KBC Bank Ireland Plc v Blake
| Jurisdiction | Ireland |
| Judge | Hon. Ms. Justice Stewart |
| Judgment Date | 12 April 2019 |
| Neutral Citation | [2019] IEHC 252 |
| Docket Number | [2012 No. 3715 P] |
| Court | High Court |
| Date | 12 April 2019 |
[2019] IEHC 252
Stewart
[2012 No. 3715 P]
THE HIGH COURT
CHANCERY
These proceedings were instituted by plenary summons dated 12th April, 2012. The general indorsement of claim sets out a claim for rectification of a guarantee and indemnity of 24th February, 2006, made between the plaintiff (“KBC”) and the defendant (“Mr. Blake”) so as to embody the agreement actually reached between them. In the alternative, KBC seeks specific performance of the agreements of 12th December, 2005, and 7th May, 2009, which would require Mr. Blake to guarantee all sums due to them by Eileen O'Grady Blake (“the borrower”), who is Mr. Blake's wife. Judgment against Mr. Blake in the sum of €5,737,941.65 is also sought.
Background
KBC's version of events is set out in the statement of claim delivered on 2nd August, 2012. By facility letters dated 12th December, 2005, and 24th January, 2006, KBC advanced €5.32m to the borrower. These monies were secured by, inter alia, Mr. Blake's guarantee supported by his interest in the two properties in respect of which the funds were to be advanced (“the properties”). Correspondence between solicitors indicates that this guarantee was to be for the full amount of the loan, plus interest, costs and expenses, supported by Mr. Blake's interests in the properties. Effectively, this was to be an “all sums due” guarantee. KBC allege that its then-solicitors, BCM Hanby Wallace (now Byrne Wallace) solicitors, mistakenly sent a guarantee document to Mr. Blake which was limited to €50,000. This is the document that was signed on 24th February, 2006, which KBC now seek to have rectified. By facility letter dated 7th May, 2009, KBC agreed to vary the terms of the original loan to the borrower. By means of additional comment precedent to that letter, it was specifically stated that the security of the original facility letter was in full force and effect. Mr. Blake signed an acknowledgement appended to this letter, which confirms that his guarantee was for all sums due. In the months that followed the execution of this facility letter, BCM Hanby Wallace carried out a review of the Blake file and the alleged error in the guarantee document came to their attention. Through correspondence sent to the Blakes between late-2009 and 2011, KBC called on Mr. Blake to rectify the mistake in the guarantee document. This has yet to occur. On 8th February, 2012, judgment was granted against the borrower in the sum of €5,678,203.84. This is the sum that was due as of that date, which has since increased due to the ongoing accrual of interest. On the 27th March, 2012, KBC demanded payment of this sum from Mr. Blake pursuant to his guarantee. This demand was not met.
In his defence delivered on 9th November, 2012, Mr. Blake denied ever having agreed to provide a guarantee or indemnity for the borrower's loans. In the alternative, it was pleaded that such a guarantee was intended to be limited to €50,000. Without prejudice to that position, Mr. Blake pleads that, when he attended the meeting in which he executed the guarantee, he had believed that he was there to execute a family home declaration; the issue of the guarantee was not tabled until the meeting had commenced. In those circumstances, he suggests that KBC should have advised him to procure independent legal advice. He also argues that relief should be refused because the amount claimed for includes debt arising from a “SWAP” financial product, which he was never advised or informed about. Had he been aware that the borrower was availing of such a product, he says that he would not have executed the guarantee. He denies that there was any common continuing intention between the parties, that there was any mistake and/or that any such mistake gives rises to a remedy as against him. As for the document executed in May, 2009, Mr. Blake denies executing such a document. In the alternative, he alleges that he did not understand the document he was signing and was not appropriately advised as to its impact. In conclusion, he denies that KBC is entitled to any relief against him. He alleges that KBC have excessively delayed in seeking relief and that relief for this alleged mistake should properly be sought against their former solicitors.
