Allied Irish Banks Plc v Keane

• Jurisdiction: Ireland
• Judge: Ms. Justice Dunne
• Judgment Date: 23 November 2012
• Neutral Citation: [2012] IEHC 516
• Docket Number: [No. 3861 S./2010]
• Court: High Court
• Date: 23 November 2012

[2012] IEHC 516

THE HIGH COURT

[No. 3861 S./2010]

Allied Irish Banks PLC v Keane & Ryan

BETWEEN

ALLIED IRISH BANKS PLC

PLAINTIFFS

AND

SEAN KEANE, MICHAEL RYAN AND MICHAEL RYANSENIOR

DEFENDANTS

LLOYDS BANK PLC v LAMPERT 1999 1 AER (COMM) 161 1999 BCC 507

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

CONSULNOR GESTION SGHC SA v OPTIMAL MULTIADVISORS IRL PLC UNREP KELLY 27.3.2009 2009/9/2107 2009 IEHC 173

GE CAPITAL WOODCHESTER LTD & GE CAPITAL WOODCHESTER FINANCE LTD v AKTIV KAPITAL ASSET INVESTMENT LTD & AKTIV KAPITAL ASA UNREP CLARKE 19.11.2009 2009/22/5542 2009 IEHC 512

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

HOLME v BRUNSKILL 1878 3 QBD 495

Banking - Loans - Application for final judgment - Whether defendants had bona fide defence to the claim

Facts: The plaintiff had advanced sums to the first and second developments in respect of a purchase of a site for development. The third defendant, the father of the second defendant, had provided a guarantee in respect of the loans. Following a failure to repay the outstanding sums, the plaintiff had offered to extend the loan facilities subject to a further guarantee. This was not provided, and the matter passed to litigation.

Held by Dunne J, that the defendants contended the original terms of the loans had been varied, in such a manner that the plaintiff's right to call in the sums due had been negated. However, this argument disregarded the basic fact that under the terms and conditions applicable the bank was entitled to call in the sums in the event of a default. The plaintiff had been amenable to compromising on the matter, but the failure of the third defendant to provide a further guarantee had prevented an agreement. As such, the plaintiff was entitled to seek final judgment in the matter. GE Capital Woodchester Ltd v Aktiv Kapital & Others [2009] IEHC 512; [2009] 11 JIC 1903 applied.

In respect of the guarantee, the Court dismissed the third defendant's submissions that the extension of time for repayment by the plaintiff had the effect of discharging him from liability in respect of the guarantee. Such a variation was expressly provided for in the terms of the guarantee. The Court also dismissed the other arguments advanced by the third defendant and held that final judgment was available to be entered against him also.

The plaintiff's claim would therefore succeed.

Ms. Justice Dunne

1 The plaintiff's claim herein against the first and second named defendants is in respect of two loans, one for the purchase of a site and the second in respect of the development of the site, amounting in total to the sum of €2,527,628. The claim against the third named defendant, the father of the second named defendant, is on foot of a guarantee dated the 13^th August, 2007.

2 This matter came before the Master of the High Court on foot of a motion seeking liberty to enter final judgment. Following an exchange of affidavits between the parties, the proceedings came before this Court and in the course of the hearing, the plaintiff sought judgment against the defendants while the defendants maintained that there was abona fide defence to the proceedings and argued that the matter be adjourned to plenary hearing.

3 The background to this matter is set out in some detail in the affidavit of Michael Flanagan sworn herein in the 17^th January, 2011, on behalf of the plaintiffs. He explained that the bank made loan facilities available to the first and second named defendants for the purpose of acquiring and developing a commercial development site located at Waterford Airport Business Park. The site was approximately two acres and initially it was intended by the first and second named defendants to construct 41,000 sq. feet of industrial development property on the site. A letter of sanction dated the 13^th August, 2007, was furnished to the first and second named defendants in respect of an overall sum of €5,300,000 on terms and conditions set out therein. That letter of sanction was duly executed by the first and second named defendants on the 15^th August, 2007. The loan consisted of two separate facilities, the first being in the amount of €1,300,000 for the purpose of funding the acquisition of the site together with stamp duty and interest roll up for the two year term of the loan. That sum was drawn down on the 17^th August, 2007 and is reflected in loan account No. 17721031 in the name of the first and second named defendants. The balance of the facility, namely €4 million, was to be provided to fund the development costs of the industrial units on the site. Part of this facility was drawn down and is comprised in account No. 17721387. As security for the loan, the bank required a guarantee from the third named defendant in the sum of €5,300,000. A guarantee appears to have been executed on the 13^th August, 2007, by the third named defendant. That guarantee was supported by a charge over a stud farm situate in Dungarvan, Co. Waterford. I will refer later to this guarantee in the context of the affidavit sworn herein on behalf of the third named defendant.

