Anglo Irish Bank Corporation Plc v McGrath

• Jurisdiction: Ireland
• Judge: KELLY J.
• Judgment Date: 21 December 2005
• Neutral Citation: [2006] IEHC 78
• Docket Number: Record No. 1425S/2005
• Court: High Court
• Date: 21 December 2005

[2005] IEHC 78

THE HIGH COURT

Record No. 1425S/2005

ANGLO IRISH BANK CORPORATION PLC v MCGRATH

COMMERCIAL

BETWEEN:

ANGLO IRISH BANK CORPORATION PLC

Plaintiff

-and-

BRENDAN MCGRATH

Defendant

FIRST NATIONAL COMMERCE BANK PLC v ANGLIN 1996 1 IR 75

AER RIANTA v RYANAIR 2001 4 IR 607 2002 1 ILRM 381

HOLME v BRUNSKILL 1878 3 QBD 495 1878 42 JP 757

PRACTICE AND PROCEDURE: summary judgment

Facts The plaintiff bank sought summary judgement on foot of a guarantee to purchase and equip a fishing vessel, following the failure of the borrowers to keep up payment. The defendant asserted that the termination of a management agreement amounted to a variation of the agreement and gave rise to an arguable defence in law.

Held by Kelly J., granting summary judgement, that termination was contemplated by the management agreement which was not the contract guaranteed but the contract under which the monies were advanced. No arguable defence existed in law.

Reported: E.F.

NOTE OF

1 EX TEMPORE JUDGMENT DELIVERED BY KELLY J. ON WEDNESDAY, 21 DECEMBER, 2005

Kelly J. delivered judgment as follows:-

2 This is my ruling on the bank's claim for summary judgment on foot of a guarantee dated 20 December, 2002.

3 It is important to bear in mind the principles which I am required to apply in dealing with an application of this kind. These principles are the subject of a number of decisions of the Supreme Court. I begin by setting forth the principles and I will then seek to apply them to this case.

4 InFirst National Commercial Bank plc v. Anglin [1996] 1 IR 75, Murphy J. (speaking for the court) said (at pp 78-79):-

"For the court to grant summary judgment to a plaintiff and to refuse leave to defend, it is not sufficient that the court should have reason to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action."

5 In my view, the test to be applied is that laid down in Banque de Paris v. de Naray [1984] 1 Lloyd's Law Rep 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank plc v. Daniel [1993] 1 WLR 1453. The principle laid down in the Banque de Paris case is summarised in the headnote thereto in the following terms:-

"The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the court had to look at the whole situation to see whether the defendant had satisfied the court that there was a fair or reasonable probability of the defendants having a real or bona fide defence".

6 In the National Westminster Bank case, Glidewell L.J. identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:-

"I think it right to ask, using the words of Ackner L.J. in the Banque de Paris case, at p 23, "is there a fair or reasonable probability of the defendants having a real or bona fide defence?". The test posed by Lloyd L.J. in the Standard Chartered Bank case, the Court of Appeal (Civil Division), Transcript No. 699 of 1990 "is what the defendant says credible?", amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence".

7 This decision was cited with approval by the Supreme Court inAer Rianta v. Ryanair Limited (2002) 1 ILRM 381. In that case, as appears from the headnote, the Supreme Court held as follows:-

8 1. "The test to be applied in deciding whether leave to defend should be granted is whether, looking at the whole situation, the defendant has satisfied the court that there is a fair and reasonable probability that he has a real and bona fide defence. It is not a sufficient basis for refusing leave to defend that the court has ground to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action. The question for the court is not whether the defendant's version of events is probable or more likely to be true but, rather, whether the defence put forward is so far-fetched or so self-contradictory as not be to credible.

9 2. The mere assertion on affidavit of a given situation which is the basis of the defence will not of itself ground leave to defend.

10 3. The mere length of time occupied in the argument of the case may demonstrate that it is not suitable for summary disposition.

11 4. There were considerable weaknesses in the defence put forward by the defendant which was vague and lacked detail. Nevertheless, the possibility remained open, on the affidavit evidence before the court, that the defendant had a real or bona fide defence or that the defence put forward was credible. Therefore, the matters at issue between the parties required to be resolved by plenary hearing."

12 That is the approach which has been indicated by the Supreme Court and it is one which I must follow. That is the approach which I intend to adopt here.

13 It is necessary to set out in short summary the facts of this case. The guarantee was executed in order to secure payment of portion of monies advanced by the bank to a partnership called the MFV Solstice Partnership. Its purpose was to purchase and equip a fishing vessel of the same name. Part and parcel of the agreement between the bank and the partnership was that the defendant would guarantee the monies due under what is described in the facility letter as "facility 2".

14 It was also part of the agreement as reflected in the facility letter that a company controlled by the defendant would manage the vessel. During that time the members of the partnership were to avail of certain capital allowances. It is also true to say that the management agreement to be entered into with that company contained within it a power of termination.

15 Initially the bank advanced €8.5 million as set out in the facility letter of December 2002 repayable on demand. It was one of the terms of the facility being made available to the borrowers that a guarantee would be provided by the Defendant in relation to the facility 2 funding.

16 The monies having been advanced, unfortunately, there was a change in circumstances. For specified breaches, the management agreement was terminated. There was a further advance under a subsequent facility letter in 2003. That facility letter amended portions of the earlier facility letter.

17 Subsequently, there was a failure on the part of the borrowers to keep up the payments. In August 2005, a demand was made on the borrowers. It was not honoured. A demand was served on the Defendant on 16 august 2005. These proceedings followed.

18 It is also necessary to look at what I perceive to be the relevant provisions of the guarantee. The guarantee defines the facility 2 obligations as meaning all monies and liabilities which are now or any time in the future shall have been advanced to, become due, owing or incurred by the facility 2 borrowers in respect of facility 2 under the facility letter.

19 The guarantee itself is contained in clause 2. Clause 2.1 provides as follows:-

"In consideration of the Bank agreeing to provide Facility 2 to the Facility 2 Borrowers as provided in the Facility Letter and...