Contractual Issues
Cases
Bank of Scotland PLC -v- O’Connor;
O’Connor -v- Bank of Scotland PLC & ors
[2017] IECA 24 (10 February 2017)
Composition of Court:
Finlay Geoghegan J., Peart J., Binchy J.
Judgment by:
The Court
Status:
Approved
Result:
Dismiss
THE COURT OF APPEAL
Neutral Citation Number: [2017] IECA 24
Appeal No: 2015 No. 225
JUDGMENT OF THE COURT DELIVERED BY MR JUSTICE MICHAEL PEART ON THE 10th DAY OF FEBRUARY 2017
1. This is a judgment to which all members of the Court have contributed. The appellant’s first appeal (2015/225) is against an order dated 6th March 2015 (Cregan J.) in which judgment was given against him in the sum of €7,683,999.96 in proceedings brought by Bank of Scotland Plc (‘BOSI’). In the High Court he had sought to resist judgment on the basis of claims made in other proceedings which he commenced against BOSI and the other named defendants. Both proceedings were heard together. By a separate order of the same date, the reliefs sought in those proceedings were refused, and a lis pendens which he had registered against certain lands (‘Lindville’) which were mortgaged to BOSI by way of security for borrowings was vacated. The second appeal (2015/216) is against those orders.
2. This judgment will address the issues raised in the appellant’s proceedings since it is accepted that if he fails in his second appeal (2015/216) the appeal against the judgment in favour of BOSI fails and that judgment will stand.
Some background
3. Mr. O’Connor is an experienced property developer. The lands at Lindville were lands on which he sought to construct 8 houses for which planning permission had been granted. Initially he sought to develop these lands through a partnership with a Mr. O’Donovan. However, it appears that following differences between them the partnership was dissolved by agreement in late 2000. Thereafter, Mr. O’Connor sought to ‘go it alone’ in relation to the development of the Lindville sites, but he needed funding to do so – hence the BOSI borrowings which are the basis for the judgment granted against the appellant in the High Court.
4. The Lindville lands were purchased by Mr. O’Connor and Mr. O’Donovan with the assistance of a loan from Ulster Bank, who took a first charge on the entire of the Lindville lands. A map attached to that charge outlined the secured lands in red. That map is of some relevance on this appeal as we shall see in due course.
5. The Court notes that at this time Mr. O’Connor was also planning to develop two other sites at Rochestown Road, Cork, one being Ashley, and the other being Five Firs immediately adjacent to Ashley. The development at Ashley is of some relevance to two of the issues in the case, namely whether:-
(i) the bank represented to the appellant that it would provide funding to enable him to complete the development at Ashley, and failed to do so, and
(ii) that the bank reneged on a promise that it would provide a sum of €100,000 to complete the show house at Ashley to a high standard. This judgment will return to these issues in due course.
6. Upon the dissolution of the partnership, Mr. O’Connor was anxious to obtain additional finance in order to discharge an agreed sum to Mr. O’Donovan on foot of the dissolution of the partnership, to pay off certain sums owed to Bank of Ireland, and to fund the ongoing development of the 8 houses at Lindville. The first BOSI loan facility letter in respect of a loan to Mr. O’Connor of the sum of €820,000 is dated 25th September 2002. It was accepted by Mr. O’Connor and in accordance with the conditions for the loan he, inter alia, executed a mortgage in favour of BOSI over eight sites at Lindville as security for those borrowings. It was a condition also that upon the sale of each site a sum of €150,000 would be repaid to BOSI and the solicitor then acting for him, Mr. Cuthbert of Martin Sheehan & Co, solicitors gave an undertaking in that regard to BOSI. In fact, prior to the drawdown of this facility Mr. O’Connor had already entered into an agreement for the sale of one of the eight Lindville sites (No.59), and Mr. Cuthbert gave an undertaking to pay over a sum of €150,000 upon the completion of that sale. Thus, the security for the loan was a charge over seven sites and an undertaking by Mr. Cuthbert to pay over €150,000 to BOSI upon the completion of the sale of each of the remaining seven sites.
7. As noted by the trial judge at para. 3 of his judgment “the plaintiff and the defendants all agreed, at the end of the trial, that there were seven major issues which needed to be considered by the Court”. He set them forth as follows:
(1) The issue of whether the common areas of “Lindville” were intended to be included in the security granted by the plaintiff to the Bank in 2002;
(2) The issue of whether, if a mistake was made in 2002, the defendant solicitors were negligent and/or in breach of duty in failing to notice that the common areas had been included in the plaintiff’s security granted to the Bank in 2002 when they were reviewing the security for the plaintiff for the 2007 loan in 2007;
(3) The issue of whether the Bank made a representation to the plaintiff on or about 12th March, 2010 that the Bank would fund the plaintiff’s developments through to completion;
(4) The issue of whether the amalgamation of further loans advanced by the respondent to the appellant in 2007 and 2008 loans by means of another loan in 2010 was unlawful and was procured by the Bank by deceit or fraud or undue influence or was in any other respect unlawful;
(5) The issue of whether the Bank represented to the plaintiff that he could spend €100,000 to complete one of the houses in Ashley to show- house standard and that the Bank would provide funds for same;
(6) The allegations against the receivers that the receivers had a conflict of interest, that the receivers had failed to carry out their duties properly and that the receivers had failed to preserve the assets.
(7) The issue of whether the defendant solicitors failed to properly advise the plaintiff in respect of the 2007, 2008 or 2010 loan offers;
First Issue – the common areas at Lindville site
8. Central to the issues raised by Mr. O’Connor in the High Court and on this appeal is that the 2002 BOSI facility letter described the security for the loan as consisting of, inter alia, a “first specific charge over the freehold land of the borrower consisting of eight sites at Blackrock Road, Cork”. There is no dispute that these are the Lindville lands, but Mr. O’Connor asserts that this charge was intended to cover only the sites themselves, and that it was never intended that the bank’s security would include what has been described as the common areas. He says that this is corroborated by the fact that BOSI’s solicitor’s letter to Mr. Cuthbert dated 2nd October 2002 enclosing the mortgage and charge and draft certificate of title is headed “Mortgage of eight sites at Blackrock Road, Cork”. In addition he relies on the fact that on page 1 of the Solicitor’s Report and Certificate of Title the security property is described as “sites 27, 28, 29, 30, 53 and 57 at Lindville, Blackrock Road, Cork”. Mr. O’Connor relies on the fact that in all these descriptions there is no reference to the common areas as forming part of the bank’s security.
9. However, as noted by the trial judge at para. 30 of his judgment, the body of the Solicitor’s Report and Certificate of Title states: “I/we have investigated the title to the property described in Part One of the Schedule hereto (hereinafter called “the property”), the tenure of which is stated therein”. The trial judge stated that it was clear therefore that the actual property over which security was being provided is that which is described in that Schedule which was in the following terms:-
“All that and those part of the lands of Lindville, Blackrock Road, Cork as more particularly delineated on the map or plan attached hereto and thereon outlined in red held firstly for the residue of a term of 500 years demised by indenture of lease 28th March, 1854 and subject to the yearly rent therein reserved, and secondly in fee simple.” [trial judge’s emphasis]
10. The schedule to the deed of mortgage and charge dated 29th October 2002 that was executed by Mr. O’Connor in favour of BOSI refers to the Lindville lands as being “as is more particularly delineated on the map and next hereto and they are on outlined in red”.
11. The reason why the appellant says that it was never intended that the common areas be included as part of the bank’s security is that there is, he maintains, within the ground comprising the common area sufficient land upon which to construct two further houses. He was permitted to call an independent expert witness, Mr. Glen Barry, in that regard, even though his report was produced only after the commencement of the hearing. The defendant’s expert, Mr. Crean, had opined that it was extremely unlikely that a planning permission for two additional houses could ever be obtained, firstly, because following some public protests the council had already taken the common areas in charge; secondly, the appellant had failed in his judicial review challenge to the council’s decision in that regard; and thirdly, because two applications by the appellant for such a planning permission had already been refused. Nonetheless, this was why the appellant was seeking to establish that the common areas were never intended to be included in the bank’s security. That evidence would be relevant to the question of damages if the trial judge had been satisfied that the appellant was correct that those areas were not intended to be included in the bank’s security, but in circumstances where he decided otherwise for the reasons he gave, any conclusion on the competing evidence of Mr. Barry and Mr. Crean was unnecessary.
12. Before reaching any conclusions on this issue, the trial judge had noted that even though this error as to the inclusion of the common areas in the security given to BOSI is said to have occurred in 2002, while Mr. Cuthbert was acting for Mr. O’Connor, he never brought proceedings against either Mr. Cuthbert or the firm of Martin Sheehan & Company. Rather, he has sued the solicitors who were acting for him in 2007, when a new facility issued which required a continuation of the 2002 facility, and on the basis that those solicitors had failed to properly protect him by permitting that extension of the 2002 facility which had included the common areas, and which, he says, should not have been included.
13. Having referred to the matters to which I have referred in paras. 6, 7 and 8 above, the trial judge went on to arrive at his conclusion on this issue in the light of evidence adduced. It is convenient to set forth his conclusions on this issue by setting forth what he has stated from paras 30.5 to 32 of his judgment as follows:
“(5.) Mr. Cuthbert gave evidence on behalf of the plaintiff. Mr. Cuthbert was the plaintiff’s solicitor at the time of the 2002 loan facility and 2002 mortgage and charge over Lindville. He was a frank and honest witness. Mr. Cuthbert’s evidence was that he would never have allowed a client to sign a mortgage or charge (where that mortgage or charge referred to a map) without reviewing the map carefully with the client. His evidence was that (although he had no distinct recollection of the transaction twelve years ago) he was of the view that he would have followed his normal procedure with Mr. O’Connor in relation to the signing of the mortgage and charge in 2002. If that were the case, then clearly Mr. O’Connor would have seen the map and would have known that the mortgage and charge were created over the sites and the common areas at Lindville.
(6.) Mr. Cuthbert also gave evidence that if he did not follow his normal procedure in 2002 that was simply because Mr. O’Connor had such an intimate knowledge of the Lindville site because of his experience in purchasing the site, developing the site, financing the site and because of his involvement in agreeing the map with his partner Mr. O’Donovan some time previously. He also said that, even if he did not specifically get Mr. O’Connor to review the map before he signed the mortgage, he had no doubt whatsoever that Mr. O’Connor was intimately familiar with the map. Given that this evidence was from a witness on behalf of the plaintiff, and was the plaintiff’s solicitor at the time of this transaction, I am of the view that it is clear beyond doubt that Mr. O’Connor was fully aware that the common areas were included in the mortgage in 2002
(7.) It is also important that Ulster Bank originally had a charge over all the common areas and sites at Lindville. That is agreed by all parties. The refinancing which Mr. O’Connor was seeking to obtain was refinancing from BOSI to pay off Ulster Bank, (and also to pay off other debts he owed to Bank of Ireland and Mr. O’Donovan). Therefore it makes sense that BOSI would have obtained the same security as Ulster Bank. As Ulster Bank had security over all the common areas and all the sites, it makes sense that BOSI was also obtaining security over all the common areas and all the sites (with the exclusion of a number of sites which had been sold by that time).
(8.) When questioned as to whether Mr. O’Connor intended at any time to give security to BOSI which was a lesser security than that offered to Ulster Bank, Mr. O’Connor’s evidence was uncertain. In my view it was not clear that he intended to offer BOSI less security than he had granted to Ulster Bank.
(9.) Moreover, when asked whether, in effect, by granting the Bank security over the sites only, BOSI would have been landlocked by virtue of the fact that they had no access to the common areas and no rights of way, Mr. O’Connor indicated that they could have been included in an extra conveyancing document but were not. However there was no evidence of any discussion at the time of BOSI or the plaintiff discussing rights of way or other conveyancing documents.
(10.) When asked did he intend to frustrate the security he offered to BOSI his reply was an emphatic no – that he did not mean to do so.
(11.) I am not convinced that Mr. O’Connor intended to grant less security to Bank of Scotland (Ireland) than had been granted to Ulster Bank. Indeed the entire tenor of his evidence was that this was a very fraught time and he was focused on obtaining the finance to pay off his former partner and to pay off Ulster Bank. Thus there was no particular reason as to why he would have contested the transfer of the common areas.
(12.) Likewise his evidence is that he did not wish to frustrate BOSI’s security. If that be so, then it follows – given that there was no additional wayleave agreement – that the parties must have intended to include all the common areas, roads and services as part of the agreement. If that were not so then BOSI’s sites would have been landlocked and Mr. O’Connor would have had an advantage which was not agreed or intended between the parties.
(13.) It is also of some significance that this schedule of the property is in fact on the page immediately before the signature page. The signature page therefore follows immediately after Mr. O’Connor assigned the mortgage and charge and this signature has been witnessed by his solicitor Mr. Cuthbert. A copy of the map was produced in court and the map is then attached as a following page. The map clearly includes, within the red interlining, the common areas of Lindville.
(14.) Another reason, in my view, why the map included the common areas and was always intended by all parties to include the common areas was that Mr. O’Connor gave evidence to the court that the map drawing up these sites and these common areas was drawn up by Mr. O’Donovan’s solicitor and interlined in red at the time of the partnership dissolution agreement.
(15.) This map appears to have formed the basis for the map attached to the mortgage and charge dated September 2002. There is however a difference between the two maps in that the map drawn up for the dissolution of the partnership agreement included extra sites whereas the map attached to the mortgage in charge has been interlined in red to exclude a number of sites, (which had been sold). Mr. Murphy SC for the Bank, submitted to the court – and it seems a reasonable inference – that what in fact happened was that the map drawn up for the dissolution of the partnership agreement was photocopied and then re-interlined in red marker by some person so that it would properly reflect the provisions of the mortgage with BOSI. This appears to be the case because there is a stamp on the dissolution of partnership agreement which is a taxing/revenue stamp and which is peculiar to each document. It appears that exactly the same stamp appears on the document attached to the deed of mortgage and charge in 2002. (That seems a likely explanation as to what happened but it is by no means hugely important to the matters which I have to decide).
(16.) It is surprising that Mr. O’Connor could have signed a document such as a mortgage document which on the previous page refers to a map but which Mr. O’Connor now says he has no recollection of seeing and is of the view that it was not there. I do not accept this evidence. In my view, given that the solicitors report and certificate of title refer to a map, and, given that the mortgage of 29th October, 2002 also refers to a map, it is highly likely that this map was drawn up at that time and appended to the agreement.
(17.) Moreover Mr. O’Connor has not put forward a scintilla of evidence – beyond his bare assertion – that it was not intended that the common areas would be transferred to BOSI in February 2002. He seeks to rely on his contemporaneous notes of the time which on occasion refer to the transfer of eight sites. Insofar as Mr. O’Connor put forward any evidence that he did not intend to transfer the common areas to BOSI I do not accept his evidence. I have no doubt that Mr. O’Connor knew full well at the time what he was conveying to BOSI – which was the eight sites plus all the common areas.
(31.) I believe that what Mr O’ Connor has sought to do in this case is to exploit a certain looseness of language in certain parts of the documents (for example in the solicitors correspondence and in the solicitors certificate and report of title) – which refer to eight sites but which do not refer to the common areas – to seek to argue that therefore there was no intention to convey the common areas but only an intention to convey the sites. In my view his evidence on this is non- existent and his case is untenable.
Conclusion on the first issue
(32.) Having heard evidence on this issue from the plaintiff, the plaintiff’s solicitor and the Bank’s solicitor, I therefore find as a fact that it was at all times the plaintiff’s – and the Bank’s – intention to mortgage and charge the common areas to BOSI and that the plaintiff at all times actually knew that he was in fact mortgaging and charging the common areas of Lindville and the relevant sites to BOSI in September 2002. I therefore conclude that the Plaintiff’s case on the first issue is unfounded.”
14. In his notice of appeal the appellant states a ground of appeal (ground B) which was not part of the grounds which he relied upon in the High Court – namely the doctrine of Non Est Factum. In other words, in his notice of appeal he states for the first time that mortgage document dated 2002, on which the bank relies “is not the document that [the] Appellant signed on 4th October 2002”. He gives three reasons for his reliance on that ground of appeal, two of which are dealt with later in this judgment. The third reason is one which he seeks raise for the first time on this appeal, not having done so in the High Court, namely that the document upon which the bank relies is not the document which he signed on 4th October 2002. Given that it was not raised in the High Court, this Court does not propose to address it as it is clear that it is not one upon which the appellant is now entitled to rely. In an effort to identify the issues that required to be determined the trial judge on Day 10 of the hearing identified seven precise issues that seemed to him to arise for determination. The appellant agreed that these were the issues in the case. Non Est Factum is not one of the issues identified. Appropriate allowance will be made to self-representing plaintiffs and defendants, and some latitude will be permitted in the application of strict rules that will otherwise apply. At the commencement of his judgment the trial judge refers to this latitude, indeed assistance, that was provided to the appellant. But a self- representing party cannot be permitted to depart completely from the rules that apply, and in particular cannot be permitted to argue on appeal an issue to which evidence would be relevant, which was not raised at first instance. Non Est Factum is not therefore a ground for determination on this appeal.
15. At a directions hearing in relation to this appeal, the respondents were directed to provide to the appellant a written submission outlining the principles in Hay v. O’Grady [1992] 1 I.R. 217, as applied in Northern Bank Finance Limited v. Charlton [1979] I.R. 149. They did so. That submission identified for the appellant the difficult task which he faced in seeking to overturn the very clearly stated findings of fact made by the trial judge in relation to the common areas issue in this case. Without stating these well-known principles in full detail, it can be briefly stated that in general the appellate court should not interfere with findings of fact made in the court below where there was credible evidence to support those findings which the trial judge accepted. The appellant submits that this Court can reach its own conclusions of fact because even under Hay v. O’Grady principles the evidence upon which the court relies must be credible evidence and he submits that it is not, and also in so far as the judge drew inferences in order to support his conclusions, such inferences were not reasonably drawn and can be revisited by this Court. While the appellant is correct in this regard as a general statement on Hay v. O’Grady, the Court is satisfied that he has failed to establish any lack of credibility in relation to the evidence upon which the trial judge founded his conclusions, either in relation to facts or inferences.
16. In the present case the plaintiff gave evidence that the common areas were not intended to be included as part of the BOSI loan security in 2002, and by extension as security for the later loans in 2007, 2008 and 2010. The trial judge explicitly stated that he did not accept that evidence. The trial judge heard all the evidence and observed all the witnesses who gave it. He was entitled to form his clear view of that evidence and prefer the evidence of other witnesses to the evidence given by the plaintiff himself. Indeed, part of the evidence upon which he has stated that he relied for his conclusion, and was clearly entitled to accept, was evidence given by the appellant’s own solicitor, Mr. Cuthbert. His conclusions on the common areas issue is firmly based upon evidence given to him and which he was entitled to accept, and in my view the appellant has failed to overcome the obstacle presented to him by Hay v. O’Grady. This Court should not interfere with his findings of fact on this issue.
17. The respondents have pointed out that on this appeal the appellant has sought to take issue with some of the evidence given in the High Court but to which he voiced no objection in the High Court, and submit that this is not permitted on appeal. This Court agrees. Where evidence given by a witness at first instance is not challenged, it can be presumed to be not disputed, and the judge is entitled to accept it. Objection to it cannot be voiced for the first time on appeal. Similarly, it is clearly the case that he may not on appeal raise issue for the first time that he never raised in the court below. In so far as such issues have been raised for the first time on appeal, the Court does not propose to address them.
18. The rejection of the appellant’s appeal on the common areas issue has a cascading or domino effect into some of the other issues in the case.
Second issue – Negligence against the solicitor defendants in 2007
19. By 2007 the appellant had obtained two further loan facilities from BOSI. The 2003 loan facility was for two years in the sum of €750,000. Its purpose was to restructure the existing 2002 loan, and to fund the construction of two detached houses at Lindville. The security was stated to be an extension of the bank’s first specific charge over the “freehold land incorporating five sites in Lindville …”. The bank was also to receive a payment of €150,000 from the proceeds of sale of each of the two houses to be constructed. The reference to five sites clearly references that two sites had been disposed of by 2003. By this time Mr. Cuthbert of Sheehan & Co was for some reason no longer acting for Mr. O’Connor. His solicitor at that date, according to his own evidence was Mr. James Riordan of Messrs. M.J. Horgan & Sons.
20. In June 2004 the appellant signed and accepted a further loan facility letter from BOSI – this time in the sum of €900,000 to enable him to complete the construction of four houses at Lindville. The facility was for 2 years, and the security to be provided was “an extension of [the BOSI] first specific charge over the freehold land and premises of the borrower consisting of one completed house and four sites at Lindville”. His acceptance of this facility was signed by James Riordan, solicitor. Repayment was intended from the sale of the houses specified, but in any event by the 16th June 2006, as noted by the trial judge.
21. Later in 2006 the appellant was interested in purchasing the lands at Ashley for development purposes. The trial judge sets out his summary of the events leading up to the purchase of these lands, and in particular the appellant’s evidence that he contacted Michael Cotter of Ernst & Young in relation to financing the purchase through BOSI. The trial judge notes that Mr. Cotter made contact with a Mr. Roy Barry in BOSI. A meeting was arranged with BOSI which the appellant and Mr. Cotter attended when details of the purchase and development costs were discussed. The appellant stated that ahead of the auction that was to take place on the 12th December 2006 he was assured by BOSI that the funding would be made available, and even though he had not received the facility letter itself by the date of the auction he was assured that the funding would be provided. On that basis he purchased the Ashley lands at auction for the sum of €1.51 million, and paid a deposit of 10% from his own funds.
22. Some weeks after the auction BOSI issued a facility letter dated 5th February 2007 indicating the approval of a loan facility in the sum of €4.34 million. The loan term was again 2 years, and its purpose was to:-
(a) the purchase the Ashley land,
(b) to cover the cost of constructing the houses at Ashley,
(c) to cover rolled-up interest, and
(d) to refinance the previous BOSI facility. The security was a first charge on the Ashley land, as well as an extension of BOSI’s existing charge on the land at Lindville which by then consisted of three completed houses. Mr. O’Riordan was named as the appellant’s solicitor. In fact, according to the trial judge, Mr. O’Riordan’s partner, Mr. Darren O’Keeffe, also acted in the matter.
23. The appellant has sued these solicitors in negligence in relation to their advice and handling of the 2007 loan facility and security in that they are said to have failed to notice that an error had been made back in 2002 by the previous solicitors acting for the appellant, in that the security provided in 2002 included the common areas, as already described above, and accordingly that they acted negligently by including those common areas in the security being provided for the 2007 facility by way of extension of the 2002 BOSI charge. It is alleged that the firm was negligent in failing to advise him of the error in the 2002 security documentation. He has also sued them on the basis that they had a conflict of interest in that they also acted from time to time on behalf of BOSI in relation to other matters, but also in relation to putting in place the BOSI security for the 2002 and 2004 loans. That separate conflict of interest issue will be considered in due course.
24. On the negligence issue, however, the trial judge concluded as follows at para. 50 of his judgment:
“However, in my view, the plaintiff’s allegations in this regard are also completely unfounded. His allegations against the defendant’s solicitors in relation to the 2007 mortgage rest crucially on the assumption that the 2002 mortgage wrongly included the common areas of the Lindville Development. However, for the reasons set out earlier in my judgment, I have concluded that the common areas were indeed included – and properly included – in the 2002 mortgage. That being so, the defendant’s solicitors could not be found liable for any wrongdoing or negligence in respect of the 2007 mortgage when it was clear that all parties intended the existing security to continue and to be extended to cover additional loans. Of necessity, this included the common areas. I would therefore dismiss the plaintiff’s second allegation.”
25. This Court is satisfied that in order to successfully challenge the trial judge’s conclusions in relation to negligence on the part of the solicitor defendants, he would have to have succeeded in overturning the trial judge’s conclusions in relation to the common areas. Not having done so, the appeal on the negligence issue must inevitably fail.
Third issue – BOSI’s alleged representation on 12th March 2010 that it would fund the Ashley development to completion
26. By April 2008 the appellant wanted to purchase additional land for development which was immediately adjacent to the Ashley site. This site is referred to as the Five Firs site. He wanted to build two more houses on this site and sought funding from BOSI both for the purchase cost and the cost of construction, rolled up interest and stamp duty. Having applied for a facility he received a facility letter dated 3rd April 2008. This loan was stated to be for a period of three years and in the amount of €1.88 million. The specified security was a first charge over the Five Firs land, an extension of the BOSI charge over the adjoining Ashley land, as well as an extension of the BOSI mortgage and charge over the Lindville lands which still comprised three completed houses.
27. The trial judge noted in particular a condition precedent to drawdown which was contained in this 2008 facility letter as follows:-
“Before release of funds in respect of the construction finance the Bank to be in receipt of confirmation from the borrower’s solicitors that a minimum of two houses of the four in phase one at [Ashley] have contracted sales in place.”
Having drawn attention to this clause, the trial judge went on to state that “the plaintiff at all times has accepted that no contracted sales in Ashley were ever put in place.”
28. The trial judge noted that this facility letter was to be accepted by the appellant not later than the 3rd May 2008 but that it was not signed until 17th November 2008. The letter specified that these funds had to be drawn down by the 3rd April 2009. While at this time it was anticipated that the Five Firs purchase would take place shortly after the 3rd April 2008, in fact that did not occur until November 2008. The appellant sought to lay emphasis on these facts, according to the trial judge, in order to show that there was some flexibility on the part of BOSI in relation to financing. In that regard, as stated, this facility letter was not signed by the appellant until November 2008 even though it had specified that it must be accepted by 3rd April 2008. He says that he was advised by Mr. Daly of BOSI that when it was signed in November 2008 instead of April 2008 “all dates would go forward” and that he should have “no concerns about the drawdown date for the loan”. The trial judge noted that there was no dispute about that, since the bank had later written to the plaintiff stating that the new latest date for drawdown would be 20th November 2011, which was in fact two years from acceptance of the loan. Nevertheless, as noted also by the trial judge, the condition precedent to drawdown, namely that his solicitor must provide “confirmation from the borrower’s solicitors that a minimum of two houses of the four in phase 1 at [Ashley] have contracted sales in place” still had to be complied with.
29. In 2009 the appellant made a further application to BOSI for funding. This was turned down because there was still a requirement that two pre-sales be confirmed as set forth above before the funding for the completion of the development could be drawn down. The trial judge noted that BOSI had gone on to state that it would reconsider the proposal “in the light of any potential sales of property – specifically the sale of the Lindville houses which would reduce the BOSI debt”. This letter also confirmed that the drawdown, subject to the two pre-sales, was valid until 20th November 2011. The trial judge stated that this pre-sale requirement before any further funding could be drawn down in order to complete the Ashley development was still in place, and that this was an important fact given the appellant’s contention in the proceedings that BOSI, (through Mr Aidan McCarthy) had made an express representation to him on the 12th March 2010 “that BOSI would fund the project through to completion” (i.e. irrespective of completed sales).
The meeting on 12th March 2010:
30. By this time the financial crisis was well underway, and like many other developers of property the appellant found himself in some financial difficulty since there was little or no demand for the houses that he had built and wanted to build. He and the bank discussed these issues and his financial needs. In fact the bank appointed new personnel to deal with developers in this sort of difficulty, including the plaintiff.
31. The appellant made the case in the High Court that the bank breached a representation made to him, upon which he relied and was entitled to rely, on the 12th March 2010 as he and Aidan McCarthy of BOSI were walking the Ashley site. The trial judge notes that this representation was that BOSI would finance the houses and sites at Ashley to completion if the appellant gave BOSI additional security over two unencumbered houses that he owned in Douglas, which had a combined value of €500,000. Before setting out his conclusions in relation to this alleged representation the trial judge discussed the context in which the meeting on the 12th March 2010 took place, and he reviewed the evidence that the appellant had given, and also that given by Aidan McCarthy of the bank. He first of all referred to the 2007 loan in the sum of €4.34 million which had been due for repayment by March 2009, but which had been extended by 12 months to March 2010. There was also the 2008 loan in the sum of €1.8 million which included the purchase monies for the Five Firs land. Even though the appellant had been granted planning permission for two houses on the Five Firs land, these had not been built. This loan included funds for the construction of those two houses, and these had to be drawn down not later than 20th November 2011, but that drawdown, as has already been referred to, was at all times subject to the pre-condition of his solicitor’s confirmation of contracts in existence for two pre-sales on the Ashley site.
32. In the light of these circumstances, the trial judge was satisfied that the appellant’s financial position was “extremely fragile” by the time he met with Aidan McCarthy on the 12th March 2010, exacerbated by the state of the country’s economy, and the fact that while he had spent some €1.4 million on the partial construction of the houses on the Ashley site, none was completed and they remained unsold. The site in its unfinished state was unsightly for any persons who might be interested in buying a house at Ashley. He could not satisfy the pre-sale pre-condition for drawdown. The trial judge noted also that one particular possible purchaser wanted confirmation that funding was in place for the build out the remaining houses on the Ashley site to completion, and that in response to that concern, Aidan McCarthy had written a letter dated 17th February 2010 to Savills, the selling agents, in the following terms:
“Dear Catherine,
As discussed, Pat O’Connor has advised the Bank that you currently have a live prospect for number six Ashley which is presently under construction.
I confirm that the Bank, subject to a satisfactory contract of sale being achieved, and the Bank being satisfied with same, we would support the completion of number six to the showhouse standard including relevant landscaping, site access, tarring, lighting and footpaths would be completed for the developed area of the site.
Yours sincerely,
Aidan McCarthy, BOSI.” [emphasis added]
33. Insofar as the appellant was seeking to characterise this letter as one where the bank stated that it would support the completion of number 6 to showhouse standard, the trial judge said that such an interpretation was not open in the light of the full text of the letter. By that he meant that the bank had indicated its support for the completion of number six, “but only subject to a satisfactory contracted sale being achieved” and that “the plaintiff appeared to read in the letter only of what he wanted to read”. The trial judge concluded that this letter was consistent with the earlier BOSI position that it would provide financing only upon confirmation of concluded contracts for two houses, albeit that in relation to number six it was relaxing this requirement in the event that it received a single concluded contract in relation to that particular house. He went on to state:-
“However, it is clear that BOSI was not offering to provide financing for the completion of the site in any way which would lead the plaintiff to believe that BOSI was waving its condition precedent about completed sales”.
34. In relation to the meeting which took place on 12 March 2010 on the Ashley site and upon which the appellant relies for his representation argument the trial judge thought it appropriate to set out the plaintiff’s evidence from Day 2, page 127 of the transcript as follows:
“So we walked out from no.3 and we walked up the site and we were about at number two when Aidan McCarthy said to me he said Pat, he said, you have two houses that are unencumbered over in Douglas and he said if you’re prepared to put those two houses into the pot, the bank will support the completion of the estate and on that basis that I was understanding that to mean that the Bank were going to give me finance if I gave them additional security of two houses unencumbered which I believe at that time were valued at €285,000 each or thereabouts depending on the market, and I agreed on that basis that I was in return having an agreement with the Bank to provide full funding to completion of the estate.
So, Mr. McCarthy then said that he would have to get the bank’s quantity surveyor a Mr. Eoin Stack to value all of the remaining works to be completed on site and do a report and to that end I called over my son Cathal who was with me…”.
35. The trial judge then described this evidence as being the height of the plaintiff’s evidence in respect of his case against the bank that Aidan McCarthy had made a representation to them upon which he relied. He stated that, according to the plaintiff, the nature of that representation was that if he gave the additional security of two houses to the bank, it would in return provide full funding for the completion of the estate.
36. Having so stated, the trial judge then considered the evidence that had been given by Mr. McCarthy. He summarises that evidence between paras. 76 and 84 of his judgment. Mr. McCarthy had referred to an earlier meeting with Mr. O’Connor on the Ashley site in February 2010 on which occasion it was clear that the development was only partially completed, that the access to the showhouse was unfinished, and that the common areas were unsightly and unfinished. He had gone on to state that by 12th March 2010 no sales had materialised and he had sought a further meeting. He had also earlier given evidence that the 2007 loan agreement had been fully drawn down since 20th September 2009, that direct debits in respect of interest had been rejected and had not been discharged and that the account was overdrawn in the sum of €62,815.48 sent and was therefore in default.
37. Mr. McCarthy stated in his evidence that at this meeting Mr. O’Connor had told him that the overall appearance of the site was contributing to the lack of offers and that he wanted to develop the site, but needed further finance in order to do so, and in particular to complete the common areas which, he believed, was putting off potential buyers.
38. Mr. McCarthy stated in his evidence, according to the trial judge, that he told Mr. O’Connor that given the specific precondition contained in the 2008 loan facility letter that the bank would advance further funds only if contracted sales were in place, the bank would require an additional security over the plaintiff’s unencumbered investment properties. According to Mr. McCarthy, he also told Mr. O’Connor that even though his statement of means had referred to his principal private residence as being unencumbered and having a value of €1,150,000, this would not be sought as additional security for the proposed construction finance. He also told Mr. O’Connor at the meeting that since Mr. O’Connor was continuing to devote his time and energy into upgrading the Ashley site in order to secure a sale, the bank would not require him to commit his rental income from his investment properties to the bank, and that, instead, Mr. O’Connor could use that rental income in order to finance his living expenses.
39. According to the trial judge, Mr. McCarthy went on to state in his evidence that in accordance with BOSI policy, it would have to retain a quantity surveyor in relation to the actual amount of finance that would be required to complete the common areas or to complete the property itself, and accordingly that any further application for funding by Mr. O’Connor would have to be accompanied by such a report from a quantity surveyor.
40. In relation to whether Mr. McCarthy did or did not make a representation as alleged by Mr. O’Connor at that meeting, the trial judge stated that his evidence was “clear and unambiguous”, and was stated in the following terms by reference to the transcript:-
“Your honour and I hope I am as clear as I possibly can [be] on this. I agreed nothing with Mr. O’Connor on that site. What I agreed to do was make a proposal to the Bank. I outlined that proposal to Mr. O’Connor and that proposal was part of the meeting that we had and the strategy discussed.”
41. The trial judge went on to note that Mr. McCarthy had categorically stated that under no circumstances would he have made any representation to Mr. O’Connor that the bank would have provided finance to complete the development at Ashley without any preconditions. He said that he was an experienced banker and would never make any representation of that nature, and moreover, that he did not have the power to make any such representation because any such loan could only be approved by the credit committee, and only after all the relevant documentation had been obtained. He characterised the discussion on 12th March 2010 as being simply a discussion in general terms about how the bank and Mr. O’Connor might move forward together in an effort to ensure the best outcome for him and the bank by permitting further finance to complete the common areas so that potential purchasers would be encouraged to buy so that some profits would be generated in order to reduce the banks loan exposure and/or to complete another house which in turn could be sold.
42. The bank obtained a quantity surveyor report from Mr. Eoin Stack, and he gave evidence by reference to his witness statement which was accepted in full. As noted by the trial judge, his report suggested that the outstanding work at Ashley would have to be carried out in three phases. Phase 1 comprised the works required to complete units one, two and four externally and to complete the common areas including roads, parks etc in order to facilitate the proposed sale of the completed showhouse on the site. Phase 2 comprised the works required to complete units one, two and four internally, but with only unit two having the fit out completed to showhouse standard, and the works required construction finished units five and six externally. Phase 3 then comprised the works necessary to complete the internal fit out of units one and 4 to showhouse standard, and to complete units five and six internally to showhouse standard.
43. At para. 86 of his judgment, the trial judge notes that the bank approved another facility in May 2010 on foot of which a sum of €225,000 was released to the appellant to enable him to complete the common areas at Ashley, and to complete phase 1 of the works set out in Mr. Stack’s report. The May 2010 facility letter indicated approval for total borrowings of €5.4 million. Apart from the sum of €225,000 which was drawn down in order to complete those works, this facility was for the purposes also of refinancing the 2007 and 2008 borrowings in respect of which a sum of €5.1 million was owing, and to cover rolled up interest of €80,000. That loan agreement was accepted by the plaintiff on 9th June 2010 after he had received legal advice. His signature on the acceptance form was witnessed by his solicitor, Mr. O’Keeffe.
44. That 2010 facility letter gives rise to the appellant’s fourth issue in these proceedings, which will be dealt with shortly, and which is an allegation of deceit and undue influence in relation to the amalgamation of the 2007 and 2008 facilities with the 2010 facility. For the moment, however, it is necessary to set out the trial judge’s conclusions in relation to the appellant’s allegation that Mr. McCarthy made a representation at the meeting which took place on 12th March 2010, that BOSI would fund the Ashley development to completion.
