ACC Bank Plc v Kelly

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 10 January 2011
• Neutral Citation: [2011] IEHC 7
• Court: High Court
• Date: 10 January 2011

ACC Bank PLC v Kelly

BETWEEN

ACC BANK PLC

PLAINTIFF

AND

FRANK KELLY AND ANN KELLY

DEFENDANTS

[2011] IEHC 7

[No. 5503 S/2009]

[No. 84 COM/2010]

THE HIGH COURT

CONTRACT

Breach

Loan - Commercial transaction - Arrears - Demand for repayment - Evidence - Lay litigant - Witness statements - 'Unless' order - Defendant precluded from tendering evidence at trial unless witness statements delivered - Witness statements not delivered - Principles to be applied by court where litigant representing himself - Whether agreement that plaintiff would not demand repayment of loan if certain steps taken by defendants - Whether plaintiff estopped from seeking repayment of loan - Whether agreement to create contingency fund to meet shortfall between net rent and interest - Whether receiver wrongfully appointed over properties - Whether actions of receiver wrongful - Whether mortgage deed properly executed - Whether surcharge interest properly added to defendants' account - Claim allowed (2009/5503S - Clarke J - 10/1/2011) [2011] IEHC 7

ACC Bank PLC v Kelly

Facts The plaintiff sought judgment in the sum of €1,951,070.32 being the balance outstanding of a loan given by it in October 2006 to the defendants. The plaintiffs had borrowed the money from the plaintiff along with other borrowings in order to buy properties with a view to renting out those properties. Arrears began to build up at an early stage and this led to discussions between the plaintiff and the two defendants. The principal case made in the formal defence filed on behalf of the second named defendant was that an arrangement or agreement had been reached between the defendants and the plaintiff in the course of meetings held in October 2007 and August and November 2008, the substance of which was that, provided certain steps were taken by the defendants, the plaintiff would not call in the loan. The defendants sold two of their properties over which the plaintiff had security. The defendants asserted that the plaintiff agreed to their suggestion that some of the net proceeds from those sales would be ring fenced to provide a fund out of which any continuing shortfall thus arising could be met. The second named defendant also relied on promissory estoppel as a potential defence. The first named defendant was precluded from calling any witnesses by reason of his failure to comply with an earlier court order in respect of the delivery of witness statements. The second named defendant was the only witness called to give evidence on her behalf. The plaintiff strongly contested that any such arrangements or agreements took place and a letter was sent a few days after the meeting in which it was alleged an agreement was reached, seeking further details of the proposal put forward by the defendants. The loan facility was stated to be repayable on demand.

Held by Clarke J. in granting judgment to the plaintiff for the full sum claimed: That there was no evidence for the contention put forward on behalf of the defendants that the plaintiff agreed to the suggestion to set up a contingency fund to meet any shortfall between net rent and interest. Furthermore, having considered all of the evidence, on the balance of probabilities, no agreement was reached at the meetings whereby the plaintiff agreed that it would not enforce its entitlements under the letter of loan sanction provided that certain steps were taken by the defendants. The loan was clear in its terms and the defendants were bound by the terms, which they signed up to. The agreement was a demand facility, which at least at the level of principle, entitled the plaintiff to demand payment at anytime. The plaintiff had ample reason to call in the loan due to the significant arrears. Having regard to the finding that no concluded agreement was reached between the parties, there was no factual basis for promissory estoppel. Furthermore, surcharge interest was properly charged by the plaintiff and there was nothing inappropriate, as alleged by the defendants, in the appointment of the receiver and there was no evidence of any inappropriate action on the part of the receiver.

Reporter: L.O'S.

BELL JUDGES, FAIRNESS AND LITIGANTS IN PERSON 2010 1 JSIJ 34

DIRECTOR OF CHILD AND FAMILY SERVICES (MANITOBA) v A (J) 2006 MBCA 44

WAGG v CANADA (F.C.A.) 2004 1 FC 206

R v BROADHEAD 2006 EWCA CRIM 3062

HUSSEY v DILLON & ORS UNREP COSTELLO 23.6.1995 1995/8/2373

RAJSKI v SCITEC CORPORATION PTY LTD UNREP SAMUELS NEW SOUTH WALES COURT OF APPEAL 16.6.1986

COOKE & ORS v WRIGHT 1861 1 B&S 559

MONTGOMERY, A BANKRUPT, IN RE 1876 IR 10 EQ 479

FULLERTON v PROVINCIAL BANK OF IRELAND 1903 AC 309

LAND & CONVEYANCING LAW REFORM ACT 20092009 PART 10 CH 3

LAND & CONVEYANCING LAW REFORM ACT 2009 S96

LAND & CONVEYANCING LAW REFORM ACT 2009 S96(1)(A)