Particulars were replied to on 8th February, 2013. Various pre-trial motions were litigated from 2013-2016. A notice of intention to proceed was filed on 2nd September, 2016. A reply to defence was delivered on 2nd January, 2017. KBC denies therein that the meeting on 24th February, 2006, was held for the purposes of executing a family home declaration. They also deny that this was the first time the issue of a guarantee was raised or that there was any obligation to advise Mr. Blake in respect of receiving legal advice. In any event, it was pleaded that Mr. Blake was granted the opportunity to obtain legal advice and his failure to do so has no impact on the validity of the guarantee. The objection taken by Mr. Blake in respect of the “SWAP” financing is fully denied. Indeed, it is pleaded that KBC and the Blakes entered into an ISDA Master Agreement in 2006, which expressly anticipated such financing. It was pleaded that the guarantee was designed in such a way that the rights and liabilities outlined therein were insulated from any change in arrangements between KBC and the borrower.
Notice of trial was filed by KBC on 17th January, 2018, and notice to admit documents was filed on 19th April, 2018. Such documents include the 2005 facility letter, the guarantee document, the 2009 facility letter and the ISDA Master Agreement. The 2005 loan is a repayable-on-demand facility secured by, inter alia, “the guarantee of Bruce Blake supported by his interest in [the properties]”. Clause 1 of the guarantee would appear to be “all sums due” in nature, until Clause 1(a)e), where it is stated “… Provided Always that the total amount recoverable hereunder shall not exceed the sum of €50,000.00…”. This would appear to contrast with Clause 1(b), where it is stated that Mr. Blake shall indemnify KBC against all loss, damage or liability of whatsoever nature sustained by reason of having provided credit to the borrower. Clause 4 states that the guarantee shall be construed as a guarantee for the whole and every part of the ultimate balance owed to KBC. The amendments to the 2005 facility letter made in 2009 specifically state that the security set out in the original facility letter remains in full effect. Page 6 of the 2009 letter is signed by Mr. Blake. That same page includes a warning box, which states that Mr. Blake will have to pay off the debt if the borrower does not. It also advises him to seek independent legal advice before signing. A number of acknowledgements are set out beneath that warning box. This includes a confirmation that the guarantee referred to in the 2005 letter of loan offer is “all sums due” in nature and that it remains in full effect. Interrogatories were delivered by KBC on 3rd May, 2018, querying whether Mr. Blake had signed the admitted documents. By affidavit sworn on 30th May, 2018, Mr. Blake confirmed that he did sign those documents. He also averred that the intentions of the parties to those agreements was an issue for determination at the hearing of the action.
The first witness was a Mr. Garrett O'Donohoe, who is employed as the Head of Business Managing for KBC Ireland. However, back in 2005, he was a deputy manager within KBC's Business Banking Dept. He stated that relations between KBC and the borrower were facilitated by a broker called Michael Gilhooly. On the borrower's behalf, Mr. Gilhooly was seeking re-financing for one of the properties and funds to purchase the other one. As far as he could recall, the original borrowing was with First Active. The process for securing funds commenced and, during that process, Mr. O'Donohoe was introduced to the borrower. Funding was approved and a facility letter was drawn up, including the security term of a guarantee supported by Mr. Blake's interest in the properties. According to Mr. O'Donohoe, this particular phrasing was used because the borrower's property portfolio had been originally purchased using monies acquired through the sale of a business in which both of the Blakes were involved. Thus, there was a concern on KBC's part that some equitable interest in the properties could vest in Mr. Blake, notwithstanding the fact that the properties were held in the sole ownership of the borrower. Mr. O'Donohoe stated that he was not involved in the review of draft documentation related to the guarantee, as that function was performed by KBC's solicitors. The first time Mr. O'Donohoe became aware of any issue with the guarantee was in 2010, when a colleague notified him of it. He stated that there had never been any discussion about limiting the guarantee to a specific amount.
Under cross-examination, Mr. O'Donohoe confirmed that KBC's dealings in respect of the loans took place through Mr. Gilhooly and the borrower. He could not recall any conversation with Mr. Blake in which Mr. Blake indicated that he had the means to facilitate an all-sums guarantee. He could not recall taking any steps to ensure Mr. Blake had taken proper independent legal advice before signing. It was Mr. O'Donohoe's understanding that both borrower and guarantor were represented by the same solicitor, a Mr. Justin McKenna of Partners at Law Solicitors. He clarified that he was not involved with this file in 2009. He could not speak to any undue pressure placed upon Mr. Blake by the borrower due to the pressure she herself was under in 2009, but he conceded it was possible such pressure might have been applied. A line of questioning was advanced regarding the...
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