Tennants Building Products Ltd v Dennis O'Connell

• Jurisdiction: Ireland
• Judge: Mr. Justice Hogan
• Judgment Date: 17 April 2013
• Neutral Citation: [2013] IEHC 197
• Court: High Court
• Date: 17 April 2013

[2013] IEHC 197

THE HIGH COURT

[No. 5390 S/2010]

Tennants Building Products Ltd v O'Connell

BETWEEN/

TENNANTS BUILDING PRODUCTS LIMITED

PLAINTIFF

AND

DENNIS O'CONNELL

DEFENDANT

R v COLL 1889 24 LR IR 522

FLANAGAN v FAHY 1918 2 IR 361

MACKLIN & MCDONALD v GRAECEN & CO LTD & ORS 1983 IR 61 1982 ILRM 82 1982/7/1218

ICDL & ORS v EUROPEAN COMPUTER DRIVING LICENCE FOUNDATION LTD UNREP SUPREME 14.11.2012 2012/18/5066 2012 IESC 55

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

ULSTER BANK IRL LTD v DEANE UNREP MCGOVERN 20.6.2012 2012 IEHC 248

Banking law - Contract law - Evidence - Personal Guarantee- Binding nature of - Self-corroboration - Written evidence - Records - Admissibility - Assurance - Whether personal guarantee was binding and enforceable

Facts: The plaintiff company brought a claim on foot of a personal guarantee for Eur 294,841. The defendant maintained that he only gave the guarantee on foot of a representation that it was simply for presentational purposes and would never be used. The Court considered whether the guarantee bound the defendant. Objections were made to the admissibility of evidence on the basis of the rule against self-corroboration. The Court considered the lack of written evidence, the absence of a witness providing such an assurance and contemporary records.

Held by Hogan J. that the guarantee was signed and duly executed by Mr. O”Connell and therefore was prima facie binding. It was open to him to establish the existence of a collateral contract proven through unequivocal evidence. Viewed objectively, the evidence did not support this as there were at most pre-contractual representations that the personal guarantee would not be called upon. The Court was compelled to the viewpoint that the guarantee bound the defendant and the Court would give judgment in the amount sought.

1 1. In these proceedings the plaintiff company, Tennants Building Products Ltd. ("Tennants") claims the sum of €293,841 on foot of a personal guarantee given by the defendant, Mr. O'Connell, in October, 2008 in respect of (admitted) obligations incurred by O'Connell Dry Lining Ltd ("Dry Lining") to that plaintiff. The defendant was the effective owner of Dry Lining and this company is now in voluntary liquidation. The defendant maintains that he only give the guarantee on foot of a representation by the plaintiff's agent that it was simply for presentational purposes and that it would never be used. The essential question, therefore, is whether this guarantee binds the defendant.

2 2. The plaintiff is a distribution company for building materials such as suspended ceilings, partitions, fire protection insulation and external cladding. Up to the commencement of these proceedings, the plaintiff had an excellent business relationship with Dry Lining, a company owned by the defendant and of which he was the director. Indeed, Dry Lining was one of the plaintiff's biggest customers. But by 2008 the downturn in the construction business was affecting Dry Lining. It was experiencing difficulties in securing payment from its own customers and, indeed, as Mr. O'Connell explained in evidence, it was obliged to write off some of this debt. All of this was in turn was affecting its ability to pay Tennants. Tennants had insurance cover on the account, but because of late payments, this was cover was withdrawn.

3 3. At this stage Dry Lining was indebted to Tennants for significant sums which were not insured. It was at this point that Tennants made clear that some further security was required if the existing trading terms were to continue since the capacity of Dry Lining to discharge these sums was by then in doubt. There is equally no doubt but that Mr. O'Connell was most reluctant to execute a personal guarantee in respect of the trading debts of Dry Lining, as indeed he had been since the very start of the trading relationship between the parties. Yet it is not disputed but that he did so at some stage in early October, 2008 in consideration of Tennants "supplying goods and services to [Dry Lining] on credit both prior to the date of this guarantee and from here on…"

4 4. The guarantee is, in fact, undated. It is, however, date-stamped as having been received by Tennants on 8 ^th October, 2009.I think that this is more likely to have been a secretarial slip and that it was actually received on 8 ^th October, 2008.

