Danske Bank as (t/a National Irish Bank) v Feeley & Halpin

• Jurisdiction: Ireland
• Judge: Mr. Justice Ryan
• Judgment Date: 09 December 2011
• Neutral Citation: [2011] IEHC 456
• Court: High Court
• Date: 09 December 2011

[2011] IEHC 456

THE HIGH COURT

[No. 3116 S./2011]

Danske Bank AS (t/a National Irish Bank) v Feeley & Halpin

COMMERCIAL

BETWEEN

DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK

PLAINTIFF

AND

MARTIN FEELEY & LEO HALPIN

DEFENDANT

AER RIANTA v RYANAIR 2001 4 IR 607

SHEPPARDS & CO v WILKINSON & JARVIS 1889 6 TLR 13

FIRST NATIONAL COMMERCIAL BANK v ANGLIN 1996 1 IR 75

HARRISRANGE v DUNCAN 2003 4 IR 1

PRACTICE AND PROCEDURE

Summary judgment

Banking - Loan - Arguable defence - Test to be applied - Whether fair of reasonable probability of real or bona fide defence - Whether loan agreement was non recourse against defendants personally - Whether loan agreement required bank to first recover monies from development lands - Whether conduct of bank led defendants to believe that demand for repayment would not be made provided interest payments continued - Whether bank wrongfully withdrew money from interest fund - Whether bank collected excessive interest - Whether loan given to defendants jointly and severally - Whether proposed defence credible - Aer Rianta v Ryanair [2001] IESC 6, [2001] 4 IR 607 and Harrisrange Ltd v Duncan [2002] IEHC 14, [2003] 4 IR 1 applied - Summary judgment granted (2011/3116S - Ryan J - 9/12/2011) [2011] IEHC 456

Danske Bank A/S t/a National Irish Bank v Feeley

Facts The plaintiff sought summary judgment in the sum of €4,861,204.37 plus interest. The plaintiff had agreed to give the defendants a €5 million loan facility and the defendants drew down the money in November 2007. The loan was for two years during which the defendants were only required to pay interest on the capital sum and a fund was set up out of the loan to pay the interest as it fell due. It had been agreed that when the loan expired it would be restructured onto a mutually agreed amortisation term or refinanced or repaid in full, "subject to approval". The plaintiff stated that following the expiration of the loan it was not possible to reach agreement on a satisfactory arrangement. Consequently, on 7 June 2011 the plaintiff demanded payment of the principal and interest then due under the facility. At that time the interest fund was sufficient to service the loan until December 2012 and the account was also due to be credited by more than €40,000 because reductions in interest rates between 2007 and 2009 had not been reflected in the Standing Order from the interest account. The defendants did not pay on foot of the demand. The defendants submitted herein that they had a defence to the claim and the case ought to be remitted to plenary hearing. The defendants argued that the loan was non-recourse as against the defendants personally and was limited to whatever the plaintiff could recover out of the sale of lands which the facility had been set up to develop. They also argued that the plaintiff had by its conduct led the defendants to believe that demand repayment of the principal would not be made provided the defendants continued to pay the interest thereon. Lastly the defendants submitted that the plaintiff wrongly withdrew money from the interest fund and collected excessive interest. The plaintiff contradicted the defendants' understanding of the loan facility and specifically denied that a representative of the plaintiff told the defendants at a meeting that the facility would not be called in so long as interest was serviced.

Held by Ryan J. in granting the plaintiff summary judgment: That it was clear in the factual circumstances of this case that the defendants did not have a defence to the plaintiff's claim. Having regard to the loan documents there was no basis for suggesting that the plaintiff was prevented from proceeding against the defendants until it had first exhausted the sale of the land. Furthermore, continuing interest applied following the expiration of the term and there was no basis for suggesting otherwise. It was not credible that the plaintiff agreed through one of its officials not to claim the principal for so long as the interest was paid. It did not make sense for the plaintiff to agree to the continuation indefinitely into the future of a special, favourable and temporary regime that existed for the first two years. The money collected by way of excessive interest payment was used by way of set-off by the plaintiff. The arguments raised in respect of this issue did not amount to a defence.

Reporter: LO'S.

