Irish Bank Resolution Corporation Ltd (in special liquidation) v Gerard Mccaughey

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 29 January 2014
• Neutral Citation: [2014] IEHC 230
• Court: High Court
• Date: 29 January 2014

[2014] IEHC 230

THE HIGH COURT

[No. 2346 S./2013]

Irish Bank Resolution Corp Ltd (in special liquidation) v McCaughey

COMMERCIAL

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED (IN SPECIAL LIQUIDATION)

PLAINTIFF

AND

GERARD MCCAUGHEY

DEFENDANT

BANK OF SCOTLAND PLC v MANSFIELD UNREP KELLY 21.12.2011 2011/5/1049 2011 IEHC 463

BEALE & ORS CHITTY ON CONTRACTS 31ED 2012 PARA 12.103

TENNANTS BUILDING PRODUCTS LTD v O'CONNELL UNREP HOGAN 17.4.2013 2013 IEHC 197

ALLIED IRISH BANKS PLC v GALVIN DEVELOPMENTS (KILLARNEY) LTD & ORS UNREP FINLAY GEOGHEGAN 29.7.2011 2011/3/612 2011 IEHC 314

STATUTE OF LIMITATIONS 1957 S6

MOOHAN & BRADLEY T/A BRADLEY CONSTRUCTION v S & R MOTORS (DONEGAL) LTD 2008 3 IR 650 2007/42/8816 2007 IEHC 435

Application for summary judgment - Sum owed on foot of a series of credit agreements/facility letters - Test to be applied - Defence alleged existence of collateral contract - “For the duration of the fundS&Rsquo; Triable issue - Cogent evidence - Defence only applied in part - Counterclaim - Time-barred

Facts The sum of €7,730,102.18 is due on foot of a series of credit agreements and facility letters executed between 1st September, 2006 and 28th March, 2007. The plaintiff bank contends the defendant, Mr Gerard McCaughey, has no defence and that it ought to be granted summary judgment in respect of the entire sum claimed.

The money was given to part fund investment in various properties in America. Common features existed as regards each of the credit agreements entered into. Each had a letter of facility setting out specific terms and was executed by the defendant and each expressly provided that the facility was to be repayable on demand and that demand might be served at any time by the bank at its sole discretion without stating a reason for said demand. Without prejudice to the demand nature of each of the facilities, it was expressly stated to be repayable on or before a specified date, the latest of which was March 2008. Each of the facilities was also granted subject to the Bank”s general conditions governing personal loans. All provided that if there was any conflict between the terms of the facility letter and the general conditions, the terms of the facility should prevail. As is clear by the initiation of the present proceedings, date for the payment of the facilities has long since expired.

In the present proceedings, the defence contends, relying on personal averments and the affidavit of Mr Drennan (Bank Manager at the time), a collateral contract was established to the effect that the arrangement would be for “the duration of the fundS&Rsquo;. If this was the case, the facilities were not demand facilities nor were they repayable by March 2008.

Held The judge referred to modern case law regarding collateral contracts: Hogan J in Tennants Building Products Limited v. O”Connell [2013] IEHC 197 and Finlay Geoghegan J AIB Plc v. Galvin [2011] IEHC 314. The judge concluded that in appropriate circumstances terms of a written agreement may be affected by the existence of a collateral contract provided there is cogent evidence “… the courts will permit a party to set up a collateral contract to vary the terms of a written contract, this can only be done by means of cogent evidence…” (Hogan J Tennants Building Products Limited v. O”Connell [2013] IEHC 197)

The judge decided the low threshold had been achieved to conclude a triable issue had been raised as to the possible existence of a collateral agreement to the effect that the term of the agreements would be “for the duration of the fundS&Rsquo;. However, this defence only applied in part - specifically to the first and second agreements and facilities A and B of the third agreement and part of the fourth agreement. Thus, applying Moohan v. S&R Motors (Donegal Limited) [2008] 3 I.R. 650, the judge decided judgment should be entered on part of the claim to which no defence had been demonstrated.

Judgment for €5,205,175.90.

1 JUDGMENT delivered by Mr. Justice Kelly on the 29th day of January, 2014

The Case

2 1. This is an application for summary judgment for a sum of €7,730,102.18. That sum is allegedly due by the defendant to the plaintiff on foot of a series of credit agreements and facility letters executed between 1 ^st September, 2006 and 28 ^th March, 2007. These facilities are conveniently described and the amount due in respect of them as of 20 ^th January, 2014, in the table which is contained at para. 7 of an affidavit of Conor Nestor sworn on 22 ^nd January, 2014.