45. The trial judge’s conclusions on the third issue regarding the representation contained at paras 90-92 of his judgment. Rather than summarise these conclusions, it is convenient to set out them in full:
“90. It may well be that the plaintiff left that meeting of 12th March 2010 in the full knowledge – as he believed – that he had full funding to complete the Ashley and Five Firs development in total. However, there was absolutely no foundation for the plaintiff’s belief or knowledge in that regard. Indeed it is absolutely fanciful for the plaintiff to suggest otherwise. The plaintiff is an experienced property developer. He had been negotiating loan facilities and loan agreements with BOSI for over eight years at this period in time. He had at this stage, no less than five facility agreements concluded with BOSI. He was developing properties in three separate sites – Lindville, Ashley and Five Firs. He was an experienced negotiator who was at all times legally advised as to the full effect of loan agreements and contractual obligations. Throughout his evidence, he seemed quite clear about various legal obligations. Indeed, when the contractual obligations were in his favour, he seemed particularly attuned and to legal niceties. It was only when legal obligations were sought to be construed against him that he sought to contend that they had no application or that they could be explained away on the basis of some vague representations made by some bank official on some unknown date. It is quite clear from the evidence that there was no such representation made by Aidan McCarthy that BOSI would finance the development through to completion. It is also quite clear from the evidence that there was absolutely no agreement between BOSI and Mr. O’Connor that BOSI would complete the developments through to completion. The only agreement which BOSI maintained at all times both before and after 12th March 2010 was that BOSI was prepared to honour its loan facility agreement provided that the condition precedents were met (i.e. that there would be a minimum of two contracted sales in Ashley before construction finance for the two houses in Five Firs was advanced.
91. Moreover the plaintiff elsewhere in his evidence sought to argue that by virtue of the fact that BOSI had sought to rely on Mr. Stack’s QS report that that showed an indication that BOSI was prepared to agree to finance the development to completion. It shows nothing of the sort. The only reason Mr. Stack was retained was because BOSI was of the view that perhaps the full €750,000 did not need to be drawn down to construct both houses because there had been a drop in construction costs for the construction of houses between 2008 and 2010 given the conditions in the market.
92. The only witnesses to the alleged representation made on 12th March 2010 by Mr. McCarthy, on behalf of BOSI, where Mr. O’Connor and Mr. McCarthy. Having heard the evidence of both witnesses in great detail on this point, I am quite satisfied that Mr. McCarthy made no representation of any kind to Mr. O’Connor that if he granted extra security, BOSI would fund the development through to completion and I make a finding of fact in that regard. Mr. O’Connor either misheard or misunderstood what was said by Mr. McCarthy.”
46. The trial judge has clearly stated that he has made a finding of fact in this regard. Accordingly, the appellant faces the same uphill battle which he faced in relation to the earlier common areas issue by reference to the principles in Hay v. O’Grady. He must satisfy this court on appeal that there was no credible evidential basis for his conclusion as to fact.
47. The appellant’s written submissions and indeed his notice of appeal are extensive, running to many pages even on this single issue. He sets out at great length the many ways in which he considers that the trial judge erred in his consideration of the competing versions of what occurred both at the meeting on the 12th March 2010, and both before and after it. But what he has failed to do is establish any basis for deciding that there was no evidence given by the bank upon which the trial judge could properly rely as the basis for his conclusions regarding the alleged misrepresentation. Clearly the evidence given by Mr. McCarthy was evidence which he was entitled to prefer over other evidence given by Mr. O’Connor. Where there is evidence given by one side, and very different evidence given by the other, the trial judge must consider each, but eventually decide on the basis of all the evidence which he has heard, and by reference to any available documentary evidence, and all the surrounding facts and circumstances of which he has been apprised during the hearing, which evidence he considers to be more probably descriptive of the correct state of affairs, and which evidence to reject. His conclusions are reached on the balance of probabilities. In this case that is what the trial judge did. In his judgment he has made it abundantly clear that he has preferred the evidence of Mr. McCarthy to that of Mr. O’Connor. He has identified the evidence which he relies upon for his overall conclusion that the bank did not represent that it would provide full funding for the completion of Ashley in the way contended for by Mr. O’Connor. His reasoning is clear. In this Court’s view there was evidence which he was entitled to accept which supports the conclusion that he reached. Even though there was contrary evidence given by Mr. O’Connor, this Court may not interfere with the trial judge’s findings of fact on this issue.
48. The Court wishes to make it clear to Mr. O’Connor that even though the Court’s conclusions are stated relatively briefly, regard has been had to his very extensive written submissions, his oral submissions, as well as the contents of his notice of appeal.
Fourth issue – the amalgamation of the 2007 and 2008 loans
49. The appellant has sought to characterise the calling of the meeting for the 12th March 2010 as a strategy whereby it sought to induce him into providing the bank with further security even though it knew that he was not a suitable client for further borrowings, in breach of good banking practice. He considers that he was deceived by Mr. McCarthy as to the true nature of the funding being provided on the basis of Mr. Stack’s report, and that at the 12th March 2010 meeting he was duped into providing additional security to the bank on a false promise that full funding would be provided in order to complete the development at Ashley. In his written submissions he has alleged undue influence and “economic duress” against the bank. He considers that the bank in all the circumstances known to it at the time took unfair advantage of him, knowing the difficult financial position that he was in at this time, and in effect tricked him into giving the bank additional security.
50. As seen above, this meeting resulted in a new loan facility in May 2010 (the 2010 facility). It was in the sum of €5.4 million, of which €225,000 was released to facilitate the completion of the common areas of the Ashley in order to help the sale of the houses there, and €5.1 million was allocated to clear what was already owed on the 2007 and 2008 facilities which were in default. The balance represented rolled-up interest. The trial judge noted that the appellant had signed his acceptance of this 2010 loan facility letter on the 9th June 2010 and that his signature was witnessed by his solicitor.
51. The appellant has submitted that the trial judge failed to take proper account of the all the relevant facts relating to the amalgamation of the 2007 and 2008 loans, and that this was not discussed by the bank with him at the time. He says that at a meeting with Mr. McCarthy in May 2010 he was told by him that this amalgamation was solely for accounting purposes, so that there would be just one loan account instead of two or three. He says that he was never told that “the 2008 facility was being withdrawn and / or cancelled, either by Mr. McCarthy or by his own solicitors.
52. The trial judge found as a fact that he was so aware by the 8th June 2010. The appellant submits that the judge erred in this conclusion because he failed to have regard to the fact that Mr. O’Keeffe’s notes to which he referred in his evidence were not contemporaneous notes, but rather were constructed in 2011 after the appellant had spoken to Mr. O’Keeffe’s partner, Mr Riordan. The appellant has stated his view that Mr. O’Keeffe gave false evidence before the trial judge and that this is not referred to in his judgment.
53. The appellant has stated that by the date of the May 2010 loan facility, there was still life left in the 2008 facility since drawdown had to be completed by November 2011, and there was still a sum of €750,000 available to be drawn down on it. He says that by the amalgamation of that loan with the 2010 loan he lost the benefit of that facility, and that this was never explained to him. However, he overlooks the fact that the pre-sales condition to further drawdown was still in place, and for the reasons already stated, there were no such pre-sales in place, partly because the common areas were incomplete making the entire site unsightly for prospective purchasers. There was evidence given, as already set forth, that the partial drawdown of €225,000 from the 2010 facility was to enable the common areas to be finished out in order to better attract potential purchasers.
54. The trial judge set out the competing arguments in relation to this issue. He noted the appellant’s allegation of fraud and deceit on the part of the bank in relation to the amalgamation of the 2007/2008 loans. He noted the bank’s evidence that the appellant was fully informed about that amalgamation with the May 2010 facility, and that additional funds were being advanced with the provision of additional security by him. The bank’s evidence was that this was all clear from the facility letter itself, and in addition that Mr. McCarthy had told the appellant about it when he collected the facility letter from Mr. McCarthy, and further that the appellant had received his own independent advice on the matter as evidenced by the fact that his acceptance of the facility was witnessed by his own solicitor.
55. The appellant gave evidence in the High Court that when he collected the 2010 facility letter from Mr. McCarthy he saw that it was not in compliance with what he thought was agreed with Mr. McCarthy at the 12th March 2010 meeting, and he says that he went to see his solicitor. The trial judge stated at para. 100 of his judgment that this non-compliance was “because the development finance in the loan agreement was limited to €225,000 and also because it was due to be repaid in six months, i.e. in December 2010 and not in November 2011 as his 2008 loan advised”.
56. The trial judge has set out an account of evidence given at trial in relation to this matter both by the appellant and by Mr. McCarthy. During his cross-examination of Mr. McCarthy, the appellant had asked why “any man in his right mind would give up the April 2008 loan because it permitted construction finance of €750,000 until November 2011 and it was impossible to obtain finance from any other bank at that time”. The trial judge notes Mr. McCarthy’s reply which he says was “clear”, which was:
“The plaintiff had simply run out of money and run out of options. The February 2007 loan had been drawn down in full; the funds available under the April 2008 loan could not be drawn down until the plaintiff had obtained pre-sales. He could not obtain pre-sales because of the unfinished condition of the estate. He desperately needed finance to complete the common areas in Ashley which might then, with a fair wind, permit to sell the showhouse. If he sold the showhouse he then might be able to sell another house. If he achieved these two pre-sales then he might obtain further construction costs to finish out the other houses.”
57. The trial judge stated that Mr. McCarthy’s evidence was credible and showed clearly the commercial imperatives which compelled the appellant at that time to refinance his 2007 and 2008 loans into the May 2010 facility. He stated that there was a clear commercial logic for the bank, but that it also had a clear commercial logic for the appellant, despite the fact that the plaintiff was now trying to portray it differently. The trial judge set out at some length the reasoning behind the May 2010 facility, according to the evidence given by Mr. McCarthy, what he also referred to, but the appellant complained about, in relation to the 2008 loan facility being taken away from him by the 2010 facility, and that this deprived him of the ability to drawdown the remaining €750,000 for the construction of Ashley by November 2011. In that regard, the trial judge stated the following:
“However, what Mr. O’Connor conveniently ignores at each and every occasion was that he could not draw down this construction finance at his own discretion. It was subject to a condition precedent which required a contractual pre-sale of one of the houses at Ashley. He never fulfilled this condition precedent. Even up to the date of the receivership there were no pre-sales at Ashley. Thus he never could have drawn down these funds, even if the May 2010 loan agreement had not been put in place.”
58. The trial judge went on to consider the evidence in relation to the legal advice which the appellant had available to him before he signed his acceptance of the 2010 loan facility, his signature being witnessed by Mr. O’Keeffe, his solicitor. The trial judge refers to what he describes as Mr. O’Keeffe’s contemporaneous note of a meeting with the appellant on 8th June 2010. He sets out the contents of this note. Having done so, he expresses following conclusions:
“113. What is of importance in the above contemporaneous note, is that it is noted that the existing loan offer (i.e. the April 2008 loan offer) is now “off the table”. It is clear therefore that the plaintiff was absolutely aware from his meeting with his solicitor that the April 2008 loan was “off the table”. It is not only clear that he was aware of it and that his solicitor was aware of it but that his solicitor advised him on this very point. Despite this, Mr. O’Connor sought to portray himself in court as a man who was oblivious of the fact that the April 2008 loan was no longer in existence, or that it was amalgamated into the May 2010 loan agreement, that he had been deceived into giving up this April 2008 loan, and that BOSI fraudulently misrepresented the position to. It is clear that the plaintiff is wholly misguided in relation to this issue and that he was fully aware of it.
114. I therefore find as a fact based on the evidence of the plaintiff, Mr. O’Keeffe and Aidan McCarthy that the plaintiff was fully aware as at 8th June. 2010 before he entered into the May/June 2010 loan agreement that the April 2008 loan was being withdrawn and being reissued/amalgamated in the May/June 2010 loan agreement and that he entered the loan agreement in 2010 on that basis.”
59. Having expressed these conclusions, the trial judge went on to refer to a telephone conversation which the appellant had with Aidan McCarthy on 8th June 2010 at about 6015 p.m. The plaintiff apparently kept a contemporaneous note of this telephone conversation. The contents of that note are set out in the trial judge’s judgment. He also refers to a letter which the appellant then wrote to Mr. McCarthy which is dated 10th June 2010, and again the entire contents of that letter set forth in the trial judge’s judgment. He refers to the fact that the appellant had sought to contend that this letter formed part of his acceptance of the loan offer letter dated 24th of May 2010, and to the fact that Mr. McCarthy on behalf of the bank did not accept that it formed part of the loan offer obligations. The trial judge concludes that “In my view it is clear that there was no agreement on the part of the Bank that the plaintiff’s letter dated 10th of June 2010 was incorporated by an agreement into the loan agreement of 24th May/9thJune 2010”.
60. Trial judge went on to set out what Mr. O’Keeffe (solicitor) had said in his contemporaneous note of a telephone conversation he had with the appellant on the 9th June 2010, part of which, as noted by the trial judge, states “knows giving security now for small money but keeps it going – not getting anything in writing because needs a price for sale of first one to set a floor”. The judge stated:
“… it is clear from this note that Mr. O’Connor knew full well that he was giving extra security for ‘small money’. But of course Mr. O’Connor was giving extra security to BOSI in order to ensure that the February 2007 loan which was in arrears and in default would not be called in. It would instead be refinanced. Thus the extra security which the plaintiff gave in terms of its houses was not only for the development finance to complete the common areas of €225,000, but also as extra security to refinance [the] February 2007 loan which was in default.”
61. At paras. 120-122 of his judgment, the trial judge concludes as follows on this issue:
“120. It is common case that there were no contracted sales at Ashley before the loan facility of 2010. Indeed, it is common case that there were no contracted sales at Ashley before 20 November 2011 (i.e. the date of the expiry of the drawdown). That being so, and given that the condition precedent had not been fulfilled, it clearly follows that BOSI was under no contractual obligation to advance the money under the terms of the April 2008 loan offer to the plaintiff. Thus, even taking the plaintiff’s case at its height, it is abundantly clear, that even if the April 2008 loan facility letter had continued and being until 20th November 2011 there would have been no contractual obligations on BOSI to advance the €750,000 construction costs for Five Firs.
121. This is important because the plaintiff’s case is that the 2010 facility (which refinanced the 2007 and 2008 facility) put a new timeline in place which made it more difficult for him. However, even if he is correct in that submission (and in my view he is not), even if the 2008 loan facility had continued in being, the plaintiff was unable to satisfy the conditions precedent. There were no contracted sales before November 2011 and therefore the plaintiff himself was unable to comply with the terms of the facility letter of April 2008 from BOSI. Indeed I am absolutely at a loss to understand why the plaintiff believes he has any case in this regard.”
62. The appellant, despite the length of his written submissions and despite his oral submissions, has not persuaded this Court that there was no evidence which the trial could have accepted as a basis for his conclusions. Again, the Hay v O’Grady principles present a difficulty for the appellant. The trial judge has reached very clear conclusions of fact and he has made clear the evidence on which he has based these conclusions. The Court appreciates that the appellant has given other evidence. But as already stated, the trial judge is in a position to assess the evidence adduced by each party, and must reach a conclusion as to which evidence is to be preferred where it is conflicting evidence. This is what the trial judge has done on this issue, and in the Court’s view he was entitled on the evidence to reach those conclusions and there is not a basis on which this Court should interfere with same.
The fifth issue – whether the bank breached a promise that it would provide €100,000 to complete the Ashley showhouse
63. The appellant gave evidence that Savills had advised him that in order to assist with sales of the Ashley houses, a house should be finished out to a high standard as a show house. He gave evidence that on 24th February 2009 he had telephoned Mr. Daly of BOSI and had requested further funding of €100,000 for that purpose. It will be recalled BOSI had issued a loan approval letter dated 5th February 2007 in the sum of €4.34 million to enable the appellant, inter alia, to purchase the Ashley site and the cost of constructing the proposed houses at Ashley.
64. The appellant’s case is that when during a telephone call to Mr. Daly on the 24th February 2009 he sought this funding for the showhouse, and Mr. Daly agreed to it, it was intended by both to be an additional sum of €100,000 and not as part of the 2007 sanction. However, as the trial judge noted at para. 143 of his judgment, Mr. Daly had a different version of events as contained in his witness statement (which was used as his direct evidence and on which he was cross-examined). That evidence is set forth from paras. 25 and 35 of his witness statement, as follows:
“25. In respect of the showhouse funding, Mr. O’Connor sought approval to use €100,000 of funds towards the completion of a showhouse. Given that these funds were intended for the completion of construction works, the Bank’s opinion was that use of these funds for showhouse renovations constituted an amendment from the purpose of the original offer letter. I recall seeking credit approval to allow funds be diverted towards the completion of a showhouse which was refused by the Bank. I have no recollection of apologising to Mr. O’Connor for delays in the process.”
35. I can categorically confirm that I never advised either Mr. O’Connor or Corbel Developments Limited to proceed with the fit out of the showhouse. I consider this comment to be entirely untrue. I do not recall advising Mr. O’Connor that the proposal could not be made due to issues with the Bank. If the Bank had no appetite to provide additional funding to Mr. O’Connor Ashley, this message was conveyed to Mr. O’Connor professionally and in a factual manner. I do not recall instructing Mr. O’Connor to advise Mr Cathal O’Connor to proceed with the fit out of the showhouse.”
65. The trial judge noted in his judgment that Mr. Daly’s evidence was that he did in fact seek credit approval for this €100,000 but he was told that it was going to be declined. The trial judge also stated Mr. Daly’s recollection that he remembered asking whether the funds in the February 2007 loan could be diverted towards completing a showhouse and that this also was declined. On this issue, trial judge concluded as follows:
“146. Having considered and assessed the evidence on this matter I am of the view that no representation was made by Mr. Daly to the plaintiff that BOSI would definitely advance a sum of €100,000 to the plaintiff to complete the showhouse. It may well be that Mr. Daly indicated to Mr. O’Connor that he would seek BOSI approval for this request. It may also be that Mr. O’Connor heard what he wanted to hear and took that as BOSI approval of his request. However, in the event, BOSI approval was not forthcoming and the €100,000 was not advanced for the expenditure of the showhouse. If Mr. O’Connor spent €100,000 on completing the showhouse, he did so based on a misunderstanding and not based on any representation made by BOSI or based on any agreement with BOSI.”
66. The appellant submits that the trial judge erred by not having regard to his contemporaneous note of his conversation with Mr. Daly of BOSI on the 24th February 2009, as this was the only contemporaneous note of what was said in that call. In that regard he drew attention to the fact that Mr. Daly when being cross-examined on his witness statement had stated that he had no recollection of the telephone call on the 24th February 2009. However, the trial judge clearly did have regard to this note because he actually sets out its contents in his judgment as follows:
“24/2/09. 12.45pm. Gavin Daly of BOSI rang to go ahead with showhouse, 100k BOSI will treat it as part of Ashley 104”.
It was immediately after he had set forth the contents of the appellant’s contemporaneous note that the trial judge went on to state, as noted above, that Mr. Daly had a different version of events and then referred to what he had stated in his witness statement at paras. 25 and 35 as quoted above. In this Court’s view it was certainly open to the trial judge to prefer the evidence of Mr. Daly as he gave it in his witness statement, and as he spoke to that evidence when asked about it by the appellant during his cross-examination, over the evidence contained in the brief contemporaneous note of the telephone call on the 24th February 2009 even where that note is accepted as being contemporaneous and the only such note of the conversation, over the appellant’s own evidence. The note is very brief, and the trial judge was entitled to conclude that it did not support a representation by Mr. Daly such as the appellant asserts, namely that an additional sum of €100,000 would be made available for the completion of the showhouse. He was entitled to accept Mr. Daly’s evidence of seeking an approval for that additional sum and that it was declined.
67. The appellant complains also that the trial judge failed to properly consider Cathal O’Connor’s evidence regarding proceeding with the showhouse fit-out works after what he describes as the promise by Mr. Daly on that date. It is true that this evidence is not referred to. But on the other hand, any evidence of what Cathal O’Connor did after that conversation that his father had with Mr. Daly cannot assist in determining what exactly was said between them, and therefore could not assist the trial judge in determining whether what was said amounted to a representation to the appellant that additional funding would be provided for the showhouse. Accordingly the Court also dismisses the appeal on this issue.
Sixth issue – Joint Receivers
68. The appellant challenged the validity of the appointment of the receivers; but in the course of the hearing (Day 4) he confirmed to the trial judge that such challenge related only to his contention in relation to the common areas. As appears, that no longer subsists. He also claimed damages against the receivers. The trial judge identified just three issues that remained in relation to the receivers, namely:-
(i) conflict of interest;
(ii) their failure to properly maintain the assets in the receivership; and
(iii) permitting the Five Firs planning permission to lapse.
(i) Conflict of interest:
69. The appellant’s case in relation to conflict of interest is simply that Mr. Cotter ought not to have accepted an appointment as receiver over his assets because in 2007 and again in 2010 he had assisted the appellant in relation to his funding applications to BOSI. Mr. O’Connor’s evidence is summarised in the judgment of the trial judge. He apparently had not billed the appellant for any work he did for him in 2006/2007 because it was not significant. The work appears to have consisted of making a few telephone calls by way of introducing the appellant. Mr. Cotter also saw his involvement as a favour to the appellant whose brother in law was a colleague of his since the 1980s. He was able to confirm that the appellant was not set up as a client on the Ernst & Young system. The trial judge considered Mr. Cotter to be a reliable and trustworthy witness. The trial judge then set out a history of Mr. Cotter’s involvement from 2000- 2006. Mr. Cotter’s evidence was that the appellant had not consulted him in relation to the 2007 loan facility and that apart from perhaps meeting him on the street or at a social function he had no further contact with the appellant until after his appointment as joint receiver.
70. Mr. Cotter gave evidence of what checks he carried out within his firm to establish that no conflict arose. Firstly the firm would have done a conflicts check, and no conflict was identified. Secondly, as a member of the Chartered Accountants of Ireland he was subject to its Code of Ethics, and would have to consider whether any relationship he had with the appellant would breach that code if he accepted the bank’s appointment of receiver. Having considered the nature of the relationship, the size of the fees paid, if any, and how recent any relationship was (2007 being the last occasion on which he gave any assistance to the appellant), he was satisfied that there was no material relationship and that no conflict arose.
71. The trial judge was satisfied that no conflict of interest existed between the appellant and Mr. Cotter, and he set out five reasons for arriving at that conclusion:
(i) he had not acted for the appellant for at least five years,
(ii) the nature of the involvement in late 2006 which involved introducing the appellant to Mr. Barry in BOSI, rather than giving advice as such;
(iii) the appellant conducted all his own negotiations with BOSI,
(iv) the receivership arose out of the 2010 loan facility and not the 2007 facility, and
(v) the appellant gave no evidence of having made any payment to Ernst & Young for any assistance given by Mr. Cotter, and the last payment of any fees to that firm had been back in 2002/2003.
72. The trial judge concluded that the appellant’s allegation of a conflict of interest such that he should not have taken the appointment as receiver was “utterly without merit”.
73. Once again, the appellant is confronted by the principles in Hay v. O’Grady. The trial judge made a finding of fact that there was no conflict of interest arising on the evidence which he was satisfied to accept. The appellant submits that the trial judge erred by failing to consider whether the appointment as receiver was invalid by reason of Mr. Cotter failing to enquire of the bank if there were any misrepresentations by the bank or other breaches by the bank, prior to accepting his appointment. That is a ground contained in the appellant’s notice of appeal. But given the trial judge’s conclusions on the question of misrepresentation, and this Court’s conclusion in that regard on this appeal, there can be no merit in that point.
74. There are many other grounds of appeal under this heading but for the most part they seek to attack the validity of the receivers’ appointment by reason of alleged flaws in the deed of appointment, and in the mortgage documentation. In the High Court the appellant had attempted to argue that there were defects e.g. by the absence of any seal on the deed of appointment. The trial judge engaged with the appellant on that issue but ruled that it was not pleaded and was not in the case. The appellant agreed not to pursue the point, but now on this appeal sought to agitate it afresh on the basis that he had misunderstood what he was being asked to do by the trial judge. This Court is satisfied that the appellant clearly agreed not to pursue the point regarding the sealing of the documents, and that it would not therefore be appropriate to permit him to advance arguments in relation to it on this appeal.
75. In this Court’s view the trial judge was entitled to conclude on this issue as he did, on the basis of the evidence which was given.
(ii) Failure to maintain the assets and maximise the rental value:
76. The appellant had alleged that the receivers had failed to properly take care of and secure the property at Ashley from vandalism, and that they were now in disrepair. He also alleged that certain materials such as scaffolding and hoardings had been removed. In relation to the latter, however, it was clear that such property did not in fact belong to the appellant, but to the Corbel Developments Limited which is not a party to the proceedings. The trial judge noted in his judgment that the appellant accepted that point when it was raised against him in the High Court.
77. In relation to the failure to protect the houses themselves from acts of vandalism, Mr. Cotter gave evidence and the trial judge refers to that evidence. Mr. Cotter felt that the receivers had taken reasonable steps to protect the properties but accepted that there had been two minor acts of vandalism when some teenagers got into one of the properties. Thereafter some repairs had been carried out, and a security firm had been engaged to carry out daily visits.
78. There were also incidents of windows being broken. These were fixed, and thereafter the windows and doors were boarded up. A security person was engaged to make a daily visit. He went on to state, according to the judgment, that as soon as the houses could be sold the boarding would be removed, but that this could not be done at the moment as the appellant’s lis pendens remained on the property. Neither could the properties be rented out because they were unfinished. It appears that just one of the houses is rented out. This was the showhouse.
79. Mr. Cotter gave evidence of other work and repairs carried out on various dates as the judgment records, including the cutting of grass and general tidying.
80. The trial judge was satisfied by the evidence given that the receivers had taken reasonable steps to maintain the property, and to protect it from being vandalised. He concluded that the appellant’s claims in this regard were without any foundation. On the evidence before him that was a conclusion that the trial judge was entitled to reach and the appellant has not satisfied this Court of any error by the trial judge in his approach to this issue..
(iii) allowing the Five Firs planning permission for two houses to lapse:
81. The trial judge noted that this allegation had not been pleaded in any way in the proceedings, and nor had it been referred to in the appellant’s lengthy witness statement, nor during his six days of evidence during the hearing. The trial judge noted that it was raised for the very first time at the conclusion of the appellant’s son’s evidence (Cathal O’Connor). When objection was raised about it being raised in this way for the first time, it appears that the appellant was insistent upon being permitted to argue it, and stated that it had only just come to his attention. The trial judge notes in his judgment that the respondents “quite generously” consented to the amendment of the pleadings in this regard.
82. It should be clarified that the Five Firs site on which it was proposed to build two houses was immediately adjacent to the Ashley site, and later became part of an enlarged Ashley site. There was a planning permission for the construction of two houses on the Five Firs site.
83. The trial judge heard evidence from Ms. Stokes from Lisney estate agents who prepared a report for the receivers in 2012. This report had identified two problems with the development. Firstly the garden for no. 4 Ashley was very small and required more space, and secondly that the development as a whole had very little parking space. The report recommended that one of the sites be given over to providing more such space, and that another of the sites should be developed in a smaller way. For these reasons the existing planning permission was allowed to lapse, as they wished to carry out the recommendations and apply for a new permission for these revisions.
84. The Lisney report apparently went on to state that if these modifications to the development were carried out, the value of the other houses on the site would increase, and maximise the return on any sales. These advices had been accepted. Mr. Cotter gave evidence in that regard.
85. The trial judge concluded that the receivers had sought professional advice and had followed that advice in the interests of maximising the value of the property as a whole. He concluded that in such circumstances it was reasonable that the existing planning permission should be allowed to lapse, and that the allegation against that the receivers were in breach of their professional duty as receivers was unfounded.
86. The appellant has failed to identify any basis on which this Court could interfere with the trial judge’s conclusion on this issue.
Seventh issue – claims against solicitors
87. The appellant makes claims that his former solicitors were negligent and acted in breach of contract in the provision of services to him, and that they had a conflict of interest when retained by him.
Conflict of Interest:
88. The appellant alleges that his former solicitors, Mr. Riordan and Mr. O’Keeffe, had a conflict of interest in acting both on his behalf and on behalf of BOSI in relation to the 2007 loan, 2008 Loan and the 2010 loan, as a result of which he claims he suffered loss and damage. His claim is entirely grounded on his own evidence whereas the respondents, Mr. Riordan and Mr. O’Keeffe, gave evidence on their own behalf, but also called an expert witness namely, Mr. Michael Carrigan, solicitor, a consultant in the firm of Eugene F. Collins Solicitors.
89. It should be explained at this juncture that the appellant was from time to time represented by two solicitors, James Riordan and Darren O’Keeffe, who, when he initially attended with them, were partners in M.J. Hogan & Sons, and were subsequently partners in the firm of James Riordan & Partners. BOSI was represented by other solicitors in those firms. It appears that the appellant first attended with Mr. Riordan not so much looking for legal services, but for the purpose of obtaining an introduction to BOSI because he was aware that Mr. Riordan acted on behalf of BOSI.
90. The appellant relies upon the Solicitors (Professional Practice, Conduct and Discipline – Commercial Property Transactions) Regulations 2010 (S.I. 366/2010) (the “2010 regulations”). These regulations prohibit a solicitor from acting on behalf of both a borrower and a lender in the same commercial property transaction. While acknowledging that these regulations did not come into operation until 1st December, 2010, and therefore post-dated all of the transactions the subject of these proceedings, the appellant contends that at the time of the 2010 loan, the possibility of the introduction of these regulations was under discussion and well known in the solicitors’ profession. On this basis he contends that the solicitors should not have acted both on his behalf and on behalf of BOSI in the 2010 loan transaction.
91. However, there can be no question of the retrospective application of these regulations, regardless as to whether or not Mr. Riordan and / or Mr. O’Keeffe were aware or should have been aware that consideration was being given to their introduction.
92. Of much more relevance to this issue is the guide to good professional conduct of solicitors in Ireland that applied at the time the solicitors provided services to the plaintiff. That was the second edition of that publication, which was published in 2002 (“the 2002 Guide”). Mr. Carrigan deals with the recommendations of that Guide insofar as relevant to these proceedings in his evidence. The relevant provisions of the 2002 Guide may be summarised as follows:-
(1) A solicitor acting for a client in relation to any particular transaction is obliged to take all reasonable steps to ensure that his client’s interests are fully protected;
(2) The relationship of solicitor and client is a fiduciary relationship;
(3) A solicitor, or a firm of solicitors, should not act for both vendor and purchaser in a transfer of property for value at arms length;
(Mr. Carrigan was of the opinion that (3) would apply equally to acting on behalf of a borrower and lending institution in the same transaction.)
(4) There are exceptions to (3), the most relevant of which is that the parties are established clients of the solicitor and where both are clearly advised at the outset by the solicitor of the desirability of separate independent representation, but each agrees that the solicitor should continue to act for both;
(5) If a conflict of interest arises, the firm must cease to act for either client in the matter.
93. The evidence established that both parties were aware that the same firm of solicitors was acting on behalf of each party. Indeed, Mr. O’Connor specifically went to Mr. Riordan in the first place because he knew his firm acted on behalf of BOSI. However, it appears the solicitors did not advise the parties of the desirability of obtaining independent legal representation. While this is unfortunate, and is prohibited under the 2010 regulations, and subsequently, the Solicitors (Professional Practice, Conduct and Discipline-Convincing Conflict of Interest) Regulations 2012, it does not follow that the solicitors have a liability to the appellant merely because they were not acting in compliance with the 2002 guidelines. It is true that by acting on behalf of both parties to each of the loan transactions, they placed themselves in a situation where a conflict of interest could arise. However, this does not, of itself, give rise to a liability in damages. For a liability in damages to arise, an actual conflict of interest must arise, not just the potential for it, and there must be some causal link between a loss claimed and the alleged conflict. It is necessary therefore to consider:-
(1) The services provided by the solicitors to the appellant;
(2) The duties owed by the solicitors to the appellant in the provision of those services;
(3) The manner in which the services were provided and in particular whether or not the duties owed to the appellant were fulfilled; and
(4) The losses which the appellant claims to have suffered by reason of the solicitors acting whilst having a conflict of interest and without having advised him to take independent advice.
94. Before conducting this analysis, it should be noted that the appellant is relying on a decision in Murray and Whelan v O’Donnell, Dalton, Hogan, unreported, High Court 7th October 2004, in which Quirke J. stated the following in relation to solicitors acting for both a vendor and a purchaser in conveyancing transactions:
“Conflicting interests are bound to arise in such circumstances and I have no doubt whatsoever that the duty upon a solicitor who is acting on behalf of both parties in the circumstances which have arisen in this case is particularly onerous, such a solicitor is under an obligation to explain carefully and in the greatest possible detail to both the vendor and purchaser what is involved in the transaction and in particular he is under a duty to identify with precision the property to be transferred and the title of that property together with any limitations upon that title and any risks attendant upon the transfer and upon the transaction generally.”
In that case, Quirke J found that what he described as a virtual litany of acts and omissions of serious negligence on the part of the defendants and concluded that these had caused the plaintiffs loss and damage.
The Services provided:
95. At the outset, it should be observed that Mr. Carrigan gave evidence that, as a general rule, a solicitor is not responsible for the commercial decisions of his client, although he considered that a solicitor should raise with his client the wisdom of any decision if it appears to the solicitor that the decision being made by the client is not, or may not be, in the best interest of the client. He stated that the extent to which a solicitor ought to do this must be assessed by reference to the experience or vulnerability of the client concerned. The more experienced the client is in a given field the more knowledge he may be assumed to have, although this does not relieve the solicitor from his/her general duty to ensure his/her client’s interests are at all times fully protected.
96. In this case, the evidence established that the appellant was an experienced property developer with prior experience of dealing with financial institutions in connection with the provision of funding for such developments. This was the background to the retainer by him of the solicitors. He had received a loan facility in 2002, having a value of €820,000 already referred to above in respect of which the solicitors had no involvement. He received another loan from the respondent in 2003, in the sum of €750,000 the purposes of which were to restructure the 2002 loan and to fund the construction of two houses at Lindville. This loan was also secured over the sites at Lindville, but was repaid in full by 21st April 2005. He received a further loan in 2004, in the sum of €900,000 to fund the construction of four more houses in Lindville, also secured by the same property. This loan was repaid in full by 20thApril 2007, but out of the proceeds of the 2007 loan.The solicitors did not act on his behalf in respect of either of the 2003 or 2004 loans.
97. Subsequently, however, the solicitors acted on his behalf in connection with the 2007 loan, the 2008 loan and the 2010 loan. In providing services in connection at the 2007 loan, the solicitors were not consulted by him in relation to the terms of the letter of loan offer. Accordingly their instructions were to implement the loan on his behalf in accordance with the terms of the letter of offer. This required them to ensure that he provided BOSI with whatever security he had agreed to provide as a condition precedent to the drawdown of the loan, to ensure that the security provided did not extend to other property or assets not required by the letter of offer, to register the deed of mortgage and charge in the Land Registry and to furnish a certificate of title to BOSI’s solicitors at the conclusion of the transaction. The same services were required by the appellant of the solicitors in connection with the 2008 and 2010 loans, but in those transactions the solicitors did provide advice in relation to the letters of offer.
Duties owed by solicitors in the provision of services:
98. In his expert opinion to the court, Mr. Carrigan states that:-
“While the borrower’s solicitor should be satisfied that his client fully understands the consequences of default pursuant to the terms of security documentation the only issue for him generally will be to ensure that the security document accurately reflects what is set out in the letter of loan offer issued to the borrower and that the property to be secured is limited to that specified in the letter of loan offer and does not extend to other property or assets of the borrower.”
Manner in which services were provided:
99. Firstly, it should be observed that the appellant makes no complaint that any of the security documentation which he completed for the purposes of the 2007, 2008, and 2010 loans was otherwise than in accordance with his instructions. Having heard the evidence of the parties, and having considered the expert opinion of Mr. Carrigan, and having considered all of the plaintiff’s submissions in this regard, the trial judge concluded that:
“there is no evidence that the solicitor defendants failed to protect Mr. O’Connor’s interests in any way in respect of the three relevant transactions – the 2007 Loan, the 2008 Loan and the 2010 Loan.”
100. In addition to providing the necessary services to the appellant in connection with the granting of security to the bank for the purpose of drawing down each of the loans, Mr. O’Keeffe also advised the appellant in relation to the letters of offer issued by BOSI in relation to the 2008 and 2010 loans. He makes no complaint about the advice given in relation to the 2008 loan. He does make a complaint however in relation to the advice he received as regards the 2010 loan.
The complaint arising out of conflict of interest allegation:
101. It is very difficult to identify precisely what the appellant claims that he has lost by reason of the solicitors’ alleged conflict of interest. However, an analysis of the pleadings and the evidence that Mr. O’Connor gave in the High Court, as well as his submissions before this Court, suggests that he makes the following complaints as to the prejudice he suffered by reason of the same:-
(1) Firstly, in this Court he submitted that if Mr. O’Keeffe had declared his conflict of interest as required by the 2002 Guide, he (Mr. O’Connor) would have gone to another solicitor and that such other solicitor would have examined the 2002 security at the time of acting on behalf of the appellant in connection with the 2007 loan. He argues that such an examination would have disclosed that BOSI had more security than that to which it was entitled over the lands at Lindville and that this could have been corrected at that time, and that as a consequence he has suffered a loss.
(2) Alternatively, in relation to this same heading of loss, his evidence at trial was to the effect that the solicitors failed to examine the extent of the security that he provided in 2002 when acting on his behalf in connection with the 2007 loan, by reason of their conflicting obligations to BOSI, and that had they done BOSI would have been provided with security over just one house in Lindville, and the security would not have extended to the common areas, on which he claims there was scope to carry out some development at a profit.
(3) The appellant also said in evidence that if Mr. O’Keeffe had informed him that there was no security in place for the 2003 loan and the 2004 loan and if Mr. O’Keeffe had advised that, as a result, the 2004 mortgage (over Lindville) was no longer valid, he would have been entitled to ownership of unencumbered properties at Lindville. By this he presumably means that since the 2003 and 2004 loans had been repaid, he could have asked BOSI to release Lindville from its security, but of course it continued to be part of the security required by BOSI for the 2007 loan, which was in the sum of €4.34m.
