Danske Bank A.S. (t/a National Irish Bank) v Michael Walsh and Others
Jurisdiction | Ireland |
Judge | Mr. Justice Herbert |
Judgment Date | 26 April 2013 |
Neutral Citation | [2013] IEHC 190 |
Court | High Court |
Date | 26 April 2013 |
[2013] IEHC 190
THE HIGH COURT
BETWEEN:
AND
RSC O.63 r7
STATUTE OF FRAUDS (IRELAND) ACT 1695 S2
AER RIANTA v RYANAIR 2001 4 IR 607
TEDCASTLE MCCORMACK v MCCRYSTAL UNREP MORRIS 15.3.1999 1999/24/7774
SAUNDERS v ANGLIA BUILDING SOCIETY 1970 3 AER 961 1970 3 WLR 1078 1971 AC 1004
ALLIED IRISH BANK PLC v HIGGINS & ORS UNREP KELLY 3.6.2010 2010/2/422 2010 IEHC 219
IRISH BANK RESOLUTION CORP LTD v QUINN UNREP KELLY 16.12.2011 2011/27/7157 2011 IEHC 470
ACC BANK PLC v KELLY UNREP CLARKE 10.1.2011 2011/2/396 2011 IEHC 7
LLOYDS BANK LTD v BUNDY 1974 3 AER 757 1975 1 QB 326
ULSTER BANK v ROCHE & BUTTIMER 2012 1 IR 765 2012/44/13004 2012 IEHC 166
ULSTER BANK v FITZGERALD & WILLIAMS (ORSE FITZGERALD) UNREP O'DONOVAN 9.11.2001 2001/24/6443 2001 IEHC 159
Litigation - Loan facility - Repayment - Summary judgment - Guarantees - Non est factum - Undue influence - Discharge of liability - Nominal interest
Facts: The second and third named defendants were businessmen who claimed that they were both approached by their accountant, the first named defendant, in 2007 to invest in a property transaction. They agreed to give the first defendant €5,000 each for the purposes of a planning permission application for a certain amount of land owned by a company known as Totty Barry Taverns Limited. They then explained that the first defendant had 51% of the shares of Totty Barry Taverns Limited transferred to him for a nominal fee, with a nominal interest then given to the second and third defendants to reflect the €5,000 they had invested so far.
The plaintiff bank claimed that it advanced €910,000 to the defendants to facilitate the property development. Following non-repayment of the loan after a number of letters of demand were issued, proceedings were issued against the defendants for the repayment of the loan plus interest. No appearance was entered by the first defendant and summary judgement was entered against him for the sum of €311,208.34. In relation to the second and third defendants, a similar figure was sought from each on foot of a guarantee dated the 10th September 2007. It was the second and third defendants claim that they had never been advised personal guarantees were required of them, and that if they had been asked they would have refused. The plaintiff brought an application for final judgment to be entered against these two defendants on the basis that no bona fide defence had been disclosed. This was rejected by the defendants who stated that they had no knowledge of a loan being sought from the plaintiff and so stated the defence of non est factum applied, as well as a claim of undue influence which was reflected in the fact the second and third defendants only held a nominal interest in the company. Finally, they argued that there had been a discharge of the guarantee by reason of a breach by the plaintiff of a fundamental condition of the agreement between the plaintiff and the principal debtor, namely that the execution of a trust document identifying the beneficial owners of the shares was a precedent condition to the drawdown of the loan pursuant to the terms of the loan facility letter and the subsequent failure to comply discharged any liability under the guarantees.
Held by Herbert J that a letter of the 18th February 2010 from a firm of Chartered Accountants, acting on behalf of the second and third defendants, to the plaintiff clearly showed that the loan facility had been established with the knowledge of all parties and that, despite claims to the contrary, the second and third defendant”s had a proactive role within as Totty Barry Taverns Limited and could be described as acting as controllers of same. It was noted the second and third defendants had not raised a defence that they did not sign the guarantees.
