ACC Loan Management Ltd v Francis Gillespie p/a Dunlevy & Barry Solicitors
| Jurisdiction | Ireland |
| Judge | Ms. Justice Donnelly |
| Judgment Date | 12 December 2014 |
| Neutral Citation | [2014] IEHC 654 |
| Court | High Court |
| Date | 12 December 2014 |
[2014] IEHC 654
THE HIGH COURT
Purchase of Property – Undertakings - Breach – Summary Proceedings
Facts: The plaintiff (“the Bank”) sought orders against the defendant solicitor for alleged breaches of undertakings in relation to the purchase/financing of property. The Bank submitted that the court should enter summary judgment and award it damages on a no transaction basis. The defendant argued that no undertakings had been breached, and even if there were, that the matter should be dealt with after plenary hearing. The Bank relied upon a grounding affidavit by its special asset manager in relation to the special summons.
The Bank obtained security over one of the properties after the defendant failed to comply with the terms of the undertakings. The property was sold and the funds were applied in part reduction of the Borrower” indebtedness. The defendant submitted that the bank loan was not for the purpose of purchasing two properties. The defendant argued that the bank loan was for the purpose of granting the Borrowers liquidity so they could acquire and develop property. The defendant also argued that the second property was being purchased subject to planning permission and was conditional upon procuring the planning permission.
Held by Donnelly J: The issue for the court was whether the defendant solicitor had an arguable defence. The defence put forward on behalf of the defendant raised issues of fact and law. The court determined that the situation in this case could be distinguished from the case law cited where solicitors” undertakings had resulted in summary judgment. The reason for this was that the central issue in this case was the meaning and extent of the undertakings that had been given. The court said that the issues of law raised would have implications for all solicitors” undertakings. As a result, those issues required more consideration than a special summons would permit. Finally, the court pointed out that an injustice could be done to the defendant if matters were dealt with within the limited framework of summary proceedings.
JUDGMENT of Ms. Justice Donnelly delivered the 12th day of December 2014
1. The plaintiff ("the Bank"), a financial institution, originally known as ACC Bank PLC, seeks Orders by way of the special summons brought against the defendant solicitor on foot of alleged breaches of undertakings in respect of the purchase/financing of property at Mountcharles, Co. Donegal. The Bank submits that this is an appropriate case for summary judgment and for an award of damages on a no transaction basis. The defendant says that there is no evidence at all to support the claim that there has been a breach of the undertakings or, in the alternative, that the issue of whether there has been a breach is a matter that can only be determined after plenary hearing. In the further alternative, the defendant submits that there should not be an award of damages on a no transaction basis.
2. The Bank relies upon the affidavit of Eoin Gavigan, special asset manager with the Bank, to ground the special summons. He avers that the undertakings were granted in the circumstances as set out in the following paragraphs.
3. Michael McMenamin, Brendan Malone, Kevin Little and Paul Doherty ("the Borrowers") acting as a syndicate of property investors, applied in 2007 to the Bank for various loans to purchase property in or around Co. Donegal. At all material times, the defendant acted as solicitor to the Borrowers in their dealings with the Bank. The Bank made available by way of a facility letter dated the 23 rd of April, 2007, loan funds in the sum of €500,000.00 for a term of 24 months for the stated purpose of the purchase of two houses at Mountcharles, County Donegal ("the Mountcharles properties"). The Bank was advised prior to drawdown that the Borrowers had already purchased one house at Mountcharles and, as such, part of the funds were being applied to reimburse the Borrowers for this purchase. The security was to be by way of a first legal mortgage and charge on deeds "to properties being purchased at Mountcharles, Co. Donegal". The defendant, on behalf of the Borrowers, drew down the full amount of Facility One on the 30 th of August, 2007. The facility letter provided that the loan would be issued as a single advance, subject to preconditions and the Bank's commercial credit general terms and conditions being fulfilled to the Bank's satisfaction.
