The High Court recently ruled on whether the relationship between a lender and a borrower was, in the circumstances, a fiduciary relationship. In Irish Bank Resolution Corporation Ltd (In Special Liquidation) v Morrissey1 the defendant borrower had raised two issues which the court was asked to determine as preliminary issues. The first related to whether the plaintiff (formerly Anglo Irish Bank) was entitled to make demands under the relevant loan facility. The court found that there was no agreement or arrangement by which the plaintiff would not demand repayment under the relevant loan facility; nor was there any estoppel basis to prevent the plaintiff bank from doing so. The second issue was whether the relationship was a fiduciary one, by virtue of which the plaintiff should not have demanded repayment of the facility.
A fiduciary relationship?
The court began by acknowledging that both parties agreed that their relationship did not fall within one of the settled categories of fiduciary relationships, although such settled classes were not closed, and that the existence of such a relationship is primarily a question of fact to be determined by examining the specific facts and circumstances.
The High Court noted that the defendant relied on the Supreme Court of Canada judgment Galambos v Perez,2 in which it was stated that:
"apart from the categories of relationships to which fiduciary obligations are innate, such obligations may arise as a matter of fact out of the specific circumstances of a particular relationship... The existence of the fiduciary obligation is thus primarily a question of fact to be determined by examining the specific facts and circumstances."
The High Court's judgment in Irish Life & Permanent plc v Financial Services Ombudsman3 was also cited, wherein it was observed that "[t]he banking system is, by its nature, a highly regulated one which, is - or, at least, ought to be - based on trust".
The High Court observed that whether the relationship based on the facts constituted a fiduciary relationship must be informed by a consideration of what is meant by being 'a fiduciary'. In considering this issue, the court cited McMullen v Clancy (No 2),4 which in turn had approved the description given in Bristol & West Building Society v Matthew5 as follows:
"A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of...