared a residence.
26. The first purpose stated was to discharge the existing loan facility. While some confusion is to be noted with respect to the 1999 and 2006 loans, the Bank identifies the repayment as relating to the 2006 loan, the purpose of which was to pay part of the purchase price of the premises at Allen Square, Bandon, County Cork then described as a “residential investment property”. The sum of €33,930 outstanding on that loan facility was discharged on the 23rd May, 2008 from the loan proceeds of €100,000 advanced by the 2008 facility.
27. Thus approximately one third of the 2008 facility was to repay an existing loan facility. It seems, prima facia at least, that the 2008 facility was advanced partly for the purposes of renovations of the principal private residence of the first defendant Sean Browne, and partly to refinance the loan advanced to the that defendant in 2006. In that context it is necessary to consider the purpose of the 2006 loan as the Bank asserts that the loan is commercial in purpose and that this element of the 2008 loan has the effect that the 2008 loan cannot itself be treated as a consumer transaction.
28. I turn now to examine how the 2006 facility is to be characterised
The 2006 Loan Facility
29. The plaintiff asserts that the 2006 loan facility was unequivocally a commercial facility, not merely because the loan was identified as being to part fund the purchase of a residential investment property, but also because at the time the first defendant was residing in another premises, and while he later came to reside, and still resides, in the premises at Allen Square, Bandon he did not take up residence in that premises as his principle private residence until November 2007, almost exactly one year after the 2006 facility was drawn down. At the time of the 2006 loan the first defendant was residing at Ealga, Kilbrogan Hill, Bandon, County Cork.
30. The 2006 facility was stated in certain bank documentation to be commercial and the first defendant did expressly in writing warrant and represent that he was not acting as consumer in respect of the facility. The first defendant asserts that he sought the facility in 2006 to enable himself and his partner to jointly purchase the premises at 19 Allen Square, Bandon which is now their primary residence and into which they moved on the 19th November, 2007. They had obtained a mortgage from First Active for the bulk of the purchase price and the monies advanced on foot of the 2006 facility were in respect of the balance of the purchase monies, most of the initial deposit for that purchase. The first defendant says that Allen Square was in no way connected with his business and that he did not run his office from that premises nor did he at any time rent or intend to rent that premises for gain. He says he was not involved “in property development” but that he was a director of Spacecabins Limited, a company which provided cabins, chemical toilets and portable accommodation to industrial and business sectors. That business has now closed and none of the loans related to that business.
31. It seems to be the case that one consideration had by the Bank, in the advance of the 2006 facility was the capacity of the first defendant to repay that facility and the internal bank credit application assessed the financial profile of the first defendant in the context of what was then a reasonably profitable company. There is some confusion in the documentation however, and the internal bank credit documentation does identify the property at Allen Square as intended to be used by the first defendant as his “PDH”. However, the loan sanction letter of the 6th November, 2006 which forms the basis of the contract described the property as “residential investment property” and the warranty of the first defendant that he was not acting as a consumer and was acting in the course of his business is part of this loan sanction document and the terms thereof were formally accepted on the 7th November, 2006 by both defendants as is evident from their signature.
32. As the law is clear that the task of whether a loan is a consumer or a commercial transaction is an objective one having regard to the purpose of the loan, the characterisation that each of the parties put on the loan is not sufficient to determine how it may properly be characterised from a legal point of view. The Bank in its internal documentation did characterise the loan as a consumer loan as related to the purchase of the primary residence of the first defendant. The final loan offer identifies the loan as been for commercial properties.
33. I cannot decide any conflict of evidence at this stage on a motion for summary judgment, but for the purposes of the present argument I consider that the evidence is sufficient to raise the arguable defence that the loan was a consumer loan linked to the purchase of the principal private residence of the first defendant. One matter that strikes me as curious is that the first defendant asserts that the property was to be purchased by him and his partner, and he described them as joint purchasers and that they obtained a joint mortgage from First Active for the bulk of the purchase price, that fact and that the property was to be jointly owned is not identified in the loan documentation. It does not seem that the Bank was informed of this fact and this is a matter that, as a matter of probability, would have required the Bank to consider the position of the co-owner of the property. However, it should be noted in that context, and this may explain that difference, that the 2006 loan facility was intended to be short term and to be a facility for twelve months only and no security over the property to be purchased was agreed to be provided.
The 2008 loan facility
34. I turn now to consider the 2008 facility having regard to the fact that its agreed purpose was to discharge the 2006 facility and to renovate the private residence of the first defendant. In that context I consider first whether the 2008 facility may be divided such that even if it is arguable that part of the 2008 facility was for non consumer purposes whether that part advanced for the purposes of refurbishment of a private dwelling could be separately treated as a consumer loan.
35. The CJEU in the decision of Gruber v. Bay Wa A.G. (Case C-464/01) [2005] ECR I-439 was considering a reference regarding the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (the “Convention”) from the Austrian Supreme Court. Mr Gruber was domiciled in Austria and the defendant company was incorporated under German law. Proceedings were commenced in Austria by Mr. Gruber on account of an alleged defective performance of a contract between him and the German company. The question for the Court was whether the contract was a consumer contract. The Court took the view that the contract was partly for business purposes, namely the purchase of tiles by a farmer to tile the roof of his farm building, but noted also that the tiles were to be used to roof the private residence of the borrower. The Court noted that the seller had no reason to believe that Mr. Gruber would use the tiles exclusively or principally for private purposes and noted also that the large quantity of tiles purchased did suggest at least that their use was for business purposes or at least partly for business purposes.
36. The Austrian Court referred a number of questions to the Court of Justice for preliminary ruling as follows:
(a) Where the purposes of a contract are partly private, does the status of the contracting party as a consumer for the purposes of Article 13 of the Convention depended on whether the private or the trade or professional purposes is predominant, and what criteria are to be applied in determining which purpose predominates?
(b) Whether the purpose and circumstances had to be objectively ascertained by the other party to the contract?
(c) Where there is doubt, is a contract which may be attributed both to private and to trade or professional activity to be regarded as a consumer contract?
37. Certain other questions regarding jurisdiction are not relevant to my judgment in this case. The Court considered the first three questions, namely those as to the characterisation of the contract, as one question and adopted the view expressed in the Opinion of the Advocate General that the special protection afforded to consumers arises from the view that a consumer is not on “equal footing” with the other party to a contract, and accordingly the purpose of designating a party as a consumer is to afford that person special protection which can be justified by virtue of the absence of equality of bargaining or negotiating power. It was also relevant to the Court’s consideration that under Article 13 of the Convention a consumer contract is defined in what the Court described as “clearly restrictive terms”, namely a contract “concluded for the purpose… outside [the] trade or profession” of the contracting party. The Court also noted that the definition of a contract concluded by a consumer must be strictly interpreted as it constituted a derogation from the basic rule of jurisdiction in the Convention itself.
38. Bearing that in mind the Court noted that a contract with dual purposes, partly professional and partly personal, may be treated either as a commercial or as a consumer contract. The Court held at para. 39 as follows:
“In that regard, it is already clearly apparent from the purpose of Articles 13 to 15 of the Brussels Convention, namely to properly protect the person who is presumed to be in a weaker position than the other party to the contract, that the benefit of those provisions cannot, as a matter of principle, be relied on by a person who concludes a contract for a purpose which is partly concerned with his trade or profession and is therefore only partly outside it. It would be otherwise only if the link between the contract and the trade or profession of the person concerned was so slight as to be marginal and, therefore, had only a negligible role in the context of the supply in respect of which the contract was concluded, considered in its entirety”.
39. Thus the Court regarded that the contract had to be considered in its entirety, and that the correct approach was not to seek to subdivide the contract into constituent contracts or elements or separate contracts one commercial and the other consumer in nature. Further it was only if the professional element of the contract is “negligible”, and where the private use is “predominant”, that that the contract would be treated as one which had a private purpose. The Court took the view then that when a contract had a dual purpose it was not necessary that the professional purpose be predominant, and if there was a professional or business element, and unless that professional business element was negligible, its characterisation would determine the characterisation of the contract taken as a whole.
40. The judgment of the Court in Gruber v. Bay Wa A.G was referred to and followed by O’Malley J. in Allied Irish Bank Plc v. Fahy.
41. The decision in Gruber v. Bay Wa A.G also draws from a number of first principles, namely that there be legal certainty, and that the avoidance of the multiplication of the basis of jurisdiction as regards contractual relationships requires that a contract not be capable of being classified in such a way that the contract was divisible into two classes of contracts, such that one part of the contract came to be considered in the light of different principles to another part.
42. The judgment in Gruber v. Bay Wa A.G is strong authority for the proposition that, for the purpose of assessing whether a contract is a consumer or a professional contract, a court should not engage in the exercise of dividing the contract such as to generate two or more different contracts and two or more different legal tests or indeed jurisdictions. The parties in Allied Irish Bank Plc v. Fahy conceded that the contract was not divisible in this way and there was undoubtedly in that case an element of the borrowing that related to the borrowers private residence.
43. Thus I consider that the proper approach for the purposes of assessing whether the 2008 facility was a consumer or professional contract is that I must consider the predominant purpose of that contract, or take the contract as a whole, and if there is a commercial element that is not negligible, that fact will be determinative of the commercial nature of the contract as a whole.
44. It seems to me that it is undoubtedly also the case that one cannot characterise the different elements or purposes of a loan merely by reference to quantum. In this case, even if the 2006 loan were a commercial loan the repayment of that loan accounted for approximately one third of the 2008 facility. It is not a question of assessing whether the majority, or most, of the 2008 loan was a consumer loan, but whether the loan taken as a whole could be characterised as such in regard to its purpose, again looking at purpose as a whole.
45. It seems to me the question may relatively easily be answered in this case for a number of reasons. The 2006 facility was for twelve months. If it was a loan to cover the deposit required for the purposes of acquiring residential investment property, and if that made it a commercial loan, the commercial element of the loan was intended to be short term, namely for twelve months and as a classic bridging loan. By the time the 2008 loan came to be negotiated the first defendant had come to live in the premises at 19 Allen Square, Bandon. One of the stated purposes of the 2008 loan was the renovation of this as his private dwelling house. I regard it as significant also that no warranty was given by either of the borrowers for the purposes of the 2008 facility that they were not acting as consumers. The documentation provided by the Bank contained a separate schedule setting out reasons why the product identified as a “consumer loan” was considered to be suitable by the Bank. A certain element of confusion is apparent in the documentation in that the general terms and conditions which were incorporated into the loan by virtue of clause 4 of the letter of sanction were commercial and not private consumer general conditions, but the balance of the letter and the facility letter actually signed by the borrowers makes reference to and identifies the loan as a consumer loan.
46. It seems to me not to matter at the stage of an application for summary judgment whether counsel for the defendants is correct that an overly restrictive interpretation of the notion of consumer is not intended by the Directive, or by the Act of 1995 of that insofar as the judgments in Benincasa v. Dentalkit and in Gruber v. Bay Wa A.G dealt with the question in the context of the Convention where possibly different considerations might be in play. The question for the present comes down to whether the defendants have shown arguably that they were consumers and whether they in those circumstances have defences available to them that might be available to a consumer. In that context of course the test is a test of whether the defendants have made out an arguable defence as explained by the Supreme Court in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607, or as explained in Harrisrange Ltd. v. Durkan [2003] 4 IR 1, whether the defendant can show a reasonable probability of having a real or bona fide defence.
47. In that context too I am aware that the courts have found in a number of cases that the determination of a legal question may be made at the stage of summary judgment.
48. Accordingly, and bearing in mind the relatively low threshold that the defendants have to meet, and bearing in mind also that documentation does in my view point to the 2008 facility being a consumer loan or private contract, I am of the view that the first defendant has made out an arguable case that he is a consumer for the purposes of the Act of 1995.
Position of the second defendant
49. The position of the second defendant is more complex. He is not involved at all in the 2006 facility. He was a borrower in the 1999 facility but no argument is made that the facility was for commercial purposes, and it is not seriously contended that the loan was for other than the purchase of the Donegal lands which contained a derelict house, and thirty-two acres of land or thereabouts, of which only about eight were capable of agricultural use. Neither defendant was a farmer, neither had shown any intention of engaging in farming activities, and while both of them had a “vague idea” that they might develop the disused house as holiday home, that particular plan never came to have any reality, no money was ever sought to refurbish the house, and the derelict building on the land remained derelict and entirely uninhabitable even when the lands came to be sold.
50. Thus the question is whether the second defendant could be described as a consumer for the purposes of the 2008 loan when part of that loan was to discharge an earlier loan of his brother from the 2006 facility. The 2008 loan was not used nor intended to be used to further any private purposes of the second defendant, but I turn now to consider whether that of itself makes it a business or professional loan to the second defendant.
51. The second defendant, Gerald Browne, asserts that he had agreed with his brother the first defendant that Sean Browne would be wholly responsible for repaying the 2008 facility. This agreement was made between the two borrowers themselves and does not bind the Bank. However, it is equally clear that the loan, whatever its purpose, was from the point of view of the second defendant not one obtained by him for any purpose relating to his business. The second defendant is retired from the Irish Army and the 2008 facility did not and could not have been said to have furthered any business of the second defendant, he not being engaged in any trade or profession in respect of which he required or sought loan finance.
52. I consider that the legislation is such that a person is a consumer unless it can be shown that the person is acting inside the person’s business. I accept the argument of counsel for the defendant that the legislation is drafted such that in a sense the default position is that all natural persons are consumers unless it can be shown they are acting inside or for the purpose of the business in entering into a credit agreement. While it could be said that the 2008 facility did not satisfy any needs “in terms of private consumption” of the second defendant, to use the terminology of Kelly J. in Allied Irish Bank Plc v Higgins, following Benincasa v. Dentalkit, the needs of the second defendant, insofar as they related to this loan, were allied to the needs of the first defendant, and the second defendant was a borrower primarily if not entirely because he was a co-owner of the property in Donegal which was to be the security for the 2008 loan. While it would have been possible to provide the security even were Gerald Browne not to be a borrower, the Bank may have considered it more efficient to identify both Browne brothers as borrowers and mortgagors.
Conclusion on whether the contract was a consumer contract
53. I conclude that both borrowers have made out an arguable and bona fide case and they were consumers for the purpose of the 2008 loan.
54. I later consider what if any consequences this may have for the enforceability of the loan but will first deal with the argument of the plaintiff that the loan was a housing loan.
Was the 2008 Facility a Housing Loan?
55. Counsel for the Bank argues that, even if the defendants, or either of them, may properly be characterised as consumers for the purposes of the Act of 1995, that the loan was a housing loan and that as a result the borrower does not have the specific protection available to consumers under that Act.
56. A housing loan is defined in s. 2(1) of the Act of 1995, as amended as:
“(a) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land—
(i) for the purpose of enabling the person to have a house constructed on the land as the principal residence of that person or that person’s dependants, or
(ii) for the purpose of enabling the person to improve a house that is already used as the principal residence of that person or that person’s dependants, or
(iii) for the purpose of enabling the person to buy a house that is already constructed on the land for use as the principal residence of that person or that person’s dependants,
or
(b) an agreement for refinancing credit provided to a person for a purpose specified in paragraph (a)(i), (ii) or (iii),
or
(c) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land on which a house is constructed where the house is to be used, or to continue to be used, as the principal residence of the person or the person’s dependants,
or
(d) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land on which a house is, or is to be, constructed where the person to whom the credit is provided is a consumer;”.
57. The definition is cumbersome, but certain factors are clear: a housing loan for the purposes of (a), (b) and (c) is a loan granted on the security of a mortgage of an interest in land. Land for that purpose is land on which a house is intended to be constructed, or land on which a house is already constructed, provided that house is already or is to be the principal residence of a person or that person’s dependants. Thus, a housing loan is a loan which a person enters into to buy a house as his or her principal residence, or to buy land on which to construct a house where none already exists on the land, or to improve a house already used by that person or his or her dependants as a principal residence.
58. Counsel for the Bank argues that the 2008 loan was a housing loan because it was secured against the Donegal lands. There was an old ruin on the Donegal lands, which was not, at the time of the loan, the principal residence of either of the defendants, or of any of their dependants, or intended to be such. Thus the loan cannot be a housing loan within the meaning of s. 2(1)(a), (b), or (c). Counsel for the Bank, however, argues that the loan comes within subcategory (d) of the sub-section, namely that the loan was to a consumer granted on the security of a mortgage of land on which a house was, or was to be, constructed. The interpretation of the subsection is devoid of authority, and accordingly I turn to consider the terms of the Act.
59. The 2008 loan was for two purposes: the re-financing of the 2006 loan, and the refurbishment of the premises at Allen Square, Bandon. However, the loan was not granted on the security of any interest in that land. Thus, it can only be the Donegal land over which security was agreed to be, and was in fact given, which might make the 2008 loan a housing loan.
60. The evidence is that there was a ruin on the Donegal lands. The defendants say that since at least 1999 the house was fully derelict, and had no roof, the walls had collapsed, and what remained was an outline of approximately three blocks in height where they once stood. The Bank offered no contrary evidence and the credit memorandum, one of the Bank’s internal documents, described the house as “remains of an old stone house”, and also refers to it in another place as a “ruin”.
61. There is no evidence that the 2008 loan was obtained for the purpose of enabling either of the borrowers to improve the ruin on the Donegal lands.
62. Thus, it falls to be considered whether the 2008 loan could be said to be secured on land on which a house was, or was to be, constructed. There being no evidence that a house was to be constructed on the Donegal lands, the question is confined to whether the security for the 2008 loan was in respect of land on which there was a house.
63. Counsel for the Bank argues that the ruins, albeit that it was in poor condition, was still a house within the meaning of the Act of 1995. A house is defined in s. 2 as including:
“any building or part of a building used or suitable for use as a dwelling and any outoffice, yard, garden or other land appurtenant thereto or usually enjoyed therewith”.
64. Counsel for the Bank argues that the condition of a building does not, of itself, determine whether a building is a house. He argues that a “house” within the meaning of the Act of 1995 does not need to be habitable. However, this argument ignores that fact that the statutory definition requires the building to be “suitable” for use as a dwelling. It may in fact be more correct to identify a house as building which is not, or not likely to be, an office, a factory, or another commercial building.
65. Because there was no evidence before me of an intention on the part of the defendants to improve the ruin with a view to making it suitable for habitation, I will leave for decision in a suitable case the question of whether the definition includes a house which may be made suitable for use as a dwelling, because it seems to me that counsel for the defendants is correct that at the least a house has to be a building. She argues that the ruin in its present form is not even a building.
66. A building, in its widest sense, can include any form of structure including the example given by counsel for the defendants: the Spire on O’Connell Street or a coffee kiosk or pod on a public street. While in certain circumstances one could consider that a caravan or mobile home is a building used as a dwelling, I consider for the purposes of the legislation that a house must have at least some structures which would provide shelter including, at least, some walls, windows or window opes, and a roof, even if that roof was not watertight. Thus, I consider that a house, for the purposes of the Act of 1995, given that the definition includes an element of suitability for use as a dwelling, must be a building which offers some degree of enclosure or shelter. There was nothing on the Donegal land that could have even conceivably offered shelter in which any person might have dwelled, even uncomfortably and without modern conveniences. A degree of shelter, protection from the elements, is in my view a necessary element.
67. I also consider that there must be at least some degree of enclosure, a chamber or room in which a person could dwell or which could be inhabited. Bovill C.J. in Thompson v. Ward, Ellis v. Burch, (1871) LR 6 CP 327, at 358, cites the definition of house from Lord Cooke in relation to burglary:
“A chamber or room, be it upper or lower, wherein any person doth inhabit or dwell, is domus mansionalis in law”
The old derelict structure on the Donegal lands offers no enclosure. The structure was a ruin and not a building.
68. I consider then that the Bank is not correct in its argument that the 2008 loan was a housing loan because the ruin or structure on the Donegal lands was not a building, and no evidence has been shown of any intention to construct a house on that land.
69. Therefore, I conclude that the loan was not a housing loan, and that therefore the provisions protective of the borrowers as consumers do apply.
The alleged breaches of the Consumer Credit Act 1995
70. It is accepted by both parties that if the 2008 credit agreement was a consumer loan that certain conditions precedent to the enforcement of that loan are established by the legislation, and that a loan facility in respect of which there has been a breach of the Act is not enforceable by the bank. Section 30 imposes certain mandatory obligations on a credit institution and that these are mandatory is clear from the judgment of Kelly J. in Allied Irish Bank Plc v Higgins, and was accepted and noted by O’Malley J. in Allied Irish Bank Plc v Fahy. The defendants have raised three specific matters in respect of which a failure is alleged.
The first alleged breach: the address in the facility letter:
71. Section 30(3) of the Act of 1995 requires a consumer credit agreement to contain a statement of:
Section 30(3) of the Act of 1995 requires a consumer credit agreement to contain a statement of:
“(a) the names and address of all the parties to the agreement, and
(b) any costs or penalties to which the consumer may become liable for any failure by the consumer to comply with the terms of the agreement.”
72. The defendants allege that the credit agreement did not contain the address of each or all of the parties to the agreement. The facility letter of the 10th April, 2008 was addressed to both defendants at the address at Eagla, Kilbrogan Hill, Bandon, Co. Cork. The evidence is that the first defendant, Sean Browne, had by November 2007 taken up residence at the property 19 Allen Square, Bandon, Co. Cork. The second defendant at all times resided at an address in Co. Kildare. The precise residential addresses of the defendants are not denied by the plaintiff, but the plaintiff says that on a true construction of the legislation the test is met by the fact that all letters addressed to the defendants at the Eagla address were in fact received by them. The plaintiff asserts that the Eagla address is an address of the first defendant, and that the relevant legal test is whether the address be one at which post would be received by a borrower. In that context the plaintiff says that a person may have a number of addresses and the furnishing of documentation to one working postal address at which post is in fact received is sufficient for the purposes of compliance with the legislation. While the plaintiff formally denies that the first defendant did in fact reside at the premises at Allen Square, Bandon, Co. Cork in April, 2008, it is accepted that the second defendant was at all material times resident at Suncroft, Co. Kildare, although it states that the Bank was never “formally advised” of this address by either defendant. The Kildare address does not appear anywhere on the facility letter or on any other documentation.
73. With regard to the second defendant, the plaintiff asserts that in the case of joint borrowers it is sufficient for the purposes of compliance with the Act of 1995 that the documentation be sent to an address for one of them, and that that is particularly so in the case where one of those borrowers was what the bank describes as being an “organiser of the loan facility”, which it is argued is the position of Sean Browne, for whom the loan was primarily intended.
74. I do not consider that the plaintiff is correct in this assertion and the Act of 1995 is clear that the loan agreement must contain a statement of the names and address of all parties to the agreement, not just of one of the parties. I consider that the legislation does not envisage a situation were one borrower may act on behalf of other borrowers for the purposes of compliance with the mandatory requirements, and the legislation property interpreted contemplates that the addresses of each and all parties to the agreement must be identified. It seems to me that this so whether the agreement is for joint or several liability, as the purpose for which the address of the individual borrower or borrowers is required is for the purposes of ensuring that each and all of them obtain a copy of the loan agreement for the purpose of the cooling-off period requirements which I would consider below. The bank requires information in order to comply with certain other obligations in the Act of 1995 and the provision of an address for each of the borrowers on the credit agreement is the means by which the legislator has ensured that a credit institution has information by which it can meet those requirements.
75. Thus I consider that the defendants are correct that the credit agreement did not contain the names and addresses of each and all of the borrowers. It did not contain the address of Mr. Gerald Browne at all. It contained the incorrect address of Mr. Sean Browne, however, I consider that the address for Sean Browne was adequate to meet the requirements of the Act of 1995 and that counsel for the plaintiff is correct that an address for Sean Browne was provided in the credit agreement, namely the address at Ealga. That is an address at which he had resided, and at which he continued to have sufficient contact through his daughter and son in law who took up residence in the house when he surrendered his tenancy. A credit institution would not comply with this requirement under the Act of 1995 if it addresses a credit agreement to an old address of a borrower, but the evidence points in my view to Sean Browne, had sufficient ongoing contact with the address at Eagla for that to be an acceptable and current address for him for the purposes of correspondence.
76. However, I consider that the loan documentation is faulty in that it does not contain the address of Gerald Browne. Because the loan was joint and several I consider that Gerald Browne can be characterised as having made a separate promise to the Bank, and accordingly the conditions of the Act of 1995 with regard to him taken as a separate person must be met, he having entered into a separate and individual contract with the Bank to repay the loan.
The second alleged breach:
77. The second alleged failure is that the Bank failed under s. 30(1)(a) to provide a copy of the agreement to the borrowers. That subsection provides as follows:
“30.—(1) A credit agreement and any contract of guarantee relating thereto shall be made in writing and signed by the consumer and by or on behalf of all other parties to the agreement, and—
(a) a copy of the agreement shall be—
(i) handed personally to the consumer upon the making of the agreement, or
(ii) delivered or sent to the consumer by the creditor within 10 days of the making of the agreement,”.
78. It is not argued by the Bank that a copy of the agreement was handed personally to either or both of the defendants upon the making of the agreement, but it is asserted that it was delivered or sent to each of them within ten days of the making of the agreement by the letter of the 10th April, 2008 to which was attached the loan offer of the 9th April, 2008 to the borrowers. That cover note was addressed to both Sean and Gerald Browne at 19 Allen Square, Bandon, Co. Cork although the address on the loan offer itself was the address at Eagla.
79. The evidence is that a copy of the facility letter was also sent to Messrs. Casey & Co. Solicitors said by the Bank to be the solicitors for both defendants but in respect of which firm the second defendant denies any involvement. It cannot be denied that Messrs. Casey had some involvement with the transaction in that that firm were required to give an undertaking to complete the security and deal with certain other formal matters required before drawdown, and the monies were drawn down through the office of that firm. Thus it seems to me that the firm of Casey & Co. did act for both defendants, albeit the second defendant asserts, and this is not denied, that the fees of Messrs. Casey & Co. were discharged by the first defendant only, and this fact does not have the effect that Messrs. Casey & Co. did not act for both defendants. Having regard to the arrangement made between the brothers that the first defendant was to discharge the loan it was perfectly reasonable for them to agree that he too would discharge the legal fees attendant upon the putting in place the security for the loan.
80. The evidence is that a copy of the agreement was not sent to the second defendant at any address which could be characterised as an address for him. I do not believe that the legislation may be interpreted as meaning that correspondence sent to a solicitor or other agent is sufficient for the purpose of compliance with the Act of 1995. If that is what the legislation intended then it would have been stated in such a way as to make service of the loan agreement on an agent sufficient for the practice of compliance. The Act did not so provide.
81. Furthermore, it seems to me that at this stage where the question I am considering is whether the defendants have made out a bona fide case that the loan agreement was not provided to them at their addresses, the second defendant has made out a bona fide defence that the documentation was not properly served.
82. With regard to the first defendant, however, it seems to me that the cover letter under which the loan sanction letter was sent was addressed to him at the address he identifies as then being his residential address, namely at 19 Allen Square, Bandon. Having regard to the purpose of the legislation, being that documentation be received by a borrower for the purpose of the ten day cooling-off period, I am satisfied that the first defendant has not made out an arguable case that there was a failure under s. 30(1)(a)(ii) with regard to him.
Third alleged failure: breach of s. 54
83. The third alleged failure on the part of the plaintiff is that the Bank failed to serve a notice under s. 54 of the Act of 1995. Section 54 creates a limitation on the right of enforcement of a credit agreement and inter alia provides for service of a ten-day warning letter by a credit institution before any enforcement action is taken. Section 54(1)(c) requires certain matters to be specified in a warning notice, the relevant ones being:
“(iii) the name and address of the consumer;
(iv) the term of the agreement to be enforced;”
84. Breach of s. 54 does not make a credit agreement unenforceable but merely makes the notice of enforcement ineffective. Section 54(4) provides that a creditor may apply to a court of competent jurisdiction to have the provisions of s. 54 dispensed with where the court is satisfied that it would be just and equitable to do so. Thus breach of s. 54 can call on the discretion of the court.
85. The defendants allege that the notice served by the Bank breaches s. 54 in that it failed to identify the names and addresses of the consumers. This matter has been dealt with above. However, there is an additional plea made, namely that there was a breach of s. 54(2) of the Act of 1995 which requires a ten-day notice period before any action, such notice to identify the nature of the alleged breach. Two arguments are raised with regard to the warning letter sent. The first is that the warning letter of the 8th March, 2015 was insufficient to meet the requirements of the Act of 1995. In particular it is asserted that the creditor must give 21 days to the debtor to repay a loan or remedy a breach of a loan agreement. The notice was served on both by registered post on the 28th March, 2012, on the second defendant to his address at Suncroft, Co. Kildare and on the first defendant at Allen Square, Bandon. Counsel for the defendants asserts that the figure stated in the notice, in respect of the total arrears and total surcharge interest, was wrongly calculated as was the amount of the overdue instalments. Counsel for the plaintiff asserts that that error, if there be an error, is not one of sufficient gravity to void the notice itself and I accept what he says. The legislation requires that the default and the nature of the alleged breach be identified as must the sum, if any, required to be paid as “compensation for the breach”. The error identified by the defendants is an error in the calculation, but the letters adequately in my view identify the nature of the alleged breach as being a failure to meet payments when they fell due, such failure being one that is not denied by either defendant. It is a breach capable of remedy in that the defendants could have, but did not, offer to pay the arrears. Neither of them was in a position to pay the arrears at the time of demand in 2012, and that inability did not in any way occur because of the minor miscalculation made by the Bank in its calculation of the outstanding amount and the correct amount in respect of which credit ought to have been given.
86. Furthermore, I accept the argument of the plaintiff that a large number of demand letters were sent to the defendants since the 13th January, 2009, and letters in standard form were sent every month until 3rd February, 2010 after which different form letters were sent. I note the letters were sent to the old address of the first defendant, i.e. to his address at Riverview Estate which he had left in 2003, but equally it must be noted that some of the letters were sent to Mr. Sean Brown at his address at Allen Square, the earliest of which was sent on the 18th April, 2011. The position with regard to Gerald Brown is somewhat different in that the correspondence of the 23rd August, 2011, and the 19th September, 2011, is addressed to him at Riverview Estate, at no time an address at which he resided or which was a postal address for either him or indeed for the first defendant since 2003.
87. However, it must be noted in this regard that a reply was received to the demand letters from Sean Brown on the 11th March, 2010 where he identified a firm of solicitors that would act for him, a different firm of solicitors but also a firm in Bandon, County Cork, and by which he asked the Bank to “defer matters” for six months to see if he could “get to grips with things”. In this letter he sought the indulgence of the Bank having regard to the collapse of the Spacecab business and the fact that he was in significant arrears with seven identified creditors, including the plaintiff, and that he was suffering from very poor health.
88. More crucially however, the defendants argue, that the letter of the 28th March, 2012 and the final letter of demand pre-proceedings of the 18th April, 2012 in each case failed to identify the arrears. In the letter of the 28th March, 2012, the arrears were identified as €116,043.51, and at the 18th April, 2012 as €116,678.31. These are not the arrears figures at the relevant dates but the full redemption amount, and while that sum is correctly identified in the letter of the 18th April, 2012 as the full redemption figure, it is incorrectly identified as the total arrears in the first of the two letters of the 28th March, 2012. The legislation requires a 21-day warning letter to identify the means by which a borrower may remedy a defect, and in the case of a loan payable by instalments, the requirement is that the arrears of instalments to the relevant date be identified. These were not identified in the letter of the 28th March, 2012, and that leads me to conclude that the Bank’s warning letter of the 28th March, 2012, did not meet the test at s. 54. Furthermore the letter also contains what must be regarded, at least at this stage in the proceedings where the Bank claims summary judgment, as a relevant and important error, namely that the warning letter of the 28th March, 2012, seeks payment of the total sum within 21 days of the date of the letter, rather than as the legislation requires within 21 days of service of the notice.
89. This has two consequences in this case. The letter sought payment of the full redemption amount, when it should have identified the arrears of instalments and not the full amount owed, and insufficient notice was given. The notice did identify the date when the account fell into arrears, the number of payments missed in respect of the loan facility, but the warning letter is problematic in that it identified the means by which the breach may be remedied as the payment of an identified amount which is far in excess of the 36 unpaid instalments.
90. While I accept that the requirements of s. 54 do not make a loan unenforceable, nor totally avoid an enforcement process commenced by a bank, and that the Court has a discretion to dispense with the provisions of the section when it is satisfied that it is just and equitable to do so, I do not consider it is appropriate for me in a motion for summary judgment to consider the justice or equity of the matter, or to dispense with the notice requirements under s. 54 at this stage, having regard to the significant error in the Bank’s demand letter in that it incorrectly conflated the arrears amount with the full redemption figures. Thus any dispensing with the requirements of s. 54 ought to await a full trial. Further, when taken with some of the other breaches of the Act of 1995, this error is in my view sufficient at this stage to refuse the plaintiff summary judgment.
91. I conclude therefore that Gerald Browne has established a prima facie case that the 2008 facility was a consumer loan, and the Bank did not meet the requirements under s. 30 and/or s. 54, and that, accordingly, he has made out a sufficient case to avoid summary judgment being entered against him.
92. With regard Sean Browne, I consider that Sean Browne has established sufficient argument that the loan to him is a consumer loan but I am not satisfied he has made out a sufficient case that there has been a breach of s.30. There has, however, been a breach of s. 54, in that the warning letter did not identify the amount of arrears, and instead identified the amount then outstanding on the loan as a whole. That error is one which may be forgiven by a court in due course, but one which to my mind is sufficient to enable this defendant to resist an application for summary judgment against him. This is so notwithstanding the argument made by the plaintiff that neither defendant has said on affidavit that either or both of them would have been in a position to meet the arrears had the arrears been adequately identified. The stark fact of the case is that both defendants are of very limited financial means and the loan fell into arrears because of Sean Browne’s unanticipated financial and health crisis. I do not consider that the legislation may be interpreted as allowing a credit institution to avoid the provisions of the Act of 1995 merely on account of the fact that a borrower can be shown to have been incapable of meeting his or her contractual liabilities because of financial difficulties, and the purpose of the legislation is to protect consumers at the inception of the loan to redress an imbalance in negotiating powers between bank and customer. Further, I do not consider that the legislation envisages a credit institution avoiding compliance with the Act of 1995 merely on account of the fact that, at the time the facility is called in, a defendant would be, were all of the requirements of the Act complied with, not in a financial position to discharge the loan. The test of compliance with s. 30 must be made at the time the loan is advanced, and compliance with s. 54 must be tested at the time of the notice and in the context of that notice. The purpose of the legislation was to redress an imbalance in bargaining power at inception, and to fail to recognise that imbalance in the context of a financial inability of one party to pay, would be to allow the stronger party to take advantage of a financial inability which might make repayment impossible or difficult.
Other grounds of argument
93. Notwithstanding that my determination above means that summary judgment will not be awarded, and because several other grounds were advanced by the parties, and, I turn now to deal with those.
Estoppel
94. Counsel for the Bank asserts that even if it is established by the defendants or either of them that they were consumers, and if either or both of them establish a prima facie argument that there has been a breach of the legislation with regard the loan and/or the enforcement procedures adopted by the Bank, that the defendants and each of them are estopped from denying the validity and/or enforceability of the credit agreement. It is asserted in particular that the Bank used the same addresses for the second defendant Gerald Browne in all documentation relating to the 1999 and 2008 facility, and as the second defendant did not deny either the validity or enforceability of the 1999 agreement, he is estopped from denying the validity and enforceability of the later agreement where similar or identical procedures and addresses were used, and where the first defendant was used as the “lead borrower”. I do not consider that an estoppel can arise against either defendant by virtue of a course of dealings between the parties for the following reasons.
95. The provisions of the Act of 1995 are in many cases mandatory, and the specific requirements of s. 30 are mandatory in all cases. Thus a credit institution may not raise a defence of estoppel against a customer pleading that non-compliance with s. 30 has rendered a loan unenforceable. The principles of estoppel have no place in the case of mandatory statutory requirements such as these. This view is enforced by the fact that the court does have discretion to consider the effect of a breach of s. 54 of the Act, but no discretion is available to the court arising from a breach of s. 30. While the elements of estoppel and the exercise of the court’s discretion arise from different legal principles, both the law on estoppel and the elements that might influence the exercise of discretion by a court arise from broadly similar considerations of a need to ameliorate the strictness of certain requirements or the results of the application of strict law. I do not consider that the Oireachtas intended, in the case of s. 30, to allow a court to, in effect, exercise and apply discretionary and equitable principles to forgive a breach of that section. Section 30 is mandatory and is provided to be such by legislation. Compliance with s. 54 may be dispensed with if the justice of the case so demands. I consider the juxtaposition of the two sections and the different approaches available to the courts in regards to a breach of each means that the Oireachtas did not intend that circumstances could arise where a credit institution might indirectly avoid compliance with s. 30 by establishing an estoppel.
96. Even if I am wrong in this, it seems to me that the Bank has not sufficiently established facts to found an estoppel against Sean Browne. I have already taken the view that the address used for the first defendant was, for all relevant purposes, a postal address at which he could be contacted, and that the loan documentation was sent to him at his then current residential address. The position is quite different with regard to Gerald Browne and his address was not identified in the correspondence or in the loan documentation itself. The Bank has not sought to argue that it would not have advanced the loan to Gerald Browne had it known that he had a different address, or that any representations were made by Gerald Browne that encouraged or influenced the Bank in its decision to advance credit to him and his brother. The Bank’s decision to advance the 2008 credit facility is adequately identified in the documentation, namely it considered that there was sufficient loan-to-value ratio between the security offered over the Donegal lands and the amount advanced, and Sean Browne who was regarded as the “lead borrower” was identified as having sufficient income and assets to discharge the loan, and had a sufficiently long relationship with the Bank. The inclusion of Gerald Browne was most likely made for the purposes of closing off any argument with regard to the security over the Donegal lands, as these lands were held in joint names.
97. Thus I do not consider that the Bank may argue that either or both of the defendants are estopped from relying on s. 30. I have expressed my view with regard to the justice or equity in dispensing with the requirements of s. 54.
98. However, both defendants themselves also argue that the Bank is estopped from seeking to enforce the loan. This estoppel is alleged to arise from the fact that the loan documentation for 2008 identified the credit facility as being a consumer credit facility and that accordingly the Bank is estopped from now seeking to argue that the loan may be otherwise characterised.
99. The case law is clear that the test of whether a loan is a consumer or a commercial loan is one that must be objectively made and does not depend on the characterisation that the parties, or either of them, gives to the credit agreement. This much is clear from Allied Irish Bank Plc v. Higgins and Allied Irish Bank Plc v. Fahy, and was also identified by the European Court of Justice in Benincasa v. Dentalkit. For that reason, it seems to me that the question of estoppel does not arise as the Bank’s characterisation of the loan is not determinative of its true legal status, nor I do not accept the argument by counsel for defendants that the Bank’s characterisation, by virtue of the conditions contained in the 2008 loan agreement which was drafted with both the Act of 1995 and the Consumer Protection Code in mind, amounts to a representation to the borrowers that the loan was a consumer loan which would not be enforced other than in accordance with the statutory requirement. I do not accept that such a representation is either express or implicit in the language used in the 2008 agreement, but more especially I do not consider that an estoppel by representation can arise because the Bank’s characterisation of the loan, and the way in which it described it, whether in the documentation itself or in the affidavit evidence, does not determine the matter which must be determined by the court on an objective basis.
Conclusion
100. Thus, I consider that neither the plaintiff nor the defendant may be said to have raised an arguable estoppel against the other.
Specific defence of second defendant: non est factum
101. Gerald Browne also argues that the loan against him was void as not being his document, and that he entered into the 2008 agreement with the Bank on the mistaken agreement as to the legal import of that agreement.
102. His evidence is that he believed he was signing over his share in the Donegal lands to his brother, and that that was the purpose of the 2008 loan sanction agreed by him. The evidence is that the two brothers did discuss the transfer to the Donegal property to Sean Browne in consideration of the taking over by Sean Browne of the outstanding loan on that property, and other consideration not then agreed between them. In his affidavit sworn on the 13th January, 2015 the second defendant makes the following averment:
“…at all times I believed that I was only signing over my share in the Donegal Lands to him; I did not know that I was accepting a letter of loan offer.”
103. He says that his brother was in the grip of particularly serious health problems at the time at the time the 2006 facility was negotiated and that he knew nothing of this facility and he was not a party. He was aware, however, that in 2008, his brother required money to renovate the premises at 19 Allen Square which he says was always to become his primary dwelling house. He says he did not instruct Messrs. Casey & Co. Solicitors to represent him regarding the 2008 facility. He explains the signing of the documents as having arisen following a phone call from his brother in Cork city, during which his brother asked him to attend at his solicitor’s office to sign the documents which were “put in front of me by Sean’s solicitor”. He says did not receive any of the monies advanced in the 2008 facility, and that the Bank intended to contract with Sean Browne only. He says that this is apparent from the internal credit analysis documentation of the Bank.
