Allied Irish Banks Plc v McKeown
| Jurisdiction | Ireland |
| Judge | Ms. Justice Costello |
| Judgment Date | 12 May 2017 |
| Neutral Citation | [2017] IEHC 363 |
| Docket Number | [2017 No. 42 S.] [2017 No. 18 COM] |
| Court | High Court |
| Date | 12 May 2017 |
[2017] IEHC 363
THE HIGH COURT
COMMERCIAL
Costello J.
[2017 No. 42 S.]
[2017 No. 18 COM]
AND
Banking & Finance – Non-payment of debt – Deed of guarantee – Summary judgment – Bona fide defence
Facts: The plaintiff sought liberty to enter judgment against the defendants. The defendants took the defence in relation to the construction of letters, the alleged improper motives of the plaintiff and the alleged material alteration of the loans in question. The defendants had also filed a counterclaim against the plaintiff.
Ms. Justice Costello granted the desired relief to the plaintiff. The Court held that the defendants had not raised a bona fide defence. The Court found that the defendants had not established how the alleged improper motives of the plaintiff amounted to a defence to the claim for summary judgment. The Court noted that the initiation of a counterclaim would not be a ground to grant interlocutory injunction in favour of the defendants.
This is an application by the plaintiff for liberty to enter judgment against the first named defendant in the sum of €1,429,166.22 and against each of the first and second named defendants on a joint and several basis in the sum of €40,548.60. It also seeks judgment as against the second named defendant in the sum of €1,387,003.82 and €40,000. It seeks interest pursuant to contract and statute and costs. The claim arises as follows.
The plaintiff is a body corporate and at all material times carries on the business of a bank within the State. Its registered office is at Bank Centre, Ballsbridge, Dublin 4. The first and second named defendants are a husband and wife. They reside at The Poplars, Villa Nova, Douglas Road, Cork. At all material times they carried on business as professional landlords. They own a portfolio of commercial properties in Cork city which generate a rent roll from which they must draw their family income, the expenses associated with their business, including their tax liabilities and their loan repayments.
By letter of loan offer dated the 20th May, 2013, the plaintiff offered to refinance three facilities of the first named defendant with the plaintiff. The letter stated: -
‘The Bank is pleased to offer you the facilities below subject to the terms and conditions set out in this letter and subject to the Bank's General Terms and Conditions Governing Business Lending.’
It referred to three facilities, loan account (934054-28910235), (934054-28910318) and (934054-28910581). In each case repayment was: -
‘On demand at the pleasure of the Bank subject to repayment/refinance on 31/12/2013. In the interim interest is to be funded by way of a monthly standing order in’ [respect of a specified amount]’
Security for the facility included two letters of guarantee from the second named defendant for €1,650,000 and interest and €40,000 and interest in each case. The first guarantee was held as supporting security facilities 1 and 2 and the second was to be held as supporting security for facility 3. The first named defendant expressly waived his entitlement to take independent legal advice prior to signing the letter which he signed and accepted on the 24th May, 2013.
The funds were drawn down by way of refinancing i.e. they had previously been drawn down in respect of the existing facilities. It is common case that the facilities were not repaid or refinanced and each of the loan accounts remains outstanding.
The plaintiff offered the defendants a letter of loan sanction also dated the 20th May, 2013, the terms of which were accepted and signed by the first and second named defendants on or about the 24th May, 2013. This facility refinanced loan account number 934054-27044366 in the amount of €39,476.00 together with an overdraft facility of €10,000. The facility was repayable on demand at the pleasure of the plaintiff and pending repayment/refinance on the 31st December, 2013 and interest was to be funded by way of a monthly standing order in the amount of €166. Each of the defendants were jointly and severally liable for the liabilities incurred under the facility. As with the facility offered to the first named defendant alone, the finance had already been advanced and drawn down pursuant to the earlier account. The facilities were not repaid or refinanced and the loan remains in arrears.
