Zurich Bank v Richard Coffey and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 28 January 2011
• Neutral Citation: [2011] IEHC 26
• Judgment citation (vLex): [2011] 1 JIC 2801
• Court: High Court
• Date: 28 January 2011

[2011] IEHC 26

THE HIGH COURT

[No. 3061 S/2010]

Zurich Bank v Coffey & Ors (t/a Seafield Holdings Partnership)

COMMERCIAL

BETWEEN

ZURICH BANK

PLAINTIFF

AND

RICHARD COFFEY, BRIAN O'HAGAN, DONAL HUNT, RORY O'CALLAGHAN AND VIV O'CALLAGHAN TRADING AS SEAFIELD HOLDINGS PARTNERSHIP

DEFENDANTS

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607

FIRST NATIONAL COMMERCIAL BANK PLC v ANGLIN 1996 1 IR 75

DANSKE BANK A/S (T/A NATIONAL IRISH BANK) v DURKAN NEW HOMES UNREP SUPREME 22.4.2010 2010 IESC 22

MCGRATH v O'DRISCOLL 2007 1 ILRM 203

RINGSEND PROPERTY LTD v DONATEX & MCNAMARA UNREP KELLY 18.12.2009 2009/49/12226 2009 IEHC 568

ASSOCIATED JAPANESE BANK (INTERNATIONAL) LTD v CREDIT DU NORD SA 1988 3 AER 902

PRACTICE & PROCEDURE

Summary judgment

Loan agreement - Leave to defend - Test to be applied - Whether arguable defence disclosed - Implied terms - Whether arguable basis for implication of non recourse term in written loan facility between parties - Principles to be applied - Aer Rianta cpt v Ryanair Ltd [2001] 4 IR 607, McGrath v O'Driscoll [2007] 1 ILRM 203 and Associated Japanese Bank (International) Ltd v Credit du Nord SA [1989] 1 WLR 255 applied - First National Commercial Bank plc v Anglin [1996] 1 IR 75, Danske Bank a/s (t/a National Irish Bank) v Durkan New Homes [2010] IESC 22 (Unrep, SC, 22/4/2010) and Ringsend Property Ltd v Donatex [2009] IEHC 568 (Unrep, Kelly J, 18/12/2009) considered - Summary judgment granted (2010/3061S - Finlay Geoghegan J - 28/1/2011) [2011] IEHC 26

Zurich Bank v Coffey

Facts The plaintiff sought summary judgment against the defendants in the sum of approximately 8 million euro. The defendants opposed the application for summary judgment and sought leave to defend and have the matter remitted for plenary hearing. It was contended by the plaintiff that the monies had been advanced and as the repayments had not been met, letters of demand were issued and proceedings commenced. The defendants did not dispute that they entered into the written loan agreement in question but contended that the true nature of the loan agreement was not as set out in writing in the accepted facility letter. The defendants contended that the true nature of the agreement was that the facility was a "non-recourse facility" in the sense that the defendants had no personal liability to the plaintiff for the repayment of the monies. The plaintiff was only entitled to look to the properties over which it held security for repayment of principal and interest. It was also contended that part of the monies that had been advanced were advanced in order that interest payments could be met. It was contended that the plaintiff was financing the interest payments to itself and that the credit committee of the plaintiff was unaware of this. The defendants contended that they have an arguable defence by reason of the misstatements made by the plaintiff and were entitled to have the full facts put before the court on a plenary hearing prior to the court construing the written loan agreement in its relevant factual matrix.

Held by Finlay Geoghegan J in granting summary judgment. Applying the Moorcock test to the present facts, there was no basis for the implication of a non-recourse term such as it intended. There was no arguable basis for the implication of a non-recourse term in the written loan facility between the plaintiff and the defendants. The court was not satisfied that the defendants had raised as an arguable defence any issue on the construction of the written loan facility (as amended), accepted in writing by each of them, which would provide a basis for the court remitting the matter to plenary hearing. Whether or not it was an agreement which imposed personal liability on the defendants for repayment of principal and interest, the written agreement was clear in accordance with its express terms which did not require construction of the court in any particular factual matrix. The defendants did not have an arguable defence to the plaintiff's claim. The plaintiff was entitled to judgment against the defendants jointly and severally in the sum sought.

