Bank of Ireland v Philip Stafford and Others
| Jurisdiction | Ireland |
| Judge | Mr. Justice Brian J. McGovern |
| Judgment Date | 28 November 2013 |
| Neutral Citation | [2013] IEHC 546,[2013] IEHC 550 |
| Docket Number | [No. 1741 S/2012],[No. 1209 S/2012] |
| Court | High Court |
| Date | 28 November 2013 |
BETWEEN
AND
[2013] IEHC 546
THE HIGH COURT
Banking law - Practice and procedure - Contribution - Proceedings - Time - barred Loan facility - Civil Liability Act 1961
Facts: The plaintiff claimed Eur 5,358,026.12 on foot of a loan facility advanced by the plaintiff. The third named defendant claimed that the proceedings were time-barred, that the loan was a limited recourse loan, that undue influence had been exerted on the defendant and that the third named defendant did not have mental capacity to execute the loan agreement. The first named defendant sought to recover the proportion of the liability to the Bank that the third named defendant and deceased would have had under the terms of a partnership arrangement. The Court considered the application of ss. 8 & 9 Civil Liability Act 1961.
Held by McGovern J. that the first named defendant was entitled to a contribution from the third named defendant. The first named defendant had established on the balance of probabilities that the settlement reached with the Bank was reasonable.
CIVIL LIABILITY ACT 1961 S21(2)
BANK OF IRELAND v O'KEEFFE 1987 IR 47 1986/5/28
1. In this action, the plaintiff claims €5,358,026.12, together with interest and costs, on foot of a loan facility advanced by the plaintiff on 21st December, 2005, to the first, second and third named defendants and to Francis Gerard Stafford (Deceased) late of Kerlogue House, Kerlogue, County Wexford ("the Deceased").
2. On 26th February, 2013, the first and second named defendants (who are husband and wife) settled the plaintiff's claim against all the defendants by paying the sum of €3,506,776.06 plus interest and costs. The first and second named defendants served a notice of contribution and indemnity dated 25th March, 2013, on the third named defendant in her personal capacity, and on Mr. John O'Connor and Mr. Kieran Byrnes as executors of her late husband, Francis Gerard Stafford ("the Deceased"). It was subsequently agreed that the third named defendant would take over the proceedings on behalf of the executors.
3. The third named defendant denies any liability, either on her own behalf or as a representative of the estate of the Deceased on the following grounds:
(a) The proceedings are time-barred by virtue of s. 8 and s. 9 of the Civil Liability Act1961;
(b) that the loan was a limited recourse loan, being limited to the security provided in respect of the asset comprising a car park at Paul Quay, Wexford;
(c) undue influence had been exerted on the defendant, and by extension, the third named defendant by the first name defendant;
(d) the Deceased did not have the mental capacity to execute the loan agreement and did so without the benefit of independent legal advice;
(e) if the third named defendant has a liability to the first and second named defendants, such contribution should be measured on a basis which is "fair and equitable" in accordance with the provisions of s. 21(2) of the Civil Liability Act1961.
4. Before dealing with each of these issues in turn, it is necessary to look briefly at the background to the loan facility which was granted.
5. For many years prior to his death on 17th July, 2008, the Deceased and the first named defendant (who were brothers) carried on a number of joint business ventures. In or about 1999, they each acquired and equal share in Streamline Properties Ltd., an off-the-shelf company bought for the purpose of holding property. This company owned a site comprising approximately 1.75 acres at Paul Quay in Wexford. The company was granted planning permission to build a development comprising 73 apartments, approximately 40,000 sq. ft. of retail space, office space and a multistorey car park containing 312 car park spaces. The project was to be funded by a bank loan and by capital invested by the defendants. The defendants were advised to purchase the car park site from the company for its market value and to employ the company to develop the site. The car park was purchased by the Drinagh Family Partnership, the Deceased and the third named defendant. The Drinagh Family Partnership comprised the first and second named defendants (who are husband and wife) as trustees of the Drinagh Family Trust (the beneficiaries of the trust being the first and second named defendants and their children). The Drinagh Family Partnership owned 80% of the property, with the Deceased and the third named defendants each owning 10%.
