Danske Bank A/S (t/a National Irish Bank) v Madden

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian McGovern
• Judgment Date: 03 July 2009
• Neutral Citation: [2009] IEHC 319
• Court: High Court
• Date: 03 July 2009

[2009] IEHC 319

THE HIGH COURT

[No. 1255 S/2008]

Danske Bank A/S (t/a National Irish Bank) v Madden

BETWEEN

DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK PLC.

PLAINTIFF

AND

JOHN MADDEN

DEFENDANT

BANK OF IRELAND FINANCE LTD v ROCKFIELD LTD 1979 IR 21

NORTHERN BANK LTD v HENRY & FIRST NATIONAL BUILDING SOCIETY 1981 IR 1

CONTRACT

Undue influence

Loan agreement - Purpose of acquiring property -Agreement with solicitor to purchase property -True purpose of loan not disclosed -Second agreement entered into over subject property with another financial institution by solicitor -Retention of monies by solicitor -Application to set aside agreement -Solicitor and client relationship -Whether undue influence -Whether independent legal advice required -Whether actual or constructive knowledge of undue influence -Whether reasonable inquiries made -Bank of Ireland v Rockfield [1979] 1 IR 21 and Northern Bank Ltd v Henry [1981] IR 1 distinguished -Judgment for plaintiff (2008/1255S -McGovern J -3/7/2009) [2009] IEHC 319

Danske Bank v Madden

Facts The plaintiff had brought proceedings against the defendant seeking the repayment of monies allegedly owed and advanced to the defendant on foot of a loan agreement. The amount was in the region of 1.36 million (including interest). The plaintiff maintained that the clear purpose of the loan was to invest further in property acquisitions whereas the defendant maintained that it was for the purpose of purchasing a property which was being offered as security. The loan was advanced to the defendant's solicitor and the defendant took possession of the property in question. Subsequently the defendant re-mortgaged the property with Irish Nationwide Building Society. However the sum drawn down was not used to discharged the plaintiff's mortgage but was in fact retained by the defendant's solicitor, Thomas Byrne. The defendant sought to defend the present claim on the basis that he had entered into the initial agreement under the undue influence of his solicitor or that a fraud or deception had been practiced upon him by his solicitor. It was claimed that the plaintiff had constructive notice of the fraud and did not make reasonable enquiries before giving the loan. It was also contended that the plaintiff had failed to carry out the necessary property searches in order to ascertain the true ownership of the property in question.

Held by McGovern J in granting judgment to the plaintiff. There was no evidence to show that the defendant was either a vulnerable or dependent person. The evidence did not establish that the defendant was in any way overborne by his solicitor but that he was a victim of a fraud perpetrated by his solicitor. The defendant had represented to the plaintiff, both by himself and through his solicitor that he owned the property. The Bank had no obligation to go further than they did before granting the loan. In the absence of special circumstance a person will be bound by their signature and could not repudiate documents by saying they had not read them. The defendant was liable for the sum claimed.

Reporter: R.F.

1 JUDGMENT of Mr. Justice Brian McGovern delivered on the 3rd day of July, 2009

2 1. The plaintiff's claim is for monies lent by the plaintiff to the defendant at his request. The parties are in agreement that if the defendant is indebted to the plaintiff, the amount due on foot of the loan agreement as of the date of commencement of the trial is €1,359,392.97.

3 2. The plaintiff is a bank. At all material times, the defendant was the principal of John Madden Car Sales and he resided at Lucan in County Dublin.

4 3. The claim arises out of a Loan Agreement entered into by the plaintiff and the defendant on 12 ^th December, 2005, pursuant to which the plaintiff agreed to make available to the defendant a loan facility in the sum of €1,330,000.00. The terms on which the loan was granted were set out in a facility letter dated 8 ^th December, 2005, and which was accepted and signed by the defendant on 12 ^th December, 2005.

5 4. The agreement states that the purpose of the facility was "to invest in further property acquisitions". The security offered was a

"Letter of undertaking over Legal Mortgage and Deeds of property at 23, Coldwater Lakes, Saggart, County Dublin.

Any security held now or at any future time shall be security for all your liabilities to the Banks (actual or contingent) and whether as principal or surety."