104. I find it credible that the second defendant might have considered it desirable or helpful to his brother to sign over the lands in Donegal to him for the purposes of dealing with certain financial and other difficulties that he had at the time, and for the purposes of obtaining a loan to renovate his premises at Allen Square. However, I do not consider it credible that Gerald Browne could have mistaken the document executed by him in 2008 as a deed of transfer. This is for a number of reasons. Gerald Browne had purchased the property in Donegal in 1999 with his brother and he also owns the dwelling house in which he now resides, which he co-owned with his wife who is now deceased. He cannot for that reason be wholly unfamiliar with contract or title documentation. Furthermore, the documentation that he signed contains a number of elements which quite clearly identify that it is a loan offer, including, in particular in the first page thereof, details in bold print, and set out in seven numbered paragraphs, the amount of credit advanced, the period of the agreement, the number of instalments, the amount of each instalment, the total amount repayable, the APR and the total cost of credit. The document that was executed by the two brothers runs to 18 pages, to which was annexed the page containing reasons why the product is considered suitable, and a memorandum of acceptance executed by both brothers on the same date, the 22nd April, 2008, as well as another appendix containing a waiver of the ten-day cooling off period. Clause 2, under the heading “purpose”, identifies one of the purposes of the loan as being to release equity on the Donegal lands to finance renovations of Sean Browne’s primary dwelling. Accordingly, I do not consider it credible that Gerald Browne did not know that there was, at the very least, a bank involved, and the amount of money described in the first page of the loan was far in excess of the amount outstanding on the security of the Donegal premises. I do not accept that the second defendant has made an arguable case that he signed the loan offer in the mistaken belief that he was transferring the lands in Donegal to his brother, and I also consider that it is appropriate and proper for me in an application for summary judgment to consider whether the averments in the affidavit of Gerald Browne are credible so that they raise a prima facie defence. In particular, I consider that a court, in hearing a motion for summary judgment, is entitled to weigh and test the evidence adduced in the affidavits and to apply a degree of judgement and common sense in this exercise.
105. In that regard the court is entitled to make a judgment as to the credibility of a particular proposition or factual matrix alleged by a defendant. While the second defendant, in one of his affidavits, did assert that his brother was beneficially entitled to the Donegal lands having regard to the fact that he made all the payments on that loan, he later resiled from that position and I regard that as significant. In that regard, I consider that, having regard to the fact that the Donegal lands were acquired by the brothers in 1999 for “sentimental” reasons, that neither of them developed it and neither of them approached it with any particular unique proprietorial focus, that the loan repayments, while they were channelled through the account of one brother, seemed to have been met, at least informally, by both of them from their individual resources, that the averment on the part of the second defendant, that he believed he was executing a document to transfer the Donegal lands to his brother is not credible. The document that he signed manifestly does not do this, and the particular layout of the document is a matter of some significance in that context, in that even a cursory glance at the document would identify some of its features as being suggestive of a loan. Furthermore, in the absence of a credible reason why Gerald Browne might have transferred his entire legal and beneficial interest in the Donegal lands to his brother, I consider it unlikely that he might have considered in April 2008 that that is precisely what he was doing.
106. Furthermore, I must in the context of the plea of non est factum, have regard to the fact that, while signature of itself may not be sufficient to bind a party to the full terms of a document that was signed, the law is established that a party may not be excused merely on account of not having read a document. In ACC Bank PLC v. Kelly [2011] IEHC 7, Clarke J. pointed to the fact that if a person signs a document without reading it, then “they must accept the consequences”. If a person signs a document without fully understanding it, that person must equally accept the consequences, and, as he put it:
“After all, those are the terms on which the borrower gets the money. The borrower has taken the money. The borrower cannot then turn around and say that the terms were not properly understood unless the relevant financial institution has been guilty of legal wrongdoing in the way in which the contract came to be signed such as by misrepresenting its contents or the like.”
107. Gerald Browne did not assert that the Bank misrepresented the form of the document, or that even had he read it, he would not have understood it having regard to any misrepresentation or mischaracterisation contained in the document itself. He could not reasonably have made such an argument as the document is relatively clear and does not contain any unusual or particularly opaque terms.
108. Thus I consider that Gerald Browne has not made out even an arguable case that the document he signed was not his document, and that he executed the loan document as a result of a fundamental mistake as to its character, meaning or effect.
No Element of a Valid Contract
109. Counsel for Gerald Browne also argues, following the direction of Charleton J. in Friends First Finance Ltd. v. Lavelle [2013] IEHC 201, there was “never any meeting of mind, never mind any meeting in person, whereby that individual could truly be called a borrower as a matter of contract.” Ms. Lavelle, the borrower, was sued for judgment in the sum of approximately €2.25 million advanced for the purposes of an equity investment. The facility was in fact intended to be taken by Ms. Lavelle’s husband, but for “tax planning reasons” was taken by her in her sole name. The evidence was that Ms. Lavelle never met the bank, or any representative of the bank, and the bank wrote to Mr. Lavelle and not to his wife, and the documentation was signed in the agency of Mr. Lavelle himself. Charleton J. concluded that Ms. Lavelle was entitled to the defence of non est factum but went on to say, albeit obiter, that:
“I would regard it as repellent that a financial institution could hold someone to a bargain in the borrowing of a huge amount of money when there was never any meeting of mind, never mind any meeting in person, whereby that individual could truly be called a borrower as a matter of contract.”
110. Charleton J. seemed to accept in this dicta that the absence of a meeting in person was indicative of an absence of a meeting in mind, and therefore indicative of an absence of the consensus ad idem of a necessary element in a valid contract
111. Having regard to the view I take, that Gerald Browne has not made out even an arguable case that he believes he signed a document for the purpose of transferring the property in Donegal to his brother, I cannot conclude that there was an absence of consensus ad idem with regard to the purpose of the loan. However counsel argues that, in addition, the judgment of Charleton J. must be seen as one where the “mutuality of understanding as to their obligations” is necessary as between the parties.
112. I consider that the second defendant cannot succeed in this argument and that the element of lack of consensus is intrinsically bound up with his assertion, which I find not to be credible, that he believes he was signing a document for the purpose of transferring the Donegal lands, and not executing a loan document. For that reason, I do not believe that Gerald Browne has made out even an arguable case that he never intended to contract with the Bank.
113. For similar, albeit somehow different, reasons I do not accept the argument of counsel that there has been a total failure of consideration in regard to Gerald Browne. Even if it is accepted by a court that Gerald Browne was added to the transaction for “simplicity’s sake”, and because he was a co-owner of the lands in Donegal intended to be offered as a security, and that the monies were to be advanced for the sole, individual and separate purposes of Sean Browne, Gerald Browne did obtain consideration albeit that the consideration was the advance by the Bank, at his request and with his knowledge, of monies for the benefit of his brother. Consideration does not have to be consideration that passes directly to each contracting party, and a party may get consideration for a promise if that party requests a loan for the benefit or purpose of a third party. The mere fact that Gerald Browne might have been added to the documentation for simplicity’s sake does not make him a straw man for the purposes of the contract, albeit it might be said that the consideration he received was small or non-existent in monetary terms, and the consequence for him in relation to the loss of the lands in Donegal were significant and far-reaching.
Unconscionable Bargain
114. Gerald Browne also argues that the contract of loan, if such was found, was an unconscionable bargain with regard to him. An inadequacy of consideration is one factor that may lead a court to take the view that a bargain is unconscionable as is explained by Laffoy J. in Secured Property Loans Ltd. v. Floyd [2011] 2 IR 652. Consideration in the form of an advancement of money to a third party may indeed be inadequate in certain circumstances but when the parties are brothers, and when one desires by his actions, to support the other, the consideration will not be inadequate. What is inadequate consideration in the context of perhaps two persons of unequal bargaining power depends on the relationship between those persons and the extent to which, if any, it might be considered reasonable or proper for one of them to support the other through a difficult time.
115. Gerald Browne did some work, albeit on a relatively casual basis, for the company part owned by his brother Sean. Both brothers equally owned the property in Donegal and there is no suggestion that there was any element of inequality or absence of bargaining power as between the two brothers. The adding of Gerald Browne’s name “for simplicity’s sake” was to facilitate the provision of security for the loan, but neither defendant can argue that the loan would have been advanced without that security, and it seems unlikely that an unsecured loan would have been advanced to Sean Browne. One must bear in mind also in that context that Sean Browne had a fairly significant loan with another financial institution to acquire the property in Allen Square, Bandon and that the only available security was the Donegal property. Thus the availability of the Donegal property as security strengthened the hand of the Browne brothers when they came to negotiate with the Bank and, in that context, it seems to me not to be credible that Gerald Browne was thereby disadvantaged, or placed in a position where the agreement was unconscionable to him. I consider that Gerald Browne cannot show that he received no consideration for the loan, as he himself was aware of his brother’s difficulties and appears to have been happy or indeed anxious to assist him, and his care for his brother in his financial and other difficulties was perhaps the guiding force in his decision to assume the 2008 borrowing. It must be remembered also at the time that the borrowing was advanced in April 2008, neither the borrowers nor the Bank itself, could have been aware of the impending financial crash, and each of the parties assumed that Sean Browne would be in a position to pay the instalments on what was, at that time, a relatively small repayment amount.
116. Furthermore, I am not persuaded that the loan was unconscionable, also for the reason that Gerald Browne did give a personal guarantee for the loan in addition to the provision of security over his share in the Donegal lands, and that contract of guarantee was agreed on a non-recourse basis. The fact that Gerald Browne had negotiated a non-recourse guarantee, by which he achieved a significant advantage not always available to guarantors, also points to the fact that there was no absence of consideration, and nothing unconscionable in the agreement, albeit in the circumstances which later evolved and which had more to do with the financial crash than with any individual action or inaction on the part of either borrower, which led to the loan now becoming a significant and burdensome obligation for these two borrowers.
Decision
117. For the reasons stated in the first part of this judgment I refuse summary judgment.
KBC Bank Ireland Plc v Browne
[2015] IEHC 795
JUDGMENT of Mr Justice Max Barrett delivered on 15th December, 2015.
I: Nature of Case.
1. This is an application for summary judgment in respect of a debt owing by Mr Osborne to KBC Bank.
II: Background Facts.
2. Pursuant to a facility letter dated 11th November 2002, as amended, KBC made three secured loan facilities available to Mr Osborne: (1) Facility 1, being a sum up to €1.116m by way of a 15-year term loan to refinance existing debt of Mr Osborne from Permanent TSB, secured on certain industrial units located at Gorey Business Park in County Wexford; (2) Facility 2, a development finance loan which has since been repaid and thus merits no further consideration; and (3) Facility 3, being a sum up to €2.15m, by way of 15-year term loan to refinance Facility 2 upon the completion of the relevant development works. (For ease of reference, the court hereafter refers collectively to these loan arrangements as the “First Facility”). The 2002 facility letter provided that KBC was entitled to demand repayment of the First Facility at any time.
3. In addition to the First Facility, pursuant to a facility letter dated 11th October 2004, KBC made the following two loan facilities available to Mr Osborne: (1) Facility 1, a development finance loan which has since been repaid and thus merits no further consideration; and (2) Facility 2, being a sum up to €2.5m, by way of a 15-year term loan to refinance Facility 1 upon the completion of the relevant development works. (For ease of reference, the court hereafter refers collectively to these loan arrangements as the “Second Facility”). The 2004 facility letter provided that KBC was entitled to demand repayment of the Second Facility at any time.
4. In 2007, an additional loan facility in the sum of €1.985m was made available by KBC by way of amendment to the 2004 facility letter, to fund additional construction and other costs relating to the completion of Gorey Business Park. Also, the amount of the facility made available under the Second Facility increased by €250k. No further security was granted at this time, KBC apparently being satisfied that the LTV ratio was such that no additional security was required.
5. A total of just over €7m was drawn down pursuant to the 2002 and 2004 facility letters, as amended.
6. In 2009, Mr Osborne reported that he was continuing refurbishing works at the business park but was experiencing cash-flow difficulties and was unable to meet scheduled payments. KBC agreed to capitalise the arrears, pursuant to amending facility letters dated 28th September, 2009, the repayment requirements being restructured to allow for payment of interest and part-payment of capital. Over the course of 2010-2012, KBC agreed, following requests by Mr Osborne, to provide further capital moratoria and to capitalise the arrears as Mr Osborne continued not to be able to meet his repayment obligations.
7. Pursuant to the 2002 and 2004 facility letters, KBC required an assignment of certain leases. No such assignments were ever provided. Moreover, certain significant rental income (it appears in excess of €600k per annum) is apparently being received by Mr Osborne but has not been paid to KBC in repayment of his outstanding loan obligations. KBC has included at clause 11(a) of its standard terms and conditions a provision that “Any indulgence by the Lender in the enforcement of any term or condition of a facility letter (or any agreement relating thereto) or a waiver by the Lender of any breach of any term or condition shall not constitute a general waiver of such term or condition and will be without prejudice to any other term or condition”. The effect of this clause is that,e.g.KBC’s non-insistence upon certain security requirements, rebounds ultimately on Mr Osborne, not KBC.
8. In any event, in or around January 2013, the facilities reverted to full interest and capital repayments. A request for a further interest-only period made by Mr Osborne at this time was declined. In March 2013, KBC requested that Mr Osborne provide additional security in return for a revised repayment plan. No proposal as to revised security was received from Mr Osborne. Moreover, around this time, Mr Osborne indicated that certain fire safety works were required to be (and, the court understands from Mr Osborne’s contentions at the hearing, have been and continue to be) made to Gorey Business Park. Mr Osborne indicated that these works would require to be funded from rental income and would not be completed until November 2016. Although KBC has repeatedly requested detail on these works and the expenditure required, the desired level of detail has not been forthcoming.
9. Between January and May 2014, Mr Osborne indicated that a purchase of the business park or a refinancing by a third party could be forthcoming. Neither came to fruition.
10. On 13th November 2014, KBC issued what it calls a “reservation of rights letter”. In ordinary parlance it is a ‘Do what you’re supposed to do or we’ll do what we can do’ letter. It is the kind of letter that all of us would fear to receive from a lending institution as it suggests that the institution is getting serious about enforcing its contractual rights if matters do not improve. Notably, however, even after this letter issued, KBC sought to achieve a consensual agreement with Mr Osborne. Throughout the summer of this year, KBC met on numerous occasions with Mr Osborne and appears to have been pushing him to sell all of the units that he owns in the business park with a view to satisfying as much of his outstanding debt as he could. Perhaps KBC would then have been willing to ‘take a view’ on any still outstanding debt – who knows? – but the point is moot; Mr Osborne was not willing to take the course being advocated by KBC.
11. By September of this year, it was clear that no consensual agreement would be reached between bank and borrower. Accordingly, KBC issued a summary summons against Mr Osborne on 29th September last and the matter came on before this Court a couple of months later.
III: The Test for Summary Relief.
12. The hurdle to be surmounted by Mr Osborne 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:
“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, 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.”
14. The court returns to these principles later below. First, it pauses to consider certain contentions of Mr Osborne as to why this matter is not one suitable for summary judgment and ought instead to go to full hearing.
IV: Mr Osborne’s contentions.
i. Is Mr Osborne a ‘consumer’?
15. Mr Osborne contends that he is a “consumer” within the meaning of the Consumer Credit Act 1995, as amended, and that the requirements of this Act have not been observed by KBC. There is no basis for this contention. Even a cursory examination of the loan documentation clearly indicates that what is involved is commercial lending. These are business loans issued to a businessman in respect of a business park. There is no consumer dimension to them. Moreover, Mr Osborne at clause 8 of the 2004 facility letter warrants that “…he is availing of the facility in connection with his business or profession as a Business Park Proprietor and, accordingly, he is not borrowing as a consumer for the purposes of the Consumer Credit Act 1995.”Of course, such a representation does not prevent the court from finding that a person is other than what he represented himself to be, but neither does it assist that person when he subsequently claims not to be as he previously represented. In any event, with or without the presence of this representation (and one cannot lightly get over the fact that it is ‘with’) all the facts of this case indicate most clearly that Mr Osborne in treating with KBC in respect of the loans in issue did not and does not do so as a consumer for the purposes of the Act of 1995.
16. In arguing that he was a “consumer”, Mr Osborne referred to the recent judgment by Baker J. in ACC Loan Management Ltd. v. Browne and Anor [2015] IEHC 722. This judgment includes the conclusion in respect of the Consumer Credit Act, at para.52, that:
“[T]he legislation is such that a person is a consumer unless it can be shown that the person is acting inside the person’s business. I accept the argument of counsel for the defendant that the legislation is drafted such that in a sense the default position is that all natural persons are consumers unless it can be shown they [are not]”.
17. This Court, respectfully and regretfully, cannot agree with this particular conclusion. It seems to this Court, with respect, that the default position under the Consumer Credit Act 1995, as amended, is that some natural persons are consumers and some are not, and no more. A natural person does not benefit from any default position or presumption as to his or her status, and his or her opponent has no default position or presumption to overcome in this regard. The only default position arising under the Act of 1995 is that a person other than a natural person cannot, at this time, be a consumer thereunder. Whether this last fact ought to be so, whether there are some non-natural persons whose business affairs are so small in scale that they merit protection as a form of consumer is a matter of policy for our lawmakers – though it does seem odd that the moment a natural person in effect incorporates herself or himself to avail of the benefits of limited liability, s/he must immediately forfeit the benefits of the Consumer Credit Act regime.
18. As it happens, Mr Osborne is a “consumer” within the meaning of the Central Bank’s Consumer Protection Code, though not a “personal consumer”. However, he has not claimed that any of the requirements of that Code have been breached by KBC. Indeed, the court cannot but note that KBC appears to have acted with that spirit of forbearance and reasonableness in its dealings with Mr Osborne which generally informs the provisions of the Code, in circumstances where Mr Osborne has failed to put in place certain assignments of leases, not paid over rent monies received, embarked upon curing the fire safety issues without responding to certain reasonable queries from KBC, and ultimately been unable to agree any way forward that satisfies KBC as lender.
ii. Is Mr Osborne in a partnership with KBC?
19. Beyond asserting that he is in a partnership with KBC, Mr Osborne has not offered any proof of this assertion. He has, it is true, pointed to his longstanding practice of keeping KBC apprised of the various details of developments at, and issues concerning, Gorey Business Park. In fairness to KBC, however, it does not appear that Mr Osborne has always been forthcoming with every detail, e.g., as to the details of what is happening regarding the cure of the fire certificate deficiencies and what appears to be the expenditure in that process of rent monies that KBC clearly considers could be put towards loan repayment. But be that as it may, the court, in any event, does not see in the aforementioned provision of information anything more than the natural commercial desire of a prudent commercial borrower to keep his lender apprised of matters so as to avoid any misunderstandings arising if repayment difficulties, breaches of covenant or other problems should arise. Mr Osborne’s commercial ‘reward’ for his general openness likely finds manifestation in the degree of indulgence and forbearance that KBC has hitherto afforded him. But there is nothing in any of this that hints of partnership.
iii. The fire certificate.
20. As the court understands Mr Osborne’s contentions in this regard, it is that he was required to mortgage certain premises for the benefit of KBC and to the satisfaction of its solicitors. It appears that the absence of a fire certificate was not recognised when the requisite mortgage documentation was executed and that Mr Osborne has been seeking of late to resolve the issues that this presents. But taking Mr Osborne’s arguments at their height (and ignoring the obstacles that appear offhand to arise), even if he were able to establish that KBC and/or its solicitors were guilty of some form of negligence as regards the original procurement of the certificate, and he has as yet commenced no proceedings alleging such negligence, this is no defence to the within application.
iv. Complex proceedings.
21. In his affidavit evidence, Mr Osborne claims that the within proceedings “are grounded in complex financial transactions…stretching over a number of years” and that their very complexity requires that this matter go to plenary hearing. The court, with respect and regret, does not agree with him in this regard. The key elements of the relevant loan agreements are as identified above, there has been protracted default on, amongst other matters, the repayment obligations, and KBC is now seeking recovery of what is owed to it under those loan agreements. The amounts involved are vast, the dealings between the parties are considerable, the documentation in place is lengthy, but the matters in issue are simple: borrowing has happened, default has arisen, recovery is sought, no defence is apparent. There is nothing in this that requires that this matter be sent now to plenary hearing.
V. Conclusions.
22. It seems to the court that, even taking the very low threshold identified by Hardiman J. in Aer Rianta, it is very clear that Mr Osborne has no defence to the recovery of the monies sought in the within application and that there are no issues to be tried in this regard. Any such issues as Mr Osborne has sought to raise are readily addressed, and have been addressed above. Mr Osborne’s affidavit evidence fails to disclose even an arguable defence. Mindful of that circumspection urged by McKechnie J. in Harrisrange, mindful of the considerable time and energy that Mr Osborne has expended on Gorey Business Park over the years, and mindful most of all that the cost of legal representation is now such that Mr Osborne has been compelled through circumstance to argue his case in person and so without the benefit of professional assistance, the court considers nonetheless that, even bringing “discernible caution” to the question of whether or not to grant summary judgment, it is a lamentable but inexorable consequence of all the foregoing that the summary judgment now sought by KBC must be granted as sought, and that there is no basis for referring this matter to full plenary hearing.
23. In closing, the court notes that at the hearing of this matter, Mr Osborne sought to emphasise his honesty. KBC rightly indicated that it did not seek to impugn Mr Osborne’s honesty. Neither does the court. If certain security was not put in place or certain information was sometimes not provided, that is the ‘way of the world’. These things happen, there is generally nothing more to them than that they occurred, and there is certainly nothing more to them here.
24. As Mr Osborne is a so-called ‘lay litigant’, the court would respectfully draw his attention to the fact that he is entitled to bring an appeal against this judgment.
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
9. 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.
Bank of Ireland v Curran
[2016] IECA 399
JUDGMENT of Ms. Justice Irvine delivered on the 21st day of December 2016
1. This is an appeal by the second named defendant, Mrs. Maureen Curran, (“Mrs. Curran”) against the judgment and order of the High Court (McGovern J.) of 21st December, 2015, whereby he granted the plaintiff / respondent, the Governor and Company of the Bank of Ireland (“the bank”), summary judgment against Mrs. Curran for the sum of €1m. The issue on this appeal is whether the trial judge erred in law when he concluded that Mrs. Curran had not established a bona fide credible defence to the bank’s claim such that the proceedings ought to have been remitted to plenary hearing.
2. The bank, in its claim which was commenced by summary summons on 27th October, 2015, sought judgment against Mrs. Curran on foot of a guarantee dated 28th May, 2008, ( “the guarantee”) whereby she guaranteed the liabilities of a company, XL Fuels Group Ltd. (“the company”), to the extent of €1m. plus interest.
3. Following the issue of the bank’s motion for summary judgment on 2nd November, 2015, affidavits were exchanged between the parties. Three in number were sworn on behalf of the bank detailing Mrs. Curran’s dealings with the bank and the circumstances surrounding her execution of the guarantee. In response, Mrs. Curran swore two affidavits in which she advanced her intended defence. Mr. Michael Ryan, a solicitor who had acted on her behalf concerning other banking transactions concluded some weeks earlier, also swore an affidavit on her behalf.
4. In her affidavits Mrs. Curran set out to demonstrate that there were three grounds upon which she might arguably and credibly defend the proceedings; the first being that the guarantee was unenforceable as one executed under undue influence, the second that the guarantee was unenforceable as an unconscionable bargain and, thirdly, a defence based on the doctrine on non est factum.
5. In his detailed judgment delivered on 21st December, 2015, McGovern J. addressed the evidence upon which Mrs. Curran relied in support of her three potential grounds of defence before concluding that she had not established any arguable defence to the proceedings.
Relevant background facts
6. It is only possible to consider whether the trial judge erred in law in failing to refer the within proceedings to plenary hearing if the relevant background facts are known. For this reason I will try to summarise the more relevant aspects of the evidence that was before the High Court.
7. The company was incorporated in 2007. Mrs. Curran was a director of the company and was also its secretary. She received what was described as a “stipend” in respect of such services.
8. By facility letter addressed to the company secretary dated 28th May, 2008, the bank agreed to make additional facilities available to the company on the terms and conditions therein proposed. These included the requirement that further security would be provided in the form of a letter of guarantee (limit of €1m.) to be executed by Mrs. Curran. The acceptance of that facility was signed by Mrs. Curran and her son, Michael Curran, the first named defendant.
9. On the same date, at her home which was at her request, Mrs. Curran signed the aforementioned guarantee in the presence of two bank officials, Vivien Rountree and Lorraine Kavanagh. Mr. Michael Curran was not in attendance.
10. It is not disputed that Mrs. Curran signed the guarantee in three places. The first signature appears beneath a warning advising that if the borrower failed to pay the guarantor would become liable to discharge the outstanding loan together with interest and which also advised that prior to signing the guarantee independent legal advice should be obtained. The second signature acknowledges receipt of a copy of the guarantee and indemnity. The third signature appears beneath a statement written by Mrs. Curran which advises that she understood the nature of the liability she was undertaking and that she did not wish to obtain the independent advice of a solicitor. It is accepted that the text of this last statement, whilst written in the hand of Mrs. Curran, was one which would have been read out to her by one of the bank officials present.
11. It is not disputed that the following day Mrs. Curran received a letter from the bank enclosing a copy of the guarantee. The same letter explained the reason for which the guarantee had been required and also advised her that the bank would review the ongoing facility in three months time.
12. On 22nd September, 2008, the bank wrote to Mrs. Curran asking her to confirm that she was amenable to permitting the bank to rely upon the guarantee as continuing security for the facility then being afforded to the company, a request accepted by Mrs. Curran as acknowledged by her signature which she duly appended to the acceptance form enclosed with the bank’s letter.
General principles
13. The parties are not in dispute as to the threshold which a defendant must meet in order to avoid summary judgment. The question the Court must ask itself is that identified by Hardiman J. in Aer Rianta v. Ryanair [2001] 4 IR 607 at 623, namely:-
“…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?”
14. Further and more particular guidance as to the proper approach of the court on an application for summary judgment is to be found in the judgment of McKechnie J. in Harrisrange Limited v. Duncan [2003] 4 IR 1 where at para. 9 he identified twelve factors material to the court’s consideration on such an application. It is clear from this decision, and indeed many more besides, that a mere assertion as to a given situation which is to form the basis of a defence is insufficient. The defendant must do better than bald assertions as was advised by Ackner L.J. in Banque de Paris v. de Naray [1984] 1 Lloyd’s Law Reports 21, where he stated as follows::-
“…the mere assertion in an affidavit of a given situation which is to be the basis of a defence did 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.”
15. That last statement of Ackner L.J. has been approved of in this jurisdiction in many decisions including that of Murphy J. in First National Commercial Bank plc v. Anglin [1996] 1 IR 75 and more recently the judgment of Ryan J. in Bank of Scotland plc v. Hickey [2014] IEHC 202, the latter being a decision to which I will later return.
16. It is also well established law that there are issues that may conveniently be dealt with otherwise than on a plenary hearing. However these are relatively limited as was stated by Clarke J. in McGrath v. O’Driscoll [2007] I ILRM 203 where, in the following brief passage from his judgment at p. 210, he said as follows:-
“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.”
Submissions
17. The parties delivered very extensive submissions in writing on this appeal. It is not in my view necessary to rehearse these as the same will be apparent from my appraisal of each ground of defence proposed by Mrs. Curran and which are dealt with individually below. Suffice to state that Mr. O’Reilly S.C. submits that the trial judge erred in law insofar as he could not have been satisfied, as was required of him to grant summary judgment, that Mrs. Curran had no arguable defence to the proceedings. He further maintained that there were issues of law which were complex and were not capable of being determined in the course of an interlocutory hearing.
18. I now intend to review each of the potential defences advanced on behalf of Mrs. Curran for the purposes of considering whether the trial judge erred in his conclusion that she had not made out a bona fide or credible defence entitling her to have the proceedings referred to a plenary hearing. .
Undue influence
19. It is necessary first to consider in brief the law in this jurisdiction in relation to the defence of undue influence. That of course very much depends upon the circumstances in which such a defence is advanced. If one contracting party induces or forces the other to enter into a particular contract or agreement, it is clear that such a contract will be set aside inter partes. That, however, was not the scenario with which the High Court was concerned in this case. Here, Mrs. Curran’s claim of undue influence, insofar as it can be ascertained from her affidavits, does not appear to be made against the contracting party i.e. the bank, but rather against a third party, her son, Michael Curran, who had an interest in procuring the execution of the guarantee. The same was required in order that the company would be provided with the banking facilities contained in the Facility Letter of 28th May, 2008.
20. The law in this particular area was relatively recently and thoroughly addressed by Clarke J. in Ulster Bank (Ireland) Ltd v. Roche and Buttimer [2012] 1 I.R. 765, a case in which he was asked to adopt as the law in this jurisdiction the law as clarified by the House of Lords in Royal Bank Of Scotland plc v. Etridge (No.2) [2002] 2 AC 773 and in which he was encouraged to reject the approach that had been adopted by O’Donovan J. in Ulster Bank Ireland Ltd v. Fitzgerald and Williams [2001] IEHC 159. I will refer in some detail to the decision in Ulster Bank (Ireland) Ltd v. Roche and Buttimer as I consider the same of significance to my conclusions.
21. The first defendant, Mr. Roche, was involved in the motor trade and was running his business through a corporate entity, Louis Roche Motors Ltd. Ms. Buttimer, who was his partner, in the personal sense of that term, was employed as a hairdresser. She was also a director in Mr. Roche’s business although it was accepted that she played no role in it. Ms. Buttimer signed a guarantee in respect of the liabilities of the business and when the bank moved to enforce it against her she sought to rely upon a defence of undue influence.
22. The first substantial issue which Clarke J. had to address was the factual question as to whether Ms. Buttimer was actually under the undue influence of Mr. Roche at the time she executed the guarantee. This was what he described as the first leg of the “test” for undue influence. Only if that issue was resolved in her favour, would it be necessary for the court to address the legal question as to whether there were sufficient circumstances to permit Ms. Buttimer contend that the guarantee should be set aside, given that the bank was not itself guilty of any undue influence.
23. Having heard the evidence of Ms. Buttimer and that of the clinical psychologist who had been treating her at the time she signed the guarantee, Clarke J. expressed himself satisfied that at the time she executed the guarantee she was indeed under the undue influence of Mr. Roche. He found as a matter of fact that she was in a dependent and abusive relationship and that she would have done anything that he asked of her.
24. Clarke J. then went on to consider the second leg of the test, namely whether Mr. Roche’s undue influence provided Ms. Buttimer with a defence. He did so in the context of the decisions in Etridge and Fitzgerald, the latter being a decision which had received some criticism as providing insufficient protection to potentially vulnerable sureties, insofar as he had absolved the lender of any responsibility to the guarantor unless it could be established that the lender had some special reason to believe that a wrong had actually taken place.
25. Given that there was no evidence from which it could be inferred that the bank was actually aware of the undue influence exercised by Mr. Roche over Ms. Buttimer, Clarke J. went on to consider the circumstances in which it would be appropriate to attribute to a bank knowledge of undue influence where it was not actually aware of the undue influence concerned.
26. The following is what Clarke J. stated, at para. 25 of his judgment concerning the issue of constructive notice:-
“Constructive knowledge can often usefully be broken down into two separate questions. The first is as to what factors place a party on inquiry. The second is as to the nature of the inquiry or action that may then be required. If, in circumstances where a party is put on inquiry, that party does not carry out the inquiries necessary or take whatever other form of action may be mandated, then the party will be fixed with knowledge of matters which it would have discovered had it made the appropriate inquiries or, at least, may be faced with the situation where the court views the case on the basis that appropriate steps were not taken.”
27. It is clear from what is stated in his judgment that Clarke J., whilst agreeing that the decision in Fitzgerald provided insufficient protection to potentially vulnerable sureties, was not prepared to go so far as to adopt as the law in this jurisdiction that which was laid down by the House of Lords in Etridge.
28. In his judgment Clarke J. refers to two particular statements made by Nicholls L.J.; the first being that the only practical way of dealing with the issue was to regard the lender as on inquiry in every case “where the relationship between the surety and the debtor was non-commercial” and the second being that a proposed guarantee over the debts of a company in which the shares were held by both spouses or partners placed the lender on enquiry, having regard to the fact that, in many such cases, the shareholding did not reflect the true situation. It is noteworthy that Clarke J. does not state whether he would endorse either proposition. However, he described, at para. 32, the general principle which underlies Etridge in the following manner:-
“…a bank is placed on inquiry where it is aware of facts which suggest, or ought to suggest, that there may be a non-commercial element to the guarantee. That general principle, at a minimum, goes far enough to cover the facts of this case where the bank was, for reasons set out, aware of the personal relationship between Ms. Buttimer and Mr. Roche and was also aware that Ms. Buttimer had no direct interest in the company (other than being a director) and was, indeed, in those circumstances, in a less secure position than a spouse or, in the modern context, a civil partner who has at least certain potential legal rights in the assets or income of the other spouse or partner. The potential for undue influence against a partner, such as Ms. Buttimer, who has very limited legal rights indeed and who has no interest in the company whose debts it is sought that she should guarantee, seems to me to be well on the side of whatever threshold might ultimately be fixed for determining the point at which a bank is placed on inquiry.”
29. As the bank had taken no steps to ensure that Ms. Buttimer had freely agreed to the guarantee it was unnecessary to consider the precise steps which the bank was obliged to take. He held that Ms. Buttimer was entitled to rely on the “undoubted undue influence” which Mr. Roche had exercised over her and that, having regard to the bank’s failure to conduct any inquiries, the claim had to fail.
30. More recently, Ryan J. in Bank of Scotland plc v. Hickey [2014] IEHC 202 considered the obligations of a bank when taking security to support borrowing in the context of summary summons proceedings. The decision is particularly material to the type of evidence required of a defendant should they wish to rely upon a defence such as undue influence. In that case the defendant and her partner had entered into a loan agreement with the bank the terms thereof required that the parties provide security in the form of a legal mortgage over a number of properties. When the borrowers fell into arrears the bank brought proceedings against Ms. Hickey who sought, in the context of a motion for summary judgment, to contend that she had an arguable defence based upon her assertion that she executed the relevant document “at the behest and direction of Mr. Porter” her partner with whom she was in a personal relationship. The bank had failed to take steps to ascertain the circumstances in which she had executed the documentation and that being so Ms. Hickey maintained that she had an arguable defence to the proceedings based upon undue influence.
31. What Ryan J. made clear in the course of his judgment was that it was hopelessly inadequate for Ms. Hickey, in order to avoid summary judgment, to make what was a relatively bald assertion that she was under the undue influence or domination of Mr. Porter when she executed the relevant documentation. This is what he said at para. 34 of his judgment:-
“Ms. Hickey says that she “executed the relevant documents at the behest and direction of Mr. Porter” which counsel, Mr. Downey, interprets as a claim of undue influence or domination of Ms. Hickey by Mr. Porter. This is the only evidence put forward to establish that this defendant was not in control of her own destiny in taking out these loans. It is hopelessly inadequate as evidence and goes nowhere near establishing the case. As the plaintiff submitted, the defendant has provided no proof or detail of any fact or circumstance to suggest that Mr. Porter exerted undue influence over her. Moreover, she was at all times represented by a solicitor. No information is provided, no example is given of how the alleged coercion was exercised and it is impossible to deduce from the bald and brief statement the overbearing of will that would be necessary to avoid liability. Taking the statement entirely at face value, it does not amount to coercion or undue influence.”
32. From the last two mentioned decisions, it is clear that in order to establish a defence of undue influence at a plenary hearing Mrs. Curran would first have to satisfy the court that but for the undue influence exerted upon her by her son she would not have executed the guarantee and second that the bank, i.e. the creditor, had actual or constructive notice that the guarantee was procured by the undue influence. That being so, in order to resist summary judgment, Mrs. Curran had to satisfy the low threshold standard by establishing on affidavit that she might credibly argue in the course of a plenary hearing that she had executed the guarantee as a result of the undue influence. It is only relevant to consider whether it is arguable that the bank was obliged to make inquiries to ascertain whether, having regard to her connection with the company, she fully understood and was freely entering into the guarantee, if she could first establish a credible or arguable case on the facts that she executed the guarantee in circumstances of undue influence. In turn, that required her to set out on affidavit the type of facts, details and circumstances upon which she would rely at the trial to establish that her will was overborne by her son, Michael Curran, when she executed the guarantee.
33. As has so often been advised in the relevant case law, a bald assertion as to the existence of circumstances which might afford a defence is insufficient for the purposes of resisting summary judgment. That is all that Mrs. Curran placed before the High Court for the purposes of defending the motion for summary judgment. I am quite satisfied that evidence does not meet even the relatively low threshold required of the defendant to have the case remitted to plenary hearing.
34. In her affidavit of 23rd November, 2015, having referred in some detail to entering into mortgage agreements with the bank in early 2008 to secure joint borrowings of €1.7m with her son Joseph Curran, she states as follows concerning the guarantee:
Paragraph 13:
“I say that given my age and lack of involvement in the businesses, I cannot explain how the said documentation actually came to be executed by me…”
Paragraph 18:
“…aside from the advices obtained from Mr. Ryan, my solicitor, I relied wholly on the explanations and advices provided to me by Michael Curran and Vivien Rowntree of Bank of Ireland and did what was asked of me by them. I say that at no time was it explained to your Deponent that I was doing anything which I had been advised by Mr. Ryan, not to do. I say that both Michael Curran and Ms. Rowntree knew that I had been advised by Mr. Ryan.”
Paragraph 30:
“I say that Michael Curran would call to my house and request my signature for various documentation at various intervals. I say that I relied upon him to explain the nature and purpose of the request. I say that at no time was I aware that there was a personal guarantee in effect. I say that I always understood that the nature of the security provided was solely in respect of the mortgage properties.”
35. What is glaringly absent from her affidavits is evidence to demonstrate that any undue influence was brought to bear upon her by her son, Michael Curran, or indeed by the bank itself. In regard to the bank also, Mrs Curran’s affidavits cannot support any potential defence of undue influence based on the conduct of the bank as the contracting party.
36. In these circumstances I am satisfied that the High Court judge cannot be faulted for concluding that Mrs. Curran had failed to demonstrate a bona fide or credible defence based upon acts of undue influence. There was no evidence that the bank should have been on inquiry to satisfy itself that she understood the nature of the guarantee proposed and that she was executing it otherwise than under her son’s influence.
37. It is unnecessary in light of the above conclusions to consider a number of other matters raised by way of potential defence to these proceedings. These include (i) Mrs. Curran’s evidence that she was advised by the bank officials at the time she signed the guarantee that she did not require legal advice (ii) whether she played an active role within the company or (iii) whether legal advice carried over from when she executed mortgages in respect of her joint borrowings with her son, Joseph Curran, earlier in the year. These are issues which are only material to the second leg of a court’s analysis of an undue influence claim. They do not fall to be considered in the absence of factual evidence to support the undue influence alleged. Having said that, I do not think there is any reason to disagree with the conclusions of McGovern J in his judgment.
Unconscionable bargain
38. As with her proposed defence based upon a claim of undue influence, the trial judge concluded that Mrs. Curran had adduced no credible evidence to support a defence of unconscionable bargain. In coming to this conclusion he relied upon the fact that she had extensive connections with the company with the result that the guarantee could not arguably be considered an unconscionable bargain.
39. In his decision in the High Court in Carroll v. Carroll [1998] 2 ILRM 218, [1998] IEHC 42, a decision later upheld by the Supreme Court, Shanley J. set out the elements which must be established before equity would intervene on the grounds of unconscionable bargain. First, one party must be at a serious disadvantage to the other by reason of poverty, ignorance or otherwise, so that circumstances exist of which unfair advantage can be taken. Second, the transaction must be at an undervalue and third there must be a lack of independent legal advise.
40. Assuming that Mrs. Curran can credibly argue that the advice she received from Mr. Ryan concerning the execution of guarantees at the time she executed two legal mortgages six weeks prior to the transaction under scrutiny in this case was insufficient, the question is whether she put before the trial judge bona fide and credible evidence which could arguably satisfy the other two elements of the test. In my view she did not do so. Mrs. Curran did not put forward on affidavit any evidence to demonstrate that she was at any serious disadvantage to the bank by reason of poverty, ignorance or otherwise. Her age or ignorance had not precluded her from carrying out her obligations as company secretary which included signing its annual accounts. Further, some six weeks prior to the execution of the guarantee she borrowed jointly with her son, Joseph Curran, €1.7m. and executed two deeds of mortgage to support those borrowings. There is nothing in her affidavits upon which she might reasonably rely to bring herself close to the type of personal situation established by the plaintiff in Grealish v. Murphy [1946] 1 I.R. 35 or Carroll v. Carroll. The facts of those cases are well known and it is unnecessary to refer to them in any detail. Suffice to mention that Mr. Grealish was an elderly farmer who lived on his own, had a range of mental difficulties, was relatively illiterate and was known to be irresponsible with money. Further, unlike the transactions in Grealish and Carroll, the guarantee in this case can’t be stated to have been given for nothing or for some insignificant advantage. It is clear that the bank agreed to provide additional banking facilities to the company which would not otherwise have been made available had the guarantee not been provided by way of security. The “bargain” could never be considered extortionate.
41. In the aforementioned circumstances I am quite satisfied that the trial judge was correct as a matter of law when he concluded that the facts advanced by Mrs. Curran on affidavit were insufficient to demonstrate a credible defence based upon the doctrine of unconscionable bargain.
Non est factum
42. The law in relation to non est factum has been discussed in a number of recent decisions including those of Kelly J. in Allied Irish Banks plc v. Higgins and Others [2010] IEHC 219 and IBRC v. Quinn [2011] IEHC 470 and Clarke J. in Ulster Bank Ireland Ltd v. Roche and Buttimer to which I have already referred.
