Bank of Ireland Mortgage Bank v Ethel Daly (as Legal Personal Representative of the late Marcus John Albert Deceased)

JurisdictionIreland
JudgeMs. Justice Donnelly
Judgment Date06 April 2022
Neutral Citation[2022] IECA 88
CourtCourt of Appeal (Ireland)
Docket NumberRecord No.: 2021/22
Between/
Bank of Ireland Mortgage Bank
Plaintiff/Respondent
and
Ethel Daly (As Legal Personal Representative of the Late Marcus John Albert Deceased)
Defendant/Appellant
Between/
Bank of Ireland Mortgage Bank
Plaintiff/Respondent
and
Ethel Daly (As Legal Personal Representative of the Late Marcus John Albert Deceased)
Defendant/Appellant

[2022] IECA 88

Donnelly J.

Faherty J.

Collins J.

Record No.: 2021/22

Record No.: 2021/23

THE COURT OF APPEAL

Summary judgment – Arguable defence – Loan offer – Appellant appealing against the order granting the respondent summary judgment against the appellant – Whether there was an arguable defence

Facts: The appellant, Ms Daly, appealed to the Court of Appeal against the Order of the High Court granting the respondent, Bank of Ireland Mortgage Bank (the Bank), summary judgment against the appellant arising from a guarantee for €300,000 (executed on the 5th August, 2020) and a loan €350,000 (accepted on the 30th October, 2009 and drawn down in October 2010) entered into by Mr Daly (the guarantor or the deceased) to cover debts owed by his son and daughter in law (the borrowers) to the Bank. A central argument in the appeal was that it was an error on the part of the motion judge to hold that whether the deceased had or had not seen the February or May 2010 loan offers was irrelevant. As a matter of law, it was submitted, the motion judge erred in concluding that the terms of the February 2010 loan offer and in particular, the preconditions relating to the creditworthiness of the borrowers, did not inure also to the benefit of the guarantor and therefore the Bank was not obliged to inform him of the waiving and/or changing of those preconditions in the loan offer of May 2010 prior to the guarantee being executed.

Held by Donnelly J that the role of a court hearing a motion for summary judgment is to adjudicate in the first place whether the plaintiff has made out a prima facie case for judgment and thereafter the court may only grant summary judgment where there is no arguable defence; it must be very clear that there is no arguable defence. She noted that, in this case, the High Court judge took the view that it was irrelevant as a matter of law as to whether the deceased had received the February 2010 loan offer to the borrowers or the May 2010 loan offer to the borrowers. She noted that the essence of the claim made on behalf of the deceased’s estate depended entirely on the crucial contention that the deceased was only aware of the February 2010 loan offer and not the May 2010 loan offer. She noted that the first offer contained conditions precedent relating to establishing creditworthiness of the relevant borrower whereas the second offer did not contain those conditions in circumstances where objectively speaking those conditions cannot be said to have been met. She noted that from the specific facts, the deceased guarantor had been in communications with the Bank and a letter was written by the borrowers’ solicitor to the Bank in October 2009 outlining an “agreement” between them which referenced matters concerning the creditworthiness of the main borrower; those matters reflected in large part the conditions precedent set out in the February 2010 offer letter dealing with the creditworthiness of the main borrower. She held that the concern about the creditworthiness of the borrower was an issue therefore that the Bank were arguably aware was of importance to the particular guarantor. She held that it was at least arguable that the issue of pre-conditions and knowledge of the guarantor of those preconditions amounted to a defence; this was also arguably different from the general rule that a financial institution owes no duty to a guarantor in respect of its knowledge of the creditworthiness of the borrower. As it was also arguable that the deceased would not have drawn down the loan if he had known of the absence of the conditions in the May 2010 letter, she held that it was also appropriate to leave that matter to the trial of the action; the principal received in respect of that loan however was repayable and must be repaid in full prior to the appellant being granted leave to defend. In all the circumstances, she held that it was not very clear that there was no arguable defence.

Donnelly J held that the appeal would be allowed. Given that the appellant had successfully appealed against the order for summary judgment made against her in each of the cases, Donnelly J held that she was entitled to the costs of her appeals, those costs to be adjudicated in default of agreement.

Appeal allowed.

JUDGMENT of Ms. Justice Donnelly delivered on this 6th day of April, 2022

Issue
1

This is an appeal against the Order of the High Court granting the plaintiff (hereinafter “the Bank”) summary judgment against the defendant (hereinafter “the appellant”) arising from a guarantee for €300,000 (executed on the 5th August, 2020) and a loan €350,000 (accepted on the 30th October, 2009 and drawn down in October 2010) entered into by Marcus Daly Senior (hereinafter, “the guarantor” or “the deceased”) to cover debts owed by his son (hereinafter “MDJ” or “the main borrower”) and daughter in law (hereinafter collectively referred to as “the borrowers”) to the Bank. This appeal addresses whether an arguable defence may arise on the specific facts concerning the extent of the duty of disclosure, if any, required to be given to a guarantor to any change (compared with an earlier loan offer seen by the guarantor) in conditions precedent in the loan agreement related to the borrowers' creditworthiness.

