Allied Irish Bank Plc v Smith

JurisdictionIreland
JudgeMr. Justice Sean Ryan
Judgment Date05 October 2012
Neutral Citation[2012] IEHC 381
CourtHigh Court
Docket Number[No. 1951 S/2010]
Date05 October 2012

[2012] IEHC 381

THE HIGH COURT

[No. 1951 S/2010]
Allied Irish Banks (AIB) Plc v Smith

BETWEEN

ALLIED IRISH BANKS PLC
PLAINTIFF

AND

MARK SMITH
DEFENDANT

CONSUMER CREDIT ACT 1995

AER RIANTA v RYANAIR 2001 4 IR 607

FIRST NATIONAL COMMERCIAL BANK v ANGLIN 1996 1 IR 75

HARRISRANGE LTD v DUNCAN 2003 4 IR 1

TEDCASTLE MCCORMACK v MCCRYSTAL UNREP MORRIS 15.3.1999 1999/24/7774

ALLIED IRISH BANK PLC v HIGGINS & ORS UNREP KELLY 3.6.2010 2010 IEHC 219 2010/2/422

SAUNDERS v ANGLIA BUILDING SOCIETY 1971 AC 1004

CONSUMER CREDIT ACT 1995 S30(1)

CONSUMER CREDIT ACT 1995 S2

CONSUMER CREDIT ACT 1995 S30

PRACTICE AND PROCEDURE

Summary judgment

Sums due on foot of personal guarantee - Sums due on personal bank accounts - Defence raised that guarantee not executed - Defence raised that bank in breach of consumer credit legislation - Defence raised that personal accounts were operated for benefit of company to knowledge of plaintiff - Whether plaintiff entitled to summary judgment - Applicable test - Whether clear defendant had no case - Cogency of evidence to be assessed - Determining factor of achievement of just result - Application of credibility test to proposed defence - Non est factum - Whether radical difference between what was signed and what defendant thought he was signing - whether mistake as to general character of document as opposed to legal effect - Whether lack of negligence - Burden of proof on party disowning signature - Application of consumer credit legislation - Aer Rianta cpt v Ryanair Ltd [2001] 4 IR 607; First National Commercial Bank v Anglin [1996] 1 IR 75; Irish Dunlop Co Ltd v Ralph (1958) 95 ILTR 70; Banque de Paris v de Nara y [1984] 1 Lloyd's Rep 21; National Westminster Bank v Daniel [1993] 1 WLR 1453 and Harrisrange Ltd v Duncan [2003] 4 IR 1; Tedcastle and Company Ltd v McCrystle (Unrep, Morris J, 15/3/1999); Allied Irish Banks Plc v Higgins [2010] IEHC 219, (Unrep, Kelly J, 3/6/2010) and Saunders v Anglia Building Society [1971] AC 1004 considered - Judgment granted (2010/1951S - Ryan J - 5/10/2012) [2012] IEHC 381

Allied Irish Banks Plc v Smith

Facts: The plaintiff had provided credit facilities to the defendant”s company, as well as holding personal accounts for the defendant. The plaintiff contended over €300,000 was outstanding in respect of the company”s facilities as well as the personal accounts. The plaintiff suggested the defendant had guaranteed the company”s debts, and as the company was now in liquidation sought to enforce the guarantee.

The defendant denied any liability on three grounds. Firstly, the plaintiff submitted he did not execute the guarantee. Secondly, the plaintiff was in breach of consumer protection legislation. Finally, the personal accounts were in fact operated for the benefit of the company.

Held by Ryan J, that the plaintiff sought summary judgment in the matter. Domestic case law in the State had endorsed the tests detailed in English case law. The summary found in Harrisrange Ltd v Duncan [2003] 4 IR 1 was a useful guide to the approach to be adopted by the Courts. The Court”s task was not to weigh conflicting evidence but rather to consider the credibility of the defence. Aer Rianta v Ryanair [2001] 4 IR 607 considered, Harrisrange Ltd v Duncan [2003] 4 IR 1 adopted.

Considering the experience of the defendant as a businessman and as a director, it was not credible that he did not realise the implications of signing the relevant document and executing a guarantee. The guarantee was executed in the course of operating a company. As such consumer protection legislation did not apply.

In respect of the personal debt, it was not logical to suggest that the bank had agreed to provide funds to the defendant personally for use in company purposes in a manner that would impose no liability on the defendant personally. Therefore, the Court considered that the defence was not arguable, and therefore granted summary judgment.

Mr. Justice Sean Ryan
1

This is a claim for summary judgment. The bank's claim is first for €230,000 on foot of a guarantee and secondly for sums due on personal accounts of the defendant amounting to €78,479 at the date of the summons. The total less credits amounts to over €300,000 and continuing interest is also claimed.

2

The background to the claim is set out in the grounding affidavit of Mr Tom O'Reilly, who describes how the defendant personally and his company, Harmark Developments Ltd, now in liquidation had accounts at the bank's Rathgar branch. Mr Smith executed a guarantee of the company's liability to the bank. He also had personal accounts at the same branch.

3

The proposed defence is that (a) the defendant did not execute the guarantee; (b) the bank was in breach of the Consumer Credit Act, 1979 and the consumer code and (c) the personal accounts were to the bank's knowledge operated for the purposes of the limited company and not for Mr Smith's benefit.

4

The guarantee document is headed "guarantee" and is dated the 9th July 2007 and it covers debts up to €230,000. Clause 22 is a certificate that the guarantor has read the document and has received a copy for his own use. It appears to be signed by Mark Smith and witnessed.