43. In the first of the aforementioned decisions, Kelly J. at p. 41 approved of the following proposition as advised in Saunders v. Anglia Building Society [1971] AC 1004:-
“The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisors without making any inquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have had such a belief unless he had taken steps or been given information which gave him some grounds for his belief…”
44. In the present case if Mrs. Curran had taken the trouble to read the document presented to her for her signature on 28th May, 2008, as was advised by the trial judge in the course of his judgment, she would not have had any difficulty in understanding that she was signing was a guarantee for €1m. and that in doing so she was providing security to the bank that was separate and distinct from any earlier security she had provided in respect of other borrowings.
45. I am quite satisfied that the conclusion of the trial judge that Mrs. Curran, on the facts advanced, had not demonstrated an arguable defence based on non est factum is borne out by the decision of Clarke J. in Ulster Bank Ireland Ltd v. Roche and Buttimer when referring back to his own decision in ACC Bank plc v. Kelly [2011] IEHC 7 as adopted by Kelly J. in Irish Bank Resolution Corporation Limited v. Quinn [2011] IEHC 470, at p. 771 he stated:-
“….A person who signs a document which may well have significant legal effect and does so, either without reading the document or without applying themselves to the content of the document, “must accept the consequences of having signed a commercially binding agreement in those circumstances” and will, prima facie, be bound by what they have signed.”
Conclusion
46. Having considered the relevant legal principles, the judgment of McGovern J. and the evidence that was before him at the time he granted summary judgment in favour of the bank, I am satisfied that he was correct when he concluded that Mrs. Curran had not established an arguable or credible defence to the bank’s claim. For the reasons earlier set out I would dismiss the appeal
Dankse Bank A/S v Coleman
[2016] IECA 73
JUDGMENT of Ms. Justice Irvine delivered on the 4th day of March 2016
1. This is the first named defendant’s appeal against an order of the High Court (McDermott J.) of the 7th July, 2015, whereby he granted summary judgment to Danske Bank (“the Bank”) in the sum of €367,467.12.
2. It is the first named defendant’s contention on this appeal, that the trial judge, inter alia, erred in law in his construction of the terms of a loan agreement contained in a facility letter dated the 19th August, 2011, and that, on the arguments advanced, he ought to have referred the proceedings to plenary hearing.
Background facts
3. By summary summon dated the 15th August, 2013, the plaintiff instituted proceedings seeking summary judgment against the defendants for a sum of €729,500 on foot of a guarantee dated the 27th July, 2011. The Bank later compromised its claim against the second named defendant. Further, as a result of the realisation by the Bank of certain assets, the sum in respect of which it ultimately sought to enter judgment against Mr. Coleman was €367,467.12.
4. Clause 1 of the guarantee provides as follows:-
“1. In consideration of Danske Bank A/S (hereinafter called “the bank”) from time to time making or continuing advances or otherwise giving credit or affording banking facilities or granting time for as long as the bank may think fit to Elstonwood Limited . . .
WE THE UNDERSIGNED
Dermot Crinion and David Coleman
JOINTLY AND SEVERALLY HEREBY AGREE to pay and satisfy to the bank on demand all and every the sum and sums of money which are now or shall at any time be owing to the bank anywhere on any account whatsoever whether from the principal solely or from the principal jointly with any other person or persons or from any firm in which the principal may be a partner including the amounts of notes or bills discounted or paid and other loans , credits or advances made to or for the accommodation or at the request either of the principal solely or jointly . . .
PROVIDED ALWAYS that total liability ultimately enforceable against us jointly or against each of us separately under this guarantee shall not exceed the sum of €729,500 together with interest thereon from the date of demand by the bank . . .”
5. By letter of loan offer date the 19th August, 2011, the Bank offered a structured term loan to Elstonwood in the sum of €735,500. That offer was accepted by the defendants on their own behalf and on behalf of Elstonwood on 8th September, 2011. The relevant provisions of the letter of loan offer were as follows:-
“6. Security
6.1 Any security already provided by the borrower to the bank shall be security for the borrowers’ liabilities under this agreement, unless such security expressly provides otherwise.
6.2 Without prejudice to the generality of clause 6.1 and for the avoidance of doubt, the bank currently holds and relies on the following security:
(b) Joint and several guarantee in the amount of €622,200 signed by Dermot Crinion and David Coleman.
6.3 In addition, the following security is to be put in place in conjunction with this agreement:
(a) Joint and several letter of guarantee in the amount of €729,500 signed by Dermot Crinion and David Coleman. This replaces and is not in addition to clause 6.2(b) above.”
6. Following the issue of a motion for liberty to enter final judgment on the 9th July, 2014, an exchange of affidavits took place between the parties. Mr. Coleman swore affidavits dated the 15th January, 2015 and the 20th April, 2015. His accountant, Mr. Michael Kinsella, also swore two affidavits; the first being that dated 15th January, 2015, and the second that of the 20th April, 2015. In those affidavits Mr. Coleman sought the court’s indulgence to enable him discharge the sums outstanding to the Bank. Mr. Kinsella and Mr. Coleman maintained that they were in the process of putting a scheme together whereby Mr. Coleman might come to an accommodation with the bank concerning his outstanding liabilities. The only other matter of any substance raised in those affidavits was a claim made that Mr. Coleman was unclear as to how interest had been calculated up to the 24th April, 2013. However, his assertion no longer appears to be relied upon by Mr. Coleman. The affidavits did not seek to maintain that the guarantee of 27th July 2011, did not cover the liabilities of Elstonwood Limited arising from the loan agreement of the 19th August, 2011.
7. Somewhat out of the blue, almost two years after the proceedings had issued, Ms. Siobhan Marray, Mr Coleman’s solicitor, in an affidavit sworn on the 3rd July, 2015, sought to introduce an argument upon which her client might rely to defend the proceedings. She pointed to the fact that the guarantee upon which the proceedings were based predated the letter of loan offer and argued that the guarantee provided for therein was one which was to come into being subsequent thereto. Thus, she maintained that Mr. Coleman might argue that the guarantee of 27th July 2011 could not be relied upon to recover the monies later loaned to Elstonwood. The only guarantee that could support those monies was, she urged, a guarantee executed post the date of the letter of loan offer. In that regard, Ms. Marray also deposed to the fact that she had taken her client’s instructions and that he had no recollection of signing any guarantee post the 19th August, 2011.
Decision of the High Court
8. In the High Court, McDermott J. in his judgment of the 7th July, 2015, concluded that the defendant had not established an arguable defence to the proceedings. He was satisfied that the guarantee of the 27th July 2011 was likely put in place to support the intended facility of the 19th August, 2011. He saw no reason to treat the guarantee and loan facility as divorced or separate from each other. Further, the fact that the guarantee had been put in place prior to the acceptance of the loan facility did nothing, he concluded, to negate its efficacy in terms of securing the monies owed to the bank by Elstonwood.
Appeal
9. There is no dispute between the parties as to the principles to be applied by the court on an application for summary judgment. To the forefront of the court’s mind must be the test laid down by Hardiman J. in Aer Rianta v. Ryanair Limited [2001] 4 IR 607. where he described the test in the following terms:-
“In my view the fundamental question to be posed on an application such as this remains; is it “very clear” that the defendant had 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?”
10. Of importance also, in the context of the matters of construction raised for the court’s determination on this appeal is the decision of Clarke J. in McGrath v. O’Driscoll [2007] 1 ILRM 203, where he stated, in the context of a summary judgment application:-
“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.”
Submissions
11. Mr. Ross Maguire S.C. on Mr. Coleman’s behalf submits that it cannot be stated that it is clear that his client does not have an arguable defence to the proceedings. He maintains that the trial judge erred in law in the manner in which he construed clause 6.3 of the facility letter. He relies upon the fact that clause 6.3 provides that: “in addition, the following security is to be put in place in conjunction with this Agreement” and that the guarantee referred to in that clause was intended to replace the earlier guarantee in the sum of €622,000. Thus, he argues that the guarantee intended to support the loan agreement was one which had to post date the letter of a loan offer and Mr. Coleman did not recollect having executing any such a guarantee. It was, he submitted, conceivable that such a guarantee existed and that if it did, its terms and conditions were unknown. For these reasons he maintains it is arguable that the guarantee of 27th July 2011 cannot be relied upon by the Bank as it was never intended that a guarantee which pre dated 19th August, 2011 would secure the later loan to Elstonwood.
12. Counsel for the bank submits that the argument advanced on behalf of Mr. Coleman is contrived and artificial. He submits that the loan agreement does not bear the interpretation proposed by Mr. Maguire. The loan offer required no more than that a guarantee in the sum of €729,000 would be in place before the draw down of the loan. In other words, it was irrelevant that the guarantee had been executed prior to the date of the loan offer. In any event, Counsel submits that, regardless of the terms of the loan offer, the guarantee of the 27th July, 2011 is sufficiently broad in its terms to capture Elstonwood’s outstanding liabilities.
Decision
13. While the threshold for a defendant who seeks to have summary summons proceedings referred to a plenary hearing is low, I am not satisfied that Mr. Coleman has demonstrated the possibility that he has a bona fide and credible defence to these proceedings. There are a number of difficulties with the submissions made on his behalf which I view as hypothetical, contrived and without merit.
14. Firstly, Mr. Coleman, against whom the bank seeks to recover the liabilities of Elstonwood, has chosen not to depose to the circumstances in which he executed the guarantee of the 27th July, 2011. Thus he does not deny :
(i) that he executed that guarantee.
(ii) that the provisions of clause 1 thereof, prima facie, cover the liabilities of Elstonwood, regardless of the terms of the loan agreement,
(iii) that it was a term and condition of the loan agreement that he execute a guarantee in such terms, and
(iv) that Elstonwood received the sum specified in the loan agreement after he executed a guarantee to cover the sum required by the terms of the guarantee provided for at clause 6.3 of the letter of loan offer.
15. Secondly, in his affidavits Mr Coleman did not dispute his liability for the sums claimed by the Bank on foot of the guarantee. The only matters raised by him were:-
(i) his entitlement to a period of time to afford him an opportunity to put a reasonable proposal before the court in answer to the plaintiff’s claim, itself an admission of his liability on foot of the guarantee and
(ii) whether interest had been calculated appropriately up to 23 April 2014.
How, one might ask, in the context of these facts, can it realistically be contended that Mr Coleman has demonstrated the possibility that he has a bona fide and credible defence to the proceedings?
16. Thirdly, leaving aside altogether any possible potential defence based upon what Mr Maguire maintains is an “incongruity” in dates stemming from the fact that the guarantee predates the letter of loan offer which he submits provided for an “in futuro” guarantee, I am satisfied that the outcome of this appeal can be determined solely by reference to the four corners of the guarantee itself. In my view, any reliance upon the terms of the letter of loan offer as the basis for providing an arguable defence is simply misplaced.
17. The Bank has not sued on foot of the loan agreement. It has sued upon the terms of the guarantee of 27th July, 2011. Mr. Coleman does not deny executing that guarantee and its terms clearly capture the monies later loaned to Elstonwood. He does not argue otherwise. Clause 1 provides that guarantors are to be liable in respect of “any or all sums that might thereafter become due and owing to the Bank by Elstonwood Limited”. The sums claimed in the present proceedings fall fairly and squarely within that clause and it was on this basis that the Bank by letters dated 23 April, 2013 called upon each of the guarantors to meet their obligations thereunder.
18. Fourthly, regardless of the submissions made on behalf of Mr. Coleman based upon the provisions of clause 6.2 of letter of loan offer, clause 6.1 thereof provides that “any security already provided by the borrower to the bank shall be security for the borrower’s liabilities under this Agreement, unless such security expressly provides otherwise”. As of the date of the loan offer the guarantee of 27 July, 2011 had been executed and as such was “security” held by the bank on the date of the loan offer. There is nothing in the guarantee which expressly excludes the bank’s entitlement to rely upon that security to recover the monies advanced to Elstonwood. Accordingly, apart from the bank’s rights to pursue Mr. Coleman based upon the provisions of the guarantee, clause 6.1 of the letter of loan offer similarly entitles the bank to act on that security in respect of the monies advanced to Elstonwood.
19. Fifthly, and for completeness, I should say that I reject the construction placed upon the wording of clause 6.3 by Mr Maguire in the course of this appeal. The letter of loan offer required that, prior to the Bank advancing the proposed term loan to Elstonwood, the defendants put in place “in conjunction with this agreement” a joint and several guarantee in the sum of €729,500. The words used in the clause are in the present tense insofar as they provide that the guarantee “is to be put in place”. That phrase cannot, in my view, be construed so as to render unenforceable the guarantee of 27 July, 2011, executed in advance of the letter of loan offer and which Mr Coleman does not deny was executed by him, as required, “in conjunction with this agreement”. It is unstateable, I believe, to maintain as a matter of construction that the guarantee of 27th July, 2011 is unenforceable in respect of Elstonwood’s liabilities by reason only of the fact that it does not postdate the letter of loan offer.
20. The loan agreement was concluded on 8 September, 2011 that being the date upon which the Bank’s offer was accepted by the defendants on their own behalf and on behalf of Elstonwood. As a matter of construction, clause 6.3 rendered the Bank liable to make available to Elstonwood the sum of €729,500 once the terms of the letter of loan offer were complied with. These included the requirement that the defendants provide a guarantee to cover the liabilities of Elstonwood to the extent of €729,500 and which guarantee, once executed, would extinguish their earlier guarantee for €622,200. The clear intention of the contract was that the intended facility could not be drawn down until the Bank had in its possession a guarantee executed by Mr. Crinion and Mr. Coleman to cover the intended loan monies.
21. Finally, as to Mr. Maguire’s submission, based on the wording of the letter of loan offer, that there may be another guarantee in existence the terms of which are unknown and which was executed to support the letter of loan offer, I consider that submission to be both hypothetical and contrived. Why would there be another guarantee in existence when there is a guarantee in existence which conforms entirely with the letter of loan offer? Further, Mr. Coleman had not denied executing the guarantee of 27th July, 2011 to enable Elstonwood obtain the monies the subject matter of the loan agreement. In the light of his sworn affidavits which advance no suggestion of the existence of any such guarantee there is no basis upon which the court should engage with what I consider to be an unmeritorious, hypothetical and spurious submission.
22. For my part, I am quite satisfied that the first named defendant has not met the threshold as outlined in Aer Rianta v. Ryanair and accordingly, I would dismiss the appeal.
AIB v Yates
[2016] IEHC 60
JUDGMENT of Mr. Justice Noonan delivered the 5th day of February, 2016
1. This matter comes before the court by way of motion for summary judgment on foot of a summary summons issued on the 27th of June, 2014, wherein a sum of €1,648,147.97 is claimed by the plaintiff (“the bank”) against the defendant on foot of a guarantee of the 13th of April, 2010.
Facts.
2. The guarantee in issue in these proceedings relates to the borrowings of a company called Celtic Bookmakers Ltd (“Celtic”) which appears to have been operated and managed by the defendant’s husband, Mr. Ivan Yates. Both the defendant and her husband were at all material times directors of Celtic.
3. In early 2010, Celtic sought and obtained certain facilities from the plaintiff. These were initially provided for by way of letter of sanction dated the 26th of February, 2010, from the bank to the directors of Celtic. The first letter of sanction provided for four different facilities to be afforded to Celtic. Facility 1 is described as an overdraft and is in the amount of €1,000,000 for the purpose of working capital. Facility 2 is described as a standby overdraft in the amount of €300,000 and is also described as being for the purpose of working capital. Facility 3 is described as a revolving credit facility in the amount of €300,000 its purpose being described as a revolving credit facility to assist with capital expenditure. Facility 4 is described as a loan account in the amount of €5,169,000 for the purpose of funding capital expenditure projects in relation to the expansion of the Celtic Bookmakers Ltd chain. The letter of sanction provided a number of special conditions which included that fresh letters of guarantee would be signed for company facilities by the defendant and Mr. Yates. It further provided for certain security to be put in place to secure the various facilities and these included at item 6:
“Letter of guarantee for €6,769,000 in favour of the bank from Deirdre Yates for the obligations of Celtic Bookmakers Ltd supported by all sums mortgage over house on 1.3 acres at Blackstoops, Enniscorthy, County Wexford vesting in the names of Ivan and Deirdre Yates.”
The sanction letter appears to have been signed by Mr. Yates only although nothing turns on this.
4. By letter dated the 9th of March, 2010, Mr. Philip McDermott, the bank’s business banking manager at its branch at Enniscorthy, County Wexford wrote to the defendant in the following terms:
“Re: Celtic Bookmakers Ltd.
Facility: Overdraft facility for €1,000,000, standby overdraft facility for €300,000, revolving credit facility for €300,000 and loan facility for €5,169,000.
Dear Deirdre,
Our above named customer has nominated you as guarantor for the above facilities and I enclose a copy of the terms of the facilities to be guaranteed.
Your guarantee is to be secured by the following items of security:
All sums mortgage over house on 1.3 acres at Blackstoops, Enniscorthy, County Wexford.
I also enclose two copies of the guarantee form, one for you to sign and return to AIB, and the other for you to keep. Your signature to this guarantee will need to be witnessed by either your solicitor or an AIB bank official. In either case, you should bring along personal identification, such as your driving licence or passport. You are advised to obtain independent legal advice before signing the guarantee. I would also suggest that you keep copies of the guarantee, this letter and the terms of the facilities for future reference.
Please return the guarantee, duly signed and witnessed, to me at the above address.
I look forward to hearing from you in due course.
Yours etc.” (Emphasis as in original)
5. There is no dispute that the defendant received this letter. On the 2nd of April, 2010, Celtic passed a resolution to accept the offer of these facilities from the bank. This resolution is signed by Mr. Yates as chairman and the defendant as secretary of Celtic.
6. The guarantee, the subject matter of these proceedings is dated the 13th of April, 2010, approximately five weeks after the letter referred to above. It is a standardised pro forma document. At the top of the first page of the document, the following appears in a separate box:
“WARNING: – As guarantor of the credit facilities you will have to pay off the credit facilities, the interest and all associated charges if the borrower does not. Before you sign this guarantee you should get independent legal advice.”
7. The guarantee in the schedule identifies the borrower as Celtic and the limit of the guarantee as being €6,769,000. There is now no dispute about the fact that it was signed by the defendant. The defendant’s signature was witnessed by a bank official of the Enniscorthy branch. Clause 6 of the guarantee, insofar as relevant to these proceedings, provides as follows:
“[6.] The bank shall be at liberty without obtaining any consent from the guarantor and without thereby affecting its rights or the guarantor’s liability hereunder at any time:-…
(v) To enforce in whatever order it thinks fit all rights to recover and all securities and guarantees (including this guarantee) for the above mentioned liabilities of the borrower.”
8. Clause 7 provides, inter alia:
“[7.] This guarantee shall be an addition to and shall not be in any way prejudiced or affected by any collateral or other security now or hereafter held by the bank for all or any part of the monies hereby guaranteed, nor shall such collateral or other security or any lien to which the bank may otherwise be entitled or the liability of any person or persons not parties hereto for all or any part of the monies hereby secured be in anywise prejudiced or affected by this present guarantee…”
9. The final clause of the guarantee provides as follows:
“[21.] I certify that I have read the within guarantee and have received a copy thereof for my use.”
10. On the 23rd of November, 2010, a further letter of sanction was issued to the directors of Celtic this time relating to two facilities only, the first being an overdraft for €1.3 million for the purpose of working capital and the second being the loan account of €5,169,000 in identical terms to the earlier facility letter. The security section of the new facility letter included the following:
“[6.] Letter of guarantee for €6,769,000 in favour of the bank from Deirdre Yates dated 13/04/2010 for the obligations of Celtic Bookmakers Ltd. Supported by all sums mortgage over house on 1.3 acres at Blackstoops, Enniscorthy, County Wexford, vesting in the names of Ivan and Deirdre Yates.”
11. The second sanction letter was signed on the 26th of November, 2010, by both Mr. Yates and the defendant. On the same date, a further resolution of Celtic was passed accepting the offer of these facilities, which again is signed by Mr. Yates as chairman and the defendant as secretary of Celtic. Funds were drawn down by Celtic on foot of these sanctions.
12. On the 21st of December, 2010, the board of Celtic passed a resolution requesting the bank to appoint a receiver over its assets pursuant to the provisions of a debenture of the 28th of March, 2007, issued by Celtic to the bank. This resolution was again signed by Mr. Yates as chairman and the defendant as secretary of Celtic.
13. On the 4th of January, 2011, a receiver was appointed by the bank. On the 16th of March, 2012, a resolution was passed by Celtic to appoint a liquidator to the company.
14. Thereafter, it would appear that in May, 2012, bankruptcy summonses were issued by the bank against both the defendant and Mr. Yates in which a sum of €3,692,852.13 was said to be due by the defendant to the bank. The summons against Mr. Yates was dismissed by this court (Dunne J.) on the 21st of August, 2012, and the summons against the defendant was not proceeded with. On the 31st of August, 2012, Mr. Yates was adjudicated bankrupt in Swansea County Court.
15. On the 10th of June, 2014, the bank’s solicitors demanded payment of the sum claimed in these proceedings from Celtic and on the 12th of June, 2010, called in the guarantee by demanding payment of the same sum from the defendant.
The Affidavit Evidence.
16. The bank’s application is grounded upon an affidavit of Lynne Allan, a team leader in the bank’s litigation management team. Ms. Allan exhibits all of the documents referred to above and avers that the sum due by the borrower is €1,648,147.97. This figure is arrived at in the following manner. A bank statement of the 28th of January, 2011, in relation to Celtic’s loan account shows that as of the 18th of January, 2011, the sum due by Celtic was €4,524,831.97. This relates to Celtic’s loan account only and not to any of the other facilities described in the letters of sanction. That amount is then reduced by the total of the receipts in the receivership up to the 23rd of August, 2013, amounting to €2,876,684, the balance representing the sum claimed herein.
17. In her first replying affidavit, the defendant avers that she qualified as a primary school teacher and worked for 3 years in that capacity before taking a career break in the late 1980s. Celtic was established by her husband. She remained as a director and secretary of the company until it went into liquidation. At para. 4 of her affidavit, the defendant avers:
“I did take responsibility for administrative filings and I had some dealings with employment issues but I never had any responsibility for financial matters. I had no qualifications or expertise in relation to financial matters and I have never professed to have such expertise.”
18. She returned to work as a teacher in 2011. At para. 7, the defendant says:
“[7.] The reason why I signed banking documents in relation to the business of the company – including guarantee documents – was because I was asked to do so by the plaintiff and I understood that this was necessary for the business of the company. My clear understanding at all times when I signed these documents was that I was signing them for administrative purposes only and that the plaintiff would not be entitled to have recourse to any assets other than the assets of the company and certain lands owned by my husband in respect of which the plaintiff had been granted a fixed charge. I did not believe that the guarantee documents exposed me to a personal liability over and above those items or gave the plaintiff an entitlement to pursue our family home and I would not have signed those documents if I thought this to be the case. I never thought that the plaintiff was seeking to put itself in a position to have personal recourse against me, as I believe it must have known that I was not a person of any financial standing and that I had no realisable assets.”
19. This paragraph underlies one of the issues raised by way of defence by the defendant, being that of non est factum to which I will return. In the next paragraph of her affidavit, the defendant avers:
“I did not receive any legal advice in relation to the consequences of signing the guarantee and at no stage was I aware of the consequences of signing the guarantee. The plaintiff never suggested to me that I get legal advice, notwithstanding that it was aware that I had no realisable assets and no substantive financial experience, and the plaintiff took no steps whatsoever to ensure that I understood the nature of the obligation I was assuming on execution of the guarantee.”
20. In the light of the undisputed correspondence to which I have already referred and indeed the terms of the guarantee itself in its opening paragraph, the averment by the defendant that the bank never suggested that she obtain legal advice is patently incorrect.
21. In her second affidavit, Ms. Allan, at para. 9, avers:
“It is noteworthy however, that the defendant was also the secretary of the company and regularly attended meetings with the bank and was therefore appraised of its financial affairs and its dealings with the bank.”
22. This averment is uncontroverted in the defendant’s subsequent two affidavits. Ms. Allan further exhibits the last annual return of Celtic filed in the Companies Registration Office on the 16th of April, 2010, which discloses that the total number of shares held in the company was 1,000, of which 990 were held by the defendant.
The Issues Considered
23. Counsel for the defendant, Mr. Conroy B.L., identified three grounds upon which the defendant resists the plaintiff claim for summary judgment as follows:
1. The bank ought not be permitted to obtain judgment against the defendant until it has executed in full against the other security available in respect of the guaranteed debt;
2. The defendant is entitled to rely on non est factum;
3. The plaintiff has failed to adequately explain the calculation of the sum due.
24. On the first issue, counsel for the defendant makes two points. The first is that the equitable doctrine of marshalling applies in this case as explained by Andrews and Millet in Law of Guarantees 6th edition, where the authors say (at para. 11-015):
“The doctrine applies to guaranteed debts. Once a demand is made of him by the creditor, the surety has the right to compel the creditor first to have recourse to a security held by that creditor before suing him.”
However, as pointed out by Mr. Fitzpatrick B.L. for the bank, the doctrine of course has no application where it is expressly excluded by the terms of the guarantee itself, as here. Consequently I am satisfied that there is no substance in this point.
25. In addition, the defendant seeks to rely on the decision of the Supreme Court in Whelan and Ors v. AIB [2014] IESC 3 as authority for the proposition that in circumstances such as arise in the present case, the bank ought not in equity be entitled to enforce the guarantee without first realising the other security available to it. In Whelan, the six plaintiffs were members of the same family. The third plaintiff was Mr. Philip Lynch, a very wealthy business man, the fourth plaintiff was his wife and the other plaintiffs were his children. The case concerned a land acquisition deal whereby Mr. Lynch was to acquire, with another party, potential development land for €25 million, 100% financed by AIB. The purchase agreement was executed on the 8th of February, 2007. The deal was months in the making but at the last moment on the 7th of February, 2007, it was decided that Mr. Lynch’s children would also become borrowers and purchasers in the transaction. The reason for this last minute change was that the transaction potentially provided Mr. Lynch with a vehicle for family wealth management in a tax efficient way. The judgment of the Supreme Court was given by O’Donnell J. who explained the Lynch strategy in the following terms (at p. 7):
“In very simple terms, if the family members were included as participants in the transaction at the outset, then that would assist in making them liable to pay tax only on the increased value of the investment. From the outset therefore, it was the advice given to the plaintiffs, and their clear objective, that all the Lynch family members were to be borrowers of the monies advanced. However, it is noteworthy that this tax strategy meant the family members would have to become participants in their own right in the transaction, and crucially, in the loans.”
26. The introduction of Mr. Lynch’s wife and children into the transaction was considered further by O’Donnell J. (at pp. 52-53) as follows:
“When Mrs. Lynch and the Lynch children were introduced into the transaction it was for Mr. Lynch’s own, understandable, private wealth management purposes. The bank had no interest in those parties, and their addition to the transaction neither created additional risk for the bank, nor provided any additional security in terms of repayment….The position is that the extended members of the family were introduced into the transaction and indeed the loan, at a very late stage. At the last minute a change was made by the bank which was capable of causing confusion, and did, and which had the effect of exposing these individuals whose net worth may have been, in relative terms, limited, to the possibility which transpired in the High Court, of a potential individual liability in excess of €25 million.
[99.] … Nevertheless the fact is that these individuals whose net worth may be limited now face a potentially ruinous personal liability of which they were not advised, and which the bank never sought or relied upon at least from a commercial perspective and only obtained in order to facilitate the enforcement against the principal borrowers. In those circumstances there may be a residual question whether in all the very particular circumstances of this case, it would be equitable to permit the bank to enforce its legal claim against the wider members of the Lynch family, or at least to do so without having first pursued execution against the principal borrowers including Mr. Lynch. I would accordingly, and to this limited extent, set aside the judgment obtained by the bank against [Mrs. Lynch and the Lynch children]. It will be a matter for the parties if there is any merit on either side in pursuing the issue further.”
27. I do not believe that in reaching this conclusion, O’Donnell J. intended to introduce any radically new principle of law intended to have general applicability. He placed emphasis on the very particular circumstances of that case, circumstances which appear to me to bear no relation to those that arise in this case. The Lynch family members concerned were last minute, and perhaps unwitting, inclusions in a deal in which neither Mr. Lynch or the bank ever intended they would be involved. Nothing of that nature arises here.
28. The loans in this case were for the benefit of Celtic, a company in which the defendant was the major shareholder as well as the secretary and a director. On her own admission she was involved in the affairs of the company and although she denies responsibility for financial matters, she was clearly aware of them as she regularly attended meetings with the bank. In those circumstances, I cannot see how Whelan can be regarded as of any assistance to the defendant in this case. In China and South Sea Bank Ltd v. Tan Soon Gin [1990] 1 AC 536, the plaintiff sued the defendant on foot of a guarantee in respect of the liabilities of a company. The Privy Council held that the creditor owed no duty to the surety to exercise its power of sale over the mortgage securities and could decide in its own interests whether to sell and when to do so. The law is succinctly summarised by Lord Templeman (at p. 545):
“In the present case the security was neither surrendered nor lost nor imperfect nor altered in condition by reason of what was done by the creditor. The creditor had three sources of repayment. The creditor could sue the debtor, sell the mortgage securities or sue the surety. All these remedies could be exercised at any time or times simultaneously or contemporaneously or successively or not at all. If the creditor chose to sue the surety and not pursue any other remedy, the creditor on being paid in full was bound to assign the mortgaged securities to the surety. If the creditor chose to exercise his power of sale over the mortgaged security he must sell for the current market value but the creditor must decide in his own interest if and when he should sell. The creditor does not become a trustee of the mortgaged securities and the power of sale for the surety unless and until the creditor is paid in full and the surety, having paid the whole of the debt is entitled to a transfer of the mortgaged securities to procure recovery of the whole or part of the sum he has paid to the creditor.”
29. I am satisfied that this represents a correct statement of the law and I do not think for the reasons already explained that the judgment of the Supreme Court in Whelan had either the intent or effect of altering the law in that respect. Accordingly, I am satisfied that the defendant has demonstrated no arguable defence on this ground.
30. Turning now to the issue of non est factum, the law in this regard was considered by Kelly J. (as he then was) in IBRC v. Quinn [2011] IEHC 470 where he said (at p. 8):
“Non Est Factum
[24.] The first line of defence is that of non est factum. This is a defence which is only rarely invoked successfully. The law, both in England and in this jurisdiction on the topic is clear.
[25.] The leading case is that of Saunders v. Anglia Building Society [1971] AC 1004, which was followed by Morris J. (as he then was) in this country in Tedcastle McCormack and Company Limited v. McCrystal (15th March, 1999) and by me in Allied Irish Banks Plc v. Higgins & Ors. [2010] IEHC 219.
[26.] Morris J. said as follows:-
‘I am satisfied that a person seeking to raise the defence of non est factum must prove:-
(a) That there was a radical or fundamental difference between what he signed and what he thought he was signing;
(b) That the mistake was as to the general character of the document as opposed to the legal effect;
and
(c) That there was a lack of negligence i.e. that he took all reasonable precautions in the circumstances to find out what the document was.’
[27.] In his speech in the Saunders case, Lord Reid, having pointed out that there is a heavy burden of proof on the person who seeks to invoke this remedy, went on to say:-
‘The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisors without making any inquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect, whereas in fact, its character or effect was quite different. He could not have such a belief, unless he had taken steps or been given information which gave him some grounds for his belief.’
[28.] Lord Hodson in his speech in the same case said:-
‘Want of care on the part of the person who signs a document which he afterwards seeks to disown is relevant. The burden of proving non est factum is on the party disowning his signature; this includes proof that he or she took care. There is no burden on the opposite party to prove want of care.’ ”
31. The defendant relies on the judgment of Charleton J. in Friends First Finance v. Lavelle [2013] IEHC 201 where the defence of non est factum succeeded. He said (at p. 6):
“[18.] There are strong policy reasons underpinning the requirement for care in signing legal documents. The stringency of the test whereby liability may be resiled from reflects the proposition that those who enter into contractual relations on the basis of documents must take care as to what they are signing. I accept the commercial sense of the propositions which underpin the defence and note that chaos might be the result were defendants held to a less stringent circumscription of the defence.
[19.] On the very particular circumstances of this case, however, a situation arises which has rarely, if ever, been seen before and that is that a financial institution in seeking to make someone bound by a loan agreement should not see fit to meet with the borrower face-to-face, explore what requirements they have and ensure that they sign the documents establishing the mutuality of obligations of borrower and lender. Those basic steps of the ordinary establishment of a proper relationship of borrower and lender did not happen here. The plaintiff financial institution has accepted in evidence that they do not know the circumstances under which Charlotte Lavelle signed any of the relevant documents; that they never met her; that they do not know whether she received any of the letters in relation to the borrowing that was in her name; that they could not comment whether these letters which habitually came from Quinlan Private Investments were distinctively marked with the entity of the logo on the envelope (a large embossed golden ‘Q’ apparently); that they did not witness the relevant documents within their premises or even through their own personnel; and that they trusted Quinlan Private Investments to do all which they normally would have done as a matter of prudence. This constitutes a radical departure from the procedures of the plaintiff financial institution. ”
32. Charleton J. himself described the facts of that case as being possibly unique. Far from departing from the views expressed by Kelly J. cited above, Charleton J. quotes with approval the passage I have above referred to and says of it (at p. 6):
“This judgment is based on sound authority and of its origin is in itself firm precedent. I base my decision on the principles therein set out.”
33. Here again, those facts could not in any sense be equated with those arising here. The only evidence before the court which could conceivably give rise to the defence of non est factum is contained in para. 7 of the defendant’s first affidavit which I have referred to above. She says that she signed the guarantee “for administrative purposes only” without explaining what that means. At no stage does she identify what she thought she was signing if it was not a guarantee. She merely says that she understood that the plaintiff would only be entitled to have recourse to the assets of the company and her husband. She does not explain the basis for that understanding. Insofar as she was under any misapprehension, it appears to have been as to the legal effect of the document she was signing. However, as Morris J. makes clear in Tedcastle McCormack, that is not sufficient. The mistake must be as to the general character of the document. Furthermore, there is no suggestion of any kind that the guarantee was in some way radically or fundamentally different from what the defendant thought she was signing. The defendant is clearly an educated woman and does not purport to suggest that she had any particular difficulty in understanding the document. She had some five weeks to consider it and plenty of time to get legal advice on it, as she was plainly advised to do by the bank. In those circumstances, even if the defendant was under a general misapprehension as to what she was signing, it could not in my view be said that she took all reasonable precautions to find out what the document was.
34. In this regard, the comments of Kelly J. in IBRC v. Quinn are apposite (at p. 12):
“[36.] Second, in order to establish an entitlement to rely on this defence, there has to be a lack of negligence on the part of the person seeking to set it up. What could more negligent than willy-nilly signing formal legal documents without giving any thought as to their effect? Mrs. Quinn has failed to provide any evidence of the existence of the third ingredient identified by Morris J. On this topic, I agree fully with the observations made by Clarke J. in ACC Bank v. Kelly, where he said:-
‘By signing a commercial banking arrangement, a borrower agrees to be bound by the terms of that arrangement and if the borrower has not taken the trouble to adequately read the document or be adequately informed as to its meaning then the borrower must accept the consequences of having signed a commercially binding agreement in those circumstances.’ ”
35. At the end of the day, the defendant’s assertions on affidavit are just that i.e. mere assertions. As Clarke J. stated in giving the judgment of the Supreme Court in IBRC v. McCaughey (Supreme Court, unreported, 11th July, 2014) in dealing with the summary judgment jurisdiction of the High Court in bank debt cases (at p. 11):
“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.”
36. Even accepting the defendant’s averments at face value without any consideration or assessment of their credibility, it is clear that they cannot sustain the defence of non est factum.
37. The defendant’s final ground of defence relates to the alleged failure to adequately explain the calculation of the amount claimed. I have difficulty in understanding the basis for this assertion. The bank have explained the calculation of the figure on multiple occasions. The defendant has not engaged with this explanation in any way or sought to say why it is wrong. Rather, she asserts that because a different sum was said to be due in the bankruptcy proceedings which were aborted, this gives rise to a defence. I cannot see the relevance of those proceedings to the bank’s claim here. If it has decided for its own reasons to pursue the plaintiff for a lesser sum, due on one account only by Celtic, then that is a matter for them and not something of which the defendant can complain. There is also a suggestion under this heading that the bank are seeking to pursue double recovery and not giving credit for sums realised from the sale of a property owned by Mr. Yates in the course of the UK bankruptcy and indeed costs recovered by him against the bank in the successful defence of the bankruptcy summons. As counsel for the bank points out, realisations in the bankruptcy are for the credit of the bankruptcy trustee, not the bank.
38. However in any event, the bank cannot at the end of the day recover more than is due to it and there is no question of double recovery. A plaintiff may well have recourse to multiple defendants for the same debt but that does not mean that he can recover it multiple times. This is explained by Clarke J. in Londis v. Arman Retail [2006] IEHC 309:
“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 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.”
39. I am therefore satisfied that the defendant has made out no arguable defence under this heading either.
Conclusion
40. For these reasons therefore, applying the test set by the Supreme Court in Aer Rianta v. Ryanair [2001] 4 IR 607, the defendant has not to my mind established that she has a fair or reasonable probability of having a real or bona fide defence. It is in my view clear that she has no defence.
41. Accordingly, the plaintiff is entitled to judgment in the sum claimed of €1,648,147.97.
KBC Bank Ireland plc v McNamee
[2016] IEHC 347
JUDGMENT of Mr. Justice Twomey delivered on 20th day of June, 2016
Introduction
1. This case involves an application for summary judgement by the plaintiff (the “Bank”) against the defendants in the sum of €1,921,983.45. The defendants are lay litigants and have filed an unsigned affidavit dated 26th April, 2016 denying that the Bank has any right to judgment. Mr. McNamee is a lay litigant and he represented himself and his wife, Mrs. McNamee, at the hearing.
2. In this somewhat curiously worded affidavit Mr. McNamee states that he is “a non-person (a non-persona), a man living and not dead, acting as a business man” and the attestation clause states that he is “acting in role as Grantor, Governor General, Executor General, Guardian General A living man & all rights reserved”. In the body of the affidavit, Mr. McNamee alleges that the “claim of the plaintiff cannot be verified in the absence of the wet inked original instruments; Thus this matter, has no subject matter jurisdiction since the outset, as the matter stands”. At the hearing of this case, Mr. McNamee outlined that in seeking to defend these proceedings, the defendants were relying on the fact that they had not been provided with sight of the ‘wet-ink’ versions of the loan documentation which the Bank are relying upon to bring these proceedings.
3. This Court must consider whether the defendants have a credible defence, such as to deny the plaintiffs summary judgment and have the matter sent for a plenary hearing.
Background
4. The plaintiff produced sworn evidence to the Court (which evidence was not controverted by the defendants, save to the extent of the defendants’ claim of not having sight of the wet-ink versions of the loan documentation), which supported the plaintiff’s contentions that:-
a. The defendants borrowed funds from the plaintiff, then known as IIB Bank plc, to refinance existing Bank of Ireland debt relating to the Wonder Years Crèche, Rosbracken, Letterkenny, Co. Donegal and to finance an extension of that property.
b. The Bank sent a facility letter to the defendants on 6th June, 2008, and same was executed by the defendants. Pursuant to the terms of that facility, the sum of €1,800,000 was advanced to the defendants, which loan was due to be repaid in full on or before 1st August, 2028.
c. This loan facility was subject to a number of amendments as the facility was restructured over the years since 2008. The most recent version of the facility letter which was signed by the defendants is dated 26th June, 2013, and it provides for a sum, at that stage of €1,888,301, to be repaid by monthly instalments by the defendants. Under the Bank’s standard terms and conditions attached to that letter, it provided that in the event of default the Bank was entitled to require immediate payment in full of the balance.
d. On or about 1st February, 2014, the defendants defaulted in their payments to the Bank and on the 9th November, 2015, the Bank issued a letter to the defendants demanding full repayment of the amount then outstanding of €1,902,469. The Bank, by letters dated 10th December, 2015, and 29th January, 2016, again sought repayment of the outstanding amount.
e. By Deed of Appointment dated 20th November, 2015, a receiver was appointed over the property given as security for the loan facility. The secured property has not yet been sold and no proceeds have been raised to discharge any or all of the defendants’ liability under the loan.
The Law
5. The key issue to considered in this case is whether the plaintiff should be granted summary judgment or whether the defendants should be given liberty to defend the plaintiff’s application for judgment at a plenary hearing.
6. The law in this area is settled and that the principles set out in Aer Rianta v. Ryanair [2001] 4 IR 607; First National Commercial Bank v. Anglin [1996] 1 IR 75; and Harrisrange Ltd v. Duncan [2003] 4 IR 1, are the principles to be applied by this Court in considering whether to grant summary judgment. It is clear from those cases that the test for determining whether to grant summary judgment is a test of whether the defendants’ defence is credible.
7. With this in mind, the nature of the defendants’ defence to these proceedings must now be considered by this Court. On 1st February, 2016, the defendants sent identical letters in response to the letter of demand for repayment dated 18th November, 2015, from the Bank. A marked feature of these letters is, like the affidavit to which this Court has already referred, the quasi-legal style in which they are written. The letters state, inter alia:-
“You are on notice that whilst acknowledged, I do not legally and lawfully accept, and I do not legally and lawfully consent, to any and all correspondence received from KBC Bank Ireland plc to date (as the bank has never verified its claim), as my original business was with IIB Bank from the outset.”
