Allied Irish Banks Plc v Patrick Pierse and Another

JudgeMr Justice David Keane
Judgment Date14 January 2015
Neutral Citation[2015] IEHC 136
CourtHigh Court
Date14 January 2015

[2015] IEHC 136


[No. 2515S/2010]
Allied Irish Banks Plc v Patrick Pierse & Anor.
No Redaction Needed





Banking & Finance – Default in repayment of loan – Summary judgment – Fiduciary duty of bank – Consumer Credit Act 1995

Facts: The plaintiffs sought an order for summary judgment against the defendants regarding default in repayment of two loans. The defendants contended that the plaintiffs owed a fiduciary duty toward the defendants and in the particular circumstances, the plaintiffs should not have entered into the subject loan transaction with the defendants. The second named defendant contended that she was the consumer under the Consumer Credit Act 1995 and therefore, the loan agreement was invalid against her.

Mr. Justice David Keane granted an order for summary judgment against the defendants. The Court held that there was no breach of duty by the first named defendant in the case. The Court observed that the relationship of a banker and a customer does not place a banker under any duty of care to the borrower to advise the customer unless specifically asked for. The Court held that the term ‘consumer’ within the Consumer Credit Act 1995 in conformity with Council Directive 87/102/EEC, as amended by Council Directive 90/80/EEC, means a person who had acted in a private capacity and the said Act only protects persons who had entered into a contract in order to fulfil their personal needs. The Court found that it could not be said that the second named defendant jointly purchasing the properties for the purpose of investment was doing it for the satisfaction of an individual need and therefore, she could not be a consumer within the said Act.


The plaintiff in these proceedings ("the bank") seeks judgment in the sum of €1,986,132.55, together with continuing interest, against the defendants arising out of a loan facility provided by the bank to the defendants, as husband and wife, in April 2006. The purpose of that facility was to provide bridging finance to enable the defendants to purchase two blocks of apartments on the French island of Corsica, pending the execution of a contract for the sale of a 7 acre plot of land ("the 7 acres") on the first named defendant's farm ("the farm"), appurtenant to the defendants' home at Ballinorig House, Ballinorig, Tralee, County Kerry, and the sale of a separate property owned by the first named defendant at Castlegregory, County Kerry.


The following facts are not in dispute between the parties. By letter of sanction dated the 6 th April 2006 and addressed to the second named defendant, the bank offered the defendants a bridging loan facility in the sum of €2 million on specified terms. That letter recites that, within three months from the date upon which it was drawn down, the loan was to be repaid in full from the net sale proceeds of the land and property already described, with interest to roll up in the interim. The letter of sanction also states that the loan is subject to the bank's "General Terms and Conditions Governing Business Lending " as set out in a booklet, dated the 4 th May 2004, a copy of which was stated to be enclosed.


The facility was drawn down in full on the 10 thApril 2006. The defendants each signed the letter of sanction on the 1 l th April 2006. However, in circumstances addressed in greater detail below, the loan facility was not repaid in accordance with its terms. In consideration of successive extensions of the loan period and repayment terms, each of the defendants signed subsequent letters of sanction dated the 13 thNovember 2007, the 22 nd October 2008, the 23 rd December 2008, and the 30 th January 2009. On the 9 th March 2009 the bank sent letters of demand to each of the defendants requiring repayment of the balance of €2,053,249.68 then outstanding on the loan. The defendants do not dispute that the sum now claimed by the bank is currently outstanding on the loan account at issue. However, they do contend that the bank is not entitled to judgment against them.

The history of the proceedings

The proceedings commenced by way of summary summons issued on the 28 th May 2010. In the special indorsement of claim, the bank sought judgment in the sum of €2,053,249.68. The defendants entered a memorandum of appearance on the 28 th of June 2010. Hanna J. heard the application for summary judgment on the 20 thDecember 2012. The application was refused by the learned judge and the matter was adjourned to plenary hearing.


