High Court of Ireland Decisions

1. On 20th May, 1991 the Plaintiff issued a letter of offer to the Defendant and his wife, Jane Malocco, offering them a credit line facility of £250,000 on the terms and conditions stipulated. The terms stipulated included the giving of security to the Plaintiff, including a first fixed charge on the family home of the Defendant and his wife at Foxrock, Dublin and a first fixed charge over shop premises at 5B Upper Clanbrassil Street, Dublin. On 9th July, 1991 the Defendant and his wife signed a loan agreement dated 2nd July, 1991 which recorded that the Plaintiff had sanctioned them a facility to draw credit from the Plaintiff up to a credit limit of £250,000 until 1st July, 1992 on the security and subject to the terms and conditions detailed in the loan agreement and in the letter of offer and in the security documentation. The loan agreement stipulated the same security as had been stipulated in the letter of offer. It required that the account be cleared or in credit on 1st July, 1992. The rate of interest stipulated was 3.5% over DIBOR and the method of repayment was that stipulated in the letter of offer, namely, interest was to be payable every three months commencing three months after the date of issue and repayment of principal was to be within twelve months following draw-down unless otherwise agreed in writing between the parties. There were general conditions appended to the loan agreement. One of them, condition 2, has been referred to by Mr. McCann on behalf of the Plaintiff. In broad terms, it dealt with the manner in which the account was to be operated as to interest, charges, lodgments and such like. In relation to interest it provided as follows:-

2. It is quite clear from the loan agreement that the account was intended to be in the nature of a running or current account and the specific terms of the loan agreement provided that the credit facility might be drawn down by cheque drawn on the Plaintiff's account with Citibank N.A. in Dublin or by cash withdrawal at a branch of the Plaintiff. One further term of the general conditions seems to me to be relevant, namely, condition 9 which provided that the credit facility might be withdrawn at any time by the Plaintiff, whereupon accrued interest would be capitalised and any debit balance would be repayable on demand.

3. On 9th July, 1991 the Defendant's Solicitors, Malocco & Killeen, gave an undertaking in relation to the property at Clanbrassil Street. The Solicitors' undertaking incorporated an authority signed by the Defendant and his wife on 9th July, 1991 irrevocably authorising the Solicitors to give the undertaking in the form in which it was given to the Plaintiff. In the Solicitors' undertaking, which appears to be in a standard form, the Solicitors undertook with the Plaintiff to secure the execution of a deed of mortgage in the Plaintiff's standard form on the Clanbrassil Street property and to have it registered, to report on title etc. and to lodge all documents constituting the Plaintiff's security with the Plaintiff and pending compliance with these formalities to hold the title documents to the property in trust for the Plaintiff. The Solicitors' undertaking was expressed to be made in consideration of the Plaintiff agreeing to the draw-down of the loan before completion of the security formalities and to be "subject to the payment through me/us [the Solicitors] of the loan cheque....".

4. On 11th September, 1991 sums aggregating £136,217.81 were drawn down on the account of the Defendant and his wife with the Plaintiff.

5. Some time in the first half of October 1991 the credit facility was withdrawn. The Defendant, in an Affidavit sworn by him in the Summary Summons proceedings to which I will refer later, has exhibited a letter dated 4th October, 1991 from the Plaintiff to Messrs. Malocco & Killeen, Solicitors, stating that the loan facility had been withdrawn, leaving a balance due of approximately £140,200 together with interest accruing and that the loan was then due for repayment. This letter also disclosed that the Plaintiff had already obtained a Deed of Mortgage over the Foxrock property. It called on the Solicitors to comply with the undertaking with regard to the Clanbrassil Street property. In these proceedings the Plaintiff, in an Affidavit sworn by Michael Walsh on 25th August, 1999, has exhibited two letters dated 14th October, 1991, one to the Defendant and the other to the Defendant's wife. The letter to the Defendant's wife stated that the credit line facility was being thereby withdrawn. The letter to the Defendant complained that he had failed to discharge the amount due on the account and threatened proceedings for recovery of possession of the Foxrock premises. For present purposes, I will assume that the facility was withdrawn on 14th October, 1991.

