Allied Irish Banks Plc v Grove Oil (Roscrea) Ltd

JurisdictionIreland
JudgeMr. Justice MacGrath
Judgment Date26 November 2018
Neutral Citation[2018] IEHC 793
Docket Number[2015 No. 1658 S]
CourtHigh Court
Date26 November 2018
BETWEEN
ALLIED IRISH BANKS PLC
PLAINTIFF
AND
GROVE OIL (ROSCREA) LTD, CONLETH O'SULLIVAN

AND

OLIVE LYNCH
DEFENDANTS

[2018] IEHC 793

MacGrath J.

[2015 No. 1658 S]

THE HIGH COURT

Banking and finance – Guarantees – Undue influence – Plaintiff seeking summary judgment against the third defendant – Whether the third defendant had satisfied the threshold

Facts: The plaintiff, Allied Irish Banks Plc, applied to the High Court for summary judgment against the third defendant, Ms Lynch. The plaintiff claimed that certain sums were due on foot of two guarantees executed by the third defendant in respect of the debts of the first defendant, Grove Oil (Roscrea) Ltd. The plaintiff claimed a total sum of €162,886.32 from the third defendant.

Held by MacGrath J that the third defendant had satisfied the threshold and that her affidavits went beyond that of mere assertion in relation to both the question of undue influence and the plaintiff’s potential constructive notice thereof.

MacGrath J held that he would refuse the plaintiff’s application, direct that the defendant be given leave to defend and that the matter be transferred to plenary hearing.

Application refused.

JUDGMENT of Mr. Justice MacGrath delivered on the 26th day of November, 2018.
1

This is the plaintiff's application for summary judgment against the third named defendant. The plaintiff claims that certain sums are due on foot of two guarantees executed by the third named defendant in respect of the debts of the first named defendant company. It is pleaded that by letter of 10th May, 2011, the plaintiff made available to the first named defendant company a loan facility in the amount of €105,700 for the purpose of restructuring existing facilities. This was subject to certain terms and conditions including the requirement that the second and third named defendants execute letters of guarantee. These guarantees were executed on 11th May, 2011, by the second and third named defendants, and provided that the total amount recoverable from the second and third named defendants should not exceed €135,700 together with interest thereon. The guarantee was stated to be in addition to, and not in substitution for, any other guarantees or security for the obligations of the first named defendant given by the second and third named defendants. As of 15th December, 2014, the sum due on foot of the loan facility was €110,016.78.

2

A second guarantee was executed in respect of overdraft and other facilities provided by the plaintiff to the first named defendant on 31st July, 2012. The guarantee was executed on 30th August, 2012 by the second and third named defendants 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 defendant. This guarantee provided that the total amount recoverable from the third named defendant should not exceed €55,000 together with interest thereon and was stated to be in addition to, and not in substitution for, any other guarantee or security for the obligations of the first named defendant. A similar guarantee was executed by the second named defendant. As of 16th December, 2014 the total due on foot of this facility, inclusive of interest, was €52,869.54.

3

Letters of demand were served on 13th October, 2014 and 23rd June, 2015 on the first named defendant in respect of the principal sums due. Letters of demand dated 16th October, 2014 and 16th April, 2015, were served on the second and third named defendants in respect of their alleged liabilities on foot of the guarantees.

4

The plaintiff claims a total sum of €162,886.32 from the third named defendant. By notice of motion dated 8th May, 2017 the plaintiff has brought this application for liberty to enter final judgment against the third named defendant in that sum.

5

This application for summary judgment is grounded on the affidavit of Mr. Brian McGuinness, a manager employed by the plaintiff in its litigation management department. He avers to the facts outlined above.

6

Each of the guarantees state in a foreword, under the heading ‘ WARNING’ that ‘ [b]efore you sign this guarantee you should get independent legal advice’. The guarantee of 11th May, 2011 was signed by the third defendant and witnessed by a bank official. The guarantee of 30th August, 2012 had an identical warning and was witnessed by the same bank official, having been signed by the third defendant. There was a further guarantee executed by the third named defendant on 26th July, 2012 which is the subject of other proceedings which have been instituted in the Circuit Court. The guarantee was executed in the context of personal liabilities of Mr. O'Sullivan.

7

The letters of loan facilities were signed by the second defendant on behalf of the first defendant. A resolution of the first defendant company to accept the facilities was passed on 11th May, 2011 and signed by the second defendant and a Ms. Kavanagh who was described as chairperson of the company. The first defendant defaulted in its loan repayments. Demands were made of the first defendant; and then of the second and third defendants.

