Anglo Irish Bank Corporation Plc v Fanning

• Jurisdiction: Ireland
• Judge: Ms. Justice Dunne
• Judgment Date: 29 January 2009
• Neutral Citation: [2009] IEHC 141
• Court: High Court
• Date: 29 January 2009

Anglo Irish Bank Corporation Plc v Fanning

[2008 No. 505 Sp]

BETWEEN

ANGLO IRISH BANK CORPORATION PLC

PLAINTIFF

AND

OISIN FANNING

DEFENDANT

APPENDIX

[2009] IEHC 141

[2008 No. 505 Sp]

THE HIGH COURT

REAL PROPERTY

Mortgage

Possession - Loan for purchase of shares - Loan to refinance home loan - Acceptance of terms and conditions - Security - Family home - Legal charge over shares purchased - Default - Demand for payment - Claim that defendant influenced by third party - Claim that assurances given that loan would be serviced and repaid - Alleged failure of bank to inquire into ability to repay - Alleged reliance on assurances of third party - Whether bona fide defence - Summary judgment - Applicable principles - Purpose of plenary hearing - Resolution of dispute on facts - Discretion - Commercial transaction - Whether proceedings to be adjourned to allow defendant to litigate entitlement to judgment - Absence of deficiency in execution of mortgage - Collateral agreement - Default in home loan element of borrowing - Birmingham Citizens Permanent Building Society v Caunt [1962] 1 Ch 883, National Irish Bank Limited v Graham [1995] 2 IR 244, Bayworld Investments v McMahon [2004] 2 IR 199, First National Commercial Bank plc v Anglin [1996] 1 IR 75, Aer Rianta v Ryanair Ltd [2001] 4 IR 60 and Harris Range Ltd v Duncan [2003] 4 IR 1 considered - Possession ordered (2008/505Sp - Dunne J - 29/01/2009) [2009] IEHC 141

Anglo Irish Bank Corporation plc v Fanning

BIRMINGHAM CITIZENS PERMANENT BUILDING SOCIETY v CAUNT 1962 CH 883 1962 2 WLR 323 1962 1 AER 163

NATIONAL IRISH BANK LTD v GRAHAM 1995 2 IR 244 1994 2 ILRM 109 1994/5/1515

BAYWORLD INVESTMENTS v MCMAHON & ORS 2004 2 IR 199 2003/5/1036

FIRST NATIONAL COMMERCIAL BANK PLC v ANGLIN 1996 1 IR 75 1996/11/3337

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

HARRISRANGE LTD v DUNCAN 2003 4 IR 1 2002/12/2982

KILCULLEN PAROCHIAL HALL, IN RE 1947 IR 458

CLARKE v STEVENS UNREP CLARKE 19.6.2008 2008 IEHC 203

ACC BANK PLC v MALOCCO 2000 3 IR 191 2000/1/12A

GOVERNOR & CO OF BANK OF IRELAND v EDUCATIONAL BUILDING SOCIETY 1999 1 IR 220 1998 2 ILRM 451 1998/11/3359

CRIMINAL ASSETS BUREAU v KELLY 2000 1 ILRM 271 1999/6/1349

1 Ms. Justice Dunne on the 29th day of January 2009

2 The plaintiff's claim herein is for an order that the defendant deliver up possession of lands and premises comprising 24.464 acres known as Forenaughts House, Naas, Co. Kildare on foot of a mortgage entered into between the plaintiff and the defendant on the 10 ^th November, 2005, which was duly registered on the 16 ^th October, 2006.

3 The special summons herein was grounded on an affidavit of Paul Corry sworn herein on the 19 ^th June, 2008. It sets out the details of the loans secured by the mortgage the subject of these proceedings. The first loan was offered by letter of the 14 ^th September, 2005, to the defendant and Ms. Pearl Roche in the sum of €7,900,000.00 secured by a mortgage on the property, the subject of these proceedings. The purpose of the loan was stated to be:-

"To enable the borrower to participate in forthcoming Smart Telecom Plc share placing and to refinance a Bank of Ireland loan in the amount of €2.9 million."

4 The security was to be the house and a legal charge over the shares being purchased with the loan. It was provided that the loan was for a period of twelve months. These terms were accepted by the defendant and Ms. Roche.

5 A further loan offer was made by letter of the 11 ^th October, 2005. It provided for a loan of €505,000.00. The security included a provision that the loan was to be secured on the property the subject of these proceedings and Smart Telecom shares being purchased with the loan. The purpose for the loan was stated to be:-

"For the personal investment purposes of the borrower."

6 The period of this loan was stated to be three months. The terms of the offer were accepted by the defendant and Ms. Roche.

