Judgment Title: National Asset Loan Management Ltd -v- Barden
Neutral Citation:  IEHC 32
High Court Record Number: 2012 2762 S
Date of Delivery: 04/02/2013
Court: High Court
Composition of Court:
Judgment by: Charleton J.
Status of Judgment: Approved
Neutral Citation  IEHC 32
The High Court
[2012 No. 2762S]
National Asset Loan Management Limited
Judgment of Mr Justice Charleton delivered on the 4th day of February 2012
1. The plaintiff is an entity within the National Asset Management Agency, the statutory body set up pursuant to the National Asset Management Agency Act 2009 to acquire the bad debts of Irish banks and manage them over a long-term period in an attempt to realise some value while at the same time freeing the banks of the impairment of their ill-judged loans. The defendant is a property developer. In this motion for summary judgment, the plaintiff seeks judgment against the defendant for €10,072,856. This sum represents the loans advanced to him and three others for the development of property in Co Wexford. There are three relevant loans, two of which were made by the Bank of Ireland and the other by Allied Irish Banks. The Bank of Ireland loan is evidenced in a facility letter dated 8 September 2004 and was rolled over by a similar letter on 16 September 2009 and accounts for approximately €2.7 million of the debt. It is the Allied Irish Banks loan with which this application is most concerned. This was granted by way of a facility letter on the 5 February 2007 and accounts for approximately €7.4 million of the debt.
2. Two separate defences are advanced as to why summary judgment should not be granted. The defendant argues, firstly, that the acquisition of the loans from the various banks by the National Asset Management Agency was unlawful. In addition, the defendant also claims as a substantive defence to the repayment of the debt that it is not due under the terms of the contract of loan.
(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, being mindful at all times of the unavoidable limitations which are inherent on any conflicting affidavit evidence,
(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?’, which latter phrase I would take as having as against the former an equivalence of both meaning and result,
(viii) This test is not the same as and should be not 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,
(xi) Leave should not be granted where the only relevant averment in 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.
“Even if the position was otherwise, once the learned High Court Judge was satisfied that the defendant had “a real or bona fide defence”, whether based on fact or on law, he was bound to afford them an opportunity of having the issued tried in the appropriate manner.”
15. In Aer Rianta c.p.t. v. Ryanair Limited  4 IR 607, Hardiman J. reviewed Irish cases and concluded at p.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?”
6. Where an issue of law arises for determination on a summary judgment application, quite complex issues may fall for decision on the interpretation of the mutual rights and obligations of debtors, creditors and guarantors. It is not necessary for the court to resolve these issues within the context of a summary judgment application if greater knowledge of the facts, which can only be gleaned on hearing oral evidence, is appropriate, or where the decision would benefit from the wider scope of argument that is available through plenary proceedings. It is clear that, in this regard, a court may exercise discretion. In McGrath v. O'Driscoll  1 ILRM 203, Clarke J. described the law as follows, at p.210:
Contract of loan
9. The special conditions of the contract specify that all the debt due to the bank is to be cleared upon the sale or completion of 75% of the development. The loan was made to this defendant and his three business partners in this venture. Two of these have since been declared bankrupt before the courts of England and Wales.
10. Since the appointment of the receiver, there has been a wealth of correspondence between the parties. It is fair to say that the defendant cooperated with the receiver and used his best efforts to attempt to ensure the security of the relevant estate at Belmont Park and the sale of further units. This, he now says, was without prejudice to the defence which he raises. Unfortunately, that was not even hinted at in the correspondence about the loan and its repayment between him and the bank. In an affidavit sworn in these proceedings on 14 December 2012 the defendant seeks to have this dispute remitted to plenary hearing by expressing his defence in this way:
“The key elements of a claim of promissory estoppel are as follows.
(i) A pre-existing legal relationship between the parties.
(ii) An unambiguous representation.
(iii) Reliance by the representee (and possible detriment).
(iv) Some element of unfairness or unconscionability.
(v) The estoppel is being used not as a cause of action, but as a defence or as a rule of evidence to stop the other party raising a defence.
