Danske Bank A/S t/a National Irish Bank v Ken Mulvaney

• Jurisdiction: Ireland
• Judge: Mr. Justice Birmingham
• Judgment Date: 05 February 2014
• Neutral Citation: [2014] IEHC 45
• Court: High Court
• Date: 05 February 2014

[2014] IEHC 45

THE HIGH COURT

79/2012

Danske Bank AS t/a National Irish Bank v Mulvaney

BETWEEN

DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK

PLAINTIFF

AND

KEN MULVANEY

DEFENDANT

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

ZURICH BANK v MCCONNON UNREP BIRMINGHAM 4.3.2011 2011/50/14278 2011 IEHC 75

IRISH LIFE & PERMANENT PLC T/A PERMANENT TSB v HUDSON UNREP RYAN 13.1.2012 2012/19/5350 2012 IEHC 11

ZURICH BANK v COFFEY & ORS UNREP FINLAY GEOGHEGAN 28.1.2011 2011/50/14265 2011 IEHC 26

Bank Loan - Monies owed - Summary judgment sought - Plenary hearing - Leave to defend - Fair and reasonable probability of real or bona fide defence - Whether non-recourse loan

In these proceedings, the plaintiff bank sought summary judgment against the defendant, Ken Mulvaney, in the amount of €736,948.45, together with interest on the principal sum of €697,391.65 at 5.216% per annum from the 23 ^rd of November 2011. This was resisted by the defendant who asserted that the matter be dealt with via plenary hearing. The defendant stated that while the money was loaned to him by the bank and had not been repaid, that it was a ‘non-recourse’ loan. Birmingham J. held that the Court was required to consider whether there was a fair or reasonable probability of a real or bona fide defence. It was further noted that the jurisdiction to refuse leave to defend was to be exercised ‘very sparingly’ and that the test to be applied was whether it was ‘very clear’ that the defendant had no defence.

In 2005, the defendant contemplated making an investment in a project at the Sawgrass Marriott resort in Florida. During a trip organised for potential investors, the defendant was introduced to Mr Myler, an executive of the plaintiff bank. According to the defendant, he asked Mr Myler whether the plaintiff would provide a loan to fund the investment and that Mr Myler”s response was positive. The defendant claimed that he understood that the loan would be repayable via a realisation of the investment and that Mr Myler told him that the plaintiff bank would require no commitment other than security of the shares in the resort that would be purchased using loan money. Mr Myler, however, indicated that he never represented such a non-recourse loan. He asserted that it was bank policy to not offer non-recourse loans as they required the bank to accept the downside risk while allowing the borrower all the upside investment potential and that this was a ‘ludicrous proposition’. The Court noted that the account of the defendant was ‘highly improbable’.

The loan in question was the subject of two loan offer letters. The first letter provided that, ‘at the end of the 48 month period’, the loan and interest would become immediately due and payable on demand by the Bank and that the security would become enforceable. The second letter contained similar provision. The Court determined that the loan letters were ‘absolutely clear and unequivocal’ that the loan was not non-recourse. The Court considered that, on a favourable view of the evidence toward the defendant, confusion between the issue of security and the question of whether the loan was non-recourse was possible. However, the loan offer clearly set the terms out in writing and was accepted by the defendant. The Court concluded that although the threshold to be crossed to allow Mr Mulvaney to defend the proceedings was extremely low, that his defence was so farfetched and contradicted by the documentary evidence that it was ‘very clear’ that he had no defence.

The plaintiff was therefore entitled to enter judgment.

1 JUDGMENT of Mr. Justice Birmingham delivered on the 5th day of February, 2014

2 1. In this case the plaintiff is seeking liberty to enter final judgment in the amount of €736,948.45, together with further interest on the principal sum of €697,391.65 at the rate of 5.216% per annum from 23 ^rd November, 2011, until judgment or payment. The claim for summary judgment is resisted by the defendant who instead seeks to have the matter remitted to plenary hearing. Essentially the case made by the defendant is a simple one. He says that while money was lent to him by the bank and has not been repaid, that the loan in question was a "non-recourse" one.

3 2. The tests that are to be applied have been considered by the Superior Courts in a number of cases in recent years. Indeed, I do not identify any significant disagreement between the parties as to the principles to be applied, rather what is between the parties and what they do disagree about is what the outcome is if the agreed principles are applied.

4 3. In First National Commercial Bank plc v. Anglin [1996] 1 I.R. 75, Murphy J. dealt with the approach to be taken in these terms at pp. 78 to 79:-

"For the court to grant summary judgment to a plaintiff and to refuse leave to defend it is not sufficient that the court should have reason to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action"

5 …

6 In my view the test to be applied is that laid down in Banque de Paris v. de Naray [1984] 1 Lloyds Law Rep. 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank Plc v. Daniel [1993] 1 W.L.R. 1453. The principle laid down in the Banque de Paris case is summarised in the headnote thereto in the following terms:-

7 'The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the Court had to look at the whole situation to see whether the defendant had satisfied the Court that there was a fair or reasonable probability of the defendant having a real or bona fide defence.'

8 In the National Westminster Bank case, Glidewell L.J. identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:-

9 'I think it right to ask, using the words of Ackner L.J. in the Banque de Paris case, at p. 23, 'Is there a fair or reasonable probability of the defendants having a real or bona fide defence?' The test posed by Lloyd L.J. in the Standard Chartered Bank case,… 'Is what the defendant says credible?', amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence."'

10 4. The matter was again considered by the Supreme Court in the well known case of Aer Rianta cpt v. Ryanair Limited [2001] 4 I.R 607, wherein the test laid down in First National Commercial Bank plc v. Anglin was endorsed by McGuinness J. at p. 615, where she commented:-

"Thus it is for this court to decide whether in the instant case the defence set out in the affidavits of Mr. O'Leary, together with the documents exhibited therewith, is credible, or in other words, whether there is a fair or reasonable probability of the defendant having a real or bona fide defence.... The court does not ask whether Mr. O'Leary's account of events is probable, or likely to be true; nor does it ask whether Mr. Byrne's account of events is more likely. The question is rather whether the proposed defence is so far fetched or so self contradictory as not to be credible."

11 5. The issue is also the subject of a judgment from Hardiman J. in the same case. In the course of his judgment he observed at pp. 621 - 622:

"… I believe that the test for obtaining summary judgment has not changed since the early days of the procedure in the late nineteenth and early twentieth centuries. The formulation used in First National Commercial Bank plc. v. Anglin [1996] 1I.R. 75 and the cases cited in that judgment are useful and enlightening...