Allied Irish Banks Plc v DX

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 17 July 2019
• Neutral Citation: [2019] IEHC 549
• Court: High Court
• Date: 17 July 2019

[2019] IEHC 549

THE HIGH COURT

Barrett J.

Between:

ALLIED IRISH BANKS PLC

Plaintiff

– AND –

DX AND TX

Defendants

Banking & finance – Loans – Guarantees – Applicant seeking order of summary judgment in respect of non-consumer credit agreements

Facts: The plaintiff bank had provided loans to JX underwritten by guarantees provided by the defendants. The bank now applied for summary judgment, but the defendants sought the matter to be passed to a plenary hearing.

Held by Barrett J, that the matter would proceed to a plenary hearing. Whilst a number of defences raised by the respondents were flawed, the issue of the capacity of JX had reasonable foundation.

JUDGMENT of Mr Justice Max Barrett delivered on 17th July, 2019.

1 This is an application for summary judgment against Mr DX and Ms TX, as guarantors, in respect of a capped all sums guarantee executed by Mr DX on 21.10.09 and a like guarantee executed by Ms TX on the same date, in respect of certain non-consumer loan facilities granted to Mr JX. The defendants contend that this matter should go to plenary hearing. In this regard they have pointed to the poor mental health of Mr JX, Mr DX averring, inter alia, as follows in this regard:

‘4. This Honourable Court will note that…my son is considered a “vulnerable customer” within the meaning of the Consumer Protection Code. To be specific…[JX] has suffered from depression for many years. I understand that [JX]… may have been symptomatic at the time he entered into the loan agreement grounding the within proceedings: however, my wife and I were not aware that he was symptomatic and would not have executed the guarantee had we known.

5. I believe and am advised, but cannot definitively prove, that [JX]… lacked capacity to enter into the loan agreement at the time it was agreed with the plaintiff bank. I have taken steps to have [JX]… joined as a third party to these proceedings in order to ascertain the state of his health at the time of agreeing the loan and for the purpose of seeking an indemnity or contribution from him if he is found to have had capacity.

6. [The affidavit of an AIB official]… appears to suggest that [JX]… was suffering from depression at the time of the loan agreement. If this was indeed the case, I understand that the plaintiff could have become aware of this had it taken reasonable steps in this regard, such as conducting a medical or psychological evaluation of…[JX]. I am advised that the plaintiff's failure to do so and its extension of a €400,000 loan to [JX]… in circumstances where he may have been under a serious disadvantage due to his mental health amounted to the transaction being so improvident from [JX's]… perspective that the plaintiff was under a duty to ensure that [JX]… obtained independent legal advice prior to entering into the loan agreement. I understand that the plaintiff did not do so and I am advised that the loan to [JX]… may be void accordingly, which explains why the plaintiff has not sought to proceed as against…[JX].

7. I understand that, should this Honourable Court find that [JX] lacked capacity at the time of entering the loan agreement, or that he was under a sufficiently serious disadvantage to have the loan voided as improvident, this Honourable Court would be bound to find that the guarantees provided by myself and my wife are similarly void and of no effect.’

2 A few points might be made:

(i) it is clear from the evidence before the court that the defendants and Mr JX lived in the same residence at all relevant times. With respect, if, as is averred, persons living with Mr JX ‘ were not aware that he was symptomatic’ of depression, then the notion that AIB should or would know of Mr JX's mental health issues is unconvincing; however, this, of course, does not have the consequence that Mr JX was a man possessed of legal capacity, if he was not.

(ii) that Mr JX is treated by AIB as a ‘ vulnerable customer’ under the Consumer Protection Code indicates that, when one has regard to the definition of ‘vulnerable consumer’ in that Code, AIB itself can only have taken the view that in treating with Mr JX as a consumer, he ‘ has limited capacity to make his…own decisions and…requires assistance to do so’. The Central Bank gives the example in this regard of ‘persons with…mental health difficulties’.

(iii) the affidavit in which an AIB official ‘ appears to suggest that [JX]… was suffering from depression at the time of the loan agreement’ does not so suggest and there is an affidavit sworn by the relevant official indicating that he...