Facts
2

In brief, the borrowers agreed to purchase a house (“the Dublin property”) at auction. This was financed, in part, by two four-month bridging loans provided by the Bank in March 2006 and June 2006 in the total sum of €1.9 million. The purpose of those facilities was to enable the borrowers obtain a permanent home loan in respect of the property. Due to financial difficulties, the borrowers were unable to move from the bridging facilities which then expired. The Bank brought High Court proceedings in 2008 against the borrowers in respect of the bridging facilities.

3

The deceased then entered into discussions with the Bank about financially assisting the borrowers. The solicitors who were acting for the borrowers, Crowley Millar, set out the results of those discussions in a letter dated the 29th October, 2009 to the Bank saying that they had been asked to do so by the deceased. In so far as material, the agreement reached between the deceased and the Bank provided:-

  • a) The deceased would make a payment of €360,000 to the Bank at the time of drawdown by the borrowers;

  • b) The balance due on the bridging loans would be advanced by the Bank to the borrowers by means of a standard mortgage secured on the Dublin property;

  • c) The Bank will issue a letter of home loan offer to the borrowers on the standard terms without delay; and

  • d) MDJ would furnish to the Bank prior to drawdown:

    • (i) An up to date tax clearance certificate.

    • (ii) His accounts of the 31st December, 2008.

    • (iii) A certificate of his gross income to the end of June 2009, or, if required and if available, to the end of October 2009.

4

The following day, on the 30th October, 2009, the Bank issued the letter of loan offer to the deceased for €350,000 which was secured by way of a mortgage over a property of the deceased in Galway. The deceased accepted that offer but as the purpose was to facilitate the making of the payment of €360,000 to the Bank, it was not drawn down until October 2010.

5

On the 19th February, 2010, the bank issued a letter of loan offer (“the February 2010 loan offer”) to the borrowers, offering to provide a loan facility in respect of the outstanding €1.65 million, to be secured on the Dublin property. One of the special conditions set out in Clause 4 of the loan offer was that the deceased would provide a guarantee for €300,000 prior to execution of which he was to take legal advice. Another special condition set out therein, was that the deceased would make a payment of €360,000 to reduce the borrowers' existing term loans with the Bank. As will be discussed further below, the evidence demonstrates that the details of this loan offer were known to the deceased.

6

There were three conditions precedent in the February 2010 loan offer to the borrowers which “must be complied in full to the lender's satisfaction before the loan can proceed”. The first condition precedent referred to the requirement for the production of original audited or certified accounts for the previous 2 years to confirm inter alia MDJ's capacity to derive a personal income of at least €430,000 approximately after business expenses and excluding rental income; management figures had to be provided for the current financial year supported by the last six months' bank statement to confirm current turnover levels. All documentation “must be to the satisfaction of the lender”. The second, cited as a sub-clause of the first condition, was a requirement for an accountant's written confirmation that MDJ's tax affairs were up to date.

7

The third was in essence a valuation of the property for mortgage purposes showing the valuation in an amount not less than €1.5m and which must be on terms acceptable to the lender.

8

According to the Bank these pre-conditions were complied with to their satisfaction. It is the appellant's case that none of the conditions were satisfied and this was not communicated to the deceased before he entered into the guarantee or before drawing down on the loan the subject of the Bank's offer of the 30th October, 2009 to assist his son to the value of €350,000.

9

The February 2010 loan offer was not accepted by the borrowers within the stipulated time. Further negotiations between the Bank and the borrowers but not...

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2 cases
  • Pepper Finance Corporation (Ireland) DAC v Kenny
    • Ireland
    • High Court
    • 17 February 2023
    ...to an application for summary judgment are well established. The Court of Appeal ruled in Bank of Ireland Mortgage Bank v. Daly [2022] IECA 88 (Donnelly J.) that the role of a Court hearing a motion for summary judgment is to adjudicate in the first place on whether the Plaintiff had made a......
  • Bank of Ireland v Wales
    • Ireland
    • High Court
    • 13 July 2022
    ...to an application for summary judgment are well established. 80 . The Court of Appeal ruled in Bank of Ireland Mortgage Bank v. Daly [2022] IECA 88 (Donnelly J.) that the role of a Court hearing a motion for summary judgment is to adjudicate in the first place on whether the Plaintiff had m......

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