Allied Irish banks Plc v McGuigan

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 14 February 2018
• Neutral Citation: [2018] IEHC 67
• Docket Number: No. 2014 No. 3057 S
• Court: High Court
• Date: 14 February 2018

[2018] IEHC 67

THE HIGH COURT

Barrett J.

No. 2014 No. 3057 S

Between:

ALLIED IRISH BANKS PLC

PLAINTIFF

– AND –

PAUL MCGUIGAN, THOMAS MCGUIGAN

AND

MICHAEL MCGUIGAN

DEFENDANTS

Banking & Finance – Non-payment of debt – Garnishee order – Solicitor's undertaking – Judgment creditor – Equitable execution

Facts: The plaintiff sought an order to the effect of making a conditional garnishee order nisi as absolute for the failure of the defendants to fulfil their obligations under that order. In the alternative, the plaintiff made an application for the appointment of a receiver by way of equitable execution over certain settlement monies. The solicitors of the defendants had executed an undertaking whereby they held the monies due and owned by the defendants until a settlement agreement was reached between the parties.

Mr. Justice Max Barrett refused to make absolute the conditional garnishee order as sought by the plaintiff. The Court made an order for the appointment of a receiver by way of equitable execution over the proceeds of sale of the subject properties. The Court refused to make an order for the appointment of a receiver by way of equitable execution over the monies held by the solicitors of the defendants. The Court noted that equitable execution was a method of enforcement granted to the judgment creditor when the ordinary methods became ineffective. The Court observed that the company in which all the three defendants were shareholders had an interest in the debt that was sought to be garnished; however, that company was not a party to the proceedings. The Court further found that the settlement monies, which were being held in a joint account, were in the name of a person who was not a judgment debtor; thus, in those circumstances, the Court could not make the conditional garnishee order as absolute.

JUDGMENT of Mr Justice Max Barrett delivered on 14th February, 2018.

I Background

(i) General.

1 Pursuant to a breach of a loan agreement entered into between AIB plc and the defendants (three brothers), AIB, on 21st December, 2015, obtained a consent judgment against the defendants jointly and severally in the sum of €2.4+m. The order granting judgment stayed its operation for a period of three months from the date thereof. After judgment was entered, negotiations continued between AIB plc and a representative of the defendants in a bid to arrive at an agreed repayment arrangement between the parties, which the defendants naturally hoped would include some “writing off” of their extant debts. Despite these ongoing negotiations, a feature of which was the proposed sale by two of the defendants of certain apartments in Croatia owned jointly with their spouses, no repayment arrangement satisfactory to AIB was agreed. In fact, even by the time of the hearing of the within application, AIB has received no payment from the defendants since the date of judgment. On 29th May, 2017, following ex parte application being made by AIB, a conditional garnishee order nisi was made against the defendants and a named solicitor was appointed receiver by way of equitable execution over certain properties. In the within application, AIB seeks to have the said arrangements made absolute. In the event that the garnishee order absolute was refused by the court (and it must be for the reasons stated hereafter), AIB has made application for the appointment of a receiver by way of equitable execution over certain settlement monies that were previously the subject of the conditional garnishee order.

(ii) Settlement Monies.

2 The defendants and, notably, PTM (Castleblaney) Limited, a company in which each of the three brothers has a one-third shareholding, were engaged in certain litigation against Fowler Construction Limited and CS Pringle Limited. Arising out of that action, settlement monies totalling €850k plus costs was agreed to be paid to the defendants and PTM. So PTM has its own interest in the settlement monies as a plaintiff in the proceedings which settled.

3 Mr David Nolan, an AIB manager, has sworn in affidavit evidence before the court that ‘[I] n or around 12th February, 2015, in consideration of the Plaintiff entering into ongoing discussions regarding the Defendants; indebtedness to the Plaintiff, the Defendants' Financial Advisor wrote to the Plaintiff's then Solicitors advising that the net amount of the Settlement Monies had been deposited and that the Defendants undertook not to withdraw these funds until an agreement between the parties had been reached’. As a result of the foregoing, in or around 25th March, 2015, again per Mr Nolan, ‘The Defendants, both individually and on behalf of PTM…undertook to transfer €672k [this, it is accepted by all, ought to have been a reference to €665k] to their Solicitors' client account and to irrevocably authorise [the said solicitors]… to provide an undertaking to hold the balance of the settlement monies. I beg to refer to a copy of the said undertaking’. The letter of undertaking exhibited by Mr Nolan is dated 9th April, 2015, and issued to AIB from Hanley & Lynch, the solicitors for the defendants and PTM. The key portion of the letter of undertaking reads as follows:

‘As Solicitors for Paul McGuigan, Thomas McGuigan and Michael McGuigan and PTM…we confirm that we have received the sum of €665,000 (“the Settlement Monies”) into our client account.