3 2. There is no dispute but that the defendant executed all of the relevant facility letters and drew down and has had the benefit of the funds described in them.

4 3. The plaintiff contends that the defendant has no defence to these proceedings and that it ought to be granted summary judgment in respect of the sum claimed in its entirety.

The Test

5 4. Before considering the defendant's answer to this application, I ought to sketch out the test which I am obliged to apply on applications of this sort. That is what I did in my decision in Bank of Scotland Plc v. Mansfield [2011] IEHC 463, where I said:-

6 2 "8. The test to be applied by this Court on an application for summary judgment is well established. It has been stated and restated by the Supreme Court and this Court on many occasions in particular in recent times where applications for summary judgment, very often in respect of large amounts, are a commonplace.

7 9. The most recent statement from the Supreme Court on the topic is to be found in the judgment of Denham J. (as she then was) in Danske Bank A/S trading as National Irish Bank v. Durkan New Homes & Ors [2010] IESC 22.

8 10. Having recited the provisions of O. 37, r. 7 of the Rules of the Superior Courts that judge went on as follows:-

9 'Several cases were opened before the Court which have addressed this jurisdiction. These included Bank of Ireland v. Educational Building Society [1999] 1 I.R. 220 where Murphy J. emphasised that it was appropriate to remit a matter for plenary hearing to determine an issue which is primarily one of law where a defendant identified issues of fact which required to be explored and clarified before the issues of law could be dealt with properly. He stated at p.231:-

10 'Even if the position was otherwise, once the learned High Court Judge was satisfied that the defendant had 'a real or bona fide defence', whether based on fact or on law, he was bound to afford them an opportunity of having the issued tried in the appropriate manner.'

11 In Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 I.R. 607, Hardiman J. reviewed Irish cases and concluded at p.623:-

12 'In my view, the fundamental questions to be posed on an application such as this remain: is it 'very clear' that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant's affidavits fail to disclose even an arguable defence?'

13 11. At para. 22 of her judgment Denham J. stated as follows:-

"As stated in Banque de Paris v. de Naray [1984] Lloyd's Rep. 21, by Ackner L.J at p. 23:- "

14 'It is of course trite law that O. 14 proceedings are not decided by weighing the two affidavits. It is also trite that the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not, ipso facto, provide leave to defend; the Court must look at the whole situation and ask itself whether the defendant has satisfied the Court that there is a fair or reasonable probability of the defendants having a real or bona fide defence,"

15 12. In Bank of Ireland v. Walsh [2009] IEHC 220, Finlay Geoghegan J. set out the principles applicable to the determination of an application such as this by reference to a decision of McKechnie J. in Harris grange Limited v. Duncan [2003] 4 I.R. 1. It is not necessary for me to repeat yet again the twelve considerations which he set out in that judgment but I do call attention to one of them where he said:-

16 'the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, 'is what the defendant says credible?', which latter phrase I would take as having as against the former an equivalence of both meaning and result.'

17 13. Finlay Geoghegan J. said in relation to this:-

18 'As appears from sub-paragraph (vii) above, the threshold is one of an arguable defence and is, in relative terms, a low threshold. However, in making that determination, the Court should have regard to whether what the defendant is saying is mere assertion and whether the proposed defence is credible in the sense explained by Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 I.R. 607.'"

The Agreements

19 5. The first facility letter is dated 1 ^st September, 2006 and was granted to part fund the defendant's investment in the AIAC Woolgate Exchanged Geared Property Fund. The second facility was dated 10 ^th October, 2006 and had as its purpose the part funding of the defendant's equity investment in an entity called Peninsula Real Estate Fund which has been given the nomenclature for the purpose of these proceedings of the New York Hotel Fund. That is how I will refer to it.

20 6. The third facility was dated 17 ^th November, 2006, and was broken down into three different elements. They were described as Facility A, B and C. Facility A was to increase the defendant's investment in the Woolgate Exchange Geared Property Fund. Facility B was to part fund the defendant's investment in the AIAC European Geared Property Fund (E.G.P.F.). Facility C was to fully fund the defendant's...