ACC Bank Ireland Plc v Fahey, Fahey, McGrath & McGrath

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 12 February 2010
• Neutral Citation: [2010] IEHC 41
• Court: High Court
• Date: 12 February 2010

ACC Bank Ireland Plc v Fahey & McGrath

COMMERCIAL

BETWEEN

ACC BANK IRELAND PLC

PLAINTIFF

AND

GEORGE FAHEY, EVELYN FAHEY, GEORGE MCGRATH AND CATHERINE MCGRATH

DEFENDANTS

[2010] IEHC 41

[No. 1624 S/2009]

THE HIGH COURT

CONTRACT

Forgery

Contract - Loan agreement - Debt acknowledged - Fresh loan offer - Forgery of defendants' signatures on loan offer - Falsification of documentation regarding earnings in support loan offer by employee of Plaintiff - Alternative claim pursued for simple contract debt - Monies had and received - Relevant principles - Whether presumption of advancement - Tenor of correspondence sent by defendant to plaintiff prior to trial - Whether contempt of court - Surrounding circumstances - McGivern v Kelly [2008] IEHC 58 considered - Held not to be contempt of court - Judgment in favour of plaintiff - Referral of forged documentation to Director of Public Prosecutions -(2009 No. 1624S - Kelly J - 12/02/2010) [2010] IEHC 41

ACC Bank plc v Fahey and Ors

Facts: The plaintiff bank had initially sought to recover judgment against the defendants for the sum of € 3.5m, together with interest. On the day of trial, the bank no longer sought interest. The first and second defendants were married to each other and the first three defendants were described as property developers. A credit report in 2007 indicated that the first two defendants had a combined net worth of € 25.86m. The defendants had sought a bridging loan to purchase a property in Co. Galway. The defendants had failed to discharge interest payments on the loan received. They alleged that they had not seen a letter describing the conditions of the loan and an issue arose as to how their signatures were procured on this document. A bank relationship manager had sworn an affidavit indicating that the signatures had been obtained and this individual had resigned from the bank subsequently. A handwriting expert was described as concluding that the signatures were false. A false P. 60 revenue certificate was in the possession of the plaintiff, indicating earnings for one of the defendants far in excess of the true sum. An email had been sent on the eve of the hearing to a solicitor for the plaintiff with a view to attempting to put improper pressure on the bank to drop its claim.

Held by Kelly J. That judgment would be granted in favour of the bank for the net sum of €3,273,611 and no interest was payable on the sum. The costs of the proceedings were not being sought. As disturbing evidence had been revealed regarding an apparent forgery of signatures on loan instruments, the papers would be referred to the Director of Public prosecutions, encompassing the possession of fictitious P. 60 certificates.

Reporter: E.F

MCGIVERN v KELLY UNREP KELLY 22.2.2008 2008/37/8075 2008 IEHC 58

BULLEN & LEAKE & JACOBS PRECEDENTS OF PLEADINGS 13ED 1990

CHITTY ON CONTRACTS 29ED 2004 PARA 38.229

1 JUDGMENT of Mr. Justice Kelly delivered on the 12th day of February, 2010

Introduction

2 When these proceedings began, the plaintiff (the bank) sought to recover judgment against the defendants for a sum of €3.5m together with interest thereon which, as of 17 ^th June, 2009, amounted to €711,697.93 giving a grand total of €4,211,697.93. There was also a claim for continuing interest calculated at a rate of €1,386.24 per day. By February 2010 that added a further €310,000 approximately to the defendants' liability.

3 On the day of trail (2 ^nd February, 2010), the bank reduced its claim from in excess of €4.5m to €3,273,611. The bank was quite right to adopt that course but the reasons for so doing raise a number of troubling issues.

The plaintiff

4 The bank has its registered office at Charlemont Place in Dublin and carries on business at a number of locations in Ireland. The transactions the subject of these proceedings emanated from the bank's Galway Financial Services Centre.

The defendants

5 The first and second defendants are married to each other as indeed are the third and fourth. The first three defendants are described in the statement of claim as property developers and the fourth is described as a retired nurse.

6 The third defendant (Mr. McGrath) both in an affidavit sworn by him and in the witness box described himself as a retired Garda. He is now 53 years old and retired on pension from the Garda force three years ago having served 30 years as a member of it. Twenty five of those years were spent in Loughrea, County Galway. He was the only defendant to give evidence at the trial. He was the conduit through which the bank transmitted information to the other defendants.