6. In 1992 the property at Foxrock, which the Deed of Mortgage dated 16th July, 1991 given to the Plaintiff records was in the sole name of the Defendant's wife, was sold. On 27th April, 1992 an Order, which was put before the Court, was made by Lavan J. in family law proceedings in this Court in which, inter alia, it was ordered that the net proceeds of the sale less payment of all sums due and outstanding to Irish Life Building Society be placed on joint deposit in the names of the Solicitors for the Defendant's wife and Solicitors for the Plaintiff. In 1995 proceedings entitled "Jane De Valera Plaintiff and A.C.C. Bank Plc. Defendant" (Record No. 1995 No. 6557P) were instituted in this Court in which the plaintiff therein, the Defendant's wife, claimed that the mortgage of the Foxrock property should be set aside on the ground that it had been procured by misrepresentation and undue influence exerted by the Defendant. Those proceedings were settled in July 1998. The only written note of the terms of settlement in the Plaintiff's possession is contained in a letter dated 17th July, 1998 from the Plaintiff's Counsel in the proceedings, Richard Law Nesbitt, to the Plaintiff's Solicitor, which was exhibited in an Affidavit sworn on 1st July, 1999 in the Summary Summons proceedings to which I will refer below by the Plaintiff's Solicitor, Tara Glynn. In that letter Mr. Nesbitt confirmed that the terms of settlement were as follows:-

7. On 13th November, 1998 the Plaintiff's Solicitor wrote to the Defendant claiming the sum of £86,218.70 on the account together with interest accruing at the rate of £20.59 per day and threatening proceedings. A statement of the account exhibited shows that that sum represented the debit of £136,217.81 on the account at 11th September, 1991 together with various additions for interest at various rates from 12th September, 1991 less a credit of £70,000 on 31st July, 1998.

8. On 26th November, 1998 the Plaintiff initiated proceedings by way of Summary Summons (Record No. 1998 No. 619S) against the Defendant claiming recovery of the sum of £86,465.75 on foot of the loan agreement. A motion for liberty to enter final judgment brought before the Master was grounded on an Affidavit of Michael Walsh sworn on 13th January, 1999. The settlement with the Defendant's wife was not alluded to in that Affidavit. A replying Affidavit sworn by the Defendant on 2nd March, 1999 was filed in response, in which he averred that the Plaintiff's claim had not been set out properly in the Affidavit of Michael Walsh and, in particular, that a demand had been made on him by the letter of 4th October, 1991 and that he had never acknowledged that sums were due thereafter. Moreover, he referred to the payment of £70,000 by his wife in 1998 and contended that the payment was accepted as a full and final compromise of any claim on foot of the loan agreement of 2nd July, 1991. A further Affidavit sworn by Michael Walsh on 14th April, 1999 was filed in the Summary Summons proceedings. Apropos of the settlement with the Defendant's wife, Mr. Walsh averred as follows:-

9. Thereafter, the Defendant sought discovery in the Summary Summons proceedings and two Affidavits were sworn by Tara Glynn on behalf of the Plaintiff, one on 1st July, 1998, to which I have already referred, and a second on 21st September, 1999. A further Affidavit sworn by the Defendant on 2nd November, 1999 was filed in the Summary Summons proceedings. The Defendant asserted in that Affidavit that the claim in the Summary Summons proceedings was statute barred. Apropos of the settlement with his wife, he noted that the meaning contended for by Mr. Walsh, namely, that the settlement did not accrue for his benefit, was unsupported by any document that had been made available to his advisors and he suggested that the tenor of the documentation which had been discovered was counter to the construction advanced by Mr. Walsh.

10. On 20th August, 1999 the Plaintiff issued these proceedings for a declaration that the sum of £91,797.98 together with further interest at the rate of £20.59 per day from 11th August, 1999 stands well-charged on the property at Clanbrassil Street by virtue of the Solicitors' undertaking and pursuant to the letter of offer of 20th May, 1991 and the loan agreement. In an Affidavit sworn by him on 25th August, 1999 to ground the Special Summons, Michael Walsh averred as follows:-

11. In a replying Affidavit sworn on 3rd December, 1999, the Defendant denied that the Solicitors' undertaking gave rise to an equitable mortgage. He averred that the Plaintiff had never called for the execution of a legal charge over the property. He had never acknowledged that the sums claimed were due. In relation to the settlement with his wife he averred as follows:-

12. The averment that the sum of £70,000 was paid from an account in the joint names of the Defendant and his wife has not been controverted by the Plaintiff.

13. The Summary Summons proceedings were transferred to the Chancery Special Summons list in this Court in conjunction with these proceedings. Both matters were heard together last Monday and this judgment relates to both.

14. It is agreed by Counsel that two issues fall for consideration, namely:-

15. Mr. Ó Floinn submitted on behalf of the Defendant that the following passage from Treitel on The Law of Contract , 9th Edition, (1995), at page 527 is a correct statement of the law as to the circumstances in which the release of one of two joint debtors releases the other:-

16. In a comprehensive submission Mr. Ó Floinn opened a number of authorities including Cutler -v- McPhail, [1962] 2 Q.B. 292, which, although an authority concerning joint tortfeasors, was cited by Treitel as authority for the proposition that a document which simply released one co-debtor without expressly or impliedly reserving the creditor's rights against the others would still wholly extinguish those rights.