(vi) The remedy is a matter for the court.”
The legal argument raised is an interesting one. However the defendant has failed to ground the interesting legal issue, and in this context of this case, largely uncontroversial legal issue in the facts of this case. As Dr. McDermott has pointed out, Cheshire and Fifoot, have suggested of promissory estoppel that:
“Few doctrines are at once so potentially fruitful and so practically unsatisfying. It is more often cited than applied, and more often applied than understood.”
In this case, the bank offered a standstill and honoured that offer during both the original and extended standstill period. The defendant places particular emphasis on this phrase that appears in the penultimate sentence of the operative part of the letter of 23rd November, 2009:
“… and to enable Zurich Bank to devise revised repayment schedules and Loan Offer letters for your two loans based on the findings of the study.”
The defendant says that the bank has not met its obligations, whereas he says that in all material respects, he has fully honoured his side of that agreement.
This was a standstill agreement, no more and no less. A standstill was effective until 30th June, 2010. A report with suggestions as to how matters might be progressed was put forward by the defendant but was rejected by the bank by letter dated 20th July, 2010. The bank was not obliged to offer a standstill, but did so. Having done so, the bank was obliged to honour its promise and did so. I can see no basis for suggesting that there was, even arguably, any greater obligation on the part of the bank. It seems to me that the defendant’s arguments fundamentally misunderstand the nature of the relationship between the bank and the defendant. The relationship was not that of partners with a common interest, sharing a risk, rather, the relationship was that of lender and borrower.
At the heart of the doctrine of estoppel is the requirement that there would be an element of unfairness or unconscionability in permitting the promisor to welch on what he has offered. Leaving aside that what the bank offered was limited to offering a standstill period, I can find nothing unfair or inequitable or unconscionable in a party that has lent money seeking to be repaid.
I can see no arguable basis for suggesting that an equitable remedy would involve extinguishing the right of a bank that has lent a very large sum of money for a commercial development to be repaid.
14. The second argument advanced on the contract is that the appointment of the receiver was unlawful. This argument is predicated on the issue just decided; it depends on the repayment term not having been properly activated. On the appointment of the receiver, correspondence ensued, but this issue was not raised either. The appointment of the receiver was expressly made under the mortgage deed. Under clause 8 thereof, the bank was contracted to have the statutory powers conferred on mortgagees by the Conveyancing Acts and the power of sale was to be exercisable without the restriction imposed by section 20 of the Conveyancing Act 1881. Furthermore, the same clause provided that the secured money was deemed to become due within the meaning of and for all the purposes of Conveyancing Acts on the date of execution of the deed. This situation is parallel to that analysed by McGovern J. in Moran and Moran v. AIB Mortgage Bank and Others  IEHC 322, (Unreported, High Court, McGovern J., 27th July, 2012) where, as can be seen, the provisions of the mortgage deed under which a receiver was appointed were similar:
3. Both the AIB and the AIB Mortgage Bank mortgages contain interpretation provisions which provide, inter alia:-
“Reference to any enactment includes reference to any statutory modification thereof, whether by way of amendment, addition, deletion or appeal and re-enactment with or without amendment.”
4. By Clause 8.01, the AIB mortgage provides, inter alia, as follows:-
“The Bank shall have the statutory powers conferred on mortgagees by the Conveyancing Acts with and subject to the following variation and extensions, that is to say:
(a) The secured monies (whether demanded or not) shall be deemed to become due within the meaning and for all purposes of the Conveyancing Acts on the execution of these presents.
(b) The power of sale shall be exercisable without the restrictions on its exercise imposed by section 20 of the Act of 1881…”
5. The mortgages relevant to this case predate the commencement of the 2009 Act. In each case, the Mortgage Deed expressly provides that the mortgage debt is deemed to have accrued due on the date of execution of the Mortgage Deed. Thus, the right to appoint a receiver accrued prior to 1st December, 2009. Clause 8.02 of the Mortgage Deed and Clause 7.2 of the AIB Mortgage Conditions expressly excluded the restrictions on the exercise of the power of sale imposed by s. 20 of the 1881 Act. Section 20 of the 1881 Act provides:-
“A mortgagee shall not exercise the power of sale conferred by this Act unless and until-
(ii) some interest under the mortgage is in arrears and unpaid for two months after becoming due; or
(iii) there has been a breach of some provision contained in the Mortgage Deed or in this Act, and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon.”