7 Over the last twenty years or so, Mr. McGrath has been heavily involved in the acquisition and development of properties and lands. In information supplied to the bank in October 2008, Mr. McGrath was shown to own 22 properties in his own right to a total value of €5.7m. He was also in partnership with the first defendant (Mr. Fahey) under the partnership name of G. & G. Properties which had a property portfolio consisting of development and residential properties valued at €12.2m. In addition, he was a partner with three others (one of whom was Mr. Fahey) in a partnership called DFGM Properties which owned property to a total value of €26.1m. Both Mr. McGrath and Mr. Fahey were also partners in a four-man partnership called the Portmore partnership which owned the Thai Garden Restaurant at Spanish Arch, Galway, valued at €2.7m. Finally, he was also a partner in a three man partnership called the Pier Road partnership which owned a property in Portumna to a value of €1.5m. Thus, it is clear that although his career was as a member of the Garda, Mr. McGrath acquired a considerable knowledge and expertise in the acquisition and development of lands and properties.

8 As of October 2008, Mr. Fahey was the owner of 25 properties in his own right to a total value of €6.5m. He was also a partner in the various partnerships which I have already alluded to.

9 Whilst many of the properties owned by Mr. Fahey and Mr. McGrath were mortgaged, in January 2008 a credit report prepared by the bank noted that they had a combined certified net worth of €25.86m as at October 2007.

10 The relevance of the wealth of Mr. McGrath from his property transactions as distinct from his earnings as a member of the Garda will become apparent later in this judgment.

The transaction in suit

11 In 2006, the defendants wished to obtain a bridging term loan from the bank in the sum of €3.5m to assist in the purchase of a property at Moore Street/Bride Street, Loughrea, County Galway. Their application was successful.

12 On 9 ^th May, 2006, a letter of loan sanction and agreement for bridging finance was sent to the defendants at Mr. McGrath's address.

13 The defendants were offered the facility of €3.5m for a one year term. The letter was materially inaccurate when it described the property to be purchased as being situate at Main Street, Loughrea, County Galway. It was also wrong when it said that a planning permission had been granted in respect of the property.

14 The letter from the bank was signed on its behalf by Aidan Corcoran, a Relationship Manager and Pat O'Callaghan, a Senior Manager.

15 The defendants accepted the offer contained in the letter and on 19 ^th May executed a form of acceptance. Each of the defendants appended their signatures to the acceptance and each signature was witnessed by Mr. Brian Doherty Solicitor. Mr. Doherty acted for the defendants in the transaction.

16 The inaccuracies in the letter of 19 ^th May, 2006 were spotted both by Mr. McGrath and by Mr. Shane McSweeney who was the solicitor acting for the bank. He had been sent a photocopy of the letter of offer and he recommended to the bank that they correct the inaccuracies and issue a fresh one. Mr. McGrath likewise drew Mr. Doherty's attention to the inaccuracies.

17 The bank issued a fresh letter of sanction dated 7 ^th June, 2006. This letter correctly described the property but despite Mr. McSweeney's advice continued to inaccurately describe it as having the benefit of a planning permission for residential office and retail units.

18 The letter of 7 ^th June, 2006 specifically provided that it cancelled and superseded the offer extended by the bank in the letter of 9 ^th May, 2006.

19 The uncontroverted evidence of Mr. McSweeney is that funds totalling €3,279,000 were transferred to his client account by the bank on 9 ^th June, 2006. The reason why the sum is less than the €3.5m is because there was deducted from that sum €206,000 interest rollup and a bank arrangement fee of €15,000.

20 On 12 ^th June, 2006, Mr. McSweeney received a request from Mr. Doherty on behalf of the defendants seeking to draw down the funds.

21 The following day €3,273,611 was transferred from Mr. McSweeney's client account to the client account of Mr. Doherty. The reason for the small discrepancy between the sum lodged and the sum paid out from Mr. McSweeney's client account arises from the fact that he was authorised to deduct a portion of his fees from that sum. Nothing turns on this.

22 The defendants accept that they received €3,273,611 from the bank.

23 The bank has in its possession the letter of 7 ^th June, 2006, which was purportedly signed by each of the defendants and witnessed by Mr. Aidan Corcoran. The acceptances and the witnessing of the signatures bear the date 8 ^th June, 2006.

24 In accordance with the terms of the letter of 7 ^th June, 2006, the loan became due and owing on 9 ^th June, 2007, one year from the draw down date. The repayment date was extended until 8 ^th February, 2008 and a further extension was granted until August 2008.

25 The defendants failed to discharge interest payments on the loan since 1 ^st August, 2008.

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