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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Danske Bank A.S. (Trading as National Irish Bank) -v- Walsh & Ors [2013] IEHC 190 (26 April 2013)
URL: http://www.bailii.org/ie/cases/IEHC/2013/H190.html
Cite as: [2013] IEHC 190
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Judgment Title: Danske Bank A.S. [Trading as National Irish Bank] -v- Walsh & Ors Neutral Citation: [2013] IEHC 190 High Court Record Number: 2011 2661 S Date of Delivery: 26/04/2013 Court: High Court Composition of Court: Judgment by: Herbert J. Status of Judgment: Approved |
Neutral Citation Number: [2013] IEHC 190 THE HIGH COURT [2011 No. 2661 S] BETWEEN: DANSKE BANK A.S. (TRADING AS NATIONAL IRISH BANK) PLAINTIFF AND
MICHAEL WALSH, JAMES CUMMINS AND JOHN BRENNAN DEFENDANTS JUDGMENT of Mr. Justice Herbert delivered on the 26th day of April, 2013. 1. The plaintiff in this action is an external company authorised and registered under the laws of Denmark. It is registered in this State and is licensed to carry on the business of banking in the State, under the style and title of National Irish Bank. The plaintiff’s claim is for liberty to enter final judgment for a sum of €300,000 together with interest against the second and third defendants on foot of a guarantee dated the 10th September, 2007. The plaintiff sought repayment of all sums due on foot of this guarantee by letters of demand dated the 17th December, 2009. Further letters of demand were issued dated 15th February, 2011. No payment was received from any of the defendants. 2. An appearance was entered on behalf of the second defendant and the third defendant on the 31st August, 2011. By order of the Master of the High Court, made on the 23rd November, 2011, liberty was given to the plaintiff in default of appearance by the first defendant to enter final judgment against the first defendant for the sum of €311,208.34, of which sum €11,208.34 represents interest accrued from the 12th January, 2009, to the 30th August, 2011, inclusive. By order made pursuant to the provisions of O. 63, r. 7 of the Rules of the Superior Courts, the Master of the High Court referred the application against the second and third defendants to this Court for hearing. 3. In the affidavit grounding this application sworn on the 16th September, 2011, David Taylor, a manager of the plaintiff bank, avers that the defendants have no bona fide defence to the plaintiff’s claim in law or on the merits and that the appearances entered on their behalf were solely for purposes of delay. This was denied by the defendants who stated through counsel that the facts deposed by them on affidavit establish that they have three bona fide defences: non est factum, undue influence, and discharge by reason of a breach by the plaintiff of a fundamental condition of the agreement between the plaintiff and the principal debtor. Counsel for the plaintiff submitted that the defendants do not have even an arguable defence on any of these grounds and further contends that pleas of non est factum and undue influence are mutually exclusive. 4. The second defendant in his replying affidavit sworn on the 22nd February, 2011, states that he is a businessman and that the first defendant had acted as his accountant since 1991. The third defendant states in his replying affidavit sworn on the 22nd November, 2011, that he is a publican and is the owner of two licensed premises in Waterford and one in Washington D.C. United States of America and that the first defendant had acted as his accountant since 2004. There can be no question therefore, but that the second defendant and the third defendant are businessmen actively and constantly involved in commercial and financial transactions and decisions. The affidavit evidence advanced by these defendants is that the first defendant approached each of them individually in 2007 and asked if they wished to become involved in a property transaction with him and the other defendant. This transaction, they claim, involved obtaining planning permission for the development of a small site of 751sq.mtrs beside “Ryans Bar” Kilbarry, Ballybeg, Co. Waterford. It is stated in a supplemental affidavit sworn by the second defendant on the 9th March, 2012, that at the time of this approach by the first defendant, he was aware that this property was owned by Totty Barry Taverns Limited. The second and third defendants allege that the first defendant informed them that the only commitment required from them at that time was a payment of a sum of €5,000 each to be utilised in paying an architect who would apply for planning permission. They state that these sums were paid by them to the first defendant. It is alleged by the second defendant in the supplemental affidavit sworn on the 9th March, 2012, that he was advised by the first defendant that 51% of the shares in Totty Barry Taverns Limited would be transferred to the first defendant at a nominal fee and that he would hold a portion of these shares in trust for the second defendant and the third defendant in order to ensure that they had an interest in Totty Barry Taverns Limited, the owner of the property, reflecting their investment of €5,000 each. 5. The fifth paragraph in each of the replying affidavits of the second defendant and the third defendant is in precisely the same terms and asserts as follows:-
