Allied Irish Banks Plc v Gormley

• Jurisdiction: Ireland
• Judge: Mr. Justice Noonan
• Judgment Date: 20 December 2018
• Neutral Citation: [2018] IEHC 744
• Court: High Court
• Docket Number: [2015 183 S]
• Date: 20 December 2018

[2018] IEHC 744

THE HIGH COURT

Noonan J.

[2015 183 S]

BETWEEN

ALLIED IRISH BANKS PLC

PLAINTIFF

AND

PATRICK GORMLEY

AND

JAMES GORMLEY

DEFENDANTS

Banking and finance- Loan - Summary judgment - Plaintiff seeking summary judgment against the defendants - Whether the defendants had demonstrated a fair or reasonable probability of having a bona fide defence

Facts: The plaintiff, Allied Irish Banks Plc, applied to the High Court for summary judgment against the defendants, Messrs Gormley. In or about September, 2005, the defendants applied for two loans to the Bank which were sanctioned on foot of a facility letter dated the 27th September, 2005. The first loan was in the amount of €230,000 and was for the purpose of purchasing property. The second loan was in the amount of €140,000 and its purpose is described in the letter of facility as "working capital". The terms of the facility letter in respect of this loan (Loan 1) provided that it should be repaid by one single payment to be made approximately a year later on the 23rd September, 2006. Loan 1 was not repaid in accordance with its terms and a second loan facility letter dated the 4th December, 2006 was issued by the Bank in respect of a further loan (Loan 2), this time in the sum of €242,000. The purpose of Loan 2 was stated to be "Restructure". In contrast to Loan 1, Loan 2 was a long term loan for a period of approximately ten years with the loan to be repaid in 120 monthly instalments commencing on the 1st January, 2007. The defendants defaulted on the monthly repayments and this gave rise to a further loan facility being entered into (Loan 3) on the 22nd May, 2009. Loan 3 was in the sum of €193,500 and its purpose was described as being "Restructure - Customer Initiated". The Loan 3 facility provided that it was to be repaid within a year by eight instalments of €12,019.58 and a final payment of €194,719.58. Default again occurred in relation to the repayment terms of Loan 3 and this resulted in a further facility letter of the 1st October, 2010 (Loan 4) in the sum of €190,600. This again was a relatively short term loan for a period of some eight months with nine monthly payments in the same sum as before, €12,019.58 and the final payment on the 13th June, 2011 in the sum of €187,245.97. The first repayment due in respect of Loan 4 was to be made on the 13th October, 2010. The defendants defaulted. The purpose of Loan 4 was identified in the facility letter of the 1st October, 2010 as "Renewal of existing facilities". This default led to a further letter of sanction dated the 3rd November, 2010 being issued in respect of the loan, the subject matter of these proceedings (Loan 5). This was in the sum of €190,600 and was in very similar terms to the facility letter of some five weeks earlier also providing for nine monthly repayments of €12,019.58 commencing on the 23rd November, 2010 with a final payment of €187,166.06 on the 25th July, 2011. Loan 5 was granted on foot of a facility letter dated the 3rd November, 2010. The facility letter ostensibly appeared to be signed by both defendants. The defences advanced by both defendants emerged as being first, that there was no consideration supporting the agreement in respect of Loan 5 and second there was a failure on the part of the Bank to comply with the requirements of the Consumer Credit Act 1995. In the case of Mr Gormley senior, he raised the additional defence that he never signed the facility letter or had any knowledge whatsoever of Loan 5 until he received a letter of demand dated the 12th November, 2014 from the Bank.

Held by Noonan J that neither defendant had demonstrated that he had a fair or reasonable probability of having a bona fide defence.

Noonan J held that he would grant judgment to the Bank in the amount claimed.

Application granted.

JUDGMENT of Mr. Justice Noonan delivered on the 20th day of December, 2018

1 This matter comes before the court by way of application for summary judgment by the plaintiff ('the Bank') against the defendants. The first defendant ('Mr. Gormley junior') is the son of the second defendant ('Mr. Gormley senior').

Relevant Facts

2 Mr. Gormley junior, who now describes himself as an engineer, was in 2005 a building contractor. Mr. Gormley senior was in 2005 a very experienced bricklayer who then employed seven block layers in his own right.

3 The loan which is the subject matter of these proceedings was granted on foot of a facility letter dated the 3rd November, 2010, but prior to then, there was a significant course of dealing between the parties. It is relevant to refer to that course of dealing in the context of the issues that arise on this application.