In this letter, the defendants also demand “a sworn and attested” and “un-defaced original wet inked signed” copy of the loan application, the loan offer agreement, the deed of mortgage and the deed of transfer and assignment. In these letters, the defendants stated that they also sought access to those documents for the purpose of having them forensically viewed by the defendants’ experts.
8. These points contained in the defendants’ letters of 1st February 2016 were addressed by the Bank in their letter of 12th February, 2016 in the following manner:-
“To assist your understanding, please note that the bank is a public limited company. The bank was incorporated in Ireland under the Companies Acts 1963, as amended, on the 14th February 1973, under the name Irish Intercontinental Holdings Limited. On the 25th April 1973, it changed its name to Irish Intercontinental Bank Limited. On the 10th January 2000 it changed its name to IIB Bank Limited.
On the 29th March 2006, the Bank re-registered as a public limited company under the name IIB Bank plc, and on the 24th October 2008 it changed its name to KBC Bank Ireland plc.
As you know, by facility letter dated 6th June 2006 (as amended), the Bank set out the terms on which it contracted to lend sums to you and your wife jointly. The terms of the facility letters were accepted by you both. At that stage, the Bank was IIB Bank Limited.
Insofar as you had confusion on whether the Bank had contractual entitlements under the facility letter (as amended), we trust that this response now assuages your concern.”
In this Court’s view, this clarifies the point made by the defendants regarding the name of the plaintiff in these proceedings as there is no evidence produced by the defendants to contradict these statements by the Bank.
9. As regards the defendants having access to the original loan documentation, the Bank wrote in their letter of the 12th February, 2016, to the defendants in the following terms:-
“In relation to your (apparent) request to inspect mortgage documentation, pursuant to Section 91 of the Land and Conveyancing Law Reform Act, 2009 (as amended), a mortgagor’s entitlement to inspect documents of title is exercisable “on payment by the mortgagor (i.e. you) of the Mortgagee’s reasonable cost and expenses in relation to the exercise”.
The Bank shall allow inspection of the title documents at our offices at a mutually convenient time, upon discharge of the Bank’s reasonable costs and expenses of €300.
Upon discharge of the sum, we can arrange a mutually convenient inspection time and in this regard, please write to us directly quoting reference KBC 001/0021/HK/DW.“
The Defendants did not take up this offer from the Bank to inspect the original loan documentation and no reason has been put forward by the defendants for their failure to do so. Yet, at the hearing of this case, Mr. McNamee outlined that his only defence to the summary proceedings was that he had not seen the original loan documentation.
Decision
10. The defendants have made clear that their defence to this summary judgment is that they did not see the original loan documentation. They have not sought to deny that the loans had been made or that they had failed to repay them.
It is not a credible defence to summary judgment for the defendants to rely on the fact that they have not seen the original documentation which supports the claim for summary judgment, when in fact they were offered the opportunity to inspect those originals (pursuant to the statutory right to do so under s. 91 of the Land and Conveyancing Law Reform Act, 2009), but refused to take up that opportunity. On this basis this Court must conclude that no credible defence is available to the defendants in this case and so this Court has no option but to grant judgment to the plaintiff in the sum of €1,921,983.45 plus interest of €19,085, giving a total sum of €1,941,068.45.
Bank of Ireland v Quinn
[2016] IECA 30
JUDGMENT OF MR JUSTICE PEART GIVEN THE 10th DAY OF FEBRUARY 2016:
1. The defendant is appealing against an order made by Mr Justice Hedigan on the 15th July 2013 giving judgment to the plaintiff bank in the sum of €1,859,734.31. Before doing so he had concluded that none of the bases on which the defendant sought to resist the motion for judgment amounted to a bona fide defence to the claim, as that expression is to be understood. It is not contended on this appeal that the trial judge applied the wrong test.
2. As is well established by now, a defendant seeking to have a summary summons proceeding for a liquidated claim adjourned to a full plenary hearing on oral evidence must satisfy the court on affidavit that he/she has a bona fide defence. What exactly that means has been the subject of a number of judgments, perhaps the best-known being Aer Rianta v. Ryanair [2001] 4 I.R. 506 in which Hardman J. put it most clearly and pithily when he stated that the court must ask itself if it is very clear that the defendant has no defence to the claim.
3. As I have said, Hedigan J. was so satisfied and gave judgment to the plaintiff bank on the motion for judgment.
4. It is that order which the defendant appeals against. In order to do so successfully she must satisfy this Court that the trial judge fell into error in concluding that what was being urged by her as an arguable defence to the claim did not pass the Aer Rianta test.
Background facts
5. The grounding affidavit to the bank’s motion sets out that the claim arises on foot of a loan agreement entered into between the bank and Mrs Quinn and her husband on the 7th September 2010 in the sum of €1,749,497. This was a short term loan to be repaid in one sum within 6 months, or such period as may thereafter be agreed between the parties, with interest being paid monthly during that period at the rate of €2,000 per month.
6. This loan offer was accepted by the borrowers 10 days later on the 17th September 2010, and the exhibited copy of the facility agreement shows that the acceptance was signed by each borrower on that date.
7. According to the loan agreement the purpose of the loan facility was to restructure some existing loan facilities which the bank had made available to the defendant and her husband over the preceding few years.
8. The loan was repayable on demand, and until such demand was made, interest was to be discharged at the rate of €2,000 per month commencing one month after drawdown.
9. It is averred that the loan was drawn down by the borrowers on the 1st October 2010 in the sense that it was debited to the loan account and credited against the existing balance due on the previous facility. That drawdown is not in dispute, except that it is contended that since no funds were actually received by the borrowers, because it was restructuring the previous loan,, there is an absence of consideration. In my view, this submission is unstateable. The previous loan had become payable, and the new restructuring facility was in ease of the borrowers. That forbearance by the bank is a clear consideration.
10. It is averred also that the borrowers defaulted on the required repayments leading to the bank issuing a letter of demand ultimately on the 25th April 2012 in the amount then due including interest of €1,836,122.63. As of the date of swearing of the grounding affidavit the amount due was €1,859,734.31.
Non-Compliance with s. 30 of the Consumer Credit Act, 1995 (“the Act)
11. In her first replying affidavit sworn by Mrs Quinn on 4th February 2013 she disputes for the first time that she has any liability to repay the amount borrowed by her and her husband. Essential to her claim that the bank is not entitled to recover the monies lent to her and her husband is her averment that at all times she was a consumer within the meaning of the Act, and within the meaning of the Consumer Protection Codes 2006 (“the Code”) from the date on which it was implemented. The bank accepts that she was a consumer. It is also necessary for the defendant as a consumer to satisfy the court that the loan the subject of the within proceedings, and indeed the loans which preceded it and which were restructured by the loan agreement dated 7th September 2010 are not within the definition of a “housing loan” under the Act, because if indeed the loan is a housing loan then none of the requirements and obligations upon a lender under s. 30 of the Act which the defendant says have been breached by the bank thereby rendering the loan irrecoverable by the bank, are obligations with which the bank was required to comply.
12. According to the agreed note of his judgment the trial judge was satisfied that the loan was a housing loan and that therefore the requirements of the Act which are relied upon by the defendant were not applicable, because housing loans are exempted from the requirements of that Act.
13. The defendant describes how in June 2006 she and her husband had discussions with the bank about the possibility of borrowing a sum of €1,600,000 for the purpose of down-sizing from their then principal residence at 66 Bushy Park Road by releasing equity in that house in order to buy a smaller house adjacent thereto at 66A, Bushy Park Road then owned by a family member, and to provide a pension for her and her husband with the balance of the funds borrowed, since her husband had made no other pension provisions. Those discussions appear to have led to what the defendant now describes as an alleged contract dated 13th June 2006, which on its face is a loan agreement in that sum which was signed by the defendant and her husband, though not by the bank.
14. It is described as an alleged contract presumably because the defendant now seeks to argue that because it does not comply with the requirements of s. 30 of the Act because it was not executed by the bank, and therefore, it is contended, it is unenforceable by virtue of section 38 of the Act.
15. The same complaint is made in relation to a number of later loan restructuring agreements dated 11th October 2011, 14th August 2008, 22nd December 2008, and 8th April 2009.
16. In addition to that alleged defect it is stated that there was no cooling-off period specified in the loan agreement as required under the Act, and neither was there a consent by her or her husband to dispensing with that cooling-off period either in an alleged agreement dated 22nd May 2008 or that dated 14th August 2008, and since that is a breach of s. 30 (2) of the Act those agreements are rendered unenforceable.
17. Those agreements in which defects are alleged to exist thereby rendering them unenforceable by virtue of s. 38 of the Act are not of course the agreements on foot of which the bank seeks to recover the amount claimed in these proceedings. However, the defendant is now urging upon this Court, as she did in the court below, that the defects in the previous loan agreements cannot be cured by virtue of the agreement dated 7th September 2010 now sued upon, even though the latter does not contain the defects apparent in the previous loan agreements. It is submitted that in reality all of the restructuring agreements are simply variations of the first allegedly defective agreement dated 13th June 2006.
18. As I have said, the question as to whether these issues are sufficient to demonstrate the existence of a bona fide entitling the defendant to have the matter adjourned to a plenary hearing turns principally on whether or not the loan on foot of which the bank seeks to recover judgment is or is not properly to be considered a ‘housing loan’ as defined in s. 20 of the Act of 1995. The bank says that it is such a loan. The defendant disagrees.
19. Section 29 of the Act provides that Part III thereof shall apply to all credit agreements other than housing loans. A ‘housing loan’ is defined in s. 20 of the Act (as amended by the Central Bank and Financial Services Authority of Ireland Act, 2004) as follows:
“(a) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land
(1) for the purpose of enabling the person to have a house constructed on the land as the principal residence of that person or that person’s dependents, or
(2) for the purpose of enabling the person to improve the house that is already used as the principal residence of that person or that person’s dependents, or
(3) for the purpose of enabling the person to buy a house that is already constructed on the land for use as the principal residence of that person or that person’s dependents,
or
(b) an agreement for refinancing credit provided to a person for a purpose specified in paragraph (a) (i), (ii), or (iii), or
(c) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land on which a house is constructed where the house is to be used, or to continue to be used, as the principal residence of the person or the person’s dependents, or
(d) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land on which a house is, or is to be, constructed where the person to whom the credit is provided is a consumer.”[emphasis added]”
20. It is clear from the affidavit evidence and particularly the loan agreement dated 13th June 2006 that the purpose of the original loan facility was to enable the defendant and her husband to purchase the house at 66A, Bushy Park Road, Terenure, Dublin 6, which adjoined their existing house at 66, Bushy Park Road, and that the intention, and indeed a condition of the loan, was that the latter would be sold within 6 months of the date of drawdown, and the proceeds applied to pay off that facility. This was the mechanism by which the defendant and her husband downsized as it has been described. However, 60 Bushy Park Road was not sold within that period, which accounts for the fact that the facility was renewed from time to time by the issue of new facility letters which have been referred to.
21. I note also that the 13th June 2006 facility letter records that no security was held by the bank at that date in 2006, but that the security required to be put in place was a “Solicitor’s letter of undertaking, acceptable to the bank, to hold title deeds to property at 66 Bushy Park Road, Terenure, Dublin 6 in trust for the bank pending sale and thereafter to forward sale proceeds to the bank”. It appears that the borrowers in due course provided security to the bank by way of executing a first legal charge over the property at 66 Bushy Park Road. That fact is recited in the loan agreement dated 7th September 2010 under the heading ‘Security Held’.
22. The facility dated 13th June 2006 was, as already stated, signed by the borrowers, but not by the bank. That is accepted by the bank. Nevertheless it clearly performed its obligations under the agreement by making the funds available to the borrowers, since it is clear that the loan was drawn down. The later facilities were in the nature of a restructuring of that earlier loan. The nature of the loan did not alter. The argument being advanced that the loan dated 7th September 2010 now sued upon is not a ‘housing loan’ is based on the strained argument that the first loan dated 13th June 2006 is outside the definition of a housing loan under s. 20 of the Act because it is not “on the security of a mortgage”. The reason put forward for that proposition is that the facility letter refers to “Security Held” as being “Solicitors Letter of Undertaking, acceptable to the Bank to hold title deeds to property at 66 Bushy Park Road, Terenure, Dublin 6 in trust for the Bank pending sale and thereafter to forward sale proceeds to the Bank”. Counsel for the defendant has submitted that such an undertaking constitutes an equitable mortgage, and therefore it is not admissible in evidence in any court unless it has been stamped in accordance with the requirements of s. 12 (3) of the Stamp Duties Consolidation Act, 1999. In such circumstances, it is submitted that the plaintiff is not entitled to rely upon the letter of undertaking as proof that the loan is a loan “on the security for a mortgage”, and therefore cannot rely on the exemption in respect of a housing loan from the rigours of the Act.
Non-stamping of the Solicitor’s Letter of Undertaking
23. It is necessary to set out the entire of s. 12 of that Act in order to demonstrate that it does not provide for what is contended for by the defendant. It provides as follows:
“12(1) In this section “fee simple”, “interest”, “land” and “lease” have the same meanings, respectively, as in section 41 of the Finance (1909-10) Act, 1910 , and references to a “transferee” or a “lessee” include the personal representatives of any transferee or lessee.
(2) It shall be the duty of the transferee or lessee, on the occasion of any transfer of the fee simple of any land or of any interest in land or on the grant of any lease of any land for a term exceeding 14 years (whether the transfer or lease is on sale or operates as a voluntary disposition inter vivos), to present to the Commissioners such particulars in relation to such class or category of transfer or lease as they may prescribe by regulations and, without prejudice to the generality of the foregoing, the regulations may make provision in relation to all or any of the following matters:
(a) the form in which the particulars are to be delivered;
(b) the time limits within which the particulars are to be delivered;
(c) the manner in which the land is to be described or classified;
(d) the furnishing of tax reference numbers of the parties to the instrument.
(3) Notwithstanding anything in section 20 or 127, any transfer or lease to which regulations made pursuant to subsection (2) apply shall not, other than in criminal proceedings or in civil proceedings by the Commissioners to recover stamp duty, be given in evidence, or be available for any purpose unless it is stamped with a stamp denoting that all particulars prescribed by the Commissioners have been delivered.”
24. Section 12 does not refer to the payment of stamp duty. It refers to what conveyancing practitioners refer to as “the P.D. stamp”, being one which must be impressed on any conveyance or transfer of property for valuable consideration. It is a separate stamp to the stamp indicating that ad valorem duty has been paid on the deed, and, as provided in s. 12, it indicates that the particulars of the transaction have been provided to the Revenue Commissioners in accordance with the regulations made in that regard.
25. However, that is not an end to the issue raised since s. 127 of the same Act exists, and it is the section upon which reliance was probably intended to be placed. That section provides, as relevant:
“127(1) On the production of an instrument chargeable with any duty as evidence in any court of civil judicature in any part of the State, or before any arbitrator or referee, notice shall be taken by the judge, arbitrator, or referee of any omission or insufficiency of the stamp on the instrument, and if the instrument is one which may legally be stamped after execution, it may, on payment to the officer of the court whose duty it is to read the instrument, or to the arbitrator or referee, of the amount of the unpaid duty, and the penalty payable on stamping the same, be received in evidence, saving all just exceptions on other grounds.
(2) ………
(3)
(4) Except as provided for in this section, an instrument executed in any part of the State, or relating, wherever executed, to any property situated, or to any matter or thing done or to be done, in any part of the State, shall not, except in criminal proceedings or in civil proceedings by the Commissioners to recover stamp duty, be given in evidence, or be available for any purpose, unless it is not chargeable with duty or it is duly stamped in accordance with the law in force at the time when it was first executed”. [emphasis added]”
26. It follows therefore that “any instrument chargeable with any duty” may not be received in evidence in any civil proceedings unless it has been properly stamped. One must therefore see what is “an instrument” for these purposes, and then what instruments are so chargeable. Instruments which are chargeable with stamp duty are set forth in Schedule to the Act of 1999 under various headings, and as far as relevant to this case, appear under the heading of “Mortgages” and specifically under “Equitable Mortgages”, as the defendant contends that the letter of undertaking referred to in the loan facility dated 13th June 2006 constitutes an equitable mortgage and therefore is chargeable with stamp duty.
27. Under s. 1 of the Act of 1999 “instrument” means “every written document”. As such clearly a letter of undertaking comes within that definition. If that letter of undertaking creates an equitable mortgage, then it is chargeable with stamp duty as provided for in Schedule 1 to that Act. In s. 1 of the Act an equitable mortgage is defined as being “an agreement or memorandum, under hand only, relating to the deposit of any title deeds or instruments constituting or being evidence of the title to any property (other than stock or marketable security), or creating a charge on such property” [emphasis added].
28. In my view, the solicitor’s undertaking to hold the deeds in trust pending the sale of No. 66 cannot be construed as being an agreement relating to the deposit of the title deeds with the bank. The question remains whether it is an instrument which “[creates] a charge on such property”. If it is then it attracts stamp duty. I can usefully refer to Land Law in Ireland (2nd ed.) by Andrew Lyall where at pp.782-784 he discusses equitable mortgages and the forms they may take. He deals firstly with Mortgages of an Equitable Interest, Agreements for a Legal Mortgage, and equitable mortgages created by a deposit of title deeds. Then finally he discusses an “Equitable Charge” as a species of equitable mortgage but when doing so distinguishes it from an equitable mortgage as such. In that regard the author states:
“(4) Equitable Charge:
Equity allows an owner of property to create a charge over it and this differs from an equitable mortgage properly so-called in that it does not have the effect of transferring an estate, legal or equitable, in the property. It is an equitable lien rather than a mortgage. In Re Kum Tong restaurant (Dublin) Ltd a company borrowed money and agreed by letter to secure the loan by holding the purchase money from the sale of its land for the benefit of the lender. The letter was held to create an equitable charge over the purchase money.” [emphasis added]”
29. There is a lack of clarity as to what exactly the solicitor undertook to do. That uncertainty arises because there are three different sections on the Bank’s standard form of undertaking, and it is not clear which was intended to cover the transaction in this case. Nevertheless the only workable and sensible interpretation, in the light of the facility letter, is that it is an undertaking that in consideration of the bank’s agreement to make available a bridging loan of €1.6 million to the borrowers to enable them to purchase No. 66A Bushy Park Road, he would use the funds for that purpose, and that following the completion of the intended sale of No. 66 Bushy Park Road he would remit so much of the proceeds of sale as was required to discharge the bridging loan plus any interest accrued. In order to create an equitable mortgage, as opposed to an equitable charge, that letter of undertaking would have to read as an instrument which creates a charge over No. 66 Bushy Park Road pending repayment of the bridging loan. The loan in question fits most conveniently within the Section 3 undertaking on the standard form which relates to “Bridging Finance by Bank Against Sale Proceeds of Existing Property”. Within that Section 3 undertaking there is no reference at all to holding any title deeds in trust for the bank, even if it was the bank’s intention that pending the sale of No. 66 those title deeds would be held in trust. Any reference to holding deeds in trust is contained in Section 1 undertaking which relates to a “Bridging Finance Towards Purchase of New Property”. That suggests that the transaction is the purchase of a new house, but not where the buyers already own a house that is to be sold, as in the present case. It is the undertaking at Section 3 of the Standard form of undertaking provided by the bank that covers that situation.
30. At issue in In Re Kum Tong Restaurant Ltd. [1978] I.R. referred to in the passage quoted from Lyall’s Land Law in Ireland above, was the terms of an undertaking given by the company’s solicitors to its bank. The company was in financial difficulties and had contracted to sell its premises. It went to its bank for a bridging loan to enable it to continue in business until such time as the sale of the business and the premises was completed. The bank agreed to advance the funds, and the company’s solicitor’s undertaking was given in the following terms:
“We now therefore undertake in consideration of your granting the company a bridging loan of £4000 on the strength of the contract for the sale of their premises in Grafton Street to hold such documents of title to the said premises as we may have in trust for the bank and to hand over sufficient monies out of the proceeds of sale to redeem this bridging finance as soon as the sale is closed. It is however to be strictly understood that this firm undertakes only to hand over out of the proceeds of sale and should there be any delay in closing the sale the firm cannot be held responsible for the money until the sale has been finalised.”
31. McWilliam J. concluded that this letter was sufficient to create an equitable mortgage in favour of the bank. However he stated that it still remained to be decided whether it was a charge on the property or only over the proceeds of sale. It is worth noting at this point that the undertaking involved not only the payment of the proceeds of sale to the bank after completion of the sale, but that the title deeds of the premises would be held in trust in the meantime. I mention that because the latter is absent in the undertaking to which the defendant in this case refers as requiring to be stamped. McWilliam J. concluded that on the facts of that case there was a charge only over the proceeds of sale. In so concluding he stated at p. 451:
“The [undertaking] dealt solely with the proceeds of sale; the title deeds were stated to be held solely to secure payment out of the proceeds of sale. Although not stated in so many words, the clear intention was to charge the proceeds of sale and no argument has been advanced to me to show that the proceeds of sale cannot be charged as such, and I can see no reason why they should not be so charged. Although the fact that the documents of title were to be held by the solicitors in trust which normally create a charge on the vendors’s interest in the lands and, very possibly, would have done so in this case had it been registered, the purchase price would only be paid on handing over the deeds so that the holding of the deeds would be equally attributable to securing the proper application of the purchase price.”
32. A similar issue arose in different circumstances in Murray v. Wilken, unreported, High Court (Finlay Geoghegan J.) 31st July 2003. In those proceedings, the question was whether the solicitor’s undertaking created an equitable charge over the property in question. The undertaking was given in the following terms:
“Dear Sirs,
We refer to the above matter and we confirm that we act on behalf of Jurgen and Mary Wilken who are in the net any teat process selling 9 Rockfield, Ardee, County Louth.
We understand that you act on behalf of Mr John Murray.
We hereby undertake on our client’s instructions to discharge the sum of £65,000 owing to your client out of the proceeds of sale of the above property when same depart to hand.
Please note that this undertaking is being given strictly on the basis that there is absolutely no contact between your client and our client’s pending the completion of the sale of our client’s property and discharge of the sum owing to them.
We look forward to hearing from you in relation to this matter.
Yours faithfully.”
33. The learned judge had no difficulty accepting as a matter of law that a solicitor’s undertaking to hold title deeds for the benefit of another person could create an equitable charge over the property. But she went on to state:
“Regretfully, I have concluded that the undertaking given in this case cannot be considered to come within the above definition in so far as it is alleged to have created an equitable charge over the property at Rockfield. It is not possible, in my view, to construe it as even implicitly appropriating the property of the defendants referred to or as an agreement to make it answerable for the payment of the debt of IR£65,000 then due. At best, in so far as the property at Rockfield is concerned, it contains a representation made by the solicitors that their clients are in the process of selling such property.
The undertaking to pay the sum of £65,000 is expressly an undertaking to make this payment out of the proceeds of sale of the property when ‘same are to hand’. As such, it may have created an equitable charge over a future asset of the defendants, namely the fund comprising the proceeds of sale of the property when received by their solicitor.
The undertaking cannot be construed as containing any implied agreement that the property, as distinct from the proceeds of sale of a potential future sale of the property, be made answerable for the payment of the debt due.”
34. Finlay Geogehgan J. went on to distinguish the undertaking given in In Re Kum Tong Restaurant Limited since in that case the undertaking was given in circumstances where a contract for sale of the premises was already in existence when the undertaking was given.
35. The undertaking in the present case, as that form of undertaking is to be properly construed, does not undertake to hold the title deeds in trust for the bank. It undertakes to pay to the bank so much of the proceeds of sale of the existing property at No. 66 as will discharge the amount due on foot of the bridging loan.
36. I am satisfied that the undertaking in the present case is not one which the defendant can reasonably argue created an equitable charge over the property at No. 66 Bushy Park Road as no undertaking was given to hold the deeds to that property in trust for the bank. I am satisfied, as already indicated, that the form of undertaking at Section 1 of the bank’s standard form cannot be applicable to the circumstances of this loan, even if the facility letter dated 13th June 2006 intended that the undertaking would include an undertaking to hold those deeds pending that sale being concluded. It follows that on its face therefore that it is not arguable that the undertaking is one which required to be stamped as being an instrument creating an equitable mortgage, and was therefore admissible in court in so far as it was needed to be relied upon for the purposes of establishing that the loan of 7th September 2010 was a housing loan.
37. However, while I have dealt with the question of whether the undertaking in this case created an equitable mortgage as a matter of law because it was a submission made by the defendant, there is another reason why the submission made in relation to the facility agreement dated 13th June 2006 cannot avail the defendant. It is not the agreement sued upon. What is sued upon is the final facility dated 7th September 2010 which is expressed to be for the purpose of restructuring existing facilities. If one looks carefully at the statutory definition of a housing loan which I have set forth already in full, one can readily see a difference between (a) and (b) of the definition section which for convenience I will set forth again:
“(a) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land
(1) for the purpose of enabling the person to have a house constructed on the land as the principal residence of that person or that person’s dependents, or
(2) for the purpose of enabling the person to improve the house that is already used as the principal residence of that person or that person’s dependents, or
(3) for the purpose of enabling the person to buy a house that is already constructed on the land for use as the principal residence of that person or that person’s dependents,
or
(b) an agreement for refinancing credit provided to a person for a purpose specified in paragraph (a) (i), (ii), or (iii).”
38. It will be seen that whereas in (a) the agreement to provide credit for any of the three purposes set out in (a) is on the security of a mortgage, there is no provision in (b) requiring that the refinancing agreement for any of the same three purposes be on the security of a mortgage. It cannot be presumed that the absence of that requirement is mere oversight on the part of the Oireachtas, since it comes back in at (c) and again at (d) of the definition. The facility sued upon in these proceedings comes within (b), and therefore, despite my conclusions as to the absence of a requirement that the undertaking referred to in the June 2006 facility be stamped before being relied upon in these proceedings, I am satisfied that the facility sued upon comes within the very clear words at (b) above and is itself a housing loan as defined, without any reliance being necessary upon the 2006 facility.
39. I am therefore satisfied for these reasons that the trial judge was correct to conclude that the provisions of the Act do not apply to the loan facility sued upon, and for that reason the defences sought to be put forward for the purposes of having the claim adjourned to a plenary hearing do not pass the Aer Rianta threshold. I can see no basis on which it could be thought that the defendant’s arguments could be advanced further at a plenary hearing than they could be advanced on the motion for judgment. The facts are not in dispute. The issues raised are legal issues, and can be and were determined on the motion that came before Hedigan J. In my view he determined these issues correctly.
Undue Influence/Duress/Misrepresentation
40. Separate to the matters just referred to, it is submitted also that there was no consideration for the agreement sued upon, namely that dated 7th September 2010, and that in so far as the bank would say that the consideration is the forbearance to sue on its part in respect of the previous agreements, the defendant’s contention is that in circumstances where the previous agreements were defective and unenforceable, that amounts to no consideration.
41. In addition to these matters which are put forward in an effort to show that there is a bona fide defence which justifies having the bank’s claim adjourned to a plenary hearing, the defendant avers also that the loan agreement dated 7th September 2007 is void for misrepresentation, that misrepresentation being that the bank held out by its conduct that it was entitled to enforce the previous agreements, and was aware or ought to have been aware that she and her husband operated on that belief, and therefore to their detriment.
42. In addition, the defendant alleges that undue influence was exercised by the bank over herself and her husband in respect of all the loan agreements between 2007 and 2010, and that they should all be set aside as being improvident transactions. The defendant avers in that regard that she and her husband were pensioners, and placed all their trust and confidence in the bank and were influenced to sign successive restructuring agreements in the belief that they had no alternative but to do so, and have suffered prejudice as a result.
43. I consider that the arguments made on the basis of misrepresentation, undue influence or any form of duress on the part of the bank must fail. I am satisfied that the trial judge made no error in this regard. In order to merit any consideration as a possible defence to the claim, there must be something more than the mere assertions contained in the replying affidavits. In this case there are simply the bald assertions of misrepresentation and undue influence, and it is entirely insufficient to form a basis of a defence on these grounds, and the trial judge was in my view entirely correct to reject them as a potential bona fide defence to the proceedings.
Non-compliance with Consumer Protection Code, 2006
44. The defendant submits that the bank failed to comply with the Code by failing to carry out any product suitability assessment when deciding to offer extensions and renewals of the loan facility provided originally in June 2006. It is contended that as a result of that omission the bank is not entitled to recover the amount owing on foot of the loan. The particular provision in the Code that is implicated by this submission is that at which provides:
SUITABILITY:
(30) A regulated entity must ensure that, having regard to the facts disclosed by the consumer and other relevant facts about that consumer of which the regulated entity is aware:
(a) any product or service offered to a consumer is suitable to that consumer;
(b) where it offers a selection of product options to the consumer, the product options contained in the selection represent the most suitable from the range available to the regulated entity; or
(c) where it recommends a product to a consumer, the recommended product is the most suitable product for that consumer.
This requirement does not apply where:
(i) the consumer has specified both the product and the provider and has not received any advice;
(ii) the consumer is purchasing or selling foreign currency; or
(iii) where, in the context of the provision of a basic banking product or service, the regulated entity has alerted the consumer to any restrictions on the account and/or the availability of a lower cost alternative.
(31) Before providing a product or service to a consumer, a regulated entity must prepare a written statement setting out:
(a) the reasons why a product or service offered to a consumer is considered to be suitable to that consumer;
(b) the reasons why each of a selection of product options offered to a consumer are considered to be suitable to that consumer; or
(c) the reasons why a recommended product is considered to be the most suitable product for that consumer.
The regulated entity must give a copy of this written statement to the consumer and retain a copy.
This requirement does not apply where:
(i) the consumer has specified both the product and the provider and has not received any advice;
(ii) the consumer is purchasing or selling foreign currency, or
(iii) the consumer is seeking a basic banking product or service.” [emphasis added]
45. The defendant’s complaint is that the bank failed to observe the requirement underlined above, namely to ensure that the loan facility sued upon and its predecessors presumably, or at least those which post-date 1st July 2007 being the date after which compliance with the Code was required. Counsel has submitted that given the clear inability of the borrowers to service the loan facility by the time the loan was restructured by means of the final facility now sued upon dated 7th September 2010, it is manifest that it was not suitable for the borrowers, and that the failure to carry out the required suitability test in that regard is a breach of the Code and that therefore the loan is unenforceable.
46. The trial judge considered the arguments put forward in this regard and, according to the note of his judgment, he concluded (a) that the Code was not in force on the date on which the bank first agreed to advance monies to the defendant in June 2006, and (b) that the absence of a product suitability assessment was not fatal to the bank’s claim in any event because the product was clearly suitable since the bank was providing finance to enable the defendant and her husband to move from a larger house to a smaller one. The defendant submits to this Court that the trial judge erred in reaching these conclusions.
47. This Code came into force on the 1st August 2006, a couple of months after the original loan agreement in June 2006 when the defendant and her husband were planning on downsizing from their then principal residence. However, as I have said already, compliance with the Code was not required until after 1st July 2007 which postdates that first facility.
48. While compliance with the Code was therefore required by the date of the facility granted on the 7th September 2010, the bank submits that the relevant product for the purpose of considering the applicability of the Code is that made in June 2006. In other words, by the date on which this Code became operative, the product had already been provided, namely the original loan in 2006 to enable the borrowers to downsize in the manner described – that loan being simply renewed or restructured by later loan facilities in ease of the borrowers given that they had been unable within the 6 months provided for, to sell No.66 Bushy Park Road as had been their intention, and the last being that the subject of these proceedings dated 7th September 2010. In these circumstances there was not, in the bank’s submission, any new product made available to the defendant which required any assessment as to its suitability under the Consumer Protection Code, but in so far as that is found to be incorrect, the loan sued upon was clearly in ease of the borrowers in all the circumstances as it replaced other less palatable action which the bank would have been entitled to take to recover the amount then due.
49. The bank also submits that in any event, even if the 2010 facility was found to be covered by the Code, any breach of the Code could not render the loan unenforceable. The bank submits that the defendant has not produced any authority to the effect that the failure to carry out such a suitability assessment renders the loan unenforceable, and in turn refers to a number of authorities that go the other way. These include the judgment of Birmingham J. in Zurich Bank v. McConnon [2011] IEHC 75, which was followed by Ryan J. (as he then was) in AIB Bank v. Smith [2012] IEHC 381, the judgment of Herbert J. in Friends First v. Cronin [2013] IEHC 59, and that of Clarke J. in Irish Life & Permanent v. Dunne [2015] IESC 46. It is the latter to which I wish to refer in particular, albeit it is a case involving a consideration of a different Code, namely the Code of Conduct on Mortgage Arrears. However, I consider that the principles enunciated by Clarke J. in relation to that particular Code are equally applicable to the Consumer Protection Code and should be applied mutatis mutandis.
50. Irish Life & Permanent v. Dunne was an unusual case in one sense in that the judgment emanated from a Case Stated from the High Court (Hogan J.) to the Supreme Court. A question arise initially as to whether there was a jurisdiction for the High Court to state a case at all for the opinion of the Supreme Court. I need not dwell on that issue save to note that the Supreme Court considered such a jurisdiction to exist, and then went on to address the other issues arising on the Case Stated, one of which was whether in the absence of any statutory indication the Code of Conduct on Mortgage Arrears can, either generally or in certain specified circumstances, affect the legal entitlement of a lender to secure possession of mortgaged property in the event of default of payment. A further question was whether, in the event that the Code does so affect the mortgagees right to obtain possession, the Court must refuse an order for possession in the event of any breach of the Code or whether instead that entitlement depend on the nature and the circumstances of the breach. Setting the scene for the conclusion of relevance to the present case, Clarke J. at para. 5.1 of his judgment referred to the Code’s provisions thus:
“5.1 The issue raised by the trial judge is one of very considerable importance. There is no doubt but that the Code forms part of the law. Under section 117 (1) of the 1989 Act, a regulated financial institution is obliged, as a matter of law, to obey the Code. The Code involves, however, a whole range of measures of greater and lesser importance which are expressed in more or less concrete terms. At one extreme lies the moratorium period under which a financial institution is precluded from commencing repossession proceedings until that period has elapsed. That provision is both clear and of very considerable importance. Also important, but much less precise, the obligations which are placed on financial institutions to engage with borrowers in difficulty. Just how, and to what extent and in what manner, such engagement is to take place is specified to some extent, but inevitably each case is likely to throw up its own individual circumstances. At the other end of the scale, the current version of the code, for example, contains detailed measures on matters such as the obligation to keep a record of all contact with a borrower.”
51. He went on to state that the question a Court must ask itself in cases of an alleged breach of a Code such as that under consideration was “whether, applying the principles identified in [Quinn & ors v. IBRC (in Special Liquidation) I.E.S.C. 29] a financial institution must be regarded as being legally debarred from seeking to exercise a right to possession, which it would otherwise enjoy, by reason of a breach of the Code”. In Quinn, the Supreme Court has set forth a detailed but inexhaustive list of criteria by which a Court should be guided in its assessment of whether the nature of a particular breach was sufficiently serious to affect rights adversely: That list is quoted in full in ILP v. Dunne [supra] and there is no need to do so again here. In the Mortgage Arrears Code an important provision was what has been referred to as the “moratorium” on seeking possession so as to provide an opportunity for the borrower to explore whether there are other possible solutions to the arrears problem being addressed. A clear breach by an institution of that moratorium provision was considered to be of such importance as to constitute “the carrying out of the very act which the Code is designed to prevent”, and in such a case Clarke J. considered that “for a court to entertain an application for possession which was brought in circumstances of clear breach of the moratorium would be for a court to act in aid of the actions of a financial institution which were clearly unlawful (by being in breach of the Code) and in circumstances where the very act of the financial institution concerned and seeking possession was contrary to the intention or purpose behind the Code itself”. Aside from the fundamental provision relating to the moratorium, Clarke J. considered that different considerations applied in relation to the other provisions of the Code, and in conclusion he stated the following:
“5.27 In conclusion on this issue I should say that in those circumstances I am satisfied that, in the limited cases of a breach of the moratorium, but in no other cases unless and until appropriate legislation is passed, the court should decline to make an order for possession.
5.28 I would, therefore, answer questions (ii) and (iii) in the case stated in this case by indicating that, where the breach of the Code involves a failure by a lender to abide by the moratorium referred to in the Code, but in no other case, non-compliance with the Code affects, as a matter of law, a relevant lender’s entitlement to obtain an order for possession. I would further clarify that it is a matter for the relevant lender to establish by appropriate evidence in any application before the Court that compliance with that aspect of the Code has occurred.”
52. It is important to bear in mind that there is no evidence whatsoever put forward in this case as to the unsuitability of either the loan actually sued upon, or indeed the first loan in June 2006. In applying the principles in the Dunne case referred to, I would accept that there may be some provisions in the Consumer Protection Code that are of more fundamental importance than some others. Even if I was to accept (and I am not to be taken as doing so in this case) that the provision requiring a bank offering a loan or a range of options regarding different types of loan, to engage in its assessment of which loan best suits the needs of the borrower, is of central importance in the way in which the moratorium in Dunne was so found to be, any claim that the bank are not entitled to recover the amount lent would have to be soundly based on clear evidence for such a draconian result to ensue upon such breach. In the present case we know that in 2006 the borrowers wanted to downsize by purchasing a smaller house on adjacent land, and selling their larger house at No. 66 within 6 months, and repaying what was a bridging loan being advanced for the purchase of 66A. We also know that at that stage the Code was not in existence. The subsequent loans, including that now sued upon, were simply by way of restructuring. No additional money was lent other than by way of rolled-up interest. Without any evidence, and in the face merely of counsel’s submission that because the borrowers were unable to repay the loan sued upon, the restructuring loan was clearly unsuitable, I cannot accept that by a continued forbearance on the bank’s part by offering a further restructuring of the loan it is arguable that this loan was not suitable. It was clearly in ease of the borrowers in the light of the unfortunate position in which they found themselves by 2010. In order to invoke the alleged breach of the Code (even if I was to accept that the particular provision relied upon was fundamental in the sense described) there would have to be at least some prima facie evidence put forward by the defendant that the loan was not suitable. In so far as the defendant submits that she has done so by any evidence contained in her affidavits in this case, I reject that.
53. I consider that the trial judge did not err in his conclusion on this point. I do not consider it necessary to reach a definitive conclusion on the issue as to whether the Code was applicable to the facility upon which the bank now sues, given that the original loan made pre-dated the coming into force of the Code because I am satisfied in any event that even if it was applicable, there is no evidence that the loan was in any whatsoever unsuitable to the borrowers’ needs at the time. Some evidence to the contrary would be needed, and there is none. So causation is not made out. This is not a clear case such as would be the case under the Mortgage Arrears Code under consideration in Dunne, where potentially a bank seeks to recover possession of premises in clear breach of the required moratorium period provided for. That is not a case where the sort of evidence to which I am referring would need to be given, bar of the fact that the borrowers have not been given the benefit of the moratorium required to be give.
No consideration
54. Given my conclusion that the Consumer Act 1995 does not apply to the loan under consideration or its predecessors, it is clear that the argument that there was no consideration by way of forbearance to sue on the part of the bank must also fail. That argument was dependent on the prior loans being unenforceable. Given my conclusions in that regard, I am satisfied that the trial judge was correct, and therefore this ground of appeal must also fail.
55. For all these reasons I would dismiss this appeal.
ACCLM v Dolan
[2016] IEHC 69
JUDGMENT of Ms. Justice Baker delivered on the 9th day of February, 2016.
1. This judgment is given in the claim by the plaintiff for summary judgment against the defendants in the sum of €3,893,135.06, together with interest, on foot of five separate guarantees of the liabilities of a company DW Developments Ltd. (hereafter “the Company”), of which the three defendants are directors and shareholders,.
2. The defendants were represented by counsel and seek to defend the proceedings on eight identified grounds. Before dealing with those grounds, I will briefly outline the relevant sequence of events.
The facility letters
3. The plaintiff claims on foot of five contracts of guarantee and indemnity made by the defendants in respect of the liabilities of the Company arising out of the facilities next described. The guarantees were executed by them on diverse dates, and the final guarantee was executed on 28th August 2008.
4. By letter dated 18th July 2007 the bank made available to the Company a loan facility in the amount of up to €1,105,000 for the fixed term of one year, and the amounts agreed to be thereby advanced were drawn down on various dates between 10th October 2007 and 13th May 2008.
5. By a second facility letter, also dated 18th July 2007, the plaintiff made available to the Company the sum of €883,000 for the term of one year for the purpose of funding the construction of units at a development in Co. Mayo on land in title of the defendants. The monies agreed to be advanced were drawn down on various dates between July 2007 and July 2008.
6. By a third facility letter, also dated 18th July 2007, the plaintiff made available to the Company a loan facility in the sum of €402,000 for the purpose of funding a community centre and associated works at the development in Co. Mayo. The monies agreed to be advanced were drawn down in one lump sum on 30th July 2007.
7. By a fourth facility, the plaintiff made available to the Company a loan facility in the sum of €502,000 to fund the purchase of a land bank. The monies agreed to be advanced were drawn down in one lump sum on 9th January 2008.
8. By a fifth facility letter dated 15th August 2008, the plaintiff agreed to make available to the Company an overdraft facility in the sum of €100,000 for providing working capital.
