Allied Irish Banks Plc v Connors
| Jurisdiction | Ireland |
| Judge | Mr Justice Donald Binchy |
| Judgment Date | 15 June 2018 |
| Neutral Citation | [2018] IEHC 382 |
| Docket Number | [2016 No. 1235 S.] |
| Court | High Court |
| Date | 15 June 2018 |
[2018] IEHC 382
THE HIGH COURT
Binchy J.
[2016 No. 1235 S.]
AND
Banking and finance – Loan facility – Repayment – Plaintiff seeking repayment of outstanding balance – Whether the plaintiff failed to mitigate its loss
Facts: The plaintiff, Allied Irish Banks plc, by letter dated 18th March, 2010, offered the defendants, Mr J Connors and Mr L Connors, a loan facility in the sum of €205,500.00. This was accepted by the defendants jointly on 26th March, 2010, and their signatures of acceptance were witnessed by their solicitor acting on their behalf in connection with the loan. The facility was a restructure of a previous loan facility. The defendants fell into arrears with repayment of the loan, and by letter of 16th December, 2014, the plaintiff demanded repayment of the then outstanding balance of €232,494.45. Identical letters of demand issued to both defendants on that date. By motion dated 22nd September, 2016, which came on for hearing before the High Court on 17th May, 2018, the plaintiff sought judgment in the amount of €239,192.66. The motion was grounded upon the affidavit of Mr McGuinness, manager in the employment of the plaintiff. The second defendant put forward the following defences on behalf of both defendants: (1) in failing to enforce its entitlements under the policy, as mortgagee, the plaintiff failed to mitigate its loss by taking such steps as were available to it to secure payment in full under the terms of the policy; (2) the plaintiff acted unreasonably in not permitting the net settlement proceeds of €85,000.00 to be used in the restoration of the dwelling house, and had the plaintiff done so, the first defendant would have been enabled to move back into the dwelling house and resume repayments of the loan; (3) the plaintiff failed to attempt a non-legal resolution or consensual debt restructuring prior to the institution of proceedings; (4) the plaintiff unlawfully removed monies from the second defendant's bank accounts on 18th/19th December, 2014, or at least did so without the knowledge or consent of the second defendant.
Held by Binchy J that he could see no possibility that the defendants would succeed with any of the lines of defence advanced on their behalf on this application. Binchy J held that the plaintiff was entitled to obtain judgment in the amount sought in the sum of €239,192.66.
Binchy J held that a particularly unusual feature of this case was that a cheque for €85,000 issued by an insurer, FBD, had not been encashed. Binchy J noted that: (1) FBD may agree to honour the cheque if it is asked to do so; (2) if the settlement with FBD was made an order of court, then that order was likely to be enforceable against FBD for twelve years from the date of the order, and accordingly it may be obliged as a matter of law to honour the existing cheque or make payment afresh to the parties. Binchy J held that he would defer making a final order to allow the parties to explore this further with FBD; if it agreed to make payment afresh, then the payment may be applied in reduction of the amount claimed by the plaintiff.
Application granted.
This is an application for summary judgment brought by the plaintiff against the defendants, in the sum of €239,192.66. By letter dated 18th March, 2010, the plaintiff offered the defendants a loan facility in the sum of €205,500.00. This was accepted by the defendants jointly on 26th March, 2010, and their signatures of acceptance were witnessed by their solicitor acting on their behalf in connection with the loan. The facility was a restructure of a previous loan facility. None of this is in dispute, and nor is the fact that the facility was drawn down.
The defendants fell into arrears with repayment of the loan, and by letter of 16th December, 2014, the plaintiff demanded repayment of the then outstanding balance of €232,494.45. Identical letters of demand issued to both defendants on that date. By motion dated 22nd September, 2016, which came on for hearing before this Court on 17th May, 2018, the plaintiff seeks judgment in the amount referred to above. The motion is grounded upon the affidavit of Mr Brian McGuinness, manager in the employment of the plaintiff, wherein he avers to the drawing down of the loan and the amount outstanding.
