Danske Bank A/S (Trading as Danske Bank) v O'Reilly
| Jurisdiction | Ireland |
| Judge | Ms. Justice Donnelly |
| Judgment Date | 09 November 2017 |
| Neutral Citation | [2017] IEHC 675 |
| Docket Number | [2015 No. 1573 S.] |
| Court | High Court |
| Date | 09 November 2017 |
[2017] IEHC 675
THE HIGH COURT
Donnelly J.
[2015 No. 1573 S.]
AND
Banking & Finance – Non-payment of loan – Summary judgment – Bona fide defence – Execution of deed of guarantee – Misrepresentation
Facts: The plaintiff/bank sought an order for summary judgment against the third defendant for non-payment of debts by the company of which the first and second defendants were the directors. The third defendant executed a deed of guarantee in favour of the plaintiff thereby guaranteeing to pay the sums taken by the first and second defendants as the directors of the company. The first defendant had consented to the present summary judgment. The issues arose as to the meaning of certain clauses in the guarantee. The third defendant claimed that at the time of entering into the guarantee, he understood that it related to a bond required for a contract that the company had with the local county council. The plaintiff objected to the contention made by the third defendant and stated that the third defendant was also a director of that company and an experienced man and thus, he could not escape his liability.
Ms. Justice Donnelly refused to grant an order of summary judgment to the plaintiff. The Court held that though the subject guarantee was executed by the third defendant yet, he did not fully understand the meaning of the letter sent to the third defendant by the plaintiff. The Court granted leave to defend to the third defendant on the basis that the said guarantee was unenforceable owing to the misrepresentation by the plaintiff/bank's officials. The Court observed that the third defendant had established arguable defence in that the disputed guarantee was limited to certain sums of money.
The plaintiff bank ('the bank') seeks an order for summary judgment against the third defendant in the sum of €203,842.05, on foot of a guarantee. The third defendant claims that he has a full and bona fide defence to the plaintiff's claim.
The bank loaned money to a company called Denray Construction Limited ('the company') pursuant to two separate facility letters. The first facility letter dated 3rd May, 2005 (and subsequently amended), made an overdraft facility of €40,000 available to the company. The second facility letter, dated 29th February, 2008, made available an overdraft facility in the sum of €150,000. The monies advanced to the company were subject to security which included a guarantee executed by the first and third defendants on 18th March, 2008 ('the guarantee').
The first and second defendants are husband and wife and were the directors of the company. The third defendant is a brother of the first defendant. The Court has been informed that the first defendant has consented to summary judgment in these proceedings which included a sum in respect of the guarantee. In principle, this is not a matter relevant to the issue of whether the Court can grant summary judgment in relation to the third defendant.
The bank claims that under this guarantee, in consideration of the bank, inter alia, making or continuing advances to the company, the first and third defendants agreed to pay and satisfy to the bank, on demand, all and every sum of money 'which are now or shall at any time be owing' to the bank by the company. The guarantee provided that the total liability ultimately enforceable would not exceed the sum of €290,000 together with interest thereon from the date of demand by the bank.
The document presented to the Court as the guarantee does not have a National Irish Bank (then the trading name of the bank) letter head. The various other documents relating to facility letters or guarantees entered into around this time by the bank with some or all of the defendants have such a heading. The guarantee is, however, headed "Joint and Several Guarantee to Danske Bank A/S". The final page of the document is an execution page which is dated 18th March, 2008. At the top of that page in bold and delineated in a box is the following statement:-
'Warning: as a guarantor of this loan, you will have to pay off this loan, the interest and all associated charges if the borrower does not. Before you sign this guarantee you should get independent legal advice.'
The guarantee is signed by both the first and third defendant and both signatures were witnessed by Maria Toal with an address in Bailieborough, Co. Cavan. Her occupation is given as solicitor.