4. By way of a facility letter dated the 30 th of July, 2007, the Bank approved a loan to the Borrowers for an amount up to €1,900,000.00 for a term of 18 months, unless a demand for early payment was made. The purpose of this facility was to enable the Borrowers to purchase the Bank of Ireland premises at The Diamond in Donegal town. The security required under the facility letter was to include an extension of a first legal mortgage and charge over "two houses on a one acre site at Main Street, Mountcharles, Co. Donegal". A subsequent revised facility letter dated the 30 th of August, 2007, was issued by the Bank to the Borrowers. This had the effect of superseding the earlier letter of loan sanction dated the 30 th of July, 2007, but was identical in terms, save for an amendment to the rate of interest.
5. The defendant provided a solicitor's undertaking dated the 20 th of August, 2007, ("the First Undertaking") which denotes the property as "a property at Mountcharles, County Donegal, being part of Folio 10426 Co. Donegal". It is now common case that the particular Folio comprises only one house at Mountcharles. The date of the related letter of sanction is omitted. The undertaking was furnished to the Bank by the defendant under cover of letter dated the 20 th of August, 2007. That undertaking was in a form which had been provided by the Bank and contained standard terms typical of these types of undertakings. In general, the defendant undertook to:
a) ensure that the Borrowers obtain good marketable title to the property,
b) secure a valid legal mortgage on the property for the Bank,
c) complete and lodge with the Bank a report and certificate of title and the Bank's security documents,
d) furnish copies of planning permissions and building bylaw approval together with, if issued, a certificate of compliance,
e) pending compliance with the undertaking, to complete and lodge with the Bank the report and certificate of title, to promptly furnish to the Bank any information reasonably required concerning the Borrowers' title for the Bank's security, and to furnish to the Bank copies of any documents in relation thereto, required by the Bank, and to hold the title documents in trust for the Bank.
6. A second solicitor's undertaking dated 28 th of August, 2007 ("the Second Undertaking"), was provided by the defendant to the Bank under cover of a letter dated the 29 th of August, 2007. This undertaking denotes the property as two houses on a one acre site at Main Street, Mountcharles, County Donegal. The Second Undertaking held by the Bank refers to the applicable letter of sanction dated the 30 th of August, 2007. The date in the undertaking appears to read the 10 th of August, 2007. In any event, the date 30 th of August, 2007, is unusual as that facility letter post-dated the undertaking.
7. In general, the Second Undertaking contained the same undertakings as were given in the First Undertaking. However, after the undertaking to ensure that the Borrowers obtain a good marketable title to the property, there was a handwritten insertion that this was:-
"subject to the qualification that the borrowers have entered into a contract for the purchase of the property conditional upon the grant of planning permission for the erection of 30 houses thereon. Compliance with this undertaking is strictly conditional upon the successful completion of the said contract and the granting of the said planning permission."
8. The Bank first called upon the defendant to comply with the terms of the undertakings provided in relation to the Mountcharles properties by way of letter dated the 9 th of December, 2008. The defendant responded by letter dated the 8 th of January, 2009, as follows:-
"with reference to the Bank's charge over the properties at Main Street, Mountcharles, County Donegal, the undertaking dated 10 th August 2007 (a copy of which is enclosed) states that this undertaking was subject to a qualification that our clients would proceed to purchase one of the houses, subject to the granting of planning permission. This particular transaction did not proceed and, as such, our clients do not own the property. Therefore, there is only to be one house at Mountcharles that the Bank is to have security over…"
9. The reference there to the 10 th of August, 2007, appears to be an error and relates to the second undertaking dated the 28 th of August, 2007.
10. Further correspondence ensued. The Bank notified the defendant on the 10 th of March, 2009, that, having reviewed its files, this was the first notification that the Bank had received in this regard and sought clarification as to whether this was brought to the Bank's attention prior to completion. The Bank sought further confirmation as to why the entire loan facilities of €500,000.00 were requisitioned in such circumstances....
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