17. Mr. McCann, on behalf of the Plaintiff, submitted that the issue is governed by section 17 of the Civil Liability Act, 1961 and that the passage from Treitel and the authorities relied on by Mr. Ó Floinn do not represent the law in this jurisdiction.

18. Sub-section (1) of section 17 of the Act of 1961 provides as follows:-

19. As was pointed out by Egan J. in Murphy -v- J. Donohoe Ltd ., [1993] I.R. 527 at page 558 the word "accord" (unlike the word "satisfaction") is not defined by the Act of 1961. Egan J. went on to state -

20. Paragraph (h) of sub-section (1) of section 35 provides:-

21. There is a helpful commentary on section 17 in Kerr on The Civil Liability Acts 1961 and 1964 at page 39. However, before quoting that commentary I think it would be useful to refer to the introduction in Mr. Kerr's book in which he points out that, with certain variations, the Act of 1961 is essentially that drafted by Dr. Glanville Williams in Joint Torts and Contributory Negligence, (1954). Mr. Kerr's commentary on section 17 is as follows:-

22. I have no doubt that the submission made by Mr. McCann that the effect of the settlement between the Defendant's wife and the Plaintiff on the liability of the Defendant on foot of the loan agreement falls to be determined by application of section 17 of the Act of 1961 is correct. What section 17 means in the context of a wrong which is a breach of contract in the form of non-payment of a debt for which two debtors are concurrently liable and of a settlement agreement with one of the debtors is that, if the settlement agreement indicates an intention that the other is to be discharged, the settlement agreement effectuates his discharge, but, if it does not, he gets the benefit of the settlement agreement and his liability is reduced accordingly. In the application of section 17 to such a situation, in my view it is immaterial whether the debtors are jointly liable or jointly and severally liable for the debt, although in the instant case it seems to be common case that the Defendant and his wife were jointly and severally liable. As to whether an accord or settlement agreement "indicates", within the meaning of that word in section 17, that a co-debtor is to be discharged, it seems to me that it does so indicate if such outcome is agreed expressly or by necessary implication.

23. In a case in which a defendant raises by way of defence that he has been discharged by virtue of an accord or settlement agreement with a co-debtor indicating an intention that he be so discharged, the onus is on the defendant to establish such intention. I reject Mr. Ó Floinn's submission to the contrary. However, the determination to be made on the pending applications is whether summary judgment should be given in the Summary Summons proceedings and whether a "well-charging" declaration should be made in these proceedings in what, in effect, is a summary procedure. In that determination the test to be applied is the test to be deduced from the principles applied by the Supreme Court in First National Commercial Bank Plc. -v- Anglin, [1996] I.R. 75 - the mere assertion in an affidavit of a given situation which is to be the basis of a defence does not itself constitute a ground for granting leave to defend and, in deciding whether it should grant summary judgment to a plaintiff and refuse leave to defend, the Court has to look at the whole situation to see whether the defendant satisfies the Court that there is a fair or a reasonable probability of his having a real or bona fide defence, or, whether what the defendant said is credible. In my view, looking at the whole situation must involve an assessment of the cogency of the evidence adduced by the plaintiff in relation to the given situation which is to be the basis of the defence.

24. Having regard to the course of the proceedings since the inception of the Summary Summons proceedings, and having regard to the totality of the evidence adduced by the Plaintiff, I am not satisfied that I can exclude a fair or reasonable probability of the Defendant having a real or bona fide defence under section 17(1). My principal concern is that no documentary evidence whatsoever has been adduced as to what intention was indicated by the settlement agreement in July 1998. The extract from Mr. Nesbitt's letter does not address the issue and, in my view, it would not be appropriate to draw any inference one way or the other from that extract. The only other evidence before me are the averments made by Mr. Walsh, which, at best, represent the intention of one side to the settlement agreement and it is not even clear that Mr. Walsh was involved in the settlement negotiations and was a party to the agreement which was reached. As it appears from the extract from Mr. Nesbitt's letter that the issue of the liability of the Plaintiff to the Defendant's wife, and not just the issue of liability to the Plaintiff for the debt due on foot of the loan agreement, arose in the settlement negotiations, inferences which might be drawn from a less complicated set of circumstances would not be appropriate in the instant case. Finally, the fact that the averment made by the Defendant that the sum of £70,000 was paid from an account in the joint names of himself and his wife was not controverted and the fact that it was submitted on his behalf that he had some interest in the monies in question, are further reasons why I am not prepared to grant summary judgment, although the averment is at variance with the terms of the Order dated 27th April, 1992 referred to earlier.

