Allied Irish Banks Plc v Doran

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 11 January 2018
• Neutral Citation: [2018] IEHC 2
• Docket Number: 2014 No. 2988 S
• Court: High Court
• Date: 11 January 2018

[2018] IEHC 2

THE HIGH COURT

Barrett J.

2014 No. 2988 S

Between:

Allied Irish Banks p.l.c.

Plaintiff

- and -

James Doran, Senior

Defendant

Banking & Finance - Summary judgment - Bona fide defence - Practice and Procedure - Non-payment of loans

Facts: The plaintiff sought an order for summary judgment against the defendant for defaulting on the payment of the money lent in advance by the plaintiff. The guarantor/father sought to vitiate a guarantee executed in favour of a bank by reason of a breach of an alleged duty owed by the bank. The defendant contended that no legal advice was offered or given by the plaintiff while advancing the loan to the defendant.

Mr. Justice Max Barrett granted the summary judgment to the plaintiff. The Court held that it was not satisfied that the defendant had a fair or reasonable probability of a real and bona fide defence. The Court relied on the decision of the Court of Appeal in ACC Loan Management Ltd v. Connolly [2017] IECA 119. The Court stated that the defendant was aware of the endorsement of claim and what case he had to meet.

JUDGMENT of Mr Justice Max Barrett delivered on 11th January, 2018.

I

Connolly

1 The decision in this application falls to be framed in the context of the decision of the Court of Appeal in ACC Loan Management Ltd v. Connolly [2017] IECA 119. In that case, certain loans to the first defendant, Mr John Connolly, were guaranteed by way of two guarantees, one of 2005 and one of 2008, given by Mr Maurice Connolly, co-defendant, appellant, and father to John. Mr Maurice Connolly contended on appeal that account should have been taken of the fact that he had not been provided with independent legal advice before giving the guarantee and that the transaction was an improvident one for a man who was a vulnerable and not especially well person in his late 60s. No evidence of the son's supposed undue influence was given. Even so, it was argued that the low standard identified in Aer Rianta v Ryanair [2001] 4 I.R. 607 was met where the lender knew of a close relationship (including father and son) and had not taken steps to ensure that independent legal advice had been obtained by the guarantor. This last-mentioned argument failed in the Court of Appeal, Finlay Geoghegan J. observing as follows, at para.28:

'There was no evidence before the High Court upon which it could be concluded that an arguable defence of undue influence or other wrong by the son was made out....I am not satisfied that, in the absence of the father making out an arguable defence that he gave the guarantee under the undue influence of his son (or because of any other alleged wrong such as misrepresentation), there is any arguable defence available in Irish law to him that the bank was under an obligation by reason of the known fact that he, the proposed guarantor, was the father of the principal debtor to take steps to ensure that he received independent legal advice or otherwise ensure that the guarantee was freely entered into such that the failure of the bank to take such steps is an arguable defence to the enforcement of the guarantee against him.'

2 The within case offers another example of an aged father giving a couple of guarantees in favour of, inter alia, his son, the latter of which guarantees is now being sued upon. A distinction between the facts of Connolly and those at hand is that here there is affidavit evidence which is prayed in aid of the defence that the guarantee being sued upon was procured by misrepresentation, to which issue the court returns later below.

3 Continuing for now, however, with the judgment of Finlay Geoghegan J. in Connolly, she found, at para.29, that neither the decision of the House of Lords in Royal Bank of Scotland v Etridge (No.2) [2002] 2 A.C. 773 nor that of Clarke J. in Ulster Bank v. Roche and Buttimer [2012] IEHC 166 provided ' authority for an independent or distinct defence for a guarantor, albeit related to the principal debtor, seeking to vitiate a guarantee executed in favour of a bank by reason of a breach of an alleged duty owed by the bank to him to ensure that he has obtained independent legal advice or has taken some further steps to ensure that he fully understood the nature of the guarantee being given'.

