Allied Irish Banks Plc v Kennedy
| Jurisdiction | Ireland |
| Judge | Mr. Justice Noonan |
| Judgment Date | 06 June 2018 |
| Neutral Citation | [2018] IEHC 381 |
| Docket Number | [2014 No. 2849 S] |
| Court | High Court |
| Date | 06 June 2018 |
[2018] IEHC 381
THE HIGH COURT
Noonan J.
[2014 No. 2849 S]
AND
Personal guarantee – Threshold of arguability – Bona fide defence – Plaintiff seeking payment on foot of a guarantee – Whether defendant demonstrated that he had a fair or reasonable probability of having a bona fide defence
Facts: The second defendant, Mr O'Keeffe, was a director and the secretary of Island Field Properties Ltd. The first defendant, Mr Kennedy was a director of the same company. By letter of loan sanction dated the 11th January, 2007, the plaintiff, Allied Irish Banks plc, agreed to make a loan facility in the amount of €1 million available to the company for the purpose of purchasing a residential property with three adjoining sites. The company ultimately defaulted on the loan and a demand for payment was made to the company on the 26th June, 2013. Following upon the company's failure to satisfy that demand, a separate demand was made by the bank on the 18th September, 2013 of Mr O'Keeffe personally for payment of €1 million on foot of the guarantee. The summary summons was subsequently issued on the 19th November, 2014 and the motion for summary judgment on the 19th August, 2015. Mr O'Keeffe submitted before the High Court that he was not liable on foot of the personal guarantee for three reasons. First, he said that an express representation was made to him by the relevant bank official Mr O'Brien, which Mr O'Keeffe understood to mean that the bank would not be relying on the guarantee. Second, he suggested that there was some invalidity in the terms of the demand for payment made of him by the bank. Third, he submitted that because the bank extended the loan to the company and thus altered the terms of the facility underlying his letter of guarantee without his assent, he was no longer bound by the guarantee.
Held by Noonan J that Mr O'Keeffe had not met the threshold of arguability required in Aer Rianta c.p.t. v Ryanair Ltd [2001] 4 IR 607 of demonstrating that he had a fair or reasonable probability of having a bona fide defence to the plaintiff's claim.
Noonan J held that he would grant judgment to the bank in the sum of €1 million.
Application granted.
This is an application for summary judgment brought by the plaintiff ('the bank') against the second named defendant on foot of a guarantee. Judgment has already been obtained against the first defendant in respect of an identical guarantee. The second defendant (Mr. O'Keeffe) was at all material times a director and the secretary of a company called Island Field Properties Ltd. The first defendant was a director of the same company. The company appears to have been engaged in property speculation.
By letter of loan sanction dated the 11th January, 2007, the bank agreed to make a loan facility in the amount of €1 million available to the company for the purpose of purchasing a residential property with three adjoining sites. The repayment proviso in the facility letter stated:
'Facility to be revised within two years from date of drawdown, when a suitable repayment arrangement is to be put in place. In the interim, quarterly interest charges will be charged to your working account.'
The security provisions of the facility letter included the execution of a legal mortgage over the property being acquired together with a letter of guarantee to be executed by both defendants. The defendants on behalf of the company accepted the terms of the facility letter by executing it. Further to the terms of the facility letter, both defendants executed written guarantees dated the 16th January, 2007. It is suggested by Mr. O'Keeffe that the guarantee was probably actually signed by him in his solicitor's office on the 17th or 18th January, 2007. As the funds were drawn down by the company on the 18th January, 2007, it would suggest that the guarantee was executed by this stage at the latest.
There was some negotiation between the bank and the defendants concerning the terms of the loan. The bank initially appeared to have required the payment of an arrangement fee for this loan in the sum of €10,000. As part of the negotiations being conducted by the company's accountant, Mr Kelleher, with the bank, it was apparently agreed that this should be waived. Mr. O'Keeffe relies upon a handwritten note from the accountant to that effect.
It is not in dispute that the loan itself is repayable on demand. On the 3rd April, 2009, the bank wrote to Mr. O'Keeffe presumably following some interaction between him and the bank to advise him that the bank was extending the loan to the 2nd May, 2009 subject to the same terms and conditions. The extension was to allow for time for a review of the loan to take place.
The bank again wrote to Mr. O'Keeffe on the 2nd December, 2009 this time in his capacity as a guarantor notifying him that the bank had agreed with the borrower to change the terms of the facilities as set out in the accompanying letter. The letter indicated that the facility would now continue until the 1st March, 2010 when it would become repayable. The bank again wrote to Mr. O'Keeffe on the 11th August, 2010 referring to a meeting of the same day when obviously the company's loans were discussed. This letter required him to provide to the bank a statement of his net worth for the purposes of considering whether the bank would renew the company's facility.
Mr. O'Keeffe replied to this letter on the 1st September, 2010 saying that he did not think any purpose would be served by renewing the facility and he did not wish to request such renewal. Instead he made proposals for putting the secured property up for sale with a view to discharging the loan. Mr. O'Keeffe accordingly declined to furnish a statement of affairs as he was not requesting a renewal of the loan on behalf of the company. Obviously the purpose of Mr. O'Keeffe being requested to furnish such a statement of net worth to the bank can only have been in connection with his own ability to meet the terms of the guarantee which would presumably have been required for the bank to consider renewal of the loan to the company.
It is important to note that this letter written by Mr. O'Keeffe, the best part of four years after entering into the guarantee the subject matter of these proceedings, makes no mention of that guarantee or any suggestion that it was at that time other than in full force and effect.
The company ultimately defaulted on the loan and a demand for payment was made to the company on the 26th June, 2013. Following upon the company's failure to satisfy that demand, a separate demand was made by the bank on the 18th September, 2013 of Mr. O'Keeffe personally for payment of €1 million on foot of the guarantee. The summary summons herein was subsequently issued on the 19th November, 2014 and the within motion for summary judgment on the 19th August, 2015. Mr. O'Keeffe's first replying affidavit in this application was sworn on the 2nd June, 2016.
In essence, in this affidavit, Mr. O'Keeffe suggests for the first time that he is not liable on foot of the personal guarantee for three reasons. First he says that an express representation was made to him by the relevant bank official Gerard O'Brien, which Mr. O'Keeffe understood to mean that the bank would not be relying on the guarantee. Second, he suggests that there was some invalidity in the terms of the demand for payment made of him by the bank and third because the bank extended the loan to the company and thus altered the terms of the facility underlying his letter of guarantee without his assent, he is no longer bound by the guarantee.
In his first affidavit, Mr. O'Keeffe raised the issue of the bank's representation in the following terms:
'13. However, on receipt of the plaintiff bank's facility letter dated 11th January, 2007, the first written information I had received regarding the proposals, I became aware for the first time that additional security for the facility in the form of personal guarantees by the directors was being sought by the plaintiff. I was very concerned at this prospect but was reassured by Mr. O'Brien of the plaintiff bank, who...
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