Reporter: R.F.

1 JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 28th day of January, 2011

2 1. The plaintiff seeks summary judgment against the defendants in the sum of €8,157,545.06, together with interest, pursuant to a loan facility letter dated 6 ^th December, 2007, as amended by a loan facility letter dated 21 ^st January, 2009. The defendants oppose the application for summary judgment and seek leave to defend and that the matter be remitted for plenary hearing.

3 2. The background facts to these proceeding are not in dispute. In June 2006, the defendants formed the Seafield Holdings Partnership to purchase and develop properties in Bantry, County Cork. They initially purchased premises known as Vickery's Hotel in Bantry for the sum of €4.5 million, which was financed by a loan from AIB of €3.6 million. The defendants subsequently agreed to purchase two adjacent properties in Bantry known as Kiddycare and World Choice Travel for €2.9 million.

4 3. Following negotiations in 2007 between the plaintiff and certain of the defendants, the plaintiff issued a facility letter dated 6 ^th December, 2007, offering a loan in the amount of €7,985,000. The defendants accepted the facility by each signing an acceptance attached to the facility letter on or before 17 ^th December, 2007. The facility was expressed to be available for twelve months from drawdown, which was on 11 ^th January, 2008. By a further facility letter of 21 ^st January, 2009, accepted in writing by all the defendants on or before 24 ^th February, 2009, there were two amendments made to the loan agreement. First, the term of the facility was extended and the final repayment date became 11 ^th October, 2009. Secondly, there was an amendment in relation to the manner in which interest was to be paid, to which I will return.

5 4. Subsequent to 11 ^th October, 2009, there were a series of meetings and communications between the plaintiff and certain of the defendants. The defendants appointed advisers to represent them in their dealings with the plaintiff. Ultimately, letters of demand dated 19 ^th May, 2010 were sent to each of the defendants for the sum then allegedly owing to the plaintiff and, thereafter, these proceedings commenced.

6 5. The proceedings were admitted to the Commercial List by order of 12 ^th July, 2010. Thereafter, the defendants were given an opportunity to file affidavits in response to the application for summary judgment. One affidavit of Mr. Richard Coffey, sworn on 13 ^th September, 2010, was filed. He makes the affidavit on his own behalf and on behalf of all the other defendants. No replying affidavit was filed on behalf of the plaintiff.

7 6. The evidence on the application for summary judgment is that contained in the grounding affidavit of Mr. Kieran Gilmartin, filed on 30 ^th June, 2010, grounding the application, and that of Mr. Coffey. In addition, submissions were made by counsel for the plaintiff and counsel for the defendants.

Test for summary judgment

8 7. It is common case that the test to be applied by the Court on this application is that set out by the Supreme Court in Aer Rianta cpt. v Ryanair Limited [2001] 4 I.R. 607. The judgments of McGuinness J. and Hardiman J. in that decision approve and explain further the test established by the Supreme Court in First National Commercial Bank plc. v. Anglin [1996] 1 I.R. 75. McGuinness J., in her judgment at p. 614, cites from the judgment of Murphy J. in First National Commercial Bank plc. v. Anglin, where he states, inter alia, at p. 79:

"…In my view the test to be applied is that laid down in Banque de Paris v. de Naray [1984] 1 Lloyd's Law Rep. 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank Plc v. Daniel [1993] 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:-"

9 '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 bona fide defence.'

10 …"

11 8. Hardiman J. at p. 623, having considered the judgment in National Commercial Bank Limited v. Anglin and the authorities referred to therein, stated:

"In my view, the fundamental questions to be posed an application such as this remain: 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 easily determined? Do the defendant's affidavits fail to disclose even an arguable defence?"

12 9. I was referred by counsel for the defendants to the more recent application of those principles by the Supreme Court in Danske Bank A/S trading as National Irish Bank v. Durkan New Homes [2010] IESC 22. Denham J., in the only judgment delivered, cites the above extract from the judgment of Hardiman J. in Aer Rianta cpt. She also refers with approval to the following from the judgment of Clarke J. in McGrath v. O'Driscoll [2007] 1 ILRM 203, at p. 210:

"So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment."

13 In that...