Danske Bank A/S v Coyne

• Jurisdiction: Ireland
• Judge: Mr. Justice Charleton
• Judgment Date: 25 May 2011
• Neutral Citation: [2011] IEHC 234
• Court: High Court
• Date: 25 May 2011

[2011] IEHC 234

THE HIGH COURT

1491P/2010

Danske Bank A/S v Coyne

COMMERCIAL

BETWEEN

DANSKE BANK A/S

PLAINTIFF

AND

SÉAMUS COYNE

DEFENDANT

ANALOG DEVICES BV v ZURICH INSURANCE COMPANY 2005 1 IR 274

NATIONAL TOURISM DEVELOPMENT AUTHORITY v COUGHLAN 2009 3 IR 549

O'CONNELL v BANK OF IRELAND 1998 2 IR 596

MOORVIEW DEVELOPMENTS LTD v FIRST ACTIVE PLC UNREP HIGH 9.7.2010 2010/37/9346 2010 IEHC 275

GASTRONOME UK LTD v ANGLO DUTCH MEATS UK LTD 2006 2 LLR 587

CHARTBROOK v PERSIMMON HOMES LTD 2009 1 AC 1101

IRISH PENSIONS TRUST LTD v CENTRAL REMEDIAL CLINIC 2006 2 IR 126

O'NEILL v RYAN 1992 1 IR 166

COURTS ACT 1981 S22

1 1. At issue here is whether a guarantee dated 9 ^th April 2008 is enforceable. That guarantee was entered into as security in respect of a primary liability for substantial borrowings by T.C. Coyne Limited. The defence is that the guarantee is unreliable because it was signed at a disputed time and in disputed circumstances; that it is expressed to be operative in respect of National Irish Bank Limited, an entity which did not then exist; and that its terms are not operative over the liabilities of the principal debtor.

2 2. As with many similar cases, the guarantee was entered into against primary liability stretching back some years. The details of this are not relevant. It suffices to record that an earlier loan to the primary debtor with limited security was superseded by a loan of €4 million dated 19 ^th December 2006. The security for that loan was adjusted for later loans to include a guarantee from the defendant. That first form of guarantee, relevant for historical purposes only, was signed on 8 ^th January 2007 by Séamus Coyne and was witnessed. It was made out in favour of National Irish Bank Limited. The cover sheet contains a later note date 9 ^th April 2008 indicating that it was replaced.

3 3. I take nothing from the matrix of documents within which the contract of guarantee in dispute was formed apart from the obvious fact that the bank was determined to have a guarantee to support its loan. I do not need to proceed further into the background.

4 4. On 2 ^nd April 2008, the principal debtor, T.C. Coyne Limited, was loaned €8.15 million based upon security expressed as a floating charge over the assets and undertakings of T.C. Coyne Limited and a letter of guarantee for €8 million from Séamus Coyne, the defendant herein, supported by legal mortgages over development sites in Mullingar and Killucan, County Westmeath and the sale proceeds of seven residential units in Dromod, County Leitrim. The letter to the directors of T.C. Coyne Limited on 2 ^nd April 2008 states that the security is to be:-

"Any security now held or at any future time shall be security for all the borrower's liabilities to the bank (actual or contingent) and whether as principal or surety. If this guarantee secures this credit facility, the Consumer Protection Code or future statutory requirements may require us to inform the guarantor about the facility and about any future change in the terms of this agreement. As a result, it is a condition of this agreement that the borrower can consent to this."

5 5. On 9 ^th April 2008 a form of guarantee was entered into by the defendant in order to fulfil a condition of the proposed loan to the principal debtor. This is where the issues in this case have their origin. This guarantee was drafted by Mr. Declan Cox, the relevant bank manager, from an old template. The document was drawn up by him from a word-processing package containing precedents of documents on his personal computer. By that stage, the name of the bank for which Mr. Cox works had undergone a change. The limited liability indication had been dropped. By later changes, the plaintiff herein, Danske Bank A/S, became the successor in title to the rights and liabilities of National Irish Bank. At all times, however, it was either the same entity or was an entity that had lawfully succeeded to the rights and liabilities of that entity. The drafting of the guarantee by Mr. Cox from an old template is, in essence, the defence to these proceedings. By way of complication, a further issue arose as to when, where, and in the presence of whom, the guarantee was signed. Mr. Cox said that it was signed in his office on 9 ^th April 2008. A conflict on the evidence has arisen: the defence case is that it was signed on 21 ^st July 2008.

