ACC Bank Plc v Malocco

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 07 February 2000
• Neutral Citation: [2000] IEHC 13
• Court: High Court
• Docket Number: [1999 No. 371 Sp. & 1998 No. 619S]
• Date: 07 February 2000

ACC BANK PLC v. MALOCCO

BETWEEN

A.C.C. BANK PLC.

PLAINTIFF

AND

ELIO MALOCCO

DEFENDANT

[2000] IEHC 13

No. 371 Sp 1999

THE HIGH COURT

Synopsis

Commercial Law

Contract; release; joint and several liability; practice and procedure; summary judgment; land; equitable mortgage; limitation periods; plaintiff provided credit line facility to defendant and his wife on foot of a loan agreement; undertaking by defendant's solicitors, with authority of defendant and his wife, to secure execution of mortgage in favour of plaintiff in respect of shop premises; no mortgage of shop ever executed; credit facility withdrawn; house had been mortgaged in favour of plaintiff; house had been in sole name of plaintiff's wife; house sold and High Court ordered that proceeds of sale be placed on joint deposit in names of solicitors for defendant's wife and solicitors for plaintiff; separate proceedings brought by wife to have mortgage over the house set aside, were settled, with the amount on deposit being paid to the defendant's wife, subject to a payment of £70,000 to the plaintiff; £70,000 paid from account in joint names of defendant and his wife; summary summons; plaintiff seeking to recover debt from defendant on foot of loan agreement; special summons; plaintiff seeking well-charging order in respect of shop premises; both proceedings heard together; whether settlement with defendant's wife constituted a release or discharge of any liability of the defendant to the plaintiff on foot of the loan agreement; whether equitable mortgage created on foot of the solicitors" undertaking; whether plaintiff's claim statute barred; circumstances in which summary judgment ought to be granted; ss.17(1) and (2) and 35(1)(h), Civil Liability Act, 1961; ss.32(2), 36(1) and 37(1), Statute of Limitations, 1957.

Held: If settlement agreement with one debtor indicates intention that a co-debtor should be discharged, he is discharged, but if it does not then he is not discharged but his liability is reduced; onus on defendant to establish this intention; equitable mortgage created over shop premises; twelve-year limitation period in s.36(1) of the Act of 1957 applies to an action on the covenant or agreement to repay; six-year limitation period in s.37(1) applies to interest; claim not statute barred as regards principal but claim for interest in respect of any period more than six years before proceedings instituted barred; in summary proceedings the court must be satisfied that there is a fair or reasonable probability that the defendant has a real or bona fide defence; this probability could not be excluded; summary judgment refused.

A.C.C. Bank plc v. Malocco - High Court: Laffoy J. - 07/02/2000 - [2000] 3 IR 191

The plaintiff had extended credit facilities to the defendant and his wife and a loan agreement was entered into to this effect. The credit facility was subsequently withdrawn with a sum outstanding of approximately £140, 000. In due course the family home was sold and the proceeds of sale were released to the defendant's wife except for £70,000 which was paid to the plaintiff as a settlement. The plaintiff now sought to reclaim the sum of £86,465.75 which it was claimed was due and owing by the defendant in relation to the original loan agreement. The defendant disputed the claim and argued that the claim had already been settled and also contended that the claim was statute barred. Laffoy J held that the onus of proof fell upon the defendant to prove that a settlement by a co-debtor released other co-debtors from the debt in question. As the defendant could be said to have a real or bona fide defence summary judgment would not issue and the matter should proceed to plenary hearing. Interest which accrued after the withdrawal of credit facilities had not become principal and was subject to the provisions of the Statute of Limitations, 1957.

Citations:

TREITEL LAW OF CONTRACT 9ED 527

CUTLER V MCPHAIL 1962 2 QB 292

CIVIL LIABILITY ACT 1961 S17(1)

MURPHY V J DONOHOE LTD 1993 IR 527

DUCK V MAYEU 1892 2 QB 511

CIVIL LIABILITY ACT 1961 S17(2)

CIVIL LIABILITY ACT 1961 S35(1)(h)

KERR ON CIVIL LIABILITY ACTS 1961–1964 39

WILLIAMS JOINT TORTS & CONTRIBUTORY NEGLIGENCE (1954)

FIRST NATIONAL COMMERCIAL BANK PLC V ANGLIN 1996 1 IR 75

STATUTE OF LIMITATIONS 1957 S36(1)(a)

STATUTE OF LIMITATIONS 1957 S37(1)

STATUTE OF LIMITATIONS 1957 S32(2)