The second named defendant, Mr Luke Connors, who is the father of the first named defendant, swore a replying affidavit on 13th January, 2017. He deposes that while the loan was granted in the joint names of the defendants, it was understood that the first named defendant would be primarily responsible for the repayment of the loan, and that the second named defendant was being named on the loan sanction because the loan was granted on the basis of his assets and earnings at the time. In this regard, he relies on the direct debit instructions mandate completed at the time which was executed by the first named defendant only.
The second named defendant then goes on to relate how the dwelling house of the first named defendant had been destroyed by fire on 25th November, 2009. Although it is not stated expressly in any of the affidavits, it seems very likely that it was for the purpose of purchasing this dwelling house that the plaintiff originally advanced a loan to the defendants, or perhaps to the first named defendant only. In any event nothing turns on that issue. The second named defendant then proceeds to relate how an insurance claim brought by the first named defendant in relation to the destruction of his dwelling house was declined by the insurers, FBD Insurance plc. That declinature gave rise to an arbitration, which in turn gave rise to the subsequent issue of proceedings in the High Court. The first named defendant deposes that these proceedings were issued by FBD to have the award of the arbitrator set aside. The proceedings were successful, apparently because the High Court found that the arbitrator should, as a matter of fairness, have agreed to adjourn the arbitration at the request of FBD, and he did not do so (I have gleaned this from correspondence between the parties, not from the decision itself which was not available to me). That decision was appealed by the first named defendant to the Supreme Court. Ultimately there was a settlement of those proceedings for the sum of €195,000.00 of which sum €110,000.00 related to costs made up of engineer's fees, loss adjustor's fees, the fees of the arbitrator and all legal costs associated with both the arbitration and the proceedings. The upshot of all of this was that after deduction of all costs, there was just €85,000.00 available to reinstate the dwelling house, as against the sum of €156,000.00 awarded by the arbitrator.
Long before that, the solicitors acting on behalf of the first named defendant had written to the plaintiff asking for a moratorium on the repayment of the loan, pending determination of the arbitration proceedings. The second named defendant exhibits this correspondence. It starts with a letter from the solicitors for the first named defendant to the plaintiff dated 15th February, 2010. That letter describes how the first named defendant and his family were living in a caravan pending the resolution of the claim. A further letter was sent on 25th February, 2010, and another dated 22nd June, 2010. It appears that there may have been replies to at least some of these letters, but those replies were not exhibited; what is clear however, is that no moratorium was agreed to by the plaintiff.
On 8th December, 2010, the solicitors for the first named defendant wrote a further letter to the plaintiff, on this occasion referring specifically to the fact that the plaintiff was named as an interested party on the insurance policy. They refer to Clause 103 of the insurance policy which they stated in their letter (the policy itself was not exhibited or made available in these proceedings) provides as follows:-
'The interest of the mortgagee in this insurance shall not be prejudiced by any act or neglect of the mortgagor or occupier of any building hereby insured whereby the danger of loss or damage is increased without the authority or knowledge of the mortgagee provided the mortgagee shall immediately on becoming aware thereof give notice in writing to the company and on demand pay such additional premium as the company may require'.
In the same letter, the solicitors for the first named defendant said that they had received advices from senior counsel to the effect that even if FBD were entitled to deny indemnity under the policy to the first named defendant, they would have no entitlement to do so as against the plaintiff bank, on the basis of this clause. The solicitors for the first named defendant therefore invited the plaintiff to authorise the solicitors to state that it was the intention of the plaintiff to rely on the conditions of the policy and to seek indemnity under Clause 103 thereof. The plaintiff did not respond to this invitation or give any such authority to the first named defendant or his solicitors or otherwise engage in the arbitration process.
Following upon the final conclusion of the Supreme Court appeal, the solicitors for the first named defendant wrote to the plaintiff on 30th October, 2012, advising as to the outcome and in particular drawing attention to the fact that the amount that would be received by the first named defendant was substantially less than the amount required to compensate him for all loss resulting from the fire.
It is not entirely clear precisely what happened from this onwards, because not all correspondence is exhibited. Nonetheless, the key facts are clear and are not in dispute. A cheque issued from FBD in the joint names of...
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