7. At para. 7 of the grounding affidavit of David Taylor there is exhibited what is averred to be a true copy of a facility letter, dated the 26th June, 2007, sent by the plaintiff to the directors of Totty Barry Taverns Limited. This letter offers a facility which is described as a “Structured Term Loan”, of €910,000 to that company for the following expressly stated purposes:-
To repay directors loans €250,000 Professional fees/renovations €100,000.” 9. As regards the second item above it was made an express condition precedent at para. 8 of the facility letter that prior to the drawdown of the loan:-
(c) Ml. Walsh and Co. to confirm similarly and also that there are no tax implications in relation to Clause 8(b) above. (d) Security to be in place prior to drawdown to the satisfaction of the Bank’s solicitors. (e) Copy of contract to purchase shares to be provided to the Bank confirming purchase price quoted. 11. At para. 7 of his supplemental affidavit sworn on the 9th March, 2012, the second defendant claims that he had no knowledge until the institution of these proceedings of this loan facility letter or of the provision of such a facility to Totty Barry Taverns Limited. He asserts that he had no part whatsoever in seeking this loan. He states that he believes that the third defendant was equally unaware of these matters. The summary summons in these proceedings was issued on the 23rd June, 2011 and was served on the defendants on the 2nd August, 2011. Apart from anything else, I find it impossible to reconcile this statement by the second defendant with the terms of a letter dated the 18th February, 2010, from Clinton Flynn, Chartered Accountants, Waterford, to the plaintiff, (per. David Taylor) which states as follows:-
. . . As part of an information gathering exercise I am currently completing, I obtained information from the solicitor who dealt with the original transaction between the bank and the company. This information indicates that €810,000 of the loan facility was drawn down by the company on the 27th March, 2008. The solicitor’s records indicate that the final €100,000 was held bank [sic] to pay for professional fees etc. The solicitor does not appear to have any further information in relation to the drawdown of the balance. . . . I can also advise that the directors of the company have engaged our firm to act as auditors to the company. I have enclosed a letter from John Brennan which details our appointment to act on his and Jim Cummins behalf and authorizes us to discuss the company’s business with the bank. Regards.”
Dear David, I refer to the above named company and hereby authorize Ronan Clinton of Clinton Flynn Chartered Accountants to act on the behalf of myself and James Cummins with National Irish Bank. I also note that Clinton Flynn have been engaged to act as auditors to Totty Barry Taverns Limited. Regards”
1.2 . . . : 13 Shares 1.3 . . . : 26 Shares.” 15. The second and third defendants contend that a trust deed either in the form of this draft or in any other form, was not executed by the first defendant and that consequently no legal or beneficial interest in Totty Barry Taverns Limited ever passed to or was held by them or either of them. At para. 11 of his supplemental affidavit sworn on the 9th March, 2012, the second defendant states as follows:-
17. It is not at all clear from the affidavit evidence of the second defendant and the third defendant whether they deny that they signed the document or, accept that they signed it, but claim that they did not know that what they were signing was a guarantee. At para. 13 of his replying affidavit sworn on the 22nd February, 2011, the second defendant makes reference to, “a guarantee I did not sign”. However, at para. 15 of his supplemental affidavit sworn on the 9th March, 2012, the second defendant states that he has no recollection of signing the guarantee and, that their advisors, the first defendant and Peter O’Connor and Son Solicitors or one of them should have informed him and the third defendant that the document was a guarantee and warned them of the risks inherent in signing a guarantee to secure a loan to Totty Barry Taverns Limited. However, during the course of argument, the defendants through their counsel accepted that the signatures on the document appeared to be their signatures and they would not dispute this, but claimed that they had no recollection at all of signing the document and were certain that they had not signed it on the 10th September, 2007. 