(4) The appellant further contended that, Mr. O’Keefe did not declare this conflict of interest to him because of the fee income his firm was receiving from BOSI, and that, as a result, he suffered an interference with his “economic and contractual relations”. He alleges that Mr. O’Keefe failed to act independently in a non-conflicted manner and that as a result Mr. O’Keeffe failed to advise him properly in relation to the 2010 loan facility letter. At the trial of the proceedings, the appellant claimed that Mr. O’Keeffe advised him to write to BOSI himself about the terms of the 2010 loan facility letter, though Mr. O’Keeffe denied doing so.
(5) At the hearing of this appeal he argued that if he had had independent representation in 2010, his solicitors would have sent the letter that he himself sent on 10th June 2010 in relation to the terms of the 2010 loan facility letter, instead of advising the plaintiff to do so. He argued that a letter from a firm of solicitors of standing would have carried more weight in this regard than his own letter.
102. The arguments made by the appellant on this appeal in relation to the 2002 security, including those referred to at sub paras (1) and (2) above, appear to be a way of trying to get around the findings of fact of the trial judge that:
“it was at all times the plaintiff’s – and the Bank’s – intention to mortgage and charge the common areas to BOSI and that the plaintiff at all times actually knew that he was in fact mortgaging the common areas of Lindville and the relevant sites to BOSI in September 2002.”
103. Apart from this, the trial judge also heard evidence that it was extremely unlikely the common areas had any value at all. The appellant claimed that there was some possibility of developing what he regarded as an excess of lands within the common areas, but the respondents called expert evidence to the effect that it was highly unlikely that any planning permission for such development would ever be granted for a variety of reasons, not least of which was that the local authority had taken the common areas in charge (under pressure from residents) and also that the plaintiff had already made two planning applications in respect of the lands that he considered were surplus to the requirements of the common areas, and these had been refused.
104. The trial judge also noted, at para. 198 of his judgment that:-
“Mr. Carrigan gave evidence that where a loan, offered by a lending institution, involved the extension of an existing charge, it would not be normal for either the borrower’s solicitor or the lending institution’s solicitor to review the terms of an existing charge unless they were specifically requested to do so, either by the borrower or the lending institution or unless the particular facts of the case called for such a review. Thus, in his expert opinion, the defendant solicitors were not required to review the extent of the 2002 mortgage on behalf of the plaintiff or to otherwise advise the plaintiff in relation to the 2002 Lindville charge whether at the time of the 2007 transaction, the 2008 transaction or the 2010 transaction. In addition, and looking at the transaction as a whole, Mr. Carrigan was of the view that the defendant solicitors had discharged their duty of care to the plaintiff.”
105. The appellant’s claim that Lindville could have been released from the 2002 mortgage following repayment of the 2003 and 2004 loans is manifestly unsustainable , as that security was required in connection with all subsequent loans, including the 2007 loan, part of which was used to repay the 2004 loan.
106. As to the appellant’s argument. that the letter he himself wrote to BOSI on 10th June 2010 would have carried more weight coming from a firm of solicitors, and would have been sent by any other firm acting on his behalf (who would not had a conflict of interest), and that by implication he thereby suffered damage, this complaint cannot be sustained in the light of the finding of the trial judge that even if he was correct in his submission that the 2010 loan facility put a new timeline in place (and the trial judge stated that he did not consider the appellant to be correct in that regard) and the 2008 loan facility had continued in being, he remained unable to satisfy the conditions precedent to that facility. In other words, even if the appellant’s letter of 10th June 2010 was accepted by BOSI as forming part of the revised facility, he could never have availed of the facility because he did not achieve the sales required to access funds. Hence the failure of such a letter to have been sent on his behalf by a solicitor cannot on the facts as found and upheld have caused the appellant loss or damage.
107. Aside altogether from that, it is difficult to see any substance in the point the appellant makes in this regard. The letter which he sent to BOSI when returning acceptance of the 2010 Facility was essentially an attempt to alter the commercial terms of the agreement offered by the bank. While solicitors may from time to time assist clients with such communications, whether the solicitor does so or the client does so directly is unlikely to have any influence on the outcome of what is essentially a commercial negotiation. There was certainly no evidence that any such effect was likely.
108. While the solicitors were, throughout their dealings with the plaintiff, in a situation that had the potential to give rise to a conflict of interest, no such conflict actually materialised. Moreover, this was a state of affairs with which the appellant, an experienced businessman, was fully acquainted from the outset. While the solicitors should have complied with the 2002 Guidelines and advised him of the desirability of obtaining independent advice, their failure to do so did not result in any negligence on their part in the handling of his affairs, and nor did it cause him any loss or damage. It is clear to us that the solicitors discharged their duties to him in a satisfactory and professional manner. He has failed to establish that he has suffered any loss by reason of the fact that the solicitors acted for both him and for BOSI, and did so without complying with the 2002 guidelines.
109. This Court is satisfied that the conclusions made by the trial judge are correct both as regards the claim of negligence made against the solicitors and as to conflict of interest. No conflict of interest actually arose, despite the potential for such a conflict. The Court is also satisfied that no case of negligence has been made out as alleged and that the trial judge was correct in this respect.
Consumer Credit Act, 1995:
110. Finally, and briefly, it is necessary to deal with the appellant’s appeal against the conclusion by the trial judge that the appellant was not a consumer for the purposes of the 1995 Act, and the Consumer Protection Code 2006. The trial judge referred to the definition of “consumer” in s. 2 of the Act of 1995, being:
“1. A natural person acting outside the person’s business or
2. Any person or person of a class declared to be a consumer in an order made under subs. 9.”
111. Having considered the evidence which he had heard over some three weeks of hearing, the trial judge expressed himself as being satisfied, and found as a fact, that:
“Mr. O’Connor was engaged in the business of property development and that all of his actions in relation to any Bank loans which he took out from the defendant Bank were loans taken out in the course of his business” and that “in those circumstances Mr. O’Connor is clearly not a consumer within the meaning of the Consumer Credit Act 1995.”
Indeed, by signing the loan documentation the appellant himself acknowledged that he was not a consumer within the meaning of the 1995 Act.
112. It is clear, however, that while there was reference to the 1995 Act and the definition of “consumer” therein, the appellant was making the case that the 2010 loan in the circumstances in which that loan arose constituted a breach by BOSI of the Consumer Protection Code 2006. He submitted that the 2010 loan facility was an unsolicited pre-approved loan for which he had not made application, and referred to the fact that the bank itself had called the meeting, and had then made an offer of this additional finance and sought additional security.
113. The Consumer Protection Code 2006 contains a definition for “consumer” that very much mirrors that contained in s. 2 of the 1995 Act. The appellant does not come within that definition in either the Code or the Act. The Act contains no definition of “a customer”. However, the Code contains such a definition, and states that Chapter 1 of the Code applies in respect of customers as defined, whereas the remainder of the Code applies in respect of “consumers”.
114. Accordingly it is only Chapter 1 of the Code upon which the appellant could place any reliance. A “customer” is defined as meaning “any person to whom a regulated entity provides or offers a service the subject of this Code, and any person who requests such a service”. The appellant is clearly within that definition. Chapter 1 contains a list of 12 ‘General Principles’ in accordance with which a regulated entity must conduct its business with its customers. The appellant has not sought to rely upon any of these general principles. Rather, he sought to rely upon the obligation not to offer unsolicited pre-approved credit facilities. That is the first regulation contained in Chapter 4 of the Code. It applies only in respect of such loans to a “consumer”. It does not apply in respect of someone who is not a consumer, such as the appellant.
115. Even though the trial judge did not address that particular submission by the appellant by reference to the Code, the appellant made submissions in that regard before this Court, However, for the reasons just stated, the Code does not assist the appellant.
116. For all these reasons, the Court considers that the appeal should be dismissed.
117. It follows that the appeal (2015/225) against the High Court judgment in favour of the bank must also be dismissed, and that any lis pendens that remains registered against any of the lands forming the bank’s security should be vacated.
Everyday Finance DAC v Callely & anor
[2020] IEHC 131 (12 March 2020)
JUDGMENT (Ex tempore) of Mr. Justice Twomey delivered on the 12th day of March,2020Summary1. This is an application for summary judgment against the first named defendant (“MrCallely”). When this case originally opened the amount sought was just over €1.6 million(€1,631,751). Summary judgment was also sought against the second named defendantMs. Jennifer Callely (“Mrs. Callely”), otherwise known as Jennifer Foley, the wife of Mr.Callely. The application arises on foot of joint and several borrowings taken out by Mr.and Mrs. Callely from Allied Irish Banks plc (“AIB”) under the terms of a Letter of Sanctiondated 22nd of February, 2013.2. The plaintiff, Everyday Finance, acquired the said loan facilities from AIB pursuant to aDeed of Transfer dated 15th November, 2018.3. Evidence was provided to the Court of the borrowings and the reduction of thoseborrowings arising from the sale of certain secured properties, which evidence was notdisputed by Mr. CallelySettlement with Mrs. Callely4. On the opening of this action, this Court was notified of a settlement between EverydayFinance and Mrs. Callely, whereby she consented to judgment against her in the sum ofthe €1.5 million.5. As a result of this settlement, Everyday Finance confirmed that they were not seekingsummary judgment in the sum of €1.6 million against Mr. Callely, but instead proposed togive him the benefit of the settlement with Mrs. Callely by seeking summary judgment inthe reduced sum of €1.5 million.Mr. Callely’s claim of previous settlement with AIB6. In relation to the application for summary judgment against Mr. Callely, it is relevant tonote that he accepted that the monies had been lent to him. His only basis for resistingthe judgment was his claim that it was his understanding that a settlement had previouslybeen reached with AIB. However, he adduced no evidence to support this assertion.7. In fact, the only sworn evidence regarding the existence of a settlement was evidencewhich denied its existence. This is because in her affidavit dated 14th November, 2019Mrs. Callely avers at para. 11 that:Page 2 ⇓“AIB had many negotiations with your deponent [Mrs Callely] and [Mr Callely] but nosettlement was reached for which I hold [Mr Callely] responsible.”8. In these circumstances, Mr. Callely’s defence to the summary summons that there was asettlement of the debt is, at most, a mere assertion and therefore does not provide adefence to Everyday Finance’s claim for summary judgment. This is clear from thejudgment of Hardiman J. in Aer Rianta v. Ryanair [2001] 4 IR 607 at p. 622 where hequoted with approval dictum from National Westminster Bank v. Daniel [1993] 1 W.L.R.1453 at p. 1457:“The mere assertion in an affidavit of a given situation which was to be the basis of adefence did not of itself provide leave to defend: the court had to look at the wholesituation to see whether the defendant had satisfied the court that there was a fairor reasonable probability of the defendants having a real or bona fide defence.”Conclusion9. Since the allegation of a settlement was the only basis put forward by Mr. Callely todefend these summary proceedings, it seems clear to this Court that Mr. Callely does nothave a fair or reasonable probability of having a real or bona fide defence to theseproceedings.10. On this basis, while this Court does have sympathy for Mr. Callely regarding the life-changing injuries he suffered as a result of his bike accident, this Court has however nooption but to grant an order for judgment against Mr. Callely in the sum of €1.5 million.
Allied Irish Banks Plc v McGrath & anor
[2018] IEHC 545 (05 October 2018)
JUDGMENT of Mr. Justice Noonan delivered on the 30th day of July, 2018
1. By a credit agreement in writing made on the 17th October, 2007 between the plaintiff (the bank) and the defendants, the bank agreed to advance to the defendants the sum of €788,000 for a term of two years. The agreement provided for interest only payments to be made on a monthly basis with the entire capital sum being repayable at the end of the term. It is not in dispute that the money was drawn down and not repaid within the period stipulated in the credit agreement and ultimately, the balance due of €376,323 was demanded by the bank’s solicitors on the 17th June, 2016.
2. As I have said, there is no dispute about the fact that the moneys were advanced and not repaid. Initially in their replying affidavits, the defendants made a number of contentions including in particular that a guarantor of the loan, Thomas Gahan, was not being pursued for the debt to which the defendants took objection. However, this turned out to be misconceived in circumstances where it subsequently emerged that judgment had in fact been obtained against Mr. Gahan.
3. I think as the case evolved, it is fair to say that it boils down to essentially two issues raised by the defendants by way of possible defence. Both of these issues rely on the terms of the Consumer Credit Act, 1995. Although here was some debate about whether or not the defendants ought to be regarded as consumers, I am prepared to assume for the purposes of this application only that they are without determining that issue in any final sense at this stage.
4. The first point raised by the defendants is that they did not receive a copy of the fully signed loan offer within the ten day period stipulated in s. 30 of the 1995 Act and they consequently argue that the loan is unenforceable. However, the loan document itself provides at the foot thereof:
“Confirmation (for bank use only)
I confirm that the customer has been handed/sent (delete as appropriate) a signed copy of this agreement on 6/11/22.
Signed:
Ken Noonan”
5. Mr. Noonan has sworn an affidavit in which he avers he signed the document and caused a copy to be sent to the defendants. He also avers that the requirements of the Consumer Credit Act, 1995 were complied with.
6. There is therefore prima facia evidence that the bank sent the document to the defendants within the relevant period in compliance with the 1995 Act. As against that, there is a mere assertion by the defendant that they did not receive the document. I think that assertion by the defendant has to viewed in the light of the fact that very substantial payments were made on foot of this agreement by the defendant over a period of time and in particular, the security property referred to in the agreement being a farm of lands was sold by the defendants in April 2013 and the entire proceeds remitted to the bank. This conduct is on its face incompatible with the suggestion that the agreement does not bind the defendants because they did not receive a copy of it. It seems to me therefore that such conduct estops the defendants from denying the validity of the agreement based on an assertion that they did not receive a copy made for the first time more than a decade after the event. I am therefore satisfied that this issue does not give rise to any arguable defence.
7. The second issue raised by way of defence by the defendants is that they invested in a product called the Fifth Belfry Bond which was promoted by the bank and which the defendants allege was represented to them as being “risk free”. Unfortunately, it would appear that the defendants lost money on this investment and for this they say the bank is responsible as a result of negligent misrepresentation. In essence therefore, the defendants are contending that they have a counter claim against the bank for unliquidated damages which they rely on by way of counterclaim to the bank’s claim herein.
8. The law in this regard was summarised by Clarke J. (as he then was) in Moohan v. S & R Motors (Donegal) Ltd [2007] IEHC 435 where he said (at para. 4.6):
“On that basis the overall approach to a case such as this (involving, as it does, a cross-claim) seems to me to be the following: –
(a) it is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set off in equity and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set off;
(b) if and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);
(c) if the cross-claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle “
9. Applying these principles to the facts of this case, it seems clear that the counterclaim asserted by the defendants does not arise from the same set of facts as the bank’s claim. It is a separate and free standing cause of action unrelated to the credit agreement the subject matter of these proceedings. It seems to me therefore that it does not give rise to a potential defence by way of set off and therefore judgment should be entered as suggested by Clarke J. in Moohan which was followed and applied by the Court of Appeal in National Assets Loan Management v. Kelleher [2016] 3 I.R. 568.
10. The only issue then becomes whether or not execution of the judgment should be stayed pending determination of the counterclaim herein. It seems to me that the facts articulated in the defendants’ affidavits are at best vague and give no information of any kind as to what the basis or quantum of such counterclaim would be save a bare assertion that they were told that the investment would be “risk free”. It is notable that the Belfry Bonds are referred to as security for the 2007 agreement the subject matter of these proceedings. Thus it would appear that the representations of which the defendants made complaint must have been made prior to that date which in turn begs the question as to whether such a claim, were it now to be agitated, would be statute barred even making allowance for the fact that the loss may have accrued at a later date. In any event, and without expressing any view as to the merits of such potential counterclaim, I think it can fairly be said at this stage that it must at the very least be somewhat speculative.
11. In those circumstances, I do not see any basis upon which the court would be justified in staying the execution of the judgment pending the agitation of this counterclaim which of course the defendants remain free to pursue should they wish to do so.
12. Although counsel for the defendant argued that his clients’ status as putative consumers should condition the court’s view as to whether judgment should be granted pending the determination of the counterclaim, I find nothing in the authorities to which I have referred which justifies such contention.
13. For completeness, I do not overlook the other point raised by way of replying affidavits in particular the suggestion that there was a new loan agreement entered into by way of refinancing on the 28th August, 2012. Although this is referred to in the affidavits, it is not in any sense made clear how this gives rise to a defence in the absence of any dispute that the money was advanced on foot of the original agreement and not repaid.
14. In all the circumstances therefore, I am satisfied that the defendants have not established that they have a fair or reasonable probability of having a bona fide defence to the claim, being the test articulated by the Supreme Courts in Aer Rianta v. Ryanair.
15. Accordingly, the bank is entitled to judgment in the sum claimed.
Ennis Property Finance DAC -v- Murphy
[2017] IEHC 573 (10 October 2017)
JUDGMENT of Mr Justice Max Barrett delivered on 10th October, 2017.
I. Background
1. These are summary proceedings for debt.
2. In or about December, 2004, Bank of Scotland (Ireland) (‘BOSI’), the predecessor in interest to Ennis Property and Mr Murphy entered into an agreement, pursuant to which BOSI agreed to provide Mr Murphy with a loan facility in the amount of €855k (the ‘First Agreement’). The terms of the First Agreement were contained in a facility letter dated 17th December, 2004, executed by Mr Murphy on or about 20th December, 2004, and subject, inter alia, to BOSI’s general terms and conditions. The terms of the said facility were amended by the parties by facility letters dated 15th May, 2008, and 19th July, 2010. The purpose of the loan facility was to fund the purchase of certain properties respectively in County Wicklow and the United Kingdom, and to fund related legal and professional fees arising.
3. The terms of the First Agreement provided, inter alia, that BOSI was entitled (1) to interest at a rate provided for in the First Agreement, (2) without the consent of Mr Murphy, to assign any of its rights and benefits under the First Agreement to any third party, (3) upon an event of default, to call for the immediate repayment of all monies payable and due plus accrued interest thereon.
4. In or about April 2006, BOSI and Mr Murphy entered into another agreement, pursuant to which BOSI agreed to provide Mr Murphy with a loan facility in the amount of UK £630k (the ‘Second Agreement’). The terms of the Second Agreement were contained in a facility letter dated 25th April, 2006, executed by Mr Murphy on or about 5th May 2006, and subject, inter alia, to BOSI’s general terms and conditions. The terms of the said facility were amended by the parties by a facility letter dated 19th July, 2010. The purpose of the loan facility was to fund the purchase of a property in the United Kingdom, and to fund related arrangement and legal fees arising.
5. The terms of the Second Agreement provided, inter alia, that BOSI was entitled (1) to interest at a rate provided for in the Second Agreement, (2) without the consent of Mr Murphy, to assign any of its rights and benefits under the Second Agreement to any third party, (3) upon an event of default, (a) to call for the immediate repayment of all monies payable and due plus accrued interest thereon, (b) at its sole discretion, pending receipt of all monies due (including accrued interest), to convert all or part of the outstanding loan balance to a euro denominated amount.
6. In breach of the First Agreement and the Second Agreement, the loan periods under which expired on 31st December, 2010, Mr Murphy failed to make required quarterly interest payments and has failed to repay the principal sum owing. As a consequence of the failures aforesaid, letters of demand issued to Mr Murphy on 3rd June, 2016. A receiver was appointed over certain assets of Mr Murphy on 17th June, 2016. Following the appointment of the receiver, the defendant engaged in ‘without prejudice’ correspondence with Mr Murphy. However, no agreement could be reached and fresh letters of demand issued on 23rd November, 2016. Despite the said demands, the amounts demanded have not been repaid and the defendant therefore commenced the within proceedings on 7th December, 2016.
II. Some General Legal Principles
7. Mr Murphy contends that in all the circumstances arising, adjudication on his debt ought to follow a plenary hearing. The hurdle that he must cross to succeed in having matters sent to plenary hearing is notably low. As Hardiman J. stated in the Supreme Court in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, 623:
“In my view, the fundamental questions to be posed on 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?”
8. In Harrisrange Ltd. v. Duncan [2003] 4 IR 1, 7, McKechnie J. summarised as follows the relevant principles to be brought to bear when a court approaches the issue of whether to grant summary judgment or leave to defend:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…
(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…
(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;
(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;
(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;
(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…
(viii) this test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;
(ix) leave to defend should be granted unless it is very clear that there is no defence;
(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;
(xi) leave should not be granted where the only relevant averment is the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;
(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”
9. Worth mentioning also in this regard, in light of the various contentions averred to, and referred to in submission, by Mr Murphy, is the nature of the assertions that a defendant must bring to bear in order that a matter will be sent to plenary hearing. As Charleton J. noted in National Asset Loan Management Ltd v. Barden [2013] IEHC 32, “The mere assertion on affidavit of a defence is insufficient. A defence must, if the matter is to be remitted to plenary hearing, have some reasonable foundation.” As Clarke J., as he then was, observed when speaking for the Supreme Court in Irish Bank Resolution Corporation (in special liquidation) v. McCaughey [2014] IESC 44, observed, para. 5.5, “The sort of factual assertions, which may not provide an arguable defence, are facts which amount to a mere assertion unsupported either by evidence or by any realistic assertion that evidence might be available, or, facts which are in themselves contradictory and inconsistent with uncontested documentation or other similar circumstances…”. So it does not suffice simply to raise an abundance of allegations unsupported by evidence or any realistic assertion that evidence might be available and to expect that a plenary hearing will follow. Yet that, with every respect, is all that Mr Murphy has done.
III. Some Contentions Made by the Defendant
(i) The Alleged Agreement as to Residual Debt.
10. Mr Murphy contends that the actions of BOSI from February, 2012 led him to believe that BOSI had accepted a proposal whereby, following the sale of the assets that were the subject of the loan agreement, he would not be liable for the residual balance. However, his affidavit evidence, with respect, does not support this contention. When it comes to a critical meeting of 6th February, 2012, all that Mr Murphy can aver to is what seems to be a polite observation on the part of the relevant bank official who “informed me [Mr Murphy] that he believe[d]…the Bank to be reasonable and fair and that this [the non-availability of other assets to meet Mr Murphy’s liabilities] would be taken into full consideration and with my full co-operation a mutually beneficial outcome would be achieved.”
11. This expression by a bank official of his personal belief as to the likely treatment of Mr Murphy by his employer, if given as Mr Murphy avers, contains no representation as to any waiver of debt. And even if BOSI or its successor in title were slow in coming to demand their full contractual entitlements (and the court does not see that either was), cl.25.4 of BOSI’s general terms and conditions (of which there is no evidence between the court that it has been altered as between the parties to the within application) provides that “No failure to exercise and no delay in exercising on the part of the Bank any right, power or privilege…shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege, preclude any other or further exercise thereof…”. Nor does the court, relying in this regard on the judgment of Clarke J. in ACC Bank plc v. Kelly [2011] IEHC 7, para. 7.9, see that any concluded arrangement (even if short of a contract) came to exist between the parties to the within proceedings such as would have grounded a case in promissory estoppel.
12. The court, with respect, also does not see how Mr Murphy can argue on the one hand that there was an agreement of the type contended for dating from February, 2012, yet aver on the other (as he does) that BOSI asked him to, and he did, come up with fresh (and rejected) proposals in 2014. It does not appear in any event that the actions which Mr Murphy suggests that he took on the basis of the perceived understanding between him and BOSI went beyond his existing obligations in respect of the secured debt.
13. As to the suggestion that the contra proferentem rule ought now to be applied by the court in such a way as to read against BOSI its failure (as Mr Murphy perceives matters) to refer expressly in its dealings with Mr Murphy to its non-acceptance of the purported residual debt arrangement, that would be for the court to stray into error. The contra proferentem rule is concerned with the interpretation of ambiguous contractual clauses. It is not an interpretative tool capable of being used to construe the acts or omissions of a particular party in a manner more favourable to one litigant over another. (See further Allied Irish Banks plc v. Pollock and ors [2016] IEHC 581, para. 54).
(ii) Non-Receipt of Statements.
14. Mr Murphy maintains that he did not receive any bank statements after April, 2015. This may or may not be so. (The court has in the evidence before it one statement which does appear to have issued after that date). While the court does not wish to diminish the importance of a financial institution providing regular statements to an accountholder, even (perhaps especially) a borrower-accountholder in default, there is no indication that any (if any) non-receipt by Mr Murphy of certain statements has impacted in any way as regards the repayment of the debt presenting or his ability to meet same. In fact it is not even clear that Mr Murphy beyond pointing to the alleged non-receipt of statements as an error, contends for any such impact.
(iii) Alleged Deficiencies in Appointment and Actions of the Receiver.
15. Mr Murphy points to deficiencies in the appointment and actions of the receiver, whom he avers did not account to him for sales proceeds and, in truth, acted as the agent of Ennis Property and not as his agent. There is nothing in the evidence, beyond Mr Murphy’s bare averment, to suggest that the receiver acted as the agent of the plaintiff. As to the validity of the receiver’s appointment, it is striking that Mr Murphy did not seek to challenge the appointment of the receiver while the receivership was extant. The court does not see that such a challenge would now serve much practical purpose given that the receivership has concluded and the funds raised by the receiver through the disposal of secured assets have been applied against Mr Murphy’s liabilities to Ennis Property. But such a challenge, even if it were to proceed, could not amount to a defence to Ennis Property’s present claim for judgment in respect of loan facilities which Mr Murphy has expressly accepted in his affidavit evidence that he obtained. (See Allied Irish Banks plc v. Killoran [2015] IEHC 850, para. 49, and ACC Loan Management Ltd v. Dolan and ors [2016] IEHC 69, para. 42).
16. As to Mr Murphy’s mooted claim against the receiver for allegedly not obtaining the best price for the secured properties, that is a line of potential action that exists between Mr Murphy and the receiver; it is not a defence to the within summary application that Mr Murphy might be entitled to an indemnity from a non-party were that non-party to be joined to the within proceedings if the within application was to be referred to plenary hearing.
(iv) Data Protection Acts.
17. It is a surprisingly regular feature of proceedings involving financial institutions and like bodies that a defendant debtor makes complaint that a data access request under the Data Protection Acts has not been complied with swiftly or at all, which is, to put matters at their mildest, a disappointing state of affairs, if in fact it pertains. However, to the extent that there has been a failure to satisfy a data access request in conformity with those Acts, a complaint may be made to the Data Protection Commissioner. At this time, that complaint runs on a separate track to any default-debt recovery train of proceedings that arrive in court.
18. Mr Murphy complains that he made data access requests but that the cheques for the administrative fees were returned to him without explanation. If this is so, the court would respectfully urge Ennis Property to ensure that it or its agents, when returning such a cheque, explain why it is being returned. Regardless of this, it does not appear from the affidavit evidence that Ennis Property has acted otherwise than in accordance with the Data Protection Acts, and even if it had that does not affect the recoverability of the debt now sought and owing at law.
19. Mr Murphy contends that such information that will be or has been disclosed to him may relate to the validity of the appointment of the receiver. It may, but so far as the validity of that appointment does not afford a defence to the instant application, the court respectfully refers the parties to the previous section of the within judgment.
(v) Default/Penalty Interest.
20. Mr Murphy claims that he has been charged default/penalty interest. This, with respect, is not so: interest has been applied at the agreed interest loan rate. And, on a related note, the court does not accept that expert banking evidence requires to be tendered to calculate the true amount now outstanding. The calculations required are straightforward and represent but the ‘bread and butter’ of basic banking.
(vi) Counterclaim.
21. Though the possibility of a counterclaim for damages arising from stress, inconvenience and financial loss occasioned by BOSI’s actions, is tentatively touched upon in Mr Murphy’s evidence and submissions, the mooted counterclaim, as articulated by Mr Murphy, regrettably lacks any arguable substance.
22. Even if Mr Murphy could point to a specific vouched loss and substantiate a claim against Ennis Property in this regard, he would face the additional hurdle, in the context of seeking leave to defend on the strength of such counterclaim, that he would need to establish an entitlement to equitable set-off against the judgment debt in relation to any award which might be made in his favour.
23. The principles to be applied on an application for summary judgment when the defence advanced is one to set off a counterclaim or cross-claim were identified by Clarke J. in Moohan v. S&R Motors (Donegal) Ltd [2008] 3 IR 650, 656 (and recently approved by the Court of Appeal in NAMA v. Kelleher [2016] IECA 118), Finlay Geoghegan J. observing as follows in her judgment in Kelleher, para. 31:
“[W]hen as in these proceedings a defendant contends for a bona fide defence which is to set off a counterclaim or cross claim there are two separate questions which the court must address in considering whether the defence meets theAer Rianta threshold. A court must consider both whether the connection between the plaintiff’s claim and the counterclaim or cross-claim of the defendant is such as to establish aprima facie entitlement of the defendant to set off in equity the amount recoverable on the counterclaim and also whether or not the substance of the counterclaim itself reaches the arguable orbona fide threshold. Both questions must be answered in favour of the defendant to establish a bona fide defence. Unless the counterclaim or cross-claim itself meets the Aer Rianta threshold irrespective of the position in relation to set off it cannot constitute a prima facie defence.”
24. Neither limb of the test as identified in Kelleher can be said to have been met by Mr Murphy in circumstances where it is not clear that his asserted losses give rise to any stateable claim against Ennis Property and the tentatively mooted counterclaim does not reach the applicable arguable or bona fide threshold.
IV. Conclusion
25. Mr Murphy represented himself at the hearing of the within application. He is, if the court might respectfully observe, a well-spoken and softly-spoken gentleman who sought in the past, through what doubtless seemed to him to be savvy financial investments, to improve his financial standing and so better to provide for his family. There is nothing wrong, and much to be applauded, in that. Unfortunately, it seems that the market went against Mr Murphy and that, in consequence, he now finds himself heavily indebted to Ennis Property. Yet, whatever the motivations for his indebtedness and the cause of his inability to pay, he is indebted and the monies sought do fall to be repaid. Conscious of the low threshold identified by the Supreme Court in Aer Rianta for sending a matter to plenary hearing, and mindful also of that “discernible caution” which the court, recalling the observations of McKechnie J. in Harrisrange, must bring to its decision-making in summary applications, the court considers itself nonetheless to be coerced as a matter of law, and for the reasons aforesaid, into: (a) declining to send the within application to plenary hearing; and (b) granting the summary judgment now sought.
