Allied Irish Banks Plc v O'Reilly

JurisdictionIreland
JudgeMr. Justice David Barniville
Judgment Date06 March 2019
Neutral Citation[2019] IEHC 151
CourtHigh Court
Docket Number[2017 No. 827 S.],[2017 No. 827 S]
Date06 March 2019

[2019] IEHC 151

THE HIGH COURT

Barniville J.

[2017 No. 827 S.]

BETWEEN
ALLIED IRISH BANKS PLC
PLAINTIFF
AND
DANIEL O'REILLY

AND

TERESA O'REILLY
DEFENDANTS

Banking and finance – Joinder – Summary proceedings – Defendants seeking to join a third party to the proceedings – Whether it is open in principle to seek the joinder of a third party under O. 16 RSC in proceedings commenced by summary summons

Facts: The defendants, Mr and Ms O’Reilly, applied to the High Court to join a third party to the proceedings. The defendants’ application was made in summary proceedings in which the plaintiff, Allied Irish Banks plc, was seeking judgment against the defendants as guarantors for the alleged liabilities of their son, the borrower, to the Bank. In determining the defendants’ application to join the borrower as a third party, Barniville J addressed the following issues: (1) whether it is open in principle to seek the joinder of a third party under O. 16 RSC in proceedings commenced by summary summons; (2) if it is, whether the provisions of part III of the Civil Liability Act 1961 (including s. 27) apply and, in particular, whether a borrower and a guarantor are “concurrent wrongdoers” under the 1961 Act; (3) whether the terms of the guarantees themselves (and, in particular, Clause 8) precluded the defendants from joining the borrower as a third party; and (4) whether, in the event that it was open to the defendants to seek to join the borrower as a third party in the summary proceedings, there was any reason why the court should exercise its discretion not to do so or whether the joinder should be subject to any conditions.

Held by Barniville J that it is open to a defendant to seek to join a third party to proceedings brought by summary summons by way of an application for leave to issue and serve a third party notice under O. 16 r. 1 RSC. Barniville J held that the defendants and the borrower were “concurrent wrongdoers” within the meaning of that term in the 1961 Act and that it was open to the defendants to seek a contribution or indemnity from the borrower pursuant to s. 21 of the 1961 Act in accordance with the third party procedure provided for in s. 27(1) of that Act by way of an application to the court pursuant to O. 16 r. 1(1) RSC. Barniville J held that the provisions of Clause 8 of the guarantees did not preclude the defendants from seeking the joinder of the borrower as a third party to the proceedings. Barniville J held that whether those provisions precluded the granting of a contribution or indemnity in favour of the defendants as against the borrower would be a matter for the trial judge dealing with the third party proceedings. Barniville J held that the court had a discretion under O. 16 r. 1(1) RSC as to whether to grant leave to the defendants to issue and serve a third party notice on the borrower. Barniville J was satisfied that it would be appropriate to exercise that discretion to grant such leave to the defendants, subject to certain conditions designed to enable the Bank to proceed with its application for summary judgment without disruption or interruption by reason of the joinder of the third party. In those circumstances, Barniville J indicated the directions which should be made. Barniville J also concluded that a stay should be imposed on the conduct of the third party proceedings which would lapse in certain circumstances.

Barniville J held that he would hear counsel as to the precise terms of the order which would be made to give effect to this judgment.

Application granted.

JUDGMENT of Mr. Justice David Barniville delivered on the 6th day of March, 2019.
Introduction
1

This is my judgment on an application by the Defendants to join a third party to the proceedings. The Defendants' application is made in summary proceedings in which the plaintiff, Allied Irish Banks PLC (the ‘Bank’), is seeking judgment against the Defendants as guarantors for the alleged liabilities of their son, John O'Reilly (the ‘Borrower’), to the Bank.

2

The Defendants' application to join the Borrower as a third party was opposed by the Bank on a number of grounds. I have concluded that, notwithstanding the Bank's opposition, it is appropriate for me to grant the Defendants' application and to join the Borrower as a third party to the proceedings on certain terms which I will explain in greater detail in my judgment.

Structure of Judgment
3

At the outset, I will describe the proceedings brought by the Bank against the Defendants and refer to the defences which the Defendants have sought to raise in response to the Bank's claim. I will then refer to the application brought by the Defendants to join the Borrower as a third party. I will discuss the basis on which the Defendants seek the joinder of the Borrower and the grounds on which the Bank objects to that joinder. I will then identify the issues which require to be resolved on this application in the context of the applicable legal principles. Finally, I will set out my conclusions on the Defendants' application.