The company failed to comply with the repayment terms of their facility agreements. By letter dated 29th November, 2010, the bank wrote to the third defendant demanding payment in the sum of €177,461.42 being the amount due and owing on foot of the guarantee. A further letter was sent on 1st September, 2014, by the bank's solicitor demanding payment in the sum of €203,842.05, being the amount then due and owing on foot of the guarantee. In these proceedings, the bank has stated that it is voluntarily waiving any further claimed interest on the amount.
The third defendant does not contest that the company owed the money to the bank. He does not deny that he signed the execution page of the guarantee but asserts that the guarantee is nonetheless unenforceable against him as he was not shown the full document he was signing. He also claims that he was informed by the representative of the company and by his brother that it was limited to a bond in the sum of €100,000 to Cavan County Council ('the Council'), and that it only referred to his interest in lands. In order to understand the third defendant's claims, it is necessary to examine his affidavits in more detail.
The third defendant's first affidavit in these proceedings was sworn on 28th October, 2015. At that time, he was legally represented by the solicitor who also acted for the first and second defendants. Although not directly stated on affidavit, it appears, on inquiry by the Court, that the solicitor who witnessed the guarantee was a solicitor in the practice of the predecessor to that solicitor's practice.
In the third defendant's first affidavit, he states:-
'I say that the said guarantee referred to therein as the second guarantee was executed by I this deponent and said guarantee provided that the total liability ultimately enforceable would not exceed the sum of €290,000 together with interest thereon.'
The third defendant went on to refer to clause 7(b) of the facility letter dated 29th February, 2008. He said that as further security for the said borrowings, the bank took an equitable deposit over 28 acres of property owned by him jointly with his brother, the first defendant.
The third defendant then stated that subsequent to the said borrowings, 'my solicitors' received a letter of comfort from the bank's representative, Danny Hamilton. He said that he obtained a copy of that letter from his solicitors and he refers to a copy of it. The letter on its face is addressed to the solicitors T. Sheridan & Co., Bailieborough, Co Cavan, which said practice, according to a subsequent affidavit of the third defendant, was taken over by his solicitors on record at the date of the first affidavit. That letter is headed 'Re, Denray Construction Limited' and states: 'I wish to advise that Bank will be relying on guarantee signed by Liam O'Reilly with regard to mortgage on property of 28 acres at Shercock, Co. Cavan.'
The third defendant said that there appears to be several errors made in the letter. He says that firstly, the second paragraph of the letter states as follows: 'this is item 7(b) of facility letter dated 29th February, 2007'. He says that the intention of the bank was to refer to the facility letter dated 29th February, 2008. Secondly, the letter is dated 22nd October, 2007, which he states is an error as it was received by his solicitors on 12th March, 2008. The third defendant stated that it was 'unclear what the meaning and effect of this letter is'.
The third defendant stated that at the time of execution of the said guarantee, he understood it related solely to a bond required for a contract the company had with Cavan County Council and not otherwise. He said he did not have the benefit of independent legal advice when signing the guarantee. He stated that he wanted to take further legal advice and that he required clarification of the information contained in the letter of comfort received by his solicitors from Mr. Danny Hamilton.
The third defendant subsequently changed solicitors and swore a second affidavit. In this new affidavit, he claimed that he was not and never had been a director or shareholder of the company. Furthermore, he stated he was a carpenter and that at all material times he was not a company director or in any way familiar with company books, account loans etc. He said that his sole involvement with the company was in a capacity as subcontractor. The company was the main contractor and he was a subcontractor. He claimed that there was no consideration in terms of the guarantee. He also claimed that he was not given the benefit of Chapter 1 of the Consumer Protection Code 2006 and that the bank had failed in its duties to him thereunder. He claimed that by reason of the plaintiff's failure to adhere to the code and in failing in its duties to him as a customer, the purported guarantee should be set aside as void, voidable and/or unenforceable.
The third defendant said in relation to the purported execution of the guarantee that:-
(a) the bank or its servants or agents did not offer him advice or guidance as to the terms, conditions or warranties contained in the guarantee;
(b) it did not recommend that...
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