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Cite as: [1998] IESC 12

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ICC Bank plc v. Burke [1998] IESC 12 (16th July, 1998)

THE SUPREME COURT

115/97 & 116/97

ICC BANK PLC

Plaintiff

JAMES BURKE & MICHAEL O’BRIEN

Defendants

Ex Tempore Judgment delivered the 16th day of July 1998, by Keane, J.

1. This is an appeal from the decision of the High Court, (Mr. Justice Johnson) entering final judgment for the sum of £60,000 in two actions brought by the plaintiff bank against the defendants, Michael O’Brien and James Burke.

2. It is unnecessary to rehearse the facts in any detail. The claim by the bank against the two defendants is on foot of guarantees signed by them and no issue appears to be taken in relation to the execution of the guarantees by the defendants. The guarantees guarantee the liabilities to the plaintiff bank of a particular company which is called Senior Property Holdings Limited. The bank had a mortgage on the premises but they also got the further security of personal guarantees, from the then two directors of the company, Mr. O’Brien

and Mr. Burke. Their liability was not to exceed in total £60,000. The bank now in the present proceedings seek to make them liable for the unpaid liabilities of the company to the bank to the extent that they come to £60,000. They come to more, but that is the limit of the guarantor’s liability.

3. The guarantors have resisted the claim on a number of bases. It is sufficient to say that, by way of the background, it appears to be common case between the parties that these two defendants were attempting, at the very least, to dispose of their interest in the company to some other persons. The bank were aware of this and the bank were aware of the fact that the two defendants were seeking to be released from their guarantees to the bank, because the new purchasers would be taking over the company and all its liabilities. It appears from the correspondence that while the bank were disposed in principle to agree to that, their consent was conditional, as one would expect, on the transfer of shares being completed, that is, the ownership of the company being effectively transferred and new guarantees being entering into by the new proprietors of the company to replace the guarantees of the present defendants which would then be extinguished.

4. That stage, again it is common case, was not reached. The new owners went into possession and they were actually running the business. It would appear that, at some stage the bank became aware of the fact that the mortgage they had taken on the premises, and the particulars of that mortgage, had not

been delivered to the Companies Office by the company or by the bank. The particulars had not been delivered within the time required by s.l00 of the Companies Act 1963. That could, of course, have raised a question as to the validity of the bank’s security. So they accordingly applied in the ordinary way to the court for an extension of time to, to give particulars of the mortgage. They gave notice of that application to the company. Following the receipt of that letter there was a telephone conversation between the solicitor acting for the company and acting for the defendants and the solicitor for the bank. The solicitor for the two defendants in the affidavit he has sworn in these proceedings, says that on the 20th September 1994 he spoke with Mr. Michael Barker (that is the solicitor for the bank) on the telephone. He said that Mr. Barker said that the plaintiff wished to register the particulars and that a letter of consent was required for this purpose. He said that Mr. Barker told him that, subject to his superiors confirming it to be the case he believed the plaintiff was prepared to release Michael Ahern, James Burke and Michael O’Brien from their personal guarantees. It was agreed that a faxed letter would be sent to him (Mr. Barker) consenting to the late registration of the debenture in consideration of the personal guarantees being released. He then exhibits a letter which he wrote on that day and that letter is addressed to the ICC Bank, Law Department and says:

“As solicitors for Senior Property Holdings Limited we hereby consent to late registration of the debenture in consideration of ICC Bank extinguishing personal guarantees of Michael O’Brien, James Burke and Michael Ahern”

5. The attendance, which is also exhibited with the affidavit, of his telephone conversation says:

‘Mr. Barker of ICC’ Bank’s legal department telephoned to say that subject to his superiors confirming it to be the case, he believed the bank was prepared to release Michael Ahern, Michael O’Brien and James Burke from their personal guarantees. In view of what he said, it was agreed that David Morris [the solicitor for the defendants] should send a fax to him saying that in consideration of the personal guarantees being extinguished we consent to the late registration of the debenture.

On behalf of the defendants it is contended that since, as appears from the affidavits there was no reply to the fax sent on that day, the defendants were entitled to assume that the bank were in fact releasing them and that that was

being done in consideration of the company facilitating the bank with their application. Of course, the bank said that the consent of the company was obviously not necessary to the application to extend the time for registration and that it was immaterial from their point of view whether the company consented or not to the application. There is in any event, obviously, some dispute as to what exactly was said on that occasion between Mr. Barker and Mr. Morris. The defendants put their case alternatively on the basis, first that this constituted an equitable estoppel, and, secondly, that if it did not, it constituted a contract between the bank and the defendants.

It is sufficient at this stage to say, that obviously questions would arise as to whether this indeed was any form of binding contract, since, at best, from the defendant’s point of view, it was a contract subject to confirmation by the bank’s department, by the head office or superiors of Mr. Barker, of the bank’s legal department and that it was also never confirmed in any way: there was never any formal acceptance in writing of what may have been no more than an offer. These are matters, obviously, which at this stage, present difficulties in the defendants’ way in making the case that they do. But as this court has said and it has been said in the High Court on more than one occasion, the court has to look at the whole situation to see whether the defendants have satisfied the court that there is a fair and reasonable probability of the defendants having a real or bona fide defence.

Having regard to what Mr. Morris has sworn in his affidavit and which is at this stage borne out to the extent as indicated by his attendance and his letter, it would be impossible or difficult, at all events, for a court at this stage to say that matters were so crystal clear in the correspondence and on the affidavits that one could say that the defendants had no real defence on the basis of a contract between themselves and the bank to release the guarantees in consideration of their co-operating with the application to extend the time for registering particulars of the charge. So bearing in mind that the threshold is well established as I have indicated, that where there is a fair and reasonable probability of the defendants having a real or bona fide defence to their claim that the action should be sent to plenary hearing, it is in that context that I would take the view that the defendants have raised sufficient material in their affidavits to indicate that there is a fair and reasonable probability of their having a bona fide defence to the claim on their guarantees.

I would allow the appeal and substitute for the order of the High Court an order remitting the action for plenary hearing.