Danske Bank v Shortt

• Jurisdiction: Ireland
• Judge: Ms Justice Ní Raifeartaigh
• Judgment Date: 19 May 2020
• Neutral Citation: [2020] IECA 137
• Docket Number: [2019/319]
• Court: Court of Appeal (Ireland)
• Date: 19 May 2020

BETWEEN/

DANSKE BANK A/S TRADING AS DANSKE BANK

PLAINTIFF/RESPONDENT

AND

MARTIN SHORTT

AND

PAULINE SHORTT

APPELLANTS/DEFENDANTS

[2020] IECA 137

Kennedy J.

Faherty J.

Ní Raifeartaigh J.

[2019/319]

THE COURT OF APPEAL

Summary judgment – Remittal – Plenary hearing – Appellants seeking to appeal against the judgment and order of the High Court – Whether the trial judge erred in holding that the appellants did not have a fair or reasonable probability of having a bona fide defence to the respondent’s claim

Facts: The plaintiff/respondent, Danske Bank (the bank), sought judgment against the defendants on foot of a guarantee in writing executed by the appellants/defendants, Mr and Ms Shortt, on 21st July, 2005. The High Court granted the bank’s application for summary judgment. The judgment of Noonan J was delivered on 5th June, 2019 and the order granting judgment was perfected on 20th June, 2019. Judgment was in the amount of €1,368,279.10. The appellants appealed to the Court of Appeal against the judgment and order of the High Court. The appellants appealed on the grounds that the trial judge erred: (i) in holding that they did not have a fair or reasonable probability of having a bona fide defence to the bank’s claim; (ii) in holding that they had failed to show they had a substantial counterclaim against the bank; (iii) in holding that they did not have a cross-claim amounting to a defence by way of set-off; (iv) in holding that the cross-claims arose out of entirely different circumstances between the parties; (v) in holding that even if the bank was entitled to judgment, that should not be stayed while the cross-claim was litigated; (vi) in his application of the parol evidence rule; (vii) in his application of the principles applicable to the threshold for leave to defend proceedings; and (viii) when assessing the credibility of the appellants.

Held by Ní Raifeartaigh J that she agreed with the trial judge that the evidence put forward by the first appellant (even assuming it to be admissible) did not reach even the low evidential threshold required for the remittal of an application for summary judgment to plenary hearing.

Ní Raifeartaigh J held that the appeal would be dismissed.

Appeal dismissed.

JUDGMENT of Ms Justice Ní Raifeartaigh delivered on the 19 ^th day of May, 2020

1 This is an appeal against the judgment and order of the High Court granting the plaintiff's (“the bank”) application for summary judgment. The judgment of Noonan J. was delivered on 5 ^th June, 2019 and the order granting judgment was perfected on 20 ^th June, 2019. Judgment was in the amount of ₠1,368,279.10.

Background/Facts

2 The bank sought judgment against the defendants on foot of a guarantee in writing executed by the defendants on 21 ^st July, 2005. By the terms of the guarantee, the defendants agreed to jointly and severally guarantee payment on demand of all sums due by a company (Blackwood Taverns Limited) to the bank. The defendants were husband and wife and were at all material times directors of the company. The guarantee provided that the total liability under the guarantee would not exceed ₠1.5m. The guarantee was executed (a fact not in dispute) and two subsequent facilities were granted by the bank. The first arose on foot of a facility letter on 6 ^th April, 2010 and was for the sum of ₠50,000 being a renewal of an existing overdraft facility to assist with the general working capital requirements of the company. The security clause provided, among other things, for the provision of a letter of guarantee from the defendants in the sum of ₠1.5m. The facility letter was signed by the defendants as directors of the company. The second facility was entered into a month later on 6 ^th May, 2010 and was for the sum of ₠1.5m for the purpose of restructuring an existing loan. Again, the security requirement included the provision of a letter of guarantee in the amount of ₠1.5m. The facilities also provided for various legal and equitable mortgages over certain properties including the premises known as “Dagwells Bar and Restaurant”. The second facility letter was also executed by the defendants as directors of the company.

3 The monies were drawn down on foot of the two facility letters and have not been repaid. This is not in dispute.

4 A demand for payment issued to the company on 18 ^th September, 2013, giving a period of 24 hours to make the payment. On the next day, 19 ^th September, 2013 (apparently before the 24 hours had expired), the bank appointed a receiver over the property and assets of the company. On 18 ^th October, 2013, the bank demanded payment of the sums due by the company from the defendants on foot of their guarantee.

