Governor and Company of the Bank of Ireland v Curran
| Jurisdiction | Ireland |
| Judge | Mr. Justice Brian J. McGovern |
| Judgment Date | 21 December 2015 |
| Neutral Citation | [2015] IEHC 819 |
| Docket Number | [2015 No. 2006 S.] |
| Court | High Court |
| Date | 21 December 2015 |
[2015] IEHC 819
[2015 No. 2006 S.]
THE HIGH COURT
COMMERCIAL
Banking & Finance – Non-payment of loan – Execution of indemnity & guarantee – Summary judgment – Bona fide defence – Non est factum
Facts: The plaintiff sought an order for summary judgment against the second named defendant on foot of a personal guarantee executed by her in favour of the plaintiff for providing loan facilities to a company. The defendant agreed to indemnify the plaintiff subject to a maximum principle liability of €1m including the interest and other charges. The defendant alleged that the said guarantee was unenforceable as it was made under undue influence and it was an unconscionable bargain.
Mr. Justice Brian J. McGovern granted an order for summary judgment against the second named defendant. The Court held that the defendant had to meet a low threshold to satisfy the Court that he/she had a bona fide defence and if there was no real and arguable defence, then the Court should not allow to linger on the matter, for the common good. The Court held that the plea of non est factum was available to a person who signed the document believing it to be different from the one he in fact signed and not to a person who signed the document without trying to ascertain the general legal effects of signing the same. The Court found that the defendant knew the consequences of acting as a guarantor and had ignored the advice of her counsel that she had availed earlier and thus, she could not plead that she was under undue influence.
This is an application for summary judgment against the second named defendant ( ‘the defendant’) on foot of a personal guarantee executed by her in favour of the plaintiff on 28th May, 2008. Under this guarantee, the defendant guaranteed and indemnified the aggregate liabilities of XL Fuels Group ( ‘the company’) to the plaintiff to the full extent of all and every sum or sums of money remaining due and unpaid to the plaintiff subject to a maximum principle liability under the guarantee of €1m plus interest, fees, charges and expenses.
The company defaulted on its obligations under a number of loan facilities and the plaintiff now seeks summary judgment against the defendant in the sum of €1m pursuant to the guarantee. Judgment has been obtained against the first defendant in the sum of €2,266,323.28 on 9th November, 2015, as he did not contest the application for summary judgment.
There is no disagreement between the parties as to the appropriate test for summary judgment. The principles set out in Aer Rianta v. Ryanair [2001] 4 I.R. 607; First National Commercial Bank v. Anglin [1996] 1 I.R. 75; and Harrisrange Limited v. Duncan [2003] 4 I.R. 1, represent the established jurisprudence on the topic and in considering this application, I do so by reference to the principles to be found in those decisions.
The defendant maintains that she has a bona fide defence to the claim and that the guarantee is unenforceable on the grounds of:-
(i) undue influence;
(ii) unconscionable bargain; and
(iii) non est factum.
The defendant relies on the following facts. The guarantee was signed at a meeting in the defendant's home, at a time when the defendant was a 73 year old widow who lived alone. The meeting took place between the defendant and a bank official. The plaintiff knew at the time of the signing of the agreement that the defendant had previously retained a solicitor to provide the necessary independent legal advice concerning the execution of other security documents. The defendant states that she was advised by an official from the plaintiff that the presence of a solicitor was not required.
The guarantee was collateral for a number of loan facilities provided by the plaintiff to the company. The defendant states that she took no active part in the day to day running of the business, that she was not a shareholder in the company and did not derive any benefit from either the company or any of the transactions entered into between the company and the plaintiff. The execution of the guarantee was not a commercial transaction between the first and second named defendants.
The reality was somewhat different. It is undoubtedly true that the guarantee was signed in the defendant's home. But insofar as anything turns on this, it seems clear that the meeting took place at the defendant's home because it was more convenient for her. In an affidavit sworn on 2nd December, 2015, Ms. Vivien Rowntree of the plaintiff bank, said that the defendant requested that the meeting take place in her house in Oldcastle. The defendant had been asked if she would meet Ms. Rowntree in the business centre in Navan or the Bank of Ireland premises in Oldcastle but her preference was to meet in her own home as it was more convenient. The defendant does not deny that.
While it appears to be the case that the defendant had retained a solicitor to provide independent legal advice when she entered into a number of mortgage agreements in 2008, she did not have legal advice when she signed the guarantee. The solicitor who acted for her in 2008 was Mr. Michael Ryan who swore an affidavit on 23rd November, 2015, in which he said that he recalled having a discussion about various matters and the question arose of the defendant giving personal guarantees to the bank. The solicitor did not have any specific documentation in relation to this but he stated:-
‘I strongly cautioned her not to get involved in any such guarantees or to become embroiled in any such guarantee, not least, having regard to her advanced years, she being a widow, living alone, and a pensioner.’
The mortgages were entered into by the defendant in February and March 2008, only a short time before she entered into the guarantee so it seems that the advice from her solicitor against giving a personal guarantee was offered around that time.
The defendant's claim that she was advised by the bank official at her home that a solicitor was not required is disputed by the plaintiff, for the purpose of this application for summary judgment, I cannot resolve that dispute and must proceed on the basis that the defendant will be able to establish this fact.
The defendant does not repudiate the statement (in para. 8 above) made by her solicitor, Mr. Ryan. From this, it can be assumed, that the defendant did get legal advice on whether or not she should sign a guarantee and the advice was against doing so. She has not made the case (nor could she) that if she had received legal advice, she would have acted differently. It is clear that she did receive advice, albeit at an earlier date, and decided not to accept that advice.
Assuming for the purpose of this application that she was told that she did not need a solicitor's advice in order to enter into the guarantee that would represent no more than the correct legal position. In Ulster Bank v. Walter deKrester [2015] IEHC 359, Hedigan J. held:-
‘…that absent some clear evidence of the need to insist upon customers obtaining, it there is no obligation on a bank to insist on customers obtaining legal advice before entering into contracts with them. See Ulster Bank Ltd v. Roche and Buttimer [2012] IEHC 166.’
It will be necessary, therefore, to consider in due course whether or not the bank was aware of any facts which suggested or ought to suggest that there may be a non-commercial element to the guarantee or that a defendant was not a free agent when she signed the guarantee.
The defendant maintains that the bank knew or ought to have known that she took no active part in the day to day running of the business. She was not a shareholder in the company and did not derive any benefit from either the company or any of the transactions entered into between the company and the plaintiff and this was not a commercial transaction between the first and second named defendants. This claim by the defendant seems to come within the category of a ‘mere assertion’ in...
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...fide defence. The facts of this case echo those in Governor and Company of the Bank of Ireland -v- Michael Curran and Maureen Curran [2015] IEHC 819 which related to a Guarantee signed by a 73 year widow who lived alone. The Guarantee in this case was signed in her own home in the presence ......