9. The Master of the High Court gave liberty to the plaintiff to enter final judgment in respect of part of the claim on 6th December 2013. Judge Ryan on 7th July 2014 discharged the order of the Master, and adjourned the motion to the non-jury list for mention. It was agreed by the parties, having regard to the procedural history of the matter, that I am to treat the application as a motion for summary judgment in which the defendants seek leave to defend.
10. On 26th November 2015, I made an order substituting ACC Loan Management Ltd as the plaintiff in the proceedings, evidence having been adduced of a change of name of the plaintiff on 27th June 2014. No real contest arose with respect to that order.
The grounds of defence
11. The defendants seek to assert that they have a prima facie defence on six grounds which I set out now for convenience:
a. That the proofs purported to be advanced by the Bank in support of its application are hearsay, and not within the exceptions contained in the Bankers’ Books Evidence Act.;
b. That the receiver appointed by the Bank on foot of its charge was not properly appointed;
c. That the guarantees are procedurally defective and have not been proven;
d. That the Bank and the defendants and/or the Company entered into a joint venture to develop the lands at Knock, Co. Mayo. In the alternative a collateral oral agreement was entered into between the Bank and the defendants by which it was agreed that the loans to the Company would be repaid from the sale of the units to be developed on the lands in Co. Mayo, and that the Bank would not seek to enforce until a reasonable opportunity to complete the development and sell was afforded.
e. That a reasonable period to pay was required to be, but was not in fact, given by the Bank to the principal debtor before the Bank could proceed to enforce against the guarantors.
f. That the Bank acted mala fides in requiring the Company to accept further finance in 2011 when it ought to have known that the Company was already in some degree of financial difficulties.
12. I will deal with each ground of defence in turn, although some overlap does arise.
First defence: the affidavit evidence is hearsay
13. The defendant’s assert that the affidavit evidence of the plaintiff contains hearsay evidence. It is argued that Eoghan Gavigan, who has sworn four affidavits on behalf of the Bank, was not an “officer” of the Bank as a consequence of which the Bank may not rely on the exceptions to the hearsay rule contained in the Bankers’ Books Evidence Acts 1879 – 1989.
14. Documents exhibited in the affidavits include the facility letters, various letters of demand, a statement of account showing that the monies advanced were not repaid by the Company, the five guarantees, and the certificate from the Bank which identifies the amount claimed to be due by the principal debtor at the relevant date.
15. The defendants argue that the evidence is of the same category as that criticised by Cregan J. in ACC Bank Plc v. Byrne [2014] IEHC 530 where he identified six proofs required to be given by an officer of a bank in order that the enabling provisions of the Acts were properly engaged.
16. The plaintiff argues that the Bank does not need to engage the statutory exceptions, and that the matter may be dealt with under the principles identified in the recent decision of the Supreme Court in Ulster Bank Ireland Limited v. O’Brien & Ors [2015] IESC 96.
17. Before I deal with this argument, I briefly outline the basis on which the court can engage the question of the adequacy of proof at the summary hearing.
18. It is established that a court hearing a motion for summary judgment must remit to plenary hearing matters in which the defendant has raised a bona fide or credible defence. However the authorities suggests that a court hearing a summary motion may make a determination on a legal argument on which a defence is asserted to arise, unless it is considered that more lengthy legal argument may be required .
19. There is logic to that proposition, in that no oral evidence or cross-examination of evidence is required for the court to determine that a point of defence based on a proposition of law is made out.
20. I consider that I may at the hearing of the summary motion determine the legal issue whether the necessary proofs are met as a matter of the law of evidence, and that no issue requiring more comprehensive legal argument has been identified.
21. O’Malley J. in Ulster Bank Ireland Limited v Dermody [2014] IEHC 140 is clear authority for the proposition that Mr. Gavigan, as an employee of the Bank, is an “officer” within the meaning of s.4 of the Bankers’ Books Evidence Acts 1879 and he is competent to make an affidavit for the purposes of the Acts and thereby avail of the statutory exception to the hearsay rule. I reject the argument to the contrary.
22. The Supreme Court in Ulster Bank (Ireland) Ltd. v. O’Brien & Ors. has recently considered the question of proof in these circumstances. Judgments were given by Charleton J., Laffoy J. and McMenamin J.
23. In their judgments, Laffoy J. and Charleton J. expressly leave over the resolution of a difference in approach to the Bankers Books Evidence Acts in recent High Court judgments, Charlton J. dealt with the appeal on a different basis entirely, one found in the general law of evidence, and in particular in the well-established exception to the hearsay rule that a court can draw inference from admissions, or from an absence of contradiction or denial by a defendant
24. Ulster Bank (Ireland) Ltd. v. O’Brien & Ors. concerned the admissibility of documents alleged to be hearsay within the context of default on a bank loan. The bank offered proofs of the same form offered in the present case, namely an affidavit made by an employee of the bank with its authority and consent which exhibited the loan facilities, evidence to show that they fell into arrears and the quantum of the claim. At para. 17 of his judgment Charleton J. said the following:
“…both the sworn and the unsworn documents amount to the same thing: a party is making an allegation that money has been borrowed and that a debt has not been repaid, which is now due for payment. Depending upon the particular circumstances, an inference can be drawn, where a reasonable person would feel compelled to issue some form of denial, whereby the absence of contradiction can amount to the acceptance of the contrary case; in other words, an admission against interest. This principle is based on sound authority. It is also one of the primary exceptions to the rule against hearsay.”
25. Whether the exception was engaged was “entirely dependant upon the factual circumstances”, and whether a failure to respond in the face of an accusation can amount to a declaration against interest must, he said, “depend upon a myriad of factors” as follows:
“…an analysis of the nature of the relationship between the parties is essential; the circumstances under which an allegation is made must be taken into account, what is solemn, being different from what is social and from what is jocular or mischievous; the nature of what is claimed may amount, on the one hand, to a bare allegation or, on the other, to an apparently definitive statement backed-up by documentary proof; but finally, the test must be that a failure to respond, in circumstances when a denial would clearly be required, would amount in terms of the conduct of reasonable people to an admission.”
26. Charleton J. pointed also to the fact that civil proceedings carried “procedural solemnity”, and that the swearing of an affidavit, provided it is correct in form and is adequately supported by the necessary exhibits, could carry “sufficient indications of reliability”. The combination of procedural safeguards, the solemnity of the process, and the requirement that assertions be “properly referenced and exhibited” means that an admission against interest establishes an exception to the rule against hearsay.
27. The separate judgment given by Laffoy J. in Ulster Bank v. O’Brien approached the matter by reference to the wording of O.37, r.1:
“…as regards proof of the claim, an affidavit sworn by a person other than the plaintiff who can swear positively to the relevant facts is sufficient.”
28. She pointed to the provisions of O.37 which are protective of a defendant, including the proviso that a party may serve a notice to cross-examine, and, most significant in the light of the facts of the present case, that the defendant may show cause against the motion by affidavit.
29. Laffoy J. having regard to the contents of the grounding affidavit, most of which were, in her view, uncontroverted, concluded that the deponent of the affidavit “could swear positively to the relevant facts to establish the Bank’s claim.”
30. At para. 13 of her judgment Laffoy J. set out what she believed to be the correct legal position:
“13. I am satisfied that, in the absence of any assertion by or on behalf of the O’Briens that the sum, which Ms. Murray, as a senior employee of the Bank, has deposed is due and owing by the O’Briens to the Bank, is not due, the High Court judge was entitled to conclude on the basis of Ms. Murray’s affidavit that there was a sufficient evidential basis for giving the Bank liberty to enter final judgment against the O’Briens. Ms. Murray could, and did, swear positively to the facts showing that the plaintiff was entitled to judgment in the sum claimed. The Bank did not have to rely, and was not relying, on an entry in a banker’s book being admitted in evidence to establish the O’Briens’ indebtedness to it in the sum claimed in accordance with the provisions of the Act of 1879 as amended, so that the necessity to comply with the provisions of ss. 4 and 5 of the Act of 1879 as amended did not arise. Accordingly, the submission made on behalf of the O’Briens that there was no admissible evidence before the High Court proving the indebtedness of the O’Briens to the Bank is rejected.”
31. Again Laffoy J. did not approach the matter of proof by reference to the Bankers’ Books Evidence Acts, and I consider it of importance that her decision was premised on a view that a bank could seek to prove a claim other than by means of availing of the exceptional provisions of that statutory scheme .
32. The Supreme Court judgment is definitive on the question of whether a bank seeking summary judgment must of necessity avail of the special statutory provisions of the Bankers’ Books Evidence Acts, and identifies other means by which a bank prove a claim, whether by reference to the common law exception to the hearsay rule, or under the Rules of the Superior Courts.
33. The defendants point to the fact that they have sworn several affidavits and seek to distinguish Ulster Bank v. O’Brien where no affidavit evidence of the defendant was proffered. I note in that regard that the affidavits sworn by Mr Dolan on his own behalf and on behalf of the other defendants do not deny the loans, the terms of the facility letters, the execution of the guarantees, or the amounts said to be now owed by the company. What the defendants also cannot overcome is the effect of a long and detailed letter sent by the then solicitor for the debtors, Barry Sheehan, Solicitor, on 16th July 2012 to the receiver appointed by the Bank in which he set out the history of the transaction between the Bank and the Company, and in which he challenged the validity of the appointment of the receiver, and sought an undertaking from him to vacate the lands. In this letter Mr. Sheehan set out the history of the commercial loans and identified and confirmed the following:
a. the five sanction letters and the respective terms of each;
b. the fact that the loans were secured by a charge on the development site owned by the individual directors;
c. the rolling over by the Bank of those loans and the offer of the overdraft facility.
d. the account numbers and balances outstanding on the then outstanding loans as of 28th September 2011;
e. details of a solicitor’s undertaking to furnish the net proceeds of the sale of the development site reduction of the debt;
f. that the guarantees were signed by each of the three defendants, linked to an individual sanction, although he noted that they were not signed by the Bank or dated.
34. The solicitors for the plaintiff wrote in response on 24th July, 2012 noting that the letter confirmed the facilities and the security and that the sole issue in contention seemed to be the validity of the deed appointing the receiver.
35. The next substantive response from Mr. Sheehan was the letter of 24th March, 2014 which dealt with conveyancing issues arising from the sale of various completed units and the request that the Bank would execute partial discharges for the purpose of those sales. That letter arose in a context which will be explored more fully below.
36. Mr. Sheehan wrote another comprehensive letter on 13th May, 2014 where again he dealt with the appointment of the receiver and referred back to the contents of his letter of 16th July 2012. In this letter he also confirmed the relevant details of the Bank facilities, the guarantees, the nature of the security in place or agreed to be put in place, and the outstanding amounts.
37. I regard that letter as particularly significant in that it arose in the context of the response to the letter of 24th July, 2012 from the Bank’s solicitors from two years earlier, (ref para. 35 above) where the Bank’s solicitors had noted the limited nature of the disagreement between the parties, and that there were limited legal issues involved.
38. The two letters from Mr. Sheehan are in my view exactly the form of evidence in respect of which the Supreme Court gave its judgment in Ulster Bank v. O’Brien, and from which I can draw an inference. The assertions made by Mr. Sheehan are assertions against interest, and I reject the suggestion made by counsel for the defendants that an assertion against interest cannot have force if it is made by an agent, as such an assertion flies in the face of well-established law with regard to the power of an agent to bind his principal, and in that regard I note that there is no suggestion that Mr. Sheehan was not acting within his authority.
39. Further, the fact that the letter was sent to the receiver is not sufficient to permit me to regard it as falling outside the exception identified by the Supreme Court, as I note that Mr Sheehan made his complaints primarily against the Bank, and refereed to the Bank as “client” of the receiver.
40. I conclude therefore that there is sufficient evidence before me of the key elements required to be proven by the Bank, and that the affidavits of Mr. Gavigan are sufficient evidence of the advance of monies to the Company, the demand on the Company and on the guarantors on foot of the guarantee, and the amounts now said to be due on foot of the various facilities.
41. I deal more fully below with the single issue of the validity of the guarantees but I consider that the defendant has not made out a defence under this head, and that the Bank has established the formal proofs required under O.37 of the Rules of the Superior Courts, and that there are sufficient assertions against interest to enable the Bank to rely on the established exception against the hearsay rule. The plaintiff has made out a prima facie case and, as stated by McMenamin J. at para. 6 of his judgment in Ulster Bank v. O’Brien, that being the case and the defendants not having adduced any meaningful evidence to rebut it, the plaintiff is “found to have discharged the burden of proof devolving upon it”.
Second defence – The receiver not properly appointed
42. This matter can be dealt with shortly. The appointment of the receiver is the subject matter of other proceedings commenced by the defendants against the receiver and the Bank. The present proceedings are proceedings for debt which any action by the Bank by way of enforcement on foot of its security does not arise for consideration. This claim is brought on foot of guarantees accepted as having been made by the defendants in support of the Company’s loans. Subject to what I say below with regard to the validity of the guarantee, counsel for the defendants has not made out any statable argument that his complaint with regard to the appointment of the receiver might give his client a defence.
Third defence: the guarantees are not proved
43. Counsel for the defendants argues that the form of the guarantees exhibited do not show that they were executed by the Bank. Section 2 of the Statute of Frauds (Ireland) Act, 1695 requires a memorandum or note in writing for the purpose of taking action inter alia on foot of a guarantee. That note or memorandum must be signed by “the party to be charged therewith”, and in the present case, the guarantees are signed by the three defendants against whom the guarantee is sought to be enforced.
44. No stateable legal basis has been established to ground an argument that the guarantee must be signed by the person in whose favour it is made. No such requirement exits and this defence might fail.
Fourth defence: the alleged joint venture between the Bank and the defendants
45. This is identified by counsel for the defendant’s as being his primary or core ground of defence and this particular ground of defence requires me to engage the principles identified in the authorities, particularly in Aer Rianta CPT v. Ryanair [2001] 4 IR 607 and Harrisrange Ltd. v. Duncan [2003] 4 IR 1, and whether there is what was described recently by McMenamin J. in Ulster Bank v. O’Brien as a “fair and reasonable probability of the defendant having a real or bona fide defence”, whether it is clear that the defendants have no case, or have not shown an arguable defence. It is also established on the authorities, and it will become clear later that this is an important factor in the present case, that mere assertions on the part of a defendant as to a possible defence cannot suffice, as the court must be confident that the deposed facts, if established on oral evidence, could give a real or bona fide defence.
46. The Bank asserts that the commercial transaction had all the usual hallmarks of a commercial lending for property development, and the assertions that the Bank and the defendants and/or the Company were engaged in a joint venture as “inherently improbable”.
47. Counsel for the defendants accepted that the designation of the banker customer arrangement as a “joint venture” in the affidavits might not be accurate, and suggests that the proposition might usefully be considered in conjunction with his argument that there exists a collateral oral agreement between the Bank and the defendants, and/or the Company, that the Bank would enforce its entitlement to be repaid and/or its entitlement on foot of the security until the development was fully built and sold. The matter is described in various ways in the first affidavit of Seamus Dolan sworn on 7th July, 2014 which he makes on behalf of all defendants, and at para. 38 and the following paragraphs he sets out details of onsite meetings between the representatives of the Bank and the defendants during the course of the development work, and a detailed engagement with the Bank as to the minimum sale price at which the built units were to be sold. At para. 44 of this affidavit, Mr. Dolan says the following:
“… the Plaintiff and the Defendants were engaged in a joint business venture they agreed to pool their respective resources, being financial and property development acumen, for the purpose of a one-off large-scale residential development at Knock, Co. Mayo. Due to the subsequent downturn in the housing market, both parties suffered their own discreet losses and the Defendants should not be liable for the losses the Plaintiff alleges it suffered by reason of its own contributory negligence in electing to invest in the said joint venture…”
48. Mr. Dolan makes similar, but perhaps more nuanced and refined, assertions in his second replying affidavit of 12th May, 2015 where, at para. 11, he says that while the initial facilities to the Company expired in or around July of 2008,
“… these were expressly renewed on an indefinite basis with the agreement of the plaintiff. In particular, it was agreed that the development would continue, the units would be sold, part of the proceeds of sale would be used to pay for operational costs to fund the development of the remaining unit and the balance would be used to repay the loans.”
49. Counsel for the defendants clarifies the assertion of his clients that the loans were agreed to be extended “indefinitely”, and says that this is not meant to suggest that they were to be deferred on an “eternal” basis, but that the agreement that evolved as a result of the crisis in the relevant residential property market, was that repayment was linked to the finishing of the development, and was “open ended” in that way.
50. This evidence is rejected by the replying affidavit of Eoghan Gavigan sworn on 30th March, 2015 and a further affidavit sworn on 14th May, 2015. He says the plaintiff was a bank and in the business of lending and not investing or collaborating with third parties in property development, and describes the relationship between the plaintiff and the Company as a “normal arms-length commercial lending arrangement”, and “subject to the usual lending practices, which included credit applications and objective risk assessments.”
51. It is accepted by counsel that I cannot resolve a dispute of facts, but equally that I may assess the evidence including the exhibited correspondence and come to a determine whether the defendants have made out an arguable or bona fide or credible defence on this basis. I turn to consider the evidence and assertions.
The evidence and assertions said to support the defence of joint venture
52. I will deal more fully with the correspondence below, but I note that a degree of flexibility did find its way into the payment arrangements between the Company and the Bank, and that by July 2008 or thereabout, the Bank was aware of a slowdown which pointed to a significant difficulty in building and selling the development,
53. The defendants, on behalf of the Company, engaged with the Bank and committed resources of time, effort and energy to the completion of a sufficient number of units and they became what their counsel rather colourfully describes as “unpaid receivers”.
54. Counsel for the defendant argues that the trigger that resulted in the calling in of the facilities was the refusal of the Company to accept a refinance facility offered by letter of 21st June, 2010, in respect of the total balance then due on the six loan accounts. The facility was to be repayable on demand, subject to a fixed term of six months. The defendants argue that special condition 11 in this offer supports their argument that there was an arrangement or joint venture between the Bank and its customer. No distinction was made by counsel as to the Company and the guarantors for this purpose. I quote that special condition in full:
“In addition to the warranty contained in the General Terms, the Borrower hereby warrants and represents to the Bank:-
(a) The Borrower warrants and agrees that the previous arrangement with the Bank regarding the sale proceeds, as outlined in letters from the Bank to the Borrower dated 19th August, 2008 and 9th September, 2008, is cancelled in its entirety from the date of this Facility Letter.”
55. That letter arose in the context of a number of emails between Mr. Gavigan and Mr. Dolan in regard to the proposed sale prices of the units, and a de facto arrangement in place between them that in lieu of the Bank enforcing strictly the prior agreement that the full proceeds of sale would be paid to the Bank, an amount could be deducted by the Company to fund ongoing building works on the then un-built 23 units.
56. That email correspondence occurred in the middle of March 2010 and counsel for the defendants places particular emphasis on the fact that Mr. Gavigan provided his mobile phone number to Mr. Dolan and suggested that he should not “hesitate to call”.
57. The defendants also place some store on the fact that the Bank commissioned its own valuation report as evidence of a form of “micromanagement” by the Bank of the development works, tantamount, it is argued, to the Bank becoming a partner or engaging in a class of joint venture or agreeing to a long term stay on any demand for repayment. It is asserted that the relationship was one of mutual trust, and comprised a class of “special relationship”, the indices of which, while they were not such as to create the duty of fiduciary, did differ from the normal commercial banker/customer relationship.
58. By a letter of 16th August, 2010, from the Bank to Mr Dolan, the immediate contact between Mr. Gavigan and the other defendants and the Company, the Bank noted its “continued cooperation and willingness to facilitate the sale of the units”. Critical to the credibility of the assertions made by the defendants is that the Bank expressly refused to provide any comfort to the Company, or to the directors, with regard to the loan, and especially in the context of this litigation with regard to the guarantees. The letter concluded as follows:-
“However, your email appears to suggest that I provided you with some level of comfort in relation to the personal guarantees and indemnities provided to the Bank in support of the facilities advanced to DW Developments Limited.
For the avoidance of doubt, the Bank continues to rely on the personal guarantees and indemnities, and, will, if necessary, recover all monies due to it from John Waldron, John A. Waldron and yourself in this regard, as it is entitled to do. I trust this clarifies the position.
Are these assertions credible?
59. My approach to the argument by the defendants must take account of the so-called Aer Rianta principles, including the dicta of Hardiman J. in that case at para. 3.4 and 3.5 of his judgment that a “mere assertion of a defence is insufficient” and the court is entitled to consider whether those assertions are credible in the circumstances. I am persuaded especially by the judgment of Charleton J. in National Asset Loan Management v. Barden [2013] 2 I.R. 28, where he said at para. 5:-
“The mere assertion on affidavit of a defence is insufficient. A defence must, if the matter is to be remitted to plenary hearing, have some reasonable foundation. An assertion, for instance, that a cheque was paid in discharge of a debt means little if no bank statements are produced to show the provenance of the funds or when, how or to whom money was remitted. Often, arguments are advanced as to collateral contracts or representations that are claimed to override the express terms of a written contract. It is for each such allegation to be analysed in the context of whatever claim the plaintiff may make in response, bearing in mind that the summary judgment procedure does not involve the weighing of competing facts but rather requires an analysis as to whether a defence that might reasonably be an answer to the plaintiff’s claim has been made out. If it is very clear that the defendant has no defence, the court should proceed to enter summary judgment.”
60. The same judge in National Asset Management Ltd. V Barker & Ors. 2014 IEHC said the following:
“If an assertion of fact is made which is in the teeth of a written contract, then a particular scrutiny will be made of that fact and how it is alleged to fit within the matrix that amounted to the contract between the plaintiff and the defendant.”
61. The first observation I make is that counsel has not identified the indices of the alleged special relationship. As its height, he argues that the loan of the Company was agreed not to be repayable on demand as expressly agreed, but from the proceeds of sale of the units whenever that was to occur. There was no evidence as to the precise number of units that remained undeveloped when demand was made on 28th September 2011, but I note the number of 23 units identified in email correspondence. No evidence has been furnished as to the possible net returns were those units to be built, nor indeed, how those works might have been financed. The defendants’ argument rests on several contingencies, including the availability of funds to complete the development, the possible sale price, and taking the maximum sale price identified as €99,000, VAT inclusive, the maximum gross VAT inclusive figure that would have been available to the defendants on the sale of the 23 unbuilt sites was circa €2.2m. I make the observations to highlight what I consider an air of unreality in the assertion that the Bank agreed to indefinitely stay its hand. The last affidavit the defendants was sworn on 12th May, 2015, and even at that stage, the defendants had not adduced evidence on affidavit as to the point in time it was anticipated that the net proceeds of the sales would be sufficient to discharge the loans.
62. Furthermore, having regard to the dicta of Charleton J. in National Asset Loan Management v. Barden that an assertion on affidavit which flies in the face of written documents must be examined with care, I consider that the correspondence and the formal Bank documents do not bear out even an arguable case that the Bank and the Company were engaged in a joint venture or that some form of special relationship existed. The correspondence between the Bank and the solicitors for the Company of 14th June 2010 in my judgment identifies a hope or a wish of the Bank to achieve maximum benefit from the units, and it is clear that the indulgence the Bank displayed in not seeking immediate demand following default was not agreed, nor represented, to be open ended. The last two paragraphs of that letter bear repeating:-
“The Bank reserves the right to review, modify and/or cancel this arrangement at any time by notice in writing to the Borrower or your firm on the Borrower’s behalf.
For the avoidance of doubt, please note that the contents of this letter are entirely without prejudice to, and should not, in any way, limit and/or be construed as a waiver of, the Bank’s further remedies at common law and under the Bank’s general terms and conditions. All such remedies are preserved in full and exercised by the Bank at its discretion.”
63. I regard the assertion by the defendants that there existed a special relationship to be not consistent with the documentary evidence, and the indices of such a relationship have not been identified with any specificity. Accordingly, I find the assertion to be incredible. For a relatively small developer to argue a special relationship with a bank in the context of a commercial loan when all the documentation pointed to an alternative view, would be to ignore the fact that the Bank was entitled to and did offer indulgence to its customer from time to time, and did so for very sound commercial reasons and in the hope of achieving the maximum return on a default loan in the context of a profound property price collapse.
64. Further, it is not doubted that the loans were subject to Bank’s general terms and conditions applicable to commercial loans, clause 4.23.1 whereof identifies in clear terms that a waiver or indulgence by the Bank did not, of itself, amount to a general waiver of the right of the Bank to enforce the general special conditions:-
“A waiver by the Bank of any breach by the Borrower of any of the terms and conditions applicable to a Facility will not constitute a general waiver of such terms and conditions. No failure or delay by the Bank to exercise any power, right or remedy in relation to a Facility shall operate as a waiver thereof nor shall any single or partial exercise by the Bank of any power, right or remedy, preclude any further exercise thereof or the exercise of any other power, right or remedy. The remedies of the Bank contained in a Sanction Letter and these general terms and conditions are cumulative and not exclusive of any remedies provided by law.”
65. I consider that the defendants have not made out an arguable case that the loan facility to the Company was anything other than a standard commercial loan in respect of which the Bank, no doubt in its own commercial interests, agreed to a degree of indulgence for a period in the hope of achieving some return. Even had the defendants shown precisely how a long term and indefinite stay on demand might have resulted in the Company being in a position to repay the loan, the fact remains that the facilities were demand facilities and the Bank was contractually entitled to engage in indulgence and to forego to demand notwithstanding default, without loosing thereby its right to engage the full rigours of the contract.
66. For completeness, I regard as not credible the suggestion in Mr. Dolan’s affidavit that Mr Gavigan was acting as a “de facto director” of the Company in the manner in which he engaged with the question of the appropriate sale price of the units. No such role is apparent on the evidence. Mr Gavigan was a full time bank official and was engaged in the business of his employer.
Relationship may be inferred by virtue of estoppel by convention.
67. The defendants argue that the doctrine of estoppel by convention must inform my conclusion with regard to the assertion that there existed a joint venture or special relationship, and an agreed indefinite deferral on payment. It is well established that such estoppel can arise only if it is based on a common and not unilateral assumption or behaviour of the parties. The judgment of the Supreme Court and Ulster Investment Bank v. Rockrohan Estate [2015] IESC 17 is clear authority in this regard. At para. 24 of the judgment, Charleton J. delivering the judgment of the Court, said the following:-
“Estoppel can arise, however, through an assumption shared by those interacting…. This requires some demonstrable action, behaviour or representation by the party who is to be bound by the altered state of affairs. It is insufficient, to establish estoppel, merely for the party later pleading that defence to conclude that matters must be so. There must, instead, be a foundation in the behaviour of the party who is to be estopped from asserting a legal entitlement, either pursuant to contract or otherwise.”
68. The documentation and evidence on affidavit from the Bank unequivocally shows that the Bank did not act on an assumption that the repayment of the loan would be extended indefinitely. The opposite is the case and the letters of 16th August, 2010 referred to at para. 58 above makes this clear. The arrangement for the repayment of the proceeds of sale was undoubtedly changed many times between 2008 and 2010, and different amounts were agreed to be retained by the developer, and different price ranges agreed with respect to the identified units, but those arrangements were negotiated from time to time in the context of identified intended sales. It is quite clear to me that the Bank was prepared to engage these agreements in the hope either that the economy would improve or that the Company would be put in a position to pay some or all of the money borrowed. In simple terms, the Bank was owed a sufficient amount of money by the Company for it to be justified in staying its hand in the hope that the Company could repay its debt, as the alternative of placing the Company in liquidation would have offered the Bank no solace.
69. There is no evidence of a common assumption that could found an estoppel.
Collateral contract
70. In the alternative counsel argues that a joint venture or special relationship arose by virtue of a collateral contract entered into between the Bank and the Company following the economic crash in 2008. He argues in reliance on the judgment of Finlay Geoghegan J. in Allied Irish Banks Plc v. Galvin Developments (Killarney ) Limited & Ors [2011] IEHC 314 that the existence of that collateral contract displaces the Bank’s entitlement to payment on demand, and that a contractual arrangement was in place by which the developers were entitled to finish out the development, and were working to this end with the co-operation, knowledge and positive engagement of the Bank, and that nothing happened to put an end to this arrangement. The letter of 21st June 2010, which he identifies as the trigger event by which the Bank wrongly put an end to the collateral contractual arrangement, was not acceptable to the Company. He argues too that the letter was sent by the Bank in bad faith and that it tried to “slip in” a termination date, which his clients, as conscientious borrowers, refused to sign.
71. The difficulty with this argument is that the defendants have not shown the type of detailed evidence and argument which was available to Finlay Geoghegan J. in Allied Irish Banks plc v. Galvin Developments (Killarney) Ltd [2011] IEHC 314. The defendants have not identified the specific terms and conditions asserted to be part of the collateral contract. At best the defendants can say that the Bank agreed to stay its hand, but the documentary evidence points to a refusal on the part of the Bank to give comfort either to the Company or to the guarantors, and while that of itself might not determine the matter at summary judgment stage, the defendants must offer a credible argument and evidence to support a proposition that the documentation did not mean what it said.
72. There is ample case law on how a court may imply a term into a contract, but a contracting party seeking to argue such an implied term must at summary judgment stage persuade a court that there is credible evidence that the term or terms argued to be implied do not fly in the face of the documentary evidence and is credible in all the circumstances. The express terms of the loans, and in particular the demand nature of the facilities, and the fact that there was an express general condition that a waiver or temporary indulgence by the Bank would not constitute a waiver of its overriding right to seek payment on demand, are insurmountable hurdles for the defendants.
73. Further, even if the defendants can establish that a duty of good faith arises, they have not shown the manner in which this duty is alleged to have been breached, nor what the legal consequences of such might be. Thus, for example, if it were suggested that the Bank acted in bad faith in relying on its general conditions when it had agreed to suspend those, the defendants would have to show the relevant conditions which the defendant said were substituted for those general conditions. There is to my mind no more than a vague assertion that the monies would be repaid from the development, which is unrealistic having regard to the degree of indebtedness, and as there is insufficient detail for me to know whether there was any reality in the Company ever repaying the debt by that arrangement, there is nothing in the correspondence that would suggest to me that the Bank did anything other than agree the sale price for a particular tranche of identified units, and how those net proceeds would be distributed.
74. That it seems to me is the height of the defendants’ argument, namely that the Bank engaged with the Company in some detail with regard to the marketing of some of the built units and as to how the sale proceeds were to be disbursed. There was nothing more than a temporary arrangement with regard to part of the proceeds of the sale of part of the development and no element of bad faith has been credibility shown, nor can I glean what the consequences of such might be even were it to be established.
Await discovery?
75. The defendants rely on the recent judgment of Irvine J. giving the judgment of the Court of Appeal in Templecrone Co-operative Agricultural Society Ltd. v. McLoughlin [2015] IECA 14 where she did consider that the summary proceedings should be remitted to plenary hearing as:
“…discovery of documents may assist the parties in resolving the disputed facts. It would accordingly be unjust and premature in the absence of such discovery to grant judgment to the plaintiff where the true relationship between the parties may well be advanced, clarified or resolved through that process.”
76. I adopt that clear and definitive statement of the law, but note that Irvine J. identified a number of evidential matters that had been put forward by the defendants that threw doubt on the assertion by the plaintiff that it was dealing with the defendant in person or, as asserted by the defendant, with a company formed by him for the purpose of the relevant trade.
77. The defendants in the present case have produced very little documentation supportive of their assertion that there was an agreement for the long-term or indefinite stay on the recovery of the debt by the Bank. The height of the argument is the exchange of emails, and I have dealt with this above. I take particular note of the fact that the defendants have not exhibited documentation with regard to the building out of the balance of the units and how they were to be funded, which arises either because none such exists, or because the defendants have opted not to discover it.
78. Clarke J. in GE Woodchester v. Aktiv Kapital Investment Limited [2009] IEHC 512, agreed that the true nature of a defence might have to await discovery or interrogatories, went on to say at 6.6,:-
“That is not to say that it is open to a defendant, on a summary judgment application, to make a vague and generalized contention which would amount to nothing more than an assertion that something useful to his case might turn up on discovery or the like. 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.”
79. I cannot adjourn the matter to plenary hearing on account of an argument that discovery may assist the parties, unless some rational basis is put to me as to the class of documents which might so avail the parties, and as to why it is asserted they are in the hands of the plaintiff only, and given the nature of the documentation some at least of it must be in the hands of, or within the procurement of, the defendants.
80. Internal Bank documentation dealing with the on-going arrangement between the parties between 2008 and June 2010, might at best show that the Bank was prepared then to allow the Company to try and deal with its financial difficulties in the context of the economic crash which was perhaps initially hoped to be short term. The correspondence from the Bank, and the attitude that it took in the summer of 2010, and in particular in the letters of 14th June 2010 and 21st June 2010, must be interpreted as meaning that the Bank’s patience had come to an end, or that the Bank had lost confidence that the Company would be in a favourable financial position even were it to be further supported in building out the development.
81. I reject this ground of defence for all of these reasons.
The fifth defence: the guarantees have not been proved
82. The defendants argue that the guarantees have not been proved and that the exhibited documents are inadmissible hearsay. This is not an argument with regard to the Bankers’ Books Evidence Acts, but counsel argues that the Bank must prove the guarantees by calling the person who witnessed the execution of the defendants of the documents.
83. This argument can be dealt with shortly and the guarantees are original evidence, being a record of an agreement. The evidence of Mr. Gavigan prima facie establishes that five guarantees were signed and each of them is exhibited. The defendants have not denied that the guarantees were signed, and the letters from their solicitor contain admissions against interest. Edwards J. in Leopardstown Club v. Templeville Developments Limited [2010] IEHC 152 deals in detail with the use of a document as original evidence. I adopt the statement at 5.13 of that judgment:-
“Where a document is produced by a party who proposes to rely upon the statements it contains, not as evidence of their truth by way of an exception to the hearsay rule, but to show for some legitimate purpose that the statements (whether or not they be true) were in fact made, then the document is properly to be characterised as non-hearsay original evidence (otherwise original evidence).”
84. The Bank has produced the guarantees as evidence of the fact that the guarantees were made and as the documents are “original evidence”, I consider that counsel for the defendants is incorrect in its assertion. The plaintiff has proved that the guarantees were made in fact, and there is evidence from the defendants themselves that they were properly executed.
85. I reject also as not supported by any authorities the proposition advanced by counsel for the defendants that the guarantees were required to be executed by deed, or document under seal. The evidential requirements for the enforcement of a contract of guarantee are found in section 2 of the Statute of Frauds (Ireland) Act, 1695, by which is required that the contract be evidenced in writing. The contract is not one of the class of transactions required to be made by deed, such as a document by which title to land is assured.
Sixth defence: reasonable time to principal debtor
86. The defendants also argue that the Bank failed to give reasonable time to the Company to repay the debt and that as a matter of law, a bank is required to give a reasonable period to a principal debtor before it may proceed to enforce against a guarantor. Counsel relies on the judgment of Bingham J. giving the judgment of the High Court of England and Wales in Bank of India v. Transcontinental Commodity Merchants Limited & Anor [1982] 1 Lloyds Rep 506, where he said at p. 515:-
“…I consider the true principle to be that while a surety is discharged if the creditor acts in bad faith towards him or is guilty of concealment amounting to misrepresentation or causes or connives at the default by the principal debtor in respect of which the guarantee is given or varies the terms of the contract between him and the principal debtor in a way which could prejudice the interest of the surety, other conduct on the part of the creditor, not having these features even if they regular, and even if prejudicial to the interest of the surety in general sense, does not discharge the surety.”
87. The Court of Appeal in England and Wales in its decision [1983] 2 Lloyds Rep 298 agreed with that statement of principle although Goff L.J. said that he would have perhaps preferred to state it “the other way around”:-
“that is to say that there is no general principle that irregular ‘conduct’ on the part of the creditor, even if prejudicial to the interests of the surety, discharges the surety though there are particular circumstances in which the surety may be discharged, of which the interests specified by the learned Judge provides certainly the most significant, and perhaps the only, examples…. But that merely irregular conduct on the part of the creditor, even if prejudicial to the interests of the surety does not discharge the surety, there can in my judgment…”
88. In O’Flynn v. Carbon Finance Limited [2014] IEHC 458, gave in my view a definitive analysis of the principles applicable to the general question of how much time must pass where money is payable on demand before a debtor can be said to be in default. Much analysis is found in the English case law whether the applicable test is the so called “mechanics of payment test”, or a “reasonable time” test as was discussed by McGovern J. in Allied Irish Bank Plc v. Moran [2012] IEHC 323, quoted by Irvine J, who rejected the reasonable time test as being the test in Irish law.
89. A para. 135 of her judgment, having comprehensively examined both the Irish judgments and those of the Courts in England and Wales, she said as follows:-
“From these authorities it is easy to see why the mechanics of payment test has proved itself so attractive to the Courts and why there is an almost complete dearth of authority to support an alternative test. This is probably because the mechanics of payment test involves the application of relatively objective criteria. Applying this test, a borrower can without too much difficulty determine when it is likely to be safe to proceed to enforce its security. This cannot be said of the reasonable time test which involves a great deal of subjectivity and is one that the Courts have considered imprecise and undesirable in the commercial context in which it usually arises.”
90. I consider this judgment to be a comprehensive review of the authorities and a reasoned approach to the question of why the preferred test was objectively to be preferred, and I adopt her reasoning.
91. The defendants must fail in this argument and cannot make a bona fide argument that they will succeed. There are a number of reasons for this. The judgments of the Court of England and Wales in Bank of India v. Transcontinental Commodity Merchants Limited & Anor suggest the proposition that the liability of the guarantor cannot be increased or become more burdensome as a result of any action by which a creditor procures a default, or makes it impossible for the primary debtor to discharge the guaranteed liabilities.
92. The Company defaulted in its loans in 2008, and that is not denied. An event of default giving the Bank an entitlement to demand arose then, and there is no argument advanced that default was procured by any action of the Bank.
93. I accept the argument of counsel for the Bank, and this is borne out also by the evidence of the defendants, that the Bank did what it could to try to assist the Company in continuing the development in the hope that it could trade out of its financial difficulty. The Bank’s actions cannot be characterised as having increased the liability of the defendants on the guarantee, and the opposite is the case. I am not persuaded that the defendants have shown any credible basis that this defence avails them.
94. Furthermore, the guarantees were in express terms a guarantee and indemnity and by the operative part the parties of the first part “irrevocably and unconditionally” indemnified the Bank in full on demand against any losses arising from the facilities. The word “indemnify” and the relevant variations of that verb are found throughout.
95. Furthermore, clause 4.2.1 contains an acknowledgment on the part of the guarantors that none of the liabilities thereby created should be reduced, discharged or otherwise adversely affected by:-
“any variation, extension, discharge, compromise, dealing with, exchange or renewal of any right or remedy which the Bank may now or hereafter have from or against any of the principal debtor and any other person in respect of the obligations and liabilities…”
96. I also reject the argument of counsel for the defendants that the fact that the Bank did not make formal demand of the principal debtor and of the guarantors immediately upon the happening of an event of default, meant that the Bank implicitly recognised that it should wait until time had passed after demand was made of the principal debtor, as the provisions of 4.2.3 of the guarantee provided that the Bank should not be obliged before taking steps to enforce its rights under the guarantee:-
“To make demand, enforce or seek to enforce any claim, right or remedy against any of the principal debtor and any other person.”
Seventh defence: the construction of the facility letters
97. Counsel makes an argument not advanced in the affidavit evidence, namely that on a true construction of the facility letters the loan of the Company was not repayable on demand. This is a legal argument and one which I consider capable of resolution at a summary hearing. As the individual facility letters are in identical terms in the relevant respects, I will consider the argument in regard to the first of those, namely the letter of 18th July 2007, the term of which is described as follows:
“The Facility is for a term of one year from the date of first draw down of the Facility unless a demand for earlier payment is made in accordance with Clause 6”
Clause 6 deals with repayment.
“The Facility shall be repayable immediately on demand being made by the Bank on the Borrower unless and until such demand is made, (and without limiting the Bank’s right to make demand at any time)”.
(The balance of this part relates to interest and is not relevant to the argument)
……..
The Facility (including all rolled-up and capitalised interest) will be repayable when the secured property is sold, or when the term of the loan expires, whichever is earlier.
Counsel argues that on a true interpretation of that clause, the Bank could have demanded repayment of the Facilities early under Clause 6, but once the fixed term of one year from the date first draw down had expired, the loan was repayable only when the secured property was sold. No denial is made by the defendants that the Company’s loans were governed also by the general conditions of the Bank’s commercial trading, clause 4.8.2 whereof sets out as follows:
“Without prejudice to:
a. the ability of the Bank to demand immediate repayment at any time of any facility which is, in accordance with the Sanction Letter for that Facility, repayable on demand; or
b. the ability of the Bank to demand immediate repayment at any time of any overdraft facility; or
…
all principal, interest and other amounts payable under each facility shall become immediately repayable on demand being made by the Bank on the Borrower and all the obligations on the Bank in respect of the Facility shall be cancelled if:
i. any amount payable by the borrower under the Facility when due…”
98. I consider that the combined effect of the special and general conditions is that the loan facility was for a fixed term of one year, that the Bank had the right to demand within the year on any event of default, and the Bank had a general right to demand after the term expired.
99. Even if I am wrong in this, the guarantees did not require demand of the principal debtor and the construction sought to be advanced by counsel for the defendants cannot hope to succeed in those circumstances, as the clear terms of the documents that they executed are inconsistent with that argument.