Allied Irish Banks plc v McKeown & Anor
[2019] IECA 296 (28 November 2019)
JUDGMENT delivered by Ms. Justice Donnelly on the 28th day of November 2019Introduction1. On the 12th May, 2017, Costello J gave liberty to the plaintiff bank (hereinafter “therespondent”) to enter judgment against the first defendant in the sum of €1,469,251.43and against the second defendant in the sum of €1,467,102.96. The sum against the firstdefendant represented an award against him personally in the sum of €1,429,166.22 andan award on a joint and several basis with the second defendant, in the sum of€40,548.60 (those sums less surcharge interest of €463.39). The sum against the seconddefendant was sought in the sum of €1,387,003.82 and €40,000 (those sums lesssurcharge interest of €449.46).2. The first and second defendants have appealed against the judgment and order of theHigh Court. They will be referred to as the appellants in this judgment. As it has somerelevance to the issues in this appeal, it must be noted that the appellants were legallyrepresented in the High Court and the Notice of expedited appeal was filed by theirsolicitor and settled by counsel. They represented themselves at the hearing of theappeal.The Issues before the High Court3. The appellants carried on the business of professional landlords. They are husband andwife. They own a portfolio of commercial properties in Cork city. By letter of loan offerdated the 20th May, 2013, the respondent offered to refinance three facilities of the firstappellant. Repayment was:“On demand at the pleasure of the Bank subject to repayment/refinance on31/12/2013. In the interim interest is to be funded by way of a monthly standingorder in [respect of a specified amount]”.4. A further letter of loan offer of the same date was made to both appellants and acceptedby them. This related to a loan account and an overdraft facility. This was said to berepayable “[o]n demand at the pleasure of the Bank subject to repayment/refinance by31.12.2013”.Page 2 ⇓5. Security for the facilities included two letters of guarantee from the second appellant for€1,650,000 and interest and €40,000 and interest in each case. The first guarantee washeld as supporting security facilities 1 and 2 and the second was held as supportingsecurity for facility 3. The first appellant expressly waived his entitlement to takeindependent legal advice prior to signing the letter which he signed and accepted on the24th May, 2013. The funds were drawn down by way of refinancing i.e. they hadpreviously been drawn down in respect of the existing facilities. It is and was commoncase before the High Court that the facilities were not repaid or refinanced and each ofthe loan accounts remained outstanding.6. At the High Court, the appellants sought liberty to defend the proceedings and arguedthat they had established an arguable ground of defence in respect of: -(a) The proper construction of the letters of May 2013;(b) The alleged improper motives of the respondent in its dealings with theappellants and in particular in seeking summary judgment in theseproceedings; and(c) That the guarantees granted by the second appellant were discharged by amaterial alternation of the underlying loans.7. The High Court judgment records that “the defendants advanced a variety of otherarguments which were not pursued at the hearing of this case and therefore do notfeature in this judgment.” Despite that statement a number of those grounds were arguedat the oral hearing. In respect of all the issues argued before her, the trial judge rejectedthe case made out on behalf of the appellants and gave liberty to enter final judgment asset out above.The Grounds of Appeal8. The notice of expedited appeal lists ten grounds of appeal. Grounds 1 to 3 relate to theinterpretation of the loan offer of May 2013. Ground 4 appears to contain an error inexcluding the word “not”. It seems the ground meant to refer to the trial judge erring inlaw and in fact in not holding that the respondent demanded repayment of the loan in badfaith and pursuant to ulterior motives. Ground 5 repeats a claim that the guarantees wereinvalid and unenforceable against the second appellant. Ground 6 is a general plea thatthe trial judge erred in holding that the appellants did not have a valid defence. Ground 7is a general plea relating to a valid counterclaim. Ground 8 relates to a stay of execution.Ground 9 refers to a failure to have regard to the supplemental affidavits of theappellants. Ground 10 claims that there was a failure of natural justice by not giving theappellants a right to be heard and a fair hearing.9. The written legal submissions of the appellants, which were filed by them in person, referto 21 issues to be decided at the appeal. Many of these issues were not contained in thenotice of expedited appeal and/or were expressly abandoned at the hearing in the HighCourt.Page 3 ⇓Issues Not Properly Before the Court of AppealNew issue at the oral hearing10. At the hearing of the appeal, the second appellant, on her own behalf and on behalf of thefirst appellant submitted that the High Court had been deceived by the respondent and bycounsel making statements misrepresenting fact. This was explained as a reference bycounsel to over €7,000,000 owed by the appellants to the respondent. On a query fromthe bench, this came from a reference in the transcript to that figure. It was abundantlyclear from the transcript (including from its context within italics) that the reference to€7,000,000 was contained in a quote that counsel for the respondent had clearly readfrom another case. It was only after this was pointed out that the appellants withdrewthis allegation of deceit.New issues advanced only in written submissions11. In their written submissions, the appellants raised issues concerning proof of debt (undera number of separate sub-headings). As stated above, this was not at issue in the HighCourt proceedings, was not part of the notice of expedited appeal and is therefore notcorrectly before this Court as a ground of appeal. This point will not be considered furtherand is rejected.12. The appellants also claimed that the judge was dismissive of their argument regarding thethree zero balance mortgages unlawfully retained as security by the bank in the May 2013agreements. This was not contained in the notice of expedited appeal nor was thisargument developed any further in the oral or written submissions. There appears to beno real criticism of the trial judge’s summary of the respondent’s release of security. Forall these reasons this point will not be considered further and is rejected.13. The appellants complain that the total amount owed was circa €1.5 million but that theaward was for circa €3 million. Apart from the fact that this was not a ground of appeal, itis clear that this issue is misconceived. The judgment was entered against each appellanton the basis set out above. Any monies realised by the respondent in executing againsteither of the appellants will result in a pro tanto reduction of their respectiveindebtedness.14. The appellants, in their written submissions, raised for the first time an issue with theCentral Bank’s Tracker Mortgage Examination. This is not a matter which is relevant toany issue properly before this Court by way of appeal. This point will not be consideredfurther and is rejected.15. The appellants claim discovery in their written submissions. Discovery was only raisedafter judgment was given. It was not (for good reason) before the High Court and is not amatter properly before this Court. This point will not be considered further and isrejected.16. The appellants claim that at the time proceedings issued, one of the security documentswas in the name of AIB Mortgage Bank. It is not at all surprising this issue was notPage 4 ⇓argued before the High Court and was not a ground of appeal. In any event, it is notproperly before this Court and the point will not be considered further and is rejected.17. The appellants made a further claim in relation to the costs of the proceedings and claimthe respondent’s behaviour has exacerbated the costs. This is done without context. Inany event this particular issue as regards costs is not properly before the court at thispoint in the proceedings.18. The appellants claim that there was no proof of drawdown in 2013. This is against abackground where this was a restructuring of loans. This argument was not contained inthe grounds of appeal. Apart from noting that such an argument has already beendescribed as “a contrived and empty argument devoid of any merit whatsoever” in Bankof Ireland v Flanagan [2015] IECA 56 this point will not be considered further and isrejected.19. Another new ground advanced in written submissions is, in toto, as follows: “ThreeSustainable Solutions encompassing all loans including the Family Home TrackerMortgage were offered by AIB Financial Solutions Group”. It is impossible to understandthe point being advanced here. As there is no context for same, as it was not a ground inthe notice of expedited appeal and as no further explanation was given at oral hearing,this point will not be considered further and is rejected.Issues advanced in written and oral submissions on appeal only20. The appellants sought to advance on appeal an argument that the respondent had nolocus standi in the proceedings. This related to a claim that the entity named as theplaintiff in the proceedings “Allied Irish Banks PLC” was not an entity that had sent thefacility letters.21. Although this point or a similar point had been mentioned in the affidavits of theappellants before the High Court (although simultaneously contradicted by references tothe plaintiff inter alia, seeking guarantees prior to the agreements of May 2013), it wasnot pursued in written or oral submissions before the High Court. Moreover, this grounddid not form part of the notice of expedited appeal. Furthermore, the appellants soughtleave to admit new grounds of appeal on, inter alia “New evidence of the Identity andLocus Standi of the Plaintiff Allied Irish Banks PLC”. This motion was refused by Order ofMs. Justice Irvine on the 20th October, 2017.22. Under these circumstances this Court is being asked to act as a court of first instance inrespect of this issue. Such a request is occurring where the appellants were legallyrepresented at the hearing before the High Court. No explanation for the failure to pursuethis application in the High Court is before this Court (the written submissions only referto the ground itself but not the reason why it should now be accepted). There is simply nobasis upon which this Court should take the exceptional step of permitting such a groundto be argued for the first time on appeal. This point is therefore rejected.Issues Raised in the Notice of AppealPage 5 ⇓23. The appellants raised an issue of natural justice regarding their right to be heard and afair hearing. In the written submissions, they simply referred to the right to be heard andnatural and constitutional justice and made reference to another Court of Appeal case byits record number. This ground of appeal appears to refer to the request by theappellants’ counsel to reply to counsel for the respondent. At the end of counsel for therespondent’s reply, the appellants’ counsel stated to the High Court “I will have toaddress some of the points [counsel] has made”. This was refused by the trial judge onthe basis that the respondent’s counsel was replying to the submissions made on behalfof the appellants and he had not gone beyond what had been submitted by counsel forthe appellants. This was entirely in accordance with the appropriate procedure for theconduct of cases. There was no unfairness and no breach of natural justice. This groundof appeal is rejected.24. In circumstances where a stay on further execution of the High Court judgment wasplaced by order of the President of the Court of Appeal, save to the extent that I will dealwith the issue of the counterclaim below, it is unnecessary to consider the question of astay pending appeal.25. The other matters contained in the notice of expedited appeal are encompassed withinthe grounds of appeal set out below.The Legal Principles26. No issue was taken by the appellants with the general legal principles concerningapplications for summary judgment upon which the trial judge relied. These are found ininter alia, in Aer Rianta CPT v. Ryanair Limited [2001] 4 IR 607, Harrisrange Limited v.Duncan [2003] 4 IR 1 and IBRC v. McCaughey [2014] I.R 749. It is unnecessary torepeat those well-known principles, save to say summary judgment is only to grantedwhere it is “very clear” to the court that the defendant has no case and that there areeither no issues to be tried or only issues which are simple and easily determined. It isinsufficient for the defence to merely assert on affidavit an arguable defence. The courtmust look at the entirety of the circumstance in deciding whether there is a fair orreasonable probability of a real or bona fide defence and that any assertions made arecredible in the light of established facts.27. It is in the application of the above principles that the appellants submit that the trialjudge erred. They submit that it cannot be said to be very clear that they had no arguabledefence.Issues raised in the High Court and in the Notice of Expedited AppealOn Demand Clauses28. The appellants pursued at the oral hearing, the issue of the whether the “on demandclause” permitted the respondent to make the demand at any time. The two letters ofloan sanction had slightly different terminology in the “on demand clause”. The firststated that it was “On demand at the pleasure of the Bank subject torepayment/refinance on 31/12/2013” and the second stated “On demand at the pleasureof the Bank subject to repayment/refinance by 31/12/2013”.Page 6 ⇓29. At the hearing of the appeal, the appellants highlighted the difference between “on” and“by” in the two letters. They submitted that no one had made a demand on the stateddate or by the stated date. They submitted that these were not simply “on demandclauses”; the letters they submitted demonstrated an intent to do something else with theloans. The facilities had been offered “subject to the terms and conditions set out in thisletter and subject to the Bank’s General Terms and Conditions Governing BusinessLending”.30. At the High Court, it had been argued on behalf of the appellants that the import of theletters, by particular reference to the word “refinance”, was that a reasonable opportunitywould be given to the appellants to refinance. It was claimed the letters required areasonable offer to have been made and none was made. What was a reasonable offerwould be decided at the trial of the action. As the trial judge commented, the implicationof this argument was that the respondent was not at liberty to choose whether or on whatterms to offer to refinance the loans as it had agreed to some unspecified reasonablerefinancing.31. The trial judge rejected the construction advanced by the appellants at the trial. She didso in light of the decisions of the High Court in National Asset Management Ltd. v.McNulty [2013] IEHC 369 and ACC Bank Ltd Plc v Kelly [2011] IEHC 7. The observationsof Clarke J in ACC Bank Ltd Plc v Kelly at para 7.2 are apt when he said: “The ordinarymeaning of a loan being repayable on demand is that a person who gives the loan isentitled to demand repayment. The terminology used in describing the other repaymentterms is again clear. Those terms only applied where there is no demand. It is by nomeans unusual for commercial property lending facility to be payable on demand.”32. In those cases, the facilities were stated to be repayable on demand “without prejudice”. Iagree with the High Court judge that there is no distinction between a clause which is“subject to” certain terms or which is “without prejudice” to certain terms.33. The ordinary meaning of these “on demand” clauses is that the respondent was entitledto demand repayment. This was at their pleasure subject to repayment/refinancing by oron the 31st December, 2013. The ordinary meaning of this is that if there had been arepayment or a refinancing on or before the 31st December, 2013, the demand forrepayment pursuant to either letter of May 2013 could no longer be made. If there hadbeen repayment, obviously no further demand for repayment would be relevant orpermitted. If there had been a refinancing between the parties then that repaymentwould have been subject to that further refinancing agreement.34. In those circumstances, the facilities were payable on demand and the respondent wasentitled to call in the loans as and when it did. This ground of appeal is rejected.Improper Motives35. The appellants sought to defend their case in the High Court on the basis that therespondent acted for improper motives in its dealing with them and in particular inseeking judgment in these proceedings. The High Court judgment records the manyPage 7 ⇓issues that the appellants had with the manner in which they were dealt with by therespondent. These issues were many and varied. Their complaints regarding therespondent’s release of security are listed at para. 15 of the High Court judgment.36. The trial judge stated that a considerable part of the appellants’ complaint related to thetreatment of their tracker mortgage in respect of their family home. That facility did notform part of these proceedings and the trial judge held that the issues that they raised inrelation to that facility do not give rise to a defence to the sums claimed in theseproceedings. In written submissions, the appellants did not advance any specific legal orfactual reason to demonstrate that the trial judge was mistaken in law and in fact in herdetermination that the issues that they have raised in relation to that facility do not giverise to a defence to the sums claimed in these proceedings. In oral submissions, theappellants sought to advance that negotiations with respect to the house had becomepart of the restructuring negotiations. I am satisfied however that as regards the issuewith the family home there is no reason to hold that the trial judge was incorrect in law orin fact in her determination. No arguable defence to these proceedings has been madeout in respect of any issue as regards the family home.37. At the hearing of this appeal, the appellants submitted in an oblique fashion, that therespondent bank had wrongly and improperly behaved with respect to calling in theseloans. They submitted that they were not in default with their loans but that they hadbeen overcharged in respect of the mortgage. Unfortunately, at the hearing of the appeal,the appellants’ main focus as to improper behaviour was on their misconceivedsubmission that counsel for the respondent stated that the appellants owed €7,000,000. Ihave dealt with that submission at paragraph 10 above.38. The appellants submitted at the hearing that the respondent had dealt with them unfairlyin respect of the restructuring of the loans and the calling in of the loans. This submissionappeared in substance to be directed at their claim in respect of the “on demand” clausewhich I have dealt with above.39. In respect of their allegations in the High Court as to improper motives, the trial judgeheld that they had made no more than a mere assertion that the respondent bank oughtnot to have treated them as it did. She also held that they had not established how thealleged improper motives of the respondent, even if proven, would amount to a defenceto the claim for summary judgment by the respondent in respect of the on demandfacility that expired on the 31st December 2013. She noted that it was remarkable that,in the plethora of allegations advanced against the respondent, it is not stated that therespondent represented that it would not call in the loan in accordance with the terms ofthe facility. She held that no case had been made out that the alleged improper motives,even if established, would provide an answer to the claim to be repaid monies that theappellants accept they borrowed and have not repaid. The trial judge correctly observedthat questions of security and of the appointment of a receiver over certain assets do notarise in these proceedings. She held that the appellants had not established a fair orreasonable probability of having a real or bona fide defence.Page 8 ⇓40. In my view there was no error in law or in fact on the part of the trial judge in respect ofthis matter. She correctly identified that the improper motives were made by way of mereassertions. More fundamentally, she identified that these improper motives, even ifestablished, did not provide an arguable defence to the respondent’s claim.The Guarantees41. The second appellant submits that the trial judged wrongfully stated in her judgment thatthe second appellant did not swear and affidavit in the proceedings but relied upon theaffidavit of the first appellant. The position was that very late supplemental affidavitswere filed by the appellants. Counsel for the respondent at one point stated: “I’m notobjecting to the Court seeing those supplemental affidavits, I think nothing turns onthem”. Counsel for the appellants did not demur on that. Moreover, he did not open thesecond appellant’s affidavit. He only opened the first appellant’s affidavit to refer to anewspaper article exhibited by him therein.42. In her judgment, the trial judge dealt with the issue of the guarantee as raised in theaffidavit of the first appellant which purported to deal with the guarantees under whichthe second appellant was sued. She dealt with the legal argument put before her. In thenotice of expedited appeal, in their written submissions and at the hearing of the appeal,the appellants did not point to any particular averment in the affidavit, which wasmaterial to the issue upon which the High Court adjudicated on an arguable defencearising out of the guarantees. For all these reasons, I am quite satisfied that there is nomaterial error and no want of natural justice by reason of the misstatement of theposition as regards the swearing of an affidavit by the second appellant.43. In her judgment, the trial judge rejected the second appellant’s arguments that (a)because she “refused” to provide any further guarantees, the existing guarantees weredischarged and (b) that the guarantees had been discharged where there were materialchanges in the underlying contractual obligations between the respondent and the firstappellant. The trial judge referred to clause 2 of the first guarantee dated the 2nd March,2009 which was a continuing guarantee. She also cited clause 6(i) which gave therespondent liberty to determine, enlarge or vary any credit to the first appellant(borrower) without notice to the second appellant (guarantor).44. The trial judge accepted that that the guarantee was a continuing one and that it wouldinclude the sums guaranteed up to the amount referred to therein of €1,650,000. Clause6(i) permitted either the enlargement or the variation of the first appellant’s creditbrought about by the facility of May 2013. She also held that there was no obligation onthe bank to obtain an alternative or fresh or additional guarantee. A failure to do so didnot discharge the existing guarantee. She held similarly in respect of the identical (savefor the limit guaranteed) second guarantee.45. I am satisfied that the trial judge did not err in so holding. The interpretation of theguarantees was very clear as a matter of law and did not provide the arguable defencecontended for by the appellants. For this reason, all points of appeal in respect of theguarantees are rejected.Page 9 ⇓Counterclaim46. The appellants in their notice of expedited appeal and in their written submissions claimedthat the trial judge erred in finding that they did not have a valid counterclaim. This wasnot elucidated further at the hearing. Their first counterclaim related to the allegedpremature or improper calling in of the loans. The second counterclaim referred to allegedovercharging.47. The trial judge held that the appellants first counterclaim amounted to no more than areassertion of the grounds of defence which she had already rejected. In relying on thedecision of Clarke J. in Moohan v S & R Motors Donegal Ltd. [2008] 3 I.R. 656 in decidingthat she would not put a stay on her judgment. In so deciding, the trial judge made noerror of fact or of law. I therefore reject this point of appeal.48. In respect of the claim of overcharging, the trial judge identified the amount allegedlyovercharged as €57,857.67 and said that this amounted to an independent claim. Thetrial judge could not resolve the factual dispute in relation to this claim. She ruledhowever that given the scale of the discrepancy between the debt due by the appellants,a set off would mean very little. In the exercise of her discretion she declined to put astay on her judgment.49. In their written submissions, the appellants submitted that the trial judge omitted asecond assessment of overcharging on their accounts. It appears that the affidavit of thefirst appellant had referred to two reports. One report was by an Eddie Fitzgerald and thesecond was by “Cáit”. Mr. Fitzgerald had identified the alleged overcharging. The otherreport identified overcharging of circa €52,000 on one facility. This had been included inthe earlier reports. On behalf of the respondent, David Coleman swore a supplementalaffidavit identifying that the height of the overcharging complaint was the figure of€57,857.67. Neither in their supplemental affidavits nor in the hearing at the High Court,did the appellants take issue with this amount.50. I am satisfied that the trial judge did not err in her identification of the height of theamount being claimed as overcharged. I am also satisfied that in accordance with theprinciples in Moohan, she did not err in declining to put a stay on any part of thejudgments to be entered in favour of the respondent against the appellants.Conclusion51. The appellants in written and oral submissions have sought to argue certain grounds thatwere not argued in the High Court and/or were not included in the grounds of appeal. Theappellants were legally represented in the High Court. No reason has been advanced as towhy these grounds were not so argued. In all the circumstances, these grounds are notproperly before this Court and are rejected.52. In relation to the grounds of appeal which are properly before this Court, I haveconcluded that there was no error of fact or of law on the part of the trial judge. Shecorrectly applied the well-established jurisprudence.53. Accordingly, I dismiss this appeal.
Result: Dismiss appeal
Kerrigan v Keenaghan & anor
[2019] IEHC 5 (15 January 2019)
JUDGMENT of Ms. Justice Murphy delivered on the 15th day of January, 2019
1. The plaintiff’s claim is for repayment of the sum of €280,000 given by her to the defendants on the weekend of 27th August, 2010. There is no dispute that the said sum was paid by the plaintiff to the second defendant in the form of two bank drafts, one for €200,000 and one for €80,000. The plaintiff claims that the sum was given as a loan which had been requested of her by the second named defendant. The defendants deny that the said sum was given as a loan and contend that it was an unsolicited gift which the plaintiff insisted on giving them.
Background facts
2. The plaintiff Fidelma “Della” Kerrigan is a 59-year-old single woman, who lives with her sister in their family home at 56, St. Benildus Avenue, Ballyshannon in Co. Donegal. Both she and her sister have had limited formal education. The plaintiff’s talents lay in the creative and artistic sphere. She is a highly accomplished knitter. Prior to 2002, singing and dancing played a major part in her social life. She participated in musicals and sang with a folk group. She had a green belt in karate and had a passion for long walks which she indulged with her sister Celine.
3. Up to the late 1990s, she worked in the Celtic Weave Pottery factory where she worked as a finisher, working on lamps. She loved working with her hands. In or about the late 1990s, she left work to become a fulltime carer for her father who had begun to have health problems. She and her sister, Celine, and their father, lived together in the family home, a council house in Ballyshannon. Celine had acquired a job as a catering assistant with the HSE. Theirs was a happy unit which allowed the plaintiff to indulge her interests in singing and dancing, doing karate, and indulging the sisters’ mutual passion for long walks.
4. Unfortunately for the plaintiff all of this ended on 13th November, 2002, when she was involved in an horrific car accident. The plaintiff was taking her father for a drive, as she did most days, when a van crashed headlong into their vehicle. The plaintiff’s father sustained fatal injuries and the plaintiff sustained multiple serious life-threatening injuries, including head and facial injuries. She was taken unconscious, to Sligo General Hospital and was thereafter transferred to Altnagelvin Area Hospital in Derry, for treatment of her facial injuries. Her last memory before the collision was of laughing with her father and her first memory post collision is of waking up in Altnagelvin Area Hospital. By reason of the severity of her injuries she was unable to attend her father’s funeral and to participate in the normal grieving process.
5. The plaintiff spent two months in hospital and was bed bound for a further two years. Thereafter she spent three years in a wheelchair. In the years following the accident, the plaintiff underwent twenty-four different surgical procedures. Her needs were such that her sister Celine took five years unpaid leave from her job with the HSE, to care for the plaintiff. The effects of the accident have been devastating for the plaintiff’s life. Apart from the horrific physical injuries which she suffered, the plaintiff has never recovered from the traumatic loss of her father, who she perceives, died while in her care.
6. In the period following the accident, many members of the community rallied round the sisters. Jacqueline Keenaghan, the second defendant was one of those who began to call on them. Jacqueline Keenaghan is the wife of the first named defendant, John Keenaghan. They live outside Ballyshannon, in a house they had built in the 1980s on a two and a half acre plot of ground in Rathmore. They have three grown up children, two sons and a daughter. From 1982 until in or about 2008/2009 the first defendant ran an architectural services business conducting inter alia evaluations, inspections, mapping and surveying.
7. Jacqueline Keenaghan had been particularly friendly with Celine Kerrigan when they were both in national school in Ballyshannon. Their paths had diverged after national school but they reconnected, initially at a surprise 40th birthday party for Jacqueline Keenaghan in 2001, and again in the aftermath of the tragedy that had befallen the Kerrigan family. After secondary school, Jacqueline Keenaghan had worked as a legal secretary for either six or eight years until the birth of her first child in 1987. The three women got on well and Jacqueline Keenaghan was a source of comfort and support to the Kerrigan women in the immediate aftermath of the plaintiff’s dreadful accident.
8. When the plaintiff became mobile in or around 2007, the plaintiff and her sister, Celine, were regular visitors to the Keenaghan household. Jacqueline Keenaghan was aware of the plaintiff’s ongoing claim and the various surgical interventions which occurred in the years following the collision. She advised them in a general way on their dealings with their solicitor and of the need to keep pressure on her by requesting updates on the progress of the plaintiff’s claim.
9. Following the financial crash in 2007, the first defendant’s architectural practice came under increasing pressure. At the time of the crash he had three employees, all of whom he eventually had to let go. Those who owed him money could not pay and some of his primary debtors went bankrupt. In June, 2008 he secured a loan from Allied Irish Bank in Bundoran, Co. Donegal in the sum of €80,000. The loan was specified to be a short-term loan to be repaid by eight monthly repayments of €558.72 commencing on 14th July, 2008, with a final repayment on 14th February, 2009, of €80,558.72. The security for the loan was expressed to be an all sums mortgage from Mr. John Keenaghan over Rathmore, Ballyshannon, Co. Donegal. This is the land on which the defendants’ home is built. The bank also required as a security for the loan, a letter of guarantee for €90,000 from the second-named defendant, Jacqueline Keenaghan.
10. During the course of 2008, matters did not improve and the loan taken out in June, 2008 was not repaid by February, 2009. In 2008 or early 2009, the defendants borrowed €5,000 from the first defendant’s brother and over that period borrowed a further €1,500 from the first defendant’s mother. It appears that sometime in 2009 the first defendant’s architectural practice closed and the defendants approached MABS for advice about their growing indebtedness. Sometime after June, 2009 the defendants’ solicitors prepared a ” TO WHOM IT MAY CONCERN ” letter setting out the parlous state of the first defendant’s finances. Attached to the letter is a list of twelve debtors of the first defendant’s architectural business and the various sums owed by those debtors to the business. The debts accrued between October, 2006 and June, 2009. The total sum alleged to be due was €153,692 exclusive of VAT. The solicitor’s letter points out ” the realistic prospect of obtaining satisfaction from any of these debtors in the immediate future is negligible .” The letter sets out the efforts made to obtain payment by the defendants’ solicitors and goes on to state:-
“We would also point out that our clients owe considerable sum(sic) of money to the Revenue Commissioners for Vat and Income Tax and any monies obtained in settlement of any of the debts accrued as set out in the list of debtors will have to be forwarded to the Revenue Commissioners for payment of a substantial sum of money due and owing by our clients to them.”
The letter continues:-
“As you will appreciate the Revenue Commissioners rank as a priority debtor in all situations. We trust that this clarifies the situation with regard to our clients’ position and as you will note there is little or no prospect of recovering any monies personally for their own benefit in the near future arising out of the debts which we are pursuing on their behalf. Even if we are successful in obtaining monies after a long and arduous process of debt recovery there is a considerable sum of money due and owing to the Revenue Commissioners which has to be deducted from any monies recovered by our clients therefore if they are successful in recovering all of the debts then it will be some considerable time before they would ever have any of these funds for their disposal. We trust this clarifies the position and should you have any further queries please don’t hesitate to contact us.”
11. The first defendant’s architectural business closed in 2008/2009 and thereafter the only income available to the defendants’ household was Jobseeker’s Allowance which the second-named defendant applied for some time in 2009. While the defendants were facing financial ruin and bankruptcy, a fate suffered by a number of their debtors, the plaintiff was continuing to experience her own difficulties in coming to terms with the tragic death of her father. In December, 2008, she was referred for counselling for the psychological trauma resulting from the circumstances of the tragic death of her father. It was noted at the time, that she was being treated by her GP for depression since the accident. She attended psychotherapy from January, 2009 until the end of March, 2009. The depth of her trauma can be gauged from the fact that even seven years after the event, she expressed the view that she would rather have died along with her father.
12. In April, 2010 the defendants were coming under further pressure from the bank because of their failure to discharge the short term loan of €80,000 repayable in February, 2009. While the original loan offer required security over the whole of John Keenaghan’s property at Rathmore, Ballyshannon, Co. Donegal an arrangement appears to have been put in place in April, 2010 whereby part of the defendant’s original folio, upon which there was planning permission for two houses, was hived off from the main folio and a new folio 66493F was created for that portion of the lands upon which the two sites existed. A charge in favour of AIB mortgage and Allied Irish Banks PLC for present and future advances was registered against the new folio. The date of registration of the charges is 23rd April, 2010. The financial pressure continued and the court notes that in July/August, 2010 three interest payments on the bank loan went unpaid.
13. On or about 30th July, 2010, the plaintiff and her sister and her nephew attended at the Four Courts to discuss settlement of her claim. Liability was not in issue. On advice the plaintiff accepted a sum of €750,000 together with costs in full settlement of all her claims. On the way home from the Four Courts, the plaintiff telephoned the second-named defendant and notified her of the fact and of the amount of her settlement. There was a lot of contact between the plaintiff, her sister Celine and the second-named defendant in the days immediately following the settlement. There was a meeting between those three people at the second-named defendant’s house on 7th August, at a time when the first-named defendant was in Galway with his mother and son. There appears to have been a second meeting that weekend or perhaps on Monday 9th August between the Kerrigans and the two defendants. There was a third meeting on or about 16th August at which the Kerrigans and the Keenaghans were in attendance. The contents of those encounters are disputed. At the end of that process it was agreed that the defendants would accept €280,000 from the plaintiff.
14. It took some weeks for the settlement cheque to arrive. It appears to have been lodged by the plaintiff in AIB in the Diamond in Donegal town, which bank on 27th August, 2010, issued two demand drafts payable to the second-named defendant, Jacqueline Keenaghan, in the sum of €200,000 and €80,000 respectively. These demand drafts were handed over to the second-named defendant on the weekend of 27th August, 2010. The draft for €200,000 was presented for payment on Monday 30th August, 2010. The second draft for €80,000 was presented for payment on 14th January, 2011, at AIB in Ballyshannon, Co. Donegal.
15. Out of the draft for €200,000 presented on Monday 30th August, 2010, the defendant’s discharged their bank debts of €83,282.05. They repaid the family loans of €5,000 and €1,500 received in 2008/2009 from the first defendant’s brother and mother respectively. They paid €10,000 into the account of their eldest son, Edward, who lives in the U.S. €20,000 was put into an account to finance the return to college of the defendant’s daughter, Danielle, to train as a speech therapist. Money was also put aside to finance the college expenses of the defendants’ younger son, Sean. The balance was in effect used to allow the defendants train as counsellors and psychotherapists. The second defendant had started such a course in 2009 and qualified in 2012, thereafter setting up a business as Ark Counselling in Ballyshannon. Using the money given by the plaintiff, the first defendant also returned to college and trained as a counsellor and psychotherapist, and together with his wife practises as such in Ballyshannon.
16. In the months following the giving of the money, it appears that the first defendant entered negotiations with the Revenue Commissioners in respect of the VAT and Income Tax owed by his business. On 14th January, 2011 the second bank draft for €80,000 was presented for payment. Three days later a letter issued from the Donegal District of Revenue acknowledging payment of €88,119.58 in respect of the VAT and Income Tax liability of John Keenaghan. The letter confirmed that his tax liability had been paid in full. Two days later the second defendant received a letter from the Department of Enterprise, Trade and Innovation acknowledging receipt of €2,445.40 in respect of redundancy payments and advising that a further payment of €1,264.20 was due to the Social Insurance Fund.
17. The good relations between the parties continued for the next few years. Contact was somewhat less frequent because of the defendants’ college commitments, however the weekly trips by Della Kerrigan and Jacqueline Keehaghan to knitting/crocheting classes continued. By the end of 2013, the Keenaghans were back on their feet and their counselling business was up and running. They were in a position to plan a lengthy trip to the U.S. to visit their son in June, 2014. On two or three occasions in late 2013 and early 2014 the subject of the €280,000 was broached by Della Kerrigan with Jacqueline Keenaghan on the way home from knitting/crocheting classes. The content as opposed to the fact of these conversations is disputed. This culminated in a meeting at the defendant’s home in April, 2014 where the first defendant unequivocally asserted that the €280,000 given by Della Kerrigan to the second defendant was a gift.
18. Following this meeting a letter of demand seeking repayment of €280,000 was sent on the 6th May, 2014. On the 18th June, 2014 a summary summons was issued seeking repayment of the loan of €280,000 together with interest pursuant to the Courts Act 1981. On the 6th October, 2014 the second defendant filed an affidavit seeking to have the matter remitted to plenary hearing, in the course of which she averred that the monies given to the defendants was either a gift or an unconditional act of charity, or an open ended loan without a repayment date. The matter was remitted to plenary hearing. A statement of claim was delivered on 18th November, 2014 in which the plaintiff claimed the return of the monies on the basis that it was a loan and on the alternative basis that it was money had and received by the defendants to the use of the plaintiff, and on the further alternative basis that if the money was found to have been given as a gift that same had been procured by undue influence. A defence was delivered on the 2nd April, 2015 in which the defendants, while admitting receipt of the money, denied that it given as a short term loan. At para. 6 they plead that the sum of €280,000 was given ” on a charitable basis or as a gift with no repayment date discussed .” They deny the exercise of undue influence over the plaintiff. They deny certain factual matters including a specific denial ” that the defendants made any approach before or after the plaintiff’s personal injury settlement asking for money. “
19. The foregoing are the objective facts against which the court must measure the testimony of the parties as to the nature and circumstances of the transaction in which the plaintiff gave the second named defendant the sum of €280,000.
Evidence of the plaintiff
20. The plaintiff finally regained mobility following the accident, some five years after the event in 2007. While she was unable to get back to her pre-accident life she was able to socialise to some degree. A large part of that socialising was in the company of her sister, Celine, and the second defendant, Jacqueline Keenaghan. Each Thursday evening, Jacqueline Keenaghan collected her in her car and brought her to a knitting/crochet class where it appears Jacqueline Keenaghan worked as a crochet teacher. As 2007 moved into 2008 and onto 2009, she was aware that there were financial problems in the Keenaghan household. John Keenaghan’s business closed in or about 2009 and the plaintiff and her sister recall that the second-named defendant was frequently stressed and upset. She cried at the prospect of losing her home and expressed concern about putting food on the table. Around this time, she was urging the plaintiff to keep pressure on her solicitor to keep the case moving and to seek regular updates about the progress of her claim. Before the settlement in 2010, she broached the subject of the plaintiff assisting her out of the proceeds of her settlement. She promised the plaintiff that if she was willing to help her in her hour of need that she would pay back every penny. She explained that her husband, the first-named defendant, was owed money by a lot of people and that they needed help until that money came through. She also spoke of her hopes of retraining as counsellor (which she had commenced in 2009) and setting up a business with her husband John, as counsellors and psychotherapists.
21. According to the evidence of the plaintiff the issue of her willingness to loan money to the defendants was first broached in or about 2009. At that stage, according to the plaintiff, Jacqueline Keenaghan did not mention a particular sum but assured the plaintiff that if she helped her, she would pay back every penny. The plaintiff agreed in principle to help the second-named defendant. Every time the question of assistance was raised the second defendant said she would pay back every penny. It was only after the case was settled on or about 30th July, 2010 that the second defendant first mentioned the sum of money which she was requesting. It appears that a figure of €240,000 was initially mentioned, but the ultimate figure sought was €280,000. The plaintiff gave evidence that she was shocked by the size of the amount and that she had expected the sum to be in the region of €50,000. Though shocked by the size of the sum, she gave evidence that she felt that having given her word that she would help, she felt bound to do so. She also felt comforted by the second named defendant’s repeated assurances that the monies would be repaid when the monies due to the first-named defendant by his creditors was paid, and/or when they got set up in their new counselling business. She trusted Jacqueline Keenaghan to keep her word.
22. All of the initial discussions about the loan took place between the plaintiff and Jacqueline Keenaghan and sometimes with her sister, Celine. John Keenaghan was initially reluctant to accept money from the plaintiff. Jacqueline Keenaghan asked for the money to be paid in two separate bank drafts; one for €200,000 and one for €80,000. According to the evidence of the plaintiff, the second defendant wanted it in this form so that the money could not be traced. After the payment of the monies the friendship between the plaintiff and her sister and Jacqueline Keenaghan carried on much as before, though the second defendant was less available because of the college commitments, which she and her husband were pursuing, funded by the monies given to them by the plaintiff.
23. In 2012, the second defendant, Jacqueline Keenaghan, qualified as a psychotherapist and set up a counselling practice called Ark Counselling in Ballyshannon. By the end of 2013 the counselling practice had been up and running for more than a year. The defendants seemed to be back on their feet and were in a position to take holidays in the U.S. where their eldest son was living. In the car on the way back from knitting on a Thursday evening, the plaintiff broached the subject of the repayment of her loan. According to the plaintiff the second-named defendant responded that she would need more time. The plaintiff brought it up again sometime later, on one of the knitting nights, and the plaintiff’s evidence is that the complainant again stated that she needed more time and that she would have to talk it out with her husband.
24. Finally in April, 2014 there was a meeting in the defendants’ house at which the plaintiff, her sister Celine and the two defendants were in attendance. On this occasion according to the plaintiff, John Keenaghan,, on being asked about repayment of the money, replied that the money was a gift. The plaintiff states that that was the first time a gift was mentioned and that she was shocked because, throughout her dealings with the second defendant Jacqueline Keenaghan, she had asked for a loan and assured the plaintiff that she would pay back every penny. The plaintiff had trusted her to do that. At this meeting the second-named defendant suggested that they should not fall out about money and further stated that they could not pay the money back. The plaintiff and her sister left and shortly thereafter sought legal advice.
The evidence of Celine Kerrigan
25. Celine Kerrigan left school at thirteen to mind her mother who was ailing. After her mother died she worked in a hosiery factory for four years, after which she was in and out of work, until she eventually got a job as a catering assistant with the Health Board. When the plaintiff came out of hospital following her accident, Celine took a leave of absence from her work and for the next five years she cared for her sister; first when she was confined to bed, and thereafter when she mobilised using a wheelchair. She eventually went back to work part-time in 2007 and is now back working full-time. As a child she was very friendly with the second-named defendant, Jacqueline Keenaghan. As Celine Kerrigan left school at thirteen and Jacqueline Keenaghan went on to secondary school, they lost touch with each other but would see each other occasionally in various locations in Ballyshannon. In 2001, Jacqueline Keenaghan’s sister organised a surprise 40th birthday for her and both Celine Kerrigan and the plaintiff, her sister, were invited. A year later, after the tragic accident in which the plaintiff’s father was killed, Jacqueline Keenaghan was one of the people in Ballyshannon who rallied round the sisters and visited them regularly during the period when the plaintiff was housebound. Once the plaintiff was able to leave the house in 2007/2008, she and her sister were regular visitors to Jacqueline Keenaghan’s house. As the plaintiff’s personal injury claim was trundling on the second defendant, who had been a legal secretary, advised both sisters to keep the pressure on the solicitor and to keep ringing her office for updates. Before they travelled to Dublin for the settlement meeting on or about 30th July, 2010 they told the second-named defendant of the impending meeting. The witness was aware of the financial difficulties besetting the Keenaghan household for a significant period prior to the settlement of her sister’s claim. She stated that the second defendant was terrified that her house was going to be taken from her and that she cried when expressing that concern. The witness gave evidence that Jacqueline Keenaghan told her that she had sought a loan from her sister’s husband, who had been made redundant, but that he had declined her request for a loan. Celine Kerrigan confirmed her sister’s evidence that Jacqueline Keenaghan had requested help prior to the settlement and had promised to pay back every penny.
26. Jacqueline Keenaghan discussed with the witness and the plaintiff the financial difficulty that she and her husband were experiencing. She told them that her husband was owed money by many people and she asked if Della, the plaintiff, would lend her money. Della indicated a willingness to help her out. There was talk of getting money from the people who owed the first defendant fees. The first that Della heard of the sum being sought was after the settlement when €280,000 was requested. She has no recollection of the initial request for a sum of €240,000. Though shocked as her sister was that the defendants could be in so much debt, she was happy that her sister was willing to help the defendants. The plaintiff offered to give the second defendant a cheque once her settlement funds came through, but according to Celine Kerrigan, the second named defendant asked for two bank drafts so that the money could not be traced. She asked that the drafts be made out in her name.
27. According to the witness, there was a discussion about telling the second-named defendant’s mother about the fact of the loan. The second defendant suggested that she would tell her mother that her husband’s brother, Daniel, had given them the money to clear off their debts. The witness confirmed that initially John Keenaghan was reluctant to take money from the plaintiff but the second defendant Jacqueline Keenaghan suggested that they leave John to her, that she would get him around to her way of thinking.
28. At the meeting that everyone agrees occurred on 7th August, 2010, only the plaintiff Della Kerrigan her sister Celine Kerrigan and the second defendant Jacqueline Keenaghan were present. Della Kerrigan confirmed that she was willing to lend money to Jacqueline Keenaghan. Jacqueline Keenaghan said that it was wonderful news and that the plaintiff and her sister were two guardian angels and that she would repay the money. At a later meeting the first defendant, John Keenaghan, was still expressing reluctance and concern about their ability to pay the money back and the witness accepted that she urged him to take the money, notwithstanding his express concern that they could not repay it.
29. The witness gave evidence that after a couple of years Della had remarked to her that there was no sign of the money being repaid. Della relayed to the witness the contents of her conversations in the car with Jacqueline Keenaghan about the repayment of the loan. The witness urged Della to give them time because she felt sure that when the defendants established their business Jacqueline Keenaghan would come back and start paying off the loan.
30. The plaintiff and her sister went out to the defendants’ house and the plaintiff asked when they would start paying the money back, and that she wanted her money back. It was at that point that the first defendant turned around and said it was a gift. The plaintiff was shocked because Jacqueline Keenaghan had consistently, when asking for help, promised to repay every penny. There was an awkwardness and, having exchanged the usual hugs, the plaintiff and her sister left. In the car on the way home, the witness suggested that they needed legal advice. After that meeting the parties never met again.
31. After the initiating letter seeking the return of the money was sent, Jacqueline Keenaghan texted both the plaintiff and her sister, Celine, inviting them out to the house but they declined. This was particularly difficult for Celine Kerrigan because she considered that she had had a very close relationship with Jacqueline Keenaghan between 2002 and 2014. It was put to her in cross-examination that when John Keenaghan expressed his reluctance to take the money because of their inability to repay the sum, that she had said emphatically, ” who said anything about this being a loan? This is a gift .” She denied that those words were spoken but accepted that she was enthusiastic about helping out her friend with the loan that her sister Della had offered. It was suggested to her that there was a witness from Ballyshannon who would give evidence that Celine Kerrigan had told her it was a gift. When pressed by the court to identify the person and the circumstances of that conversation, a woman from Ballyshannon was named. However, the defendants subsequently resiled from that position and no such witness was called. It was suggested to her that she was jealous of the defendants’ new found prosperity and that she had concocted the story of a loan to which she replied:-
“You are so wrong. We were letting her get established with her business thinking that she’d have the decency to come back and say ‘Della there is some money after you lending me the money’, but she didn’t…Della lent her the money and waited on repayment, and never got it..”