WYLIE IRISH LAND LAW 3ED PARA 12.41

EYRE V MCDOWELL 1861 9 HL CAS 619

FISHER & LIGHTWOOD LAW OF MORTGAGE 10ED 293

1 Judgment of Miss Justice Laffoy delivered on 7th February, 2000 .

THE FACTS

2 On 20th May, 1991 the Plaintiff issued a letter of offer to the Defendant and his wife, Jane Malocco, offering them a credit line facility of £250,000 on the terms and conditions stipulated. The terms stipulated included the giving of security to the Plaintiff, including a first fixed charge on the family home of the Defendant and his wife at Foxrock, Dublin and a first fixed charge over shop premises at 5B Upper Clanbrassil Street, Dublin. On 9th July, 1991 the Defendant and his wife signed a loan agreement dated 2nd July, 1991 which recorded that the Plaintiff had sanctioned them a facility to draw credit from the Plaintiff up to a credit limit of £250,000 until 1st July, 1992 on the security and subject to the terms and conditions detailed in the loan agreement and in the letter of offer and in the security documentation. The loan agreement stipulated the same security as had been stipulated in the letter of offer. It required that the account be cleared or in credit on 1st July, 1992. The rate of interest stipulated was 3.5% over DIBOR and the method of repayment was that stipulated in the letter of offer, namely, interest was to be payable every three months commencing three months after the date of issue and repayment of principal was to be within twelve months following draw-down unless otherwise agreed in writing between the parties. There were general conditions appended to the loan agreement. One of them, condition 2, has been referred to by Mr. McCann on behalf of the Plaintiff. In broad terms, it dealt with the manner in which the account was to be operated as to interest, charges, lodgments and such like. In relation to interest it provided as follows:-

"Interest accrues on the daily balance and is debited to the account half yearly on the 25th March and 25th September or such other dates as the Corporation may notify to the customers. Interest is also capitalised at the expiry date of the facility, unless the facility has been extended for a further period."

3 It is quite clear from the loan agreement that the account was intended to be in the nature of a running or current account and the specific terms of the loan agreement provided that the credit facility might be drawn down by cheque drawn on the Plaintiff's account with Citibank N.A. in Dublin or by cash withdrawal at a branch of the Plaintiff. One further term of the general conditions seems to me to be relevant, namely, condition 9 which provided that the credit facility might be withdrawn at any time by the Plaintiff, whereupon accrued interest would be capitalised and any debit balance would be repayable on demand.

4 On 9th July, 1991 the Defendant's Solicitors, Malocco & Killeen, gave an undertaking in relation to the property at Clanbrassil Street. The Solicitors' undertaking incorporated an authority signed by the Defendant and his wife on 9th July, 1991 irrevocably authorising the Solicitors to give the undertaking in the form in which it was given to the Plaintiff. In the Solicitors' undertaking, which appears to be in a standard form, the Solicitors undertook with the Plaintiff to secure the execution of a deed of mortgage in the Plaintiff's standard form on the Clanbrassil Street property and to have it registered, to report on title etc. and to lodge all documents constituting the Plaintiff's security with the Plaintiff and pending compliance with these formalities to hold the title documents to the property in trust for the Plaintiff. The Solicitors' undertaking was expressed to be made in consideration of the Plaintiff agreeing to the draw-down of the loan before completion of the security formalities and to be "subject to the payment through me/us [the Solicitors] of the loan cheque...".

5 On 11th September, 1991 sums aggregating £136,217.81 were drawn down on the account of the Defendant and his wife with the Plaintiff.

6 Some time in the first half of October 1991 the credit facility was withdrawn. The Defendant, in an Affidavit sworn by him in the Summary Summons proceedings to which I will refer later, has exhibited a letter dated 4th October, 1991 from the Plaintiff to Messrs. Malocco & Killeen, Solicitors, stating that the loan facility had been withdrawn, leaving a balance due of approximately £140,200 together with interest accruing and that the loan was then due for repayment. This letter also disclosed that the Plaintiff had already obtained a Deed of Mortgage over the Foxrock property. It called on the Solicitors to comply with the undertaking with regard to the Clanbrassil Street property. In these proceedings the Plaintiff, in an Affidavit sworn by Michael Walsh on 25th August, 1999, has exhibited two letters dated 14th October, 1991, one to the Defendant and the other to the Defendant's wife. The letter to the Defendant's wife stated that the credit line facility was being thereby withdrawn. The letter to the Defendant complained that he had failed to discharge the amount due on the account and threatened proceedings for recovery of possession of the Foxrock premises. For present purposes, I will assume that the facility was withdrawn on 14th October, 1991.

7 In 1992 the property at Foxrock, which the Deed of Mortgage dated 16th July, 1991 given to the Plaintiff records was in the sole name of the Defendant's wife, was...