Allied Irish Bank v O'Brien & Fingleton

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 27 March 2015
• Neutral Citation: [2015] IEHC 260
• Court: High Court
• Date: 27 March 2015

[2015] IEHC 260

THE HIGH COURT

[No 3150 S/2013]

Allied Irish Bank v O'Brien & Fingleton

BETWEEN

ALLIED IRISH BANK

PLAINTIFF

AND

FRANCIS O'BRIEN AND MICHAEL FINGLETON

DEFENDANTS

Banking & Finance – Repayment of loan – Summary Judgment – S. 48 of the Credit Institutions (Stablisation) Act 2010 – The Consumer Protection Code – Meaning of customer

Facts: The plaintiff sought an order for summary judgment against the second defendant in lieu of the loan facility granted to both the defendants as the first defendant had consented to the judgment. The second defendant pleaded that he had good defence on the ground of non availability of terms and conditions to him at the time of contract, being beneficiary of the Consumer Protection Code and the constitutional obligations of the first defendant to make demand of the repayment of loans being a public body.

Ms. Justice Baker granted an order for summary judgment in favour of the plaintiff. The Court held that the second defendant failed to make a bona fide defence on any of the alleged contentions. The Court held that the general conditions were expressly mentioned in the facility letters signed by the second defendant and by virtue of his position in a major Bank, it could be meant to take that would have impacted his dealings with the plaintiff in any way. The Court held that though the Consumer Protection Act put an obligation on the Bank to comply in all respects with the code and failure of which would exempt the borrower from the liability to repay the loan, the statement if applied would be impracticable unless there would be egregious breach of Code. The Court was of the view that the plaintiff wore the hat of a public body in its dealings with the State and other government agencies and not all of the functions of the plaintiff could be termed as public functions such as advancement of loaning facility to the individuals which would be governed by the contract rather than remedies in public law.

1 1. The plaintiff in these proceedings seeks summary judgment against the defendants arising out of a loan facility granted to them jointly and severely in or around the month of October 2006. The first defendant has consented to judgment being entered against him for the amounts claimed and the motion for judgment has proceeded against the second defendant only. The second defendant has sworn two replying affidavits in respect of the motion, the first on the 18 ^th June, 2014, and the second on the 31 ^st July, 2014.

2 2. The motion is grounded on the affidavit of Joe Lyons sworn on the 25 ^th March, 2014 in which is exhibited a facility letter of the 4 ^th October, 2006 addressed to Mr Fingleton at his personal address which contains the terms on which the Bank offered to lend to Mr Fingleton the sum of €4.6 million. A similar letter was sent to the first defendant, a former member of Seanad Éireann, also at his personal address, and the terms of each of the letters are identical. The stated purpose of the loan was the purchase of two tracts of land, one comprising 9.6 acres of zoned agricultural land at Laragh, Co. Monaghan, and the other comprising 6.25 acres of zoned agricultural at Corcagham, Co. Monaghan. The loan was stated to be repayable on demand and at the pleasure of the Bank and was subject to interest roll over for one year and "clearance in full at that time".

3 3. The letter outlined six special conditions, most of which related to the security to be provided, but special condition three provided that the Bank would have full, joint and several recourse to both borrowers. Charges were to be put in place over the lands intended to be purchased, which were to be held in the sole name of the first defendant, and a charge was to be created by him over other lands stated to be in his name, the precise beneficial interest in which is unclear from the documentation.

4 4. The interest rate has been a matter of some controversy in the course of the hearing before me and I set out in full the provisions in the letter of sanction relating to interest: "Prime rate vary plus 1.5%, currently 5% per annum".

5 5. The letter stated that the loan offer was also subject to the Bank's General Terms and Conditions Governing Business Lending contained in a booklet dated March 2006, and a copy was stated to be enclosed. There is in bold print the following statement: "These are legal documents and should be read very carefully".

6 6. The loan was drawn down and while certain difficulties arose with regard to the putting in place of the charges by way of security, this matter has not been raised as a possible defence in the proceedings.