We hereby undertake to hold the Settlement Monies to the order of Allied Irish Banks plc (“the Bank”) until such time as an agreement is reached by our clients and the Bank in relation to the disposal of the Settlement Monies.

We confirm that we have our clients' irrevocable authority to provide the above undertaking to the Bank.’

4 There are at least three notable features to the above-quoted undertaking, given on the basis of irrevocable authority:

(1) any future transfer of the monies by Hanley & Lynch is to be triggered (i) not by a breakdown in the discussions aimed at securing the referenced agreement, but rather (ii) by such agreement being reached;

(2) there is no provision as to the contemplated timeframe within which the referenced agreement is to be reached and/or what is to happen in the event that no agreement is reached, the clear intention being that an agreement will be reached (indeed it must be reached if the monies are to be released).

(3) it expressly states Hanley & Lynch to have four clients (the three defendants and PTM), with the undertaking being given on behalf of all of the clients, an irrevocable authority having been reached from each of them.

5 AIB, it is clear from its actions, was satisfied to accept the undertaking, as worded, and to proceed with the mooted discussions. From certain evidence exhibited by Mr Daniel Hanley, a solicitor acting for the defendants, it appears that those discussions (which have now come to an impasse) continued until as recently as September 2016. The impasse arising, Mr Nolan, has averred, inter alia, that ‘ the Plaintiff is concerned that Hanley & Lynch…may be instructed by the Defendants to treat the undertaking as lapsed and to repay the monies to them’. For the reasons that follow, the court must admit to being rather sceptical as to the reasoning that underpins this averment:

(1) the letter of undertaking, as quoted above, states that ‘ We hereby undertake to hold the Settlement Monies to the order of Allied Irish Banks plc (“the Bank”) until such time as an agreement is reached by our clients and the Bank in relation to the disposal of the Settlement Monies’. No agreement has been reached, the undertaking was given on the basis of an irrevocable authority, and the solicitors who gave the undertaking, indicated in an e-mail of 26th May, 2017 (sent just an hour after confirmation was sought) that ‘ We will of course abide by the terms of our undertaking’, phraseology which makes clear beyond any doubt that 17 months after the judgment of December 2015, the solicitors continued to view their undertaking as extant and not to have lapsed (and as of the date of hearing that remained the position).

(2) on a related note, neither the defendants nor PTM get to tell their solicitor whether and when the undertaking has lapsed. That is fundamentally to misunderstand the nature of a solicitor's undertaking. The undertaking is one given by Hanley & Lynch and it is for them to determine how best to proceed. Yes, they might listen to any views that their clients might offer but it is for Hanley & Lynch alone to determine how best to proceed by reference to their undertaking, and they would of course be subject to disciplinary proceedings if they departed from the undertaking (not that there is the slightest suggestion that they will do so; in fact, the evidence before the court points in completely the opposite direction).

(3) the concern evinced by Mr Nolan for his employer is premised on what seems to the court to be a complete and fundamental misunderstanding by AIB of the agreement into which it entered in the spring of 2015 concerning the settlement monies. Thus AIB's concern is that the impasse between it and the defendants, i.e. the failure to reach agreement with the defendants and PTM in relation to the disposal of the settlement monies could lead to a transfer of the settlement monies by Hanley & Lynch. That patently cannot occur. As noted by the court above, any future transfer of the monies by Hanley & Lynch is to be triggered (i) not by a breakdown in the discussions aimed at securing the referenced agreement, but rather (ii) by such agreement being reached.

(4) as to any suggestion that the judgment of December 2015, obtained on consent, ended the agreement as regards the settlement monies, the court does not accept that this is so for the following reasons:

(i) the consent of the defendants to the judgment was a consequence of the ongoing negotiations between the parties, not...