In a statement of claim delivered on the 9 th January 2013 the bank seeks: judgment in the sum of €1,892,960.99 (€452,106 of the outstanding debt having been re-paid by the defendants on 21 st June 2012); continuing contractual interest at current bank rates; and the costs of these proceedings.


A defence was delivered on the 25 th February 2013. A reply to defence was delivered on the 21 st June 2013, in which the bank denies each of the points of defence raised on behalf of the defendants.


The action was tried before me on the 6 th, 7 th, and 8 th May 2014 and I reserved judgment in order to consider the evidence adduced and the defences raised.

The defences raised

While the defence delivered includes a series of general denials, including a denial of the loan agreement and an assertion in the alternative that the said agreement is unenforceable because the bank provided either no consideration or only past consideration for it, the defendants (in my view, rightly) did not rely on any of those arguments at trial.


The two arguments upon which the defendants did rely are the following: first, that the bank assumed, or ought to have assumed, a fiduciary duty or a duty of care to the defendants under which, in the particular circumstances of the case, the bank should not have entered into the relevant loan transaction with them; and second, that the loan agreement is invalid as between the bank and the second named defendant by operation of the relevant terms of the Consumer Credit Act 1995 ("the 1995 Act"), because the second named defendant must be considered a consumer in relation to that agreement for the purposes of the 1995 Act and did not receive the statutory protection to which she was entitled under that legislation. I propose to deal with each of those defences in turn. Just before doing so, it may be helpful to note that, since the only controversy between the parties was whether the defendants could make out any such defence, the parties agreed that the defendants should go first, and the trial before me proceeded in that way.


The first named defendant testified that he inherited the family farm from his father in 1988. The defendants were married in 1996 and reside in the farmhouse on the farm. The farm is situated on the outskirts of Tralee and, when the first named defendant inherited it, comprised some 90 acres. The first named defendant did not see himself as a farmer and leased the farm to a cousin of his. He has earned his own modest income at various times by playing music in local pubs and hotels, by breeding dogs, and by providing gardening services, but has been otherwise effectively unemployed.


The second named defendant gave evidence that she had become an employee of the bank prior to her marriage to the first named defendant. She worked at different times in the bank's Killorglin and Castleisland branches. She moved from full-time work to a job sharing arrangement in 2003, before finally resigning her position in 2010. The defendants have three teenage daughters.


The first named defendant gave evidence that he has supplemented the family income at various times by selling off plots of land from the farm. For example, in 2004 he sold 10 acres of land to a third party, who subsequently sold it on to two identified persons, who were then property developers in the Tralee area, for a sum of €300,000. For ease of reference, I will refer to those persons, whose role is central to the main defence advanced, as "the developers." In 2005, the first named defendant sold a 15 acre site directly to the developers. The first named defendant asserts that, in return, they agreed to pay him €1.2 million in cash and to build two houses for him in Castlegregory, County Kerry. The first named defendant asserts that only one house was provided to him and that the developers still owe him the further sum of €550,000.


The first named defendant testified that, at the time of the loan agreement which forms the subject matter of these proceedings, 62 acres of the farm that he had inherited from his father remained in his ownership. Prior to entering into the loan agreement, the first named defendant had entered into two separate agreements with the developers. The first was an oral agreement with the developers to sell them the 7 acres for €1.8 million. The second was an agreement giving the developers (in conjunction with another developer) an option to purchase the remaining 55 acres of the farm for €12 million in exchange for a payment of €50,000.


It will be evident at once that the value attributed to the lands for the purpose of these transactions was far in excess of their agricultural value. While no evidence was adduced directly on this point, it appears to be accepted on all sides that what was anticipated in early 2006 was the construction of a ring road around the town of Tralee across the lands and the development upon the lands of a "medical campus", comprising a hospital and nursing home.


Through a contact that the first defendant made when he attended an exhibition of foreign properties in Dublin in early Autumn 2005, the defendants contracted in February 2006 to purchase two apartment blocks, consisting of nine units in total, which were then...

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