4 The case at hand, as will be seen, does not contend for such a free-standing duty. Here, submission is made that '[h] istorically the bank believed it necessary to ensure [that Mr Doran]... had independent legal advice but in 2010...for some reason, the bank chose to deal with...Mr Doran where he had no independent advice...[I] nstead he relied exclusively on the bank'. However, this submission is not borne out by Mr Doran's evidence. He avers, as will be seen below, that 'Prior to my entering into the guarantee arrangement in 2006 I had the opportunity to receive and to consider independent legal advice.... The plaintiff was aware that I had received independent legal advice'. There is no mention in his evidence that the bank acted differently in 2006 and 2010; it is Mr Doran who acted differently as regards whether or not to obtain legal advice in respect of the respective guarantees. Moreover, Mr Doran's complaint in his affidavit evidence, as will be seen, is not that he relied exclusively on the bank but rather that through the concatenation of circumstances presenting, 'I had no understanding of the nature and effect of the guarantee that I signed'.

5 Finlay Geoghegan J. concludes, inter alia, as follows, in Connolly, at para.49:

'The appellant's unfortunate position is that as a person of full age he has signed a guarantee in favour of the bank. Whilst he was referred to in submission as a "vulnerable" person there was no evidence of any particular vulnerability. He has not put any evidence before the court upon which it could be argued that he did not freely enter into the commitments under the guarantee he signed and permitted to be delivered to the bank in connection with the loans being given to his son. In the absence of evidence which would support an arguable duty imposed on the bank and arguable breach thereof there is no arguable defence.'

6 Armed with this consideration of Connolly, the court turns now to a detailed consideration of the case at hand.

II

Facts

7 This is a summary claim for €126,195 plus interest and costs pursuant to a personal guarantee dated 20th July, 2010. The circumstances in which the guarantee came to be executed are as well described by Mr Doran in his affidavit as they could be by the court; for some reason Allied Irish Banks never engages in its affidavit evidence with the circumstances in which the guarantee came to be executed by Mr Doran, confining itself to a recitation of certain elements of the guarantee and a consideration of the substance of the same, so the following averments of Mr Doran are effectively uncontroverted in the evidence.

'5. Briefly, by way of background, I say I am a retired farmer and am now 80 years of age. I only completed my primary school level of education. I am in receipt of the State Pension and a Pension from Eircom. I am not a man with much experience in commercial or banking matters. The only personal loan I have entered into with the plaintiff was for €1,000 many years ago for a tractor.

[Court Note: What Mr Doran avers to in this regard is a vulnerability that rests on his advanced years, his relatively limited education, and his general inexperience in banking and commercial matters.]

6. In 2006 I did provide a guarantee to the plaintiff in respect of a loan�advanced by the plaintiff to my son�and his wife. My knowledge of the project, for which the loan was required, was quite superficial but I understood that the [said] loan�.was to assist them in setting up a dental practice�

7. I had no direct financial interest in the project. I was neither a shareholder, director nor an employee of the business�.

[Court Note: What Mr Doran avers to in paras.6 and 7 likewise paints a picture of vulnerability in the form of an elderly man of limited financial means, with no banking and commercial knowledge and but a superficial knowledge of a project, giving a financial guarantee of that project.]

8. I say that the 2006 loan advanced to [my son and his wife]� was repayable over 180 months�commencing on the 22nd August 2006.

9. Prior to my entering into the guarantee arrangement in 2006 I had the opportunity to receive and to consider independent legal advice�.

[Court Note: Repeatedly contended by counsel for the bank at the hearing of the within application was the fact that the two guarantees, that of 2006 and that of 2010, are effectively identical, and so if Mr Doran was satisfied to enter into the guarantee of 2006, following on the legal advice obtained around that time, it followed that he would likewise have been satisfied to do so had he received legal advice in 2010. The court respectfully does not accept that this is so. Professional legal advice is given by reference to all the facts presenting at any one time. Moreover, the facts in 2010 were notably different in at least two significant respects: first, Mr Doran was an older man than he had been; second, by 2010 the beneficiaries of the guarantee had acquired a history of default, a point the significance of which any competent legal advisor would doubtless have drawn to the attention of Mr Doran.]

10. In respect of the events leading to the signing of the 2010 guarantee document by me, I say the following:-

(i) I say that on 20 July 2010, I was asked by my son�to attend at the plaintiff's premises in Carrick-on Shannon to sign documentation. At no point did my son or�AIB Bank explain what the document was, what it related to or why they needed your deponent to sign it.

(ii) I was not contacted by AIB or anyone acting on its behalf prior to the meeting.

(iii) I did not...