Eighth defence: further advances mala fides
100. Finally the defendants make the argument that the Bank acted mala fides in offering further advances to the Company by the letter of 21st June in circumstances when in well knew that the Company was not in a financial position to meet any further loans. That argument might have had some force had the Company accepted the loan offer, but as it did not, no causative connection can be found between any alleged mala fides on the part of the Bank, and the absence of a causative link is fatal to this argument.
Conclusion
101. In the circumstances then I am satisfied that each of these defendants executed a guarantee and indemnity in respect of the loans of the Company as follows:
a. Three guarantees in respect of the facility letters each of the 18th July 2007. While it is not clear on the face of those guarantees which of three facility letters, is guaranteed by the respective guarantees, I am satisfied that three guarantees were made in respect of three facility letters and that there is no reasonable basis on which I could hold that the guarantees do not cover the liabilities arising under the three facilities.
b. Guarantee in respect of the facility of the 18th December 2007
c. Guarantee 20th August 2008 in respect of the facility of the 15th August 2008.
102. In each case, the guarantees were in the form of guarantees and indemnities, and created primary as well as surety obligations on the part of the defendants. I am satisfied also that the guarantees each contain a clause (Clause 11.1) by which any certificate given by the Bank specifying the amounts payable in respect of the monies so guaranteed should be conclusive and binding, and there is no dispute with regard to the actual quantum owed by the principal debtor.
103. I am not satisfied that the defendants have established any basis on which they might be entitled to defend, being aware of the low threshold that applies in respect of summary judgment, but also noting that some of the arguments advanced were arguments as to legal principles which I considered possible to resolve on a summary basis, and consider that the defendants have not made out a credible defence on the factual or legal matters on foot of which they have sought to defend.
104. Accordingly, I propose to enter judgment in the sum of €3,893,135.06, and will hear counsel an the question of interest.
AIB v Fahey
[2016] IEHC 182
JUDGMENT of Mr. Justice McDermott delivered on the 12th day of April, 2016
1. The plaintiff seeks summary judgment against the defendants for €2,771,745.27.
2. The plaintiff claims that by letter of sanction dated the 2nd December, 2008 the Bank agreed to provide two relevant loan facilities to the defendants. It is said that the letter of sanction was executed by the defendants on the 27th February, 2009.
3. The first facility, the subject of these proceedings was in the amount of €2,420,000.00 the purpose of which was to finance the purchase of the “Briar Rose Bar and Restaurant”, Douglas, Cork. The loan was repayable over 25 years by consecutive repayments of €13,775.00 per month commencing on the 2nd January, 2009. Any residual balance was repayable at the end of the period. The statement of account in respect of this loan facility is set out in loan account number 93608112440142 operated by the defendants at the plaintiff’s Business Banking Department, 66 South Mall, Cork.
4. The next relevant facility in the letter of sanction was in the amount of €1,100,000.00 the purpose of which was to finance the purchase of a 9 acre site with dwelling house at Inchydoney, Co. Cork costing €1,000,000.00 plus stamp duty and costs. A statement in respect of this loan account number 93608112440225 operated by the defendants at the plaintiff’s Business Banking Department at 66 South Mall, Cork was exhibited. Mr. Richard Stafford, a bank official employed by the plaintiff, submitted an affidavit as manager of the plaintiff’s Financial Solutions Group based at Matthew House, Fr. Matthew Street, Cork. He made the affidavit on the plaintiff’s behalf and upon their instructions and did so from facts within his own knowledge “and from inspection of the plaintiff’s books and records pertaining to the defendants.”
5. At paragraph 8 of the affidavit he states that the defendants are in default of their repayment obligations in respect of each of the loan accounts and that the last payment made by them in respect of either account was the 6th January, 2012. He further deposes that by separate letters of the 29th August, 2013 the plaintiff, through its solicitors, demanded repayment of the aggregate sum of €3,431,995.27 from each of the defendants separately which they failed to discharge.
6. The letters of demand are in identical terms. They were issued by the solicitors on behalf of the Bank and state as follows:-
“We confirm that we act as solicitors on behalf of Allied Irish Banks Plc who have instructed us to collect from you the sum of €3,431,995.27 due on foot of the above accounts as at the 27th August, 2013.
Kindly note that if the above sums due are not discharged to this office immediately, our instructions are to issue proceedings against you without further notice…”
The letter of sanction offering the loan facilities specifically stated that the offer was subject to the terms and conditions set out in the letter but also subject to the Bank’s General Terms and Conditions Governing Business Lending, a current copy of which was enclosed.
The letter adds in bold type “these are legal documents and should be read very carefully”.
7. The relevant terms of the “General Terms and Conditions Governing Business Lending” (June, 2008) relied upon are:-
“Section 3
Loan Account…
Repayable on Demand
3.1.1 Loan account facilities are repayable on demand. However in normal circumstances, the bank expects that the loan will be available as stated in the letter of sanction.
3.1.2 Without prejudice to the Bank’s right to demand repayment at anytime, the happening of any of the events set out in Clause 4.2 may lead to the Bank making demand for payment, with or without notice to the Borrower…
Events of Default
4.2 A term loan though expressed to be repayable over or within a specified period may be terminated by the Bank and the Bank may demand early repayment at any time with or without notice to the Borrower on the occurrence of any of the following events:
(i) On the failure by the Borrower to make any repayment of principal or interest on the date it is due…”
8. The application for judgment in default of defence was initially resisted on the basis of an affidavit sworn by Mr. Liam Fahey on 19th November, 2014. The merits of the plaintiff’s claim are not addressed in any detail. The following assertions are made:
(1) It is said that the contents of Mr. Stafford’s affidavit are hearsay and not admissible in evidence and that it does not explain his authorisation to swear an affidavit on behalf of the plaintiff.
(2) The plaintiff is put on full proof of any alleged agreement of loan or debt.
(3) It is said that copies of documents are inadmissible in evidence.
(4) It is said that the plaintiff has not proved any letter of demand and that any letter sent on the 29th August, 2013 did not comply with the terms of any alleged agreement and is not a letter of demand within the meaning of any alleged agreement. In the circumstances therefore it is averred that “any debt owed to the plaintiff may not be properly due as alleged”.
(5) It is claimed that Mr. Fahey has a bona fide defence to the plaintiff’s claim. However, he declines to set that defence out. He says that he is prejudiced and embarrassed “in more fully setting out my defence to the within claim without an opportunity to seek discovery of the records in the possession of the defendant”. He states that his previous solicitors wrote to the plaintiff on the 14th November, 2013 requesting information and he awaited a reply. In the circumstances he claimed that it might be necessary to file a further affidavit once the relevant information was provided. No details of any proposed defence on the merits were advanced.
(6) He says that he is advised and believes that he “may be entitled to rely on the defence of contributory negligence on the part of the plaintiff and discovery is necessary to establish his defence more fully”. There is no indication as to any possible basis for the alleged contributory negligence.
9. At this time no affidavit had been filed on behalf of Mrs. Finola Fahey. A separate firm of solicitors came on record for Mrs. Fahey on the 4th June, 2015. An affidavit was filed on her behalf on the 12th October, 2015. This affidavit purports to place the Bank on “strict proof” of any alleged loan agreement including strict compliance with the provisions of the Bankers Books Evidence Acts 1879 (as amended). The following points are made:-
(a) She alleges a failure to comply with the provisions of the Bankers Books Evidence Acts (as amended).
(b) She states that the signature on the execution of the letter of sanction “appears on a “blank” page”. She requires sight of the full original documentation. She claims that she does not recall agreeing to a loan of this nature “nor would have I had any reason to borrow that kind of money in my own name”.
(c) She claims she has no business interest of her own “in respect of the alleged loan the subject matter of these proceedings” and that she is a “consumer” within the meaning of the Consumer Credit Act 1995 (as amended).
(d) She states that it was a provision of the plaintiff’s general terms and conditions for mortgage loans that the plaintiff could not demand repayment of the alleged loan without giving prior “due notice” to the Borrowers of any alleged breach and without complying with all statutory requirements. In that regard Mrs. Fahey claims that she was not given any prior “due notice” as required nor did the plaintiff comply with the statutory requirements including the provisions of the Consumer Credit Act 1995 and the Consumer Protection Code for issuing the demand of the 29th August, 2013. She claims that she “may be able to rely on the provisions of s.44 of the Central Bank (Supervision and Enforcement) Act 2013 in relation to the plaintiff’s failure to comply with its obligations under the Consumer Credit Act 1995 and the Consumer Protection Code.
(e) Mrs. Fahey claims therefore that she is wrongfully joined in these proceedings and that both defendants have a bona fide defence in the circumstances.
Mrs. Fahey does not offer any detailed defence to the merits of the claim made.
10. Both of the defendants’ affidavits are noticeable for their failure to engage with the central facts outlined in the affidavit of Mr. Stafford. They do not deny that they received the monies advanced under the two loan facilities. They do not deny that they accepted the loan facility agreement by affixing their signatures to the letter of sanction. They do not deny that they are in default of the terms of the agreement or that they have failed to repay the money due.
11. In a further affidavit, Ms. Mary Whelan, a bank official, states that she is an employee of the plaintiff’s Financial Solutions Group and makes the affidavit from the inspection of the plaintiff’s books and records pertaining to the defendants. She states at paragraph 4 that the first named defendant wrote to the plaintiff’s solicitors seeking additional particulars in respect of the claim. Replies to these particulars, together with relevant documentation, were delivered to the first and second named defendants’ solicitors on the 15th June, 2015. In addition the first defendant made a request under the Data Protection Acts in respect of his accounts with the plaintiff. Documentation the subject matter of that request was collected from the plaintiff’s branch at Douglas Road, Cork on the 9th March, 2015. Full and up to date statements of account were furnished in those particulars and exhibited in Ms. Whelan’s affidavit. A reduction was made in respect of the liability on account number 93608112440225 in the amount of €582,385.00 on the 5th March, 2015 which represented the proceeds of sale of property located at Youghal, Inchydoney Road, Clonakilty, Co. Cork which had been held as security by the bank.
The Law
12. The legal principles governing an application for summary judgment are now well settled. In Harrisrange Limited v Duncan [2003] 4 I.R.1 McKechnie J. summarised them as follows:-
“(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 defendants’ 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) 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.”
13. More recently, Clarke J. delivering the judgment of the Supreme Court in Irish Bank Resolution Corporation (In Special Liquidation) v McCaughey [2014] IESC 44 (Laffoy and Dunne J.J. concurring) reaffirmed that the fundamental question to be posed on such an application is whether it was “very clear” that the defendant has no case or there is no issue to be tried or only issues which are simple and easily determined and whether the defendant’s affidavits disclose even an arguable defence.
14. It was emphasised that the issue of credibility in this context has a somewhat narrow meaning. Clarke J. stated:-
“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 [2001] 4 IR 607, be clear that the defendant has no defence. If the 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 statable 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 [2007] 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 v Durkan New Homes [2010] IESC 22.
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.”
Proposed Grounds of Defence – Decision
15. The technical points raised against the plaintiff’s claim are without substance. The plaintiff has established a prima facie entitlement to judgment on the basis of the evidence set out above. However, the defendants have proposed a number of grounds of intended defence.
16. The evidence establishes that letters of demand issued in respect of the monies said to be due and owing. It is not denied that these letters were received but it is said their issuance does not comply with the terms of the alleged loan agreement. I am satisfied that the bank has fully complied with its duty under the demand process set out in the terms of the loan agreements quoted above. I am satisfied that Mr. Stafford and Ms. Whelan had full legal authority to make the affidavits submitted as to the facts set out therein, including the bank records and other records relating to the loan facilities granted (including the letters of demand).
17. Mrs. Fahey attempts to imply that her signature on the acceptance of the terms of the loan facilities was not proven as part of the agreement. She implies that she is not bound by the terms of the loan agreement and that she can avail of the “non est factum” defence. The matter is not directly addressed. She claims she does not recall agreeing to a loan of this nature “nor would I have any reason to borrow that kind of money in my own name”. She claims she has no business interest of her own in respect of the alleged loan and thereby implies that she would not have been a party to it. She does not disavow her participation in the loan process or the signing of the document and no positive factual assertion is made seeking to establish this defence in any meaningful way.
18. It is well settled that in seeking to raise the defence of non est factum, a defendant must demonstrate that there is a fair or reasonable probability based on credible and cogent evidence which extends beyond a mere assertion that there was a radical or fundamental difference between what he/she signed and what he/she thought they were signing. There must be a mistake as to the general character of the document as opposed to its legal effect. There must be a lack of negligence in that he/she must take all reasonable precautions in the circumstances to ascertain what the document was. The defence is not available to those who sign a document without enquiring at least as to its general effect. In this case Mrs. Fahey does not even assert that she did not sign the document but simply maintains that her signature appears on a “blank” page and that she does not recall agreeing to a loan of this nature. There is a complete absence of credible cogent evidence to support the contention that the document was not signed by Mrs. Fahey or had a character and effect which was quite different to that which she believed it to be, if she did sign it. (Saunders v. Anglia Building Society [1971] AC 1004; Tedcastle, McCormack and Company Ltd. v. McCrystal (unreported High Court 15th March, 1999 per Morris J.); IBRC v. Quinn [2011] IEHC 470 per Kelly J.; Allied Irish Banks Plc. v. Yates (unreported, High Court 5th February, 2016, Noonan J.)). I am not satisfied that the defendants have advanced any facts which suggest a credible basis for believing that evidence is, or may be forthcoming to establish that Mrs. Fahey is not a party to the loan facility agreement and did not understand its terms and conditions. Averments in her affidavit implying or hinting that she has a defence of non est factum are based on mere assertions unsupported by any further evidence and are insufficient to give rise to a bona fide or arguable defence.
19. Mr. Fahey maintains that he “may be entitled to rely on the defence of contributory negligence on the part of the plaintiff and discovery is necessary to establish his defence more fully”. Though a defence of contributory negligence may be raised against a lender, as set out in KBC Bank Ireland Plc. v BCM Hanby Wallace [2013] IESC 32, in very limited circumstances, no evidence has been advanced to support any such defence beyond the speculative assertion set out in Mr. Fahey’s affidavit. This does not provide the defendant with an arguable or credible defence.
20. It is suggested by Mrs. Fahey that, if she was a party to the loan agreement, she was a consumer within the meaning of section 2(1) of the Consumer Credit Act 1995 as amended by schedule 3 of Part 12 of the Central Bank and Financial Services Authority of Ireland Act 2004. It is claimed that because the protective provisions of that Act were not complied with by the plaintiff, the loans were not enforceable against her. A consumer is a “natural person” acting outside her business (which includes her trade or profession). The question of whether a party to a loan agreement is a “consumer” is determined by the position of the person entering the loan agreement, having regard to its nature and aims (per O’Malley J. in Allied Irish Bank Plc. v. Fahy [2014] IEHC 244 para. 65; per Kelly J. in Allied Irish Bank Plc. v. Higgins & others [2010] IEHC 219 applying Benincasa v. Dentalkit (case C-269/95 [1997] ECR 1-3767)). It is clear that the purpose of the loan agreements in this case is commercial. There is nothing to suggest any other purpose. Indeed, having asserted that she had no reason to seek loans in relation to “that kind of money” Mrs. Fahey then claims to be a “consumer” in that she “had no business interest of her own in respect of the alleged loan” and that she is not properly joined as a party to these proceedings. It is clear that the loans were subject to “General Terms and Conditions Governing Business Lending”. It is also clear that the security set out in the loan agreement is addressed to both parties and involves securing property by way of “legal charges” from both defendants over three separate substantial property holdings of which they are joint owners. There is nothing advanced by either defendant to suggest that the loans (even if acknowledged by the defendants) were for anything other than a commercial purpose. There is no credible or arguable defence open to the defendants, and in particular, Mrs. Fahey arising from her assertion that she is or was a “consumer” in her dealings with the plaintiff.
21. I am not satisfied that the second defendant has advanced any arguable factual basis upon which to construct a defence that as a consumer, the bank has failed in its obligations to her under the Consumer Protection Code of the Central Bank as a result of which she is entitled to some remedy such as rescission of the contract. Furthermore, no specific possible or potential factual allegation has been set out on affidavit identifying a precise basis upon which any possible defence under section 44 of the Central Bank (Supervision and Enforcement) Act 2013 arises. This states that a failure by a regulated financial service provider to comply with any obligation under the Financial Services Legislation is actionable by a customer of the bank who suffers loss or damage as a result of such failure. Mrs. Fahey suggests a defence may arise under the section but beyond that assertion provides no factual or legal basis upon which such a conclusion may be reached.
22. I am not persuaded by any of the submissions made in respect of the alleged hearsay or failure to comply with provisions of the Bankers’ Books Evidence Act 1879 (as amended) arising from the affidavits submitted on behalf of the bank. It is clear that a prima facie case has been made out that a commercial loan facility was offered and accepted by both defendants and that the money was drawn down for the purposes set out in the loan facility. Letters of demand were issued by solicitors acting on behalf of the bank. The money was not repaid. The course of dealing with the bank is not denied and the defendants failed in their responding affidavits to engage with the central elements of the bank’s claim. I am satisfied that the bank has established on the evidence adduced, including that advanced using the provisions of the Bankers’ Books Evidence Act 1879 (as amended), the state of the loan accounts in respect of which it makes its claim. The liability of the defendants arising on foot of the loan agreement signed by each is not challenged by direct evidence or by denying the central factual events as to how and why the agreement was made(Ulster Bank Ireland Ltd., v. O’Brien and Anor [2015] IESC 96). Since the defendants have failed to raise an arguable or credible defence within the meaning of the established principles, the plaintiff is entitled to summary judgment.
23. I am therefore satisfied to grant summary judgment in the amount claimed.
AIB v McPhillips
[2016] IEHC 282
JUDGMENT of Mr. Justice Barr delivered on the 12th day of May, 2016
The Plaintiff’s Case
1. In this application, the plaintiff seeks summary judgment in the sum of €3,758,973.43, against the defendant in respect of sums allegedly due under five loan agreements.
2. It is alleged that the indebtedness of the defendant arises under the loan agreements in the following way: the defendant, by fixed interest rate DIBOR Loan made in writing on or about 16th December, 1998, agreed for value received, to pay to the plaintiff the sum of IR£220,000, together with interest thereon repayable over a three hundred month period. There was a capital interest moratorium for the first 24 months of the said agreement. The value received by the defendant was an advance of IR£220,000, the purpose of which was to purchase two apartments in Salthill, Galway. The plaintiff exhibited a copy of the loan agreement.
3. It is alleged that the defendant made default in the payments due under the said agreement and by notice in writing dated 13th November, 2013, the plaintiff demanded the sum of €139,822.70, due and owing to the plaintiff, together with interest accruing on a daily basis at a rate of €4.94.
4. It is alleged that the defendant by a Housing Loan Facility made in writing on or about 28th February, 2001, agreed for value received, to pay to the plaintiff the sum of IR£260,000, together with interest thereon repayable by way of 180 monthly instalments of IR£2,242.26, comprising interest and capital. The plaintiff exhibited a copy of the said loan facility letter.
5. It is alleged that the defendant made default in the payments due under this agreement and by notice in writing dated 13th November, 2013, the plaintiff demanded the sum of €172,647.01, together with interest accruing on a daily basis at a rate of €45.80. The plaintiff exhibited a true copy of the said notice of termination.
6. It is alleged that the defendant by credit facility made in writing on or about 5th February, 2002, agreed for value received, to pay to the plaintiff the sum of €97,000, together with interest thereon repayable by way of 180 monthly instalments of €810.55, comprising interest and capital. The plaintiff exhibited a true copy of the said credit facility letter.
7. It is alleged that the defendant made default in the payments due under the said agreement and by notice in writing dated 13th November, 2013, the plaintiff demanded the sum of €88,081.53, together with interest accruing on a daily basis at the rate of €6.33. The plaintiff exhibited a copy of the said notice of termination.
8. It is alleged that by facility letter made in writing on or about 30th August, 2006, the defendant agreed for value received, to pay to the plaintiff two loans making in total the sum of €2,588,636.44, together with interest thereon repayable within a 24 month period. The second loan of €2,500,000 was to enable the defendant to produce a 25% share of a site on Tuam Road, Galway, owned by AOC and JMcN. The value received by the defendant was an advance of €2,588,636.44. A copy of the said facility letter was exhibited.
9. It is alleged that the defendant made default in the payments due under the said agreement and by notice in writing dated 13th November, 2013, the plaintiff demanded the sum of €2,904,993.46, together with interest accruing on a daily basis at a daily rate of €192.52. A copy of the said notice of termination was exhibited by the plaintiff.
10. It is alleged that by facility letter made in writing on or about 5th December, 2006, the defendant agreed for value received to pay to the plaintiff the sum of €400,000, together with interest thereon repayable within a 96 month period. The value received by the defendant was an advance of €400,000. A copy of the said facility letter was exhibited.
11. It was alleged that the defendant made default in the payments due under the said agreement and by notice in writing dated 13th November, 2013, the plaintiff demanded the sum of €453,368.83, together with interest accruing on a daily basis at a daily rate of €41.27. A copy of the notice of termination was exhibited.
12. In the grounding affidavit sworn on behalf of the plaintiff by Mr. David Nolan on 21st November, 2014, it was alleged that by letters dated 13th November, 2013, the plaintiff wrote to the defendant demanding payment of the aforesaid sums of €139,822.70; €172,647.01; €88,081.53; €2,904,993.46; and €453,368.83, making in aggregate the sum of €3,758,973.43. Mr. Nolan averred that notwithstanding the said demand, the defendant has failed, refused and neglected to discharge the said sum, or any part thereof. He stated that the said sum remains due and owing by the defendant to the plaintiff over and above all just credits and allowances. He averred that no payments had been made by the defendant to the plaintiff since the date of commencement of these proceedings.
13. Mr. Nolan averred that an appearance had been entered by the defendant to the proceedings solely for the purposes of delay and that the defendant did not have a bona fide defence in law or on the merits to the plaintiff’s claim herein.
The Defendant’s Case
14. The defendant has filed a number of affidavits in response to the plaintiff’s claim. The first two affidavits set out the defendant’s case that the plaintiff had not furnished him with data and records pursuant to a request made by him under the Data Protection Acts 1988 and 2003. Some documentation had been furnished in response to such request, but the defendant was of the opinion that the bank had not furnished all the data in its possession relating to the defendant. The defendant lodged a complaint with the Data Protection Commissioner. As a result, further documentation was furnished to the defendant. However, the defendant’s complaint remains live, as the defendant maintains that there are further documents held by the plaintiff which should be released to him.
15. The main substance of the defendant’s defence is set out in his affidavit sworn on 27th July, 2015. In order to understand the defendant’s defence, it is necessary to set out some background to the loan given by the plaintiff in the sum of €2,500,000 to the defendant in the letter of sanction dated 30th August, 2006. The purpose of the loan was to enable the defendant to purchase a 25% unencumbered interest in a 4.5 acre site on Tuam Road, Galway, which was owned by two gentlemen, AOC and JMcN.
16. In his affidavit, the defendant explained that in or about July 2006, he had been approached by two developers, AOC and JMcN, to see if he was interested in going into partnership with them and investing in the Tuam Road site. The site had been zoned residential and it was expected that planning permission would be obtained to build approximately 86 houses on the site. The defendant agreed that he would invest in the partnership and would take a 25% unencumbered interest in the site.
17. The defendant states that he approached the plaintiff, with whom he had banked for the previous 20 years, seeking finance to invest in the partnership. He explained that he needed €2.5m to buy a 25% unencumbered share in the 4.5 acres and pay his share of the stamp duty.
18. The defendant states that at the time of negotiating the loan with the plaintiff, he was not aware that AOC and JMcN had already borrowed from the plaintiff to purchase the Tuam Road site. Nor was he aware that the plaintiff was entitled to a charge over the entire property.
19. The plaintiff agreed to lend the defendant the money to purchase a 25% unencumbered interest in the property, as per the terms of the letter of sanction dated 30th August, 2006. The security required by the plaintiff included a legal charge over a property owned by the defendant at 11 Lower Abbey Gate Street, Galway. The defendant states that at that time, the property was valued at approximately €8m and (for the purpose of security) the plaintiff had put a more conservative valuation of €4m on the property. The defendant states that it was, inter alia, a condition precedent to draw down of the loan of €2.5m as contained in the letter of sanction, that the plaintiff would obtain a copy of the partnership agreement between the defendant, AOC and JMcN.
20. The defendant states that his counterclaim against the plaintiff arises out of the manner in which the funds, the subject matter of the facility agreed on 30th August, 2006, in the sum of €2.5m, were lent and released by the plaintiff, its servants or agents, to third parties otherwise than for the defendant’s benefit and against his interests. He states that unbeknownst to him, when he approached the plaintiff seeking to borrow to invest in the Tuam Road site, the plaintiff had already lent money to AOC and JMcN to purchase the site and was entitled to security over those lands. The defendant maintains that at the time that the plaintiff agreed to lend him the sum of €2.5m to purchase a 25% unencumbered share in the Tuam Road site, a conflict of interest existed between the plaintiff’s interests and his own. Specifically, the plaintiff’s security could not be perfected without a substantial payment of the stamp duty due by AOC and JMcN on the purchase of the site.
21. The defendant alleges that the plaintiff failed to disclose to him that it had an interest in the property. Moreover, the plaintiff failed to disclose that it had not perfected its security at that time, as a result of stamp duty being outstanding on the property. Critically, the plaintiff was in possession of information from which it knew that the defendant could not obtain a 25% unencumbered interest in the property, because it was already charged in favour of the plaintiff. The defendant alleges that the plaintiff either intentionally refused to disclose this information to him, or was reckless as to the consequences of not doing so.
22. In his affidavit, the defendant states that it is his belief that a named employee of the bank was involved in the finance of the purchase of the Tuam Road site by AOC and JMcN. He had grave reservations concerning the participation of this man, who held a senior position in the plaintiff bank. The plaintiff stated that it was his belief that this man was involved in sanctioning the loan of €2.5m and he had since discovered that the man also had dealings with AOC and JMcN in relation to financing the purchase of the site. The defendant went on in the affidavit to state that it was a matter of public knowledge, having been widely reported in the media, that the named individual was the subject of an inquiry by the plaintiff into controversy concerning his business dealings. The defendant stated that while he suspected that the man assisted AOC and JMcN to act to his detriment, at the time of swearing the affidavit, he did not have evidence of any specific wrongdoing on the part of this man and that was one of the reasons why he would require discovery of documents relating to the financing of the site and the participation of the plaintiff in that deal.
23. The defendant stated that he gave security over his property at 11 Lower Abbey Gate Street in consideration of the entire sum of €2.5m. However, €575,000, was released directly by the plaintiff to Mr. Donal Downes of O’Dea & Co. Solicitors, who were the solicitors acting on behalf of AOC and JMcN. The defendant believes that Mr. Downes used these monies to pay the entirety of the stamp duty due on the purchase of the site by AOC and JMcN. This, in turn, allowed the perfection of the plaintiff’s security.
24. The defendant pointed out that the condition that the plaintiff should be furnished with a copy of the partnership agreement with the defendant and AOC and JMcN, was not complied with at the time that the plaintiff wrongfully released the funds to Mr. Downes. The defendant states that the plaintiff was indifferent to compliance with this condition, because it stood to benefit from payment of the stamp duty on the site, which would, in turn, allow it to perfect its security. The defendant stated that whether intentionally or recklessly, the plaintiff thereby assisted in the fraud of AOC and JMcN. Having paid the stamp duty, this allowed AOC and JMcN to refinance the site with Ulster Bank and repay the plaintiff in full.
25. The defendant states that he is advised by his lawyers and believes that the plaintiff, in its dealings relating to the Tuam Road site, owed him both a duty of care and a fiduciary duty. It was his belief that at the time that the plaintiff agreed to lend him the sum of €2.5m to purchase a 25% unencumbered share in the site at Tuam Road, a conflict of interest existed between the plaintiff’s interests and his own.
26. The defendant states that as a consequence of the wrongful acts of the plaintiff, not only has he lost all of the funds, but he has lost a valuable property at 11 Lower Abbey Gate Street, worth at least €4m, which he gave as security to the plaintiff. He intends to seek a declaration that the security over the Abbey Gate Street property is void in circumstances where the plaintiff wrongfully released some of the monies to a third party.
27. The defendant went on to state that the property at Abbey Gate Street was sold by a receiver appointed by the plaintiff, and the plaintiff and/or the receiver has yet to account to him as to what the net proceeds of sale were. He states that because of the failure on the part of the plaintiff to make full disclosure (in this instance documents relating to the receivership), he has been prejudiced in putting forward this aspect of his claim.
28. The defendant goes on to state that separately, the balance of the funds were released to his former solicitors, who in turn transferred the monies to the solicitors acting for AOC and JMcN, without obtaining any interest in the Tuam Road site, or any consideration whatsoever. The defendant has instituted proceedings against AOC and JMcN for fraud and against his former solicitors in relation to the negligent manner in which they handled his affairs, resulting in the release of €1,925,000 without receiving any consideration.
29. The defendant states that, having regard to the conduct of the plaintiff, and in order to save costs and the resources of the court, it would be more appropriate that the different cases be heard at the same time. He further stated that over and above the documentation that he had received in the course of the Data Protection request, he had no doubt but that this was a case in which discovery of documents will be required. He stated that it was imperative that he would discover what information the plaintiff was in possession of at the relevant time, in order to ascertain the relationship between the parties and the plaintiff’s state of knowledge and its participation in the transaction. He stated that it was his intention to counterclaim in these proceedings, seeking damages from the plaintiff for, inter alia, negligence, breach of duty, misrepresentation and breach of fiduciary duty.
30. The defendant stated that in these circumstances, he believed that he had a bona fide defence to the claims of the plaintiff by way of an equitable set off. He stated that he was at the loss of the value of the property at 11 Lower Abbey Gate Street. He submitted that it was clear from the foregoing, that the counterclaim would greatly exceed the plaintiff’s claim herein. He denied that an appearance had been entered for the proposes of delay. He had been advised by his lawyers and believed, that having regard to the matters set out in his affidavit and in particular, the necessity to obtain discovery and information from the plaintiff, this was not an appropriate case for summary judgment. He submitted that the case should be remitted to plenary hearing.
31. In his submissions, counsel for the defendant submitted that it was noteworthy that none of the allegations made by the defendant in his replying affidavit, had been contradicted or challenged by means of any further affidavit from the plaintiff.
32. Counsel submitted that the partnership agreement provided that the defendant was to get a 25% unencumbered interest in the site. The defendant was not aware that AOC and JMcN had borrowed from AIB in relation to purchase of the site, or that they had charged it in favour of AIB. He stated that this was not denied by the bank. This established a conflict of interest on the part of the plaintiff. He further submitted that it was highly relevant that at the time that the plaintiff dealt with the defendant, stamp duty was outstanding from AOC and JMcN in relation to their purchase of the Tuam Road site. If that was not paid, the bank would not have been able to perfect its security. By lending the money to the defendant and by releasing the sum of €575,000 to the solicitor acting for AOC and JMcN, the bank were acting in their own interests, in ensuring that the stamp duty was discharged and their security was thereby perfected.
33. It was submitted that the statements of fact set out by the defendant at paras. 15 – 17 of his affidavit, were not denied by the plaintiff. This raised a question of conflict of interest and non-disclosure on the part of the bank. The bank knew that he could not get title, because there was no equity in the site, as it had been charged in favour of the bank. The bank knew that there was money outstanding in respect of stamp duty due on the site. The sum of €575,000 was given from the defendant’s loan to the solicitor acting for AOC and JMcN, who paid the stamp duty, thereby allowing for perfection of the bank’s security. This was not denied by the bank. It was pointed out that in December 2009, the defendant had issued proceedings against AOC and JMcN for fraud. The defendant stated that they had received €2.5m from him with assistance from the bank. The defendant believed that he would get a 25% unencumbered interest in the site but he never got it. He got no value for his €2.5m borrowed from the bank. The bank had a charge on the Tuam Road site for the €6m they had lent to AOC and JMcN. It was pointed out that the letter of sanction said nothing about the payment of stamp duty. If the loan had been intended for the purpose of payment of stamp duty, the agreement would have said so. The payment of stamp duty allowed AOC and JMcN to refinance with Ulster Bank and they could repay the plaintiff.
34. It was submitted that a fiduciary duty arose by virtue of the background outlined and there was a conflict of interest, thereby giving rise to the fiduciary duty. It was submitted that the fiduciary duty also arose due to the fact that the bank got security in respect of a loan for the purchase of an interest in the site by the defendant, when the bank knew that the defendant could not get an unencumbered interest, due to the fact that they held a charge on the property. It was alleged that the bank should have disclosed this to the defendant.
35. It was submitted that as a result of the wrongful acts of the plaintiff, the defendant had lost all of the funds and the property at Abbey Gate Street, which was valued in excess of €4m. It was significant that this was not denied by the bank. These allegations were crucial to the defendant’s defence and had not been contradicted.
36. The defendant had also instituted proceedings against his former solicitor arising out of the circumstances in which the €2.5m was handed over without getting any consideration therefore.
The Plaintiff’s Response
37. Counsel for the plaintiff referred to the decision in Allied Irish Banks plc v. Taylor [2016] IEHC 121, where it was held that a mere assertion by a defendant of a state of affairs, was not sufficient to enable him to have the matter remitted to plenary hearing. In that case, the defendant had sworn an affidavit, which simply said as follows:-
“The said amounts are in dispute and the defendants intend to call a financial expert should this matter go to a plenary hearing…”
38. McGovern J. held that other than that mere assertion, the defendant had not sought to adduce any evidence that the figures claimed were incorrect. He had the following to say in relation to the purported defence put up by the defendant:-
“20. No meaningful attempt has been made by the defendants to engage with figures showing the extent of the defendants’ debt other than the statement in para. 37 of the second defendant’s affidavit of 5th February, 2016, where he states ‘the said amounts are in dispute and the defendants intend to call a financial expert should this matter go to a plenary hearing’. Such a bare assertion goes nowhere near meeting the test required to establish a defence to an application for summary judgment. See First National Commercial Bank p.l.c. v. Anglin [1996] 1 IR 75 , where Murphy J. cited with approval at p. 79, the following summary of the tests set out in Banque de Paris v. Naray [1984] 1 Lloyd’s Law Rep. 21:-
‘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.’”
39. The plaintiff also referred to the decision in Allied Irish Banks plc v. Whelan [2015] IEHC 135, where it was held that an issue as to whether negligent investment advice had been given by the bank, was a separate question to the issue of what was owed under the various loan agreements. In the course of his judgment, McGovern J. held that the defendants had not made out any arguable defence against the sums claimed to be due and owing. However, they alleged that they had suffered losses as a result of receiving negligent investment advice from the plaintiff. In these circumstances, the judge had to consider whether that afforded them a defence to the application for summary judgment, or whether that claim should be taken into account at that stage of the proceedings.
40. McGovern J. referred to the decision of Clarke J. in Moohan v. S&R Motors (Donegal) Limited [2008] 3 IR 650. There the trial judge had to consider the question of whether the nature of the defence put forward amounted to a form of cross claim. The judge said that different considerations may apply than when considering whether the defendant had an arguable defence to an application for summary judgment. He referred to the following portion of the judgment of Clarke J. in the Moohan case:-
“In those circumstances the court has a wider 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 in 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 on 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 made out.
On the other hand if the cross-claim arises from some independent set of circumstances then the claim (unless it can be dependant on separate grounds) will have to be allowed, but the defendant may be able to establish a counter claim in due course, which may in whole or in part be set against the claim.”
41. Counsel for the plaintiff submitted that in this case if the defendant had a counterclaim, this was separate to the claim made by the plaintiff on foot of the loan agreements. It was submitted that judgment should be awarded to the plaintiff and the counterclaim could then be pursued by the defendant at a later stage.
42. It was submitted that the bank did not engage with the allegations made by the defendant in his affidavit, as the onus rested on the defendant to establish an entitlement to defend the action. It was submitted that in this case the defendant had not reached the low threshold for leave to defend. The plaintiff further submitted that the outstanding request for Data Protection material, or the outstanding appeal in relation thereto, was not a bar to the plaintiff obtaining judgment in these proceedings.
43. Finally, the plaintiff submitted that even if the court were to hold that the defendant had raised an arguable defence in relation to the loan for €2.5m, he had not raised any defence to the other loans. In these circumstances, it was submitted that if the court were to remit the claim in respect of the loan of €2.5m to plenary hearing, judgment should be granted to the plaintiff in respect of the other loans.
The Law
44. The law in relation to the test which should be applied when considering whether to grant summary judgment has been set out in a number of well known cases. In First National Commercial Bank plc v. Anglin [1996] 1 IR 75, Murphy J. adopted the principles laid down in Banque de Paris v. Naray [1984] 1 Lloyd’s Law Rep. 21 and in particular to the following portion which was taken from the head note to the case:-
“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.”
45. In Aer Rianta v. Ryanair Limited [2001] 4 IR 607, Hardiman J. stated as follows 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.”
46. 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.”
47. Further on, Hardiman J. stated as follows at p. 23:-
“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?”
48. In Harrisrange Limited v. Duncan [2003] 4 IR 1, 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.”
Conclusions
49. The defendant has asserted that a named individual in the plaintiff bank had had dealings with Messrs. AOC and JMcN in relation to the purchase of the Tuam Road site, before the defendant approached the bank looking for a loan to purchase a 25% unencumbered interest in the site. The defendant says that he dealt with the same individual in the bank.
50. The defendant contends that this individual knew that the bank’s security over the Tuam Road site was not, at that time, perfected, due to there being a sum of €575,000 owing in respect of stamp duty. It is further submitted that this man knew that the defendant could not get an unencumbered 25% interest in the site, because the bank had been given a charge over the entire site. The defendant alleges that this information was kept from him.
51. When the loan was given, the sum of €575,000 was paid to the firm of solicitors acting for AOC and JMcN, who paid the stamp duty and then refinanced with Ulster Bank, meaning that the plaintiff got repaid its loan.
52. In addition, the plaintiff obtained security over the defendant’s property at 11 Abbey Gate Street, Galway. The plaintiff sent in a receiver and the property was sold. The defendant says that the plaintiff has not accounted for the proceeds of sale.
53. The defendant has put in a Data Protection Act request and has been provided with some documentation. However, he maintains that he will need discovery of documents to enable him to properly mount his defence. In all these circumstances, I am of opinion that the defendant has raised an arguable defence, and has satisfied the tests laid down in the Aer Rianta and Harrisrange cases.
54. In addition, I am satisfied that the defendant has established an arguable defence in equity arising out of the facts outlined above. This is more than a mere assertion of the type found in the AIB v. Taylor case. His counterclaim arises out of the same transaction, which gives rise to the plaintiff’s claim in these proceedings. Accordingly, if he is successful in the counterclaim, he will be entitled to an equitable set off as against the sums claimed by the plaintiff.
55. The defendant’s defence only relates to the loan for €2.5m. He has not contested the amounts due under the other loans. In these circumstances, I will remit that part of the plaintiff’s claim as relates to the loan agreement dated 30th August, 2006, to plenary hearing. The plaintiff is entitled to judgment in respect of the remaining loans, which amounted to €139,822.70, €172,647.01, €88,081.53 and €453,368.83 on 13th November, 2013.
56. The plaintiff can opt to have judgment for that amount now, in the sum of €853,920.00, or the figures can be updated either by agreement, or by the filing of an affidavit, in order to fix the correct sums due as of the date of this judgment.
Stapleford Finance Limited v Lavelle
[2016] IEHC 385
JUDGMENT of Ms. Justice Baker delivered on the 6th day of July, 2016.
1. The plaintiff seeks summary judgment against the defendant in the sum of close to €6 million, the precise amount of which will appear below. The defendant seeks to defend and claims that he has established sufficient argument and evidence to satisfy the tests established in the authorities such that the matter ought to be remitted to plenary hearing.
2. I already gave judgment in an application by the plaintiff to be substituted as plaintiff in lieu of IBRC in Irish Bank Resolution Corporation Limited (in special liquidation) v. Lavelle [2015] IEHC 321, affirmed on appeal by the Court of Appeal in Stapleford Finance Limited (as substituted) v. Lavelle [2016] IECA 104.
3. The motion for summary judgment is grounded on affidavits of Ruth Molphy and Jonathan Hanly, Mr. Lavelle swore a replying affidavit on 29th July, 2015, and Jonathan Hanly replied to that affidavit on 6th November, 2015.
4. The claim is made in respect of seven loans advanced to the defendant by five separate facility letters from Anglo Irish Bank (“Anglo”) between 2nd June, 2006 and 14th December, 2007.
5. The defendant was employed as a trader in the City of London for 11 years and in the course of this time accumulated considerable wealth and held a sum of approximately €9 million on deposit with Anglo Irish Bank in a branch or branches in the Isle of Man. The defendant returned to live in Ireland with an intention to settle here sometime in 2005 and continued to be employed in the City, working mainly online. He established a relationship with Anglo Irish Bank, and in May 2006 obtained approval for a short-term bridging facility to fund a deposit for a house purchase. That loan facility was not drawn down.
6. The defendant conducted his personal banking with Anglo and Anglo’s Wealth Management Division acted as his financial advisor. In the context of his wish to diversify his savings and put in place pension type investments to secure his and his family’s future, he sought advice from Anglo Wealth Management and was introduced to Quinlan Private through which he invested in a number of commercial transactions promoted by that private investment fund. Based on tax advice he continued to retain a substantial cash fund on deposit with Anglo in the Isle of Man which he intended to keep there until he became ordinarily resident in Ireland in January, 2008. It was for that reason that, instead of directly investing his own funds, he borrowed monies from Anglo to fund certain investments as will appear below.