7 7. The statement of account exhibited in the grounding affidavit of Joe Lyons shows transactions on the account since the monies were drawn down on the 27 ^th October, 2006 and from this it is apparent that small payments were credited to the account from time to time, the last of which was in June 2009, and interest and surcharge interest has been applied to the outstanding balance from time to time. No argument is raised with regard to the amount of surcharge interest and I note that in general surcharge interest was charged at zero percent, apart from on one or two occasions during the currency of the loan.

8 8. As at the date of the swearing of the grounding affidavit the amount stated to be owed was the sum of €5,454,279.29, calculated up to the 7 ^th June, 2013.

The defences

9 9. The two replying affidavits of Mr Fingleton assert that a number of arguable defences exist to the Bank's claim and his counsel has fairly and properly accepted that some of these defences were bound to fail and expressly withdrew them at the commencement of the hearing. Counsel has identified three categories of defence, and counsel for the plaintiff accepts these broad classifications. These grounds of defence are as follows:-

1 ) That there was no consensus ad idem for the purposes of the creation of the contract of loan, and that as Mr Fingleton had not been involved in the negotiations leading up to the loan he was unaware of all of the terms and conditions alleged to apply. Counsel makes a more focused point however, and the affidavit of Mr Fingleton asserts that he did not receive the Bank's general conditions at the time of the letter of loan sanction or at any relevant time such that the general conditions do not form part of the contract between himself and the Bank. He argues that this is particularly relevant for the purposes of the calculation of interest on the loan, and for the definition of what is meant by "prime rate" in the special conditions, and that in the circumstances he is not contractually bound to those terms. Mr Fingleton does not deny that he signed the letter of loan sanction, and indeed it is apparent from the documentation exhibited that he signed not only the letter addressed to himself but also that addressed to the first defendant, although he does say that the documents were presented to him by his co-borrower and he signed the last page of the letters of loan sanction without reading the documentation.

2 ) Mr Fingleton said that he is entitled to the benefit of Consumer Protection Codes, and in particular the Code issued by the Central Bank in 2006. He no longer asserts that he is a "consumer" for the purposes of those Codes but points to the fact that parts of the Code apply to persons defined as "customers" of regulated financial entities, and asserts that he was at all material times a customer for that purpose and entitled to the benefit of that part of the Code in force at the time the contract of loan was concluded.

3 ) He asserts that the Bank had a duty to invite and consider submissions from him before making demand under the facility and/or before commencing these proceedings. In that context he asserts that certain public law obligations arise having regard to the status of the Bank as a body charged with performing its functions in the public interest pursuant to the s.48 of the Credit Institutions (Stabilisation) Act 2010, that an obligation has arisen to afford him fair procedures, and that as the bank refused to engage with him and to consider the submissions he sought to make, the demand is not properly made. He argues that he has a bona fide claim that he was entitled to be heard by the Bank before it made demand on him and that in those circumstances the matter is not properly before the Court.

Mr Fingleton also asserts that he is entitled to a set-off arising from the fact that he claims to have a 25% equitable interest in certain lands owned by a developer, one Jerry Gannon, with whom he had a business relationship, and some of whose land is held as security for the Bank. In the course of argument it was accepted by counsel for the defendant that the argument for a set-off more properly arises as a matter of consideration on an application for a stay of execution in respect of any judgment that might be entered against him.

10 10. I will consider each of these possible defences in turn but before doing this I turn to consider the law that governs the entry of judgment on foot of a summary summons.

Summary judgment

11 11. The leading case on the nature of the jurisdiction of the court to grant judgment summarily is the case of Aer Rianta v. Ryanair [2001] 4 I.R. 607 and it cannot be doubted that the bar set by that decision of the Supreme Court is relatively low. The Supreme Court identified a range of cases in which summary judgment ought not to be entered, and at one end of the spectrum is what Hardiman J. described as cases which turn "on a stark conflict of factual evidence". Any conflict of factual evidence that might influence the court in its decision must be resolved on oral evidence and by giving the other party an opportunity to cross examine....