18. It was not contended on behalf of the second defendant and the third defendant that the guarantee was unenforceable because of a non-compliance with the provisions of s. 2 of the Statute of Frauds (Ireland) 1695. This section does not require the signature of the party to be charged to be witnessed. A contract of guarantee, like any other written agreement, is deemed, prima facie, to have been executed and to take effect from the date stated in it unless that date is proven to be incorrect: the onus of proof being on the party so asserting. I am satisfied that these defendants have not raised even an arguable case that the document was not signed by them on the 10th September, 2007. Their assertion in their replying affidavits that they had not met the witness to their signatures, Thomas Murran, solicitor, Wyse House, Adelphi Quay, Waterford, on that date and were otherwise engaged, - the third defendant in playing golf in Waterford and, the second defendant working all day in his office at Mayfield, Cashel, Co. Tipperary, where (based upon an entry in an unexhibited diary) he claims he met his manager, his in-house accountant and an agricultural adviser, - is not enough to raise an arguable case that the date appearing on the document, just above what they now acknowledge to be their signatures, is incorrect. 19. By a letter of demand dated the 16th December, 2009, the plaintiff demanded repayment by Totty Barry Taverns Limited of €932,446.08 with continuing interest. By letters dated the 17th December, 2009, addressed to the second defendant and the third defendant, the plaintiff called-in the “guarantee of obligations of Totty Barry Taverns Limited”. The first paragraph of each such letter stated as follows:-
21. By a letter dated the 10th March, 2010, exhibited by the second defendant in his supplemental affidavit sworn on the 9th March, 2012, Peter O’Connor and Son, Solicitors, wrote to Nolan Farrell and Goff, solicitors as follows:-
YOUR CLIENT: JOHN BRENNAN Totty Barry Taverns Limited (“the Company”) Dear Sirs, We refer to the above matter and to your letter of the 9th March, 2010. We confirm that your client and James Cummins called to this office yesterday afternoon to discuss their difficulties with National Irish Bank. The writer and Marie Dennehy attended on Mr. Brennan and Mr. Cummins out of courtesy with a view to assisting them with their inquiries. We furnished your client and Mr. Cummins with a copy of a letter of loan sanction from National Irish Bank dated the 26th June, 2007 which issued to the Directors of the Company. One of the Banks requirements as part of the security for the advancement were “letters of Guarantee signed by Michael Walsh, James Cummins and John Brennan for a minimum of €300,000”. We do not have copies of those Guarantees on file as we did not advise either your client or Mr. Cummins in relation to the security documentation. We understand that these would have been executed by your client and Mr. Cummins at Michael Walsh’s former office and on his advice, as their accountant. We trust that this is the information that you require, but if you have any further queries, do not hesitate to contact the writer. Yours faithfully.” 23. The case of the plaintiff is plain: there is here a straightforward guarantee clearly and repeatedly identified as such on its face, dated, and signed by each of these two businessmen, whose signatures are witnessed by a then and still practicing solicitor. Though not expressly stated therein, the defendants’ affidavits clearly indicate that a defence of non est factum is sought to be relied upon by them. It was submitted by counsel for the defendants that the affidavits of the defendants also raise an arguable defence that the execution of a trust document identifying the beneficial owners of the shares was by reason of the provisions of para. 8(b), (c), (d) and (e) of the facility letter a condition precedent to the drawdown of the loan to Totty Barry Taverns Limited and the failure of the plaintiff to ensure that this was done amounted to a material alteration of the agreement between the plaintiff and the principle debtor without their consent such as to discharge them from all liability on foot of the guarantee. It was further submitted by counsel for the defendants that the defendants’ affidavits disclosed an arguable defence of undue influence in that these defendants generally and in respect of this transaction in particular had placed trust and confidence in the first defendant as their accountant and, the fact that they had no legal or beneficial interest in Totty Barry Taverns Limited put the plaintiff on inquiry as to the circumstances in which the alleged guarantee was obtained, and the plaintiff had failed to take any or any reasonable steps to ensure that it was properly obtained. 24. The test to be applied by this Court in determining whether or not to grant summary judgment is set out succinctly by Hardiman J. in Aer Rianta v. Ryanair [2001] 4 IR 607 (at 623):
(a) That there was a radical or fundamental difference between what he signed and what he thought he was signing; (b) That the mistake was as to the general character of the document as opposed to the legal effect; and (c) That there was a lack of negligence i.e. that he took all reasonable precautions in the circumstances to find out what the document was.”