4 In or about September, 2005, the defendants applied for two loans to the Bank which were sanctioned on foot of a facility letter dated the 27th September, 2005. The first loan was in the amount of €230,000 and was for the purpose of purchasing property. The second loan was in the amount of €140,000 and its purpose is described in the letter of facility as 'working capital'. Mr. Gormley junior describes the first loan of €230,000 as being for the purpose of acquiring a one-acre site in Coolaney, County Sligo upon which he intended to build six houses for which planning permission had already been obtained.

5 The second loan, which in the same affidavit sworn on the 13th January, 2017, is described incorrectly by Mr. Gormley junior as being in the sum of €170,000, was, according to him, for the purpose of carrying out the development works on the site. The facility letter of the 27th September, 2005 is headed 'Joint application from Patrick Gormley Esq. and Mr. James Gormley' and the body of the letter states that the Bank has sanctioned facilities to both Messrs. Gormley. There is no dispute about this.

6 Mr. Gormley junior in his affidavit states that the funds were used to purchase a single property, although it is evident from the documents exhibited in an affidavit sworn by John Rynne on behalf of the Bank that in fact two properties were purchased, both in Coolaney being the properties comprised respectively in Folios 21052F and 19722F County Sligo. It may of course be the case that a single property was purchased which was comprised in two folios, but nothing turns on this.

7 Of importance, the folios demonstrate that both Messrs. Gormley junior and senior were registered as owners of these folios respectively on the 26th and 27th June, 2006.

8 The terms of the facility letter in respect of this loan (Loan 1) provided that it should be repaid by one single payment to be made approximately a year later on the 23rd September, 2006. It may well have been envisaged that by the latter date, the development would have been completed and the houses sold.

9 Loan 1 was not repaid in accordance with its terms and a second loan facility letter dated the 4th December, 2006 was issued by the Bank in respect of a further loan (Loan 2), this time in the sum of €242,000. Presumably this represented the original €230,000 with accrued interest. The purpose of Loan 2 was stated to be 'Restructure'. The loan facility letter in respect of Loan 2 was signed in three places by each defendant. This again is not in dispute. In contrast to Loan 1, Loan 2 was a long term loan for a period of approximately ten years with the loan to be repaid in 120 monthly instalments commencing on the 1st January, 2007.

10 The defendants defaulted on the monthly repayments and this appears to have given rise to a further loan facility being entered into (Loan 3) on the 22nd May, 2009. Loan 3 was in the sum of €193,500, possibly representing the then outstanding balance of the previous loan, and its purpose is described as being 'Restructure - Customer Initiated'. The Loan 3 facility provided that it was to be repaid within a year by eight instalments of €12,019.58 and a final payment of €194,719.58. The loan facility letter is again signed by each defendant in three different places.

11 Default again occurred in relation to the repayment terms of Loan 3 and this resulted in a further facility letter of the 1st October, 2010 (Loan 4) in the sum of €190,600. This again was a relatively short term loan for a period of some eight months with nine monthly payments in the same sum as before, €12,019.58 and the final payment on the 13th June, 2011 in the sum of €187,245.97. The loan facility letter is executed by both defendants.

12 It is important to pause at this juncture in order to note that the facility letters in respect of each of these loans are exhibited in an affidavit sworn on behalf of the Bank by Rosie McDonnell on the 4th April, 2017 in which, in addition to exhibiting the facility letters, she avers that they were signed by both defendants. Two subsequent affidavits were sworn by Mr. Gormley senior respectively on the 20th July, 2017 and the 30th November, 2018 and in neither of these does he take any issue with the foregoing averments by Ms. McDonnell.

13 As appears above, the first repayment due in respect of Loan 4 was to be made on the 13th October, 2010. The defendants defaulted. The purpose of Loan 4 is identified in the facility letter of the 1st October, 2010 as 'Renewal of existing facilities'.

14 At para. 18 of her affidavit, Ms. McDonnell says that this default led to a further letter of sanction dated the 3rd November, 2010 being issued in respect of the loan, the subject matter of these proceedings (Loan 5). This was in the sum of €190,600 and was in very similar terms to the facility letter of some five weeks earlier also providing for nine monthly repayments of €12,019.58 commencing on the 23rd November, 2010 with a final payment of €187,166.06 on the 25th July, 2011. Ms. McDonnell says at para. 22 of her affidavit that at the time Loan 5 was entered into, there was no subsisting loan agreement between the Bank and the defendants having...