Allied Irish Banks Plc v Murphy

JurisdictionIreland
CourtHigh Court
JudgeMs. Justice Murphy
Judgment Date16 June 2020
Neutral Citation[2020] IEHC 300
Docket Number[RECORD NO. 2016 1585 S]
Date16 June 2020
BETWEEN
ALLIED IRISH BANKS PLC
PLAINTIFF
AND
TIMOTHY MURPHY

AND

MARGARET MURPHY
DEFENDANTS

[2020] IEHC 300

Murphy J.

[RECORD NO. 2016 1585 S]

THE HIGH COURT

Summary judgment – Loan agreement – Defence – Plaintiff seeking summary judgment arising from a loan agreement made with the defendants – Whether the second defendant had an arguable case that in entering the loan agreement she was acting as a consumer

Facts: The plaintiff, Allied Irish Banks PLC, applied to the High Court for summary judgment in the sum of €111,704.48 arising from a loan agreement made with the defendants, Mr and Mrs Murphy, on or about the 11th September 2009. The amount of the loan was €95,000. Its purpose was to restructure existing debts arising from the first defendant’s business as a builder. The uncontroverted evidence of the first defendant was that at the time of the granting of the loan, he had an existing business loan of €70,000 an overdrawn balance on his current account of €21,000 and arrears on a financing and leasing account of €4,000. The total of his indebtedness to the bank was therefore € 95,000. The first defendant had averred that he was advised by a bank official that all of his debt should be restructured under the umbrella of one loan. The loan was issued to Mr and Mrs Murphy. Security for the credit facility was an all sums mortgage from Mr and Mrs Murphy over 0.74 acres at Kilmihil, Ballingarry, Co. Limerick, of which they were joint owners. There was no dispute as to the fact of the loan, nor the fact of default in repayment, nor was the amount claimed by the plaintiff in dispute. At the outset of the application for summary judgment, the first defendant consented to judgment in the sum claimed together with appropriate costs. The second defendant sought to contest the entitlement of the plaintiff to judgment against her for the said sum. Essentially she asserted that she contracted for the said loan as a consumer within the meaning of the Consumer Credit Act 1995 and that the plaintiff failed to afford her the mandatory protection of s. 30 of that Act, which stipulates that a “cooling off” period must be provided to consumers. In her affidavit the second defendant raised issues of unfair pressure being applied by the bank in securing her and her husband’s agreement to the restructured loan, but the main defence advanced on her behalf was the bank’s failure to afford her the relevant protection under the Consumer Credit Act. Non-compliance with the obligations under s. 30(4) of the Act cannot be disregarded by a Court and in effect results in the loan contract being unenforceable; the issue for the Court therefore on this application was whether or not the second defendant had an arguable case that in entering this loan agreement she was acting as a consumer.

Held by Murphy J that, as a matter of law and fact, the second defendant had established a fair and reasonable probability that she had a real and bona fide defence to the plaintiff’s claim.

Murphy J held that the Court would remit the claim to plenary hearing.

Claim remitted to plenary hearing.

JUDGMENT of Ms. Justice Murphy delivered on the 16th day of June, 2020
1

This is the Plaintiff's application for summary judgment in the sum of €111,704.48 arising from a loan agreement made with the Defendants on or about the 11th September 2009. The amount of the loan was €95,000. Its purpose was to restructure existing debts arising from the first named Defendant's business as a builder. The uncontroverted evidence of the first named Defendant is that at the time of the granting of the loan, he had an existing business loan of €70,000 an overdrawn balance on his current account of €21,000 and arrears on a financing and leasing account of €4,000. The total of his indebtedness to the bank was therefore € 95,000. The first Defendant has averred that he was advised by a bank official that all of his debt should be restructured under the umbrella of one loan. The loan was issued to Timothy Murphy and to his wife Margaret Murphy. Security for the credit facility was an all sums mortgage from Mr. Timothy Murphy and Mrs. Margaret Murphy over 0.74 acres at Kilmihil, Ballingarry, Co. Limerick, of which they were joint owners.