33. At para. 8 and para. 7 of their replying affidavits sworn respectively on the 22nd February, 2011, and the 22nd November, 2011, the second defendant and the third defendant employing exactly the same language, state as follows:-
35. I find this claim to a defence based on undue influence to be simply untenable. In every case where a transaction is sought to be set aside for undue influence, this must be proved as a matter of fact. Even if I were to accept the mere assertion without any proof that these defendants did have trust and confidence in the first defendant as their accountant, I am satisfied, to borrow the words of Sir Eric Sachs in Lloyds Bank Limited v. Bundy [1974] 3 A.E.R. 757 at 767, that the basis for this did not go, “beyond… the confidence that can well exist between trustworthy persons who in business affairs deal with each other at arms length”. 36. However, even if the relationship was one which as a matter of law gave rise to a presumption of influence, there is more than sufficient evidence to rebut any such presumption in these statements of fact in the affidavits of the defendants. Further, I am satisfied that even if these defendants on the 10th September, 2007, had no legal or beneficial interest in Totty Barry Taverns Limited, this fact alone would not have put the plaintiff on inquiry as to the possibility of undue influence. The facility letter of the 26th June, 2007, shows that this was a commercial transaction between persons all of whom were involved in business and as such persons whom the law generally regards as well capable of looking after their own interests. Unlike the situation which pertained in Ulster Bank v. Roche and Buttimer [1012] IEHC 166, there was no element of personal relationship or of moral or of psychological dependency between the parties in the instant case. That case is therefore entirely distinguishable on its facts from the present case. In the present case, I am satisfied that the plaintiff knew who the debtor was and its circumstances. The plaintiff also knew the purpose for which the structured term loan was being advanced and, I am satisfied that it understood the true nature of the transaction. To have framed the conditions precedent at para. 8(b), (c), and (e) of the facility letter, the plaintiff must have been advised and clearly understood that this apparent borrowing by Totty Barry Taverns Limited to pay creditors in fact involved a mechanism whereby “the investors” were acquiring a majority shareholding in that company. I am satisfied that these conditions precedent arose out of the concern of the plaintiff to ensure that there were no legal or tax issues arising before any drawdown of the facility could take place. 37. If, which is altogether improbable, the plaintiff considered that these defendants were not also, “the investors” in Totty Barry Taverns Limited, in my judgment, there is still nothing in the affidavit evidence from the defendants regarding this transaction which should have raised an issue in the mind of the plaintiff as to the circumstances in which these defendants were entering into the guarantee and which should have caused the plaintiff to take reasonable steps to ensure that this guarantee was properly obtained. Absent some special circumstance or circumstances in a transaction, a bank is not generally required to inquire why a number of businessmen might be willing to enter into a guarantee with the bank to enable a company in which they had or appeared to have no apparent interest to obtain finance from the bank. 38. I do not accept that these defendants have shown even an arguable defence that they entered into this guarantee because of undue influence on the part of the first defendant. Even if they were able to show such an arguable defence, I find that they could not show an arguable defence that the plaintiff was fixed with constructive notice of such undue influence. Additionally, these defendants have failed to demonstrate that they have an arguable defence that the express warning in the guarantee, located as it is in a large box in bold print on the same page as and, immediately above the indicated signature spaces, (as in Ulster Bank v. Fitzgerald (Unreported, High Court, 9th November, 2001, per. O’Donovan J.)) was not in the particular circumstances of this case a sufficient discharge by the plaintiff of any obligation on its part to take reasonable steps to ensure that the guarantee was properly obtained, free from influence by others. 39. The third and final alleged ground of defence is based, it appears, on the averments contained at paras. 8, 9 and 11, of the supplemental affidavit of the second defendant sworn on the 9th March, 2012, which are as follows:-
9. I say and believe that 51% of the shares in Totty Barry Taverns Limited were transferred to the First Named Defendant on the 21st December, 2007. I say that the Share Sale and Transfer Agreement was drawn up by Peter O’Connor and Son, Solicitors and they were aware that the deed of trust as exhibited above had not been executed. I further say however, that as the deed of trust was never executed, no legal or beneficial interest in the shares in that company passed into the possession of your deponent or the Third Named Defendant, on trust or otherwise. I beg to refer to a copy of the Share Sale and Purchase Agreement upon which marked with the letter “E”, I have signed my name prior to the swearing thereof. 11. I say and was so advised by the First Named Defendant that the proposed transfer of shares in Totty Barry Taverns Limited to the First Named Defendant on trust for your deponent and the Third Named Defendant was for the purposes of ensuring that your deponent and the Third Named Defendant had in interest in Totty Barry Taverns Limited, which was the owner of the property, which it was proposed to be developed at Kilbarry, Ballybeg, Co. Waterford. I say that the transferral shares to be held on trust was to be for a nominal fee to reflect the previous investment of €5,000 each invested by your deponent and by the Third Named Defendant.” 41. This alleged defence is based upon an interpretation of the provisions of item (e) of para. 8 of the conditions precedent in the facility letter dated the 26th June, 2007, the very existence of which these defendants claim they were unaware until the institution of these proceedings. It will be recalled that this provision requires that:-
43. In light of the foregoing, I am satisfied that the defendants’ affidavits do not disclose any arguable defence and do not meet the requirements of the test set out in the Aer Rianta v. Ryanair(ante). I will therefore grant the plaintiff’s motion for summary judgment in this case.
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