Ulster Bank (Ireland) Ltd v De Kretser

• Jurisdiction: Ireland
• Judge: Mr. Justice Gerard Hogan,Mr. Justice Birmingham
• Judgment Date: 07 December 2016
• Neutral Citation: [2016] IECA 371
• Date: 07 December 2016
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2016] IECA 371 Appeal No. 355/15 No. 2015/355

[2016] IECA 371

THE COURT OF APPEAL

CIVIL

Birmingham J.

Hogan J.

Peart J.

Birmingham J.

Hogan J.

Neutral Citation Number: [2016] IECA 371

Appeal No. 355/15

No. 2015/355

BETWEEN

ULSTER BANK (IRELAND) LIMITED

APPELLANTS PLAINTIFF/RESPONDENT

AND

WALTER DE KRETSER

AND

GILLIAN FOX

RESPONDENT DEFENDANTS/APPELLANTS

Undue influence – Non est factum – Arguable defense – Respondent seeking liberty to enter final judgment in the amount of €126,077.06 – Whether appellants raised an arguable defence

Facts: The defendants/appellants, Mr De Kretser and Ms Fox, appealed to the Court of Appeal from a judgment of the High Court (Hedigan J) dated the 10th June, 2015, granting the plaintiff/respondent, Ulster Bank (Ireland) Ltd, liberty to enter final judgment in the amount of €126,077.06 (representing a principal sum of €89,350.95 with interest thereon from the 19th August, 2010). The respondent sued on foot of a joint and several guarantee in writing entered into by the appellants dated the 5th July, 2007, in respect of the obligations of a company of which both defendants were directors, named Stones Finishes Supply Ltd. The guarantee was a condition for the granting of an overdraft facility to the company which was granted by way of a facility letter dated the 29th June, 2007. The guarantee was limited to the principal sum of €100,000 plus interest. The company defaulted on its obligations under the facility letter and a demand was consequently made under the guarantee for the principal sum of €89,350.95 on the 7th January, 2009. Thereafter a summary summons was issued in respect of that sum plus interest on the 19th January, 2009.

Held by Birmingham J that the trial judge was correct when he determined that the defendants, and in particular the second defendant, had not raised an arguable defence to the claim on the basis of undue influence. Birmingham J noted that other grounds were mentioned, including the defence of?non est factum,?but were not seriously pressed. In Birmingham J's view the trial judge was correct in determining, as he did without any difficulty, that these did not give rise to an arguable defence. Birmingham J held that this was not a case where the defence of?non est factum?was made out; the main focus of the defendants' arguments was on the undue influence issue.

Birmingham J held that the judge was entitled to grant liberty to enter final judgment. In those circumstances Birmingham J favoured dismissing the appellants' appeal.

Appeal dismissed.

JUDGMENT of Mr. Justice Birmingham delivered on the 7th day of December 2016

1 This is an appeal by the defendants/appellants from a judgment of the High Court (Hedigan J.) dated the 10th June, 2015, granting the plaintiff/respondent liberty to enter final judgment in the amount of €126,077.06 (representing a principal sum of €89,350.95 with interest thereon from the 19th August, 2010). The plaintiff/respondent sued on foot of a joint and several guarantee in writing entered into by the appellants dated the 5th July, 2007, in respect of the obligations of a company of which both defendants were directors, named Stones Finishes Supply Limited. The guarantee was a condition for the granting of an overdraft facility to the company which was granted by way of a facility letter dated the 29th June, 2007. The guarantee was limited to the principal sum of €100,000 plus interest.

2 The company defaulted on its obligations under the facility letter and a demand was consequently made under the guarantee for the principal sum of €89,350.95 on the 7th January, 2009. Thereafter a summary summons was issued in respect of that sum plus interest on the 19th January, 2009. The background to the entry into the guarantee is that the first named appellant/defendant was a stonemason by trade and an expert in restoration. He started Stone Finishes Supply Limited in 1999 and it grew into a very successful business, having a turnover of over €1.1 million per annum at one stage and employing fifteen staff directly as well as a number of subcontractors. However in late 2007 the company came under significant pressure with regards to cash flow with a number of clients delaying payments due. The company encountered major difficulties in mid to late 2008 when two of its biggest clients became insolvent. In those circumstances the company went into voluntary liquidation on the 4th December, 2008.