8

Counsel for the third named defendant, Mr. Hickey B.L. emphasises that the plaintiff does not seek judgment against the first or second named defendant. Counsel for the plaintiff, Mr. Walker B.L. submits that the liability of the third named defendant is a separate and independent liability and is not dependent upon the plaintiff proceeding against the first or second named defendant. Having considered the guarantees, for the purpose of this application and in the circumstances outlined, I accept Mr. Walker B.L.'s submissions on the facts as pleaded.

9

The third named defendant does not deny that she executed the guarantees but she submits that she is not liable thereon by reason of undue influence allegedly exerted on her by the second named defendant. She further alleges the plaintiff had, or should have had, constructive notice of this alleged undue influence.

10

Further, as security for the guarantee, the second and third named defendants executed a deed of mortgage on 11th May, 2011 in respect of property at Roscrea, Co. Tipperary. On 10th May, 2011, the plaintiff posted to both the second and third named defendants, at different addresses, a letter in the following terms:-

‘Re: Grove Oil (Roscrea) Limited

Facility: Overdraft €30,000.

Loan €105,700

Dear Ms. Lynch

Our above named customer has nominated you as guarantor for the above facilities and I enclose a copy of the terms of the facilities to be guaranteed.

Your guarantee is to be secured by the following items of security:

Legal Charge over property on 7.8293 hectares at Knock, Roscrea, Co Tipperary

I also enclose two copies of the guarantee form, one for you to sign and return to AIB, and the other for you to keep. Your signature to this guarantee will need to be witnessed by either your solicitor or an AIB bank official. In either case, you should bring along personal identification, such as your driving licence or passport. You are advised to obtain independent legal advice before signing the guarantee. I would also suggest that you keep copies of the guarantee, this letter and the terms of the facilities for future reference.

Please return the guarantees, duly signed and witnessed, to me at the above address.’

The words ‘ You are advised to obtain independent legal advice before signing the guarantee’ were emboldened.

11

The third named defendant, Ms. Lynch had been in a relationship with the second named defendant. They have a son who was born in 2005. In a replying affidavit sworn on 23rd October, 2017, she avers that she worked as a shop assistant and as a factory worker/general operative. She has no special training or business acumen. Mr. O'Sullivan effectively ran the company. He ran a filling station and retail business together with a garage, car sales and repairs business. He also had an interest in farming and in property speculation. While Ms. Lynch was in a relationship with him, she states that she never participated in his business affairs. She is not now, nor was she ever a shareholder or a director of the first named defendant.

12

Ms. Lynch avers that following the birth of their child in 2005, she became a full time homemaker. In May, 2011 while she was still living with Mr. O'Sullivan, he informed her that money was required for the business of the first named defendant. He did not go into detail or elaborate on what he was doing. At that time their relationship was under stress and Ms. Lynch avers that she was totally dependent on him.

13

Ms. Lynch further states that on the morning of 11th May, 2011, before they attended at the branch office of the plaintiff, she was told by Mr. O'Sullivan: ‘ don't ask questions, just sign the papers’. When they were asked by an official of the plaintiff if they had received legal advice, she states that Mr. O'Sullivan said that they had been with a solicitor in Roscrea the previous week. Ms. Lynch avers that that meeting related to signing a mortgage and had nothing to do with the loans or guarantees.

14

At para. 7 of her affidavit Ms. Lynch avers that she had never previously seen a letter of guarantee nor did she know what it was. She recalled the second defendant saying that he required €30,000 to stay afloat. She believed the loan was in respect of an overdraft on the garage. She queried the bank official as to why the figures stated on the guarantee were larger than the figures indicated to her by Mr. O'Sullivan and she states that ‘ this servant or agent left the room telling us to sort it out amongst ourselves’. She says that Mr. O'Sullivan assured her that it was ‘ just written that way’ and that his property portfolio would cover the loans and ‘ the paperwork would cover the shortfall’. The bank official...

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2 cases
  • Pepper Finance Corporation (Ireland) DAC v Kenny
    • Ireland
    • High Court
    • 17 February 2023
    ...or leave to defend, as the case may be.” 29 . Reviewing this caselaw, McGrath J. concluded in AIB PLC v. Grove Oil (Roscrea) Limited [2018] IEHC 793 as follows (para. 25): “ Thus leave to defend ought to be granted unless it is very clear that there is no defence. Leave should not be grante......
  • Bank of Ireland v Wales
    • Ireland
    • High Court
    • 13 July 2022
    ...or leave to defend, as the case may be.” 83 . Reviewing this caselaw, McGrath J. concluded in AIB PLC v. Grove Oil (Roscrea) Limited [2018] IEHC 793 as follows (para. 25): “Thus leave to defend ought to be granted unless it is very clear that there is no defence. Leave should not be granted......

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