2

There is no dispute as to the fact of the loan, nor the fact of default in repayment, nor is the amount claimed by the Plaintiff in dispute. At the outset of the application for summary judgment, the first Defendant, Timothy Murphy, consented to judgment in the sum claimed together with appropriate costs. The second Defendant Margaret Murphy, who is the wife of the first Defendant, seeks to contest the entitlement of the Plaintiff to judgment against her for the said sum. Essentially she asserts that she contracted for the said loan as a consumer within the meaning of the Consumer Credit Act 1995 and that the Plaintiff failed to afford her the mandatory protection of s. 30 of that Act, which stipulates that a “cooling off” period must be provided to consumers. In her affidavit the second Defendant raises issues of unfair pressure being applied by the bank in securing her and her husband's agreement to the restructured loan, but the main defence advanced on her behalf is the bank's failure to afford her the relevant protection under the Consumer Credit Act. Non-compliance with the obligations under s. 30(4) of the Act cannot be disregarded by a Court and in effect results in the loan contract being unenforceable. The issue for the Court therefore on this application is whether or not the second Defendant Mary Murphy has an arguable case that in entering this loan agreement she was acting as a consumer.

Facts
3

The Defendants are married to each other, and live in Ballingarry, Co. Limerick. The first Defendant is a builder and the purpose of the loan was to restructure existing debts that he had incurred in the course of his building business, which he operated as a sole trader. The pre-existing debts amounted to €95,000. As a condition of the facility, the bank required security over 0.74 acres at Kilmihil, Ballingarry, Co. Limerick, which property was in the joint names of both Defendants. The Second Named Defendant, Margaret Murphy, is a nurse by profession and is employed as such by the University Maternity Hospital in Limerick. Prior to qualifying as a nurse, Margaret Murphy had been a teacher. The evidence of Margaret Murphy on affidavit and that of her husband is that Margaret Murphy is not involved in her husband's business and has not received a salary or any other remuneration from her husband's business. Margaret Murphy was advised by the bank, to obtain independent legal advice before entering the loan agreement. At all times, Margaret Murphy had her own independent income and independent bank account separate from her husband's accounts. The Plaintiff bank does not accept that Margaret Murphy had no involvement in her husband's business and has pointed to the fact that in May 2001 Margaret Murphy was appointed as a director and company secretary of a company named BGM Construction Limited, a company formed by her husband in 2001. The second Defendant has averred that this company was formed on the basis of taxation advice received by her husband and that she was nominated as a director simply to comply with the requirements of company law. It is averred that the company never transacted any business and that Mr. Murphy continued to conduct all his business as a builder in his capacity as a sole trader and not through the corporate entity. The company was dissolved in 2004 and remains so. The Court has affidavit evidence from Alexandra Moore, solicitor, in which she exhibits a report on BGM Construction Limited, which shows the incorporation of the company on the 14th of May 2001 and its dissolution on the 23rd January 2004. There were no annual returns made by the company during its short existence. In her affidavit, Mrs. Murphy has averred that she is a nurse by profession and is employed by the University Maternity Hospital in Limerick. She says that she does not have any role or part in her husband's business and that the company BGM Construction Limited was set up on the advice of an accountant for tax reasons and never in fact traded.

4

By 2013, difficulties had arisen with the restructured loan repayments. On the 9th October 2013 the second Defendant, Margaret Murphy, wrote a handwritten letter to a woman in the bank named Anne. Both parties place reliance on the content of the letter. It reads: -

“Anne,

Sorry this has taken so long to get back to you. In reply to your letter of the 18th September 2013 in relation to the loan in both our names. I have spoken to Ted and he tells me he is dealing with the matter. The loan in question was in relation to his business and my name was added so as to be able to access details should anything happen to him. I have always had my own account and independent work. That said, I have filled out the paperwork to verify our income status.

I would appreciate it if you could send me a copy of the paperwork relating to that loan as I need to get advice as to where I am in relation to this matter.

Yours sincerely,

Margaret Murphy”.

5

The second Defendant, Margaret Murphy, seeks leave to defend these proceedings and for that purpose to have them remitted to plenary hearing, on the basis that she entered the loan agreement as a consumer, for the purposes of the Consumer Credit Act 1995 (as amended) and that since AIB have not acted in compliance with that Act, the loan agreement is unenforceable against her. AIB deny that she is a consumer for the purposes of the Act.

6

The Consumer Credit Act 1995 transposed Directive 87/102 as amended by Directive No. 90/88/EEC into Irish Law. One of the purposes of the Act is to protect people dealing with financial institutions, otherwise than in the course of...

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