25. The provision of the Statute of Limitations, 1957 on which the Plaintiff relies in contesting the Defendant's assertion that it's claim was statue barred when the Summary Summons proceedings and these proceedings were issued is section 36 (1). Paragraph (a) of that sub-section provides as follows:-

26. The word mortgage is defined in the Act of 1957 as including an equitable mortgage. In these proceedings, in addition to a "well-charging" declaration, the Plaintiff claims ancillary relief that the payment of the monies be enforced by the sale of the property at Clanbrassil Street or by the appointment of a receiver or by both.

27. In considering the application of the Act of 1957 to the Summary Summons proceedings and these proceedings, in my view, two further provisions come into play. The first is section 37 (1) which provides as follows:-

28. In relation to the application of section 36 to the Plaintiff's claim against the Defendant for recovery of the monies due on the loan agreement, the basis on which Mr. Ó Floinn contended that it had no application is that the monies in question are not "secured by a mortgage or charge on land". Mr. Ó Floinn referred to the following passage in Wylie's Irish Land Law , 3rd Edition at paragraph 12. 41:-

29. Despite the unequivocal terms of the foregoing passage, which, in my view, properly records the long-standing jurisprudence of this Court, Mr. Ó Floinn urged that, in order to establish the existence of a equitable mortgage on foot of the Solicitors' undertaking, the Plaintiff would have to surmount two hurdles: that it has a contract for a legal mortgage which is specifically enforceable; and that the circumstances are such that a Court in aid of execution would infer the existence of an equitable mortgage. Mr. Ó Floinn also pointed to the statement in the Solicitors' undertaking, which I have quoted earlier, that it was "subject to the payment through me/us" of the advance and he asserted that compliance with this requirement was a condition precedent to the existence of an equitable mortgage and that there was no evidence before the Court that the advance was made through the Solicitors. I reject this latter assertion, because it is quite clear from the totality of the documents generated in connection with the transaction in 1991 that the Defendant and his wife would be entitled to draw down on the account by cheque.

30. The true position, in my view, is that by the combined operation of the loan agreement, under which the Defendant agreed to give a first charge on the property at Clanbrassil Street to the Plaintiff, and the Solicitors' undertaking, including the authority given by the Defendant embodied in it, on 9th July, 1991 an equitable mortgage over the interest of the Defendant in the property at Clanbrassil Street was created and the monies payable to the Plaintiff under the loan agreement became secured on the Defendant's interest in that property. The existence of an equitable mortgage is in no way contingent upon the Court making a "well-charging" declaration. However, as, in the instant case, the Plaintiff did not pursue the alternative remedy open to it of enforcing the Solicitors' undertaking and obtaining a legal mortgage which would have enabled it to sell out of court, in order to realise its security it has to go the route of a court sale in a mortgage suit.

31. I am satisfied that the limitation period for bringing the Summary Summons proceedings is the limitation period stipulated in section 36(1)(a) and that that provision applies to an action on the covenant or on the agreement to repay (see Fisher & Lightwood's Law of Mortgage , 10th Edition at page 293). On the assumption I have made previously, the right to receive the principal money in this case accrued on 14th October, 1991 when the facility was withdrawn and the debit balance which became repayable was demanded. However, section 36 applies only to an action to recover the debit balance, including capitalised interest, as at 14th October, 1991. Recovery of any interest which accrued after 14th October, 1991 is subject to section 37. I do not accept Mr. McCann's submission that interest which accrued after 14th October, 1991 became principal within the meaning of section 36(1)(a) by reason of the application of condition 2 of the general conditions of the loan agreement. Accordingly, the claim in the Summary Summons proceedings, as regards principal, is not statute barred but the claim for any interest in respect of any period more than six years prior to 26th November, 1998 is statute barred.

32. The claim in these proceedings for a sale of the land, the subject of the equitable mortgage, is not statute barred.

33. The Defendant is not entitled to have the Summary Summons proceedings or these proceedings dismissed either on the ground that the settlement agreement with his wife discharged his liability or on the ground that the claims are statute barred. On the other hand, for the reasons I have outlined, I do not think it would be proper to give summary judgment to the Plaintiff in either proceeding. I will adjourn both matters to plenary hearing and I will hear the submissions of the parties as to pleadings and such like.