AIB Mortgage Bank v O'Brien
| Jurisdiction | Ireland |
| Judge | Mr. Justice Binchy |
| Judgment Date | 08 June 2018 |
| Neutral Citation | [2018] IEHC 408 |
| Docket Number | [2014 No. 2862 S.] |
| Court | High Court |
| Date | 08 June 2018 |
[2018] IEHC 408
THE HIGH COURT
Binchy J.
[2014 No. 2862 S.]
AND
AND
Summary judgment – Absence of consideration – Plenary hearing – Plaintiffs seeking summary judgment in respect of sums which they claimed they advanced to the defendants – Whether there was an absence of consideration provided by the plaintiffs to the defendants in connection with the facilities
Facts: The plaintiffs, AIB Mortgage Bank and Allied Irish Banks plc, sought summary judgment in the sum of €2,621,702.19 in respect of sums which they claimed they advanced to the defendants, Mr and Ms O'Brien, pursuant to letters of loan offer dated 23rd September, 2010 and 29th October, 2010 (the 2010 facilities). Mr O'Brien raised three core points in opposition to the application. Firstly, he submitted that the facilities offered by the plaintiffs to the defendants in 2010 were no more than an internal banking exercise and did not give rise to any actual advance of funds by the plaintiffs to the defendants; accordingly, those loan agreements were void for want of consideration or on the grounds that the consideration moving between the parties was past consideration. Secondly, Mr O'Brien relied upon his oral agreement with the first plaintiff that it would advance funds to him to construct an extension at no. 24 Clonfadda Wood, Mount Merrion Avenue, Blackrock, Co. Dublin. He submitted that the failure on the part of the first plaintiff to honour that oral agreement caused the defendants a delay in constructing an extension; in turn, that caused a delay in placing no. 23 Clonfadda Wood on the market for sale and as a result of that delay the defendants, instead of selling no. 23 at the top of the property market, were ultimately forced to sell that dwelling house at the very bottom of the market. Mr O'Brien submitted that if the proceedings were remitted to a full plenary hearing, it was the intention of the defendants to counterclaim for what they said was the resulting loss. Thirdly, Mr O'Brien claimed that the plaintiffs failed to comply with the code of conduct of mortgage arrears in circumstances where the defendants made every effort to co-operate with the plaintiffs, including by signing the very agreements relied upon by the plaintiffs in support of this application. Mr O'Brien submitted that by seeking summary judgment, the first plaintiff sought to avoid determination of any issues in relation to the code of conduct on mortgage arrears.
Held by the High Court (Binchy J) that there was substance in the argument that there was an absence of consideration provided by the plaintiffs to the defendants in connection with the 2010 facilities. While acknowledging that this did not mean that, even if they were successful with such a defence, the defendants were not indebted to the plaintiffs, whether pursuant to the original advance in 2006, or pursuant to the 2008 facility letters, Binchy J noted that the exact amount due may vary depending on which loan facility was applicable to the debt, and the interest rate payable thereunder. Binchy J held that it was not the function of the High Court, on this application, to anticipate such matters. For that reason, Binchy J considered it appropriate to send the proceedings forward for plenary hearing.
Binchy J held that, having succeeded in establishing their entitlement to a full plenary hearing, it would not be appropriate to restrict the defendants as to the matters they wished to raise in their defence, other than to restrict them to the matters that they had already raised on this application.
Proceedings sent forward for plenary hearing.
In these proceedings the plaintiffs seek summary judgment in the sum of €2,621,702.19 in respect of sums which they claim they advanced to the defendants pursuant to letters of loan offer dated 23rd September, 2010 and 29th October, 2010 ('the 2010 facilities'). The background to those advances however starts some years earlier. It should be explained from the outset that the 2010 facilities and earlier facilities to which I refer below were advanced by the first named plaintiff to the defendants. However, the plaintiffs entered into an outsourcing and agency agreement with each other on 8th February, 2006, and arising out of that agreement, the second named plaintiff undertook certain functions on behalf of the first named plaintiff in connection with the 2010 facilities. It is for that reason that the second named plaintiff joins in these proceedings as plaintiff.