The defendants’ case
32. Jacqueline Keenaghan, the second named defendant, gave evidence that she is married to John Keenaghan, the first named defendant, and has three adult children. She worked as a legal secretary until 1986 in a solicitors’ office in Bundoran. She was in the same class as Celine Kerrigan in national school and they were great friends. Celine left school at thirteen and Jacqueline Keenaghan went on to secondary school in the Mercy Convent. They encountered each other from time to time, but were not close friends. She gave evidence that her husband started his own business in architectural services in 1982/83. Both the plaintiff and Celine Kerrigan were invited to her 40th birthday party in July, 2001. She recalled how the town was shocked at the time of the accident which claimed the plaintiff’s father’s life and led to years of pain and suffering for the plaintiff. She took to visiting the sisters, who were in effect housebound by Della’s injuries. She remarked that since everyone in town called to visit them, they had all of the current gossip which she, living two miles outside the town, might not otherwise hear. They became very close friends over the period and supported each other through various medical procedures that one or other of them had had to undergo.
33. She gave evidence about the economic situation in Ballyshannon in 2008 and 2009. In or about 2009 her husband had to start letting people go. A firm of plumbers in the town went into liquidation. A major bakery closed. In 2008 and 2009 a number of people who her husband did an awful lot of work for were in financial difficulty and some ended up bankrupt.
34. Her husband’s office was in a building beside the family home and it would have been noticeable that there were less cars outside the big building. She suggested that Celine was the one who calls the shots in the Kerrigan household and that on an occasion when it was obvious that the employees of her husband’s business were not at work, Celine demanded to know what was going on. She says this took place in 2009 and 2010. She gave evidence that she told Celine about the level of their debts and that her husband was trying to work with Revenue. She stated that she never expressed concern about losing her house because as of July, 2010, there was no mortgage on her house. The bank charges were on land adjacent to the house which lands had planning permission. She gave evidence that she told both the plaintiff and her sister Celine that her husband owed over €200,000 but that he was working with the bank and Revenue authorities. She stated that she did not feel under any pressure at the time because her husband was working with his solicitor trying to obtain fees, and that he was meeting the bank and Revenue. She denies that she ever mentioned money to either the plaintiff or her sister. She stated that she and her husband were in the process of working out their debts with the bank and Revenue. She gave evidence that the allegation that she had complained that she was finding it difficult to put food on the table ” cut [her] to the bone .” She stated she was on Jobseeker’s Allowance and that that was sufficient to pay the bills and food, and that they were in the process of working out their debts with the bank and Revenue.
35. She confirmed that every Thursday night she collected Della for crochet class. She would often go into the house to visit Celine and there were lots of hugs. She was aware of the ongoing case because the Kerrigan women would tell her that they had been to Dublin to see this doctor or that doctor. She painted a picture of an extremely close friendship, particularly with Celine Kerrigan, which was of mutual benefit to all parties. She confirmed that on the evening of the settlement on or about 30th July, 2010 she received a phone call from the Kerrigans telling her the amount that the plaintiff’s case had been settled for. According to the witness, the plaintiff and her sister were out a number of times that week and said nothing about the settlement. On 7th August, 2010 when the first named defendant and his son and his mother were in Galway for an anniversary mass, the witness and her daughter Danielle remained at home. She was at home when, as she calls them, ” the girls ” arrived. According to the witness Celine Kerrigan turned around and said ” Della and I have been talking and we’ve decided we wanted to give you a gift of €240,000 .” This she claims was entirely unsolicited. She said Celine asked where the first defendant was and she explained that he would be back on Sunday. According to her evidence, Celine told her that they had jokingly planned a holiday to Hawaii out of the proceeds of the settlement which was now not going to happen, stating ” no, we are not doing that now, we have decided that we are doing this instead…we want to give you this gift, and that’s it .” The witness said that she refused the gift and told the Kerrigan sisters that her husband John would refuse it as well. She gave evidence that she had no idea where this offer came out of. She picked up her daughter Danielle from her work at Waterworld and told her about the offer and spoke to her about her husband’s probable reaction. She states that she rang her husband that night and that he refused to take the money. When she communicated that refusal to Celine Kerrigan, her reply by text was ” what the f… is wrong with yis? This is what we want to do .”
36. Jacqueline Keenaghan gave evidence that there was a meeting on Monday 9th August when her husband again refused the offer of €240,000 and Celine Kerrigan pushed him to take it. The evidence of Jacqueline Keenaghan was that between 9th and 16th August the plaintiff and her sister were texting them, trying to force them to take the money. According to the witness, she and her husband resisted all attempts by the Kerrigans to force a gift of €240,000 on them. On the 16th August there was a meeting in the Keenaghan house during which Celine Kerrigan was pressing them, using colourful language, to take the money. At some point during the meeting when John Keenaghan said he was not accepting it as he could not pay it back, Celine Kerrigan got up and said ” what the f… are you talking about? Who said anything about this being a loan? This is a gift and this is what Della and I have decided, isn’t that right Della “? According to Jacqueline Keenaghan, Della Kerrigan then said ” yes, John, this is what we have decided, and we want to give you this. ” John Keenaghan then apparently turned around and said ” okay “. There was then cheering and roaring and Sean and Danielle, the son and daughter of the defendants, who were in the other room, joined in on the hugging and celebration and according to Jacqueline Keenaghan, Celine Kerrigan then said ” it took yous f…ing long enough to accept this gift .”
37. According to Jacqueline Keenaghan, having persuaded the defendants to take this gift, Celine Kerrigan then imposed a condition that they were not permitted to tell their family about the gift because she was not telling her own family, ” because they are nothing but money grabbers. ” This suggestion was not put to Celine Kerrigan. According to Jacqueline Keenaghan a few days after they had apparently accepted the gift of €240,000, Celine Kerrigan came out to the house, walked across to Jacqueline Keenaghan and said that she and Della were talking and that they were now going to give €280,000. When Jacqueline Keenaghan said that she did not even want to take the €240,000 she was told to ” shut your f…ing mouth. This is what we have decided. This is what you’re doing and you have no say in the matter. ” The witness gave evidence that they attempted to refuse this gift many times but that ” the girls ” said that as they had been friends that this would make them feel better, that they were doing something good with their money; ” they had weight off their shoulders, it felt that some good was coming out of this money. “
38. When asked about the bank drafts, Jacqueline Keenaghan said she was never asked about a cheque. Had she been asked she avers that she would have taken a cheque. Her evidence was that Celine asked ” what way do you want this? ” and she thought to herself, that €200,000 and a separate €80,000 would clear the bank. A bank draft was mentioned. She denied saying that a bank draft was preferable because it would not be traceable. This suggestion was also not put to the plaintiff or her sister. The second defendant acknowledged that she lodged the draft for €200,000 on Monday the 30th August, 2010.
39. She gave evidence that the friendship continued on as before and that there were a number of outings to places like Ballymena. They continued to exchange birthday and Christmas cards and gifts. She produced an album of cards and photographs documenting the ongoing friendship, including photos of the surprise 50th birthday party which the plaintiff and her sister Celine assisted in organising for her in 2011.
40. Jacqueline Keenaghan gave evidence that between 2010, when she received €280,000 from Della Kerrigan, to 2013 she never thought about the money that she had received from her. Asked about the conversation in which the plaintiff asked for the money back, the second defendant gave evidence that she said to Della Kerrigan, ” do you not remember all of that…about you giving it as a gift? ” She says that Della Kerrigan replied, ” That’s right. But our circumstances have changed. We want it back .” Jacqueline Keenaghan told her “that money is long gone since 2012.” The witness gave evidence that the plaintiff brought the matter up again and said they, meaning she and Celine, would do what they had to do, to get it back. She recounted details of an encounter with Celine Kerrigan in her house. That event was never put to Celine Kerrigan.
41. Jacqueline Keenaghan’s evidence about the meeting in April, 2014 when the plaintiff and her sister were looking for the money back, was that Celine Kerrigan accepted that the money was a gift but that now they wanted it back. Explaining the ” gift “, Jacqueline Keenaghan said:-
“The girls had said that they loved me that much and that this is what they wanted to do and that this would make them feel better…it was them who came up with ‘this is a gift’, this is what they wanted to do… then John accepted it and the whole thing about it is the girls had said to me our friendship meant so much and that because of the accident and the whole lot that this would actually make them feel better that at least the money was going to two good causes, ourselves and their nephew, and that this is what they wanted to do. And in my heart and soul, hand on heart, this is what I felt they wanted to do. And they were so insistent and persistent that ‘this is what we want to do’ and that is why we accepted it then. You could see it seriously in the girls this is something they wanted to do.”
The witness said she took the money because ” the girls ” were insisting they would feel better and because ” we were such good friends it would make them feel better. ” The witness stated that she never ever asked them for money. According to her, where the sum of €240,000/280,000 came out of, she will never know.
42. In cross-examination it was put to the witness that in resisting an application for summary judgment she had sworn an affidavit describing the monies given to them as, ” either a gift or an unconditional act of charity or an open ended loan without a repayment date. ” The second-named defendant’s explanation for that description, was that the affidavit had been typed by her legal team and that she had read it and signed it. Notwithstanding that her description in 2014 encompassed the possibility that the money was given as a loan without a repayment date, the second defendant refused to accept responsibility for that description and held fast to her current evidence that it was given as a gift.
43. The differences in educational attainment between the witness and Della Kerrigan were explored. The witness obtained a B.A. in counselling and psychotherapy in 2012 and an M.A in the same discipline in 2015. The witness did not accept that this gave her any superior intellectual advantage over Della Kerrigan, despite the latter’s debilitating injuries.
44. The witness denied that she had ever cried in front of the plaintiff and her sister, when speaking of her family’s financial predicament. She maintained that in the absence of Della Kerrigan’s money she and her husband would have worked their way out of their financial difficulties. When asked about how much they had recouped from their list of debtors she replied ” nothing…they all went bankrupt. ” Despite this the witness insisted that she and her husband did not need either a loan or a gift of money in 2010. Her explanation for taking the money was that the girls insisted that they take it. When pressed on the point, the witness agreed that she and her husband took the money out of kindness to the plaintiff and her sister, because it was what they wanted to do. The witness denied ever telling the plaintiff or her sister that she would pay back every penny of the amount being lent to her. She also denied telling them that she would beg, borrow or steal to pay the money back. On the issue of the bank drafts she agreed that it was she who suggested two drafts, one for €200,000 and one for €80,000. In her head she said she was thinking of €80,000 for the bank to get that sorted. She stated that she would have taken a cheque but that Della Kerrigan had gone to the bank and that the bank had told her that it would take some time for a cheque book to issue.
45. There was a lengthy exchange about what John Keenaghan meant when he refused the money, on the basis that they could not pay it back. It was put to the witness that that indicated that John Keenagahan knew that what was on offer was a loan. The witness maintained that he was just clarifying things. Counsel was unable to establish what the witness thought that John needed clarity on. When asked specifically whether he needed clarity as to whether it was a gift or a loan, the witness replied ” no it was always a gift .” In the course of the exchanges on this issue the witness pointed out that 90% of the interactions and conversations took place between herself and ” the girls ” and that her husband John was only intermittently present throughout their friendship and throughout the events leading up to the payment of the money.
46. In the course of cross-examination the witness insisted that she was 110% sure that she had never told ” the girls ” that her husband owed €240,000, that the most she had ever said was that he owed over €200,000. When confronted with an earlier contradictory averment in her affidavit of 6th October 2014, in which she swore that ” I had told them the sum was in the region of €200-240,000 but left it at that “, she had no coherent explanation for the contradiction and again sought shelter behind her legal team. During the course of the cross-examination it emerged that the defendants’ debts as of 2010 were in the order of €190,000, the bulk of which was owed to the bank and Revenue. The balance of the money received from Della Kerrigan of €90,000 was spent by the Keenaghans on college education for themselves and two of their children, apart from a sum of €10,000 which was given to their eldest son who resides in the U.S.
Evidence of John Keenaghan
47. The first defendant set out the history of his business providing architectural services, which he commenced on leaving college at the age of 22. The 1980s were tough but business began to improve in the 1990s. He built a house on a two and a half acre plot given to him and his wife by his father. Eventually he moved his offices to outbuildings beside his family home. In the early 2000s business was good and he had three people employed. Like all self-employed people he relied on clients paying their bills. The business had an overdraft to cover the periods between work being done and payments received. At the end of 2007 he had no significant debt problems.
48. In 2008, he noticed a change. There was less work coming in and it became increasingly difficult to get paid for work on hand and work completed. As he put it, ” as a result of that, the overdraft took off “. As mentioned earlier in this judgment his business loan was restructured in June, 2008 with short term loan facilities of €80,000 being advanced, with interest only payments for a period of eight months, and the full sum to be repaid by mid-February, 2009. The security for this loan was an all sums mortgage over the defendants’ lands at Rathmore. In addition the second defendant had to sign a letter of guarantee in the sum of €90,000. Things did not improve. The loan remained unpaid in February, 2009. He had to let his employees go which was a difficult decision in a small community, where employees tend to be friends as well as employees. By 2009 both work and money had dried up. The first and second defendant attended MABS, the money advice and budgeting service, for advice on how to deal with their growing liabilities. They were clearly advised to engage with their creditors and the court infers that the undated letter titled ” TO WHOM IT MAY CONCERN “, drafted by their solicitor sometime after June, 2009 was part of that process. Unfortunately, two of their biggest debtors who accounted for the bulk of the approximately €153,000 owed to the business, went bankrupt. The second defendant applied for and received Jobseeker’s Allowance around this time. As advised by MABS the first defendant engaged with his major creditors, being the bank and Revenue. He answered every inquiry and engaged whenever requested to do so. The witness accepted that as 2009 turned into 2010, he was in severe financial difficulties. When asked as to whether he felt that he could overcome these difficulties, he answered, ” I tried what I could do with the bank…talked to the Revenue, was going to MABS…I was doing everything I could do…trying my best. ” When asked as to whether he felt that he was getting anywhere, he replied ” I was hoping, but I wasn’t really .”
Relationship with the plaintiff and her sister
49. The witness stated that he knew that his wife had been friends with them and had met them the odd time over the years. Knowing that, he invited them to the surprise party that he had organised for his wife’s 40th birthday. He knew that after the accident in 2002, his wife went to visit them regularly at their home. When Della became mobile the sisters began to visit them at their house, first intermittently but this gradually developed into visits, to his recollection, a few times per week. In the witnesses’ view the relationship was developing and ongoing. It was a very close and happy relationship. He personally did not have a lot of contact but any that he did have was great. In his view they were ” great fun…they were just jolly and happy go easy people .” Generally speaking he would be in the room next door when they visited. He was rarely in the room with them. They had great fun with “loads of chat and gossip “. He was the ” tea maker ” and would ” get a shout from the room every now and again ” to bring in tea, and would then maybe have a quick chat.
The money
50. The witness stated that he was unaware of the terms of the settlement of Della Kerrigan’s personal injury claim before 7th August, 2010. He stated that he had nothing to do with that. On that day he was in Galway with his mother and younger son attending a family anniversary mass. He states that he got a call from his wife who told him that ” the two girls had said to her that they were offering €240,000 to help us and that they wanted to give us this money .” His initial reaction was that it was a very generous offer, but that they could not accept it, and his impression was that his wife agreed with him. He got back home on Sunday and he states that his wife showed him texts from ” the girls ” inquiring as to whether John was home and whether he had agreed to take the money.
51. There was a meeting on Monday 9th August at the Keenaghan home when the witness states that he was repeatedly urged, particularly by Celine Kerrigan, to accept the money. He states that having refused to take it umpteen times, he left the room. He states that he was uncomfortable. He states that as she was leaving, Celine Kerrigan approached him and said words to the effect that ” this is what we are doing, this is what we want to do. “
52. Over the next week there were further texts and calls, according to the witness and there was another meeting at the house. Again Celine Kerrigan was urging him to accept the money, assuring him that it was what she and Della wanted to do. He says that he resisted. When asked why by Celine, he says that he responded that they could never pay it back. It was at this point he states that Celine Kerrigan said ” what the f… are you talking about? It’s not a loan, it’s a gift. We have given it to you, that’s what we want to do. Isn’t that right, Della? ” He says that he looked at Della Kerrigan and she said words to the effect that ” this is what we really want to do .” He then agreed to accept the money, which at that stage was €240,000. This was followed by celebrations and hugs with the Keenaghan’s and their two children who were in the adjoining room. The witness gave evidence that he had no idea how the original sum of €240,000 increased over the following days to the sum of €280,000, which they eventually received.
53. The witness confirmed that following the giving of the monies, the relationship between his family and the Kerrigans continued in a happy vein. The Kerrigans still visited two to three times per week and were involved in all major Keenaghan family events. He was aware from his wife that Della Kerrigan had asked for repayment of the monies a few times in late 2013 and early 2014. He was present at a meeting in their home in April, 2014 when the issue of repayment was discussed. He became emotional and cried, and asserted that the money was a gift which the Kerrigans had pressed them to take and that it had all long since been spent.
Cross-examination
54. In cross-examination, the witness was asked about his and his wife’s landholding of approximately two and a half acres, which had been given to them by his father and on which their family home was built. It was established that prior to 2008 there was no mortgage or charge against any of the land. He was taken through the loan document from AIB of the 5th June, 2008, signed on behalf of the bank by a named official. The witness professed not to know who he had dealt with in relation to the restructuring of his loan, but assumed it must have been the named official. He accepted that the restructured loan was for €80,000, to be repaid in full in eight months. He acknowledged that the interest rate on his overdraft of €10,000 was increased as part of the arrangement.
55. He accepted that a term of the restructured loan was that the he would grant the bank an all sums mortgage over his entire folio of two and a half acres. In addition, his wife had to sign a personal letter of guarantee in the sum of €90,000. It appears that at that time, 2008, the witness had secured planning permission for four houses on his lands. He professed not to know what the current value of four houses built in accordance with the original planning would be, despite the fact that one of the services offered by his previous business, was property valuation. He suggested that he lost interest in following up house values when he closed his architectural services business in 2009. He acknowledged that two of the sites were hived off into a separate folio in or about April, 2010 and that the bank registered a charge against the new folio.
56. The current position appears to be that there is subsisting planning permission on the lands for one house, which expires in 2020. There is other land available for potential development, which enjoys road frontage. The site with planning permission, is according to the witness, intended for his daughter Danielle.
57. He stated that the first he knew of bank drafts was when they arrived at his house. He stated that he wasn’t surprised that they were made payable solely to his wife. He was asked about the loans received from his brother (€5,000) and his mother (€1,500) and confirmed that there was no documentation relating to those loans and no interest charged on them. He commented to the effect that they were private loans and that it was ridiculous to talk about interest in such circumstances.
58. He was asked about the issue of the secrecy of the transaction. It was put to him that secrecy was in his interest, because if word were to get out in Ballyshannon that he had access to funds, other creditors might emerge for payment or alternatively, someone like Florence Hutchinson, Della’s solicitor in her personal injury claim, might have intervened to protect Della’s interests. The witness rejected that suggestion and said that that ” is not the type of people we are. ” Later in his cross-examination he claimed that it was ” the girls ” who asked them not to tell anyone.
59. He was asked about the letter of claim of the 6th May, 2014 seeking repayment of the loan, and in particular, why his solicitor did not immediately respond to the plaintiff’s solicitor, saying you have got this all wrong, you ” are barking up the wrong tree ” because the money was given as a gift. He was asked why the first mention of a gift came five months later in an affidavit sworn by his wife in October, 2014 to fend off summary judgment. He had no real answer to the question other than repeating words to the effect that ” we always said it was a gift .”
60. The witness was questioned as to whether he told his accountant, the bank or the revenue of the source of his new found wealth. He stated that he did not tell them, nor did any of them ask him about the provenance of the money.
Other Evidence
61. Two of the defendant’s three children were called to give evidence, their daughter Danielle, and their younger son Sean. Neither of them had much direct evidence to offer. Neither had been directly involved in discussions about money.
Evidence of Danielle Keenaghan
62. Danielle Keenaghan is, courtesy of the funding provided by Della Kerrigan, a speech and language therapist working in the U.K. The Kerrigan sisters have been part of her life virtually since childhood. She was told by her mother of events which had occurred when the three women met at the Keenaghan house on the 7th August, 2010. She gave evidence that her mother showed her the texts that she had received from the Kerrigan sisters after that meeting, asking whether John was home and insisting that they wanted to give them the money. She was at home for the meeting on 16th/17th August. She was in the room next door. She gave evidence that she heard both Celine and Della, particularly Celine, say ” You’re taking the money. We’re offering you this money. This is what we want to do…You’re our friends .” Danielle gave evidence that it was a lengthy conversation. She did not hear her father refer to any difficulty in relation to repayment of the money. At the end of the conversation there was cheering and hugging, and Celine is to have said words to the effect ” it took us long enough to persuade your parents to take the money. “
63. She also gave evidence that she was in attendance at a later meeting between Della and Celine when the money increased to €280,000. Danielle stated that on that occasion she answered the door to the Kerrigan sisters and brought them into the room where her mother was sitting. Danielle said that she witnessed Celine standing over mother wagging her finger when she said ” Della and I have decided that we are giving you €280,000…This is what we want to do .” Celine allegedly told Jacqueline Keenaghan that they were now giving her €280,000 as they wanted to be of more help. According to Danielle, Celine kept insisting that the Jacqueline take the money ” no questions asked .”
Evidence of Sean Keenaghan
64. Like his sister, Sean Keenaghan has little by way of direct evidence to offer the court. The only direct evidence he could provide to the court was that he was present at the family home on the occasion of the meeting between his parents and the Kerrigan sisters on 16th /17th August, 2010. He was with his sister in the adjoining room and heard his parents chatting with Della and Celine when the conversation of the money came up. He gave evidence that he heard ” the girls ” saying that they wanted his to take the money but that they had refused on the basis that the offer was too generous.
65. Sean gave evidence that after the conversation took place he heard a commotion, and that Celine came out of the room to Sean and Danielle saying that they were celebrating their parents’ acceptance of the money. He avers that following the parents’ agreement to accept the money, he was present at a conversation where Celine stated that the one condition that was attached to the gift was that they did not want anyone to know about it.
Evidence of Dr. McGuire
66. Dr. Mary McGuire is a consultant psychiatrist and former clinical director of Roscommon Mental Health Services. She assessed the plaintiff on 7th November, 2018, immediately prior to the hearing of this case. Her assessment was based on an interview of the plaintiff and on an affidavit prepared by the plaintiff dated 16th September, 2014 and a psychotherapy report prepared by Ross Scully, dated 9th June, 2009. The psychiatrist noted that in the collision on 13th November, 2002 in which the plaintiff’s father was fatally injured the plaintiff sustained multiple injuries including facial injuries, bilateral fractured humeri, bilateral fractured knees, a fractured right leg and a punctured lung. She also sustained a closed brain injury and experienced loss of consciousness for an unknown duration. The psychiatrist noted that the plaintiff’s history was that her last memory was of laughing with her father and her next memory was waking up in Altnagelvin Area Hospital in Derry. The plaintiff reported that her memory was patchy for some time afterwards and is patchy, ” even yet “. As part of her history, Dr. McGuire outlined the memory problems the plaintiff experienced after her accident, which continue to this day. Dr. McGuire noted that the plaintiff had developed a major depressive disorder in the aftermath of the accident and this, in conjunction with her natural grief reaction for her father, has resulted in her being treated with significant levels of antidepressant medication since that time. In the course of her assessment by Dr. McGuire the plaintiff stated, ” I will never be right, daddy is dead .” This very much echoes the thought process which she revealed during her psychotherapy sessions in early 2009. Dr. McGuire conducted a mini mental state examination and the plaintiff scored 29 out of 30; the point she lost was in the subsection dealing with recall. In Dr. McGuire’s opinion she states:-
“Ms. Kerrigan sustained life threatening injuries in a road traffic accident on 13.11.2002 and her father was fatally injured in the same accident. Significantly, she sustained a closed brain injury which caused post traumatic amnesia of unknown duration. She continues to experience difficulties with recent memory. It appears that she developed a Major Depressive Disorder in conjunction with her natural grief reaction for her father and has been treated with anti-depressant medication ever since. Her previously normal mental [health] has never recovered. While it is difficult to diagnose in retrospect the objective evidence supports Ms. Kerrigan’s contention that ‘I was not right’ when she handed over €280,000 to her neighbour, Ms. Keenaghan.
(1) She had suffered a closed brain injury with loss of consciousness and post-traumatic amnesia of unknown duration.
(2) She developed a Major Depressive Disorder and was being treated with antidepressant medication.
(3) She was frail mentally and physically.
(4) When asked why she did not get a solicitor to draw up a contract she stated that it never entered her head. Ms. Kerrigan appears to have been very vulnerable, gullible and naïve at that time in her life. She was evidently not looking to her own future needs.”
67. Dr. McGuire was challenged in cross-examination that there was no independent evidence upon which to base her evaluation as to Ms. Kerrigan’s state of mind at the time she handed over €280,000 to her friend Jacqueline Keenaghan. Dr. McGuire instanced the independent evidence of the injuries sustained in the accident; the high dosage of antidepressant medication which she has been on since the time of the accident and the content of the psychotherapy notes which dated from early 2009, all of which supported her opinion of Della Kerrigan’s mental state at that time.
Evidence of Kevin Devlin
68. Kevin Devlin is a Revenue official summoned to prove the fact that neither of the defendants had filed an income tax return in respect of a gift of €280,000. The defendants had been served with a notice to admit facts in respect of this matter but had declined to do so. Mr. Devlin gave evidence as to the Gift Tax payable on a gift of €280,000. The amount payable would depend on whether it was paid as €140,000 to each of the defendants or as €280,000 to the second-named defendant. Mr. Devlin confirmed that having checked the records from 2010 to 2018, neither of the defendants had filed an appropriate Income Tax form in respect of a gift of €280,000. The current liability in the event of a gift of €280,000 being paid in August in 2010, is in excess of €100,000. Later Mr. Devlin returned and gave evidence that there are also Income Tax implications arising from the receipt of an interest free loan. Such a loan is it appears, treated as a benefit in kind and is taxed as such. This too would give rise to a significant tax liability.
Assessment of the Court
69. The most significant testimony in this case is the testimony of the three women, Della Kerrigan, Celine Kerrigan, and Jacqueline Keenaghan. All of the material conversations took place between two or more of them. All of the other witnesses as to fact, including John Keenaghan, are bit players in these events. John Keenaghan’s evidence is in many respects dependent on his acceptance of the truth of what his wife has told him about events leading up to the giving of the money. Similarly, the evidence of her children is largely dependent on what she told them about her interactions with ” the girls “.
The friendship
70. There is no doubt that following Della Kerrigan’s terrible accident, a strong friendship developed between these women. Immediately post-accident, Della was entirely dependent on her younger sister, who took five years’ leave of absence to care for her. For a number of those years they were effectively housebound and neighbours and friends rallied round to keep them company. One of those was Jacqueline Keenaghan, who had been particularly friendly with Celine Kerrigan when they were in national school. The rekindled friendship deepened and the three women spent significant time in each other’s company, first in Celine and Della’s house and after 2007, when Della after many surgical procedures, regained mobility, in Jacqueline Keenaghan’s house. As John Keenaghan put it, the three women would be in one room chatting and gossiping while he would be in another, emerging occasionally to make tea. Celine was a larger than life figure who appears to have had hugs for everyone. The court has the impression that Della was more diffident, perhaps as a consequence of her horrendous injuries and her persistent depression and survivor guilt arising from the death of her father. The court has the impression that prior to these events, Jacqueline Keenaghan was an ebullient type of personality.
71. The court has no doubt that the progress of Della’s claim was discussed between the women. It would be surprising if it were not. Della underwent numerous procedures and had to attend various doctors for the preparation of medical reports. Jacqueline Keenaghan had a general knowledge about the operation of legal practices, having worked for a number of years as a legal secretary, and the advice she is said to have given about seeking regular updates on the progress of the case seems to be the kind of sensible advice that a former legal secretary would give, to ensure that appropriate attention was being given to progressing the claim. As a former legal secretary, it is also reasonable to infer that Jacqueline Keenaghan would have been aware that Della Kerrigan’s case was a substantial one which was likely to attract significant compensation. It seems to be accepted that there was chat, jocose or otherwise, about a possible trip to Hawaii when the claim came through.
72. The court has the impression that these three women discussed everything and supported each other in everything. Apart from the multiple medical procedures necessitated by Della Kerrigan’s injuries, there were a number of medical issues that Jacqueline Keenaghan experienced over the years which required medical operations. They were all the subject of supportive banter between the three women.
73. Just as Della Kerrigan’s claim was likely to have been a subject of conversation between the women, so too was the fact of the rapidly deteriorating finances of the Keenaghan family, particularly in 2009 and 2010. These are issues that one discusses with one’s best friends.
The crisis
74. The court accepts the evidence of the Kerrigan sisters, that in 2009/2010 Jacqueline Keenaghan was frequently tearful and upset at the prospect of losing her home. Looking at the objective facts, the loss of her home was a real possibility. Financial pressure had certainly begun to build in 2008. In June of that year her husband had agreed an all sums mortgage on their two and a half acre holding in Rathmore in return for a restructuring of his business’s loan. On the same occasion she had had to sign a letter of guarantee for €90,000. That has to have been a significant worry for someone who had never had a debt on her property.
75. Thereafter, things continued to go downhill. The couple were unable to repay the restructured loan on its due date in February, 2009. The business closed and its employees were laid off. In that year they approached MABS for advice on managing their debt and John Keenaghan certainly heeded the advice given to him, to engage with his creditors, the primary ones being the bank and Revenue, to whom collectively a sum in the order of €170,000 to €180,000 was owed. They approached their solicitor to try to recoup money from their debtors but were unsuccessful, because their debtors were themselves in trouble. Their two primary debtors, who between them apparently owed the business in excess of €120,000 net of VAT, went bankrupt. Bankruptcy was also a realistic fate facing the Keenaghan’s at that time.
76. In 2009, Jacqueline Keenaghan applied for and received Jobseeker’s Allowance, which is a means tested benefit. She also began a college course to qualify as a counsellor and psychotherapist. By the end of 2009, the only income the couple had to live on, and to service their growing debts, was Jobseeker’s Allowance. This income was supplemented by family loans totalling €6,500 provided by John Keenaghan’s brother and mother.
77. Having regard to the closeness of their friendship, it is in the court’s view highly probable that Jacqueline Keenaghan regularly discussed her worries and anxieties about her family’s precarious and worsening financial circumstances with one or both of the Kerrigan sisters. The court notes that it appears to be common case that she was particularly close to Celine. The court accepts the Kerrigan sisters’ evidence that at some point in those conversations Jacqueline Keenaghan expressed concern that she might not be able to put food on the table. Given their dire financial circumstances for which there was no prospect of relief, that was not an unreal concern. The court also accepts Celine Kerrigan’s uncontested evidence that around this time, Jacqueline Keenaghan told her that she had sought a loan of money from her brother-in-law who had received a redundancy payment, but that he had declined to advance them a loan.
The transaction
78. As the Keenaghan family were sinking ever deeper into debt, Della Kerrigan was approaching a point where she was going to receive substantial compensation for the horrendous accident which had occurred in November, 2002. The court accepts the Kerrigan sisters’ evidence that in the months leading up to the settlement Jacqueline Keenaghan broached the possibility of Della helping her, out of the proceeds of her settlement. The court accepts that she assured Della that if she could help them out of their difficulties that she would pay back every penny. The court is not certain whether the means of paying back the money were discussed before or after the settlement, but is satisfied that Jacqueline Keenaghan talked about the money John was owed and of her plans to set up a counselling business, and that she would be in a position to repay Della Kerrigan out of those resources. The court is satisfied that Della Kerrigan agreed in principle to help her dear friend from the proceeds of her settlement by loaning her money. The court is also satisfied that Celine was an enthusiastic supporter of her sister’s decision. She loved Jacqueline Keenaghan and her family and very much wanted to help her.
79. The court also accepts Della Kerrigan’s evidence that no specific sum was mentioned by Jacqueline Keenaghan prior to the settlement of her case on or about 30th July, 2010. This makes perfect sense, because Jacqueline Keenaghan did not know what sum to pitch for until she knew the amount of the settlement. The fact that almost the first thing the Kerrigan’s did following the settlement, was to phone Jacqueline Keenaghan to tell her of the fact and the amount of the settlement, is also consistent with the Kerrigan’s evidence that in the months leading up to the settlement Jacqueline Keenaghan had been asking them for help from the proceeds of the settlement.
80. On or about 30th July, 2010, Della Kerrigan went from having no money to being wealthy. Neither she nor her sister had any previous experience of handling a large amount of money. Apart from very general advice that they should be careful with their money, and according to Celine, advice not to rush out and buy a Mercedes, there appears to have been no guidance given to them about accessing advice on investing the money with a view to providing an income for Della into the future.
81. There is truth in Jacqueline Keenaghan’s suggestion that Della Kerrigan viewed the money as ” blood money ” stemming as it did from the accident which killed her father. This of course, together with her general vulnerability as found by Dr. Maguire, made her more susceptible to making unwise decisions in relation to the money. The court notes that in giving her evidence, Della Kerrigan became most animated when it was suggested to her that she had obtained a good settlement. She was offended by the notion that any level of damages could compensate for the loss of her father and the manner of his loss. The court is satisfied that she would willingly have handed back every penny to have her pre-accident life restored to her.
82. There is no doubt in the court’s mind that the sisters, particularly Celine, derived significant pleasure and satisfaction from the fact that the settlement of €750,000 put them in a position to give their friend Jacqueline, the help which she had been requesting over the previous months. Knowing the settlement figure, Jacqueline was now in a position to formulate her request for a loan. The court considers it likely that there may have been some preliminary chats in the week following the settlement. It is agreed that there was a meeting between the three women in Jacqueline Keenaghan’s house on Saturday 7th August, 2010, when her husband John was away at a family event in Galway. Jacqueline Keenaghan’s initial request appears to have been for €240,000. The court accepts the evidence of the sisters that they were shocked at the size of the sum. Della Kerrigan had anticipated that the sum would be in the region of €50,000. However, she felt honour bound by her earlier agreement to help Jacqueline, and trusted her word that she would repay every penny. The Kerrigan’s didn’t even ask for a breakdown of the Keenaghan’s liabilities. Had they done so and had the query been answered, they would have learned that their debts were in the region of €180,000 to €190,000. The sum actually owed was €50,000 to €60,000 less than the sum of €240,000 initially sought by Jacqueline Keenaghan. Della Kerrigan agreed to advance her the money. There were kisses and hugs and the court accepts the Kerrigan sisters’ evidence that in her gratitude and euphoria, Jacqueline Keenaghan once again promised to her ” guardian angels ” that she would ” pay back every penny .” There was a conversation between Celine and Jacqueline about John’s likely reaction.
83. That evening she phoned John in Galway. According to his evidence she told him that the girls were offering €240,000 to help them out. This of course was true. What Jacqueline Keenaghan failed to tell her husband, at least on that occasion, was that she had asked for the money and had promised to pay it back. To the court’s mind there is a real possibility that Jacqueline Keenaghan never told her husband the full details of what had transpired between her and the Kerrigan sisters.
84. The court accepts that John Keenaghan’s initial reaction was that it was a most generous offer, but one which they could not accept. His wife professed agreement with his view. In the circumstances of this case, the court considers that that agreement was feigned. Jacqueline Keenaghan was desperate to get access to money to discharge their liabilities. The court accepts that over that weekend there were texts from Celine asking what the situation was with John and whether they were going to accept the money.
85. There was a meeting in the Keenaghan house on Monday 9th August, 2010, at which John was in attendance. The purpose of the meeting was to persuade John to take the money. Celine Kerrigan was trying to reassure him in the forthright language that she is prone to using, that she and Della had discussed the matter and that they really wanted to help them. The court accepts his evidence that the situation made him uncomfortable. To his credit he had qualms about accepting their money notwithstanding the dreadful financial circumstances in which his family found itself. He must of course, have known that the sum on the table grossly exceeded the family’s liabilities, yet he said nothing. The court accepts Celine Kerrigan’s account that following this inconclusive meeting Jacqueline Keenaghan said to her words to the effect ” leave John to me. “
86. A week passed during which the court has no doubt, that there were lots of conversations, particularly between Celine and Jacqueline. A further meeting took place on Monday 16th August when John was again being urged to accept the money, primarily by Celine Kerrigan. The court accepts that at one point during that meeting he expressed the view that they would not be able to repay the money. The court does not accept however that this prompted Celine to respond ” what the f… are you talking about? Who said anything about this being a loan? This is a gift. ” Celine Kerrigan was fully aware of the arrangement that had been made between Jacqueline and Della and was unlikely to describe as a gift that which she knew to be a loan. Her concern at that meeting was to get John Keenaghan to accept the money which her friend Jacqueline had been requesting for months. The court does not consider that reference was made to either the term ” loan ” or ” gift ” during the course of that meeting. The entire focus of the meeting was on getting John to accept ” the money “. Wiser heads might have paused when one of the beneficiaries of a loan expressed concern about repayment, but the entire focus of that encounter was as already stated to persuade John Keenaghan to accept the money. Della Kerrigan confirmed that she wanted to give them the money and John Keenaghan relented, and that is to his discredit. Also to his discredit is the fact that he agreed to accept from these women, who he knew had no expertise in business or finance, a huge sum of money which was grossly in excess of the family’s liabilities. In seeking to persuade the court that the sum was a gift rather than a loan, John Keenaghan testified that he would not have accepted a loan as he already had two significant loans and he would not take on a third. The court is not persuaded by this testimony. The fact is that by accepting this money, he was able to get two powerful well-resourced creditors, the bank and Revenue, off his back and replace them with a creditor who was benign, generous, empathetic and unfortunately for her in the circumstances of this case, naïve and gullible.
