Allied Irish Banks Plc v Higgins and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 03 June 2010
• Neutral Citation: [2010] IEHC 219
• Court: High Court
• Date: 03 June 2010

Allied Irish Banks Plc v Higgins & Ors

COMMERCIAL

BETWEEN

ALLIED IRISH BANK PLC

PLAINTIFF

AND

BRIAN HIGGINS, SEAMUS KAVANAGH, JAMES MANSFIELD AND GLEN O'CALLAGHAN

DEFENDANTS

[2010] IEHC 219

[No. 5142 S./2009]

THE HIGH COURT

PRACTICE AND PROCEDURE

Summary judgment

Contract - Consumers - Commercial lending - Loan agreement - Bona fide defence - Defence of non est factum - Business transaction - Whether defendants consumers for purpose of legislation - Whether bona fide defence disclosed -Aer Rianta Cpt v Ryanair Ltd [2001] 4 IR 607, Tedcastle McCormack & Co Ltd v McCrystal (Unrep, Morris J, 15/3/1999) and Harrisrange Ltd v Duncan [2003] 4 IR 1 applied; Benincasa v Dentalkit (Case C-269/95) [1997] ECR I-3767 followed - Consumer Credit Act 1995 (No 24), ss 30 & 38 -Partnership Act 1890 (???), ss 1, 5 & 45 - Liberty to enter judgment granted (2009/5142S - Kelly J - 3/6/2010) [2010] IEHC 219

AIB plc v Higgins

CONSUMER CREDIT ACT 1995 S30

CONSUMER CREDIT ACT 1995 S38

DATA PROTECTION ACT 1988 S4

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

NATIONAL WESTMINSTER BANK PLC v DANIEL & ORS 1993 1 WLR 1453 1994 1 AER 156

HARRISRANGE LTD v DUNCAN 2003 4 IR 1 2002/12/2982

CENTRAL BANK & FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2003 FIRST SCHED PART 21

PARTNERSHIP ACT 1890 S1

PARTNERSHIP ACT 1890 S45

INTERPRETATION ACT 2005 S18

EEC DIR 87/102

EEC DIR 90/80

BENINCASA v DENTALKIT SRL 1998 AER (EC) 135 1997 ECR I-3767 1997 ETMR 447 1997 ILPR 559

PARTNERSHIP ACT 1890 S5

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

SAUNDERS v ANGLIA BUILDING SOCIETY 1971 AC 1004 1970 3 WLR 1078 1970 3 AER 961

1 JUDGMENT of Mr. Justice Kelly delivered on the 3rd day of June, 2010

Introduction

2 This is an application for summary judgment against the defendants for €6,324,959.81.

3 The plaintiff (AIB) alleges that this sum is due to it in respect of monies which it lent to the defendants who formed a partnership for the purpose of acquiring and developing lands in Duleek, Co. Meath.

4 The first, second and fourth defendants do not deny that the moneys in suit were received by them as loans from AIB but contend that they have an arguable defence to the claim by reference to certain provisions of the Consumer Credit Act 1995 ("the Act"). They argue that they made these borrowings from AIB as "consumers" within the meaning of that Act. If correct, then s. 30 of the Act was applicable to the lending but its requirements were not complied with by the bank. That omission renders the loan unenforceable (s. 38 of the Act).

5 The third defendant (Mr. Mansfield), who was separately represented, also relies on this point. In addition, he seeks to make a number of other defences chief amongst which is one of non est factum.

6 I will deal with the defendants other than Mr. Mansfield first. I will then deal with all of Mr. Mansfield's alleged defences including the "consumer" point. In the light of his approach I have to set out the background to the transaction more than is necessary to deal with the other defendants.

7 AIB's claim is based on a facility letter of 19 ^th January, 2009. This was the fifth in a series of such letters. I must outline its predecessors.

The First Facility

8 By letter of 3 ^rd March, 2003, AIB offered the defendants a loan facility for €673,000 to assist them in the purchase of a 1.1 acre site in Duleek, Co. Meath. This letter was addressed to each of the defendants. It identified each of them as borrowers and offered the money for the stated purpose. It provided for a capital moratorium until 25 ^th February, 2005 with a repayment schedule to be reviewed at that stage. In the interim, interest was to be met on a quarterly basis.

9 The offer was expressly made subject to the terms and conditions set out in the letter and also subject to the banks general terms and conditions governing business lending. A copy of those terms was enclosed and the addressees of the letter were advised that these were legal documents and should be read very carefully.

10 The loan was to be secured by the execution of two legal charges. One was over the 1.1 acre site at Duleek to vest in the names of the defendants. The second legal charge was over an adjoining 4.5 acre site at the same place.

