Allied Irish Banks Plc v Smith
| Jurisdiction | Ireland |
| Judge | Mr Justice Max Barrett |
| Judgment Date | 13 November 2015 |
| Neutral Citation | [2015] IEHC 707 |
| Court | High Court |
| Date | 13 November 2015 |
[2015] IEHC 707
THE HIGH COURT
Between:
- and -
Banking & Finance – Non-payment of loan – Summary Judgment – Bona fide defence – Fraud by ex-wife
Facts: The plaintiff sought an order for summary judgment against the defendant on the basis of non-payment of loan advanced to the defendant. The defendant alleged that a substantial amount of the overdraft occurred due to forged signature on the direct debit form by his ex-wife to clear her credit card debts and hence he was not obliged to pay the said loan amount due to the fraud done by his ex-wife.
Mr. Justice Max Barrett granted an order for the summary judgment in favour of the plaintiff. The Court found that the amount demanded by the plaintiff was not tainted by defendant's ex-wife's alleged fraud as evidenced by the statement of bank accounts of the defendant and hence the defendant was bound to repay the said amount in consonance with the “first in, first out” principle laid down in The Clayton's Case (1816) 35 E.R. 767.
JUDGMENT of Mr Justice Max Barrett dated 13th November, 2015
1. AIB seeks summary judgment in the amount of €146,874.35, being the amount that it claims is owed by Mr Smith to it on foot of an overdraft facility on his AIB current account. The overdraft was repayable on demand. By letter dated 9 th June, 2011, AIB demanded repayment in full. Mr Smith has made no payment to AIB since demand and the full amount of the overdraft remains due and owing.
2. Mr Smith claims that he should not be obliged to pay the amount demanded of him. He maintains that a substantial amount of the overdraft arose due to his now ex-wife allegedly forging his signature on a direct debit form, at a time when they were still married, so as to ensure monies were taken from his account to settle certain credit card debts that she had incurred. However, an analysis of the facts and figures presenting indicates a somewhat different truth to arise as regards the debt in respect of which claim is made by AIB.
3. The court has considered various bank statements regarding Mr Smith's account that were exhibited in the evidence before it. That analysis shows that from August 2007 until August 2009 the debt incurred on four credit cards was paid from Mr Smith's current account. One of those cards was in the name of Mrs Smith. But from September 2009, the debt arising on only three credit cards was paid out of Mr Smith's current account. All three of those cards were in the name of Mr Smith.
4. Mr Smith claims, as mentioned, that he has been the victim of a fraud on the part of his ex-wife. He also contends that AIB was negligent in facilitating what he claims was the fraudulent conversion of monies from his account. But even taking Mr Smith's case at its height, even assuming that he can prove his allegations against his ex-wife (and at this time they are but allegations), in law this offers no defence to the claim now brought. This is because any debt tainted by his now ex-wife's alleged fraud is not the debt in respect of which AIB now makes demand. This in turn is because of the near two-century old decision in Clayton's Case (1816) 35 E.R. 767.
5. Mr Clayton had an account with Devaynes, Dawes, Noble & Co., a London banking partnership. Mr Devaynes died wealthy, but eight months later Devaynes, Dawes, etc. collapsed. A large number of law-suits were commenced against the individual partners and against Mr Devaynes' estate. The first of these cases to be heard, Sleech's Case (1816) 35 E.R. 771, had as its result that Mr Devaynes' estate was liable for the debts of the partnership to his death but no further. Mr Clayton, a gentleman of Newcastle, had a cash-deposit of £1,713 with the banking-house at the time of Mr Devaynes' death. He withdrew £1,260, reducing his balance to £453. He came to court seeking this £453 of Mr Devaynes' estate, less his proportion of the bankruptcy share-out. Notably, however, after withdrawing the £1,260, Mr Clayton continued his banking relationship with the firm, making various deposits and withdrawals. He contended that his withdrawals should be netted against the latest lodgements ( i.e. on a 'last in, first out') basis. This would have had the effect that the £453 would not have been drawn against. Mr Devaynes' estate argued that the latest withdrawals should have been counted against the earliest lodgements (i.e. 'first in, first out'). This latter approach had the effect that the £453 debt was long settled.
6. Grant M.R., in his judgment, opted for the 'first in, first out' approach, which has since become something of a 'golden thread' of banking practice from then to now, stating, at 608:
"[T]his is the case of a banking account, where all the sums paid in form one blended fund, the parts of which have no longer any distinct existence. Neither banker nor customer ever thinks of saying, this draft is to be placed to the account...
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