87. John Keenaghan had been in business for almost 30 years. He had experience of contracts and business dealings. He had had dealings with banks relating to loans and overdrafts. He had had dealings with solicitors. He knew how these matters should be conducted. He knew or ought to have known, that Della Kerrigan should take advice before handing over a third of her settlement cheque to his wife. He did nothing. Having relented, and having agreed to accept Della Kerrigan’s money, he left the finer details to his wife. He professed not to know how the sum of €240,000 originally offered was ultimately increased to €280,000.
88. Sometime between the 16th and the 27th August, 2010, the sum requested by Jacqueline Keenaghan increased from €240,000 to €280,000. The evidence of the Kerrigans is not very clear as to how that came about. Celine’s memory only relates to the sum of €280,000, while Della remembers that the initial request was €240,000 but ultimately increased to €280,000. The court notes that the additional €40,000 equates in general terms to the sum set aside by Jacqueline Keenaghan for the Keenaghan children’s education. It is in the court’s view possible that having encountered little resistance to her original request, she decided to pitch for an additional sum to cover her children’s education. One way or another, the court is satisfied that the increase of €40,000 was requested by Jacqueline Keenaghan.
Confidentiality
89. On the evidence, the court is satisfied that the parties agreed that they would keep the fact of the transaction between themselves. Each had different interests in doing so. While the Kerrigans had immediately told Jacqueline Keenaghan of the amount of Della Kerrigan’s settlement, that information would not have been common knowledge at that time in Ballyshannon. It is perfectly understandable that people who come into a large sum of money, would not want that fact generally known. The court notes that when Della Kerrigan received her settlement cheque, she did not lodge it in a bank in Ballyshannon but instead travelled approximately 15 miles to Donegal town to open an account with AIB.
90. Jacqueline Keenaghan of course had a far greater imperative for secrecy. First of all, had it become common knowledge that the Keenaghan’s had received €280,000 from Della Kerrigan, wiser heads might well have intervened to protect Della from her own naivety and sought as a minimum, to put any such arrangement on a formal and proper legal footing. Secondly, such information would have alerted the Keenaghan’s creditors to the availability of funds and would have hampered their capacity to negotiate with those creditors. In his cross-examination, John Keenaghan was coy about the original sum claimed by Revenue and whether or not the ultimate sum paid to Revenue was a compromise figure. The court notes in this regard that Revenue were not paid for more than four months after the Keenaghans received €280,000 in August, 2010. The court also notes that the €280,000, when paid was paid to Jacqueline Keenaghan solely, which meant that it was not directly amenable to John Keenaghan’s creditors.
The payment
91. The court accepts Della Kerrigan’s evidence that Jacqueline Keenaghan asked for the sum to be paid by way of two bank drafts so that it could not be traced. Jacqueline Keenaghan accepts that she suggested the two drafts and the amount of each, but denies that she said that it was so that the money could not be traced. She said that she would have been willing to take a cheque. The court does not accept her evidence in that respect. The evidence is that it would have taken some weeks for a cheque book to issue on Della Kerrigan’s new account and Jacqueline Keenaghan did not want to wait. Delay of that order might well have frustrated her plan. Furthermore, there was a risk that were she to present a cheque signed by Della Kerrigan, questions might have been asked, or alternatively, the information that Della Kerrigan had given her such a large sum of money might have leaked out in a small community. That too might have frustrated her plan.
Repayment
92. It is agreed that on two or three occasions in late 2013/early 2014, Della Kerrigan asked Jacqueline Keenaghan about the repayment of her money. By that point, more than three years had passed and the Keenaghans were both qualified as counsellors and psychotherapists and were running a business as such, known as Ark Counselling. The conversations took place in Jacqueline Keenaghan’s car on the way back from the Thursday crochet/knitting classes. According to Della Kerrigan on each occasion the matter was raised, Jacqueline Keenaghan pleaded that she needed more time. On one such occasion she suggested that she ” would have to talk it out with her husband. ” Jacqueline Keenaghan’s version is that she responded to Della that the money had been a gift and that Della had agreed, but maintained that circumstances had changed and she wanted the money back. On another occasion she suggested that Della Kerrigan said that she would do whatever was necessary to get the money back. The court prefers the evidence of Della Kerrigan on this issue for two reasons. First there is evidence that when she relayed the contents of her conversations with Jacqueline Keenaghan to Celine, Celine urged her to give Jacqueline the extra time that she had requested. Second, when in the meeting in April, 2014, John Keenaghan had suggested that the money was given as a gift and Jacqueline had agreed with him, that assertion caused an immediate rift between the parties. Had Jacqueline suggested in her earlier conversations with Della that the money was given as a gift, the rift between the parties would have occurred earlier.
Jacqueline Keenaghan’s account
93. The court rejects the evidence of Jacqueline Keenaghan because it is implausible and in many respects self-serving. She asks the court to accept that there was no financial crisis in the Keenaghan household in August, 2010; that they neither needed a loan nor a gift; that they were dealing with their creditors and would work matters out. That flies in the face of the facts as set out in this judgment. In July/August, 2010 alone, three bank loan interest repayments went unpaid. Their creditors were circling and they had no means to fend them off. Her husband essentially accepted that that was so.
94. She asks the court to accept that she never became emotional or tearful in front of ” the girls ” about the financial crisis facing her family. In the course of her evidence both in chief and in cross-examination, the court has had the opportunity to observe how readily tears come to her. Her demeanour both in the witness box and in the court room over a number of days, strongly supports the evidence of the plaintiff and her sister on this aspect of the case.
95. She asks the court to accept that Celine Kerrigan ” out of the blue ” and without prompting from her in any way, first offered €240,000 and later €280,000 to her. That is simply not credible.
96. She asks the court to accept that she and her husband accepted the money as a kindness to Della Kerrigan, because she and Celine were so persistent and insistent that they should take it. Suffice it to say that the court finds that assertion to be both arrogant and patronising as well as not credible. Were there an iota of truth in this assertion, one would have expected that the Keenaghans would simply have put Della Kerrigan’s money aside, to be returned to her when she needed it. As we know, that did not happen.
97. In her first response to Della Kerrigan’s claim which came in her affidavit of 6th October, 2014, resisting summary judgment, she adverted to the possibility, among others, that the money was given as a long term loan without a repayment date. When asked to explain how she came to make that averment, she blamed her lawyers. Thereafter, she opted for and stuck fast to the defence that the money was given as a gift. Her family, who had no material involvement in the transaction, adopted that mantra and repeated it throughout their respective evidence.
Decision
98. For the reasons set out herein, the court is quite satisfied on the balance of probabilities, that Jacqueline Keenaghan, in the face of impending financial disaster for the Keenaghan family, pleaded with Della Kerrigan for help and promised that if she did help that Jacqueline Keenaghan would pay back every penny. The money given to her therefore was a loan which had no specified repayment date.
99. Seeing the enthusiasm that the Kerrigan sisters, particularly Celine, had for helping her, Jacqueline Keenaghan became greedy and sought a sum vastly in excess of her family’s liabilities. She allowed Della Kerrigan to give her €90,000 to €100,000 more than the family’s debts. This was spent on college fees and expenses for John and Jacqueline Keenaghan and their two children, Danielle and Sean. Though married in the U.S, their eldest son Edward was not excluded from the windfall. €10,000 was lodged to his account in AIB Ballyshannon on the 30th August, 2010, the day the draft for €200,000 was cashed.
100. The real tragedy in this case stems from the reaction of the Keenaghans to Della Kerrigan’s request for repayment in 2013 and 2014. The three women were still best friends. Had the Keenaghans made any effort or proposal to begin repayment, it is highly likely in the court’s view, that it would have found favour with the Kerrigans. There is no suggestion that Della Kerrigan ever demanded immediate repayment of the full sum. The court is confident that any reasonable proposal would have found favour even if it was spread over many, many years. The Keenaghans were in a position to make payments. Two acres of their two and a half acre holding has road frontage and development potential. At one point it had planning permission for four houses. Had that been sold in 2014 it could have provided for a lump sum payment. In addition, the Keenaghans were both earning and having regard to their absence of debt, were in a position to make some weekly or monthly payments. It would not have been unreasonable for them to have asked their children, whose education had been entirely funded from Della Kerrigan’s money, to make some contribution. Had they taken those steps or any of them, the court considers it probable that this case would never have come to court.
101. Rather than acknowledging their debt, the Keenaghans chose to deny it and thereby, at least by implication, cast doubt on the honesty of the Kerrigans. It was Jacqueline Keenaghan’s denial of the true circumstances of the loan that ruptured this friendship. The Kerrigans saw that denial for what it was, an enormous breach of trust.
102. For the avoidance of doubt, the court wishes to make it clear that while holding that the sum paid to Jacqueline Keenaghan was a loan requested by her, had the court concluded that in fact this money was given as a gift, it would in the circumstances of this case, have set the gift aside as being an improvident transaction on foot of which John and Jacqueline Keenaghan have been unjustly enriched, and accordingly it would be unconscionable for them to be permitted to retain it.
The Governor and Company of the Bank of Ireland v Timmons
[2019] IEHC 419 (20 May 2019)
JUDGMENT of Mr. Justice Meenan delivered on the 20th day of May, 2019
Background
1. This is the plaintiff’s motion seeking liberty to enter final judgment in the sum of £248,520.75 (Sterling) or the euro equivalent thereof. The sum being claimed arises from two loan accounts, having account numbers 300733774 and 300734044.
2. Initially the defendant was not legally represented but solicitors came on record on 30 June 2017. Prior to this date, the defendant filed a number of affidavits himself. For the purposes of this application, the defendant relies upon an affidavit, sworn 3 March 2017, wherein he seeks to raise a number of defences so as to have this matter remitted to plenary hearing.
Affidavit of the defendant
3. The affidavits set out the history of the defendant’s dealings with the plaintiff. This history is sadly similar to that of many others who, with little or no experience, became involved with commercial property and incurred financial liabilities as a result. These persons, such as the defendant herein, were particularly vulnerable when the economic crash occurred.
4. The defendant deposes in his affidavit that he was approached to become part of a company (Investrade Limited) that was set up to purchase the upper floor of a property known as Halifax House, Fenwick Street, Liverpool. This company then approached an official of the plaintiff with a view to obtaining finance to develop Halifax House into 26 apartments. The company borrowed some £3million from the plaintiff. A number of serious problems developed with Halifax House, including a water leak and an ensuing insurance claim. There were also a number of claims concerning maintenance which affected the rest of the building. In any event, following the initial sale and rental of a number of apartments in the building, there remained four vacant units.
5. The defendant maintains that he was contacted by Mr. Pat Flynn, an official of the plaintiff, concerning the purchase of these four apartments.
6. In his affidavit, Mr. Flynn states that a number of meetings with the defendant and other investors took place in or around October 2006. Arising from these meetings the plaintiff issued a letter of offer in the sum of £125,000 to the defendant on or about 19 December 2007 to finance his purchase of the apartments. Mr. Flynn states that the defendant and his co-investors decided not to draw down the funds offered and requested the plaintiff to issue individual facilities in respect of each property, which the plaintiff agreed to do. These individual facilities were drawn down by the defendant in May 2008. Confirmation of the draw down is evidenced by documentation exhibited in this affidavit.
7. The defendant maintains that, in the course of these meetings, the plaintiff bank did not act in good faith and that he relied upon the advice of the plaintiff to purchase the apartments. This advice, on the submission of the defendant, amounted to negligent misstatement.
8. The defendant maintains, in his affidavit, that the monies referred to in the affidavit of Mr. Flynn were not, in fact, drawdown.
Affidavits of the plaintiff
9. A number of affidavits had been filed on behalf of the plaintiff. The affidavit of Ms. Hazel Fitzpatrick exhibits the various bank statements and loan offers made to the defendant. It is clear from these affidavits, in particular the exhibits thereto, that the amounts being claimed by the plaintiff are in respect of monies advanced by the plaintiff to the defendant which were drawn down.
10. I refer again to the affidavit of Mr. Flynn wherein he states that it was the defendant and his co-investors who proposed that the apartments be purchased in their own names and that this proposal was not instigated by him. Mr. Flynn further states that neither he nor the plaintiff applied any pressure to the defendant or his co-investors and that all requests in relation to the restructuring of their financial obligations to the plaintiff were at the their instigation and behest. Mr. Flynn maintains that he did not offer any advice in relation to the financial affairs of the defendant.
Principles to be applied
11. The principles to be applied by a court in an application for summary judgment are well established. I refer to the often cited passage of Hardiman J. in Aer Rianta v. Ryanair Limited [2001] 4 IR 607, at p. 623: –
“In my view, the fundamental questions to be posed on an application such as this remain: it is “very clear” that the defendant has no case? Is there either no issue to be tried or only issues which are simply and easily determined? Do the defendants’ affidavits fail to disclose even an arguable defence?”
12. In his replying affidavit and submissions to the Court, the defendant maintained that the plaintiff was not only acting as a banker but was also giving commercial advice. The defendant maintains that this advice was given negligently and that he acted on it to his detriment. On this issue I refer to the following passage from the judgment of Ní Raifeartaigh J. in Allied Irish Banks Plc. v. Marino Motor Works Limited [2017] IEHC 522: –
“35. There is no doubt that there was a long set of interactions between the parties involving considerable correspondence and meetings, only some of which have been put before the court. It is true that no evidence was put before the court to suggest that the bank went beyond the normal banking/customer relationship and somehow took on the mantle of offering general business advice; however, the defendant’s case, in terms of its proposed counterclaim, is primarily one not of fiduciary duty but of simple negligence in the course of the ordinary bank-customer relationship. I do not underestimate the difficulties facing any defendant in bringing such a claim home successfully; however, it is probably fair to say that the nature of the defendant’s business was such that the banking facilities available to the business were integral to the day-to-day running of the business. It is possible that, upon a close examination of the evidence, a conclusion might be reached that there was some negligence on the part of the bank at particular moments in time which may have negatively impacted on the defendant’s business and, in turn, its ability to repay the bank. I am sceptical, on the basis of the evidence I have seen, that this is so but, in view of the substantial conflict of evidence concerning various factual matters as between Mrs. Barry’s affidavits and that of Ms. Lombard, I am not in a position to conclude that the proposed counterclaim is inevitably doomed to fail and that the defendant simply has no case in this regard. Accordingly, on this ground also, I will remit the matter to plenary hearing.”
Application of principles
13. Insofar as the defendant alleges that the monies were not drawn down and questions the basis for the two loan accounts referred to by the plaintiff, I am satisfied that the defendant has failed to establish any bona fide grounds for defence. I am satisfied, on the basis of the documentation exhibited, that these are the relevant loan accounts and that the monies have not been repaid.
14. In respect of the defendant’s claim for negligent misrepresentation, I adopt the passaged cited above from Ní Raifeartaigh J. in Marino Motors . Though I have misgivings on this point, there is nonetheless a conflict between the affidavits of the defendant and that of Mr. Flynn which I cannot resolve in the course of a hearing for summary judgment. I am satisfied that the defendant’s claim of negligent misrepresentation goes beyond a “mere assertion”, as per McKechnie J. in Harrisgrange Ltd. v. Durcan [2003] 4 I.R. 8.
Conclusion
15. The plaintiff is entitled to judgment in an amount but I will hear counsel as to precisely what this amount is.
16. I will permit the defendant to maintain his action for negligent misrepresentation by way of a counterclaim. Depending on the determination of the counterclaim, the defendant may be entitled to set off such amount, if any, as may be awarded in the counterclaim as against the sum due and owing to the plaintiff.
17. I will hear counsel on directions as to pleadings.
Spencer -v- Irish Bank Resolution Corporation Ltd (In Special Liquidation)
[2016] IECA 346 (23 November 2016)
JUDGMENT of Mr. Justice Gerard Hogan delivered the 23rd day of November 2016
Introduction
1. This is an appeal brought by the plaintiff and appellant, John Spencer (“the plaintiff”), against the decision of the High Court (Costello J.) where his claim for damages for negligent misstatement and misrepresentation in respect in respect of oral and written statements which he alleged were made to him by the first named defendant (“the Bank”) was dismissed: see Spencer v. Irish Bank Resolution Corporation [2015] IEHC 395.
2. The background to these proceedings is complex, but it is admirably summarised by Costello J. in the comprehensive judgment which she delivered on 15th June 2015. In many instances in this judgment, I have adopted or adapted the helpful summary of the relevant facts and general narrative set out in the judgment of the trial judge. While I reach a different conclusion from Costello J. in respect of some key aspects of both her reasoning and the ultimate result, her summary of the facts and the issues and her presentation of the applicable legal questions has been of considerable assistance in the preparation of the judgment.
The background facts
3. The essence of the plaintiff’s case is that his contention that as a result of certain representations made by the Bank he invested €1m. personally in a life assurance bond offered by Anglo Irish Assurance Company Limited (“AIAC”) and he borrowed a further €1 m. from the Bank for the purpose of advancing that sum to a partnership, the Cashel Rock Partnership, so that the Partnership could purchase a life assurance bond from AIAC. In relation to the Partnership, the plaintiff initially claimed that he was an assignee of the interests of the Partnership and was entitled to sue in respect of the losses allegedly caused to the Partnership arising out of the investment in the bond. At the end of the case in the High Court it was accepted that the evidence did not establish an assignment of the Partnership interest and this claim was not maintained. Both of these bonds now have a nil value. It is, however, unnecessary for me now to examine the Castle Rock Partnership issue at all.
4. The plaintiff also advanced a distinct claim for negligent misrepresentation as against the Bank in connection with the representations which he alleges caused him to enter into a loan agreement with the Bank. The plaintiff also sought a declaration that discharges him from his obligations arising under the current loan agreement. He also sues for damages for breach of warranty, breach of duty and breach of fiduciary duty.
5. The second named defendant, Stapleford Finance Ltd. (“Stapleford”) was joined by order of the High Court. It purchased the loan, the subject of the proceedings, from the Bank pursuant to s. 12(2) of the Irish Bank Resolution Corporation Act 2013. The second named defendant has counterclaimed seeking judgment against the plaintiff pursuant to the loan agreement. The plaintiff replies that he is entitled to set-off his claim in damages against the Bank in relation to the loan against the entire claim due and owing pursuant to the loan agreement. The plaintiff accepts that if his claim to a set-off fails that the second named defendant will then be entitled to judgment against him in respect of the loan.
6. The appellant did not appeal against certain aspects of the judgment of the High Court, a matter to which I will later refer as appropriate. Both the Bank and Stapleford lodged notices to vary in respect of the findings of misrepresentation made by the trial judge. I will also address this matter in due course.
The Whitgift Shopping Centre
7. The dispute itself concerns the purchase of certain property interests in Croydon, a southern suburb of London in 2005. In the 1960s the Whitgift Shopping Centre (“the Whitgift Centre”) was constructed in central Croydon on lands owned by the Whitgift Foundation. It was refurbished in 1985 and 1998. By 2005 the Centre was a large retail/office centre. Part of the Centre comprised ageing offices and a car park which was leased to the British Home Office on a lease which was due to expire in December 2010.
8. The freehold title to the Centre vested in the Whitgift Foundation. The Whitgift Foundation was founded in 1596 and is comprised of two charities; it owns much of the freehold of central Croydon for, inter alia, educational trusts. There was a long reversionary lease held by the Royal London Mutual Insurance Society (“the Royal London”) and a long sub-lease held by Whitgift Shopping Centre Partnership and property partners. In essence, therefore, the Whitgift Foundation and the Royal London each owned 25% of the interest in the Centre and the then managing company, the Whitgift Shopping Centre Partnership and property partners, owned the remaining 50%. This long leasehold interest was offered for sale in 2005 and is the subject of these proceedings.
9. Under the terms of the reversionary head lease, no development could be carried out without the consent of the Whitgift Foundation. In addition, even if the Foundation as landlord authorised developments to the Centre, the Whitgift Foundation and the Royal London would each have to agree to contribute to the costs of any proposed development on a pro rata basis. They were under no obligation to contribute to the costs of any development in excess of 5% of the rental income of the Centre.
The purchase of the long leasehold interest in the Whitgift Centre
10. Howard Holdings plc (“Howard Holdings”) was an Irish and UK based property development, advisory and management company. It had over 50 staff and was itself based in Croydon. It had significant experience in the Irish, UK, European and South African property markets and at that time had approximately stg£1.5 billion of property under development. The Bank had established a successful working relationship with Howard Holdings during the development and management of two successful property developments in Cork.
11. On 29th March 2005, Howard Holdings made a presentation to the Bank in relation to the Whitgift Centre. The presentation provided a description of the “[s]ignificant opportunities for asset enhancement”. The Bank was interested in joining with Howard Holdings in forming a joint venture to purchase and develop the asset.
12. The structure of the proposed purchase and investment was complex. The leasehold interest was to be acquired by AIAC, a subsidiary of the Bank, and was to be vested in a Jersey unit property trust (“the JUPT”). A fund known as the Whitgift Geared Property Fund was established by AIAC to acquire 77.3% of the units in the JUPT. The balance of the units were to be purchased by representatives of Howard Holdings (“the JV Partners”). The investors in the Whitgift Geared Property Fund would each purchase a life insurance bond from AIAC for the Fund. The value of each bond or policy was linked to the value of the underlying asset, being the long leasehold interest representing 50% of the interest in the Whitgift Centre.
13. The purchase price for the 50% stake in the Whitgift Centre was stg£225 million plus costs of stg£7 million. The source of funding was a debt facility of stg£166m. provided by the Bank and investor equity of stg£66 million. Of this equity, stg£15m. was to come from the JV Partners and stg£51m. was to be raised from the Bank’s client base of high net worth individuals. Pending the raising of the equity, the Bank was to provide AIAC and Howard Holdings with bridging facilities in relation to stg£66m. which would be repaid upon receipt of investor equity.
14. The Bank was to be involved in this project in a number of ways. As provider of finance for the purchase of the leasehold interest it required approval from its Credit Committee for the proposed facility; as it was proposing to market and sell the Insurance Bonds in the Whitgift Geared Property Fund to its clients it required Product Committee approval for the investment product. These parallel approvals were pursued within the Bank between May 2005 and June 2005. While there were issues which were never resolved in evidence in relation to each of these approvals, the Bank proceeded on the basis that it had Credit Committee and Product Committee approval. This was never questioned by the Bank.
15. It was essential that a thorough due diligence investigation be carried out as part of the process of deciding whether or not AIAC should purchase the leasehold interest (and whether the Bank should provide finance and invite its clients to invest in the Whitgift Geared Property Fund). For this purpose the Bank instructed Davies Arnold Cooper solicitors to prepare a report dealing with the title and planning history of the Whitgift Centre. They furnished a report in July 2005. The Bank also instructed DTZ Debenham Tie Leung (“DTZ”) to prepare a valuation report; this report was furnished on 22nd August 2005. In addition, the Bank had the benefit of a property report prepared by EC Harris LLP for the previous owners of the leasehold interest in the Whitgift Centre. The Bank instructed McCann Fitzgerald and Matheson Ormsby Prentice solicitors and KPMG Accountants to advise in respect of the legal and tax matters relevant to the proposed investment.
16. On 31st May 2005, Howard Holdings hosted an investment presentation in Croydon to a number of client relationship managers from the Bank during which they had the opportunity to visit the Whitgift Centre. On 20th June 2005, representatives of Howard Holdings and two representatives from the Bank met with representatives of the Whitgift Foundation in relation to the proposed acquisition of the 50% interest in the Whitgift Centre by Howard Holdings and AIAC. Another purpose of the 20th June 2005 was to assess the position of the Whitgift Foundation in relation to proposed developments of the Centre. As the meeting of the 20th June 2005 is of considerable importance to many of the issues arising in this appeal, the details of these meetings will be considered later in this judgment.
17. Once the Bank had completed the due diligence process to its satisfaction on 29th September 2005, AIAC entered into a contract to purchase the leasehold interest and the Bank advanced the finance (both bridging and long-term). The Bank and AIAC were now formally in a position to offer bonds in the Whitgift Geared Property Fund to their clients.
Planning in relation to the Whitgift Centre
18. The planning history in relation to the Whitgift Centre and an adjoining development was complex and still evolving throughout 2005. Prior to the acquisition of the Whitgift Centre by AIAC in 2005 the previous owners of the long leasehold interest had made two planning applications to develop the Centre. The first application, known as Bishops’ Court 1, was refused on 4th April, 2003. A revised application in respect of the Whitgift Centre, known as Bishops’ Court 2 was submitted. This also was refused but was appealed in 2005 to the Secretary of State. The appeal was rejected on 5th October 2005.
19. The owners also applied to develop the site of an existing car park between office blocks B and C on the Wellesley Road side of the Whitgift Centre to provide a new medium sized retail unit comprising of some 80,000 square feet. This application was referred to as the Phase IV development. It was on the site of the car park that was leased to the British Home Office together with various offices. That lease was due to expire in December 2010 so that the owners did not have an immediate right to vacant possession of this plot of land. (This is a detail which also assumes some considerable importance so far as the resolution of this appeal is concerned and to which I will later refer.) On 22nd December 2004, planning permission was granted in respect of the Phase IV development, but this could not immediately be acted upon without the cooperation of the Secretary of State and, specifically, without the surrender of the existing lease.
The plaintiff’s investment in the Whitgift Geared Property Fund
20. The plaintiff is a solicitor who in 2005 had been in practice on his own account in Nenagh for some 20 years. He had developed a substantial property portfolio of more than 15 properties both in Ireland and in England. He found managing a large number of individual properties was time consuming and wished to change to a less “hands on” form of property investment.
21. In the spring of 2005 he became aware of an opportunity to invest in a geared property fund offered by Quinlan Private in an asset in Knightsbridge in London (“the Knightsbridge Investment”). On 2nd and 3rd June 2005, the plaintiff wrote to Ms. Margot Deacy of the Private Client Division of the Bank asking for a loan to enable him to part-finance his proposed investment in the Knightsbridge Investment. On 16th June 2005, the Bank issued the plaintiff with the letter of offer to enable him to complete this investment. The Knightsbridge Investment was in sterling and the plaintiff wanted to fix the euro cost of the sterling he would require for the investment. The plaintiff agreed a rate and a purchase price for the relevant amount in sterling at that time.
22. Ms. Deacy was aware that the Whitgift Geared Property Fund would shortly be available to market to clients of the Bank. While she arranged for the loan to the plaintiff, she also urged that the plaintiff should consider the Whitgift option before finally committing himself to the Knightsbridge Investment.
23. On 22nd June 2005, Ms. Deacy met the plaintiff at his office in Nenagh and discussed a number of matters. They discussed an investment property owned by the plaintiff and three other partners in Nenagh; a property that they owned in Croydon (entirely unrelated to the Whitgift Centre); and the possibility of acquiring a new premises for another solicitor’s practice in either Killaloe/Ballina. There was, in addition, a general discussion in relation to his pension provision. He indicated that he was interested in gearing up his pension with a view to purchasing a property. He was interested in family partnership and he requested a follow-up meeting on estate planning. At that meeting Ms. Deacy offered the plaintiff the opportunity to invest in the Whitgift Geared Property Fund.
24. Following the meeting of 22nd June, 2005, Ms. Deacy sent the plaintiff a loose-leaf brochure (“the first loose leaf brochure”) in relation to the Whitgift Centre, together with a compliments slip. This was received by the plaintiff on 23rd June 2005. In summary, this brochure identified five asset management opportunities which had a total potential rent increases of stg£2.5m.. It identified five possible development opportunities offering a total potential development profit of stg£30m.. The return on equity was:-
“projected at 150% over 10 years on conservative rent assumptions and NO development profits assumed. Based on Howard’s Master Plan for the centre, our client ROEs could be as high as 250% (development profits included).”
25. The plaintiff was interested in involving a friend who resided in Australia in a property investment. On 27th June 2005, he faxed a friend, Ms. Catharine Scott, a handwritten note urging her to invest with him in the Whitgift Geared Property Fund together with a copy of the first loose-leaf brochure. (Although Ms. Scott has been based in Australia since 1979, she is originally from Ireland). While the issues in relation to Ms. Scott’s involvement in the project featured in the judgment of Costello J., no issue was taken before this Court in relation to those issues and I accordingly propose to leave those issues to one side.
26. The next day the plaintiff emailed Ms. Deacy in relation to his pension mortgage in the following terms:-
“Dear Margot,
…The [pension] fund is due to receive €175,000 per annum for at least the next 7 – 8 years and I am aiming for a growth rate in it of 12% – 15% year on year…
If it is possible to proceed on this basis I am interested in relying on the Anglo investment in Woodgift (sic), Croydon as recently discussed.”
27. In late June 2005 the plaintiff was now considering both the Knightsbridge Investment and the Whitgift Investment as alternative opportunities. He continued to write to Quinlan Private in relation to the Knightsbridge Investment up to 30th June, 2005.
Decision to invest
28. On 15th July 2005, the plaintiff sent an email to the Bank confirming that he would not be proceeding with the Knightsbridge Investment and cancelling the pre-ordered sterling. He stated:-
“Instead I propose to enter an investment vehicle formulated by Anglo Irish Bank which is due to come on stream in terms of its offer to the public in about 3 weeks.”
29. Ms. Deacy sent him a second compliments slip which is stamp dated 15th July, 2005. There was considerable controversy as to what was enclosed with the compliments slip, but Costello J. ultimately found that it was the second version of the loose-leaf brochure which had been enclosed by Ms. Deasy.
30. The plaintiff’s case is that as a result of receiving the second version of the loose-leaf brochure on 15th July 2005, and he decided to invest in the Whitgift Investment. He therefore abandoned the Knightsbridge Investment and he wrote on 15th July 2005 to cancel the pre ordered sterling he had required for that investment.
31. Having decided to invest in the Whitgift Geared Property Fund the plaintiff took the necessary steps to enable him to invest in the Fund. The plaintiff proceeded to realise a number of his assets in order that he could fund his own investment.
32. The plaintiff had two meetings with representatives from the Bank during September 2005. On 9th September 2005, he met with Ms. Deacy and Mr. Tynan and on 29th September 2005, he met Ms. Deacy. Mr. Tynan was involved in order to deal with the complications imposed by the involvement of Ms. Scott in the investment. Ms. Deacy stated that the plaintiff “really liked both the asset management and the development play associated with the Whitgift Fund”.
33. By letter dated 5th October 2005, the plaintiff confirmed that he would be investing €1m. in the Whitgift Geared Property Fund in his own name and the Cashel Rock partnership would also invest €1m. For the reasons which I have already mentioned, it is now unnecessary to consider the position in relation the Cashel Rock partnership any further.
34. On some date between the 12th and the 19th October 2005, the plaintiff met representatives of the Bank, a Mr. David Hayes and Ms. Deacy, at the Radisson Blu Hotel in Galway. Mr. Hayes made a presentation to the plaintiff in respect of the proposed investment in the Fund. Mr. Hayes certainly had a brochure at the meeting. One of the contested issues was whether or not Mr. Hayes was in possession of the second loose-leaf brochure or whether it was the formal funds brochure colloquially referred to as “the Black Book”. In a letter dated 19th October 2005, the plaintiff expressly acknowledged that he had an opportunity to read “the investment information”. In her judgment Costello J. found that that this was a reference to the Black Book as opposed to the second loose-leaf brochure. This is an issue of fact to which I will later return in this judgment.
35. On 19th October 2005, the plaintiff completed a number of documents in the presence of the Bank’s officials. The first was a personal financial review with Ms. Deacy. The plaintiff indicated that he was prepared to invest 100% of his wealth in a high risk investment. Ms. Deacy recommended investment in the Whitgift Geared Fund and the plaintiff acknowledged that the recommendation was based upon the information he had disclosed and that he agreed with the recommendation. This document was signed by Ms. Deacy as sales intermediary and by the plaintiff on 19th October 2005.
36. Also on 19th October, 2005, the plaintiff and Ms. Deacy signed a letter of that date from the Bank to the plaintiff dealing with his investment objectives referred to as the ‘Reasons Why’ letter. The letter refers to a meeting had over the past few weeks and under the heading “Investment Objectives” stated as follows:-
“You indicated that you had several investment objectives. I have outlined these below:
• Diversification -you wish to develop and expand the types of investments you hold – in your case you would like to have exposure to the UK and other property markets as you have sufficient property holdings in Ireland.
• Growth – you wish to get an improved return on your assets by investing in geared property investment options. You are aware that leveraged investments have additional risks; however [they] also have additional potential investment returns.
• Security – you wish to invest in a well-managed investment however Capital Guarantees are not required and you could get less back than you invested.
• Income – we have advised you that this investment does not provide a regular income and you have sufficient resources to cover your income requirements for the next 7-10 years”.
37. The letter recorded the following information that had been provided in relation to his investment experience background and financial standing:-
“• You are aware of property investments and have significant exposure to property investments in your own right
• You have experience of geared property investments and you are aware of the additional risk due to the borrowing
• You have invested in other types of investments including unitised funds, pensions, shares and life investments.
• Your current financial standing allows you to invest in the proposed investment for the term and you are aware of the potential risks to both capital and returns.
• You have had an opportunity to read the investment information and you are satisfied that it meets your investment requirements.” (emphasis added)
38. The letter specifically recorded that in deciding how to invest his money and with a view to potentially higher returns he was prepared to take significant risk with capital. The letter stated that the Whitgift Geared Property Syndicate was a high-risk investment. The letter defined high-risk as where the capital was not guaranteed and could be subject to a high degree of volatility. It was acknowledged that he had an appetite for high-risk. The letter stated:-
“• Recommendation
• Based on the information discussed at our meeting and set out above, I recommend the following investment option as suitable to your circumstances:
The Whitgift Geared Property Syndicate. The amount to be invested will be €1,000,000 in the name of John Spencer.”
39. The plaintiff signed the letter and his signature was witnessed by Ms. Deacy.
40. By letter of loan offer dated 13th October 2005, the Bank offered to advance the plaintiff the sum of €1m. to part fund his investment in the AIAC Whitgift Geared Property Fund. Security for the loan was to be the assignment of his interest in the Fund. At the meeting with Ms. Deacy on 19th October 2005, the plaintiff accepted the letter of offer. He expressly waived his right to a 10 day period to consider the commitment to the agreement and he also waived any right which he may have to withdraw from the agreement under s. 30 or s. 50 of the Consumer Credit Act 1995. He confirmed by his signature that he had read the conditions of the letter and the general conditions in the credit agreement and acknowledged that they formed part of the agreement. His acceptance of the facility letter was witnessed by Ms. Deacy on 19th October 2005.
41. The plaintiff also applied on the same day to AIAC for an investment bond in the Whitgift Geared Property Fund. As this was a life assurance bond, the Life Assurance (Provision of Information) Regulations 2001 applied. Ms. Deacy signed the bond as the plaintiff’s financial advisor. It is expressly noted that it was recommended that independent financial advice be taken when purchasing financial products. Both Ms. Deacy and the plaintiff executed the application for the investment bond on 19th October, 2005.
The Policy Documents
42. By letter dated 5th December, 2005, the Bank issued a receipt to the plaintiff in respect of bond number INB/0003006 in the Fund. The letter enclosed documents relevant to the Fund and the investment including: the policy documents, the Fund’s brochure (“the Black Book”) and disclosure documentation.
43. The Black Book set out the nine asset management opportunities and development opportunities that were set out in the loose-leaf brochure, including a statement that the Bank was satisfied from its meetings with the Foundation that the latter body was “in favour of Howard [Holdings’] plans for the Centre, but clearly can give no guarantee with regard to consents.” By contrast, however, with the earlier loose-leaf brochures, it did not seek to monetise the expected return. On the contrary, on p. 20 it stated that it was difficult to quantify the return potential from the opportunities. At p. 33 it set out the risk factors as follows:-
“A geared property investment is considered to be high-risk and the following considers the types of risk associated with an investment of this kind. This brochure does not constitute investment advice, and prospective investors should consult their own legal, financial or tax advisors in relation to the participation in this investment…
This brochure includes information obtained from external sources, and this information has been reproduced accurately from those sources, but Anglo and AIAC do not accept any responsibility for the accuracy or completeness of such information…
Investors should note that a fall in the capital value of the property of approximately 26% would reduce the value of investor equity to zero assuming no surplus rental income and no reduction in Bank borrowings…
Development Risk
The intention to develop portions of the Property will attract further risks. However, any proposals to develop within the existing shopping centre or develop new properties on the site of the WhitgiftCentre, will have to satisfy Anglo and AIAC with regard to the feasibility and commerciality of same. AIAC will act in the best interests of the Fund investors when assessing such proposals.
As mentioned previously, any capital expenditure on the Whitgift Centre in excess of 10% of gross annual income requires the consent of the Whitgift Foundation and the Royal London Mutual Insurance Society. It is worth noting that both bodies have given their consent to, and funded their share of the cost of, the historic major refurbishments carried out to date. Anglo is satisfied that it is in both parties commercial interest to continue to do so where a clear and compelling case exists.”
44. At p. 22, under the heading “Asset Management/Redevelopment Opportunities”, the brochure provided:-
“One of the key attractions of the Whitgift Centre is the opportunity to add substantial value by way of active asset management and redevelopment opportunities. Howard and the JV Partners believe that the Centre has not been managed to maximise its existing potential. Howard believe that with entrepreneurial management of this Centre, significant value can be unlocked over a 5-7 year period, which coincides with the £2.5bn spend on Croydon in general…
Redevelopment opportunities (subject to planning permission and, where applicable, head leaseholders/freeholders consents).