6 The property specified is one and the same as that described elsewhere as No. 8, Tassagard Drive, Citywest, Saggart, County Dublin. A letter of undertaking was given by the defendant's solicitor, Mr. Thomas Byrne.

7 5. The granting of the loan followed upon a meeting that took place on 10 ^th November, 2005, when the defendant attended with his solicitor at the bank's premises for the purpose of making a loan application. At that meeting, the bank officers outlined the requirements that had to be met in order to proceed with the application. The defendant had been introduced to the bank by Mr. Thomas Byrne, who had personal borrowing with the bank and was in the course of opening his practice account with the bank at that time. The defendant was described to Mr. Gordon Bothwell of the plaintiff bank as a client of Mr. Byrne's firm, Thomas Byrne & Co., as well as being a business associate. When the parties met on 10 ^th November, 2005, Mr. Bothwell and Mr. David Doyle represented the bank and the defendant attended with his solicitor, Mr. Byrne. It is accepted by Mr. Bothwell and the defendant that Mr. Byrne did most of the talking.

8 6. There is a disagreement between the parties as to what was the purpose of the loan. The defendant maintains that the loan was to enable him to purchase the property at No. 23, Coldwater Lakes ("the property") from Mr. Byrne to compensate him in respect of losses suffered due to Mr. Byrne not completing an earlier property deal in which he and the defendant were involved. The plaintiff maintains that the clear purpose of the loan was as stated in the facility letter, namely, "to invest in further property acquisitions." As evidence of this, the plaintiff says that the defendant furnished a Schedule of Assets which included the property which was described as No. 8, Tassagard Drive, Citywest, Saggart, County Dublin ("the property"). This statement of affairs had been furnished to the bank by the defendant's solicitor. The defendant says that he did not see the statement of affairs before it was furnished and it now transpires that the defendant did not own the property even though it was offered as security for the loan as can be seen from clause 5 of the facility letter.

9 7. In the course of his evidence, Mr. Bothwell, on behalf of the bank, stated that he was never told that the loan was for the purpose of purchasing the property being offered as security. I accept that evidence. The defendant admitted, under cross-examination, that he did not tell the plaintiff that he was acquiring the property from Mr. Byrne. Following the meeting on 10 ^th November, 2005, the defendant's solicitors sent to the bank the statement of affairs which included the property, and in the credit application dated 6 ^th December, 2005, the following appears:

"The purpose of this submission is to request sanction for a twenty-five year term loan for €1,330,000.00. This is based on 70% LTV on unencumbered property at 23, Coldwater Lakes, Saggart, County Dublin, which will be held as security. The proposed funding will be used to invest in other property."

10 This corroborates what was ultimately stated in the letter of sanction and the evidence of Mr. Bothwell as to his understanding of the position. The defendant concedes that he did not state anywhere, in his replying affidavit to the summary summons, that he had told the bank that he was buying this house. He accepted, under cross examination, that Mr. Bothwell would have been under the impression that the loan was "to invest in other property" as stated in the facility letter and the credit application.

11 8. The solicitor's undertaking dated 22 ^nd December, 2005, is given in respect of the property, and on the same date the defendant signed an authorisation to his solicitor to give that undertaking. On the same date, the defendant made a statutory declaration that the property was not a family home. In his evidence, he said that he did not sign this in front of the Commissioner for Oaths, contrary to what appears in the declaration. While this raises an issue of great concern, it was not possible to make contact with the Commissioner during the course of the trial to establish whether this assertion was contested. I cannot reach any conclusion on this evidence in the absence of hearing the Commissioner. However, it is not necessary for me to ascertain the true position in order to resolve the matters in issue between the parties. What is clear, beyond doubt, is that the defendant signed the declaration. The loan was drawn down on 23 ^rd December, 2005, and the defendant accepts that he made payments on foot of the loan.

12 9. It appears, from the evidence, that the loan was paid to the defendant's solicitor at the defendant's request, but that it was never, in fact, passed on to the defendant. The defendant was given the keys of the property and took up occupation, believing he was the owner of it. Approximately six months later, he decided to sell the house but his solicitor...