5

The defendant's first replying affidavit is dated 3rd February 2011. He says that in or around July 2007 the bank contacted him by phone requesting that he enter into a personal guarantee for the credit facilities afforded to the company. He was preoccupied at the time due to illness of his wife and son but he agreed to discuss the matter with the bank as he wished to continue the company's credit line. On or around the 9th July 2007 he was requested by phone to attend the Main Street, Bray branch of the bank to sign some banking documents relating to the proposed personal guarantee for the company. He usually dealt for his personal banking and that of the company with the Rathgar branch.

6

Mr Smith says that he was presented with a single page for signing and he duly did so. It was not attached to any other document or pages. He says that he did not believe that he was entering into a finalised personal guarantee for the company because he had not yet been presented with the terms and conditions or the limit and had not been given an opportunity to obtain legal advice. Also, he did not get a copy of the guarantee. Mr Smith says that when he finally got to see the guarantee, on the 20th March 2009, he noted that it did not have the mandatory warning to seek independent legal advice, as he says is required by the consumer protection code of 2006.

7

As to the claim for €78,000 the defendant says that he never received those monies and that the loan was not a personal loan but was paid to the company and not him personally and that no original loan agreement exists that is signed by him.

8

The bank's response is in an affidavit sworn on the 25th November 2011 by Mr Kieran Walsh, lending manager who was formerly a branch manager at the plaintiff's branch. He says that Mr Smith was acting as owner and director of the company and not as a consumer for the purpose of the 2006 consumer protection code. Referring to the guarantee, he says that the reason it was signed by the defendant at the Bray branch was to facilitate Mr Smith who lives in Wicklow. It would have been easier for the bank to have done it at Rathgar. On the 2nd July, a week before the guarantee was executed, the bank wrote a letter of sanction to the company offering loan facilities subject to security that included a guarantee by Mr Smith, who signed the company's acceptance and the company's resolution on the 5 July 2007. The sanction letter made clear that security in the form of a personal guarantee from Mr Smith was required.

9

As to the balance of the money claimed, Mr Walsh gives particulars of the transfer of funds between Mr Smith's personal accounts and exhibits signed debit and lodgment dockets and extracts from the bank statements for the relevant personal accounts.

10

Another affidavit in support of the bank's claim is sworn by Ms Jennifer Smith, a bank official employed at the Bray branch. She says that she witnessed Mr Smith's execution of the guarantee. She says that Mr Smith was not and could not have been presented with a single sheet which was subsequently attached to other documents to make up the guarantee document. The guarantee form comes from the printers in the form of pages which are stapled prior to delivery and it would be obvious if there had been any interference. The original document was produced in court and this statement appears to be correct and counsel for Mr Smith did not suggest the contrary. Ms Smith goes on to say that the bank's guarantees are light yellow in colour and each one has a white copy which is given to the customer and that is what happened in this instance. On the reverse of the page signed by the defendant it is stated in bold print: "I/we certify that I/we have read the within guarantee and have received a copy/copies thereof for my/our use". She says that the only reason Mr Smith called at that branch was to execute the guarantee and it was done there to facilitate him.

11

The defendant Mr Smith replies in another affidavit dated February 23rd, 2012. He repeats his claims about the execution of the guarantee. In regard to the point Ms Jennifer Smith makes about the form of the document, namely, that it was stapled together by the printers who supplied it to the bank and that it would have been obvious if it had been interfered with, Mr Smith says that if the alleged guarantee was complete when he executed it, "only the signatory page was presented to me and I was not shown, nor was I afforded an opportunity to examine, the other folios of the...

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5 cases
  • Stapleford Finance Ltd v Courtney
    • Ireland
    • High Court
    • 14 October 2014
    ...decided in Zurich Bank v. McConnon [2011] IESC 75 and McCaughey v Anglo Irish Bank Corporation Limited [2011] IEHC 546, AIB v Smith [2012] IEHC 381, Friends First Finance v. Cronin [2013] IEHC 59. 52 With regard to the defendant's submission that he had a bona fide defence by way of counter......
  • The Governor and Company of Bank of Ireland v Roarty
    • Ireland
    • Court of Appeal (Ireland)
    • 22 February 2019
    ...Regulation. In that regard this Court was referred in written submissions to the judgment of Ryan J. (as he then was) in AIB v. Smith [2012] IEHC 381. 34 I am satisfied that there is no error identified in the judgment of the trial judge, and I would therefore dismiss the appeal (Appeal nu......
  • Bank of Ireland v Quinn
    • Ireland
    • Court of Appeal (Ireland)
    • 10 February 2016
    ...judgment of Birmingham J. in Zurich Bank v. McConnon [2011] IEHC 75, which was followed by Ryan J. (as he then was) in AIB Bank v. Smith [2012] IEHC 381, the judgment of Herbert J. in Friends First v. Cronin [2013] IEHC 59, and that of Clarke J. in Irish Life & Permanent v. Dunne [2015] IES......
  • KBC Bank Ireland Plc v Blake
    • Ireland
    • High Court
    • 12 April 2019
    ...grounds that such a defence was not pleaded. They also refer to Ryan J.'s (as he then was) decision in Allied Irish Banks plc v. Smith [2012] IEHC 381 and Kelly J.'s (as he then was) decision in AIB v. Higgins [2010] IEHC 219. It is submitted that, in line with those decisions, Mr. Blake wa......
  • Request a trial to view additional results
1 books & journal articles
  • Case Notes on Contracts of Guarantee
    • Ireland
    • Hibernian Law Journal No. 12-2013, January 2013
    • 1 January 2013
    ...of signing a contract of guarantee. 104 See, as another example, the view taken by the Court in Allied Irish Banks plc v Smith [2012] IEHC 381 (unreported, High Court, Ryan J, 5 October 2012). This might be contrasted with the perhaps somewhat generous f‌inding of the jury in Bank of Irelan......

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