7. By the first facility letter dated 2nd June, 2006, Anglo offered to lend to the defendant the sum of €750,000 for the stated purpose of enabling the defendant to part fund an investment in the Mall of Sofia Shopping Centre, Sofia, Bulgaria, described as a Quinlan Private promoted investment. The loan was secured on the intended investment in the shopping centre, as well as on two equity funds of the borrower. The facility was a demand facility subject to repayment in full on or before 30th June, 2007. The defendant signed acceptance of this loan facility on 2nd June, 2006 and the monies were drawn down.
8. By the second facility letter dated 23rd August, 2006, Anglo offered to lend to the defendant the sum of €1 million for the stated purpose of fully funding an investment in the Baggot Street co-ownership, described as a Quinlan Private promoted investment. The loan was secured on the borrower’s investment in the Mall of Sofia Shopping Centre, the subject matter of the first loan, and on the investment in the Baggot Street co-ownership. The offer was accepted by the defendant in writing on 24th August, 2006.
9. The first and second loan offers were made by documentation in a form suitable for use as a credit agreement regulated by the Consumer Credit Act, 1995.
10. By the third facility letter dated 3rd January, 2007, Anglo offered to lend to the defendant €1.5m stated as being in addition and not in substitution for previous facilities issued by the bank to the borrower, for the express purpose of fully funding an investment in that amount in Neumarkt Galerie, Cologne, Germany, described as a Quinlan Private promoted investment. Security was to be put in place inter alia, over the Sofia and Baggot Street investments. The borrower accepted this facility in writing on 3rd January, 2007.
11. In conjunction with the third facility the defendant executed a certificate that he was not acting as a consumer for the purposes of the Consumer Credit Act 1995, and the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995, and that as the facility was being advanced for the purpose of his trade, business or profession, he was not a consumer within the meaning of the Act or the Regulations. He also confirmed that he understood the effect and importance of the certificate and was advised to take and had been given the opportunity to take separate legal advice. No specific trade or business in which the defendant was engaged was expressly described.
12. By the fourth facility letter dated 9th May, 2007, Anglo offered to lend to the defendant a top up of the third facility in the maximum amount of €220,000 to further fund the Neumarkt Galerie, Cologne investment. This facility was accepted by the borrower in writing on 14th May, 2007, and he executed, on that day, a certificate for the purposes of confirming he was not a consumer in similar terms to that executed for the purposes of the third facility.
13. By the fifth facility letter dated 14th December, 2007, Anglo offered to lend to the defendant the sums of €1,005,000, €755,000 and €1,005,000 (total €2,765,000) for the stated purpose of funding an investment of €1 million in a Quinlan Private Jury’s Hotel deal, €750,000 for investment in four Davy promoted investments and a further €1 million for an Anglo investment to be decided. Security was to be put in place over the intended investments and over the investments the subject matter of the other four facilities. The defendant accepted the offer in writing on 20th December, 2007 and on the same day executed a certificate in identical terms to that executed by him for the purposes of the third and fourth facilities save that the purpose of the facility was identified specifically by reference to the three investment funds or instruments referred to above, and not in the general terms used for the earlier certificates.
14. The plaintiff claims that as of 31st May, 2013 the defendant was indebted to IBRC, which by then by statute had taken an assignment of the assets and liabilities of Anglo, in the aggregate sum of €4,023,047.55 representing principal and interest and by letter of 5th June, 2013 IBRC demanded payment of the entire of the said sum. The defendant made no payment on foot of the demand and the amount said to be owing as of 16th May, 2014 was 5,934,485.75.
15. The defendant does not dispute that he drew down the various amounts offered to be lent by the five facility letters, seven loans in total.
16. He seeks liberty to defend the proceedings and argues that he has established an arguable ground of defence in a number of respects as follows:
a. That the claim of the plaintiff is statute barred because the order by which the current plaintiff was substituted for IBRC was made outside the six year statutory time limit in respect of the institution of claims in contract.
b. That the plaintiff has not adequately established by proof that it has taken an assignment of the chose in action from IBRC such as to entitle it to maintain these proceedings.
c. That he was for the purposes of all loans a consumer within the meaning of the consumer credit legislation and European law, and that the mandatory statutory requirements were not met.
d. That the calculation made by the plaintiff in respect of accrued interest is incorrect.
17. Some grounds of defence raise matters of law, and some of mixed fact and law. I will deal with each asserted ground of defence in turn. First however, I briefly set out the jurisdiction of the court on a motion for summary judgment.
18. In order to be permitted to defend a claim for summary judgment a defendant must make out an arguable defence as explained by the Supreme Court in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607 and in Harrisrange Ltd. v. Duncan [2003] 4 IR 1, i.e. whether the defendant can show a reasonable probability of having a real or bona fide defence.
19. The courts have found in a number of cases that the determination of a legal question may be made at the stage of summary judgment.
20. In Bank of Ireland v. Educational Building Society [1999] 1 IR 220, Barron J. in one of three concurring judgments in the Supreme Court, said at p. 233:
“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, the defendant should be given liberty to defend…”
21. In Harrisrange Ltd v. Duncan [2003] 4 IR 1, McKechnie J. said the following at p. 7:
“(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.”
22. Clarke J. in Chadwicks Ltd. v. P. Byrne Roofing Ltd. [2005] IEHC 47 referred to different considerations arising in cases where defences are based on contentions of fact as opposed to law. In relation to the latter, he explained at pp. 7-8:
“Where the defence, at least in part, depends on an issue of law then it is a matter for the discretion of the court to determine whether that issue should be tried on the summary motion or remitted for further consideration at plenary hearing dependant, in the main, or whether the issue is sufficiently nett or straightforward to be easily determined within the confines of a summary judgment motion.
Finally it may be observed that the defence may amount to a mixed question of law and fact in which case the court must exercise a judgment as to whether the factual matters in respect of which a credible dispute has been established combined with any legal issues which are not capable of being resolved on a summary judgment motion give rise to a fair or reasonable probability of the defendant having a real or bona fide defence.”
23. In Danske Bank t/a National Irish Bank v. Durkan New Homes & Ors. [2010] IESC 22 Denham J. at para. 20 added the following guidance:
“While a court may resolve questions of law there is no obligation to do so. The test, as stated previously, is whether the appellants have established an arguable defence.”
Clarke J approved that statement in IBRC (in special liquidation) v. McCaughey [2014] IESC 44
Is the claim of Stapleford arguably statute barred?
24. This is an argument that in my view is capable of being determined on a summary motion for judgment and raises a question of pure law.
25. The defendant argues that the claim of Stapleford is statute barred in the following circumstances. Stapleford Finance Limited was substituted as plaintiff in place of IBRC by my order made on 4th June, 2015, affirmed on appeal by the Court of Appeal on 11th April, 2016. It is argued that the present proceedings are a new cause of action which are deemed to commence on the date the substitution order was made.
26. The question of the Statute of Limitations seems to have been argued to some extent in the appeal before the Court of Appeal, and Costello J. in her judgment at para. 23, recites the submission of counsel for Mr. Lavelle that as a matter of law it was possible to assign a chose in action but not an existing cause of action, and that following the assignment of a chose in action an assignee must start new proceedings. At para. 27 of her judgment, Costello J. pointed to the “startling gravity of the implications” of that argument, but did not need to expressly decide the point.
27. The argument in the present case engages a consideration of the effect of an order substituting a party in proceedings, when what is relied on is an assignment of a cause of action by IBRC pursuant to s. 12 of the Irish Bank Resolution Corporation Act, 2013 by which the now plaintiff took an assignment of the interest of Anglo/IBRC from its special liquidators. Section 12(2) of the Act provides that on the sale or transfer of any cause of action:
(2) On the sale or transfer of any cause of action or proceedings by IBRC, acting through a special liquidator, or by a special liquidator where such cause of action has, or proceedings have, vested in the special liquidator, to any person—
(a) that person assumes all of the rights and obligations in relation to the cause of action or proceedings which IBRC had immediately before that sale or transfer, other than the obligations of IBRC to which paragraph (b) relates,”
28. As Costello J. said in her judgment in the Court of Appeal in reference to the argument that IBRC could not as a matter of law assign an existing action:
“The legislative intent of s. 12 will likewise be defeated the Rules of the Superior Courts do not permit the purchaser of the “cause of action or proceedings” to be substituted as plaintiff in those proceedings.” (para. 22)
29. She also referred in her judgment to the provisions of the Supreme Court of Judicature (Ireland) Act 1877 and the provisions of O. 17, r. 4 of the Rules of the Superior Courts as the basis of the power to assign.
30. I consider that the provisions of s. 12(2) of the Act of 2013 are clear and as a result of a sale by the special liquidators pursuant to that statutory power, as a matter of law there occurred an assumption of the rights and obligations in the cause of action or proceedings which IBRC had immediately before that sale or transfer.
31. The matter was considered in the more broad context by the Court of Appeal of England and Wales in Yorkshire Regional Health Authority v. Fairclough Building Limited [1996] 1 W.L.R. 210. Costello J. giving the judgment of the Court of Appeal in the substitution application quoted from a dicta at p. 215 of the judgment of Millett L.J. in which he refers to the historical evolution in that jurisdiction of the power to transmit or devolve a cause of action. Later in the judgment, in a paragraph not quoted by Costello J., Millett L.J. said the following by reference to Ord. 15, r. 7 of the then applicable Rules of Court:
“Ord. 15, r. 7 does not contain, and none of its predecessors ever has contained, any reference to limitation. This is as it should be, since the circumstances in which the rule may be invoked do not give rise to any question of limitation. Even though the rule permits a new party to be substituted for an original party, this does not involve a new cause of action; the new party is substituted because he has succeeded to a claim or liability already represented in the action and sues or is sued in respect of the existing cause of action. The substitution of the successor does not deprive the defendant of an accrued limitation defence. There is no good reason why the substitution should not be made at any stage of the proceedings and whether a relevant period of limitation has expired or not; the expiry of the limitation period is completely irrelevant.”
32. I adopt this statement of principle from the judgment of Millett L.J., and consider that the defendant is incorrect in his argument that the cause of action now subsisting is a fresh cause of action in respect of which he has an arguable defence under the Statute of Limitations. Stapleford has taken an assignment of the various rights of IBRC, and those rights included the present existing cause of action. In taking that assignment, Stapleford stepped into the shoes of IBRC for all purposes related to this cause of action and took the benefit and burden of these proceedings, including the burden for example of any pleas in defence then existing. The assignee is not in a better position than the assignor of the chose in action, but equally cannot be said to be put in a worse position.
33. The Court of Appeal in its decision in the substitution application also quoted from the decision of Mance J. in the English High Court in Industrie Chimiche, Italia Centrale and Another v. Alexander G. Tsavliris & Sons Maritime Co. & Anor. [1996] 1 W.L.R. 774, (at p. 782) as follows:-
“In all situations, of which death is only the most striking it seems self evident both that any existing proceedings, properly constituted within the limitation period, should be allowed to continue for or against the party to whom the relevant right or obligation has been transferred in law; and this should be permitted whether the transfer occurs before or after the expiry of the limitation period.”
34. Costello J. referred to that decision of Mance J. more by way of authority for the proposition that the power to substitute a plaintiff existed before the enactment in England and Wales of the Supreme Court of the Judicature Acts in 1875, but it is a useful statement of law as to the effect of an assignment of a cause of action.
35. My view is that the defendant has no arguable grounds to advance the argument that once Stapleford acquired by assignment the chose in action comprising, inter alia, the existing cause of action against Mr. Lavelle, a new action was required to be commenced, or was deemed thereby to come into existence. I consider that the transfer by virtue of s. 12 had the effect, as a matter of law that Stapleford assumed all the rights and obligations in relation to the cause of action and the proceedings already commenced by IBRC in this case. As no argument is being made that those proceedings were statute barred, and as the benefit of the proceedings is now vested in Stapleford, the argument that the cause of action is now statute barred seems to me, to be tantamount to arguing that the cause of action is an a different one from that already commenced by IBRC. On the transfer to Stapleford of the IBRC debt, the action did not thereby become extinguished, but was capable of being continued by the person to whom it had been assigned.
36. I reject that argument that defendant is entitled to defend the proceedings on this ground.
Proof of assignment to Stapleford
37. The defendant argues that the plaintiff has not put before the court sufficient evidence to establish it is the successor in title of IBRC for the purposes of the proceedings. After some argument it was, in principle, accepted by counsel for the plaintiff that the fact that the substitution order was made by me on the interlocutory application and affirmed on appeal by the Court of Appeal does not, of itself, prevent a defendant from requiring proof of assignment.
38. The evidence before me is that on or about 28th March, 2014, IBRC acting through its special liquidators entered into an agreement with Stapleford for the absolute transfer, transmission and assignment to it of its rights in the facilities, the subject matter of these proceedings. The document described as a “loan sale deed” was exhibited and while it is described as a deed, it is, in substance, an agreement to sell to Stapleford the assets therein set out.
39. The documents exhibited contains a significant number of redactions but do identify to my satisfaction loan accounts of the defendant as part of the list of assets or borrowers in respect of which the agreement was made. The agreement was performed by the execution of a deed of transfer on 23rd May, 2014, by which the assets were assigned to Stapleford.
40. I am satisfied as to the proofs and the affidavit evidence is in conformity with O. 37 R1 as explained by the Supreme Court in Ulster Bank Ireland Ltd v O’Brien & Anor 2015 IESC 96.
Does the defendant have an arguable defence that he was a consumer?
41. The defendant argues that he has put sufficient facts before me to be permitted to defend the summary proceedings on the grounds that he was a consumer, and therefore entitled to the special protection afforded to a consumer under the Consumer Credit Act 1995, and the European Communities (Unfair Terms in Consumer Contracts) Regulations.
42. The factual nexus on which he relies may briefly be stated. The plaintiff was at all material times employed as a financial trader and the loans in respect of which this claim is brought were not loans obtained by him for the purposes of that business. Rather, the plaintiff says on affidavit that on account of tax advice he intended retaining substantial funds out of Ireland until he established residence in Ireland in early 2008, that he borrowed monies in Ireland so as to invest in “safe pension type investments to secure my family’s future”.
43. There have been a number of recent High Court decisions which deal with the question of whether a borrower is or could be said to be a consumer for the purposes of the legislation. Certain themes emerge from these which it is convenient to identify separately. Broadly these are:
(a) The relevance of the characterisation put on the loans by the parties at the time of the advance;
(b) The scale of the borrowing;
(c) Borrowing for personal investment purposes outside a business;
(d) Whether the court should construe the definition of a consumer strictly.
I deal now in sequence with these themes.
The characterisation of the loans by the parties
44. The two first loans advanced to Mr. Lavelle were each made subject to the general conditions then operated by Anglo in respect of consumer loans. The documentation comprising the offer contained a single page document headed up “Credit Agreement, regulated by the Consumer Credit Act, 1995”, and identified the amount of credit advanced, the period of the agreement, the number and amount of instalments, the total amount repayable, the cost of credit, the APR and the arrangement fee. In bold print there was stated that the borrower could withdraw from the agreement at any time within 10 days of receiving the agreement and that legal advice should be taken before it was signed. The borrower signed an acceptance in standard form and on a separate page by which he waived the 10 day cooling off period under ss. 30 and 50 of the Consumer Credit Act, 1995.
45. The second facility letter also contained a similar document and the borrower, by his signed acceptance, also waived the cooling off period.
46. The third, fourth and fifth facility letters did not include the one page document identifying the credit terms in a manner intended to satisfy the Consumer Credit Act, and there was no part of the document by which the borrower could waive or seek the benefit of the 10 day cooling off period. The borrower instead signed a certificate confirming that the facility was to be advanced to fund an identified investment, and that the provisions of the Act did not apply “as the facility is being advanced for the purposes of my trade, business or profession”, and the certificate contained the following at para. 3:
“None of the provisions of the Consumer Credit Act, 1995 (the “Act”) apply to the Facility as the Facility is being advanced for the purposes of my trade, business or profession and I am not therefore a “consumer” within the meaning of the Act.”
The document also confirms that the provisions of the European Communities (Unfair terms in Consumer Contracts) Regulations, 1995 did not apply for the same reason.
47. The fourth and fifth facility letters were in broadly similar terms.
48. Accordingly, of the five facility letters, seven loans, two were expressly contained in documentation which expressly made reference to the provisions of the Consumer Credit Legislation.
49. The first argument made by the defendant is that he was treated as a consumer by Anglo for the purposes of the first two loans, nothing changed in his personal circumstances between the first two loans and the later loans, and all of the loans were taken out by him for the same general purpose, namely to make pension or long term investments to secure his family’s future.
50. Stapleford submits that all seven loans must be characterised as non-consumer loans and that the inclusion of certain documentation which suggests a characterisation of the first two loans as consumer loans is not determinative.
51. It is established as a matter of law that the question of whether a person is a consumer is a matter to be determined objectively and irrespective of the characterisation that the parties might have applied to the loan. In ACC Loan Management Ltd. v. Browne [2015] IEHC 722 on which both parties relied in support of the proposition, it was stated by me that the label or characterisation that the parties themselves “may be deemed to have put on a loan is not determinative”, although the characterisation put by the parties themselves may be of some benefit to that analysis. The point is not controversial and is established in the authorities.
52. Apart from that general proposition however, Stapleford asserts that the documents sent by Anglo with the first two loans do no more than suggest that the Bank proceeded as if the loans were regulated by the Consumer Credit Act 1995, and do not of themselves comprise an acknowledgement on the part of the Bank that Mr. Lavelle was a consumer. I accept that proposition and I do not consider that the documentation sent by the Bank of itself contains an acknowledgement or assertion on the part of the Anglo that Mr. Lavelle was a consumer, and that the Bank did no more than conduct its business so as to ensure that it did not fall foul of the legislation.
53. Equally however it seems to me that Stapleford is incorrect in asserting that the statement by Mr. Lavelle in the documents that accompanied his signature of acceptance on the third, fourth and fifth facility letters amount to an acceptance or acknowledgment by him that he was not a consumer, and while Mr. Lavelle can be assumed to have personal knowledge of the purpose of his borrowings, his own characterisation of the transaction is not determinative. The documents executed by Mr. Lavelle might in suitable circumstances have the legal effect of an estoppel by representation, but no argument has been made in this case that this is so, and no evidence of reliance by the Bank is made out.
54. However correspondence has been exhibited which might amount to an acknowledgment by IBRC that Mr Lavelle was a consumer for the purpose of the first two loans, especially a letter of 5th June, 2013 from Messrs. Arthur Cox & Co. Solicitors to Mr. Lavelle which contains an express recognition that the first two facility letters were governed by the Consumer Credit Act, 1995.
55. Before this, by a letter sent from IBRC to Mr. Lavelle on 2nd April, 2012 and in express reply to correspondence from Mr. Lavelle the following statement is made by reference to a letter of 1st March, 2012 from IBRC to Mr. Lavelle:
“Paragraph 1.4 of this IBRC letter acknowledges that the CCA applies to the June 2006 facility letter. Although this is clear in the response by IBRC we confirm this again. For the avoidance of any doubt, we confirm again that the CCA applies to the facility letter dated 23 August, 2006.”
56. The letters referred to are the first two facility letters.
57. It seems clear that the purpose of the later loans was broadly similar to the purpose of earlier loans, and Mr. Lavelle has made out an arguable defence that he could have been a consumer for at least the first two loans, and that Anglo had no reason to treat him differently for the purposes of the third, fourth and fifth facilities. The advances in January and May of 2007 were top-ups on the earlier loans, and may require to be characterised in conjunction with those loans to which they are subsidiary. Finally the last facility letter of 14th December, 2007 was accepted by Mr Lavelle at a time when the investment in respect of which he was making the borrowings had not yet been specified or determined and that it cannot be clear in that context what the purpose of the loans was.
58. All of these factors persuade me that the characterisation of the loans is difficult to resolve at summary hearing.
59. Mr. Lavelle argues that the loan agreements in each case breach the requirements of s. 30 and/or s. 54 of the Act as amended. Breach of s. 30 makes a loan unenforceable. The plaintiff denies any such breach but of itself the mere assertion by Mr. Lavelle of an alleged breach would not be sufficient to prevent the determination of this factual dispute on a summary hearing. However, Mr. Lavelle makes specific averment on affidavit that he signed the documents for the first loan (2nd June, 2006) on the first tee of an identified golf course. He said he was not handed copies of any of the relevant paperwork on that day nor was he subsequently sent or given any signed copies. He explained how and why he is aware of this and a degree of embarrassment he met when he was unable to provide copies to his accountant some time later. He says also that the document was not signed at his home, albeit that this appears on the document itself. He makes similar averments with regard to the second facility letter of 23rd August, 2006, namely that he was not sent or given a copy of the signed agreement, the facility accepted by him on 3rd January, 2007 and that of 14th May, 2007.
The scale of the borrowing
60. The second theme to emerge in recent jurisprudence regarding the status of a person as a consumer arises from a decision of Barrett J. in Ulster Bank Ireland Ltd. v. Healy [2014] IEHC 96, whether the amount or scale of a borrowing may be determinative or relevant to the characterisation of a transaction.
61. In Ulster Bank Ireland Ltd. v. Healy, Barrett J. who was hearing an application for summary judgment in which Mr. Healy asserted that he was a consumer, permitted the defendant to defend on the grounds that he considered it arguable that Mr. Healy was a consumer when he borrowed monies for the stated purpose of purchasing investment properties in the United Kingdom to hold as long term pension type investments for the benefit of his own retirement or for the benefit of his family. Mr. Healy was an employee in a company that manufactured construction materials and he had no established or identified business of investment or property purchase. Barrett J. considered that a borrowing for the purposes of providing for a retirement income, or in the hope of funding a better quality of life either in retirement or for one’s family, of necessity did not make the borrower a professional investor or property investor. He went on to say:
“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.”
62. Barrett J. considered the judgment of the European Court of Justice in Benincasa v. Dentalkit (Case C-269/95) [1997] E.C.R. 1-03767 and quoted from the judgment of Kelly J. in Allied Irish Banks Plc. v Higgins & Ors. [2010] IEHC 219 at para. 28 as follows:
“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.”
63. Having regard to the low threshold that a defendant must satisfy in order to be permitted to defend, Barrett J. determined that it was arguable that Mr. Healy was a consumer as he never had the business of property investor and that he had made a stateable argument that this was so.
64. The Rubicon identified by Barrett J. is said by counsel for the plaintiff to play a part in his later judgment in KBC Bank Ireland Plc. v. Osborne [2015] IEHC 795 where he rejected the contention that Mr. Osborne was a consumer and took the view that what was involved was clearly business lending, and that the loans were “business loans issued to a businessman in respect of a business park”
65. Barrett J. did not in fact expressly say that the scale of Mr. Osborne’s lending of approximately €3.26m was such that he did cross the Rubicon, but the plaintiff suggests that it was implicit in his decision. I disagree with that proposition.
66. The finding of Barrett J. in KBC Bank Ireland Plc. v. Osborne related to the purpose of the loan, identified by him as a loan for the purposes of the refinance an existing debt secured on certain industrial units located in Gorey Business Park, Co. Wexford, and another loan taken out for development works on that facility. It is clear from the recital of facts in the judgment of Barrett J. that Mr. Osborne was himself actively engaged in the refurbishing of certain units in the business park and was in receipt of rents from some or all of those units. I do not regard the judgment of Barrett J. in that case as being one in which he identified the quantum or scale of the loan as being determinative or even relevant to the question of whether a borrower was a consumer.
67. Both the plaintiff and the defendant agree that the test for a court in determining the characterisation of a borrower is not one in respect of the scale or quantum of borrowing plays a part. I agree and the starting point must be the definition of a consumer for the purposes of the Consumer Credit Act, 1995 and the way in which the definition has been treated in subsequent judgments of the Irish and European courts, all of which point to purpose and not scale as the defining factor.
68. Longmore J. in Standard Bank London Ltd. v. Apostolakis (No. 1) [2002] CLC 933, pointed to an obvious reason why the question of scale could not be determinative of the status of a contract as follows:
“Difficult questions would arise as to where one would start to draw lines. One could hardly apply that to what I have called the umbrella agreement when it was made. It could only be applied retrospectively. The requirement that one looks to the purposes for which the contracts were made seems to me to militate against looking at a general consequence or a scale of value in the context of both the Convention and the Regulations.”
69. I consider the statement of Barrett J. that there might exist a Rubicon which could determine the characterisation of a consumer contract in Ulster Bank Ireland Ltd. v. Healy to be obiter, and to not find support in the authorities, and not binding on me. He did not rely on a test of the scale of the borrowings in his later judgement. Furthermore it is my view that the case law identifies the purpose of the loan as being the defining or identifying characteristic and not the quantum of the loan. This is also a position which is consistent with common sense and it is perfectly possible for a person to borrow a very substantial amount of money, an amount similar to or even greater than that borrowed by Mr. Lavelle, for the purposes of acquiring a private residence or a holiday home for personal use and in that circumstances such a person would readily be identified as a consumer.
70. I do not consider that the scale of the borrowings can be determinative.
Borrowings for personal investment purposes
71. The defendant borrowed for the purpose of investing in commercial property funds or investment instruments in all cases managed by a firm of investment managers, Quinlan Private. That investment company managed the funds on behalf of investors and the investors did not come as a result of the investments to acquire title to any of the real property acquired by the funds, and took instead an interest in an investment instrument.
72. The authoritative judgment of Kelly J. in Allied Irish Banks Plc. v Higgins & Ors. considered whether the defendants had made out an argument that they had contracted a loan from AIB as consumers within the meaning of the Act. The loan in respect of which the claim was brought was made for the stated purposes of a partnership formed for the purpose of acquiring and developing lands in Duleek, Co. Meath. The Court accepted that property investment was not the principal or main business of any of the defendants. Rather, the money was borrowed “to invest it in promoting another business with a view to a profit”. Central however to the finding of Kelly J. was that the defendants acted as partners in a partnership “with a view to investing in property and its development for profit”. He held, in those circumstances, that they engaged in business and that they had made out no arguable or triable issue that they were engaged as consumers.
73. Allied Irish Banks Plc. v Higgins & Ors. can be distinguished from the present case in one important respect. The defendants in that case were a partnership and borrowed the relevant monies qua partners. Kelly J. made express reference to this in his judgment, and pointed to the clear legal proposition that a partnership is engaged in a business. Further, the partnership comprising the defendants in Allied Irish Banks Plc. v Higgins & Ors. itself engaged in the business of acquiring and developing the lands. Kelly J. held that a person may have more than one trade, business or profession, and that a person cannot be characterised as a consumer merely on account of the fact that borrowings were made in respect of a business or a trade which was not that person’s main, primary, or even established, business. It is noteworthy that the partners did not seek to argue that they were personal borrowers outside the partnership.
74. I accept the argument of the defendant that, prima facie at least, Mr. Lavelle’s borrowings may be distinguished from those the subject matter of the judgment of Kelly J. in Allied Irish Banks Plc. v Higgins & Ors. in that Mr. Lavelle was borrowing monies not to himself purchase or develop property, but so that he could invest in a fund which would own or manage property investments. He was not involved in purchasing business properly or in the business of investment. While Mr. Lavelle was employed as a trader, there was no evidence before me that he was personally involved in the business of investment, nor was there any suggestion that he personally engaged in the evaluation or management of the investments. The evaluation, choice and management of the investments were to be done by Quinlan Private and Mr. Lavelle was a client of that firm.
75. Mr. Lavelle was borrowing monies to invest in an investment fund or financial instrument and was not therefore borrowing to invest directly in any property or commercial transaction in which he would directly benefit. I accept that it is arguable that this factor distinguishes Mr. Lavelle from the partnership which comprised the defendants in Allied Irish Banks Plc. v Higgins & Ors., and also from the defendant in KBC Bank Ireland Plc. v. Osborne.
76. The CJEU in Benincasa v. Dentalkit made the following statement which has been quoted with approval in a number of Irish decisions:
“17. 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.”
Kelly J. quoted that extract with approval in Allied Irish Banks Plc. v Higgins & Ors. and, at p. 28 of the judgment, repeated the phraseology in respect of which the defendant makes argument in the present case, namely:
“Only contracts concluded for the purpose of satisfying an individual’s needs in terms of private consumption are protected by the Directive.”
77. Mr Lavelle argues that the uncontroverted evidence is that he was not engaged in the business of investing in the identified properties in Cologne, Baggot Street or Sofia. He has put forward evidence that he was investing for personal purposes and for those of his family, and was not engaged in the underlying businesses in respect of which his investments were made, and took no part in managing or choosing the investments. He chose to invest through Quinlan Private, and Quinlan did the management and evaluation of the products. Indeed, he points to the fact that at the time of the last facility letter, the last three of the seven loans, some of the precise investments were not identified.
78. In Allied Irish Banks Plc. v. Fahy [2014] IEHC 244 O’Malley J. quoted Benincasa v. Dentalkit and the later case of Gruber v. Bay Wa AG (Case C-464/01) and determined the question before her on the evidence and took the view that the loan was for “unquestionably business purposes”, that the defendant was the full beneficial owner of two property companies and was engaged in the property business through them and in her own personal capacity. The monies were borrowed for the purposes of the business property transactions, either through the company or by herself personally. O’Malley J. also noted that the funds advanced were as a matter of fact paid to the companies and that the defendant was at all times seeking a business facility.
79. The judgement of O’Malley J. does not deal with a borrowing in respect of an investment made personally and not through a company. She also does not deal with the question that arises centrally in the present case where the loans were for the acquisition of investment instruments to be managed and operated by an entity not controlled or owned by the borrower whether through a partnership or a company.
80. The defendant says the facts are close to those dealt with by Longmore J. in the English High Court in Standard Bank London Ltd. v. Apostolakis (No. 1) also referred to by O’Malley J. in Allied Irish Banks Plc. v. Fahy where she noted that Longmore J. had distinguished Benincasa v. Dentalkit on the basis that the factual situation was very different and,
“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.”
81. Longmore J. was giving judgment in the English Commercial Court on a preliminary issue of whether a contract between the defendants, a Greek married couple, a civil engineer and a lawyer, and a bank. The loan had been entered into as a result of which the bank was to purchase ECUs to the value of €7million on their behalf in exchange for drachmas and Longmore J. held that the borrowings were consumer transactions. He considered that it was not part of the trade of the defendants as a civil engineer or a lawyer respectively, to enter into foreign exchange contracts and that they were not engaging in the trade of foreign exchange contracts as such but were rather “disposing of income which they had available”. As he put it:
“They were using the money in a way which they hoped would be profitable but merely to use money in a way one hopes would be profitable is not enough, in my view, to be engaging in trade. This is all the more so if one looks at the purpose of the contracts as Article 13 of the Convention invites one to do. These contracts were made by Mr. and Mrs. Apostolakis for the purpose of using their income in what they hoped would be a profitable manner. They were not trading in foreign exchange contracts in the sense that a bank or dealer can be said to trade. The evidence is all to the effect that it was outside their trade or profession that the contracts were being made.”
82. Longmore J. distinguished Benincasa v. Dentalkit on its facts in that Senor Benincasa had made the contract to buy equipment to set himself up as a dentist in Munich using Dentakit’s trademark, and held that the factual context was different in that the needs of Mr. and Mrs. Apostolakis were for private consumption, and the investment was an “appropriate use for their income”. He described the investment as a private use of their private income, or that the defendants had “privately consumed their income” for the purposes of acquiring the foreign exchange product
83. I find the reasoning of Longmore J. difficult and I am not quite clear as to how he distinguished the judgment of the European Court in Benincasa v. Dentalkit. However his judgement has persuasive authority, and his finding that the use by Mr. and Mrs. Apostolakis of their own income or funds as sufficient to constitute them consumers of the financial instruments, that they were not themselves engaged in the trade of foreign exchange contracts was given in the context of European legal principles.
84. Further, this is the same result as was reached by Barrett J in Ulster Bank Ireland Ltd. v. Healy, in a decision which is binding on me, although he did not expressly rely on the judgement of the English High Court in his reasoning.
85. From the authorities in which a difference of approach is apparent, it is in my view at least arguable that the defendant is correct that he was acting as a consumer and the case law relied on by the plaintiff is not authority for the broad proposition that a person who borrows money to make a personal investment cannot be a consumer for the purposes of the legislation. I consider for that reason that the question may not readily be determined on a summary hearing. This is more evident when one looks at the two decisions of the CJEU on which reliance is placed and to the proposition advanced by the plaintiff that the test of whether a person is a consumer must be strictly construed. I turn to consider this proposition.
A strict construction?
86. The CJEU in Benincasa v. Dentalkit was hearing a reference for a preliminary ruling from an Italian court. The first question considered by the Court was whether a plaintiff who had concluded a contract with a view to pursuing a future trade or profession may be regarded as a consumer for the purposes of the Article 14 of the Brussels Convention of 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters as amended by the Accession Convention of 1978. The Court considered that the Convention affected only a “private final consumer, not engaged in trade or professional activities”. It then went on to say the following:
“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 self-same person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others.
87. The test identified in Benincasa v. Dentalkit was further considered by the CJEU in Gruber v. Bay Wa AG on a preliminary ruling from the courts of Austria, again on the interpretation of the Convention on Jurisdiction. Express reference was made to the earlier judgment of the Court in Benincasa v. Dentalkit and the reasoning of the Court related to the fact that the provisions of Art. 13 of the Convention were a derogation from the basic rules of jurisdiction and that the requirements of legal certainty, as well as the fact that a provision which derogated from a general rule should be interpreted strictly, suggested that a contract for mixed private and professional purposes did not come within the special rules.
88. A difficulty is immediately apparent in relying on either Benincasa v. Dentalkit or the judgment of the court in Gruber v. Bay Wa AG, in that in both cases the Court was considering a provision which was a derogation from a general rule of jurisdiction. It is not readily apparent that the provisions of the Directive (Council Directive 87/102/EEC of 22nd December, 1986 as amended by Council Directive 90/88/EEC of 22nd February, 1990) or of the Irish consumer credit legislation ought to be construed as a derogation from any general rule. Rather, they are an attempt by Community and domestic law to offer special protection to a person who might have a deficit of bargaining power. There is nothing in my mind which suggests a strict construction of the concept of “consumer” for the purposes of the consumer protection legislation is warranted by the European case law. While Kelly J. in Allied Irish Banks Plc. v Higgins & Ors. quoted with approval from the judgment of the European Court of Justice in Benincasa v. Dentalkit, he did so for the purposes of the conclusion that he reached that the self same person can be a consumer in relation to certain transactions and an economic operator in others, and only some contracts concluded by an individual person may be properly characterised as consumer contracts. He nowhere in that judgment stated a view that the concept was to be interpreted restrictively.
89. In ACC Loan Management Ltd. v. Browne I observed at the stage of an application for summary judgment that I would not consider whether counsel for the defendants was correct that an overly restrictive interpretation of the notion of consumer is not intended by the Directive, or by the Act of 1995. The point remains to be decided by an Irish court or by the CJEU. However the argument that a less restrictive construction is warranted is one that adds weight to the submissions of the defendant that the legal issues in the present case are less than clear.
Conclusion on question of the status of the defendant as a consumer
90. The defendant makes the argument that as an investor in a financial instrument he was not, or could not be said to be, engaged in the business of the underlying assets. He was not a property developer as were the defendants in Allied Irish Banks Plc. v Higgins & Ors. . While the underlying funds may have been “sophisticated investments”, to use the language of the plaintiff that is not to say that Mr. Lavelle, by investing in those instruments himself was a sophisticated investor. His level of sophistication in any event seems to me to be irrelevant to how he is to be characterised for the purposes of the transaction.
91. I accept that there is sufficient evidence before me that Mr. Lavelle did not engage in the business of the underlying investments. He was not engaged in the activity of investing in commercial property or other commercial investments with his money. He was rather placing the money in the hands of somebody who would do that on his behalf, and he did so in the hope that his money would in turn generate further monies, or at least be secure in terms of the capital.
92. As a result of the conclusion come to by the English High Court in Standard Bank London Ltd. v. Apostolakis (No. 1), a judgment that was referred to with approval by O’Malley J. in Allied Irish Banks Plc. v. Fahy, and because of the decision of Barrett J. in Ulster Bank Ireland Ltd. v. Healy, and because there is no decided Irish case or judgment of the CJEU which deals with the matters I have outlined, I have come to the conclusion that the question of whether the defendant was a consumer is one that cannot readily be answered on the authorities. The factual matters identified by the defendant with regard to compliance with the requirements of the legislation are in my view more than mere assertions, unsupported by evidence, and do raise what Clarke J. identified in IBRC v. McCaughey as “a realistic suggestion that evidence might be available to support the argument put forward by a defendant.”
The burden of proof
93. Before I leave the topic of the nature of a consumer contract however, I wish to address a question that arose in the course of the argument, namely whether there is a presumption that a natural person is a consumer. In my judgment in ACC Loan Management Ltd. v. Browne, at para. 52, I made the following somewhat infelicitous statement:
“52. I consider that the legislation is such that a person is a consumer unless it can be shown that the person is acting inside the person’s business. I accept the argument of counsel for the defendant that the legislation is drafted such that in a sense the default position is that all natural persons are consumers unless it can be shown they are acting inside or for the purpose of the business in entering into a credit agreement.”
94. Barrett J. in KBC Bank Ireland Plc. v. Osborne expressly refused to agree with that particular conclusion, and I wish to take this opportunity to clarify the obiter statement by me in that judgment.
95. I have re-read the statement made by me at para. 52 of my judgment in ACC Loan Management Ltd. v. Browne and consider that it lacked clarity, and, having regard to the submissions of counsel in this case, I consider that the broad statement made by me therein is not borne out by the authorities and is not correct as a matter of law.
96. I agree with Barrett J. that there does not exist, as a matter of law, any presumption or default position that a natural person is a consumer. As Barrett J. said, “the only default position arising under the Act of 1995 is that a person other than a natural person cannot … be a consumer”. It was not my intention in making that statement in ACC Loan Management Ltd. v. Browne to express a view that there exists an evidential or factual presumption that all natural persons are consumers. The distinction may more properly be expressed as follows: only a natural person may be a consumer for the purposes of the legislation under the European Directives, therefore the first question that must be asked by a court is whether the transaction, be it a borrowing or other transaction, was conducted by a natural person or by a corporation or business entity such as a partnership.
97. As this is an application for summary judgment, the burden is on the defendant to establish to my satisfaction that he has an arguable defence that he is a consumer and that certain provisions of the legislation were not complied with by the predecessor in title of the plaintiff. Beyond that, I do not intend considering the broader question of where the burden of proof lies with regard to the establishment of the satisfaction of a court that a person is a consumer in the present case, as the matter did not require to be argued before me on the motion.
The quantum of the claim
98. The defendant makes a number of specific arguments with regard to the calculation made by the plaintiff in the grounding affidavit. These may briefly be outlined.
99. The defendant asserts that IBRC delayed in crediting the sum of €169,552 in his account between 2011 and 6th February, 2013. It is argued in those circumstances that interest for that period was incorrectly calculated. Without prejudice to its assertion that no error was made, the defendant has amended its figures and has reduced the sum in respect of which judgment is claimed by €20,000 to take account of this potential conflict of fact.
100. The second issue raised by the defendant was that he had agreed interest rates with IBRC during the period from 30th June, 2008 to 28th June, 2013. Mr. Lavelle exhibits correspondence with Anglo with regard to what was described as “interest rate hedges” and an email of 6th June, 2008, to suggest that there was agreed a rate of 4.96%. Mr. Lavelle says in his replying affidavit that the arrangement of an interest rate swap had not been discussed with him and that it “distorts the balance of the accounts”.
101. Thirdly, it is asserted that the bank credited the amount of €320,129 to the accounts in lieu of the sum of €383,842.90, in September, 2010. Again, he says that this has distorted the accounts.
102. Fourthly, the defendant says that certain monies were transferred to his account and not to a trust account, in accordance with his instructions. That suggestion would, it seems to me, not benefit the defendant with regard to the calculation of the plaintiff’s claim in that his personal accounts in respect of which this claim was brought were augmented by those amounts, and a smaller amount of interest accrued thereafter as a result.
103. Mr. Lavelle’s overriding proposition is that he should be entitled to test the evidence of calculations and his assertion that there has been a “distortion” of the accounts and that he ought to be afforded the benefit of discovery for the purpose of defending the quantum of the case. While he suggests that interest was charged at a penal rate but does not seem to be making any argument that the interest rate is unenforceable as being a penal rate.
104. I accept the argument of the plaintiff that the concession it has made which, in total, reduces the amount of its claim by €120,000 may be sufficient to deal with the assertions by the defendant. However, the calculations are likely to change with the delay now inevitable as a result of my decision that the defendant has raised a bona fide entitlement to defend and accordingly I will not consider that matter further
Conclusion
105. I therefore propose making an order that the defendant be permitted to defend the claim save in regard to the issue of the Statute of Limitations and the matter of the proof of assignment.