The Proceedings
4

The Bank commenced the proceedings against the Defendants by a summary summons which was issued on 11th May, 2017. As appears from the special indorsement of claim on the summary summons, the Bank's claim against the Defendants is for the sum of €400,000.00 together with continuing interest which is allegedly due and owing by the Defendants under separate guarantees in writing dated 21st October, 2009, given by each of the Defendants in respect of loan facilities extended by the Bank to the Borrower. It is pleaded that the Borrower has outstanding debts due to the Bank in respect of those loan facilities which are in excess of €400,000.00 with interest and that despite demand the Borrower has not discharged his liabilities to the Bank. The Bank claims that it has demanded payment of €400,000.00 plus interest from each of the Defendants and that they failed to pay the sum demanded. Therefore, the Bank seeks summary judgment against the Defendants in the sum of €400,000.00 together with interest.

5

Following the entry of an appearance on behalf of the Defendants, the Bank issued a motion seeking liberty to enter final judgment against the Defendants in the amount of €400,000.00 (as at 15th September, 2016) on 26th July, 2017. The motion was returnable before the Master on 26th October, 2017. It was grounded on an affidavit sworn by Richard Stafford, an official of the Bank, on 21st July, 2017. Mr. Stafford's affidavit referred to the loan facilities advanced by the Bank to the Borrower on foot of a facility letter dated 19th October, 2009, which was accepted by the Borrower on 21st October, 2009. The facility letter described the purpose of the facility as ‘working capital’ and stated that it was in substitution for existing liabilities on the Borrower's account with the Bank. The security required to be provided for the facility advanced to the Borrower was a letter of guarantee from each of the Defendants for the sum of €400,000.00. Mr. Stafford exhibited letters of guarantee from the Defendants dated 21st October, 2009. He averred that the Borrower's loan account with the Bank went into arrears and that the Bank demanded payment of the amount outstanding from the Borrower in September, 2016. Mr. Stafford averred that the Borrower failed to repay the sum demanded and that, as of September, 2016, a sum of in excess of €400,000.00 was due and owing by him to the Bank (the statement of the Borrower's loan account showed a sum allegedly due and owing by the Borrower as of that date of €408,587.92). Mr. Stafford then referred to letters of demand sent to both Defendants on 15th September, 2016, demanding payment of the sum of €400,000.00 from the Defendants together with interest. He then referred to further letters of demand sent to the Defendants by the Bank's solicitors on 27th September, 2016.

6

Mr. Stafford explained (at para. 13 of his affidavit) that, in light of a medical report in relation to the Borrower, the Borrower has been classified by the Bank as a ‘ vulnerable customer’ for the purposes of the Consumer Protection Code. No proceedings have been brought by the Bank against the Borrower. Mr. Stafford asserted that the Borrower's current condition and his status as a ‘ vulnerable customer’ have no bearing on the guarantees given by the Defendants and the Bank's alleged right to enforce those guarantees. Mr. Stafford contended that the appearance entered on behalf of the Defendants was entered solely for the purposes of delay and that the Defendants have no credible or bona fide defence to the Bank's claim on foot of the guarantees.

7

The first Defendant, Mr. O'Reilly, swore a replying affidavit on his own behalf and on behalf of the second Defendant. In his affidavit, the first Defendant referred to the Bank's treatment of the Borrower as a ‘ vulnerable customer’. He stated that the Borrower had suffered from depression for many years and may have been symptomatic at the time he entered into the loan agreement with the Bank. He stated, that the Defendants were not aware that the Borrower was symptomatic and would not have entered into the guarantees had they known. The first Defendant stated that if the Borrower was suffering from depression at the time of the loan agreement, the Bank could have become aware of that, had it taken reasonable steps, and that its failure to do so, and its extension of a €400,000.00 loan to the Borrower, in circumstances where the Borrower may have been under a ‘ serious disadvantage due to his mental health’ meant that the transaction was an improvident one and gave rise to an obligation on the part of the Bank to ensure that the Borrower obtained independent legal advice prior to entering into the loan agreement. The first Defendant asserted that the Bank did not do so and that, as a consequence, the loan agreement between...

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