Allied Irish Bank, Plc and Bernard English Between Allied Irish Banks, Plc and Gabrielle English
| Jurisdiction | Ireland |
| Judge | Mr Justice Garrett Simons |
| Judgment Date | 03 April 2019 |
| Neutral Citation | [2019] IEHC 351 |
| Date | 03 April 2019 |
| Court | High Court |
| Docket Number | 2016 No. 2385 S 2016 No. 2386 S |
[2019] IEHC 351
THE HIGH COURT
Garrett Simons
2016 No. 2385 S
2016 No. 2386 S
These two related matters come before the court by way of application to enter final judgment against each of the two Defendants. The applications arise out of separate guarantees entered into by the individual Defendants in respect of the indebtedness of a company known as Bernard English Goldsmiths (Scotch Hall) Ltd. ( “the Company”). The Company had been engaged in retail sale of jewellery.
The Defendant in the first set of proceedings, Mr Bernard English, was at all material times a shareholder and a director of the Company. The Defendant in the second set of proceedings, Mrs Gabrielle English, is the wife of Mr English. Mrs English is also a shareholder and director of the Company. As discussed presently, the Defendants attach some significance to the fact that Mrs English was a minority shareholder, holding some 20 per cent of the issued shares in the Company.
The guarantees were entered into on the 25 May 2009. In each instance, the first page of the guarantee contains a box with the following information.
“ WARNING: – As Guarantor of the credit facilities you will have to pay off the credit facilities, the interest and all associated charges if the Borrower does not. Before you sign this guarantee you should get independent legal advice.”
Clause 7 of the guarantees provides as follows.
“This guarantee shall be in addition to and shall not be in any way prejudiced or affected by any collateral or other security now or hereafter held by the Bank for all or any part of the moneys hereby guaranteed, nor shall such collateral or other security or any lien to which the Bank may otherwise be entitled or the liability of any person or persons not parties hereto for all or any part of the moneys hereby secured be in anywise prejudiced or affected by this present guarantee. The Bank shall have full power at its discretion to give time for payment to or make any other arrangement with any such other person or persons without prejudice to this present guarantee or any liability hereunder. Without prejudice to the next following clause hereof all moneys received by the Bank from the Guarantor or from the Borrower or any other person or persons liable to pay the same may be applied by the Bank to any account or item of account or to any transaction to which the same may be applicable as the Bank in its absolute discretion sees fit.”
Clause 14 of the guarantees provides as follows.
“Any moneys hereby guaranteed shall become due and payable by the Guarantor to the Bank forthwith upon written demand made by the Bank.”
Each of the guarantees provides that the liability of the guarantor would not exceed the sum of €130,000, together with interest thereon from the date of demand.
The Company became insolvent and a liquidator was appointed to wind up the Company. The Bank made a demand of the liquidator for payment of the sum of €99,229.28 by letter dated 1 October 2010.
A demand was made of each of the Defendants by letter dated 3 February 2015.
The legal test governing an application for leave to enter summary judgment is well established. The court must consider whether a defendant has a real or bona fide defence. The test was summarised by Hardiman J. in Aer Rianta c.p.t v. Ryanair Ltd. (No. 1) [2001] 4 I.R. 607 at 623 as follows.
“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant's affidavits fail to disclose even an arguable defence?”
This passage has been reaffirmed in Irish Bank Resolution Corporation (In special liquidation) v. McCaughey [2014] 1 I.R. 749 at 759.
“[22] It is important, therefore, to re-emphasise what is meant by the credibility of a defence. A defence is not incredible simply because the judge is not inclined to believe the defendant. It must, as Hardiman J. pointed out in Aer Riantac.p.t. v. Ryanair Ltd. [2001] 4 I.R. 607, be clear that the defendant has no defence. If issues of law or construction are put forward as providing an arguable defence, then the court can assess those issues to determine whether the propositions advanced are stateable as a matter of law and that it is arguable that, if determined in favour of the defendant, they would provide for a defence. In that context, and subject to the inherent limitations on the summary judgment jurisdiction identified in McGrath v. O'Driscoll [2006] IEHC 195, [2007] 1 I.L.R.M. 203, the court may come to a final resolution of such issues. That the court is not obliged to resolve such issues is also clear from Danske Bank a/s (t/a National Irish Bank) v. Durkan New Homes [2010] IESC 22, (Unreported, Supreme Court, 22nd April, 2010).
This matter came on for hearing before me on 16 May 2019. The Bank was represented by Mr Alistair Rutherdale, BL, and the Defendants were represented by Mr Brian Kelly, BL.
Leave to defend the proceedings was sought on the following three grounds.
(i) No independent legal advice
Each of the Defendants has averred that the Bank did not advise them to take independent legal advice before entering into the respective guarantees, and that they did not take independent legal advice before doing so. Mrs English, in her second affidavit (30 July 2018) states as follows.
“4. I beg to refer to the averment sworn on behalf of the Plaintiff at paragraph 4 of its Affidavit wherein it is averred that it was not necessary for the Plaintiff to advise me to take independent legal advice prior to my execution of the Guarantee on 25 th May, 2009. I say and believe and am advised that the Plaintiff ought reasonably to have been on notice to advise me to take independent legal advice in circumstances where my husband was the owner of 50% of the issued share capital in the borrower Company, Ms. Olwyn McGinn was the owner of 30% and I only held a minority shareholding of 20% of the shares.”
Counsel on behalf of the Defendants submits that the legal consequence of the failure of the Bank to advise the Defendants to obtain independent legal advice is that the guarantees are null and void and invalid. Despite having been invited to do so, counsel did not cite any case law in support of this proposition.
In response, counsel on behalf of the Bank submitted as follows. Neither of the Defendants has given evidence to the effect that they were unaware that they were signing a guarantee or that they had been given misleading information by the Bank. The guarantees were both headed up with a warning to take legal advice (see paragraph 3 above).
Counsel submitted that the absence of independent legal advice will not normally constitute a defence unless that person is able to demonstrate a substantive defence to the claim. More specifically, it is submitted that there is no general principle to the effect that the provision of independent legal advice is a prerequisite to the valid execution of a guarantee. Rather, the question of whether or not a party had independent legal advice is relevant to cases where the nature of the transaction is such as to put a bank on enquiry.
The example is given of a transaction whereby one spouse is charging the matrimonial home as security for the business liabilities or potential liabilities of the other spouse. In such circumstances, a bank should take steps, including advising the spouse to obtain independent legal advice, in order to protect its own position.
Counsel referred in this regard, in particular, to the judgment in Royal Bank of Scotland plc v. Etridge (No. 2) [2002] 2 AC 773. Reference was also made to the judgment of the Court of Appeal in ACC Loan Management v. Connelly [2017] IECA 119 and in Bank of Ireland v. Curran [2016] IECA 399.
Findings of the court
Having carefully considered the four affidavits filed on behalf...
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