In 2006 the defendants were residing at No. 23 Clonfadda Wood, Mount Merrion Avenue, Blackrock, Co. Dublin ('no. 23'). That premises was held in the sole name of the second named defendant (Mrs. O'Brien'), and at the time was subject to borrowings of approximately €80,000,00, which were secured over the property to the Bank of Ireland. Both defendants were approximately 55 years of age at the time with four young children in their care, one of whom is their own daughter who was at the time still a dependant of the defendants, and the other three of whom are foster children of the defendants, and are younger than their daughter. The first named defendant ('Mr. O'Brien') is a solicitor, Mrs. O'Brien is a housewife and homemaker.
During the course of 2006, the premises next door to that of the defendants, No. 24 Clonfadda Wood ('no. 24'), came on the market for sale. Although the houses were of a similar character, Mr. O'Brien considered that no. 24 was suitable for an extension of a kind which could not be undertaken at no. 23 and that, if extended, would be more suitable for the purposes of the defendants. In her first replying affidavit in response to this application, Mrs. O'Brien avers that she was apprehensive about the defendants incurring any debt at this particular stage in their lives. They were fortunate to be living in comfortable circumstances with modest borrowings attaching to their family home and Mr. O'Brien was due to retire aged 60. According to Mrs. O'Brien, she allowed herself to be persuaded by her husband, against her better judgment, that they should acquire no. 24, extend it and then sell no. 23 and apply the proceeds of sale of the latter towards the cost of the acquisition and extension of the former. Mrs. O'Brien avers that she knew little of the detail of any of this and was not involved in any way in the decision making process. She was not made aware by Mr. O'Brien of the amount of the purchase price or how much would have to be borrowed to fund the purchase. She says that having been informed by Mr. O'Brien that he had purchased no. 24, she was later presented with documentation, at home, by Mr. O'Brien, and signed such documents as she was requested by him to sign. She claims that at the time she was under extreme pressure as a result of issues concerning the children, and she was also struggling to manage medical conditions from which she suffered.
Mr. O'Brien says that by oral agreement made with an unidentified representative of the first named plaintiff, that the plaintiff agreed to advance 100% of the purchase price for no. 24 to the defendants. As part of this arrangement however, it was agreed that no. 23 would be sold, with the sale proceeds to be applied in reduction of the funds advanced by the first named plaintiff to purchase no. 24. More specifically, Mr. O'Brien claims that the first named plaintiff gave him an informal approval to purchase no. 24 for up to €3 million and promised that if necessary it would also advance additional funds in respect of the stamp duty payable and an unspecified amount in connection with the construction of the extension. In the event, Mr. O'Brien attended the auction and purchased no. 24 for the sum of €2,500,000.00. This was in March, 2006. Shortly thereafter, by letter dated 28th March, 2006, the second named plaintiff requested a solicitor's undertaking in relation to the funds advanced and this was completed and returned to the first named plaintiff by letter dated 27th June, 2006. The completion of the purchase of no. 24 took place on 9th August, 2006. On the same date, the defendants accepted an offer of mortgage loan from the first named plaintiff, and on 11th August, 2006 both defendants executed a Deed of Mortgage over no. 24 in favour of the first named plaintiff. The loan offer of 9th August was an interest only loan, for a term of twelve months.
Mr. O'Brien then set about getting planning permission in connection with the extension to no. 24. He clearly wasted no time about this because a final grant of planning permission for the extension was granted by the planning authority on 25th January, 2007. In the meantime, the defendants also let no. 24 to tenants to assist in servicing the interest repayments at the time..
According to the Mr. O'Brien, following the grant of planning permission, he approached the plaintiffs with a view to borrowing an additional €350,000.00 to fund the anticipated construction costs of the extension for which the planning permission had been obtained. To his great surprise, this request for facilities was declined. Mr. O'Brien claims that the plaintiffs then suggested that the defendants should consider a smaller extension, and that for that purpose they would be willing to advance additional funding up to €150,000.000. Mr. O'Brien claims that he felt he had no choice but to take this course and proceeded to have plans drawn up for a scaled down version of the extension, in respect of which planning permission was not required. He says that he was acutely aware of the need to move forward quickly in order to be able to move into no. 24, and sell no. 23, and thereby reduce his borrowings and the cost of servicing the same significantly....
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Allied Irish Banks Plc v Gormley
...to Loan 1. Particular reliance in that regard was placed by the defendants on the judgment of this court (Binchy J.) in AIB v. O'Brien [2018] IEHC 408, the facts of which have similarities to the present 41 The bank in that case had advanced funds in 2006 for the purchase of a house which ......