The Governor and Company of the Bank of Ireland v. Educational Building Society;
[1998] 2 I.L.R.M. 451
KEANE J delivered his judgment on 23 June 1998 saying: The claim of the plaintiff (hereafter ‘the bank’ ) is as the holder for value of nine cheques totalling £183,559 against the defendant (hereafter ‘the building society’ ) as drawer of the cheques which were drawn upon Ulster Bank Ltd in favour of the bank. Each of the cheques when presented for payment was dishonoured and returned unpaid to the bank marked ‘payment countermanded’ .
The building society having filed an affidavit in which it disputed the bank’s claim, a motion for summary judgment on behalf of the bank was heard by Morris J (as he then was). In a reserved judgment, he concluded that the claim should be sent for plenary hearing. From that decision, the bank have now appealed to this Court.
The facts, in so far as they are not in dispute, are as follows. A company called Ballinorig Enterprises Ltd (hereafter ‘the company’ ) had a current account at the Tralee branch of the bank. Over a period of 15 months from September 1994 to January 1996, a series of cheques drawn by the building society on its current account with the Ulster Bank Ltd in which the bank were named as payee were lodged by the company to the credit of its current account with the bank. Over the same period, the company drew cheques on its account with the bank which it delivered to the building society. Thus, four cheques totalling £81,155 drawn by the building society in favour of the bank were lodged to the company’s account with the bank on 18 January 1996. The building society say that it drew these cheques in favour of the bank and gave them to the company because the company had delivered it five cheques totalling £80,913 drawn by it on its account at the bank. The bank do not dispute that these cheques were dishonoured by it when presented for payment on 23 January 1996, i.e. the day that the first four cheques drawn by the building society in favour of the bank were stopped by the building society. A further five cheques drawn by the building society on 19 January 1996 and totalling £102,404 were similarly returned marked payment countermanded.
It is not in dispute that similar transactions took place on a regular basis over the previous 15 months and that the company were engaged in the practice known as ‘kiting’ . Under the system of clearing cheques operated by the associated banks, approximately four days normally elapse before a cheque is presented for payment by the collecting bank to the paying bank and honoured or not, as the case may be. It is stated at paragraph 8 of the affidavit sworn on behalf of the bank by Mr Neil Timlin, the manager of the branch, that:
The [bank] was in the habit of permitting its customer [the company] to draw against uncleared effects ….
It is not in dispute in the present case that the company was abusing the facilities it was being given by both the bank and the building society to draw cheques on its account (in the case of the bank) which were unsupported by funds and obtain cheques in favour of the bank (in the case of the building society) again unsupported by funds. In each case, the success of the scheme from the customer’s point of view depended on the willingness of the bank and the building society to allow the customer to draw cheques or obtain cheques from the building society before the effects supporting the transaction were cleared.
The payee of the cheques drawn by the company on its account with the bank and presented to the building society was Martin Hartnett, one of the directors of the company. The company did not have an account with the building society, but Martin Hartnett did. In an affidavit sworn by Mr Thomas Greene, the internal audit manager of the building society, he deposes that, to the best of his knowledge and belief, the building society had not previously been the victim of what he describes as a kiting fraud. By contrast, he says, the bank, as a clearing bank, is likely to have had regular experience of such frauds. Mr Greene does not, however, in his affidavit explain how the building society first became aware that such a fraud had been perpetrated on it. In his affidavit, Mr Timlin says that the bank instituted enquiries with the directors of the company on 24 January to find out what was going on i.e. after the building society cheques had been returned. The bank were informed at that meeting that up to recently the building society had been ‘exchanging cheques with the company’ , but that it had altered its procedure ‘in the previous few days’ and was now lodging the cheques to Mr Hartnett’s account. Mr Timlin’s affidavit goes on:
It appears that at that stage the [building society] discovered that the arrangement involved the kiting of cheques and it proceeded to countermand payment of the nine cheques issued in favour of the bank on 18 and 19 January 1996.
It was submitted by Mr Nesbitt SC on behalf of the bank that the affidavits filed on behalf of the bank and the building society did not disclose any issue of fact which justified the case being remitted for plenary hearing. The bank’s claim was as a holder for value of the nine cheques and the fact that the drawing of the cheques by the building society in its favour had been procured, as the building society alleged, by the fraud of the company afforded no defence where it was not shown that the bank was aware of the fraud. He cited in support Watson v. Russell (1862) 3 B & S 34 , affd. (1864) 5 B & S 968 and Jones (R.E.) Ltd v. Waring and Gillow Ltd [1926] AC 670 . He submitted that, on the undisputed facts of the present case, the bank was a holder for value, since, in consideration of the delivery of the cheques payable to it, the bank had allowed its customer to draw cheques on its current account and the fact that the consideration moved from the promisee (in this case the bank) to a third party and not to the promisor (in this case the building society) was immaterial.
On behalf of the building society, Mr Senan Allen submitted that the bank had not made clear in its affidavits the terms on which the company was allowed to draw cheques against uncleared effects: it was, however, clear that the building society had relied upon those cheques in issuing the nine cheques in favour of the bank upon which the latter now sued. He said that, in those circumstances it was clear that an issue of fact would have to be tried on plenary hearing. He also submitted that where the drawing of cheques had been procured by fraud, the payee was not entitled to enforce the payment of the cheques. He also urged that the action of the bank in entering into an agreement with the company under which the latter were paying a sum of £2,000 per month to the bank in recoupment of the bank’s losses was inconsistent with its claim to be entitled to recover the same losses from the building society.
The issue before the High Court and which has arisen again in this Court is as to whether the affidavits disclose a good defence to the bank’s claim which necessitates the case being sent for plenary hearing at this stage. The issues of law and fact which arise cannot be conclusively resolved in favour of either party, unless, as is submitted on behalf of the bank, the affidavits do not disclose even an arguable defence to its claim. While that is an essential caveat to be borne in mind at this stage, the inquiry as to whether a good defence is made out on the affidavits requires at least some examination of what appear to be the applicable principles of law.
It should be noted at the outset that none of the nine cheques drawn by the building society in favour of the bank which have given rise to the proceedings can be equated in law to a banker’s draft, i.e. a draft drawn by one branch of a bank on another branch or on the head office of the same bank. Banker’s drafts are not cheques or bills, there being no distinct drawer and drawee. Although the identity of the drawer of the cheques in issue in the present case would undoubtedly afford comfort to the bank, they remained in law cheques, which had to go through the clearing system for presentation and honouring before the proceeds could be collected by the payee.
We are also not concerned in this case with the rights of a holder in due course of a negotiable instrument, such as a cheque. While s.2 of the Bills of Exchange Act 1882 provides that ‘holder’
means a payee or indorsee of a bill or note who is in possession of it or the bearer thereof,
it is clear that the payee is not a holder in due course, since, under s. 29(1) , such a holder is a person to whom a bill has been negotiated in good faith and for value. (See the dictum of Lord Russell of Killowen in Lewis v Clay 67 LJ (QB) 224 approved of by the House of Lords in R.E. Jones Ltd v. Waring and Gillow Ltd ). Where, as here, the payee sues the drawer on foot of the cheque, he will be defeated, like any other party to a simple contract, by the absence of consideration: in the case of cheques, however, like other bills of exchange, a consideration is presumed until the contrary appears, under s.30 of the 1882 Act.
In the present case, there is no suggestion that the consideration moved directly from the bank to the building society. It is argued, however, that the fact that the bank allowed the company to draw cheques against uncleared effects, including the building society cheques, constituted such consideration.
The arrangements between a bank and its customer as to the drawing of cheques by the customer on his account can take different forms. The bank may not have afforded the customer any overdraft facility, in which case any cheques he draws may be lawfully dishonoured by the bank if there are not sufficient funds in the account to meet them. Similarly, if the customer is afforded an overdraft facility, a cheque drawn on the account which brings the overdraft above its permitted limit may lawfully be dishonoured. But whether the customer is afforded an overdraft facility or not, in the absence of an agreement to that effect between the bank and himself, he cannot draw cheques on the account against cheques lodged to the account but not yet cleared and credited to his account without running the risk that the cheques will be dishonoured in the event of any of the lodged cheques being dishonoured and the customer, as a result, exceeding his overdraft limit or going into debit where the stipulation is that the account should be in credit.
In the present case, the bank has confined itself to a somewhat terse statement that it was in the habit of permitting the company to draw against uncleared effects. Indeed, apart from the reference to that practice, the affidavit does not indicate in any way the nature of the arrangements as to any overdraft between the bank and the company.
If the arrangement between the bank and the company was that the latter were entitled to draw cheques against all uncleared effects, and not merely cheques such as those issued by the building society which might afford a special degree of comfort to the bank, it is difficult to see what the consideration was on which the bank could rely in suing as the payee against the building society as the drawer. If that was the position, the customer would have been entitled to draw cheques on his account against cheques lodged to the credit of the account, irrespective of whether they were cheques payable to the company by other parties or cheques from the building society naming the bank as payee. The consideration in legal terms in such circumstances for permitting the company to draw against the uncleared effects would be the normal rate of interest payable by the company to the bank in respect of what would then be an overdraft of a temporary nature.
It may be that the agreement of the bank to allow the company draw against uncleared effects was specifically related in some way to the delivery by the company to it of the building society cheques. As matters stand, however, there was not sufficient evidence before the High Court to permit the recovery by the bank of final judgment against the building society on that ground.
If that was indeed the arrangement between the bank and the company, a further question could arise as to whether it constituted consideration on which the bank would be entitled to rely. It is, of course, a fundamental principle of our law of contract that provided that consideration moves from the promisee, it need not confer any benefit on the promisor: a benefit conferred by the promisee on a third party and thus constituting a detriment to the promisee may be sufficient to constitute a consideration in law for the promise. No authority was cited to us for the proposition that as between the immediate parties to a bill of exchange — i.e. in this case the payee and the drawer — consideration must move directly from the plaintiff to the defendant. In Churchill & Sim v. Goddard [1937] 1 KB 92 , Scott LJ said:
The presence of consideration is not an essential element of a bill of exchange contract as of an ordinary contract not under seal — it is presumed by the [1882] Act and was presumed by our Law Merchant before the Act. But as between immediate parties the defendant is entitled to prove absence of consideration moving from the plaintiff as a defence to an action on the bill …
That statement of the law would appear to be consistent with the view that, while the drawer is entitled to prove absence of consideration, he may in turn be met with a reply that there has been consideration in the form of a detriment incurred by the payee. That issue, for the reasons already stated, however, can only be resolved at a plenary hearing.
There is a further defence on which the building society relies, i.e. that the drawing by the building society of cheques in favour of the bank was procured by the fraud of the company and that, in those circumstances, the payee cannot enforce the instruments.
Mr Nesbitt sought to counter this by the following passage from the judgment of Crompton J in Watson v. Russell (1862) 3 B&S 34 at p. 38:
If A., by means of a false pretence or a promise or condition which he does not fulfil, procures B. to give him a note or cheque or acceptance in favour of C., to whom he pays it, and who receives it bona fide for value, B. remains liable on his acceptance. His acceptance imports value and liability prima facie , and he can only relieve himself from his promise to pay C. by showing that C. is not holder for value, or that he received the instrument with notice or not bona fide .
In that case the defendant had chartered a ship to K. at a certain rate per week, to be paid every four weeks in advance. On the second payment becoming due, K. received from the plaintiff, through whom he had sub-chartered the ship to B., a cheque for half the amount due, payable to the order of the defendant, upon the terms that K. should inform the defendant that the advance was made in consideration that the ship should be allowed to perform the charter. K. paid the cheque to the defendant, but omitted to inform him of the terms on which it had been given. The defendant, who was thus without notice of the condition subject to which the cheque had been drawn by the plaintiff, prevented the ship from moving because he had not received the full amount of the payment due. It was held that the defendant was entitled to enforce payment of the cheque.
It will be seen from that recital of the facts that Watson v. Russell was essentially a case in which an agent exceeded his authority by not disclosing to the named payee the terms on which the cheque had been drawn in favour of the payee by his principal. The payee not having been aware of the restriction on the agent’s authority was thus entitled to sue the drawer on foot of the cheque. In R.E. Jones Ltd v. Waring and Gillow Ltd Lord Sumner and Lord Carson in the course of their speeches said that the statement of the law by Crompton J went further than the facts of the case required.
In R.E. Jones Ltd v. Waring and Gillow Ltd , the drawing of the cheque was undoubtedly procured by the fraud of a third party, but the drawer, in seeking to recover the money paid on foot of it from the payee, relied on its having been paid to the payee under a mistake of fact and the case was treated as distinguishable on that ground also from Watson v. Russell .
It would seem that, although the principle laid down in Watson v. Russell was wider than the facts of the case required, it has been treated as correctly stating the law in a number of subsequent cases: see for example Talbot v. Von Boris [1911] 1 KB 854 .
The authorities would suggest, accordingly, that the claim of the bank on foot of the cheques could not be defeated, if it received them as holders for value in good faith and without notice of the fraud. There is no suggestion that the bank were actually aware of the fraud: it is, however, claimed on behalf of the building society that the circumstances did put it on inquiry, that it failed to make inquiries and that, accordingly, it cannot be regarded as having received the cheques in good faith.
If the building society cheques were simply lodged to the credit of the company’s account along with other cheques, it is difficult to see in what way the bank could have been put on any inquiry as to the circumstances in which it was named as payees and the cheques delivered to it. The case made on behalf of the bank, however, is that it was in some way induced by the presentation to it of the building society cheques to allow the company draw cheques on its account, before the building society cheques themselves had been presented for payment and honoured. In those circumstances, it would be at least arguable that the bank should have been aware that some form of ‘kiting’ of cheques by the company was going on. While it is true that, in general, the courts have not favoured the extension of the doctrine of constructive notice to commercial transactions, it is also clear that a person who claims to be the holder for value of a negotiable instrument but who has refrained from making inquiries which a reasonably prudent person would have made may be held not to have acted in good faith: see National Bank Ltd v. O’Connor (1963) 103 ILTR 73 .
As to a possible defence grounded on the cheques having been paid under a mistake of fact, the affidavits filed on behalf of the building society do not contain any indication that the cheques were paid by it under a mistaken belief as to the nature of the transaction. It must indeed be said that the evidence from the building society as to the circumstances in which the cheques came to be issued is singularly sparse: the only information before us is that given in the affidavit sworn on behalf of the bank which in turn is based on what Mr Timlin was told by the company’s representatives. As the bank were apparently told that the building society cheques were ‘exchanged’ for the company cheques drawn in favour of Mr Hartnett, the transaction seems an unusual one for a building society to have sanctioned. It is sufficient, however, to say that the affidavits do not disclose any defence based on the cheques having been drawn in favour of the bank under a mistake of fact. There is, undoubtedly, however, an unequivocal averment that the issuing of the cheques was procured by the fraud of the company and, for the reasons already stated, I am satisfied that a good defence is disclosed by the affidavits that the bank were not holders in good faith and for value of the building society’s cheques. On that ground, accordingly, I would affirm the order of the High Court remitting the action to plenary hearing.
I should add that it does not appear to me to be a relevant factor that the bank have apparently entered into an arrangement with the company under which it is seeking to recoup its losses from them. That would mean no more than that, if final judgment were being entered, credit would have to be given for the sums already paid by the company in recoupment of the bank’s losses. It does not, however, affect the right of the bank to sue for whatever is the unpaid balance due on foot of the cheques, assuming that it was entitled so to do.
MURPHY J: The proceedings herein were instituted by way of summary summons. The plaintiff (the bank) claimed as holder for value against the defendant as drawer of nine cheques totalling £183,559 drawn upon Ulster Bank Ltd in favour of the bank. It was alleged that each of the said cheques when duly presented for payment was dishonoured and returned to the bank marked ‘payment countermanded’ .
An appearance having been entered by the defendant (the EBS) the summons was set down before the Master on a motion for judgment dated 29 April 1996. The motion was grounded upon the affidavit of Mr Neil Timlin who, among other things, stated as he was required to do under O. 37, r. 1 of the Rules of the Superior Courts , that in his belief there was no defence to the action.
In an affidavit sworn by him on 3 July 1996 Mr Thomas Greene the internal audit manager of the EBS, claimed that the defendant did have a bona fide defence to the proceedings and swore that the appearance had not been entered on its behalf for the purpose of delay. Specifically and unequivocally Mr Greene swore that ‘the plaintiff provided no consideration of any kind whatsoever for the said cheques’ . What Mr Greene explained was that the cheques admittedly drawn by the EBS on the Ulster Bank Ltd in favour of the bank formed part of an activity known as ‘kiting’ perpetrated upon the building society and the bank by Ballinorig Enterprises Ltd over a period of 15 months prior to the commencement of the proceedings herein.
The Master put the matter in the Judges’ list where it came before Morris P. Having heard full argument on the matter the learned judge of the High Court directed that the case be sent for plenary hearing without further pleadings. He stated his reasons for so doing in a comprehensive judgment given on 19 April 1997. It is from the order and judgment of Morris P that the bank appeals to this Court.
That Morris P was entitled to be satisfied on the evidence and argument that there was ‘a fair and reasonable probability of the EBS having a real and bona fide defence to the proceedings’ could hardly be disputed.
In Crawford v. Gillmor (1891) 30 LR Ir 238 at p. 245 Barry LJ observed :
I am of opinion that … the mere length of time which has been occupied by the argument of this case — and I do not think that one moment of our time was occupied unnecessarily — shows that it does not come within the rule which allows final judgment to be marked on motion.
It seems to me this citation is appropriate in the instant case. The detailed written submissions by both parties; the argument of counsel and more particularly the analysis by my colleagues of those arguments make it clear that the defendant/respondent had raised by way of defence an issue of law on which it was entitled to be heard. This was rightly accepted by Morris P. Indeed I do not understand it to be disputed by the appellant. What is challenged is the need or appropriateness of sending the matter for plenary hearing to determine an issue which is primarily one of law.
The building society has contended by way of defence that the cheques on foot of which the bank claims in these proceedings were given without consideration and accordingly invalid. The resolution of this question depends in part at least upon things done or not done or any detriment suffered by the bank for or in relation to those cheques. Questions also arise as to the relationship between the bank and its customer particularly in relation to the right of the customer to draw against ‘uncleared effects’ .
I believe that the defendant/respondent has identified issues of fact which require to be explored and clarified before the undoubted issues of law can be properly dealt with.
Even if the position was otherwise once the learned judge of the High Court was satisfied that the EBS had ‘a real or bona fide defence’ , whether based on fact or on law, he was bound to afford it an opportunity of having the issue tried in the appropriate manner. In my opinion the sending of the motion for trial by plenary hearing represented a proper exercise by the learned judge of the discretion vested in him by O. 37, r.7 of the Rules of the Superior Courts to select the mode of trial.
I too would dismiss the appeal.
BARRON J: The basic facts in this action are simple. The legal construction to be placed upon them and the ultimate decision which should be reached are not so simple. They are nevertheless eased for this Court since the issue before it is not whether the plaintiff should succeed in its claim, but whether the defendant should be given liberty to defend.
The claim relates to certain cheques drawn by the defendant on its own bank Ulster Bank Ltd in favour of the plaintiff. It is common case that the cheques were issued in the course of a fraudulent scheme whereby a party with two accounts with different financial institutions passes cheques between them in such a way that though he has no money to meet them they will be met by further cheques also unsupported by funds. Such a scheme is known as kiting. The cheques are so much waste paper, but enable the perpetrator to run an overdraft without it being disclosed. It is made possible by two circumstances:
(1) A period of four days required to clear cheques through the clearing banks system; and
(2) permission to draw against uncleared effects.
In the present case, the scheme was engineered by Ballinorig Enterprises Ltd (‘the company’ ) which had an account with the plaintiff, but none with the defendant. It issued cheques on its account with the plaintiff in favour of one of its directors, Martin Hartnett, who had an account with the defendant. These cheques would be lodged to Hartnett’s account with the defendant who at his request issued cheques payable to the plaintiff drawn on the defendant’s account with its own bank. The cheques so issued were lodged by the company to its account with the plaintiff so that in turn earlier cheques drawn in favour of its director would be met. The evidence on affidavit is not clear as to the actual steps taken to purport to provide funds to support the cheques issued by the defendant. This no doubt will become clearer following a full oral hearing. It is suggested that it was only in the latter stages that cheques were made payable to Martin Hartnett. Whether that is correct is another matter which should also become clearer.
The entire scheme was fraudulent to the knowledge of the company and its director. The officials dealing with respective accounts were unaware of a fraud. Clearly, if they had been, the kiting would have been stopped immediately.
The scheme was discovered first by the defendant who immediately refused to pay any outstanding cheques. The present proceedings are brought to recover the moneys payable thereunder. The plaintiff sues as holder for value. The defendant in seeking liberty to defend relies upon three matters: that no value was given for the cheques by the plaintiff; that they were issued under a mistake of fact; and that the plaintiff ought to have known that the cheques were invalid.
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 v. Anglin [1996] 1 IR 75 .
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.
That is essentially the position in the present case. The third issue raised is clearly one which can only be decided after a full oral hearing. The other two issues appear on their face to be pure matters of law, but they also depend on where the truth lies.
The affidavits show that further examination of the facts is required. Mr Timlin on behalf of the plaintiff in his first affidavit does not make clear whether the plaintiff really dealt with the cheques because it was the payee or, as he deposes, as a bank for collection on behalf of its customer. He also suggests that Mr Hartnett only became the payee of the company’s cheques towards the end whereas this is disputed.
In his first affidavit on behalf of the defendant Mr Greene alleges that Mr Timlin is oversimplifying the facts. He refers to the existence of the kiting over a period of 15 months and that the evidence of the bank account over this period is relevant. He also sought evidence of when and by whom and on what terms the company was permitted to draw against uncleared effects.
The issues of law require to be determined in the light of the facts as will ultimately be found following a full oral bearing. Since it cannot be said that whatever picture develops the plaintiff must succeed, it is clear that the defendant should be given liberty to defend.
The plaintiff’s case is that the cheques cannot be stopped against it since it is the payee and has given value for them. Certainly, value was given in the sense of detriment to the plaintiff moving to its customer. The issue remains whether that is sufficient as regards the defendant.
Both R.E. Jones Ltd v. Waring and Gillow Ltd [1926] AC 670 and National Bank Ltd v. O’Connor (1963) 103 ILTR 73 have a similarity to the facts of the instant case. In the former, a third party fraudulently induced the plaintiff to draw a cheque in favour of the defendant. The plaintiff thought it was a deposit on the purchase of goods from a company, being financed by the defendant. The defendant thought it was payment of the first instalment under a hire purchase transaction between it and the third party. The cheque was held to have been paid under a mistake of fact. It had been cashed, but the proceeds were held to be recoverable.
In the latter case two bank drafts were issued through the fraud of a teller in the plaintiff bank. The fraud related to the lodgment of other cheques which if good would have been sufficient to meet the amounts for which the bank drafts were drawn. The plaintiff was successful upon two grounds. It was held that the drafts were issued under a mistake of fact and so were void. In so holding Budd J said at p. 88:
They were expressed to be for value received. As between the plaintiffs and the defendant O’Connor no consideration moved from O’Connor to the bank. These drafts came into existence as a result of the fraudulent misrepresentations made by James Thornton to the senior officers of the Bank at Tuam. These misrepresentations operated on the minds of the senior officials in issuing the drafts. They resulted in a mistake in the minds of the officials concerned that their customer was in funds or had put the bank in funds to meet the drafts and that the bank had received consideration for them. Both drafts were received by O’Connor as original payee or holder.
Secondly, it was held that the defendant for whose benefit the drafts were drawn was not entitled when his suspicions ought to have been aroused by earlier transactions deliberately to shut his eyes to the obvious. If so, he could not be acting bona fide . In the result, it was held that the case being made that O’Connor had implied knowledge of the fraud had been made out. Budd J said at p. 82:
I also refer to the proposition evidently approved of by Shadwell VC in Jones v. Smith 1 Hare 43 that what is required to fix a person with implied knowledge of fraud is a suspicion of the truth and a fraudulent determination not to learn of it. Wilfully abstaining from enquiries when suspicion is aroused is much the same thing and has much the same result as will be seen from the observations of Lord O’Hagan in Jones v. Gordon (1877) 2 App Cas 616 at p. 625.
Both these cases support the view that the correct decision will depend upon a fuller examination of the facts than at present.
In the ordinary way, the principle of constructive notice does not apply in commercial transactions to questions of title as it does in the case of sales of land. That is because in the latter type of transaction, it is of the essence of it that the title should be examined and all necessary enquiries made. To require the same quality of enquiry in commercial transactions would defeat the object thereof.
Nevertheless, there seems nothing in principle which would make it oppressive to require enquiry when legitimate suspicions have been aroused. The rule for commercial transactions is designed to prevent delay in completion. Such a rule need have no application where it cannot result in delaying a transaction. There is nothing in principle not to require of those carrying out repeated commercial transactions to exercise normal prudence. The defendant says that if the bank had exercised normal prudence it would have exposed the scheme much earlier. The same is said of the defendant. Where a person fails to question the obvious it is likely, though not necessarily so, that he or she is either a knave or a fool. If as Budd J held in National Bank v. O’Connor the knave cannot be allowed to rely upon his failure to enquire, there seems no reason why, if the facts support a finding that the plaintiff’s officers should be regarded as fools, they should not be similarly treated.
Counsel for the plaintiff relies upon a passage in the judgment of Crompton J in Watson v. Russell (1862) 3 B&S 34 . This case was distinguished in R.E. Jones Ltd v. Waring and Gillow Ltd Watson v. Russell was a case in which a cheque was issued to pay the hire under a charter. Only part was paid and the drawer of the cheque did so on the basis that the charter would be allowed to continue. The cheque was delivered by a third party who did not pass on to the payee the condition on which the cheque was being paid. It was held that the payee was entitled both to retain the amount paid and terminate the charter.
In my view, this case and R.E. Jones Ltd v. Waring Ltd and Gillow Ltd merely illustrate the fundamental distinction between mistake and fraud. The former generally vitiates the transaction, while in the latter case it is always voidable. In R.E. Jones Ltd v. Waring and Gillow Ltd the drawer of the cheque wrongly thought it was being drawn to pay a particular deposit. In Watson v. Russell , the cheque was used for the purpose for which it was drawn.
In conclusion it would seem that each of the three issues raised by the defendant suggest that the questions of law which they raise cannot yet be determined but must be dependent upon the evidence yet to be adduced.
I would agree with Keane J that the arrangement entered into between the plaintiff and its customer does not affect any issue between the plaintiff and the defendant save as to the credit for any moneys recovered thereunder.
Consular Gestion SGHC S. A. -v- Optimal Multiadvisors Ireland PLC
[2009] IEHC 173 (27 March 2009
JUDGMENT of Mr. Justice Kelly delivered on the 27th day of March, 2009
Introduction
This is another piece of litigation spawned by the criminal dishonesty of the by now infamous Bernard Madoff of New York and a company under his control called Bernard L. Madoff Investment Securities LLC.
The application to which this judgment relates is one for summary judgment in the sum of €3,241,474.90 sought by the plaintiff against the defendant.
Before considering the evidence in the case it is desirable that I should briefly address the legal principles which are applicable to an application of this sort.
Summary Judgment
This application is brought pursuant to O. 37, r. 7 of the Rules of the Superior Courts. That rule describes the powers invested in the court on an application of this sort. The court may do one of three things. It may grant judgment to the plaintiff or dismiss the action or adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons.
The principles applicable to an application for summary judgment have been considered in recent years by both the Supreme Court and this Court on quite a number of occasions. I mention just a few of the cases.
In First National Commercial Bank Plc v. Anglin [1996] 1 IR 75, Murphy J. speaking for the Supreme Court said:-
“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 (see Irish Dunlop Co. Ltd. v. Ralph (1958) 95 I.L.T.R. 70).
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.’”
In Aer Rianta C.P.T. v. Ryanair Limited [2001] 4 IR 607, McGuinness J. identified the above passage from the judgment of Murphy J. as being the correct test to be applied in deciding whether to grant summary judgment.
More recently in this Court, McKechnie J. in Harrisrange Limited v. Duncan [2003] 4 IR 1, summarised the principles applicable by reference to the preceding case law. I do not intend to set out all of those principles in the course of this ruling. It is sufficient if I refer to just some of them.
In all, McKechnie J. laid out twelve matters which inform the approach of the court to an application for summary judgment. The seventh of those matters he identified as follows:-
“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.”
He went on to say that that 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.”
In the present case, counsel on both sides have accepted that that is the appropriate test to apply. They also accept that the threshold which has to be reached by the defendant in order to defeat the plaintiff’s application for summary judgment is not a high one.
The defendant puts forward five different grounds upon which it says it can demonstrate an arguable defence to the plaintiff’s claim. It is of course only necessary that it should demonstrate an arguable defence on any one of these to result in the application of the plaintiff for summary judgment being refused.
The Grounds of Defence
I set out in summary form the five separate grounds which are relied upon by the defendant by way of defence. In order to make sense of them it will be necessary to refer to the factual background against which they arise. That I will do later, but it is useful to summarise them at this juncture.
They are as follows:-
(1) The defendant contends that it has validly exercised the power under its articles of association to temporarily suspend redemption of shares in the Optimal Strategic U.S. Equity Ireland Euro Fund of the defendant. As a consequence of that suspension, there is no obligation to pay the monies the subject of this application.
(2) Because of the circumstances leading to the aforesaid suspension the Net Asset Value (NAV) of the plaintiff’s shares which was struck on 10th December, 2008 was manifestly erroneous and is no longer reliable or effective to trigger the payment obligation the subject of this application.
(3) It would be unfair to other shareholders to pay the amount claimed by the plaintiff on foot of the aforesaid NAV.
(4) There was a fundamental mistake as to the existence of the assets that were the subject matter of the NAV upon which the plaintiff relies. That mistake vitiates the redemption transaction thereby removing any payment obligation.
(5) The redemption transaction has in all of the circumstances been frustrated thereby discharging any obligation on the part of the defendant to make the payment in question.
Relevant Facts
The plaintiff is a Spanish company whilst the defendant is an Irish one. The defendant is authorised as a “Qualifying Investor Fund” (QIF) by the financial regulator in this jurisdiction.
The defendant is constituted as an umbrella fund with a number of sub-funds. The investment policy of the relevant sub-funds is to invest 100% of their assets in a series of share classes in the Optimal Strategic U.S. Equity Series of Optimal Multiadvisors Limited (Optimal Bahamas). Optimal Bahamas is a multi-portfolio investment company with two “series” each of which has a definite investment objective. The assets of each series are traded through a separate trading company.
The plaintiff invested in a sub-fund of the defendant which is known as Optimal Strategic U.S. Equity Ireland Euro Fund (Optimal Euro sub-fund). This sub-fund invested all or nearly all of its assets in shares in the Optimal Strategic U.S. Equity Series of Optimal Bahamas (the SUS Series). The assets of Optimal Bahamas corresponding to the SUS Series are held by it through its Bahamian trading subsidiary, Optimal Strategic U.S. Equity Limited (Optimal SUS). Optimal S.U.S. established a discretionary account with Bernard L. Madoff Investment Securities LLC (BMIS) a United States broker dealer in order to execute its trading strategy. All of the assets of the Optimal Euro sub-fund were invested with BMIS through the SUS Series and Optimal SUS.
The financial regulator in this jurisdiction obliges every investment fund to use the services of an independent Irish administrator and an independent Irish custodian. H.S.B.C. Securities Services (Ireland) Limited (H.S.B.C. Administrator) and H.S.B.C. Institutional Trust Services (Ireland) Limited (H.S.B.C. Custodian) were appointed to both the defendant and Optimal Bahamas.
When an investor such as the plaintiff wishes to redeem its investment, it must follow a detailed process.
This process is primarily dealt with in the defendant’s articles of association but also in other documents which I need not refer to in any detail for the purposes of this ruling.
The plaintiff desired to redeem some 19,735,007 shares. As is prescribed, it completed a redemption form and sent it to H.S.B.C. Administrator. That must be done at least 40 calendar days in advance of the relevant dealing day. The dealing day for the Optimal Euro sub-fund is the first business day of a calendar month. Four redemption forms were sent to H.S.B.C. Administrator on 29th September, 2008. The relevant dealing day was therefore 1st December, 2008.
On receipt, H.S.B.C. Administrator was required to notify the investment manager of the redemption request and did so.
Arrangements then have to made to insure that there are sufficient funds in the cash account to pay out the redemption request at the conclusion of the redemption process. That normally involves the submission of a redemption request to Optimal Bahamas in order to redeem shares held by the Optimal Euro sub-fund in the SUS series. Such redemption requests were submitted to H.S.B.C. Administrator.
The next step in the process is the calculation or “striking” by H.S.B.C. Administrator of the NAV of the Optimal Euro sub-fund. The valuation day is the last business day of the month preceding the dealing day. The process for calculating the NAV commences after the dealing day and normally is not finalised until ten days after that dealing day.
The NAV of the SUS Series was struck on 9th December, 2008 and the NAV of the Optimal Euro sub-fund was struck on the following day, 10th December, 2008. Both were released for publication on 11th December, 2008. Redemption proceeds fall to be paid within one month after the dealing day. For this to happen, Optimal Bahamas would normally have to receive the funds from BMIS and remit the redemption proceeds to H.S.B.C. Custodian. No money has been received by Optimal Bahamas from BMIS in respect of these redemption requests. The reason for that is no mystery.
On 11th December, 2008 it was reported that Bernard Madoff, the principal of BMIS had been arrested in New York for alleged fraud in connection with the operation of a “Ponzi” scheme through BMIS. It was said that that scheme could involve sums up to $50b. At that time, the Optimal Euro sub-fund had assets under management with BMIS totalling €411,505,000. As it is now well known, Bernard Madoff has since pleaded guilty to a series of dishonesty offences and is awaiting sentence before a United States Court.
When, however, on 11th December, 2008 news of his activities became public, the board of directors of the defendant held a series of emergency meetings. They inter alia resolved to suspend all share redemptions and to inform shareholders that the valuation published on 11th December, 2008 could not be relied upon. As a result, the redemption payments would not be paid pending clarification of the position about BMIS.
On 16th December, 2008, the directors of the defendant issued a notification of suspension of the determination of the NAV which was forwarded to H.S.B.C. Administrator for distribution.
On the preceding day, Optimal Bahamas also suspended all redemptions.
The defendant contends that the concerns of its directors were well founded in light of the fact that it now appears that BMIS did not conduct any trades in the last thirteen years which would, it is said, mean that the assets on which the NAV was based did not exist.
The plaintiff contends that whilst all this may be very interesting, it has done nothing more than operate in a bona fide manner the redemption procedure to the letter. The procedure had reached a stage where the plaintiff’s entitlement to payment had crystallised and thus no resolution of the directors can set that at nought. In any event, the resolution, with its alleged consequences for the plaintiff, is not one which is accommodated by the articles of association, it is argued.
The Resolution
The resolution to suspend was passed at a meeting of the board of directors held on 12th December, 2008 at 5.30p.m. Irish time. The resolution reads:-
“It was resolved to suspend redemptions in the shares of Optimal Strategic U.S. Equity Ireland U.S. Dollar Fund and Optimal Strategic U.S. Equity Ireland Euro Fund and that such suspension would apply to any redemptions made for the 1 December dealing day in those two subfunds and any future redemptions.”
The plaintiff contends that this resolution is ineffective to produce the result which is contended for by the defendant. The defendants contend otherwise and argue that this resolution was authorised by the articles of association and had the desired result from their point of view. This, in turn, calls attention to the articles of the defendant under which this resolution was purportedly passed.
The Articles of Association
Part 5 of the articles of association deals with redemption of shares. Part 6 deals with suspension of redemption, valuation and dealings.
Article 21 deals with temporary suspensions. Insofar as it is relevant, it empowers the directors to declare a temporary suspension of the determination of the NAV and of the issue and redemption of any class of shares during…:-
“the whole or any period of a period when, as a result of political, economic, military or monetary events or any other circumstances outside the control, responsibility and power of the directors, any disposal or valuation of investments of the relevant fund is not, in the opinion of the directors, reasonably practicable without this being seriously detrimental to the interests of owners of shares in general or the owners of shares of the relevant fund or if, in the opinion of the directors, the net asset value cannot fairly be calculated or such disposal would be materially prejudicial to the owners of shares in general or the owners of shares of the relevant fund.”
The directors may also declare a temporary suspension:-
“during the whole or any part of any period when the company is unable to repatriate funds required for the purpose of making redemption payments or when such payments cannot, in the opinion of the directors, be effected at normal prices or normal rates of exchange or during which there are difficulties with or it is envisaged that there will be difficulties with the transfer of monies or assets required for subscriptions, redemptions or trading.”
The effect of such a suspension is defined at Article 23(b). It recites as follows:-
“Any such suspension shall take effect immediately and thereafter there shall be no determination of net asset value and issue of shares or redemption of shares until the directors shall declare the suspension at an end…”
In a word, the plaintiff contends that this power of the directors can have prospective effect only and cannot affect its entitlement to be paid given the stage the redemption process initiated by it had reached.
It is important to bear in mind that Part 5 and in particular article 20 of the articles of association deal with redemption. The redemption process is specifically stated to be subject to the provisions thereafter provided. Article 20(a)(iii) provides:-
“In the event that the determination of the net asset value per share has been suspended in accordance with Article 23 the right of the applicant to have his shares repurchased or redeemed pursuant to this Article, shall be similarly suspended and during the period of suspension he may at the discretion of the directors withdraw his request for redemption and his certificate if applicable.”
Article 20(d) provides that upon the redemption of a share being effected pursuant to the articles, the holder ceases to be entitled to any rights in respect thereof and his name is to be removed from the register and the relevant shares are to be treated as cancelled.
Article 21 deals with the redemption price. Under Article 21(d), it is provided that:-
“Payment of redemption proceeds shall be made in the currency as set out in the relevant redemption request subject to Article 23.”
Article 23 is, of course, the one which deals with the entitlement to temporarily suspend.
The defendants say that at the time when the resolution of 12th December was passed, the directors were aware that the NAV appeared to have no basis in reality or at the very least, that there was serious risk that such was the case. That was because of the activities of BMIS. The decision to suspend redemption, to view the NAV as being unreliable and not to pay redemption proceeds is, it is contended, a proper exercise of the powers conferred under article 23 and has the effect of disentitling the plaintiff to payment.
The defendant contends that the argument of the plaintiff that the power to suspend redemptions does not include the suspension of payment of redemption proceeds is ill founded. Redemption is completed, it is argued, only when the one month period for payment has expired and payment is duly made and the shareholders name has been removed from the register. In the instant case, the one month period had not expired and would not do so until January 2009. Furthermore, the plaintiff’s name had not been removed from the register in respect of the redeemed shares.
This interpretation, it is argued, is consistent with the grounds for suspending redemption contained in the articles which include the fact that the company “is unable to repatriate funds required for the purpose of making redemption payments” or that “there are difficulties with or it is envisaged that there will be difficulties with, the transfer of monies or assets required for subscriptions, redemptions or trading”.
The argument that redemption includes all stages up to redemption payments being made is, it is argued, supported by a recent decision of the Cayman Court of Appeal in In Re Strategic Turnaround Master Partnership Limited (Unreported, Cayman Court of Appeal, 12th December, 2008).
That court reversed the decision of Smellie C.J. which, inter alia, held that the exercise by the directors of a company of a power of suspension of redemption was ultra vires the articles of association which are not dissimilar to the ones in suit. He reached that conclusion on the basis that there was no power to suspend redemption payments, as opposed to suspending redemption in advance of the redemption date. The Chief Justice gave five reasons for so doing but none of them was considered sufficient by the Court of Appeal.
Vos J.A. said:-
“Redemption in these Articles must be referring to the entire process of redemption including
- the notice to redeem;
- the debt that arises on the redemption date;
- valuation of the N.A.V. at the redemption date and, as a consequence, the redemption sum;
- the payment of the redemption sum; and
- the removal of the member from the register.”
Later, he said:-
“The suspension power exercised by the company was a power to suspend the payment of redemption proceeds. Since the proceeds had not been paid in April 2008, when the resolutions were passed, the exercise of this power cannot have been retrospective. This point would only hold water if the petitioner had been right to suggest that the redemption process was complete on 31st March, 2008. As I have already held, however, the redemption was not complete on that date, not least because the proceeds had not been paid.”
The factual situation in that case was not identical to this and there was an additional complicating factor in that a confidential memorandum defined the power of suspension as extending to the determination of the NAV, the redemption of shares and the payment of redemption proceeds, whilst the articles of association contained no such definition. Nonetheless, the court held that the extra detail in the confidential memorandum was not inconsistent with the articles but merely explained in detail how the powers in the articles might be used in practice.
I regard the decision of the Cayman Court as providing persuasive authority in support of the defendant’s case. It is sufficient to satisfy me that it has achieved the necessary threshold of proof in respect of this first line of defence. I hold that there is an arguable defence to the effect that the temporary suspension effected by the resolution of 12th December, 2008 was efficacious to absolve the defendant from payment of the amount in suit given that the redemption process was incomplete.
Having so held, it is not necessary for me to consider in detail the other lines of defence which have been outlined. I do not propose to do so save to comment that on at least some of them I am equally satisfied that the defendant has demonstrated an arguable defence.
Conclusion
Having found as I do that an arguable defence has been demonstrated it follows that the plaintiff is not entitled to summary judgment. Instead, I will adjourn the case for plenary hearing and give the defendant leave to defend.
The defendant, through counsel, gave an undertaking that pending trial it would not, without notice being given to the plaintiff, make any payments to shareholders or former shareholders. This undertaking is accepted and will be recorded in the formal order of the court.