Zurich Bank v McConnon
|Mr. Justice Birmingham
|04 March 2011
| IEHC 75
|04 March 2011
 IEHC 75
THE HIGH COURT
PRACTICE & PROCEDURE
Bona fide defence - Arguable basis to absolve from liability - Frustration - Estoppel - Whether all matters can be resolved at summary application without causing injustice to defendant - Whether insufficient evidence at time of summary application to advance defence in full- First National Commercial Bank Plc v Anglin  1 WLR 1453; McGrath v O'Driscoll ; Central London Property Trust Ltd. v. Hightrees House Ltd.; Banque de Paris v de Naray  1 Lloyd's Law Report 21; National Westminster Bank Plc v Daniel  1 KB 130; Ringsend Property Ltd. v Donatex Ltd. and Bernard McNamara IEHC 568, (Unrep, Kelly J, 18/12/2009) and Allied Irish Banks v Higgins and Ors IEHC 219, (Unrep, Kelly J, 3/6/2010) considered. Aer Rianta CPT v Ryanair Limited  IESC 22 (Unrep, SC, 22/4/2010) applied - Central Bank Act 1942 (No. 22), s 16 -Central Bank and Financial Services Authority of Ireland Act 2004 (No.21), s 10 - Consumer Credit Act 1995 (No.24 ), s 30 and 38 - Summary judgement granted (2010/5690S - Birmingham J - 4/3/2011)  IEHC 75 and Danske Bank a/s trading as National Irish Bank v Durkan New Homes and Others
Zurich Bank v. McConnon
Facts The plaintiff herein sought summary judgment in the sum of €31,883,565.56 together with continuing interest against the defendant. The plaintiff claimed that by way of Facility Letter it offered to advance to the defendant the sum of €32,522,613 subject to the terms and conditions set out in that letter and the final repayment date was twelve months from the date of initial disbursement. The defendant availed of that facility and failed to repay the loan. However, the defendant claimed that there were a number of defences available to him which would enable him to defeat the plaintiff's claim. The defendant submitted that the various defences were of sufficient substance such that it was clearly appropriate that he should be permitted to defend the case and that the matter should go to trial. The defendant borrowed the money in order to carry out development works. However, as the economy stalled the project encountered major difficulties and according to the defendant it was clear that the monies expended on the development would never be recovered. The defendant submitted that the plaintiff breached a condition of the loan contract by failing to investigate the independent valuations obtained by the defendant in relation to the development. The defendant also sought to raise the issue of estoppel arising from a standstill agreement between the plaintiff and the defendant. The defendant also sought to rely on the doctrine of frustration, alleging that the agreement was frustrated by the dramatic collapse in property values. Lastly the defendant relied on the terms of the Financial Regulator's Consumer Protection Code, which he submitted formed an implied term of his contract with the plaintiff.
Held by Birmingham J. in granting the plaintiff summary judgment in the sum of €31,883,565.56: That there was broad agreement between the parties on the legal principles that apply to applications for summary judgment. The case law indicated that the jurisdiction to refuse leave to defend and proceed to summary judgment ought to be exercised sparingly. The defendants suggestion herein that it was entitled to rely on the alleged failure of the plaintiff to subject the valuations to scrutiny was fanciful. The clause in relation to the valuations was not a clause upon which the defendant, as the borrower could rely. The defendant also failed to make out even an arguable defence based on the invocation of the doctrine of estoppel. The defendant appeared to be seeking to rely on frustration in order to escape from what proved to be a bad bargain. Aside from the fact that the defendant was not a 'consumer' within the meaning of the Code, there was also no basis for suggesting that any alleged breach of the Code exempted the defendant, as a borrower, from repaying the loan. There was no arguable basis whatsoever for suggesting that the defendant could be absolved from his liability to repay the loan to the plaintiff.