4 Paragraph 8 of the affidavit sworn by Mr. Flanagan is of some significance and I propose to refer to it in detail. He stated:-

"I say and believe that subsequent to the acquisition of the site and in view of the economic downturn which occurred at that time, the first and second named defendants advised the plaintiffs that they intended limiting the initial development of the site to 17,000 sq. feet (ie approximately 40% of the original scale of development). I say and believe that the plaintiffs agreed to provide support for the revised development in the sum of €1,150,000, being the amount of the fixed price contract in respect of the 17,000 sq. feet development. I say and believe that the said agreement was made orally and that no revised letter of sanction was either prepared or executed in respect of this agreement."

5 Mr. Flanagan went on to point out that the facilities provided on foot of the letter of sanction of the 13^th August, 2007 were to be cleared within two years from the date of drawdown of the first facility. He pointed out that the loans were not cleared within that period but that the 17,000 sq. feet of development was practically complete with only some groundwork remaining outstanding. He then outlined meetings between the first and second named defendant and the bank on the 30^th November, 2009, for the purpose of discussing the extension and renewal of the facilities. A sum of €127,000 was sought at that stage for the purpose of completing the outstanding works together with a sum of €25,000 sought to clear outstanding balances owed by a company of the first and second named defendants namely First Adventure Limited. That request was approved and a letter of sanction dated the 10 December, 2009, was provided to the first and second named defendants. That provided for an extension of the facilities to the first and second named defendants for a further period of one year. It contemplated that the guarantee provided by the third named defendant would be reduced in amount to a total of €2,670,000 reflecting the reduced amount of the overall loan facilities being provided. Correspondence then ensued between the bank and the first and second named defendants through their representative Mr. Frank Wallace, accountant. The first and second named defendants were dissatisfied with the interest terms contained in the letter of sanction. Subsequently, they indicated that there was a requirement for a further sum of approximately €200,000 to complete the initial stage of the development. Confusingly, it was suggested by Mr. Flanagan in his affidavit that the bank had provided the additional sum of €127,000 in November, 2009, on foot of the final architect's certificate. The first and second named defendants declined the plaintiff's offer and appealed the matter to the plaintiff's internal appeals board, which notified the defendants by letter of the 14th June, 2010, that the appeal had been rejected. Subsequently on the 30^th June, 2010, a revised proposal was submitted on behalf the first and second named defendants on terms that were acceptable to the plaintiff and a further letter of sanction issued on the 7^th July, 2010, together with a revised guarantee addressed to the third named defendant. The third named defendant at that stage sought to have the amount of the guarantee reduced to €1 million and that was not acceptable to the plaintiffs and as no agreement could be reached between the parties, a decision was made to demand repayment on foot of the facilities and those letters of demand were issued on the 8^th July, 2010. Notwithstanding this, the plaintiff remained prepared to extend the facilities as set out in the letter of loan sanction dated the 7^th July, 2010, subject to the provision of a supporting guarantee of the third named defendant. The first and second named defendants subsequently returned the letters of loan sanction duly executed but the third named defendant declined to put in place the securities specified in that letter of loan sanction and therefore the plaintiffs did not approve the further extension of loan facilities. Whilst there were further discussions between the parties, the matter was not resolved and these proceedings duly issued.

6 Sean Keane swore an affidavit on behalf of the first and second named defendants on the 2^nd May, 2011. There is little factual dispute between the parties in relation to the background to this matter. Mr. Keane in his affidavit pointed out that Mr. Eamon Moore of the plaintiff's bank, a bank manager based in Dungarvan, Co. Waterford was involved in dealing with the negotiation of the letter of loan sanction dated the 13^th August, 2007. The facility in respect of the...