“A mortgagee entitled to appoint a receiver under the power in that behalf conferred by this Act shall not appoint a receiver unless he has become entitled to exercise the power of sale conferred by this Act, but may then, by writing under his hand, appoint such person as he thinks fit to be a receiver.”
However, the restrictions imposed by s. 20 were varied by the terms of the Mortgage Deeds and the Mortgage Conditions so that the power of sale was exercisable without the restrictions imposed by s. 20 of the 1881 Act. Furthermore, the secured monies were deemed to become due within the meaning and for all purposes of the Conveyancing Acts on the execution of the mortgage. Therefore, as soon as the Deed was executed and the contract entered into, the power of sale was exercisable and, as a result, the right to appoint a receiver had accrued.
The powers of the National Asset Management Agency
17. A preliminary point requires to be decided before turning to any of these arguments. The plaintiff argues that these arguments as to the statutory competence of the National Assets Management Agency may only be raised by judicial review. These issues were not canvassed by the defendant as an applicant in judicial review proceedings under Order 84 of the Rules of the Superior Courts. Instead, the challenge to the powers of the defendant was first made in these summary proceedings by way of a proposed defence. In my view, this is impermissible. In addition, time limits apply for the commencement of judicial review proceedings or, where permissible, plenary proceedings where this course may be a legitimate alternative. I am satisfied that, as a matter of fact, a decision was made by the National Assets Management Agency, to acquire these loans on the stated date of 8 September 2011. There is no other evidence on which I could reasonably rely. These defences of the National Assets Management Agency exceeding its statutory powers were first raised by way of defence to these summary proceedings well over a year later. The terms of section 193 of the Act of 2009 are as follows:
(ii) the Court is satisfied that—
(I) there are substantial reasons why the application was not made within that period, and
(II) it is just, in all the circumstances, to grant leave, having regard to the interests of other affected persons and the public interest,
(b) the Court is satisfied that the application raises a substantial issue for the Court's determination.
(2) The Court may make such order on the hearing of the judicial review as it thinks fit, including an order remitting the matter back to the maker of the decision with such directions as the Court thinks appropriate or necessary.
(3) This section applies to NAMA and a NAMA group entity in the same manner as it applies to any other applicant for judicial review of a decision under or pursuant to this Act.
20. The purposes of the Act of 2009, which set up the National Assets Management Agency, are set out in section 2 thereof. Those purposes are all related to the economic collapse due to vastly overvalued real property prices that became starkly apparent in 2008. These include addressing the threat to the economy; returning the availability of credit to business; resolving the problems created by the financial crisis generated in the years 2000 to 2008; protecting the State’s support of improvident banks; protecting the taxpayer; restructuring credit institutions; bringing certainty into the valuation of the assets of banks; restoring confidence in the banking sector; and contributing to the development of the nation. Under section 10, those purposes are to be fulfilled through the National Assets Management Agency. This is to be done by acquiring bank assets; by dealing expeditiously with those loans; by protecting the value of what is acquired; and by achieving the best possible return from that process for the State. Under section 84, property should not be acquired if the long-term economic value of that property is less than the market value as of the notional date of acquisition. Under section 96, it is the duty of the bank to notify debtors and guarantors within 60 days of the transfer of the assets. The provisions of Part 10 of the Act are more difficult to understand. It is clear that the relevant chapters of the Act contemplate that actions for damages may be brought within particular time limits. Construing, therefore, section 193 within what seems to be its legislative context, both actions in respect of damages and judicial review are made possible under the Act. This action is not in its substance, however, an action for damages. It is an action that seeks to delay or upset the repayment of a loan. The most that could be achieved by the defence that the assets of the defendant were wrongfully acquired by the National Asset Management Agency, is that the Court give leave to the defendant to defend his claim by remitting this action to plenary hearing. He claims that the plaintiff has no entitlement to enforce the