6. The plaintiff agreed to fund the development and negotiations were entered into with the plaintiff with regard to the provision of a limited recourse loan facility in 2003. It was envisaged that the limited recourse loan facility would be drawn down by Stonebridge Car Park Partnership. The partners were the three defendants and the Deceased. But it was ultimately agreed that the facility would be drawn down by the company. The car park was transferred to Stonebridge Car Park Partnership because there were significant capital allowances available on the building of multi-storey car parks and the first and second named defendants believed they would be able to use that vehicle to shelter other income from the rest of the development.
7. The defendants and the Deceased agreed to act as sureties for the company on the basis that their liability to the plaintiff was limited to the value of the site itself and the car park constructed on it. However, the Loan Sanction Committee of the plaintiff would not agree to an express stipulation in a letter of loan offer that the guarantees would be limited recourse only. The plaintiff agreed to issue loan facility letters providing that the borrower and sureties were jointly and severally liable to repay the loan in full and to provide side letters to indicate the true nature of the guarantees. The defendants claim that they were led to believe that their liability as sureties would be limited to the value of the car park.
8. It was understood that the car park would be completed by the end of 2005, and that the ownership of the car park would transfer to Stonebridge Car Park Partnership. The company agreed with Stonebridge Car Park Partnership to borrow the working capital necessary to fund the development and thereafter to invoice the partnership once the car park had been completed.
9. The construction of the car park was completed in December 2005, and it became necessary for the partners to raise finance to pay to the company the price of the construction. In particular, the partners were advised that it would be necessary to repay the company before the end of 2005 in order to avoid certain VAT liabilities which would involve a saving of approximately €750,000. Thus, it became necessary to arrange the loan in a short space of time.
10. An urgent request was made for a loan facility in the sum of €5,306,125. The request was made on 20th December, 2005, by way of an overdraft loan facility. The loan facility was advanced pursuant to a letter of offer dated 21st December, 2005, by way of a three-month loan facility for the purpose of paying the amount then due to Streamline Properties Ltd. for the construction of the car park. The three defendants and the Deceased accepted the terms of the loan facility letter and duly signed the form of acceptance on 22nd December, 2005.
11. The first named defendant says that he and the other defendants (including the Deceased) thought that the monies were advanced on the basis of limited recourse to the value of the car park. The first named defendant, having received legal advice, eventually accepted that this was not so, and that the loan was recoverable from the defendants (and the estate of the Deceased) jointly and severally on a full recourse basis. When he received this advice, he decided to settle the action, discharging the debt in full, and he now brings these proceedings against the third named defendant by way of contribution or indemnity in respect of her share and the share of the Deceased.
12. The letter of offer dated 21st December, 2005, had conditions attached. Clause 10 of the conditions provided for "events of default" and one of the events of default is the death of the borrower. The Deceased died on 17th July, 2008, and the third named defendant argues that the death was an event triggering default. She relies on s. 8 and s. 9 of the Civil Liability Act 1961.
13. Section 8 provides as follows:
2 "8.-(l) On the death of a person on or after the date of the passing of this Act all causes of action (other than excepted causes of action) subsisting against him shall survive against his estate.
(2) Where damage has been suffered by reason of any act in respect of which a cause of action would have subsisted against any person if he had not died before or at the same time as the damage was suffered, there shall be deemed, for the purposes of subsection (1) of this section, to have been subsisting against him before his death such cause of action in respect of that act as would have subsisted if he had died after the damage was suffered."
14. Section 9 provides:
2 "9.-(1) In this section "the relevant period" means the period of limitation prescribed by the Statute of Limitations or any other limitation enactment.
(2) No proceedings shall be maintainable in respect of any cause of action whatsoever which has survived against the estate of a deceased person unless either-
(a) proceedings against him in respect of that cause of action were...
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