6 6. A great portion of the hearing was devoted to this issue as to when the guarantee was entered into, and in what circumstances, with whom present and at what location. The terms of the guarantee, if enforceable, make it clear that it effects the security for personal repayment by the defendant in respect of any sums of money which were as of the date of the guarantee, or which would at any time in the future become, owing to the bank from T.C. Coyne Limited. Another issue was whether or not the defendant intended to contract with the predecessor in title to the plaintiff ( i.e. National Irish Bank). The commendably honest evidence of the defendant did not establish any contrary case in law that he did not intend to contract with the predecessor in title to the plaintiff. His evidence was to the effect that he did not know why he signed the guarantee. His evidence did not establish and, in the circumstances outlined in his evidence, could not establish that in entering into the guarantee he was intending to contract with an entity different to National Irish Bank. Even were it to the contrary, the absence of any other entity with whom he might genuinely have thought he was contracting limits the prospect of this defence succeeding.

7 7. I now turn to the relevant contract. The operative clause of the guarantee reads as follows:-

"In consideration of National Irish Bank Limited (hereinafter called the "Bank") from time to time making or continuing advances or otherwise giving credit or affording banking facilities or granting time for as long as the bank may think fit to T.C. Coyne Limited of Milltownpass, County Westmeath (hereinafter called "the principal") I the undersigned Séamus Coyle hereby agree to pay and satisfy to the bank on demand all and every sum and sums of money which are now or shall at any time be owing to the bank anywhere on any account whatsoever whether from the principal solely or from the principal jointly with any other person or persons or from any firm in which the principal may be a creditor, including the amount of notes or bills discounted or paid and other loan credits or advances made to or for the accommodation whereat the request either of the principals solely or jointly or if any such firm as aforesaid or for any monies for which the principal may be liable as surety or in any other way whatsoever together with in all the cases aforesaid. All interest discount and other banker's charges including legal charges occasioned by or incidental to this or any other security held by or offered to the bank for the same indebtedness or to the enforcement of any such security. Provided always the total liability ultimately enforceable against me under this guarantee shall not exceed the sum of EUR€8,000,000 (€8M) together with interest thereon (as well as after as before any judgment) from the date of demand by the bank upon me for payment…"

8 8. The borrowings of the principal debtor were made against a background of loans for property development in the way that I have touched on earlier.

9 9. National Irish Bank Limited, the party to whom the guarantee was given, had by that date ceased as a trading name for the plaintiff. Going back to the 2006 documents, it was then the appropriate name in respect of the advance of monies accepted by T. C. Coyne Limited, the principal debtor, and the later guarantee entered into by the defendant. By the time of this document, unwisely called up for word-processing by Mr. Cox and never altered, the change of name which I have noted had been effected. I am satisfied that this change of name has been properly proven. I am satisfied that it is beyond doubt that the relevant entity under the new name is the predecessor in title to the plaintiff in these proceedings. At a later stage in the events with which the Court was concerned, another form of document was drawn up by Mr. Cox for the plaintiff, with the correct party to whom the guarantee applied accurately stated therein, in the hope that the defendant might sign it. That never happened as the defendant, understandably in human terms, declined.

10 10. By letter dated 27 ^th October 2009, on National Irish Bank headed notepaper, the nature of the error was explained to the defendant in the following terms:-

"In accordance with the requirements of the April 2008 facility letter, the guarantee letter, of 9 ^th April 2008… provided by you provides for payment by you, on demand, of all sums owing by T.C. Coyne Limited up to the limit of €8M plus interest from the date of demand. It is the intention of the bank to shortly issue a demand for this sum, the exact amount of which will be set out in that demand letter. However it has come to the attention of the bank that the guarantee letter was addressed, in error, to "National Irish Bank Limited" as opposed to "National Irish Bank", which is and was at the time the trading name of the bank. We thought it preferable to address this matter in advance of issuing a demand on the guarantee and do so below. By virtue of the addition of the word "limited" to the bank's name, the obligations undertaken by you by way of guarantee to the bank in respect of the liabilities of T.C. Coyne Limited to the bank were recorded in the guarantee letter as being undertaken by reference to "National Irish Bank Limited". This is clearly an error in that the guarantee was required under the...