Friends First Finance Ltd v Cronin

• Jurisdiction: Ireland
• Judge: Mr. Justice Herbert
• Judgment Date: 15 February 2013
• Neutral Citation: [2013] IEHC 59
• Court: High Court
• Docket Number: [No. 2721 S./2011]
• Date: 15 February 2013

[2013] IEHC 59

THE HIGH COURT

[No. 2721 S./2011]

Friends First Finance Ltd v Cronin

BETWEEN

FRIENDS FIRST FINANCE LIMITED

PLAINTIFF

AND

FRANK CRONIN

DEFENDANT

RSC O.37 r6

RSC O.37 r7

RSC O.37 r11

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

CENTRAL BANK ACT 1989 S117

INVESTMENT INTERMEDIARIES ACT 1995 S23

INVESTMENT INTERMEDIARIES ACT 1995 S37

CONSUMER CREDIT ACT 1995 S8H

INSURANCE ACT 1989 S61

REID v RUSH & TOMPKINS GROUP PLC 1990 1 WLR 212 1989 3 AER 228 1990 RTR 144 1990 ICR 61

LLOYDS BANK LTD v BUNDY 1975 QB 326 1974 3 WLR 501 1974 3 AER 757

TUFTON v SPERNI 1952 2 TLR 516 1952 WN 439

CENTRAL BANK ACT 1989 S117(1)

CENTRAL BANK ACT 1989 S117(3)(B)

CENTRAL BANK ACT 1989 S117(4)

INVESTMENT INTERMEDIARIES ACT 1995 S79

INVESTMENT INTERMEDIARIES ACT 1995 S74

CENTRAL BANK & FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2003 S35

CENTRAL BANK & FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2003 SCHED 1 PART 25

CONSUMER CREDIT ACT 1995 S12(1)(A)

FREDERICK INNS LTD (IN LIQUIDATION) & ORS, IN RE 1991 ILRM 582 1991/9/1964

THE ALBAZERO, IN RE 1975 3 WLR 491 1975 3 AER 21

THE ALBAZERO, IN RE 1977 AC 774 1976 3 WLR 419 1976 3 AER 129

ADAMS v CAPE INDUSTRIES PLC & ANOR 1990 CH 433 1990 2 WLR 657 1991 1 AER 929

BRAY TRAVEL LTD & BRAY TRAVEL (HOLDINGS) LTD, IN RE UNREP SUPREME 13.7.1981 (EX TEMPORE)

POWER SUPERMARKETS LTD T/A QUINNSWORTH & QUINNSWORTH LTD v CRUMLIN INVESTMENTS LTD & DUNNES STORES (CRUMLIN) LTD UNREP COSTELLO 22.6.1981 1981/11/2038

DAVIES & ORS GOWER & DAVIES PRINCIPLES OF MODERN COMPANY LAW 8ED 2008 PARA 8.1

PENNINGTON COMPANY LAW 7ED 1995 63

PRACTICE & PROCEDURE

Summary judgment

Loan agreements - Defendant employed by plaintiff - Defendant alleging that plaintiff acted negligently and in breach of care - Defendant alleging loan agreements unenforceable - Defendant alleging loan agreements procured by misrepresentation and misstatement - Whether arguable defence - Aer Rianta cpt v Ryanair Ltd [2001] 4 IR 607 applied - Reid v Rush & Tompkins Group plc [1990] 1 WLR 212 considered - Application refused, matter adjourned to plenary hearing (2011/2721S - Herbert J - 15/2/2013) [2013] IEHC 59

Friends First Finance Ltd v Cronin

Facts: The plaintiff brought a motion for leave to enter final judgment against the defendant for the sum of €148,525.95 that was allegedly owed from two loan agreements made on the 2^nd August 2006 and the 28^th May 2008 respectively. The plaintiff claimed that whilst the defendant had entered an appearance in the matter, this was done simply to delay proceedings as he lacked a bona fide defence.

The defendant did not dispute the loan agreements but alleged that he entered into the agreements without being warned of the high level of risk attached. He claimed that he was an employee of the plaintiff who was given a presentation by a private investment team of the company who was offered a loan to invest in certain products on offer. They were in a unique position to check the defendant”s salary and determine whether he was in a position to make repayment and by failing to do so, the plaintiff broke its own lending rules and conditions. He alleged that he was not briefed on the risks attached to the investment or advised to seek independent advice and as such, the plaintiff failed to discharge the required duty of care owed to him as an employee and as a customer.

The plaintiff claimed that the act of borrowing and investing were two separate transactions by two separate corporate entities. The defendant claimed the court should consider the plaintiff and the related company of Friends First Life Assurance Limited as sufficiently related so that the borrowing and investment transactions were carried out by the same company. As such, the defendant averred that the loan agreements should be rescinded on the basis of misstatement and/or misrepresentation.