Judgment of Mr. Justice Birmingham delivered the 4th day of MARCH 2011
In this case the plaintiff, Zurich Bank ("the bank") seeks summary judgment in the sum of €31,883,565.56, together with continuing interest.
The bank claims to be entitled to judgment on the basis that money was lent by it to the defendant on foot of a Facility Letter dated 15 th June, 2007, which was accepted by the defendant on 18 th June, 2007, which remains outstanding.
By that Facility Letter, the bank had offered to advance to the defendant the sum of €32,522,613 subject to the terms and conditions set out in the letter. The letter identified the final repayment date as twelve months from the date of initial disbursement.
It is not in dispute that the defendant availed of the facility and drew down the available funds and that the loan has not been repaid. However, the defendant says that there are a number of defences available to him which will enable him to defeat the bank's claim. Moreover, he says that in respect of the defences on which he relies, that while there may not be sufficient information available at present so that the Court would be satisfied that the defences will ultimately succeed, that certainly it is the case that the various defences relied on are of sufficient substance that it is clearly appropriate that he should be permitted to defend the case and that the matter should go for trial and the application for summary judgment should be refused.
There was broad agreement between the parties on the legal principles that apply to applications for summary judgment. Those principles have been the subject of discussion in a number of Supreme Court cases. In First National Commercial Bank Plc v. Anglin,, Murphy J. dealt with the issue in these terms on pp. 78-79:-
"For the court to grant summary judgment to a plaintiff and to refuse leave to defend it is not sufficient that the court should have reason to doubt the bone fides of the defendant or to doubt whether the defendant has a genuine cause of action… In my view the test to be applied is that laid down in Banque de Paris v. de Naray  1 Lloyd's Law Report 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank Plc v. Daniel  1 W.L.R. 1453. The principle laid down in the Banque de Paris case is summarised in the headnote thereto in the following terms:-"
'The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the Court had to look at the whole situation to see whether the defendant had satisfied the Court that there was a fair or reasonable probability of the defendants having a real or bone fide defence.'
In the National Westminster Bank case, Glidewell L.J. identified two questions to be posed in determining whether leave to defend should be given. He expressed the matters as follows:-
'I think it right to ask, using the words of Ackner L.J. in the Banque de Paris case at p. 23,
'Is there a fair or reasonable probability of the defendants having a real or bona fide defence?' The test posed by Lloyd L.J. in the Standard Chartered Bank case … "Is what the defendant says credible?" amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence'.
The matter was again considered by the Supreme Court in the well known case of Aer Rianta CPT v. Ryanair Limited, She commented:- wherein, the test laid down in First National Commercial Bank v. Anglin was endorsed by McGuinness J. on p. 615.
"Thus it is for this court to decide whether in the instant case the defence set out in the affidavits of Mr. O'Leary, together with the documents exhibited therewith, is credible, or in other words, whether there is a fair or reasonable probability of the defendant having a real or bona fide defence… The Court does not ask whether Mr. O'Leary's account of events is probable, or likely to be true; nor does it ask whether Mr. Byrne's account of events is more likely. The question is rather whether the proposed defence is so far fetched or so self-contradictory as not to be credible".
The issue is also the subject of a judgment from Hardiman J. in the same case. In the course of his judgment he observed, on pp. 621-622:-
"… I believe that the test for obtaining summary judgment has not changed since the early days of the procedure in the late nineteenth and early twentieth centuries. The formulation used in First National Commercial Bank Plc v. Anglin and the cases cited in that judgment are useful and enlightening expressions of the test, but I do not believe that this formulation expresses an altered criterion which is more favourable to a plaintiff than that derived from the other cases cited. The "fair and reasonable probability of the defendants having a real or bona fide defence" is not the same thing as a defence which will probably succeed, or even a defence whose success is not improbable". Later, Hardiman J. went to on to say, at p. 623:-
"In my view, the fundamental questions to be posed, on an application such as this remains; is it 'very clear' that the defendant has no case? Is there either no issue to be tried or only issues, which are simple and...
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