Allied Irish Banks Plc v Marino Motor Works Ltd
|Ms Justice Ní Raifeartaigh
|27 June 2017
| IEHC 522
|[2014 No. 2513 S.]
 IEHC 522
Ní Raifeartaigh J.
[2014 No. 2513 S.]
THE HIGH COURT
Banking – Default in repayment of Loan – Summary judgment – Test for valid defence – Overcharging interest rates – Negligence by bank – Remit of matter to plenary hearing – Bona fide defence
Facts: The plaintiff/bank filed a motion for summary judgment to recover monies from the defendant owed on foot of a number of loan and overdraft facilities. The bank contended that the defendant's loan account went into arrears due to its failure to make the repayment of various loan agreements. The defendant counter-claimed it by saying that the bank had indulged in intimidating and oppressive conduct by asking and pressurising it for more security, due to which the defendant had to face financial difficulties leading to heavy losses. The defendant contended that it had offered to sell its properties in order to reduce the debts owed to the bank, but the bank officials unilaterally rejected the offer on the basis that the properties were performing assets and that there was no sense in selling those properties. The defendant also contended that the bank had failed and refused to provide a detailed breakdown of interest charges on the defendant's request to review the overcharged interest rates.
Ms. Justice Ni Raifeartaigh did not grant the summary judgment and remitted the matter to plenary hearing. The Court held that before granting the summary judgment, the Court had to satisfy itself that there was a fair or reasonable probability of the defendant having a real or bona fide defence. The Court held that the interest calculation had not been done in a transparent manner so as to conclude sufficiently that the figure was correct. The Court, after considering the fact of the bank refusing to provide the detailed information of interest charges when requested by the defendant, held that the matter was not suitable for disposal by way of summary judgment. The Court noted that the nature of the defendant's business was such that the banking facilities available to the defendant were integral to the day-to-day running of the business. The Court, with considerable hesitation, said that it was possible that, upon close examination of the evidence, a conclusion might be reached that there had been some negligence on the part of the bank that might have negatively impacted the defendant's business and, in turn, the defendant's ability to repay the bank.
This is the plaintiff's (‘the bank's’) motion for summary judgment in proceedings commenced by summary summons on the 13th October, 2014. The claim arises in circumstances where the bank seeks to recover monies owed on foot of a number of loan and overdraft facilities. The defendant company is the owner of a company called Barry's of Bantry Ltd. which is or was engaged in the operation of a car dealership and a crash test and repair centre in Co. Cork.
The original sum claimed in the proceedings was €1,121,249.88, but this sum was said at the oral hearing to have been reduced to €728,388.84. The reduction was primarily due to the sale of a property by the receiver and the deduction of the amounts thereby realised; an event which took place after proceedings had issued.
The bank's motion for summary judgment issued on the 22nd December, 2014, and was grounded upon an affidavit of Mr. David Coleman, case manager at the plaintiff bank, which set out the details of the loans and overdraft facilities in question.
The first loan agreement dates from 2002 and was in respect of a sum of €292,000.00. The letter of sanction is dated the 14th March, 2002. The loan was accepted by Mrs. Mairead Barry and Mr. Sean Barry, directors of the company, in writing on or about 11th April, 2002. This was a term loan for the purpose of assisting the purchase of a dwelling house in Co. Cork. The loan was secured by a number of mortgages and a letter of guarantee for €555,000.00 to be provided by the directors of Marino Motor Works Ltd. together with the assignment of life policies. Mr. Coleman says that ‘the defendant failed to abide by the terms of the first loan agreement in relation to repayment thereof and the loan account went into arrears’ although the details of this are not set out. By letter dated the 5th March, 2014, the bank made formal demand for repayment of the loan at which point the redemption figure was €142,082.00. It will be noted later in this judgment that the defendant disputes that this account in fact went into arrears as described.