The JV Partners have identified a potentially attractive range of development opportunities, comprising residential, office and mixed use schemes. While these are subject to detailed evaluation and planning consents, Anglo consider that they represent a substantial opportunity to enhance the earnings and overall value of the asset over the medium to long-term.”(emphasis added)
45. In each case it is stated that the opportunities identified are not intended to be definitive or exhaustive.
46. The policy documents included supplementary provisions for the Whitgift Geared Property Fund which were stated to be supplementary provisions which attached to and formed part of the Bond. Paragraph 3.3 of the Bond provided:-
“By signing your Application and requesting that contributions should be paid into the Whitgift Geared Property Fund you agree, accept and acknowledge that:-
3.3.1 we have no responsibility to advise you as to the suitability of an investment in the Whitgift Geared Fund for your particular circumstances;…
3.3.4 you will not commence or bring and you hereby irrevocably waive any entitlement to commence or bring any legal or other proceedings against us arising out of or connected with the non performance of the assets forming part of the Whitgift Geared Property Fund or their failure to perform as you may have anticipated or expected”.
47. Paragraph 3.4 provides:-
“You specifically agree by signing your Application and requesting that contributions should be paid into the Whitgift Geared Property Fund that these Supplementary Provisions are fair and reasonable in the particular circumstances of an investment into the Whitgift Geared Property Fund and you acknowledge that you have had the opportunity to raise any concerns relating to these Supplementary Provisions with us.”
48. Enclosed with the other documentation was an investment bond cooling off notice which expressly gave the plaintiff a period of 30 days from the date of the letter to cancel the investment.
Developments in the period from 2006 – 2008
49. After concluding the two investments the plaintiff sought tax advice on the transactions from a Mr. Brian Bohan. In or around March 2006 he wrote to Mr. Bohan stating that the investment was expected to yield a return of 300% over a period of 7 – 9 years. He received no information from AIAC regarding the development of the Whitgift Centre, so he instructed UK solicitors on his behalf to conduct a planning search of the Whitgift Centre to ascertain if any applications for planning permission had been lodged. The results were negative. In February 2007 he wrote directly to Howard Holdings enquiring, inter alia, in relation to redevelopment proposals. The following year, on 6th February 2008, he wrote to the Bank stating that he was anxious to hear about the development plan for the Whitgift Centre and the results of any efforts to obtain planning permission.
50. While there may possibly have been some preparatory work done, it is not disputed that no application for planning permissions for re-development was ever applied for. None of the proposed potential developments ever came to pass.
The plaintiff’s complaints
51. These proceedings were commenced in 2011. In his statement of claim the plaintiff pleaded that there were 3 specific oral and written representations made by the Bank:-
(1) That the Whitgift Shopping Centre was projected to increase its rental income by stg£2m. year on year.
(2) That there existed significant potential to increase the rental income by reason of “existing asset management” and “new development” opportunities.
(3) That the potential return on investment after 10 years was between 220% and 300%.
52. The plaintiff contended that the oral representations were made by Mr. Hayes and the written representations were in a brochure provided to the plaintiff by the Bank.
53. The written representations upon which the plaintiff relies are those set out in the second loose-leaf brochure. The brochure identified 5 asset management opportunities as follows:-
“• Relocate pedestrian access along M&S
Forecast net added values £8.5m
Timeframe 3-5 years.
• Planning exists for 80k sq. ft. new space
Forecast net value added £5m
Timeframe 3 years
• Early lease renewals
Forecast value added £4.5m
Timeframe 1-3 years.
• Reconfigure M&S and River Island units
Forecast net value added £3.5m
Timeframe 3-5 years
• Increase Mall Income
Forecast net value added £3.5m
Timeframe 1-3 years”.
54. It identified 4 potential development opportunities:-
“WHITGIFT TOWER
25 STOREYS
200, 000 sq. ft.
OFFICES / RESIDENTIAL / HOTEL
PROFIT £15m
FOCUSHOUSE
15 STOREYS
125, 000 sq. ft.
OFFICES
PROFIT £10m
WESTERNGATEWAY
NEW RESIDENTIAL
FIVE STOREYS
110 FLATS
140,000 sq. ft.
PROFIT £12m
RESIDENTIAL TOWER
10 STOREYS
175 FLATS
160,000 sq. ft.
PROFIT £15m”.
55. Under the heading “Risks and Sensitivities” the brochure stated:-
“Whitgift Foundation. The WF owns the Freehold title to the property. Their consent must be received for all expenditure >£1m. We have met with the WF, who confirm that they will support and fund plans which will maximise the value of the Whitgift Centre.”
The plaintiff’s evidence in relation to the representations
56. In her judgment Costello J. found that the plaintiff’s evidence was, in many respects, “wholly unreliable and frequently inconsistent”, although she acknowledged he was giving evidence in respect of events which occurred nine years previously. He had no clear recollection of many of the key details of the case. He was clearly trying to reconstruct events to some extent by reference to the documents. Even making allowances for this fact, Costello J. stated that there were “some startling inconsistencies in his evidence.”
57. The plaintiff had pleaded that he met Mr. Hayes and Ms. Deacy at the Radisson Blu Hotel in Galway in the autumn of 2005. He says it was at this meeting that Mr. Hayes made his oral presentation and furnished him with the loose-leaf brochure. This presentation was what persuaded him to invest in the Whitgift Investment.
58. On the other hand Costello J. noted that in his witness statement dated 4th June 2014, the plaintiff alleged for the first time that the meeting occurred during the period the 11th – 15th July 2005. He stressed in the High Court that this was the correct date as his decision to invest in the Whitgift Geared Property Fund was made when he decided not to proceed with the Knightsbridge Investment. He cancelled the sterling he had pre-ordered to enable him to invest in the Knightsbridge Investment on 15th July, 2005. It was clear therefore that his evidence was he decided to invest in the Whitgift Fund on or before the 15th July 2005, at the latest.
59. The plaintiff, however, pointed to a second compliments slip from Ms. Deacy which was date-stamped the 15th July 2005. It read:-
“Attached please find up to date brochure FYI
I have also attached a copy mandate for you & partner to complete
Kind Regards
Margot Deacy”.
60. In view of the fact that it referred the most up to date version of the brochure, the plaintiff maintained that the loose-leaf brochure upon which he based his case was furnished to him by Ms. Deacy under cover of this compliments slip which he received on 15th July, 2005, rather than by Mr. Hayes at a meeting in the Radisson Blu Hotel in Galway. Costello J. then observed:
“He now accepted this meeting took place in October of that year. From expenses claims from the Bank and correspondence it is clear that this was on the Friday between 12th and 19th October 2005. Given the inconsistency of the plaintiff’s evidence in relation to this crucial meeting, I am unable to place any reliance on his evidence in relation to it.
By the conclusion of his evidence, the plaintiff’s case was that he decided to invest based on a brochure which he received in the post sometime on 15th July 2005. It was the second such brochure. He spoke with no one in the Bank in relation to the investment as outlined in that brochure, but in the late afternoon of 15th July 2005, he had made up his mind to invest in the Whitgift Geared Property Fund and to cancel his interest in the Knightsbridge Investment. Most importantly his decision to invest was made some months in advance of the oral presentation of Mr. Hayes upon which he had placed so much emphasis in his earlier testimony.”
61. Costello J. found other aspects of Mr. Spencer’s evidence were unreliable and that he was confused about the relevant dates and the times he received the different documentation. Some of the Bank employees were also uncertain about the critical times and dates. Here it must be recalled that all parties were giving evidence in 2014 about events which took place some nine years previously. Costello J. continued her narrative thus:
“Ms. Deacy gave evidence on behalf of the Bank and she accepted in evidence that she enclosed a brochure that related to the Fund with that compliments slip. Her evidence was that this was the prospectus brochure known as the Black Book. As Mr. Gerard Davis, the author of the Black Book, gave evidence to the effect that the Black Book had not been completed until late August, 2005, clearly Ms. Deacy’s evidence that the brochure referred to was the Black Book could not be correct. I accept on the balance of probabilities that Ms. Deacy enclosed a brochure with this compliments slip and on the balance of probabilities that it was not the Black Book. I am left to draw the inference that the loose-leaf brochure was enclosed with the compliments slip and the plaintiff had the brochure when he made his decision to invest in the Whitgift Fund. Therefore the written representations set out in the loose-leaf brochure were made to him prior to his decision to invest in the Fund. On the other hand I do not accept that the plaintiff has established that Mr. Hayes made the oral representation pleaded at para. 6(a) of the Statement of Claim. I dismiss his claim based upon oral representations allegedly made by Mr. Hayes on behalf of the Bank.”
62. No challenge was made in this Court to either of these two findings of fact.
Did the contents of the loose-leaf brochure amount to misstatements?
63. The plaintiff must, of course, establish as a prelude to any potential liability on the part of the Bank that the representations contained in the documentation which had been supplied to him were untrue. It is necessary to consider the evidence in relation to the asset management and development prospects of the Whitgift Centre in 2005. Given the way that the issues have been narrowed down for the purposes of an appeal to this Court, it is not necessary for me to review either the detailed planning or valuation evidence which has been comprehensively set out in the judgment of the trial judge. Nor do I find it necessary to review the evidence of the various banking experts adduced by both sides.
64. What is, however, of critical importance was the attitude of the Whitgift Foundation (“the Foundation”), since the representations made in relation to it and its attitude to any potential redevelopment formed a central part of the plaintiff’s evidence before this Court. It is to this evidence – and especially that of the Foundation’s surveyor, Mr. Stapleton – to which I will now turn.
The attitude of the Whitgift Foundation
65. The attitude of the Foundation was critical to the reasonableness and reality of many of either the asset management opportunities or the development opportunities. If the Foundation was likely to refuse consent to any development which required its consent or to refuse to contribute to the development costs of any development then, as Costello J. found:
“In reality, there was no real prospect of the development being carried out. In that case it would not be reasonable to identify any such development as an opportunity. While in theory it might exist, if as a fact consent and / or investment would not be forthcoming, it could not proceed.”
The evidence of Mr. Richard Stapleton
66. Mr. Richard Stapleton, the Surveyor to the Foundation gave evidence on behalf of the plaintiff. He had been surveyor to the Foundation since 1998. He indicated that the Foundation was an educational charity that had been established in the 16th century and had to be prudent in relation to its assets. He confirmed that prior to 2000 the Foundation had made capital investments in the Whitgift Centre alongside the other co-owners of the Centre to refurbish and improve parts of the Centre. He said that the Foundation had long formed the view that it should be reducing its investments in the Centre.
67. Mr. Stapleton said that he had two meetings with Howard Holdings in 2005. On the 27th May 2005, he met with representatives of Howard Holdings in Croydon. He confirmed that the Foundation’s formal approval would be required for any redevelopment of the Centre. He further stated that the Foundation’s established policy was to consider any specific proposals to improve the Centre on its merits and any decision as to the appropriateness of the Foundation giving its consent and/or investing in a proposal would depend on the advice it received at the time, including advice on viability, risk and availability of funds. It was made clear and it could not be assumed that the Foundation would be prepared to make any further investment. It was pointed out that under the terms of the lease there was no obligation on the Foundation to make further investment in excess of the capital limit (5% of net rental income). He stated that Howard Holdings’ representatives did not discuss any specific plans or proposals at that meeting.
68. On 20th June 2005, Mr. Stapleton met with representatives of the Bank and Howard Holdings. The Foundation was questioned about its aspirations for the Whitgift Centre and it was indicated that the Foundation’s prime concern was to ensure that the asset was properly managed and developed and that it was for the Asset Manager of the Centre to come forward with any specific development proposals. In the absence of specific proposals it was impossible to comment further. Mr. Stapleton said that he expressly asked the representatives of Howard Holdings to explain their plans for the Centre and they said they were not prepared to do so. None of the asset management opportunities or development opportunities identified in the loose-leaf brochure were raised at the meeting. Mr. Stapleton’s evidence was that if the Foundation had been shown the loose-leaf brochure they would have said that they would not fund the development opportunities – which he regarded as “speculative” – identified in that loose-leaf brochure.
69. Mr. Stapleton said that on several occasions during the meeting both Howard Holdings and the Bank asked precisely what the Foundation’s position would be on development proposals but that in the absence of specific proposals it was impossible to comment further. He said it was made clear that any proposal would have to be considered on its merits and that the Foundation did not have any significant funds to invest in the Centre.
70. Under cross-examination he agreed that in 2005 the Foundation was open to the idea of redevelopment of the Centre. He agreed that the attitude of the Foundation was one of openness to consideration of improvement in redevelopment opportunities, subject to detailed plans being submitted for consideration and risk assessment and with no guarantee that the Foundation would necessarily follow through with the proposed plan. He agreed that as no specific proposals had been discussed they were neither in nor were they out.
The plaintiff’s evidence in relation to the representations
71. As Costello J. observed, a crucial issue which had to be resolved was to what extent the plaintiff relied upon the statements of the Bank in relation to the prospects for a return when he decided to invest in the Whitgift Fund. The plaintiff was examined by his counsel at the hearing in relation to his understanding of the projected return of 165% over a ten year period (the base case)
“134Q… 165% return on investment, that would involve a growth of 65%: is that right?
A. That is my understanding of it, yes.” 6
72. The plaintiff was also cross-examined in relation to the Bank’s statement in the loose-leaf brochure to the effect that a combination of the base case, the asset management opportunities and the new development opportunities could give a return of 220%. He was questioned as to his understanding of this representation upon which he based his case. At one point the plaintiff commented:-
“470…
A. Yes. The figure of 220% including my investment would have been satisfactory to me.
471 Q. Well, the figure of 165 would too, if I’m right about the maths
A. Yes. Yes, it would.
472 Q. So if I’m right about that, if that’s what the return means, in fact you were being offered a figure higher than the figure you would have been happy to invest in.
A. If you are right about that, that is true. But my case is all about the realism of the figures.” 7
73. Costello J. found, based on the expert evidence, that a return of 165% meant the return of the investment plus 165%. This meant that the plaintiff’s understanding of 220% as including the return of his investment was, in fact, less than what was meant by a return of 165% which, it is common case, was a reasonable representation for the Bank to have advanced in 2005.
74. The plaintiff gave evidence that he was particularly interested in the development angle of the Whitgift Investment. This was confirmed by Ms. Deacy in evidence on behalf of the Bank. The Knightsbridge Investment likewise involved development opportunities, though they were not spelt out to the same degree as in the loose-leaf brochure. The plaintiff accepted that, on the assumption that he had been provided with the loose-leaf brochure in or around July 2005, further documentation was to come. He accepted that as an experienced solicitor the loose-leaf brochure was not the sort of document that was going to be a legally binding document surrounding the conclusion of an agreement. He stated:-
“… I agree with you the loose-leaf [brochure] wouldn’t have been an effective way of investing in this”.
75. The plaintiff accepted that at the latest he received the Black Book on the 5th December 2005. He said that he read it; he absorbed it and pondered it. He was asked whether he understood the document, he was asked did he note the guarded terminology and the absence of figures and he answered, that, in the words of Costello J. “it was legalese” and:-
“… it’s a different emphasis than what I had been told and what the brochure is saying or told me four months ago or three months ago.”
76. He said that if somebody had asked him to sign the Black Book he would not have signed it. He said:-
“I was relying on my rights as I felt that they were in how I got here.”
77. The plaintiff acknowledged that he understood that quite different things were being said to him in the Black Book. He believed that different things were being said to him in the Black Book than had been set out in the loose-leaf brochure. Specifically, he said that he believed that the Black Book was now saying that the Bank was not standing over the figures and that the development opportunities were difficult to quantify. He confirmed that he understood all of this and said that it did not dissuade him from proceeding.
78. In relation to the loose-leaf brochure he said that he took opportunities to be plans and that he took it that “the investment couldn’t fail”. On the other hand he accepted that it was a high-risk investment and that he understood the nature of geared investment.
Whether there had been any oral misstatements or misrepresentations
79. In her judgment Costello J. found that Mr. Spencer had not established on the balance of probabilities that any oral representation was made to him to the effect that the Whitgift Centre was projected to increase its rental income by stg£2m. year on year. She further noted that he had adduced no expert evidence in relation to this alleged representation and that this part of his claim could not succeed. This matter was not pursued on appeal.
The alleged misrepresentations
80. This left for consideration the allegations of the misstatements and misrepresentations contained in the Bank’s documentation.
81. The plaintiff’s case in negligent misstatement against the Bank rests upon representations which were made directly to him, as Costello J. had found that Ms. Deacy had posted him the loose-leaf brochure. It is clear, accordingly, that he is a person to whom the Bank owed a duty of care in accordance with the principle established in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465. If there were any doubt in the matter, I agree with Costello J. when she said that he was clearly “in the limited identifiable class of persons to whom the Bank sent the loose-leaf brochure and therefore to whom the Bank made the statements therein set out.”
82. While it was not unreasonable for the Bank to state that there existed asset development opportunities which had the potential significantly to increase the value of the Centre, the Bank nonetheless owed the investors (such as the plaintiff) a duty of care to ensure that the statements which it made in that regard were accurate and not misleading.
83. The new development opportunities were high level concept ideas and not definite plans. This is abundantly clear from both the scant information and the round figures attributed to the identified opportunities. Having reviewed the evidence, Costello J. stated that she did not believe that:
“….the identified asset management opportunities and new development opportunities were not unreasonable and, accordingly, the representation that they existed as opportunities did not amount to a misstatement in and of itself. Therefore I hold that the second alleged misstatement upon which the plaintiff bases his case falls.”
84. No appeal has been taken against that part of the High Court decision.
Misrepresentations contained in the loose-leaf brochure
85. At the heart of Mr. Spencer’s case – and the focus of the appeal to this Court – is the contention that the Bank’s written documentation contained a number of material misrepresentations. While these matters (which are, in any event, all inter-related) can now all be considered, I propose to turn first to an allegation of negligence, namely, that the Bank ought to have been aware of the letter which Mr. Stapleton (the surveyor to the Foundation) arranged to send to Mr. Sparrow of Howard Holdings some time after their first meeting on 27th May 2005.
86. The letter in question appears to have been dated 2nd March 2005 and was apparently addressed to the Foundation. The letter itself appears to have emanated from the solicitors for the superior landlord, the Royal London, whose consent (along with that of the Foundation) to any re-development would also have been necessary. It is, unfortunately, impossible to be more specific than this because the full text of the letter was not produced in evidence at the trial following objections from the Bank that it had not been included in Mr. Stapleton’s witness statement. The trial judge nonetheless ruled that the following portion of the letter could be received in evidence:
“We believe that it may be misleading not to point out that in 2004 and on other occasions the superior landlord and landlord have declined to support proposals brought forward by Arlington, specifically, the Phase 4 scheme.”
87. One way or another, the real significance of this letter is that it shows that the relevant landlords had previously refused to support the Phase 4 development just a year earlier.
88. Mr. Stapleton maintained in cross-examination that both Howard Holdings and the Bank were aware of this letter and that it formed the backdrop to the meeting of the June 20th meeting. The two witnesses from the Bank who were present at that meeting – Mr. Hayes and Ms. Lally – were not called to controvert that evidence. The Bank explained that Mr. Hayes was not available to it as a witness. Various explanations were proffered as to why Ms. Lally was not called.
89. In these circumstances, since Mr. Stapleton’s evidence was not controverted and was otherwise accepted by the trial judge, the inevitable conclusion must be that the Bank was at least aware in general terms of the March 2005 letter prior to the meeting of June 20 2005 and the negative implications this might have had for any proposals to build out the Phase 4 scheme. The failure to disclose this highly material fact to the investors in the context of representations which the Bank made concerning the feasibility of building out the Phase IV project amounted, in my view, to a negligent misstatement.
90. I now turn to a consideration of the various misrepresentations of which the plaintiff complains.
First misrepresentation: mutually exclusive development opportunities
91. Two of the opportunities for development identified in the loose-leaf brochure were, in fact, mutually exclusive. These developments were mutually exclusive because they each related to the same site within the Whitgift Centre. It would not thus have been possible to complete both the Phase IV development and the Whitgift Tower. While it is clear from the coloured version of the loose-leaf brochure that the two opportunities occupy the same site, I agree with the comments of Costello J. that “the inclusion of the two as opportunities with no note indicating that they were alternatives was misleading.” This was not seriously disputed by counsel for the Bank, Mr. McCullough S.C.
Second misrepresentation: the attitude of the Whitgift Foundation
92. Under the heading “Risks and Sensitivities”, the loose-leaf brochure identified the Foundation as the owner of the freehold title to the property whose consent must be obtained for any expenditure in excess of stg£1m.. As I have already noted, the attitude of the Foundation was accordingly of central importance if any development opportunities were to be progressed.
93. The second loose-leaf brochure (which the plaintiff received prior to his decision to invest) stated:
“We have met with the WF, who confirmed that they will support and fund plans which will maximise the value of the Whitgift Centre.”
94. The evidence was that Howard Holdings had two meetings with representatives of the Foundation in May 2005 and in June 2005. The Bank attended the second meeting which took place on 20th June 2005. As it happens, Howard Holdings did not and would not disclose to the Foundation any of its plans for the Centre, even in the broadest outline. They were asked by the Foundation on several occasions to give details of their proposals and they declined to do so. The Foundation, accordingly, had no opportunity to express its opinion in relation to plans for development which included residential, office and hotel developments.
95. The Foundation’s chief surveyor, Mr. Stapleton, emphatically rejected in evidence the suggestion that it had ever “confirmed” that it would support or fund such plans. He said that any proposal for re-development would have been considered on its merits. His note of the meeting of the 20th June 2005 was that the Foundation had expressly stated that “it did not have any significant funds to invest in the Centre.”
96. Four representatives of the Foundation attended that meeting: the Chairman, the Chairman of the Finance Committee, the Clerk to the Foundation and himself. In evidence Mr. Stapleton stated that the Foundation considered that it was too heavily invested in the Centre already. He said that if the Foundation had been shown the loose-leaf brochure it would have said that they would not fund the development opportunities identified in that loose-leaf brochure which he personally regarded as speculative. He agreed that while the attitude of the Foundation was one of openness to consideration of improvement, there was no guarantee that the Foundation would necessarily approve any proposal.
97. In my judgment, in the light of the evidence available to the High Court, this statement by the Bank in the second loose-leaf brochure must be adjudged to be seriously misleading. There was no basis at all for the statement that the Foundation had “confirmed” that it “will” support and “fund” plans which will maximise the value of the Whitgift Centre. The Bank ought to have known that this statement – which was of central importance to the possibilities of re-development on the site – could not possibly have been true.
98. A key selling feature of the project was the identification of the four specified potential development opportunities in the loose-leaf brochure. As Costello J. herself recognised, it would have been fair for any reader of the brochure to assume that the Foundation’s support for potential re-development would include at least some of the new development opportunities identified in the brochure itself. As Costello J. stated (at paras. 149 et seq. of her judgment):-
“The approval of the Whitgift Foundation of the plans of the Whitgift Centre was absolutely fundamental to any of the new development opportunities. Simply put, none of them could be achieved without the consent of the Foundation and none of them could be realised without the pro rata funding commitment from both the Whitgift Foundation and Royal London. The Bank was fully aware of the vital importance of the Whitgift Foundation and yet failed to ascertain even in the broadest terms the attitude of the Foundation where representatives to the plans for the development of the Centre which it was promoting to its clients and potential investors in the Fund. The overall impression from the loose-leaf brochure was that the Whitgift Foundation was aware of the identified opportunities and was in principle supportive of the opportunities. This impression was subsequently reinforced by the Black Book where it was stated at p. 14:-
“The Whitgift Foundation has given its consent to, and funded its share of the cost of major refurbishments carried out in 1985 and 1998 respectively. Clearly it has an incentive to do so, as beneficiaries of c.25% of gross rental income. AIAC, Anglo and the JV Partners have met with the Whitgift Foundation and are satisfied that the Foundation is in favour of the progressive nature of Howard’s plans for the Centre, but clearly can give no guarantee with regard to any consents.” (emphasis added) It was reasonable to assume that the Foundation had been informed of the broad nature of the plans outlined in the Black Book and was generally in favour of them. It is true that it was stated that the Bank could not guarantee that it would consent to any particular proposal. Nonetheless it appeared that the Bank had met with the representatives of the Foundation and ascertained that the Foundation was aware of the possible plans, that they included the plans identified in the Black Book and that it was in favour in principle of Howard Holdings’ plans and that the Bank had no reason to believe otherwise.”
99. The evidence established, however, that none of these development plans identified in the loose-leaf brochure (or, subsequently, in the Black Book) had ever been put before the Foundation, even though, as I have already noted on more than one occasion, at the one meeting at which the Bank attended (on 20th June 2005), the Foundation had specifically asked for details of what Howard Holdings and the Bank had in mind. It is striking that the Bank did not in fact put before the Foundation the re-development proposals which it was at the same time assiduously marketing to its clients as re-development opportunities which the Foundation would in principle support and fund. The available evidence suggests that the Foundation would not have countenanced speculative development of this kind, much less funded this.
100. The Bank had been present at a meeting where both it and Howard Holdings had consciously declined to specify the nature of any such re-development proposals to the Foundation. Indeed, this was acknowledged by Ms. Marian Lally, when she sent an email on 12th July 2005 to Mr. Sparrow of Howard Holdings in advance of a meeting with Royal London on 15th July 2005:
“….given that [Royal London’s] consent is required re any development/funding we undertake, we would need to satisfy ourselves that they were supportive. I’m not planning a hard commitment here – just something similar to our meeting with the Whitgift Foundation, to introduce ourselves etc.”
101. This email is consistent with Mr. Stapleton’s evidence to the effect that no proposals were advanced by either the Bank or Howard Holdings at that meeting, which Ms. Lally had clearly regarded as being simply introductory and non-committal in nature.
102. It followed that the Bank must have known that these representations in the second-loose leaf brochure regarding the Foundation’s support and funding could not possibly have been true. I agree with the conclusions of Costello J. (at para. 149 of her judgment) that these representations were, accordingly, false and seriously misleading. I am also of the view that these misrepresentations were made in a negligent fashion.
Third misrepresentation: The Phase IV development
103. The second version of the loose-leaf brochure presented the Phase IV development (“Planning exists for 80k sq.ft. new space”) as a current opportunity when, as it happens, the Home Secretary was in occupation of the land in question pursuant to a lease that was to run to December 2010. It also envisaged that this development would happen within a timeframe of three years.
104. The previous managers of the Centre had been negotiating with the Secretary of State in June and July 2005 for a surrender of the lease when the loose-leaf brochure(s) were being circulated and when the Black Book was being drafted. The Black Book stated (at p. 22), however, that:
“Planning permission exists for 80,000 sq.ft. of new retail space in the Centre. Discussion regarding pre-lets are advanced with a view to complete in early 2006.”
105. The managers believed that an agreement might be reached to surrender the lease in whole. Costello J. considered that it followed that “neither the loose-leaf brochure nor the Black Book were incorrect at the time that they were written.” She added:
“On balance, I do not accept that the failure to make clear that the right to develop the Phase IV plans would not have arisen until 2010 is sufficient to amount to a negligent misstatement.”
106. For my part, I take a different view: I fear that I cannot agree that neither the loose-leaf brochure nor the Black Book were incorrect at the date of writing by failing to make this clear. The representation made by the Bank clearly implied that the lands were immediately available, when as matters stood the lands in question were not available for re-development for another five and a half years. Indeed, the second version of the loose-leaf brochure expressly mentioned a time frame of three years for the utilisation of the Phase IV planning permission. The Black Book added that “Discussions regarding pre-lets are advanced with a view to completion in early 2006.” All of this underscored the clear impression which had been given that the lands were immediately available for re-development. It is hard to see how this is not a material misrepresentation of the true facts: who, for example, would be prepared to invest in a re-development project in respect of certain lands only later to be told that the developers did not have immediate access to the land and would only be entitled to obtain such access in five and a half years time?
107. It is true that the Bank had hopes that the Secretary of State might be prepared to effect a surrender of the lease and that negotiations to this effect were on-going in early summer of 2005. On 5th October 2005 the Secretary of State indicated that he was refusing to surrender the lease in question. This had the effect of dashing any hopes which either Howard Holdings or Anglo had for the development of Phase IV, certainly in the short to medium term.But this makes the failure to disclose these essential facts all the more troubling and, frankly, unacceptable.
Fourth misrepresentation: the statements in the Black Book
108. The formal fund brochure (known as “the Black Book”) was prepared at the end of August 2005. Three fundamental representations were made by the Black Book:
109. First, the Bank endorsed the representations of the potential six new development opportunities in the form already identified in the second loose-leaf brochure which were repeated again. Specifically, the Bank stated that:
“Anglo consider that they represent a substantial opportunity to enhance the earnings and overall value of the asset over the medium to long term.”
110. This, however, was a just a re-statement of what had been stated in the second loose-leaf brochure and it was just as misleading. The clear impression was given that the Foundation had been informed of the identified potential projects (four of which were set out in pictorial form on the following page) and was broadly in favour of these developments. This, as we have seen, was untrue.
111. The second misrepresentation was that Anglo were satisfied “that the Foundation is in favour of the progressive nature of Howards’ plans for the Centre, but clearly can give no guarantee with regard to any consents.” This statement was completely untrue: as we have seen, Anglo and Howard had expressly declined to give the Foundation any outline of its proposed plans, so the Foundation could not possibly have given even broad assent to this.
112. The third misrepresentation was that planning permission “exists for 80,000 square feet of new retail space in the Centre. Discussions regarding pre-lets are advanced with a view to completion in 2006.” It is true that planning permission had indeed been granted for this Phase IV proposal. But the utilisation of this planning permission was contingent on the appropriate consent being given by the Foundation and, to repeat, Anglo had never disclosed its plans in this regard to the Foundation.
113. In any event, the development of Phase IV was contingent on the surrender of the lease by the Home Office (Secretary of State), a fact which, as we have seen, was not revealed to investors. Nor was Mr. Spencer informed that on 5th October 2005 the Home Office had refused to surrender the lease. In this context, the statement contained in the Black Book to the effect that there had been discussions with regard to pre-lets with a view to completion in 2006 without disclosing this other information was grossly misleading.
Whether the plaintiff could rely on the loose-leaf brochure(s) to ground an action for misrepresentation and negligent mis-statement?
114. In her judgment Costello J. proceeded to examine whether the plaintiff could rely on the statements contained in the loose-leaf brochures. In this regard Costello J. referred with approval to the following statement of principle contained in the judgment of Lord Oliver in Caparo Industries plc v. Dickman [1990] 2 AC 605, 638:
“… the necessary relationship between the maker of a statement or giver of advice (‘the adviser’) and the recipient who acts in reliance upon it (‘the advisee’) may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given;(2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment.”
115. Costello J. then continued:
“It is necessary therefore to consider the representations in the context in which they were made. They were in a loose-leaf brochure that was given to certain clients of the Bank with a view to ascertaining whether or not they would be interested in investing in the Whitgift Geared Property Fund. If the client expressed an interest in the product then they would be furnished with additional, more detailed information than that set out in the loose-leaf brochure. They could attend oral presentations and they would receive the formal contract documentation including the Black Book. In the case of the plaintiff, he attended a presentation on the investment with Mr. Hayes in October, 2005 and he received all of the contract documentation including the Black Book. He had a 30 day cooling off period if, on reflection, he did not wish to proceed with the investment in the light of this finalised documentation. The plaintiff correctly accepted that the investment could not have been made on the basis of the loose-leaf brochure and he acknowledged that further documentation would be provided. The loose-leaf brochure was not the Bank’s final word on the proposed investment. The plaintiff must show that the Bank should have realised that the statements were likely to be acted upon by the plaintiff for the purpose for which it was intended without independent inquiry. So the plaintiff must show that the purpose of the statements was to induce clients of the Bank to invest in the Fund and not simply to ascertain the level of interest amongst the clients of the Bank.”
116. Costello J. then referred to the judgment of Clarke J. in Raiffeisen Zentralbank Osterreich AG v. The Royal Bank of Scotland plc [2010] EWHC 1392 (Comm):
“82. In the case of an express statement, “the court has to consider what a reasonable person would have understood from the words used in the context in which they were used”: IFE Fund SA v Goldman Sachs International [2007] I Lloyd’s Rep 264, per Toulson J at [50] (upheld by the Court of Appeal [2007] 2 Lloyd’s Rep 499). The answer to that question may depend on the nature and content of the statement, the context in which it was made, the characteristics of the maker of the statement, of the person to whom it was made, and the relationship between them.”
117. Costello J. then stated:
“The plaintiff gave evidence that the loose-leaf brochure was not the sort of document that was going to be a legal binding document. He also says that he took the opportunities identified in the loose-leaf brochure to be plans and he took it that “the investment couldn’t fail”. He knew and accepted that further contractual documentation would be forthcoming. In determining the status of the loose-leaf brochure it is important to put it in context. It was provided to potential investors to ascertain their interest in investing in the Fund. It could not form the basis of the investment in the Fund. Further detailed documentation was required and was in fact forthcoming. Most importantly that documentation advised parties to take their own independent financial legal and tax advice and it afforded each of the investors a 30 day cooling off period. Seen in this context, I do not accept that the statements in the loose-leaf brochure had the character of statements upon which the representee was intended and was entitled to rely. So, on this basis his claim founded on the statements in the loose-leaf brochure must fail.”
118. I find myself for several reasons in respectful disagreement with this analysis.
119. First, it has always been the law that pre-contractual representations could – in principle, at any rate – form the basis of a subsequent action for negligent misstatement, even though the parties always understood that the representations in themselves could not form the basis of a contractual agreement and that further, more formal documentation would be forthcoming.
120. Many, many examples of this proposition could be cited. One Supreme Court decision must suffice for the purposes of illustration: in Gahan v. Boland, Supreme Court, 20th November 1984, the plaintiff sought rescission of an agreement to purchase a house. It was accepted that the purchaser had inquired of the vendor whether the house in question would be affected by the construction of the (then) projected M50 motorway. It was further accepted that the vendor had assured the purchaser that this was not the case and the purchaser signed the contract based on that assurance. The purchaser later discovered that the proposed motorway was routed to pass through the property.
121. While it was accepted that the representation was made innocently, the Supreme Court also noted that the evidence had also established that this representation was false; that it was a material one “with the intention of inducing the plaintiff to act on it” and that it was “one of the factors that induced the plaintiff to enter into the written contract on the following Monday to purchase the property.”
122. In the present case the representations went beyond what O’Hanlon J. described in Donnellan v. Dungoyne Ltd. [1995] 1 I.L.R.M. 388, 396 as mere “sales talk.” On the contrary, very clear and specific statements were made in the loose leaf brochure(s) which – if words are to have any meaning at all – were designed to induce the plaintiff to invest in the project.
123. Second, following on from this, it is quite clear that a key purpose of the loose-leaf brochure(s) was to persuade investors such as the plaintiff to invest in the project. I think, with respect, it would be quite unreal to regard the purpose of the brochure(s) as being simply to gauge the level of potential interest. It is rather the case that potential investors were interested in the project precisely because of the representations contain in these loose-leaf brochures.
124. This is borne out by what happened to the plaintiff himself. He had originally committed himself to investing in the Knightsbridge project, but Ms. Deacy requested him to defer investing in that project until she had an opportunity of persuading him to invest in the Whitgift Centre. There can be no suggestion that the plaintiff’s will was somehow overborne by Ms. Deacy. It is, however, clear, that she wanted the plaintiff’s business and the promotional loose-brochure(s) were an integral part of this sales-pitch.
125. As Costello J. herself found, by the end of June 2005 Ms. Deacy had met with the plaintiff for this purpose and then immediately sent him the first version of the loose-leaf brochure. The plaintiff committed himself in principle to the investment and by mid-July 2005 he was sent the second version of the loose-leaf brochure.
126. The only rational inference to be drawn from this sequence of events is that these brochures were sent not simply for the purpose of gauging interest in the project, but were also designed to persuade persons such as the plaintiff to invest. It would be manifestly unfair and at odds with the principles of good faith upon which the entire law of contract is founded, if those who made specific statements designed to induce others into enter into contractual relations were later to be allowed to resile from that position and to claim that such statements were not to be taken seriously.
127. Third, I cannot agree that it is material to this issue that the plaintiff had the opportunity of consulting legal or tax advisers or that he had the benefit of a 30 day cooling off period. His own legal and tax advisers would doubtless have assumed that the representations contained in the various documentation were true and had been fairly made. These advisers could have had no insight, for example, into whether the Foundation had committed itself to supporting and funding the Bank’s proposals. To take another example: how, it might be asked, could they have known that the British Home Office had no intention of surrendering a lease of lands which the Bank’s documentation had represented as being immediately available?
128. Nor is it relevant in this context that the plaintiff had a 30 day cooling off period. There must be little doubt that if the plaintiff had known at the time of the extent to which he had become the unwitting victim of a sustained series of misrepresentations at the hands of the Bank that he would have exercised his option to cancel the investment within the 30 day period. The party who uttered these misrepresentations cannot, however, be heard to place the onus on the plaintiff to cancel a contract which by their own actionable misrepresentations they had induced him to enter.
129. Fourth, it is true that all the parties (including the plaintiff) recognised that no investment could take place simply on the basis of the loose-leaf brochures and that further documentation (including the exchange of binding legal contracts) was required. But, it might be asked, what further investment-related documentation was the plaintiff going to receive?