By guarantee in writing dated the 2nd March, 2009, in consideration of the plaintiff agreeing to give time or make or continue advances or otherwise give credit or afford banking facilities to the first named defendant, the second named defendant irrevocably and unconditionally agreed to pay and satisfy to the plaintiff on demand, all sums of money which were then or at any time thereafter might become owing to the plaintiff from the first named defendant up to an amount not exceeding €1,650,000 together with interest thereon. The defendant accepted the agreement in writing on the 2nd March, 2009.
On the 1st December, 2009, the second named defendant entered into a second guarantee in identical terms in favour of the plaintiff in respect of the liabilities of the first named defendant to the plaintiff up to a total amount not to exceed €40,000 together with interest.
The defendants do not deny that they entered into the facilities of May, 2013. They accept that funds were drawn down in the sense that this was a refinancing of existing facilities. They accept that the facilities were temporary and expired on the 31st December, 2013, and they accept that the monies have not been repaid.
There were considerable dealings between the parties between May, 2013 and the institution of proceedings in January, 2017. A number of offers and counter offers were made in an effort to place the facilities on a basis acceptable to both parties and to address the many concerns and complaints regarding the facilities raised by the defendants. The defendants made two complaints to the plaintiff's Credit Appeals Office, neither of which was upheld. Mr. David Coleman on behalf of the plaintiff stated in his affidavit grounding the plaintiff's application for summary judgment: -
‘The Plaintiff has spent a considerable amount of time liaising with the Defendants and their advisors to try to establish whether there is any basis on which their indebtedness might be rescheduled or managed in some way so as to avoid the necessity to issue the present proceedings, but to no avail, and the Plaintiff has been left with no option but to institute these proceedings.’
In a submission to the plaintiff dated November 2015 the defendants stated: -
‘We have not asked for a debt write down or any other form of write off to this point. We acknowledge our debt and only request the opportunity to pay it off over time at existing rates. This was the spirit in which AIB lent us the monies in the first place. We do not pose a risk to the bank and are not in negative equity, in fact our Loan to Value and Income have greatly increased since AIB lent us the money initially for our investment.’
The plaintiff submitted two restructuring proposals in December, 2014 and June, 2015. Both proposals involved the disposal of the assets of the defendants and an increase in the interest rates to reflect the increased cost of funds to the plaintiff. As the defendants' living expenses were mainly dependent upon rental income from these properties, both of these proposals were rejected by the borrowers.
The borrowers submitted two counter proposals to the plaintiff which involved the disposal of only one minor property and continuing the original interest rates applicable to the loans when they were first advanced. These proposals were not acceptable to the plaintiff primarily because they would not cover its costs of borrowings, but also because, in its view, the repayments were not sustainable based on rental income levels for the properties over the long term.
The defendants appealed their case to the Credit Review Office for review. The first named defendant exhibited the report to his affidavit of the 27th February, 2017, though he pointed out that they had objected to the report on the basis of ‘… a number of issues pertaining to accuracy and impartiality…’ and it had been withdrawn on the 26th October, 2016. Despite this fact, the defendants elected to put it in evidence to the court and so I have considered it. The reviewers reviewed the current and projected rent-rolls from the properties and agreed with the plaintiff that the loans are not sustainable on a long term basis without property disposal.
There were further proposals, counter-proposals, an appeal to the plaintiff's appeals board in 2016, but no resolution to the issues between the parties was found and the facilities were neither refinanced nor repaid.
Throughout the period the defendants made a variety of complaints to the plaintiff regarding their treatment by the plaintiff. The plaintiff denied that it had acted wrongly and said that where it had made an error it had corrected the error. These matters included claims that: -
•The plaintiff wrongly failed to release title deeds in respect of properties in 2005 which they accept were subsequently offered as security for later facilities.
• The duplication of one repayment of €582.02 in October, 2010 which was corrected in December 2011.
• The alleged wrongful charging of a funding premium to their accounts (their complaint in relation to this was not upheld by the Financial Services Ombudsman).
• The plaintiff delayed in placing the tracker mortgage relating to their family home on an interest only basis...
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The Importance Of The All Sums Due Clause
...High Court, in the recently decided case of Allied Irish Banks Plc v McKeown & anor [2017] IEHC 363, granted an order for summary judgment in favour of AIB in respect of amounts owing by the first named defendant on foot of facilities originally granted in 2005, for which the second nam......