The second loan agreement dates from 2008. By letter of sanction dated the 31st January, 2008, the bank agreed to make available two facilities to the defendant. The first facility was an overdraft facility on a current account in the amount of €50,000.00 and was for the purpose of providing the defendant with working capital. The second facility was a business credit line in the amount of €350,000.00 for the purpose of the defendant constructing a panel beating unit and spray booth. The securities included a number of mortgages and assignments of certain life policies. The amounts were drawn down. Mr. Coleman averred that the account fell into arrears and by letter dated the 5th March, 2014, the bank formally demanded repayment. At that point, the total redemption figure in respect of the second loan agreement stood at €413,641.09 plus interest in respect of the overdraft facility and the business credit line facility. Again, no details are given of when the account fell into arrears.
The defendant, by way of guarantee dated the 28th May, 2014, had undertaken, inter alia, to pay to the bank on demand all monies and liabilities which were then or should at any time thereafter become owing to the plaintiff from Barry's of Bantry Ltd., with a cap of €657,000.00 together with interest.
There was a third loan agreement in 2008 of the same date. By facility letter dated the 31st January, 2008, the plaintiff agreed to make available three facilities as follows. First, an overdraft in the amount of €200,000.00 for working capital. Second, a business credit line facility in the amount of €330,000.00 in respect of stock facilities. Third, a bank guarantee in favour of Customs & Excise, Vehicle Registration Facility, in the amount of €127,000.00, together with commission to be charged quarterly in advance to the debtor's working account. These were secured by counter indemnities in respect of the bank guarantee in respect of Customs & Excise, together with the guarantee of the 28th May, 2004, (the ‘intercompany guarantee’) with a cap of €657,000.00. Again, Mr. Coleman averred that, after a certain period, there was a failure to make repayments, and by letter dated the 5th March, 2014, the bank formally demanded repayment. The total redemption figure at that time was approximately €565,000.00. By letter dated the 19th March, 2014, the bank called upon the defendant to make payment on foot of the guarantee.
Mrs. Barry, a director of the defendant company, swore a number of affidavits in the matter from which it was clear that there had been extensive interactions between the bank and the defendant over the years. In her first affidavit, she explained that the company had been operating for seventy-five years in west Co. Cork and was a holding company for a trading business known as Barry's of Bantry Ltd.. The pillar of the business was an Opel dealership although the company also provided other services. Her husband, Mr. Barry, had been appointed franchise dealer in 1983 and the company had run a successful business for over thirty years. She said that the company had been run prudently and conservatively and had not, for example, invested significant sums to build new showrooms or make extravagant financial commitments as other companies had done. She averred that the company never had, and does not have, Revenue liabilities and that no judgments have been entered against it. She said that since 2008, the car industry suffered extensively as a result of the banking crisis but that the company continued to meet its commitments and stayed within its overdraft limits. She said that the company's mortgages with A.I.B. were kept up-to-date and the insurance policies assigned to the bank were paid. She says that loan interest of approximately €45,000.00 was paid to the bank annually. She said that, for approximately fifty years, the company had a strong relationship with the bank. This continued until the company's accounts were transferred from Bantry to a new specialist lending unit in Bandon. She alleged that, from 2009 onwards, the company experienced intimidating and oppressive conduct on the part of the bank such that, she said, its behaviour actually contributed to the financial difficulties of the company and its downward spiral culminating in the loss of the Opel dealership in 2014.
In her affidavits, Mrs. Barry set out the basis for this view. She dated the beginning of the problems to a letter sent by the bank dated the 22nd January, 2010, when it sought to increase its security by requesting a new guarantee. She said that this was unreasonable because ‘the company was fully performing as a customer of the bank and all interest and charges were being paid and up to date.’ She said that, when they refused to increase the security or to enter into a new guarantee, the relationship between the bank and the company deteriorated and the bank proceeded to disrupt the smooth and profitable operation of the company's business. In October, 2010, the bank refused to grant an annual insurance loan of €10,000.00, which was unprecedented, and in December, 2010, the bank refused to furnish the company with its annual letter confirming...
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