Judgment Title: ACC Bank Plc -v- McEllin & ors
Neutral Citation:  IEHC 454
High Court Record Number: 2012 1400 S
Date of Delivery: 18/10/2013
Court: High Court
Composition of Court:
Judgment by: Birmingham J.
Status of Judgment: Approved
Neutral Citation:  IEHC 454
THE HIGH COURT
[2012 No. 1400 S.]
A.C.C. BANK PLC
RUADHRI McELLIN, JOHN McELLIN AND EMER McELLIN
JUDGMENT of Mr. Justice Birmingham delivered 18th the day of October 2013
1. This is an application by the plaintiff, ACC Bank plc (“the bank”) for summary judgment against the three defendants in the proceedings, Ruadhri, John and Emer McEllin. When the matter came before me during the course of the Cork Non Jury List, the application for summary judgment was resisted by the second and third named defendants who argued that rather than having judgment given against them, that the matter should be referred to plenary hearing. The first named defendant did not appear, and took no part in proceedings. His solicitor had been given liberty to come off record on the 15th April, 2013. Until then the same solicitor had represented all three defendants. The first named defendant, I should explain, is the son of the second and third named defendants.
2. The background to the application is that the second and third named defendants had for many years owned and operated a general store/hardware store at Balla, Castlebar, Co. Mayo. Their property was adjoined by a vacant site referred to as “Wade’s”. The first named defendant identified that if the adjoining site could be acquired, that the enlarged site would be suitable for a mixed commercial/residential development involving houses, apartments and retail units, one of which would serve as a replacement for the existing hardware store.
3. He explained what he had in mind to his parents and they came on board. The expectation of the defendants was that this would be a successful venture, and in particular there was a belief that this development would provide financial security for the second and third named defendants in their retirement. ACC Bank was approached by the first named defendant acting, or purporting to act, on his own behalf and on behalf of the second and third named defendants. There is no doubt that at this stage the first named defendant was playing the lead role in developing the proposal.
4. On the 12th April, 2006, the plaintiff advanced the sum of €500,000 to facilitate the acquisition of the adjoining property. The term of the loan facility was eighteen months. Security comprised of a first legal mortgage and charge on the existing McEllin premises in Balla, and a first legal mortgage and charge on the adjoining property and there was also a requirement for the assignment of a mortgage protection policy on the life of Ruadhri McEllin, the first named defendant.
5. Developments in relation to obtaining planning permission and related matters took longer than was expected. Planning permission was not secured until the 27th June, 2007. A second loan facility was sought and was agreed to by letter of loan sanction of the 7th January, 2008. This time the loan was in the amount of €651,000. This was designed to repay the existing loan, and provide funding for professional fees. Initially this bridging facility was for a term of four months, however, by letter of variation of the facility letter dated 19th November, 2008, the bank agreed to a variation in the terms and conditions applicable to the loan, in particular the final due date of the bridging facility was extended out to 30th April, 2009, and there was also provision for an increase in the interest rate.
6. The defendants defaulted. It appears that there was only ever sporadic payments of €1,000 off the interest element. A letter of demand was issued on 4th October, 2011, and then on 17th April, 2012, a summary summons was issued, followed by a notice of motion dated 9th August, 2012.
7. A number of affidavits have been sworn by the defendants resisting judgment and seeking to have the matter referred to plenary hearing. In particular all three defendants swore affidavits dated 14th November, 2012, and supplemental affidavits were sworn by the second and third named defendants on 6th March, 2013, and further supplemental affidavits by each of them on 10th April, 2013.
8. I will refer in more detail to the case that is made by the second and third named defendants in resisting judgments and seeking a plenary hearing presently, but at this stage is it appropriate to refer to the principles that the court should apply in deciding whether to grant summary judgment or refer the matter to plenary hearing.
9. The tests that are to be applied have been considered by the Superior Courts in a number of cases in recent years. Indeed, I do not identify any significant disagreement between the parties as to the principles to be applied, rather what is between the parties and what they do disagree about is what the outcome is if the agreed principles are applied.
10. In first National Commercial Bank plc v. Anglin  1 IR 75, Murphy J. dealt with the approach to be taken in these terms at pp. 78 to 79:-
‘The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the Court had to look at the whole situation to see whether the defendant had satisfied the Court that there was a fair or reasonable probability of the defendants having a real or bona fide defence.’
In the National Westminster Bank case, Glidewell L.J. identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:-
‘I think it right to ask, using the words of Ackner L.J. in the Banque de Paris case, at p. 23, ‘Is there a fair or reasonable probability of the defendants having a real or bona fide defence?’ The test posed by Lloyd L.J. in the Standard Chartered Bank case, . . . 'Is what the defendant says credible?', amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence.’”