LAND & CONVEYANCING LAW REFORM ACT 2009 S97(1)

1. Introduction

2 2 1.1 In October, 2006 the plaintiff ("ACC") lent €2,105,000.00 to the defendants (respectively "the Kellys", "Mr. Kelly", and "Mrs. Kelly"). ACC now sues for the return of the balance which is said to remain outstanding on that loan which, on ACC's case, as of the time of the trial of these proceedings, amounted to €1,951,070.32. The case has a number of unusual features to which it will be necessary to turn in due course but also has, as its basic background, a set of facts with which the courts are all too familiar in the current climate.

3 3 1.2 Both of the Kellys were school teachers for many years. However, over the last decade or so Mr. Kelly became involved in auctioneering and during the course of recent years the Kellys built up a significant portfolio of buy-to-rent properties. It would appear that, as of 2008, the Kellys owned in excess of thirty such properties which were financed both by the borrowings from ACC to which I have referred and from more extensive borrowings with Ulster Bank. The total indebtedness seems to have amounted to a sum well in excess of €7,000,000.00.

4 4 1.3 Against that background, it is hardly surprising that the buy-to-rent business has run into difficulties in recent times.

5 5 1.4 There is no doubt that from an early stage some arrears had built up on the ACC loan such that, by October, 2007, the accumulated arrears on the loan was in excess of €20,000.00. Starting from around that time discussions took place between ACC, on the one hand, and initially Mr. Kelly and subsequently both of the Kellys, on the other hand. By August, 2008 the arrears had reached a figure in excess of €80,000.00 and more significant discussions began to take place. The main issue which arises in these proceedings concerns the question of what, if anything, was agreed in the course of those discussions.

6 6 1.5 In substance, the case made by the Kellys is that, on the basis of the original loan terms and additional agreements which are said to have been reached in the course of the discussions to which I have referred, ACC was not legally entitled to demand payment of the entire loan and that the current balance, while owing, is not now due. Furthermore, the Kellys argue that there remains in place a long term financing arrangement which they are entitled to avail of. As indicated earlier, there are some unusual features to this case which are at least in part caused by the fact that the Kellys were litigants in person at the trial before me. In those circumstances, it seems to me to be appropriate to start by referring to the procedural history of this case insofar as it is relevant to the issues which I now have to decide.

2. The Procedural History

2 2 2.1 The proceedings were commenced by summary summons on the 18 ^th December, 2009. An application to have the proceedings admitted to the Commercial List was acceded to by Finlay Geoghegan J. by order of the 15 ^th March, 2010. By the same order it was directed that a hearing of ACC's claim for summary judgment be heard on the 14 ^th April, 2010. At that stage, Mrs. Kelly was represented by solicitor and counsel while Mr. Kelly appeared in person. By order of the 14 ^th April, Kelly J. adjourned the proceedings for plenary hearing and gave directions for the exchange of pleadings, the seeking of discovery and the like. When that process had concluded, the matter came back before the court (Kelly J.) on the 19 ^th July when the 14 ^th December was fixed as the commencement date of the hearing of the action and various directions concerning the delivery of witness statements and legal submissions were given. Mr. Kelly failed to comply with his obligations under that order to file a witness statement in the time specified. On that basis, ACC brought a motion on the 1 ^st November seeking to have Mr. Kelly's defence struck out or, alternatively, an order that Mr. Kelly not be entitled to call any evidence. Rather than make either of the orders sought, Kelly J. made an "unless" order which provided that Mr. Kelly would be precluded from tendering evidence at the trial unless he were to deliver witness statements by Wednesday 10 ^th November, 2010. No such witness statements were delivered either within that time scale or at all. The position is, therefore, that the order of Kelly J. became operative as of the 10 ^th November.

3 3 2.2 In that context, it does need to be noted that Mr. Kelly did raise, at the close of ACC's case, the question of whether he would be permitted to give evidence. It seemed to me that that was far too late a stage in the process to permit Mr. Kelly to revisit the question of whether he should be permitted to give evidence. It must be recalled that Mr. Kelly did not seek to appeal the order of Kelly J.. Neither did Mr. Kelly seek to go back before Kelly J. and invite the court to vary or alter the existing order. If there was any good reason why Mr. Kelly should not be subject to the...