Promontoria (Arrow) Ltd v Mallon and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian McGovern
• Judgment Date: 22 March 2018
• Neutral Citation: [2018] IEHC 145
• Docket Number: [2017 No. 2440 S.]
• Court: High Court
• Date: 22 March 2018

[2018] IEHC 145

THE HIGH COURT

COMMERCIAL

McGovern J.

[2017 No. 2440 S.]

BETWEEN

PROMONTORIA (ARROW) LIMITED

PLAINTIFF

AND

CATHAL MALLON

AND

MICHAEL SHANAHAN

DEFENDANTS

Banking and Finance – Summary judgment – Non-payment of loan – Lack of credibility – Oral evidence – Public policy

Facts: The plaintiff sought an order for summary judgment for the amount outstanding on foot of a facility letter against the second defendant. The second defendant objected that loan was on the basis of a limited recourse. The second defendant argued that the plaintiff was estopped by convention or representation from relying on the terms of the facility letter and letters of amendment as there was an oral agreement between the parties that there would be no recourse to the defendants personally in respect of the borrowings The second defendant contended that it would be unjust in the absence of discovery to grant summary judgment to the plaintiff where the true relationship between the parties might be clarified through the process of discovery.

Mr. Justice Brian McGovern held that the plaintiff was entitled to summary judgment. The Court held that for public policy, it would not permit the oral evidence to be admissible for the purpose of contradicting the terms of a written agreement between the parties. The Court stated that there was no evidence to support the defence of the second defendant based on estoppel either by convention or representation.

JUDGMENT of Mr. Justice Brian McGovern delivered on the 22nd day of March, 2018

1 The plaintiff's application is for summary judgment against the second named defendant arising out of a loan facility provided by EBS Building Society (EBS) to the defendants on foot of a facility letter dated 28th June, 2006. The agreed facility was €1,800,000 and was for the purchase of a one acre site for development at Mill Lane, Shankill, Co. Dublin (‘the property’). The facility letter of 28th June, 2006, was amended by further letters of 7th November, 2008 and 24th March, 2009, extending the term of the loan.

2 On 4th August, 2006, 2nd December, 2008 and 9th April, 2009, the defendants accepted the term of the facility letter and amendments thereto respectively.

3 Pursuant to the powers of the National Asset Management Agency Act 2009, National Asset Loan Management Limited (NALM) became legally and beneficially entitled to the facility and other rights connected therewith. On 11th December, 2015, the plaintiff acquired the rights of NALM to the loan.

4 The plaintiff sent the defendants a letter of demand on 7th July, 2016, in the sum of €2,044,306.23, being the sum then due and owing under the facility letter.

5 Over a period of time, discussions took place between the plaintiffs and the second named defendant concerning the repayment of the debt. The first named defendant has not taken part in any discussions and the proceedings against him stand adjourned. In the course of this judgment, the second named defendant will be referred to as simply ‘ the defendant’.

6 While the defendant raised a number of defences in his first affidavit sworn on 15th January, 2018, he has abandoned some of them and has crystallised his opposition to summary judgment in a further affidavit sworn on 8th March, 2018. He raises two issues which he argues constitute a defence to the claim for summary judgment, namely:-

(i) that the loan was on the basis of limited recourse being the value of the property; and

(ii) that the plaintiff is estopped by convention or representation from relying on the terms of the facility letter and letters of amendment.

He also raises a subsidiary point that the matter should proceed to plenary hearing to allow discovery which will assist him in establishing his defence.

7 The defendant contends that the letter of sanction of 28th June, 2006, as amended, does not comprise the whole of the agreement between the defendants and EBS concerning the borrowings which are the subject matter of these proceedings. He states that there is another key term of the agreement which was not reduced to writing but which was agreed between himself on the one hand and Mr. Conor Boyle and Mr. Philip Butler on behalf of EBS on the other hand. This agreement was to the effect that EBS was to have no recourse to the defendant personally in respect of the borrowings. He says that he made it clear that he would not have borrowed the monies if there had been any personal risk or liability associated with the facility and this was agreed by Mr. Boyle and Mr. Butler as a fundamental and underlying term of the agreement prior to the drawdown of funds. While he accepts that the facility letter and amendments thereto describes the facility as a personal loan with no reference to limited recourse, this was not the whole agreement. In his second affidavit, the defendant avers that the original loan terms were discussed in mid-June 2006 on the basis of recourse limited to the security. He describes a meeting which took place at approximately 9am on 30th June, 2006 at EBS Head Office at which Mr. Boyle and Mr. Butler explained to him that the credit committee of EBS were unlikely to approve the loan facility unless there was an element of personal recourse to him available to EBS. This was two days after the date which appears on the facility letter.

8 In the same affidavit, he avers that the facility letter of 28th June, 2006, was only sent by fax to his advisers, Messrs. BDO at approximately 10:55am on 30th June, 2006, being the morning of the meeting. While he accepts that the letter of sanction does not reference the terms of the agreement as being limited recourse, he states in his affidavit that when he received the letter of sanction he ‘…was only concerned to check whether the same included a provision in respect of a guarantee – which would denude the arrangement of its non-recourse basis – or whether the credit committee of EBS had agreed to accept a revised deposit and reduced borrowings in place of having recourse to me personally’. As he was satisfied the latter arrangement had been approved he did not concern himself with the fact that the letter of sanction did not express that it was a limited recourse facility because that had already been agreed.

Legal Principles Applicable to the Issues

9 The legal principles applicable to applications for summary judgment are well established and were drawn together by McKechnie J. in Harrisrange v. Duncan [2003] 4 I.R. 1, when he listed twelve factors to be considered when deciding to make an order for summary judgment or to remit the matter to plenary hearing:-

‘(i) the power to grant summary judgment should be exercised with discernible caution;

(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case, there being several ways in which this may best be done;

(iii) in so doing the court should assess not only the defendant's response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff, being mindful at all times of the unavoidable limitations which are inherent on any conflicting affidavit evidence;

(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;

(v) where however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;

(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;

(vii) 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;

(viii) this test is not the same as and should be not elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;

(ix) leave to defend should be granted unless it is very clear that there is no defence;

(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;

(xi) leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;

(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person's right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.’

10 In GE Capital Woodchester Limited v. Aktiv Kapital Asset Investment Limited [2009] IEHC 512, Clarke J. stated:-

‘It is clear that the mere assertion of a defence is insufficient. Insofar as factual issues arise it is ordinarily necessary for a defendant to place affidavit evidence before the court setting out facts which, if true, would arguably give rise to a defence. However, that proposition should not, in my view, be taken over literally. For example, the factual basis on which a defendant may wish to oppose a plaintiff's claim may not derive from facts within the defendant's own knowledge.’

Legal Issues Raised

(A) Is the facility one of limited recourse?

11 Clause 11 of the facility letter states that the borrower's liability shall be joint and several. Clause 12 of the standard...