It was further held that pursuant to Aer Rianta v. Ryanair [2001] 4 I.R. 607, summary judgement would be granted where a defendant failed to put forward an arguable case. The defence of non est factum was rejected by the court on the basis that the second and third defendants were experienced businessmen and that they could not have been in doubt that the document they had signed was a guarantee to the loan facility. The defence of undue influence was also rejected on a similar basis as the parties were deemed to have a strictly business relationship where undue influence could not arise given the nature of the transaction and the business experience of the individuals involved. The final claim by the defendants was rejected on the basis that the correct interpretation of the loan facility letter did not mandate the execution of the trust document before the loan could be drawn down. It was also noted that even if that was a condition of the letter, the defendants had failed to show how its non-compliance would result in a full discharge from the guarantee. As no arguable defence was put forward, summary judgment was entered against the second and third defendants.
Summary judgment against the second and third defendants in the amount of €300,000 plus interest each.
JUDGMENT of Mr. Justice Herbert delivered on the 26th day of April, 2013.
1. The plaintiff in this action is an external company authorised and registered under the laws of Denmark. It is registered in this State and is licensed to carry on the business of banking in the State, under the style and title of National Irish Bank. The plaintiff's claim is for liberty to enter final judgment for a sum of €300,000 together with interest against the second and third defendants on foot of a guarantee dated the 10 th September, 2007. The plaintiff sought repayment of all sums due on foot of this guarantee by letters of demand dated the 17 th December, 2009. Further letters of demand were issued dated 15 th February, 2011. No payment was received from any of the defendants.
2. An appearance was entered on behalf of the second defendant and the third defendant on the 31 st August, 2011. By order of the Master of the High Court, made on the 23 rd November, 2011, liberty was given to the plaintiff in default of appearance by the first defendant to enter final judgment against the first defendant for the sum of €311,208.34, of which sum €11,208.34 represents interest accrued from the 12 th January, 2009, to the 30 th August, 2011, inclusive. By order made pursuant to the provisions of O. 63, r. 7 of the Rules of the Superior Courts, the Master of the High Court referred the application against the second and third defendants to this Court for hearing.
3. In the affidavit grounding this application sworn on the 16 th September, 2011, David Taylor, a manager of the plaintiff bank, avers that the defendants have no bona fide defence to the plaintiff's claim in law or on the merits and that the appearances entered on their behalf were solely for purposes of delay. This was denied by the defendants who stated through counsel that the facts deposed by them on affidavit establish that they have three bona fide defences: non est factum, undue influence, and discharge by reason of a breach by the plaintiff of a fundamental condition of the agreement between the plaintiff and the principal debtor. Counsel for the plaintiff submitted that the defendants do not have even an arguable defence on any of these grounds and further contends that pleas of non est factum and undue influence are mutually exclusive.
4. The second defendant in his replying affidavit sworn on the 22 nd February, 2011, states that he is a businessman and that the first defendant had acted as his accountant since 1991. The third defendant states in his replying affidavit sworn on the 22 nd November, 2011, that he is a publican and is the owner of two licensed premises in Waterford and one in Washington D.C. United States of America and that the first defendant had acted as his accountant since 2004. There can be no question therefore, but that the second defendant and the third defendant are businessmen actively and constantly involved in commercial and financial transactions and decisions. The affidavit evidence advanced by these defendants is that the first defendant approached each of them individually in 2007 and asked if they wished to become involved in a property transaction with him and the other defendant. This transaction, they claim, involved obtaining planning permission for the development of a small site of 751sq.mtrs beside "Ryans Bar" Kilbarry, Ballybeg, Co. Waterford. It is stated in a supplemental affidavit sworn by the second defendant on the 9 th March, 2012, that at the time of this approach by the first defendant, he was aware that this property was owned by Totty Barry Taverns Limited. The second and third defendants allege that the first defendant informed them that the only commitment required from them at that time was a payment of a sum of €5,000 each to be utilised in paying an architect who would apply for planning permission. They state that these sums were paid by them to the first defendant. It is alleged by the second defendant in the supplemental affidavit sworn on the 9 th March, 2012, that he was advised by the first defendant that 51% of the shares in Totty Barry Taverns Limited would be transferred to the first defendant at a nominal fee and that he would hold a portion of these shares in trust for the second defendant and the third defendant in order to ensure that they had an interest in Totty Barry Taverns Limited, the owner of the property, reflecting their investment of €5,000 each.
5. The fifth paragraph in each of the replying affidavits of the second...
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