The Facts

1 1. Pursuant to a facility letter dated the 14 ^th November 2007 the plaintiff bank agreed to give the defendants a €5 million loan facility. The defendants drew down the money on the 23 ^rd November 2007. The loan was for two years during which the defendants were only required to pay interest on the capital sum. A fund was set up out of the loan to cover interest payments as they fell due. The agreement was that when the loan expired it was to be restructured onto a mutually agreed amortisation term or refinanced or repaid in full, "subject to approval". The bank says that following the expiration of the two-year term of the loan, it engaged in negotiations with the defendants in regard to restructuring and/or refinancing but it proved impossible to reach agreement on a satisfactory arrangement. On 7 ^th June 2011 the bank demanded payment of the principal and interest then due under the facility. At the time of the demand letter the interest fund was sufficient to service the loan until December 2012. That account was also due to be credited by more than €40,000 because reductions in interest rates between 2007 and 2009 had not been reflected in the Standing Order from the interest account. The defendants did not pay on foot of the demand letter and the bank now seeks judgment in the sum of €4,861,204.37 plus continuing interest.

2 2. The matter comes before me as an application by the bank for summary judgment. The defendants submit that they have a defence to the claim and that the case should be remitted for plenary hearing. They make three points. First, they argue that the loan is non-recourse as against the defendants personally and the bank is limited to whatever it can recover out of the lands whose development was the purpose of the facility. Second, the bank by its conduct led the defendants to suppose that it would not demand repayment of the principal as long as they continued to service the interest payments. When the demand letters were issued, the defendants had enough money on deposit to service interest on the loan until December, 2012. Third, the bank wrongfully withdrew money from the interest fund and collected excessive interest. The issue for the Court is whether the defendants have made out sufficient grounds of defence to defeat the bank's claim to summary judgment.

3 3. As to the first line of defence, the defendant Mr Halpin, whose affidavit was filed on behalf of both defendants, acknowledges that the conditions attached to the facility letter did not restrict recourse to the lands in Rathdrum that the defendants intended to develop. He says that the defendants assumed that the loan was non-recourse and that there would be no question of the bank pursuing them over and above what might be realised out of the proposed development lands. The contention is contradicted by the affidavit filed by the bank in reply. Mr Halpin concedes that he has been advised that his understanding of the facility does not accord with its express terms, "which I am advised provides for the joint and several liability of the defendants".

4 4. The second point that Mr. Halpin relies on is that the Bank agreed that it would not seek payment of the capital sum as long as the defendants kept up the interest payments. Mr Halpin says that he and his co-defendant deduced from the fact that the bank continued to take interest payments out of the fund after the expiration of the loan term in November 2009 that the bank would not enforce any rights that they had to demand repayment of the money. He says that this assumption was confirmed at a meeting with Mr Drew Corry of the bank that took place at the Rathdrum property on the 4 ^th February 2010. Mr Halpin says that he and Mr Corry had a discussion of the facility and that the latter

"made it clear to your deponent that the plaintiff had not called in the loan so long as the defendants continued to service interest on the loan. I was not surprised at all by this, as the plaintiff's actions in continuing to take interest from our deposit account since the expiry of the facility in November 2009 was consistent with this position."

5 5. It is not in doubt that there was a meeting with Mr. Corry when he visited the land in Rathdrum but Mr. Corry denies the alleged agreement and says that he would not have agreed to any such alteration of terms and that he did not even have authority to do so.

6 6. Mr Halpin says that the main purpose of the meeting on the 4 ^th February 2010 was to discuss the possibility of financing the purchase of an adjoining development whose developer had gone bankrupt.

"I further say that Mr. Corry not only unambiguously represented that the facility would not be called in so long as interest was serviced, he went on to express the opinion that a repayment of the loan should be frozen for four or five years on the basis that the property market was severely depressed and that myself and the first named defendant did not have the personal assets to discharge the outstanding loan to the plaintiff."

7 7. The Bank's answer to this is, first, an affidavit from Mr. Corry which rejects this version of events. The bank goes further, however. The argument that Mr. Abrahamson B.L. puts forward is that the conduct of the defendants in the aftermath of the alleged agreement of the 4 ^th February, 2010 was wholly inconsistent with there being any agreement...