Held by Herbert J that the defendant”s claim that the plaintiff had breached its duty as an employer in not investigating and advising on the high level of risk attached to the investment products resulting in economic loss could not be sustained as no such tort was in existence. There was nothing to suggest that the plaintiff had made the misstatement or misrepresentation. However, in terms of a duty of care to the plaintiff as a customer, it was held that there was at least an arguable case. The plaintiff had acted as a creditor and it could be said that it owed a fiduciary care to the defendant. If the duty did exist, the court would then determine whether it had been discharged or not.

In terms of the claim that the plaintiff and the private investment team should be considered the same, it was held that whilst it was generally accepted that each company in a group is a separate legal entity, the interests of justice may require the court to look beyond the corporate veil to consider whether the separation of companies has been done to conceal the true nature of its actions. This defence was once again at least arguable. As it had been concluded that the defendant had an arguable defence to the plaintiff”s claim, the motion for leave to enter final judgment had to be refused.

Motion refused.

Mr. Justice Herbert

1 The plaintiff's claim in this motion is for liberty to enter final judgment for a total sum of €148,525.95 alleged owing on two loan agreements in writing made on the 2^nd August, 2006, and the 28^th May, 2008, between the plaintiff and the defendant. An appearance was entered on behalf of the defendant on the 21^st July, 2011. The grounding affidavit of Gordon Hill, arrears controller of the plaintiff, sworn on the 3^rd August, 2011, avers that this appearance was entered by the defendant solely for purpose of delay and that the defendant does not have a bona fide defence to the plaintiff's claim in law or on the merits. In his replying affidavit sworn on the 12^th December, 2011, and in two supplemental affidavits sworn respectively on the 16^th April, 2012, and the 18^th October, 2012, the defendant does not deny that he executed these agreements and does not challenge the amount of the claim.

2 In his supplemental affidavit sworn on the 16^th April, 2012, the defendant claims that the plaintiff was guilty of the tort of deceit. Reliance upon this allegation was very properly abandoned by counsel for the defendant in argument before this Court. In his affidavits the defendant asserts that he had a bona fide defence to the entire claim of the plaintiff on other grounds. The Master of the High Court, in exercise of his powers pursuant to the provisions of O. 37, r. 6 of the Rules of the Superior Courts transferred the case to this Court. The power conferred on this Court by O. 37, rr. 7 and 11 is to grant judgment for any relief to which it considers the plaintiff is entitled, dismiss the claim, or, if it considers that the affidavits disclose even an arguable defence to permit the defendant to defend the action, either unconditionally or subject to terms and, for that purpose adjourn the case for plenary hearing or make such other order for the determination of the questions in issue as it considers just.

3 In his first supplemental affidavit at para. 17, the defendant states that he was, "director of sales" of the plaintiff with a role, "centred around the management of the relationship with motor dealers which included the management of a team of motor finance representatives". He asserts that David Taylor was at all material times the managing director of the plaintiff and this is not disputed. The defendant then goes on to state:-

"Mr. Taylor told me, when discussing the investments products with me that they were 'akin to a little savings schemes' and 'we would make a small profit'."

4 The defendant claims that this was a misrepresentation and a misstatement of fact and a breach of a duty of care which Mr. Taylor as managing director of the plaintiff and his direct superior owed to him as an employee.

5 The investment products referred to are identified by the defendant in the further supplemental affidavit sworn by him on the 18^th October, 2012 as "The Diamond and Thistle Investment Funds", which were being sold by Friends First Life Assurance Limited. The defendant states that this company, like the plaintiff, was a subsidiary company of Friends First Holdings Limited and this is not disputed. In this further supplemental affidavit the defendant also claims that what he now describes as the "information" given to him by Mr. Taylor that these investments products were "akin to a saving scheme", (the word "little" has been dropped), was not in fact true. He claims that documents, (not exhibited), produced in the course of a complaint made by him to the Financial Services Ombudsman in relation to his dealings with the plaintiff and Friends First Life Assurance Limited show that these investment products carried levels of "mezzanine debt" and "rolled-up debt", something which was known to the plaintiff and to Friends First Life Assurance Limited but was not disclosed to him in any documentation produced to him, (none exhibited), or in any presentation or in any advice given to him which fundamentally affected the risk attaching to these investments so that they were not akin to a savings scheme. In his first replying affidavit sworn on the 12^th December, 2011, the defendant described these investments products as "high risk property investments". The defendant asserts that if he had been informed of this risk, it would have affected his decision to take up the loans and purchase these investment products.

6 The defendant accepts in the supplemental affidavit sworn by him on the 16^th April, 2012, that David Taylor has stated in correspondence that he has no recollection of discussing the merits or otherwise of these investment products...