15. In the case of Zurich Bank v. McConnan  IEHC 75 (Unreported, High Court, Birmingham J., 4th March, 2011), having reviewed the relevant case law, I commented (as I was reminded in the written and oral submissions of the defendants in the present case) that while the jurisdiction to refuse leave to defend and to proceed to judgment undoubtedly existed, that it was a jurisdiction to be exercised very sparingly indeed. I remain firmly of that view. In the Aer Rianta v. Ryanair case, Hardiman J., as I have just quoted, summarised the test as being “is it very clear that the defendant has no case”. That is the test I will apply. If the answer is in the affirmative, I will accede to the motion. However, unless it is very clear that the defendants indeed have no case, the matter will go to Plenary Hearing.
16. By reference to the written submissions, oral arguments and the seven affidavits to which I have referred, a number of arguments that are made against judgment being given emerge and I will deal with these in turn.
The second and third named defendants were distant from the transaction
18. I can see no basis whatsoever for concluding that there was any question of undue influence or anything remotely approximating to that. In that context, it is not without significance that the first affidavit sworn by John McEllin includes a specific statement as follows:-
21. While the initiative was taken by the first named defendant, the project was intended to benefit all three defendants. The money was borrowed by all three defendants and there is an obligation on all three defendants to repay.
Capacity to repay linked to a successful outcome
23. Now, it is beyond argument that there was an understanding that the loans and the repayment of those loans were linked to the development. That was put beyond doubt, if there could ever have been any doubt, by the heading of the loan letter of the 12th April, 2006, which was “letter of loan sanction and agreement for bridging finance”. However, there would be many cases where there is an expectation on the part of a borrower, and indeed sometimes a shared expectation on the part of borrower and lender, as to how borrowing would be repaid. A simple but obvious example is someone applying for a car loan or a house mortgage in the expectation of remaining in good health and gainful employment. Sadly, sometimes that does not work out. However, that does not mean that the obligation to repay the loan disappears. No arguable case has been made out that there was no obligation to repay the loan here because the development project did not succeed to a successful conclusion.
The second and third named defendants acted as consumers
25. However, it seems to me in any event, that the arguments in this regard face insuperable obstacles. The documentation in relation to both the original €500,000 loan and the subsequent €651,000 loan sees the borrowers represent and warrant that in entering into the loan agreement that the borrower is acting within the borrower’s trade, profession or business and thereby not acting as a consumer within the meaning of s. 2 of the Consumer Credit Act 1995. The representation and warranties in the case of the later loan is to the same effect though couched in broader and more comprehensive terms.
26. The suggestion that the borrowers were consumers would, even absent the repeated warranties and representations to the contrary, have been surprising. This is a transaction that has all the hallmarks of a commercial transaction. That is so and remains the case notwithstanding that the second and third named defendants may never have been involved in property development previously, as I fully accept to be the position.
27. Similar arguments were considered by Kelly J. in AIB v. Higgins, Kavanagh, Mansfield and O’Callaghan  IEHC 219 (Unreported, High Court, 3rd June, 2010). He deals with the issue at p. 20 and subsequent pages. At p. 26 he commented as follows:-
It follows from the foregoing that, in order to determine whether a person has the capacity of a consumer, a concept which must be strictly construed, reference must be made to the position of the person concerned in a particular contract, having regard to the nature and aim of that contract, and not to the subjective situation of the person concerned. As the Advocate General rightly observed in point 38 of his Opinion, the self-same person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others.
Consequently, only contracts concluded for the purpose of satisfying an individual's own needs in terms of private consumption come under the provisions designed to protect the consumer as the party deemed to be the weaker party economically. The specific protection sought to be afforded by those provisions is unwarranted in the case of contracts for the purpose of trade or professional activity, even if that activity is only planned for the future, since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character.’” [Emphasis provided by Kelly J.]
The absence of independent legal advice
Delay in calling the loans and appointing a receiver
32. More fundamentally, this argument ignores the fact that there is no obligation to enforce rights at any particular time. It is for the bank to choose the time to act. That appears very clearly from the decision of the Court of Appeal in Silven Properties Limited v. Royal Bank of Scotland plc  1 WLR 997. In that case, Lightman J. at para. 14, delivering the judgment of the court commented as follows:-
35. I have considered the contents of the affidavits and what is urged in the oral and written submissions, but considering all of the arguments that have been advanced individually and indeed considering the situation in the round, I am of the view that no arguable case has been made out. I made it clear at the outset that the threshold to be crossed before leave to defend would be given was a low one, but low as it is it has not been crossed. Rather, the position is that (to use the language of Hardiman J. in Ryanair v. Aer Rianta) it is very clear that the second and third named defendants have no case. Accordingly, the plaintiff is entitled to the orders that it seeks against all three defendants.