5 Dagwells Bar and Restaurant (“Dagwells”) was sold by the receiver on 16 ^th May, 2014 and the net proceeds were credited to the account of the company.

6 The proceedings on foot of the signed guarantee were issued by way of summary summons by the bank on 25 ^th February, 2015 and the motion for judgment before the Court issued on 12 ^th December, 2016. Two affidavits were sworn by the first defendant, Mr. Shortt, in response to the claim and none by the second defendant. Mr. Shortt averred, among other things, that around the time the company wanted to purchase a large property portfolio, there was a meeting with employees of the bank, Mr. James Bradley and Mr. Jim Deeney, to discuss the terms of the original facility letters which relate to earlier facilities than those before the Court. Mr. Shortt says that during those meetings he questioned the necessity for the personal guarantees being sought and said that neither defendant would agree to sign them. He said that ultimately, in view of the fact that he was introducing business to National Irish Bank (the plaintiff's predecessor) and was not receiving commission, in lieu of commission and on the strict basis that he signed up to the personal guarantees, he was told that the guarantees would not be enforced against the defendants. He says that he received this assurance directly from Mr. Bradley and Mr. Deeney and that he relied upon it.

7 In his affidavits, Mr. Shortt also raised two other matters. Firstly, he said that at the time of the execution of the guarantee in July 2005, he was what he would describe as a vulnerable person and a patient in a mental hospital. He says that this was known to the bank and that by virtue of this, the guarantee was unenforceable. This was the only evidence offered on this point. Secondly, he complained that at a meeting between the bank and his solicitor after the company's default, it was agreed that he would voluntarily sell Dagwells and that his solicitor would have carriage of the sale; but that the bank breached this agreement by appointing a receiver and that the receiver went into possession of Dagwells before the twenty-four hours afforded by the letter of demand to the company had expired. He says that the appointment of the receiver was therefore defective and unlawful and that, as a consequence of this, the bank is liable to him in damages. He says that he is entitled to exemplary damages both against the bank and the receiver and that the damages due will exceed the plaintiff's claim.

8 In neither of his affidavits does Mr. Shortt suggest that these alleged issues were at any time raised with the bank prior to the swearing of his affidavits.

The High Court Judgment

9 In his judgment, Noonan J. summarised the position as being that the defendants claimed to have a defence to the claim on three grounds:

(1) The bank had agreed that the guarantee would not be enforceable;

(2) The bank and the receiver were in breach of the agreement concerning the sale of Dagwells which gives rise to a counterclaim on the part of the defendants which would exceed the value of the bank's claim;

(3) The first defendant was, at the time of execution of the guarantee, a vulnerable person and a patient in a mental hospital and this rendered the guarantee unenforceable.

10 With regard to the first defence, Noonan J. observed that the most striking aspect of this was that the guarantee was signed on 21 ^st July, 2005, because Mr. Shortt claimed that it was at a meeting six months later on 19 ^th December, 2005 that it was agreed that the guarantee would not be enforced if the defendants signed it. He commented that this clearly could not be correct. The Court agrees with this comment at the level of principle. Clearly, an event which takes place after a contract cannot possibly be a promise which induces a person to enter into the contract.

11 Noonan J. went on to say that, even assuming that this alleged agreement on the part of the bank's officers was entered into before the guarantee was signed, the question would arise as to whether this could constitute an arguable defence. He pointed out that it had never previously been suggested that the guarantee did not bind the defendants for the reasons Mr. Shortt was now advancing to the Court, and that one would have expected any reasonable person faced with a call on a guarantee which had been agreed never to be enforceable to respond swiftly and firmly to that effect. He said that some three and a half years had elapsed before Mr. Shortt had raised the issue and this was only when facing a motion for judgment, which significantly undermined the credibility of the assertion. He referred to his own earlier judgment AIB v. Kennedy [2018] IEHC 381, in which a similar type of defence had been raised and considered that the points therein applied with equal force to the case before him. I will return to the Kennedy case below. However, I pause to note that I would characterise the criticisms made by Noonan J. in this regard as criticisms concerning the credibility or sufficiency of the evidence.

12 Turning to the second issue, the counterclaim arising from an alleged breach of the agreement...