Summary of defences and issues raised

3 The High Court concluded that the defendants had not made out an arguable defence to the claim. The appellants had resisted the bank's claim advancing inter alia the following defences:-

(i) A lack of review or understanding of the guarantee by the appellants, which was supposedly signed in desperation in a situation where the company was in an extreme financial situation.

(ii) That Ms. Fox only signed the guarantee consequent upon undue influence and duress by Mr. De Kretser.

(iii) That the guarantee was unenforceable due to the rule in relation to past consideration.

(iv) That the respondent was legally bound to accept the assignment of certain insurance policies offered in full and final settlement of the claims under the guarantee.

4 On the 18th February, 2012, the appellant/defendant Gillian Fox swore an affidavit which asserted inter alia:

(a) That she had been pressured into signing the guarantee by her husband, the first named defendant/appellant Mr. De Kretser.

(b) She had only signed the guarantee under duress.

(c) She had not seen copies of the guarantee prior to signing it.

(d) She was only a 1% shareholder of the company and received no benefit from the guarantee.

5 The first named appellant also swore an affidavit on the 18th February, 2012. He averred that:

(i) He was a 99% shareholder in the company.

(ii) The original guarantee provided to the company had only been provided by him and he did not understand why his wife had been required to act as co-surety in 2007.

(iii) He put undue pressure on his wife to execute the guarantee, as the company was under huge pressure in order to meet obligations and the respondent insisted on this prior to releasing funds.

(iv) He had not seen copies of the guarantee prior to signing it.

(v) The respondent had made contractual agreement to settle all outstanding liabilities under the guarantee by taking an assignment of an Ark Life Assurance policy which was valued at just over €55,000 and then unreasonably insisted on a contractually impossible encashment deadline of 28 days.

(vi) The respondent was legally obliged to take an assignment of the Ark Life policies.

6 Both defendants/appellants swore further affidavits on the 13th June, 2012. On this occasion Mr. De Kretser swore an affidavit reiterating his position in relation to the Ark Life policies and stated that he had a valid defence under the past consideration rule. Ms. Fox in her affidavit stated that she wished to defend the action based upon the defences of duress/undue influence and the rule of past consideration.

7 On the 18th October, 2012, Mr. Damien Devlin of the Collections and Recoveries Department swore an affidavit on behalf of the plaintiff bank refuting the claims that had been set out in the appellant's affidavits. In relation to Ms. Fox, the second named defendant/appellant he stated that:-

(a) Ms. Fox was not under the undue influence of her husband and that she had in fact introduced her husband to the respondent, with whom she had had prior dealings through her spa and beauty business Heavenly Spa Limited.

(b) That while she only held 1% shareholding in the company, she was also a director of the company and drew a €2,000 per month salary from it, contrary to her assertion that she received no benefit from the guarantee.

(c) That the facility letter was addressed to and signed by both appellants as directors and the guarantee was not signed until two weeks after the facility letter issued.

(d) That Ms. Fox had previously provided guarantees in the same or similar form going back to 2000, when she had guaranteed the liabilities of Heavenly Spa Limited and she had provided guarantees in respect of Stone Finishes Supply Limited on four occasions in 2002, 2003 and 2006.

8 In relation to Mr. De Kretser, Mr. Devlin stated that:

(a) Contrary to Mr. De Kretser's assertion that Ms. Fox had only been asked to provide a guarantee in 2007, she had in fact provided four previous guarantees in relation to the obligations of the company.

(b) His statement in relation to not having seen the guarantee in advance had to be seen in the context of his having known about the obligation to provide it two weeks earlier and his previous record of having signed guarantees.

(c) His statement about desperation to get funds for the company was refuted by the fact that he was also, at the time seeking a €740,000 mortgage in respect of the business premises that he owned and in which the company was operating.

(d) That the respondent had only conditionally accepted the assignment of the Ark Life policy when offered subject to encashment within 28 days and when this did not happen, the offer lapsed and there was consequently no contract to enforce.

9 While there has been mention of other issues, the real point in this case, both at first instance and on appeal is as to whether the guarantee was valid and that in turn raises the issue of whether there was a positive or affirmative duty on the bank to ensure that Ms. Fox understood the nature of the guarantee and had done what was required to ensure that she had access to independent legal advice, if she required it, before executing the guarantee.

10 Before addressing the issues raised in greater detail and before seeking to put those issues in a factual context, I need to remind myself these issues are arising in the context of an application for...