Judgment of Mr. Justice Clarke delivered the 9th April, 2014.
1. Introduction
1.1 A very net question about banking transactions arises on this appeal. The defendant/appellant ("Mr. Coyle") had a significant banking relationship with Anglo Irish Bank plc ("Anglo Irish"). His loans were taken over by the plaintiff/respondent (which, as it is a subsidiary of the National Asset Management Agency, I will refer to as "NAMA"). Subsequently, NAMA issued proceedings claiming both euro and pound sterling sums with a combined value in excess of €60 million. The proceedings were admitted into the Commercial List of the High Court and, having been brought by summary summons in respect of a claim for a liquidated sum, were brought in the ordinary way before the Court on a motion for summary judgment.
1.2 The High Court (McGovern J.) delivered a reserved judgment on that motion and, for the reasons therein set out, granted summary judgment in the sum of €49,856,925.50 and Stg. £10,567,723 (see National Asset Loan Management Ltd v Coyle [2013] IEHC 606). Mr. Coyle appealed to this Court. In that context, it should also be noted that Mr. Coyle had sought, but had failed to obtain, a stay on the judgment granted by McGovern J. In those circumstances, Mr. Coyle applied to this Court for a stay. At an early stage of the hearing of the stay application it became apparent that one of the major issues which would need to be determined on the stay application was as to whether Mr. Coyle really had sufficient grounds for appeal to meet the established criteria for a stay. It is, of course, well settled that one of the issues which this Court is required to assess on a stay application is as to whether, on the materials available, it can properly be said that there are significant grounds for the appeal. The absence of such grounds would weigh very heavily against the granting of any stay. However, with that in mind, it became clear that it would be an unnecessary use of scarce court resources to hear detailed submissions on the merits of the appeal solely for the purposes of deciding whether or not to grant a stay when, in reality, it would not take much longer to analyse those same grounds for the purposes of determining the substantive appeal. In those circumstances, it was arranged that the appeal would come on for hearing in early course.
1.3 It must, of course, be recalled that the judgment granted by McGovern J. in the High Court in these proceedings was on a motion for summary judgment. The issues before McGovern J. and, therefore, the issues before this Court on appeal, are not, therefore, as to whether Mr. Coyle must necessarily succeed on his defence but rather whether he has a sufficiently arguable defence to meet the undoubtedly low threshold specified in the jurisprudence in respect of the grant of summary judgment. While that jurisprudence is now very well rehearsed, it will be necessary to touch briefly on it in due course.
1.4 However, the basis on which Mr. Coyle asserted that he had an arguable defence became focused at the appeal before this Court on one point. It is necessary, in that context, to identify that argument.
2. The Defence as argued
2.1 It is not in dispute but that Mr. Coyle's loan facilities with Anglo Irish had been in difficulties from some time in 2008. He had a very large number of bank accounts. In 2009, a number of rearrangements occurred in respect of those bank accounts which had the effect of significantly narrowing the total number. In October 2008, Mr. Coyle had approximately 16 separate loan accounts with Anglo Irish. By the end of that year, it appears that this had grown to 21 different accounts. On the 23rd January, 2009, 10 of these separate loan accounts were amalgamated into a single new account. This appears to have been done through the debiting of money from the new account and the transfer of those monies to the then existing accounts so as to leave them with a zero balance. Once a zero balance was thus reached, the old accounts were then closed. A similar process was carried out at about the same time which brought three other loans together in a separate account. These transactions were not expressly authorised by Mr. Coyle at any point. It is said that these changes were the product of the implementation by Anglo Irish of a new banking system known as T24. Further similar activity occurred throughout 2009 and 2010, resulting ultimately in six streamlined accounts.
2.2 However, on the 20th July 2010, a facility letter was issued by Anglo Irish to Mr. Coyle which specified six facilities lettered "A to F". It is worth quoting the facilities and their respective purposes in full. The details of each facility are set out in section 1 of the letter:
Facility A:
Palace Street The maximum amount of GBP £8,004,000 (Eight Million and Four Thousand Pounds Sterling) with a current balance of £7,965,596, together with interest accrued and due thereon.
Facility B:
Palace Street Interest A/c The maximum amount of GBP £1,028,000 (One Million and Twenty Eight Thousand Pounds Sterling) with a current balance of £1,262,863, together with interest accrued and due thereon. Please note this account is currently in excess of the approved limit of £1,028,000 and that the excess referred to above is not ratified by the Bank.
Facility C:
Investment Properties The maximum amount of €29,814,000 (Twenty Nine Million, Eight Hundred and Fourteen Thousand Euro) with a current balance of €30,654,404, together with interest accrued and due thereon. Please note this account is currently in excess of the approved limit of €29,814,000 and that the excess referred to above is not ratified by the Bank.
Facility D:
Investment Prop Interest A/c The maximum amount of €1,149,000 (One Million, One Hundred and Forty Nine Thousand Euro) with a current balance of €1,611,601, together with interest accrued and due thereon. Please note this account is currently in excess of the approved limit of €1,149,000 and that the excess referred to above is not ratified by the Bank.