debts against him because of an absence of legal entitlement due to wrongful acquisition. That plea is classically the invocation of a public law remedy. Despite it being generally possible to enforce public law rights through a plenary summons within the appropriate time limits, or again within the appropriate time limits through a counterclaim, it seems to me that section 193 has excluded that alternative procedure. No challenge to an action of the plaintiff by way of a public law remedy of certiorari or mandamus is possible except on the two conditions that are clearly laid out in that section. Firstly, an application for judicial review must be brought within a month of the relevant decision. Secondly, it is implicit that such an application must be brought to the High Court, a conclusion made explicit by the requirements that the judge hearing the application should not give leave to commence proceedings unless an applicant has “a substantial issue for the Court’s determination.” It would be easier to conclude that a plenary action is an alternative that is open to a party aggrieved by an administrative decision, where no limit is set on the discretion of the court hearing an application for leave to commence judicial review. The reality is, however, that unless the High Court decides that the case is substantial, no action by way of judicial review is mandated. Further, such a decision cannot be made by counsel signing a plenary summons. That is not their function under the Act of 2009 as it is expressly reserved to the High Court. That assessment enabling the commencement of a judicial review application is judicial in nature. It is not merely a matter of ethics at the Bar whereby a plenary summons should not be signed by counsel unless, on the facts that counsel are instructed on, a stateable case is shown. Here the test is not that there should be a stateable case but that a substantial issue is raised. The requirement that the High Court come to the conclusion that an application should be founded on a substantial issue before leave to commence judicial review proceedings is granted renders the alternative of a plenary proceeding incompatible with the intention of the Oireachtas.
21. Even supposing that decision to be incorrect, these arguments cannot be now raised. The time limit for the commencement of proceedings set out in the Act of 2009 would apply to both a judicial review application and to the issuing of a plenary summons. Voluminous correspondence ensued after the decision by the National Asset Management Agency on 8 September 2011 to acquire these loans. That correspondence was redolent with the skilled recitation of arguments that echoed back and forward in a way that could leave no doubt in the mind of anyone reading the exchanges that the defendant was fully aware that he was both aggrieved by the decision to acquire the loans and that this perceived wrong was expressed as a misapplication of public law by the plaintiff. A summary summons was issued by the plaintiff seeking recovery of the debt on 23 July 2012. Whatever might be said about the defendant not being obliged to seek judicial review until he had become aware of the relevant decision of the plaintiff and whatever might also be argued that a swift letter of complaint might allow an extension of time until a reply had been received clarifying why the National Asset Management Agency had chosen to act under its statutory powers, there is nothing before this Court whereby it would have any entitlement to extend the time for challenging that decision up to and including remitting this case to plenary hearing. Specifically, and using the statutory test set out in section 193 of the Act of 2009, no substantial reasons are given why the issue was not commenced in time and there is, furthermore, nothing whatever said about the interests of other affected persons or the public interest.
22. Given that the Act of 2009 was commenced in the public interest and in circumstances of a national emergency that continues down to the present time, it may be inferred that the intention of the Oireachtas was for reasonable certainty to attend the property transactions of the National Asset Management Agency. Fair dealing and security of title are, as a matter of law, to be obtained with the acquisition of assets. Such acquisitions are not made subject to the ordinary rules under the Statute of Limitations 1957, as amended. Instead, both as to claims for damages and public law challenges which would upset the transfer of assets to a responsible public body set up to reintroduce calm and certainty into the fractured economy, the legislature has required that any perceived wrongs should be litigated within clear time limits and under stringent conditions as to the commencement of judicial review. The courts are required to uphold that statutory intention through ruling out claims that have been brought outside the deliberately short time limits where no good reason is shown to offer indulgence.