130. Costello J. found that the plaintiff relied exclusively on the documentation supplied by the Bank and the Bank knew this when it supplied that documentation to him, as quite obviously he had no independent knowledge of these matters. In this context, the formal contractual and banking documentation relating to the loan itself had no bearing on the investment decision. This formal documentation was simply the vehicle whereby the contractual relationships came into existence and it quite obviously did not address the underlying commerciality of the project. It is quite clear, therefore, that all parties knew that the plaintiff’s investment decision was going to be based on either the loose-leaf brochure(s) or the Black Book or a combination of the representations contained in this documentation.
131. All of this meant that the representations contained in these brochures and Black Book were potentially operative in any investment decisions which this plaintiff (or, for that matter, any other investor) was to take. As Smith J observed in the Australian case of Jones v Dumbrell [1981] V.R. 199, 203:
“When a man makes a representation with the object of inducing another to enter into a contract with him, that other will ordinarily understand the representor, by his conduct in continuing the negotiations and concluding the contract, to be asserting, throughout, that the facts remain as they were initially represented to be. And the representor will ordinarily be well aware that his representation is still operating in this way, or at least will continue to desire that it shall do so. Commonly, therefore, an inducing representation is a ‘continuing’ representation, in reality and not merely by construction of law.”
132. This passage was expressly approved by Lord Reed JSC for the UK Supreme Court in Cramaso LLP v. Ogilvie-Grant [2014] UKSC 9, [2014] AC 1093. Admittedly, Lord Reed acknowledged that there may be cases where a misrepresentation does not have a continuing effect, because “it is withdrawn or lapses”, or because the other party discovers the true state of affairs before the contract is concluded, so that it cannot induce the other party to enter into the contract and therefore cannot affect its validity or give rise to a remedy in damages for any loss resulting from its conclusion. Critically, however, Lord Reed JSC added:
“The continuing effect of a pre-contractual representation is reflected in a continuing responsibility of the representor for its accuracy. Thus a person who subsequently discovers the falsity of facts which he has innocently misrepresented may be liable in damages if he fails to disclose the inaccuracy of his earlier representation: Brownlie v Miller (1880) 7 R (HL) 66, 79; Brownlie v Campbell (1880) 5 App. Cas. 925, 950 per Lord Blackburn. The same continuing responsibility can be seen in the treatment of representations which are true when made, but which become false by the time the contract is entered into: see, for example, Shankland & Co v Robinson & Co 1920 SC (HL) 103, 111 per Lord Dunedin. The law is thus capable, in appropriate circumstances, of imposing a continuing responsibility upon the maker of a pre-contractual representation in situations where there is an interval of time between the making of the representation and the conclusion of a contract in reliance upon it, on the basis that, where the representation has a continuing effect, the representor has a continuing responsibility in respect of its accuracy.”
133. This principle is illustrated by the facts of Cramaso itself. In that case A considered taking a tenancy of a grouse moor in Scotland, but was concerned about possible over-shooting on the moor and the availability of sufficient levels of grouse. B, a representative of the owner, provided a count of the grouse which was designed to re-assure A. A did not in fact proceed with the transaction, but B then asked A to forward the assurance (contained in an email) to C who was also considering investing. Acting on foot of this representation, a few months later C entered into the lease of the lands.
134. C later discovered that the counting areas were not representative of the moor as a whole and that the grouse population was smaller than he had believed. It would in consequence take longer for the population to recover to the point where shooting could take place at the level which he had intended. The UK Supreme Court accepted that the email contained a material misrepresentation, namely an implicit representation that the counts were representative of the population of grouse on the moor. Critically, however, the Court found that the email was a continuing misrepresentation which had induced C into taking the lease of the lands.
135. In my view, the same was true here. The representations made in the loose-leaf brochures were obviously designed to induce investors to invest in this project and were obviously continuing representations. It is true that, as the plaintiff himself accepted in evidence, the language of the Black Book was, in some respects, more guarded than the loose-leaf brochure(s). There was, however, nothing at all to suggest that the Bank had expressly disavowed the earlier representations contained in the loose-leaf brochure to the degree that the law requires. This, however, is to anticipate somewhat, because it is next necessary to consider the evidence in relation to the Black Book.
The Black Book.
135. It is next necessary to review the evidence in relation to the formal fund document, the Black Book. Costello J. made a specific finding that the plaintiff had received this document at a meeting in a hotel in Galway on either 12th October 2005 or 19th October 2005. The significance of this is that she found that as the plaintiff had received the Black Book before he subsequently made any contractually binding investment decisions, this had the effect of superseding all previous representations contained in the loose leaf brochure.
136. What, then, was the evidence to justify that finding? The plaintiff himself denied that he had received the Black Book at that October 2005 meeting and that it was only supplied to him in December 2005. It should be noted, however, that Costello J. found that, given certain inconsistencies in Mr. Spencer’s evidence, she could not place reliance upon it. On the other hand, the only evidence from the Bank referable to this point was that of one of its employees, Mr. Greg Tynan, who attended the Galway meeting. Mr. Tynan was cross-examined on his witness statement as follows:-
“527 Q. It seems to me that you were very careful in that particular passage not to address the question of whether or not the fund brochure was actually given to Mr. Spencer at that meeting; isn’t that correct?
A. Well, I do not recall giving him a brochure. I am not sure, you know, where he got the brochure or if he got the brochure. All I can say is I don’t remember giving him the brochure. The issue of whether, you know … I don’t really understand in terms of … the point is that’s what I remember. I can’t say anything more than that. I don’t remember giving him the brochure.” (emphasis added)
528 Q. No, but in that paragraph you are referring to two different types of document; isn’t fair to say?
A. Yeah, well, I mean, for me, the brochure is the Black Book brochure.”
137. However, the witness then went on to state that, as the Black Book was in circulation at that time, he believed that the plaintiff would have been provided with a copy at the meeting. Mr. Tynan was then further cross-examined as follows:-
“548 Q. That document would absolutely have been discussed with Mr. Spencer?
A. Whether ….
549 Q. Where in your statement do you say that?
A. Well, I don’t say it in that, but in my view is that it would have been discussed at that meeting. But before Mr. Spencer would have completed his full details, a full statement, that he definitely would have had a copy of that. My recollection …
550 Q. Sorry, hold on a moment now. We are moving on a little bit in terms of the narrative. Just deal with the meeting at the moment?
A. Yes.
551 Q. Do you have a specific recollection of Mr. Spencer being given the black book at that meeting?
A. I don’t have a specific recollection. I didn’t say that I did.
553 Q. Did you by what you said a moment ago suggest that he was given it on some prior occasion?
A. No, I didn’t suggest that. “
138. Pausing at this point, it cannot be said that the evidence of Mr. Tynan was unequivocal on this question. He agreed that he had no clear recollection as to whether Mr. Spencer had been given the Black Book at the meeting: taken at its height, his evidence was really that he assumed that the plaintiff would have been given the Black Book prior to the investment on the basis that this had been the Bank’s standard practice. If the evidence had rested there, I consider that Costello J. would have been perfectly free to prefer the evidence of Mr. Tynan to that of the plaintiff and, accordingly, to conclude on the balance of probabilities that Mr. Tynan had given him the Black Book at the meeting.
139. There was, however, other relevant evidence in this context to which the trial judge did not refer. At least one other witness, a Mr. David Raethorne, stated unambiguously that he had invested in the Whitgift project on the basis of representations contained in the loose-leaf brochure(s) and before he had been supplied with the Black Book. He executed the appropriate documentation on the 11th October 2005 and transferred the funds some two weeks later. He gave unchallenged evidence to the effect that he had received an email from Ms. Lally on 1st November 2005 thanking him for his investment and stating that the policy documentation would be sent as soon as it was to hand. Mr. Raethorne stated that he had received the Black Book on 20th December 2005.
140. Counsel for the Bank, Mr. McCullough S.C., submitted that this Court was bound by the trial judge’s finding by reference to standard Hay v. O’Grady principles (Hay v. O’Grady [1992] 2 I.R. 210). The Supreme Court has, however, made it clear that findings of fact of this nature are not inviolate where, in the words of Clarke J., there has been a “material and significant error in the assessment of the evidence” or where there has been “a failure to engage with a significant element of the evidence put forward”: see Wright v. AIB Finance and Leasing Ltd. [2013] IESC 55 and Doyle v. Banville [2012] IESC 25.
141. Given the importance of this factual finding – on which, it would be fair to say, a good deal of the conclusions of the High Court ultimately rested – it was accordingly necessary for the trial judge to have engaged with the evidence of Mr. Raethorne. As we have seen, Mr. Tynan did not positively assert that he had given the Black Book to Mr. Spencer at the October 2005: rather, he had assumed that Mr. Spencer had the Black Book at the time because – it is to be inferred from his evidence – this was the Bank’s standard practice. If, therefore, Mr. Raethorne’s evidence was correct, then it tended to undermine a critical aspect of Mr. Tynan’s evidence, because that was certainly a case where that practice (if such it was) was not followed.
142. Putting this another way: given the evidential conflict, then in any assessment of the evidence touching on the question of whether Mr. Spencer must have been given the Black Book in advance of investing and whether he received it at the October 2005 meeting, it would also have been necessary for the trial judge to consider and weigh the evidence of Mr. Raethorne. As, however, Costello J. did not do so, I find myself most reluctantly driven to the conclusion that for this reason alone that finding of fact cannot stand.
143. If matters stood at that point, then, given the paramount importance which this finding of fact assumed in Costello J.’s judgment, a re-trial might well have been necessary. In the event, however, for reasons I am about to set out, I do not think that such a step is in fact necessary.
Whether the Black Book had the effect of superseding all the earlier representations?
144. In her judgment Costello J. found that the plaintiff had acknowledged in evidence that the Black Book no longer contained the estimated returns contained in the earlier loose-leaf. The Black Book further indicated that the development opportunities were difficult to quantify. Costello J. then continued:
“Despite these differences [between the loose-leaf brochure and the Black Book] this did not dissuade [the plaintiff] from continuing with the investment. In the light of this evidence I conclude that the plaintiff in fact did not rely upon the statements in the loose-leaf brochure or, to put it more correctly, purported to rely upon them when he had no entitlement to do so. Certainly, as concerns his case based on the figures in the loose-leaf brochure, these were corrected and were corrected to the knowledge of the plaintiff in the Black Book. He had absorbed it and pondered it and noted that the Bank was not standing over the figures and that the development opportunities were difficult to quantify. In my opinion this amounted on the part of the Bank to a correction of any misrepresentation that occurred in the loose-leaf brochure. As Cartwright stated at para. 3-11:-
“Since the test for whether a statement is an actual misrepresentation generally looks to whether it was false at the moment it was acted upon by the representee, it follows that a misrepresentation which is made but is adequately corrected before the representee acts upon it is not longer actionable. In such a case it can be said either that there is no longer a misrepresentation, or that the representee in acting in the knowledge of the truth is no longer relying on the representation. The correction may be made by the representor, or by a third party, or by the representee independently discovering the truth. But the correction must be sufficient to remove the effect of the original misrepresentation: a partial or inadequate statement is not sufficient. Where, however, the true position appears clearly from the very terms of the contract which the representee claims to have been induced to enter into by the misrepresentation, the misrepresentation will have been “corrected” as long as the claimant is bound by those terms.”
145. Once again I find myself in respectful disagreement with the trial judge. The Black Book did not, of course, repeat the figures giving in the loose leaf brochure(s) regarding the potential rate of return. There was, indeed, a statement in the Black Book to the effect that it was difficult to quantify the rate of return. This, however, was the extent of the correction, if such it can be fairly described. One thing, however, is clear: even if the Black Book statements can be regarded as a correction, they are at best a partial correction and they could not be regarded as being sufficient to have removed the impression on investors regarding the potential rate of return which the loose-lead brochures had served to create.
146. In any event, this was the limit of the extent to which the earlier misrepresentations contained in the second loose-leaf brochure by the Black Book had been corrected. As I have earlier found, the Black Book still contained three serious misrepresentations, none of which were corrected – even partially – prior to the execution of the contract by the plaintiff in October 2005.
147. What, then, were the misrepresentations on the part of the Bank which were contained in the Black Book? First, it endorsed the development potential opportunities found in the Black Book, even though by this stage Anglo must have known that the Foundation had not been given any opportunity – either by it or by Howard Holdings – of considering these proposals. Second, it asserted that the Foundation was in favour of the progressive nature of Howard Holdings’ plans for the Centre, when the Bank must have known that this was not so. Third, it asserted that some 80,000 sq.ft. of retail space was on the cusp of being developed in the course of the Phase IV development without revealing that this could not happen without the surrender of a lease by the British Home Office, which lease had still five years to run. Nor was the plaintiff told at the meeting at Radisson Blu Hotel in Galway which was held a few days thereafter (sometime between the 12th and 19th October 2005) that some days previously the Home Office had refused to surrender the lease.
148. This in itself is sufficient to doom the Bank’s defence to the action for actionable misrepresentation, unless the Bank can show by unequivocal evidence that despite the actionable misrepresentations the plaintiff would have invested in the project in any event. It is true that the plaintiff was interested in the handsome returns projected by the Whitgift Centre project as a whole, but a critical element of that investment was the development potential which the Bank had held out to the investors (including the plaintiff) as having had the imprimatur in principle of the Foundation, when this was simply not the case.
Causation
149. At the heart of the Bank’s defence on the causation point is that the plaintiff stated in evidence that he would have been prepared to accept a return of 165% even though this is what was projected from the so-called “dry” case scenario, i.e., simply asset management of the Centre even without actual re-development or the utilisation of any of these development opportunities. It was accordingly submitted that the plaintiff would have invested in the project anyway in reliance on the project’s “dry case” projected returns.
150. This submission was accepted by Costello J. when she said (at para. 165):
“The plaintiff gave evidence that he would have invested in the Whitgift Fund if it gave a return of 220%. As referred to above, his understanding was that this meant 220% including his own investment of €1 million. It was common case that a return of 165% (as set out in the loose-leaf brochure) meant the return of an investor’s investment plus 165%. It was reasonable for the Bank to make this statement. This meant that the Bank made a reasonable representation to the plaintiff that he would get a return which was greater than that upon which, on his own evidence, he would have been prepared to invest in the Fund. It follows therefore that he has not established that he would not have invested in the Fund had he known the true figures (as he alleges) in relation to the projected returns for the asset management opportunities or the new development opportunities.”
151. Again, I find myself unpersuaded by this reasoning. As I have already found in this judgment, the Bank is guilty of a series of negligent statements which amounted to actionable misrepresentation. With one possible exception – the first misrepresentation regarding the development opportunities which were mutually exclusive – all of these misstatements and misrepresentations were seriously misleading. If the plaintiff was, indeed, aware of these matters in the Autumn of 2005, I find it difficult to believe that he (or any other reasonable investor) would have persevered with this investment.
152. In this respect the present case is very different from McCaughey v. Anglo Irish Bank [2011] IEHC 54. In that case it emerged that the Bank had failed to disclose a zoning difficulty to potential investors who were considering investing in a New York property project. Birmingham J. found no causation, saying:
“….no reasonable, prudent investor who found the proposed investment otherwise attractive is likely to have been dissuaded from investing by being told about the reality of the zoning issue.”
153. Applying that test to the present one, it is hard to see how any reasonable, prudent investor would have continued with the Whitgift project had they known, for example, that, contrary to the express representations made by the Bank, the Foundation had been given no proposals for re-development or that it was not prepared to fund such proposals or that the British Home Office was in occupation of some of the lands on a lease that had over five years to run and that they had declined to surrender that lease.
154. It is, in my view, impossible on the facts of this case to segregate out the development potential from the other asset management aspects of the project: indeed, the Bank’s own promotional literature at the time was the first to trumpet the importance of the development potential of these assets. Like many investors, the plaintiff was probably influenced by a range of factors. But, as O’Hanlon J. observed in Donnellan v. Dungoyne Ltd. [1995] 1 I.L.R.M. 388, 397, it is sufficient that the issue of development potential was “ a contributing factor in inducing the plaintiffs to undertake the contractual commitments to the defendant….”.
155. All the evidence showed that this was so. The plaintiff gave evidence that he would have stayed with the Knightsbridge option if the Whitgift project had simply involved passive asset management. He had explained that while he would have been prepared to accept asset management in Knightsbridge given its prestigious location, he would not have done so in the case of Croydon. The irresistible inference from the evidence of Ms. Deacy – who fairly acknowledged the plaintiff’s interest in the re-development potential of these projects within the Whitgift Centre – is that she persuaded him to avail of the Whitgift option and to cancel the Knightsbridge option, precisely because of the development potential associated with the Croydon project.
156. The plaintiff’s subsequent actions are also consistent with this conclusion. Between 2006 and 2008 he pursued with the Croydon planning authorities the issue of whether any application for development of the Centre had ever been lodged. In the light of all that has occurred, it is, perhaps, not surprising to learn that no such planning application for any development was ever subsequently lodged.
Conclusions
157. It follows, therefore, that for all the reasons specified in this judgment, this appeal must be allowed.
158. The sorry events described in this judgment – a veritable Pelion of misrepresentations heaped upon an Ossa of negligence- bring little credit to the Bank. In all of these respects, the conduct of the Bank fell below the standards of responsibility which this Court has every right to expect and demand from the holder of a banking licence and from that of its employees.
159. This conduct has had serious consequences for the plaintiff. By 2010 the value of the equity of each investor dropped to nil. The loss has subsequently crystallised by the sale of the underlying asset by the IBRC. These are losses which the plaintiff is entitled to say he would have avoided but for these misrepresentations and negligence on the part of the Bank.
160. It is, of course, true that the plaintiff entered into this investment knowing that it was high risk. But even those who invest in high risk projects are entitled to be protected by the law in respect of negligence and misrepresentation.
161. I would accordingly allow the plaintiff’s appeal and remit the matter to the High Court for an assessment of damages. It follows from the terms of this judgment that I would also dismiss the notices to vary lodged by both the Bank and Stapleford against those findings of misrepresentation made by the High Court.
AIB Mortgage Bank & Anor v Hayden & Anor (Approved)
[2020] IEHC 442 (12 June 2020)
JUDGMENT of Mr. Justice Meenan delivered on the 12th day of June, 2020
Introduction
1. The plaintiffs are seeking summary judgment arising out of five separate loan agreements with the defendants. The details of the various loan agreements are as follows: –
I. First Loan Agreement
2. The first loan agreement was made on 27 July 2004 whereby the second named plaintiff advanced a sum of €735,000.00 to the defendants’, payable over a term of 25 years. The interest rate was fixed for one year at 2.75% and the second named plaintiff’s variable rate would apply thereafter. This loan agreement was mortgaged against 35 The Woodlands, Greystones, County Wicklow. The defendants accepted and signed this loan agreement on 6 August 2004. The second named plaintiff transferred all its rights and obligations pursuant to this loan agreement to the first named plaintiff. The defendants defaulted on this loan agreement and, as of 16 January 2020, there was due and owing the amount of €820,146.40 together with continuing interest.
II. The Second Loan Agreement
3. Pursuant to a loan agreement made on 27 July 2004, the second named plaintiff advanced a sum of €425,000.00 to the defendants to be repayable over a period of 25 years. The interest rate was fixed for the first year at 3.5% and the second named plaintiff’s variable buy-to-let interest rate would apply thereafter. This loan agreement was secured against 18 Delgany Glen, Delgany, County Wicklow, a buy-to-let property. The second named plaintiff transferred all its rights and obligations under this loan agreement to the first named plaintiff. The defendants defaulted on this agreement and, as of 16 January 2020, there was due and owing the amount of €660,980.20 together with continuing interest.
III. The Third Loan Agreement
4. Pursuant to a loan agreement made on 23 July 2004, the second named plaintiff agreed to grant overdraft facilities in respect of the defendants’ current account (No. 933554-[—]5090). By letter, dated 16 November 2015, addressed to the defendants, the second named plaintiff demanded repayment of the sum outstanding. As of 16 January 2020, the total balance outstanding for this account was in the amount of €104,389.86.
IV. The Fourth Loan Agreement
5. Pursuant to a loan agreement made on 23 July 2004, the second named plaintiff agreed to grant overdraft facilities in respect of the defendants’ current account (No. 933554-[—]4063). By letter, dated 16 November 2015, addressed to the defendants, the second named plaintiff demanded repayment of the sum then outstanding. As of 16 January 2020, there was due the amount of €20,620.71.
V. The Fifth Loan Agreement
6. Pursuant to a loan agreement made on 17 February 2006, the first named plaintiff advanced a sum of €354,000.00 to the first named defendant, to be repayable over a period of 25 years. The interest rate was fixed for one year at 3.70%. This loan agreement was secured against 50 Church Avenue, Eden Court, Delgany, County Wicklow, a buy-to-let property. The first named defendant defaulted on this loan agreement on 2 October 2008. By letter, dated 25 June 2014, addressed to the first named defendant, the first named plaintiff demanded repayment of the sum then outstanding. As of 16 January 2020, there was due and owing the amount of €321,604.45 together with continuing interest.
7. The total judgments being sought by the plaintiffs are in the following amounts, together with continuing interest, as of 16 January 2020: –
(i) The first named plaintiff against the first named defendant: –
• First loan agreement – account no. 930350-[—]5024 – €820,146.40
• Second loan agreement – account no. 930350-[—]6007 – €660,980.20
• Fifth loan agreement – account no. 930350-[—]3038 – €321,604.45
• Total: €1,802,731.05
(ii) The second named plaintiff against the first named defendant: –
• First loan agreement (account no. as above) – €820,146.40
• Second loan agreement (account no. as above) – €660,980.20
• Total: €1,481,126.60
(iii) The first named plaintiff against the second named defendant: –
• Third loan agreement – account no. 933554-[—]5090 – €104,389.86
• Fourth loan agreement – account no. 933554-[—]4063 – €20,620.71
• Total: €125,010.57
(iv) The second named plaintiff against the second named defendant: –
• Third loan agreement (account no. as above) – €104,389.86
• Fourth loan agreement (account no. as above) – €20,620.71
• Total: €125,010.57
8. There was a further loan agreement (the sixth loan agreement) which the plaintiffs are, at present, not pursuing. Currently there is an issue concerning the tracker interest rates involved.
Principles to be applied
9. Over the last number of years, the Superior Courts have set out the principles which a court should apply in considering whether to grant summary judgment or to remit a matter to a plenary hearing. I will start with the oft cited passage from the judgment of Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd [2001] 4 IR 607 where, at p. 623, he states: –
“In my view, the fundamental questions to be posed on 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?
First National Commercial Bank v. Anglin [1996] 1 IR 75 and the cases cited therein seem to me to focus on a specific aspect of these questions, that of credibility. It is indeed true that ‘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’ (National Westminster Bank v. Daniel [1993] 1 W.L.R. 1453). Equally, ‘it is not sufficient that the court should have reason to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action’ (First National Commercial Bank v. Anglin).”
10. I also refer to the following passage from the judgment of Irvine J. in Harrahill v. Swaine [2015] IECA 36, where she states: –
“30. In Harrisrange Limited v. Duncan McKechnie J. advised that the power to grant summary judgment should be exercised with discernible caution and he advised that a defendant should be considered to have a bona fide defence if he demonstrated ‘a fair or reasonable probability of having a real or bona fide defence.’
31. In McGrath v. O’Driscoll the High Court laid out the basic test as to whether a legal dispute should be decided on summary proceedings or not:
‘So far as questions of law and 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 were 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.’”
11. In this case, the defendants have put forward a number of defences which involve questions of law and, to a lesser extent, the construction of documents. What is not in dispute is that monies were advanced under the various loan agreements and not repaid. Both parties helpfully provided the Court with detailed written submissions supported by the relevant legal authorities. In addition, the Court had the benefit of submissions made by Mr. Andrew Fitzpatrick S.C., on the part of the plaintiffs, and Mr. Stephen McCullough B.L., on the part of the defendants. With the assistance of these submissions I am satisfied that the Court is in a position, without doing injustice to either party, to determine a number of the legal issues raised.
Defences
12. Mr. McCullough raised a number of defences, which I will examine in turn: –
(a) The requirements arising from Bank of Ireland Mortgage Bank v. O’Malley [2019] IESC 84.
13. This recent decision of the Supreme Court restated the requirement on the part of a plaintiff seeking judgment for a sum of money to provide particulars of the amount sought to be recovered as would be sufficient to allow a defendant to know whether he should concede or resist the claim. I refer to the following passage from the judgment of Clarke C.J.: –
“A person confronted with a claim or a court confronted with a question of whether there is prima facie evidence for that claim is entitled to at least enough detail to know the basis on which the sum claimed is calculated. The defendant is entitled to that information to decide whether there is any point in pursuing a defence or, indeed, potentially expending monies on procuring professional advice in that regard. The court is entitled to that information to enable it to form an assessment as to whether there is sufficient evidence to say that the debt has been established on a prima facie basis. Neither the defendant nor the court should be required to infer the methodology used, unless that methodology would be obvious to a reasonable person or is actually described in the relevant documentation placed before the court.”
14. Having considered the documentation before the Court, I am satisfied that the plaintiffs have satisfied the “O’Malley test”. I refer to an amended “special indorsement of claim” on the summary summons. In respect of each of the various loan agreements, the following amendment is made: –
“The particulars of the amount due and owing are calculated as detailed in the bank account statements in respect of loan account no. [blank] and have previously been notified to the defendants by the delivery of same from time to time.”
The relevant bank statements have all been exhibited in the various affidavits filed by the plaintiffs.
15. Further, the various replying affidavits filed on behalf of the defendants were filed before the decision was given in the O’Malley case. In these affidavits no complaint was made that the plaintiffs had not put sufficient evidence before the Court concerning the alleged debts or that there was a lack of particularity as would be sufficient to allow the defendants to know whether or not to concede or resist the claim. I am therefore satisfied that the defendants have not established any defence in this regard.
(b) Code of Conduct.
16. The defendants claim that the facility letters, relating both to the first and second loan agreements, provide that the plaintiffs’ entitlement to demand early repayment of the loans is “subject to due compliance with any statutory requirement, if applicable”. They further submit that this has the effect of incorporating into the loan agreements the provisions of the Central Bank’s Code of Conduct on Mortgage Arrears.
17. The affidavit of the first named defendant (sworn also on behalf of the second named defendant) states that the defendants engaged fully with the plaintiffs in trying to agree an acceptable and sustainable resolution in relation to the arrears on these loans that had arisen. They state that they have been paying and continue to pay the sum of €3,500.00 per month. However, Mr. Garrett McCabe, on behalf of the plaintiffs, states in his affidavit that though €3,500.00 was being paid from February, 2015 and that the last such payment was made in September, 2017 that the contracted monthly repayment was in excess of €4,200.00. This was not acceptable to the plaintiffs and so the defendants were removed from the Mortgage Arrears Resolution Process (MARP). The reasons for this were set out in correspondence sent to the defendants.
18. This defence requires a court to hold that the provisions of the said Code of Conduct were terms of the first and second loan agreements and that the decision to remove the defendants from MARP was unlawful. The legal status of the Code of Conduct was considered by the Supreme Court in Irish Life and Permanent PLC v. Dunne [2015] IESC 46. In his judgment, Clarke J. (as he then was) stated: –
“There is nothing in the legislation to suggest that it is the policy of the legislation that the courts should be given a role in determining whether particular proposals should be accepted or in deciding whether a financial institution, in formulating its detailed policies in respect of mortgage arrears and applying those policies to the facts of individual cases, can be said to be acting reasonably. Neither can it be said that the policy of the legislation requires that courts assess in detail the compliance or otherwise by a regulated financial institution with the Code. If the Oireachtas had intended to give the courts such a role then it would surely have required detailed and express legislation which would have established the criteria by reference to which the Court was to intervene to deprive a financial institution of an entitlement to possession which would otherwise arise as a matter of law.”
and: –
“Rather, the Court is concerned with the extent, if any, to which the Code can be said to impact on the legal rights and obligations as and between a lender who is a regulated financial institution, on the one hand, and a borrower, on the other hand.
In what way can it be said that the Code so impacts? Two possible bases were put forward in argument on behalf of the Dunnes. Counsel suggested that it was possible to argue that the Code might amount to an implied term in the relationship between the parties. In fairness, counsel did not press that argument too far. In my view, counsel was correct in adopting that position. It is very difficult to see how the contractual arrangements between a lender and a borrower must be taken to have implied into them the provisions of the Code in circumstances where the Code can change from time to time (and thus could not have been particularly in the contemplation of the parties when they entered into their contracts) and where, unlike other legislation such as, for example, the Sale of Goods and Supply of Services Act 1980, the Employment Equality Act 1998 and the Package Holidays and Travel Trade Act 1995, the relevant legislation in this case does not expressly provide that certain terms are to be implied into relevant contracts. If the Oireachtas had wanted to convert any particular provision or type of provision of the Code into an implied term then it would have been easy for the Oireachtas to adopt the same policy as was adopted in respect of other legislation and to have said so.”
In light of this, I do not believe that any alleged failure by the plaintiffs to abide by the Code of Conduct gives the defendants a defence. For such an alleged failure to be a defence, it would mean giving the Code of Conduct a legal status which it clearly does not have. The court does not have a jurisdiction to pass judgment as to whether or not the plaintiffs or the defendants were acting reasonably in the negotiations they had to resolve the arrears that had arisen. I think that the furthest the court could go would be to take into account the actions of the plaintiffs and the defendants when the matter of a stay is being considered.
19. It is also clear from Irish Life and Permanent PLC v. Dunne that it is not open to the court to imply the terms of the Code of Conduct into the contractual relationship between the parties. I am, therefore, of the view that the defendants’ alleged wrongful removal from MARP under the Code of Conduct does not afford a defence to the defendants. I am satisfied that I can reach such a conclusion in the course of a hearing for summary judgment where, as in this case, both parties filed detailed written submissions on this point and referred the Court to the relevant authorities.
(c) Overdraft.
20. The third and fourth loan agreements provided for the granting of certain overdraft facilities. It was a term of the fifth loan agreement that the third loan agreement and the fourth loan agreement had to be cleared on drawdown. Thus, the position was reached that both overdrafts were cleared. However, subsequently, the defendants drew down monies from these accounts. The defendants argued that once these accounts had been cleared, it was necessary for the second named plaintiff to issue new agreements. As no new agreements were issued, the defendants allege a breach of the provisions of the Consumer Credit Act, 1995 (the Act of 1995).
21. Section 35 of the Act of 1995 provides: –
“(1) A consumer shall be informed by the creditor at the time, or before, an agreement is made in respect of the granting of credit in the form of an advance on a current account [including an overdraft] granted by a credit institution…”
and, s. 38 states: –
“A creditor shall not be entitled to enforce a credit agreement or any contract of guarantee relating thereto, and no security given by the consumer in respect of money payable under the credit agreement or given by a guarantor in respect of money payable under such contract of guarantee as aforesaid shall be enforceable against the consumer or guarantor by any holder thereof, unless the requirements specified in this Part have been complied with:
Provided that if a court is satisfied in any action that a failure to comply with any of the aforesaid requirements, other than section 30, was not deliberate and has not prejudiced the consumer, and that it would be just and equitable to dispense with the requirement, the court may, subject to any conditions that it sees fit to impose, decide that the agreement shall be enforceable.”
22. An analysis of this defence requires consideration of the legal basis of an overdraft. The plaintiffs relied upon the following passage from Breslin and Corcoran “Banking Law” (4th Ed. Round Hall, 2019): –
“It is a basic obligation owed by a bank to its customer that it will honour on presentation cheques drawn by its customer on the bank, provided there are sufficient funds in the customer’s account to meet the cheque, or the bank has agreed to provide the customer with overdraft facilities sufficient to meet the cheque. Where the bank honours such a cheque, it acts within its mandate, with the result that the bank is entitled to debit the customer’s account with the amount of the cheque, because the bank has paid the cheque with the authority of the customer.
In other circumstances, the bank is under no obligation to honour its customer’s cheques. If, however, a customer draws a cheque on the bank without funds in his account or agreed overdraft facilities sufficient to meet it, the cheque on presentation constitutes a request to the bank to provide overdraft facilities sufficient to meet the cheque. The bank has an option whether or not to comply with that request. If it declines to do so, it acts entirely within its rights and no legal consequences follow as between the bank and its customer. If, however, the bank pays the cheque, it accepts the request and the payment has the same legal consequence as if the payment had been made pursuant to previously agreed overdraft facilities; the payment is made within the bank’s mandate, and in particular, the bank is entitled to debit the customer’s account, and the bank’s payment discharges the customer’s obligation to the payee on the cheque.”
It follows from this that each time the defendants drew on these accounts when there were not sufficient funds available, it amounted to a request by the defendants for an overdraft which was granted. If the defendants’ interpretation of the Act of 1995 is correct, it would mean that each time the defendants drew on these accounts when there were no sufficient funds available, the second named plaintiff had to provide to the defendants a statement for the purposes of the said Act. I do not think this is correct. As is stated in the passage from Breslin and Corcoran in “Banking Law”, an express contract is not required, “the payment has the same legal consequence as if the payment had been made pursuant to previously agreed overdraft facilities…”.
23. In any event, if I am incorrect and there has been a breach of the Act of 1995, I am satisfied that the matter is covered by s. 38 quoted above. There is no suggestion that an alleged failure to comply with the requirements of the Act of 1995 was deliberate and certainly it could not be maintained that there has been any prejudice to the defendants. It would be just and equitable to dispense with the said requirements, were such applicable. I am satisfied that the third and fourth loan agreements are enforceable.
24. In my view, the defendants have raised no defence under this heading. In reaching this conclusion, the Court had the benefit of written legal submissions, was referred to the relevant authorities and heard the submissions of counsel.
(d) Tracker Interest Rate.
25. The defendants maintain that in respect of the first and second loans that they should have been offered a tracker mortgage rate on the expiry of the initial rate.
26. In considering this defence, I refer to the “applicable interest rate” as set out in the letters of offer in respect of these loans. The wording in respect of the first loan states: –
“2.7%, fixed for 1 years after which the rate will revert to the bank’s variable interest rate, unless borrower(s) avail(s) of another interest rate option then on offer by the bank…”
Similar wording is used for the second loan offer. It seems to me that the wording is clear. It was open to the defendants to avail of another interest rate then on offer and, presumably, this would have included a mortgage tracker interest rate should this have been on offer at the time. There was no obligation, as maintained by the defendants, for them to be offered such an interest rate, but they could have requested it.
27. I am satisfied that the defendants have not established a defence under this heading. The clear wording of the relevant terms in the letters of offer, for both the first loan and the second loan, does not support such a defence.
(e) “Part Payment”.
28. In the course of the first named defendant’s affidavit, when addressing the fifth loan agreement, he states: –
“When those loans fell into difficulty, I had discussions with Karl Ruddy, an employee of the plaintiffs with whom I had a longstanding and good working relationship, and he told me that the plaintiffs wanted the properties to which the loans related to be sold and the proceeds applied to the outstanding balances. When I pointed out to Mr. Ruddy that the plaintiffs were asking us to sell at the bottom of the market and that if they waited, we could obtain a higher price when the market recovered, Mr. Ruddy told me that the plaintiffs just wanted to move the files on and he assured me that if I agreed to sell at that time, I would not be pursued for any residual debt. It was on that basis that I agreed to sell the properties and I understand that in doing so had an agreement that the plaintiffs would not pursue me further and that any residual debt would be written (sic). As such, it is my case that the plaintiffs are breaching that agreement by seeking to obtain judgment against me in respect of the fifth and sixth loans.”
As already noted, the plaintiffs are not pursuing the sixth loan.
29. Mr. Fitzpatrick, on behalf of the plaintiffs, submitted that this defence amounted to no more than an “assertion” and, in any event, the defendants would still be faced with the hurdle of the principle in Pinnel’s Case. In support of this submission, the Court was referred to a number of authorities including Harrahill v. Swaine [2015] IECA 36, National Asset Loan Management Limited v. Barden [2013] 2 I.R. 28 and Ulster Bank Ireland Ltd and Anor. v. Deane and Anor. [2012] IEHC 248.
30. Having considered the matter, I am of the view that as the first named defendant specifically identified a servant or agent of the plaintiffs with whom he had an alleged conversation that this brings the matter beyond being an assertion. Even if the defendant does establish that there was such an arrangement, he undoubtedly will be met with the defence that a creditor’s agreement to accept a lesser sum in full satisfaction of the whole debt does not discharge the obligation to pay the entirety of the amount due. This is the rule in Pinnel’s Case. Notwithstanding this, I have to consider that, depending on the evidence adduced, a factual situation may emerge which would prevent the application of this rule. For these reasons, I am going to direct a plenary hearing in respect of the fifth loan agreement.
C
onclusion
31. By reason of the foregoing, I am satisfied that the plaintiffs are entitled to judgment against the defendants in respect of the first, second, third and fourth loan agreements. Counsel will provide to the Court amounts in respect of these which are presently outstanding.
32. I will direct a plenary hearing in respect of the fifth loan agreement, solely on the issue raised by the defendants, namely, as to whether there was an agreement that if certain properties were sold and the proceeds applied to the fifth loan agreement that any residual debt would be written off. Further, if this was the case, what are the legal consequences of same.
33. I invite counsel to make submissions concerning the consequential orders that arise from this judgment, including costs.