Lynch v Darlington Properties Ltd and Others
| Jurisdiction | Ireland |
| Judge | Mr Justice Michael Peart |
| Judgment Date | 06 July 2011 |
| Neutral Citation | [2011] IEHC 273 |
| Docket Number | Record Number: No. 17962P/2001 |
| Court | High Court |
| Date | 06 July 2011 |
[2011] IEHC 273
THE HIGH COURT
Between:
And
DARLINGTON PROPERTIES LTD v MEATH CO COUNCIL UNREP KELLY 8.3.2011 2011 IEHC 70
O'DONOVAN & PHILLIPS THE MODERN CONTRACT OF GUARANTEE 2010 PARA 10.101
O'DONOVAN & PHILLIPS THE MODERN CONTRACT OF GUARANTEE 2010 PARA 10.102
STIMPSON v SMITH 1999 1 CH 340
ANDREWS & MILLETT LAW OF GUARANTEES 2ED 1995 P360
KEANE COMPANY LAW 3ED 2000 PARA 20.50
FULLER CORPORATE BORROWING: LAW AND PRACTICE 3ED 2006 PARA 6.90
FULLER CORPORATE BORROWING: LAW AND PRACTICE 3ED 2006 PARA 6.91
BANKING LAW
Guarantees
Judgment - Garnishee - Conditional order of garnishee - First defendant giving guarantee to bank - Demand for payment - Whether liability of first defendant under guarantee contingent on demand for payment being made - Charge - Whether conditional order of garnishee creating charge over amount due to plaintiff on foot of judgment - Conditional order of garnishee post dating crystallisation of bank's charge - Whether appropriate to make absolute order of garnishee - Stimpson v Smith [1999] Ch 340 considered - Relief refused (2001/17962P - Peart J - 6/7/2011) [2011] IEHC 273
Lynch v Darlington Properties Ltd
On 20 April 2010 the plaintiff recovered judgment against the first defendant (Darlington) and second defendant (Woodgreen) in the sum of €64,404.86, together with costs of the action when taxed and ascertained.
On the 7th May 2010 a Receiver was appointed by Ulster Bank Ltd to Darlington and Woodgreen pursuant to the terms of a Mortgage Debenture dated 30th December 1998.
This judgment remains unsatisfied, and while the defendants have been served on the 10th March 2011 with a copy of the order granting such judgment by the plaintiff's solicitors, no execution has been levied against the defendants.
The plaintiff ascertained that on 8th March 2011 in proceedings entitled Darlington Properties Ltd v. Meath County Council, Record Number 2010 No. 2720 P, Darlington obtained Judgment against Meath County Council in the sum of €4 million.
On 14th March 2011 the plaintiff applied for and obtained a conditional Order of Garnishee over so much of monies due by Meath County Council to Darlington Properties Ltd as will satisfy the plaintiff's said judgment obtained against the first and second named defendants herein, and her costs when taxed and ascertained. That order was made returnable to 4th April 2011, on notice to Meath County Council and Darlington, so that cause might be shown as to why Meath County Council should not pay to the plaintiff an amount sufficient to satisfy the said judgment and costs from the amount due by it to Darlington.
By order dated 16th March 2011 the said order dated 14th March 2011 was varied so as to permit Meath County Council to pay a sum of €2.2 million to Darlington. By the said order dated 16th March 2011, this Court directed that a sum of €150,000 from the amount due by Meath County Council to Darlington be placed on joint deposit in the names of the plaintiff's solicitor and the Receiver.
The Receiver has stated that Darlington as principal is indebted in the sum of €142,534.16 to Ulster Bank Ltd, and further that the company, as guarantor, is liable to Ulster Bank Ltd under the terms of a Guarantee dated 5th November 2008 for the entire balance due to Ulster Bank by Woodgreen and another company Ravenslane Properties Limited amounting to a sum of €22,883,915, and further that these sums are secured under the terms of the said Mortgage Debenture dated 20th December 1998, which created a fixed and floating charge over all the undertaking, property rights and assets of Darlington both present and future as security for the repayment of all sums due or to be become due by that company.
Paragraph 2 of the said Guarantee, as exhibited by the Receiver provides:
"In consideration of the Bank making or continuing advances or otherwise giving credit or affording banking facilities to the Customer, for as long as the Bank may think fit, the Guarantors agree to pay to the Bank on demand all sums of money … which are now or shall at any time be going or remain unpaid to the Bank anywhere…". (emphasis added)
It is in those circumstances that the Receiver submits that Ulster Bank Ltd is a secured creditor and, as such, is entitled to the entire of the amount due to Darlington by Meath County Council in priority to the plaintiff's unsecured debt, and it is submitted that in those circumstances the application for a final order of Garnishee should be dismissed.
The plaintiff on the other hand submits that since there is no evidence that anydemand has been made by the Bank to the Guarantors, no sum is therefore yet due on foot of the said Guarantee, and that any liability which may arise on foot of the Guarantee is simply a potential liability, and cannot therefore rank in priority to the plaintiff's judgment already obtained.
It is submitted that where a contract of guarantee requires a demand, such demand (in addition to the issue of proceedings) is a strict requirement and that, as in the case of a sum of money payable under a collateral agreement, no cause of action arises until that demand is made and the guarantor's liability to pay an outstanding debt is crystallised only by the service of the demand. In this regard, the plaintiff has referred toJC Phillips, The Modern Contract of Guarantee (Sweet & Maxwell) (2nd edition 2010, para. 10-101- 10-102) where in relation to conditions precedent to a guarantor's liability and the requirement for strict compliance, the learned author states:
"Such terms may be drafted as conditions precedent to liability but in the context of...
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...Kanwell Developments Ltd. v. Salthill Properties Ltd. (In Receivership) [2008] IEHC 3 and Lynch v. Darlington Properties & Anor. [2011] IEHC 273. The appellant submitted that there must be money due to the judgment debtor from the third party and the debt needs to be payable at the time of......