11 It is common case that this letter of offer was accepted by each of the defendants appending their signatures to it on 19 ^th April, 2004. The funds, the subject of the offer, were drawn down at that time.

The Second Facility

12 On 15 ^th August, 2006, AIB offered a further loan to the defendants in the sum of €3,461,000.

13 The offer was made by a letter of sanction of that date addressed to each of the defendants and identified each of them as the borrowers. The purpose of this loan was "to fund the development of two 2.5 story (sic) blocks containing 23 apartments, six commercial/retail units, crèche and underground car parking on site in Duleek, Co. Meath". This loan was repayable on demand and at the pleasure of AIB subject to clearance in full from the 100% gross sale proceeds of the development. The loan was to be secured by means of an all sums legal charge over the 1.1 acre site with the existing house, commercial and derelict structures and the benefit of a full planning permission for the development in question. There was also to be a legal charge over the 4.5 acre site zoned residential at Duleek, Co. Meath. The offer was made on the terms and conditions contained in it and the banks general terms and conditions which were once again enclosed and advice tendered that these were legal documents to be read very carefully.

14 Mr. Mansfield accepts that his signature is on the acceptance of this offer. He says he signed it on the bonnet of a car and that it was "just the plain back sheet" he signed. The other defendants do not raise any issue as to their acceptance of this offer.

15 The funds the subject of this second letter of sanction were duly advanced to fund the development of the property.

The Third Facility

16 On 3 ^rd April, 2007, AIB agreed to advance a further €500,000 to the defendants by way of an increase to their existing loan.

17 Again the letter was addressed to all four defendants and they were identified as the borrowers. Again, it enclosed a copy of the bank's general terms and conditions and pointed out that they should be read very carefully. The purpose of this loan was to fund the development. It was also to cover contributions and an archaeology survey and additional costs not accounted for in the previous loan. There is no evidence that this letter was executed by any of the defendants but none of the defendants save Mr. Mansfield make any point about this. It is common case that the €500,000 referred to in the letter was drawn down.

The Fourth Facility

18 On 17 ^th January, 2008, AIB agreed to advance a further loan to the defendants. This was in respect of a sum of €1.3m. The letter was in similar form to the earlier ones and the purpose of this additional funding was expressed to be by way of assistance for the completion of the development.

19 This letter of offer was accepted on 24 ^th January, 2008. Mr. Mansfield says that the signature on the letter is not his.

The Final Facility

20 On 19 ^th January, 2009, a further letter of sanction was issued by the bank in favour of the defendants. It identified the four defendants as the borrowers. The letter dealt with two facilities. The first was a term loan called account No. 1 (A/C No. 00046120) and the second was term loan account No. 2 (A/C No. 00046203). It is these loan accounts that are sought to be recovered in this action.

21 Term loan account No. 1 was in the sum of €772,187. This was originally sanctioned towards funding the purchase of the 1.1 acre site in Duleek, Co. Meath.

22 Term loan account No. 2 is in the sum of €5,331,229. It was originally sanctioned towards funding the development and completion of the various blocks of apartments and commercial and retail units.

23 Under the terms of this letter of sanction, there was a roll up of the interest that had accrued on the initial loan of €673,000 which had been used to acquire the site and also on the subsequent development loan which had been increased from time to time. Both of these facilities were expressed to be repayable on demand but were subject to clearance in full by 28 ^th February, 2009 by way of refinance or otherwise.

24 All of the defendants agree that they signed the acceptance of these terms on 20 ^th January, 2009 by appending their respective signatures to the acceptance form.

25 The loans were subsequently called in. No part of the monies advanced have been repaid.

26 AIB alleges that the moneys were advanced by it as part of its commercial lending business.

27 I turn now to the evidence advanced by the defendants other than Mr. Mansfield on the "consumer" issue.

Brian Higgins

28 Mr. Higgins swore two affidavits. In the first he accepted that he entered into the loan agreements with AIB and that the money was advanced by it and used for the specified purposes. He expressed concern that AIB failed to deal with him properly as a consumer.

29 He recounted that he began work as an apprentice electrician in 1977. He worked as an electrical contractor until 1983. At that stage he set up his own contracting business.

30 In 1998, he set up a second business through a company called Lara Alarms Limited which specialises in security alarms.

31 In the early 90s, he purchased one property as an investment in Maynooth, Co. Kildare. He continued to buy investment properties in the 1990s whilst at the same time running his other businesses.

32 He said that apart from the purchase of investment properties he had never been involved in...