7 The final letter of offer was dated the 1 ^st November, 2006. It provided for a loan secured by way of mortgage in the sum of €8,048,000.00. In this case, the security was stated to be the property the subject of these proceedings and "a first legal charge of 15,675,000.00 Smart Telecom shares". It incorporated the terms of the previous loan agreements and stated that it was to be read in conjunction with the previous facility letters. Again the terms of this letter were accepted by the defendant and Ms. Roche.

8 The sums advanced to the defendant were as follows:-

9 €500,000.00 on or about the 11 ^th October, 2005.

10 €5 million on or about the 9 ^th November, 2005.

11 €2,900,00.00 on or about the 30 ^th January, 2006.

12 Thereafter, it appears that the payment on foot of the mortgage being payments of interest only went into default in April 2007. The plaintiff demanded payment of the sums then due by letter dated the 9 ^th May, 2008, these proceedings then issued on the 20 ^th June, 2008. Following service of the proceedings, an appearance was entered on the 16 ^th October, 2008. A replying affidavit was sworn by the defendant on the 5 ^th November, 2008.

13 In his affidavit, the defendant sets out the background to obtaining the loan. He was the Chief Executive Officer (CEO) of Smart Telecom Plc. Mr. Brendan Murtagh became involved with Smart and became its largest shareholder. In 2005 Mr. Murtagh provided €8 million to Smart. That year, the company embarked on a fundraising campaign to raise €44 million through a share placing. Mr. Murtagh suggested to the defendant that he should be seen to invest in Smart. The defendant and Mr. Murtagh discussed this. The defendant indicated to Mr. Murtagh that he did not have the finances to do this. Apparently he was not in receipt of a monthly salary from the company. Ultimately, the defendant tried to raise €5 million to invest in shares. He approached Bank of Scotland with whom he had a home-loan in the sum of €2.9 million. They refused.

14 Mr. Murtagh then advised the defendant to contact Mr. Corry of the plaintiff bank, who was Mr. Murtagh's bank manager. According to the defendant, Mr. Corry had no difficulty in providing this sum, although there is some dispute between the defendant and Mr. Corry as to the precise circumstances in which the loan was approved. In my view, nothing turns on this. The defendant expressed surprise at the loan approval as two years earlier, the plaintiff had refused to fund the defendant or his company.

15 The defendant set out details of a number of discussions and dealings with Mr. Murtagh. The defendant stated that on the basis of Mr. Murtagh's assurances to him he entered into the loan. It appears that interest on the loan was paid by the defendant in circumstances where the defendant's account was credited with the interest due to the plaintiff by a transfer of the necessary sum from Smart to his account.

16 The defendant then set out details of proceedings he has commenced against Mr. Murtagh and others arising from the breakdown of the relationship between Mr. Murtagh and the defendant, which led to the ousting of the defendant from his position in Smart. He has also sought an indemnity from Mr. Murtagh in respect of the sum of €5 million (together with interest) "allegedly" due to the plaintiff herein.

17 A meeting was scheduled to take place between the plaintiff and the defendant on the 3 ^rd August, 2007, and in advance thereof, the defendant wrote to the plaintiff seeking details of the dealings between Mr. Murtagh and the plaintiff in connection with the loan approval in respect of the defendant. There was no reply prior to the meeting. Subsequently, the defendant by fax "withdrew" that letter. He offered in the course of the letter to "split" the loan - ie. to pay the interest due on the sum of €2.9 million but he indicated that he was not in a position to discharge the amount due on the loan. By letter of the 12 ^th October, 2007, this proposal was rejected by the plaintiff. I do not think it is necessary to set out all the details of those letters which were exhibited in the proceedings.

18 The defendant continued his affidavit by setting out what appears to be the gist of his complaint:-

19 1. That in the course of the negotiation of the loan, the plaintiff was influenced by Mr. Murtagh.

20 2. That the loan was advanced not on the basis of the security provided but on the security and assurances given by Mr. Murtagh that interest on the loan would be serviced and that it would be repaid in due course.

21 3. That the plaintiff made no inquiry into the defendant's financial situation or ability to repay the loan.

22 4. That the plaintiff relied upon the assurances of Mr. Murtagh and never intended to rely upon the security given for the loans.

23 The defendant goes on to say that if he has any liability to the plaintiff he is entitled to a full indemnity from Mr. Murtagh.

24 Mr. Corry swore a replying affidavit on the 28 ^th November, 2008. He took issue with a number of the defendant's averments. In particular, he pointed out that the loans made to the defendant were subject to formal approval processes of which the defendant was aware. He reiterated that the facilities afforded were afforded to the defendant on the basis of his personal situation, assets and the security he provided.

25 A final affidavit was sworn by the defendant on the 5 ^th December, 2008, by way of response. In that affidavit, the defendant, inter alia, contends that the plaintiff has failed to make full disclosure of all documentation relevant to the issues raised herein and asserts that he has a bona fide defence to the proceedings.

Submissions

26 Mr. Murphy, S.C. on behalf the plaintiff submitted that no defence was disclosed on the affidavits before the...