Ulster Bank Irl Ltd v Roche & Buttimer

JurisdictionIreland
JudgeMr. Justice Clarke
Judgment Date29 March 2012
Neutral Citation[2012] IEHC 166
Docket Number[2008 No. 2550 S]
CourtHigh Court
Date29 March 2012
Ulster Bank Irl Ltd v Roche & Buttimer

BETWEEN

ULSTER BANK IRELAND LIMITED
PLAINTIFF

AND

LOUIS ROCHE AND SORCHA BUTTIMER
DEFENDANTS

[2012] IEHC 166

[No. 2550 S/2008]

THE HIGH COURT

BANKING LAW

Undue influence

Guarantee - Constructive notice - Second defendant guaranteeing liabilities of first defendant's business - Defendants in personal relationship - Witness of guarantee - Whether requirement that guarantee be witnessed amounted to acceptance by plaintiff of obligation to advise second defendant - Whether second defendant under undue influence of first defendant - Whether non-commercial aspect to guarantee - Whether plaintiff placed on inquiry of operation of undue influence - Whether steps taken by plaintiff to ensure guarantee openly and freely given - Ulster Bank Ireland Ltd v Fitzgerald (Unrep, O'Donovan J, 9/11/2001) not followed; Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 considered; ACC Bank plc v Kelly [2011] IEHC 7, (Unrep, Clarke J, 10/1/2011); Irish Bank Resolution Corporation Ltd v Quinn [2011] IEHC 470, (Unrep, Kelly J, 16/12/2011) followed - Claim dismissed (2008/2550S - Clarke J - 9/3/2012) [2012] IEHC 166

Ulster Bank Ltd v Roche

Facts The first-named defendant had been the operator of a business. The second defendant was the partner of the first-named defendant and signed a personal guarantee in favour of the plaintiff in respect of the business. Although the second defendant was a director of the business, she took no active part in it. The plaintiff Bank sought to call in the guarantees of the defendants and had obtained a summary judgment against the first-named defendant. The second defendant disputed that she had a liability under her guarantee and contended that she had been subject to undue influence to sign the guarantee and that the Bank had a duty of care to ascertain the circumstances surrounding the giving of the guarantee.

Held by Clarke J in dismissing the plaintiff"s case: The second defendant had been in a dependent and abusive relationship with the first-named defendant (in this respect the court had regard to the evidence of a clinical psychologist). Given that the Bank was aware that the parties were in a relationship and in the context that the guarantor was not a shareholder, the Bank was placed on inquiry as to whether there was a non-commercial element to a guarantee. The Bank had failed to take appropriate steps to ensure that the proposed surety was freely agreeing to provide the requested security. The second defendant was therefore entitled to rely upon the undue influence which she had been subject to and the Bank"s claim must fail. (Declining to follow Ulster Bank Ireland Ltd. v. Fitzgerald (Unreported, High Court, O"Donovan J., 9/11/01 and following Royal Bank of Scotland Plc v. Etridge (No. 2) [2002] 2 AC 773).

TULSK CO-OPERATIVE LIVESTOCK MART LTD v ULSTER BANK LTD UNREP GANNON 13.5.1983 1983/12/3661

TOWEY v ULSTER BANK LTD 1987 ILRM 142 1986/4/1527

TE POTTERTON LTD v NORTHERN BANK LTD 1993 1 IR 413 1993 ILRM 225 1992/12/4072

ACC BANK PLC v KELLY UNREP CLARKE 10.1.2011 2011/2/396 2011 IEHC 7

IRISH BANK RESOLUTION CORP LTD v QUINN UNREP KELLY 16.12.2011 2011/27/7157 2011 IEHC 470

DONNELLY THE LAW OF CREDIT & SECURITY 2011 PARA 19.141

ULSTER BANK IRL LTD v FITZGERALD & WILLIAMS (ORSE FITZGERALD) UNREP O'DONOVAN 9.11.2001 2001/24/6443

ROYAL BANK OF SCOTLAND PLC v ETRIDGE (NO 2) 2002 2 AC 773 2001 3 WLR 1021 2001 4 AER 449

TYNAN v COUNTY REGISTRAR FOR THE COUNTY OF KILKENNY & START MORTGAGES LTD UNREP LAFFOY 22.6.2011 2011/48/13475 2011 IEHC 250

DONNELLY THE LAW OF CREDIT & SECURITY 2011 PARA 19.143

MEE UNDUE INFLUENCE & BANK GUARANTEES 2002 37 IJNS 292

DELANY EQUITY & THE LAW OF TRUSTS IN IRELAND 5ED 2011 746

IRISH TRUST BANK LTD v CENTRAL BANK OF IRELAND 1976-7 ILRM 50

WORLDPORT IRL LTD (IN LIQUIDATION), IN RE UNREP CLARKE 16.6.2005 2005/58/12287 2005 IEHC 189

BRADY v DPP UNREP KEARNS 23.4.2010 2010/5/1016 2010 IEHC 231

I (K) v MIN FOR JUSTICE UNREP HOGAN 22.2.2011 2011/26/6999 2011 IEHC 66

1. Introduction
2

2 1.1 In early 2006, the first named defendant ("Mr. Roche") was running a business through a corporate entity called Louis Roche Motors Ltd. ("Roche Motors"). As the name implies, the business involved the motor trade. At that time, the second named defendant ("Ms. Buttimer") was his partner in the personal sense of that term, although she took no role in the business. She was, at all material times, employed as a hairdresser on a modest salary. It does, however, have to be noted that she had become a director of Roche Motors, although her case is that her involvement was limited in the extreme.