5 5. It would seem that Mr. O'Connell executed the guarantee to some degree against his better judgment. It may be that he perhaps felt under pressure to do so if he wanted the business relationship to continue. Mr. O'Connell maintains, however, that he was personally asked at a meeting in Galway on 8 ^th October, 2008, by Mr. Cullen, the general sales manager of Tennants, to sign the guarantee on the basis that it would not be enforced. He said that Mr. Cullen told him that the purpose of the guarantee was to reassure the London head office and that it would be simply "put into the drawer."

6 6. In this respect Mr. O'Connell's evidence was re-inforced to some degree by Mr. Ronan Coffey. Mr. Coffey was at the time a director of the company, but he negotiated a severance package at some stage in 2009. At the time, however, he was Mr. Cullen's immediate superior.

7 7. Mr. Coffey acknowledged that the company was under pressure to secure some additional comfort in respect of Dry Lining's debt exposure. He had discussions with Mr. O'Connell in that regard in September, 2008 with regard to a personal guarantee, as otherwise all credit facilities would thereafter be withdrawn. He indicated to Mr. O'Driscoll that he hoped that it would never be activated and he may even have hinted that it most was most unlikely that the personal guarantee would ever be activated. To that end he sent Mr. Cullen to Galway (where Mr. O'Connell was based) at the end of September or early October, 2008 in order to have the personal guarantee signed. Mr. Coffey said that Mr. Cullen was unsuccessful in that regard, but that the guarantee had arrived by post about one week later. As it happens, Mr. Coffey placed the guarantee in a drawer and did not distribute it.

8 8. For his part Mr. Cullen emphatically denied that he had visited Galway for this purpose. He contended that Mr. O'Connell had in fact sent him a text message by mobile phone on 6 October, 2008 (i.e., two days before any meeting on October 8 ^th) confirming that he had just signed the personal guarantee. Although the actual text message was (understandably) no longer to hand, counsel for the plaintiff, Ms. Geoghegan, then sought to tender an email which Mr. Cullen sent to his credit controller, Ms. McCausland, on that day following receipt of the text message. This email stated, inter alia, stated that "he has signed the personal guarantee on his account and is putting it in the post today!"

9 9. Counsel for the defendant, Mr. Buckely, sought to object to the admissibility of the email as violating the rule against self-corroboration. Of course, the entire object of the rule against narrative is to ensure that litigants do not seek to re-inforce the credibility of their evidence by invoking self-serving statements and correspondence which were conveniently created by them after the events the subject of the dispute. It is clear, however, that where the credibility of a witness is impugned, he may way of exception to the rule against narrative re-inforce his own testimony by reference to documents created before the actual happening of the event which might be otherwise thought to taint his objectivity qua witness, even if as Gibson J. put it in R. v. Coll (1889) 24 L.R.Ir. 522, 529-530, any attempt at definition "of the conditions necessary to justify the reception of such evidence [would be] a difficult, perhaps impossible, task."

10 10. It is true that there are passages in the judgment of Gibson J. in Coll (which were approved by the former Irish Court of Appeal in Flanagan v. Fahy [1918] 2 I.R. 361) which might suggest that such evidence may be tendered only to rebut a cross-examination along the lines that the witnesses' account of certain facts is a recent invention. Yet I think that this should be regarded only as a specific example of the court's more general jurisdiction to admit such evidence.

11 11. In the present case I disallowed Mr. Buckley's objection to the admission of the email in response to a specific question asked of Mr. Cullen in evidence in chief by Ms. Geoghegan, since I considered that the present case provides almost a textbook example of both the reason for the rule and the reason for the exception to it. Had a witness in the position of Mr. Cullen become aware that the question of whether he was physically present when the personal guarantee was executed was to become an issue in later litigation, then the temptation to create a self-serving record of these events might be considerable. This is in effect why the common law precludes the tendering of such evidence by reason of the rule against narrative.

12 12. It is, however, different where the record is created before the event giving rise to the controversy. Leaving aside the fact that Mr. Cullen (like the other witness who gave evidence before me) is a witness of integrity, the critical fact is that this email was created before any question of the circumstances in which the personal guarantee was created could possibly come into controversy. The email, in other words, is plainly an authentic and spontaneous contemporary record, created in circumstances where Mr. Cullen could not possibly have anticipated that the issue of the personal guarantee would later become an issue in litigation. It was inherently probative and it would be wholly artificial...