3

3 1.2 In any event, Mr. Roche was dissatisfied with his then current banking arrangements and entered into discussions with a Mr. Brendan Healy who was the manager of the Midleton branch of the plaintiff bank ("Ulster Bank"). As a result of those discussions, Mr. Roche agreed that the banking business of Roche Motors would be transferred to Ulster Bank at the Midleton branch.

4

4 1.3 The various banking formalities were entered into, but, of particular relevance to the issue which I now have to decide is the fact that one of the terms imposed by Ulster Bank was that a guarantee be put in place from the directors of Roche Motors. It is not disputed that a guarantee document was in fact signed by Ms. Buttimer. Moreover the circumstances in which that occurred are of some controversy. A guarantee was also executed by Mr. Roche. Ultimately, both the guarantees of Mr. Roche and of Ms. Buttimer were called in and proceedings against both, seeking to recover the monies said to be due arising out of those guarantees, were commenced by Ulster Bank by summary summons. I understand that judgment has been obtained against Mr. Roche but no sums have been paid by him on foot of that judgment. The case as against Ms. Buttimer was adjourned to plenary hearing and came on for hearing before me.

5

5 1.4 The guarantee concerned was for a maximum sum of €50,000 together with interest from the time when the guarantee was called in. That event occurred on 27 th July, 2007, so that the claim is now for the sum of €50,000 together with interest from that date. There is no dispute between the parties as to the calculation of the amount due. The dispute which arises is as to whether Ms. Buttimer is liable on the guarantee at all. In that context, Ulster Bank's case is simple. Ulster Bank says that Ms. Buttimer guaranteed the liabilities of Roche Motors up to maximum of €50,000, that that guarantee has been validly called on and that the amount claimed is now due and owing. Against that background, it is appropriate to turn, first, to the defence put forward on behalf of Ms. Buttimer.

2. Ms. Buttimer's Defence
2

2 2.1 Counsel for Ms. Buttimer commendably confined himself at the hearing to making two points in defence of Ulster Bank's claim. I propose dealing with them separately.

3

3 2.2 The first point arises out of a factual dispute, to which brief reference has already been made, as to the circumstances in which Ms. Buttimer came to sign the relevant guarantee. It does need to be noted that Ms. Buttimer accepted in evidence that the signature on the guarantee is hers. The guarantee purports to be witnessed by an employee of Ulster Bank, a Ms. Sinead O'Connell. Ms. Buttimer says that she never attended at Ulster Bank in Midleton and never met Ms. O'Connell. On the other hand, Ms. O'Connell gave evidence that, while she had no direct recollection of the circumstances in which Ms. Buttimer came to sign the guarantee, it was her universal practice not to sign banking documents as witness unless the signatory was in her presence and signed the document in a way which she could verify.

4

4 2.3 On the assumption that I might favour the evidence of Ms. Buttimer on this point, counsel suggested that, in the event that the guarantee was not signed in the manner asserted on behalf of Ulster Bank, it could be said that Ulster Bank had failed in a duty to Ms. Buttimer which it is said that Ulster Bank had assumed. It is argued that by producing a standard form contract which, by its terms, required the document to be signed in the presence of a witness, Ulster Bank intended to afford Ms. Buttimer an opportunity to make enquiries and the like in relation to the substance of what she was doing. There is, under this heading, therefore, both a factual dispute and a legal question as to whether, even if Ms. Buttimer's evidence is accepted, same would afford any defence. Finally, under this heading, it should be noted that Ms. Buttimer's account is that she, on a number of occasions, signed documents that were given to her by Mr. Roche in connection with Roche Motors without reading the documents or considering their contents.

5

5 2.4 Indeed, that latter point leads to the second issue in the case. It is asserted on behalf of Ms. Buttimer that she was subject to undue influence from Mr. Roche. Evidence was lead in favour of that proposition. However, even if that evidence is accepted, there is a difficult legal issue as to the circumstances in which a finding of undue influence by Mr. Roche gives Ms. Buttimer a defence to these proceedings. It is, of course, clearly the case that, where one contracting party induces the other to enter into the relevant contract by the exercise of undue influence, then the contract concerned can be set aside inter partes. However, the problem here is that the assertion of undue influence is not made against a contracting party, but rather against a person who, in the context of the guarantee, is a third party, albeit one who had an interest in the execution of the guarantee in question by Ms. Buttimer, as the guarantee was a necessary part of the banking arrangements...

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