Facility E:
54 Apart Suites & Kasterlee The maximum amount of €10,680,000 (Ten Million, Six Hundred and Eighty Thousand Euro) with a current balance of €9,608,872, together with interest accrued and due thereon.
Facility F:
Private Banking The maximum amount of €3,518,000 (Three Million, Five Hundred and Eighteen Thousand Euro) with a current balance of €3,826,639, together with interest accrued and due thereon. Please note this account is currently in excess of the approved limit of €3,518,000 and that the excess referred to above is not ratified by the Bank.
Section 2 sets out the purpose of each facility:
Facility A
Renewal & Amalgamation of previous existing Facilities at an increased level to fund working capital requirements totalling £82,000 to the 31st of December 2010.
Facility B
Continuation of existing Facility at its existing level to the 31st of December 2010.
Facility C
Renewal & Amalgamation of previous existing Facilities at an increased level to fund working capital requirements of €232,000 to the 31st of December 2010.
Facility D
Continuation of existing Facility at its existing level to the 31st of December 2010.
Facility E
Continuation of existing Facility until the 31st of December 2010 at an increased level to fund the fit out of the 54 apart-suites at Ballytivnan, Co. Sligo and various professional fees.
Facility F
Transfer of debt held under Tom Coyle (client number 9511085) into client number 9712985 and extend the Facility to the 31st of December 2010.
2.3 A number of points need to be noted about that facility letter. First, most of the reorganisation measures taken in respect of Mr. Coyle's accounts had already occurred by the time the facility letter in question was issued. Second, some of the facilities (specifically facility C and facility F) contemplated some degree of further reorganisation. Third, some of the facilities (B and D) contemplate that the facility in question was used to pay interest on other accounts. Fourth, the facility letter was accepted in the ordinary way by Mr. Coyle. Although it is a point to which it will be necessary to return, it should be noted at this stage that part of the case made on behalf of NAMA before this Court was that, whatever the merits of any points raised on behalf of Mr. Coyle as to events which occurred after that facility letter, it is said that, by accepting the facilities in that form, Mr. Coyle must be taken to have accepted any rearrangement of his accounts which either occurred before the time of that facility letter or which are contemplated by the terms of the letter itself.
2.4 Be that as it may, the argument raised on behalf of Mr. Coyle is to the effect that, in putting in place the arrangements which led to a reorganisation of his accounts, Anglo Irish acted without authority so that, it is said, Anglo Irish could no longer have any claim arising out of its contractual relations with Mr. Coyle. On that basis it is said that, likewise, NAMA, as a successor in title to Anglo Irish, could not maintain any claim based on those contracts.
2.5 It is also important to note that certain transactions took place when the loans concerned were transferred from Anglo Irish to NAMA on the 1st November, 2010. The precise mechanism used for those transfers will need to be explored in somewhat more detail in due course. However, the substance of what appears to have occurred is that, in respect of each relevant existing account with Anglo Irish, a new account was opened in Mr. Coyle's name with NAMA (even though the new accounts continued to be managed by Anglo Irish). A transaction was then put in place in respect of each account which led to the creation of an indebtedness in the new NAMA account in an identical sum to that which had previously appeared as a debt in the corresponding Anglo Irish account together with a transfer of the relevant sum to that latter account leading to it being cleared of its indebtedness and then closed. There is not doubt that the substance of the situation was that, immediately after what occurred on the 1st November, however characterised, Mr. Coyle was in exactly the same position, having the same set of liabilities divided into six facilities as he had before even though the accounts on which those liabilities arose after those transactions were new accounts held with NAMA, rather than the old accounts held with Anglo Irish. The terms and conditions of the six respective accounts were, likewise, unchanged.
2.6 While Mr. Coyle does not dispute but that NAMA was entitled to take over the loans from Anglo Irish, it is argued on his behalf that the method adopted, whereby new accounts were created, funds drawn down from those accounts and transferred to the old accounts, thus paying off and leading to the closure of those old accounts, was unauthorised. As a consequence, it is said that Mr. Coyle cannot be liable on the old accounts because they have been cleared and closed and cannot be liable on the new accounts because they were not authorised.
2.7 It is, in fairness to Mr. Coyle, important to emphasise that his counsel did not argue that there might not be a legal method by which, in those circumstances, NAMA might be able to seek to recover from him. However, it is said that, for the technical reasons just identified, NAMA is no longer entitled to sue on a summary summons and obtain summary judgment in respect of sums said to be owing as a simple contract debt. McGovern J. rejected that argument as providing an arguable defence. It is argued on behalf of Mr. Coyle that it is an arguable defence and that the case should, therefore, go to plenary hearing.
2.8 In that context, it is appropriate to refer briefly to the test for the grant of summary judgment.
3. The Summary Judgment Test
3.1 In Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, Hardiman J. reviewed the authorities on the test to be applied in summary judgment applications 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?”
3.2 This passage was also cited more recently by Denham J. in her judgment in Danske Bank v. Durkan New Homes [2010] IESC 22. That judgment also cited my High Court judgment in McGrath v. O'Driscoll [2007] 1 ILRM 203, which addressed the question as to whether it was appropriate to determine issues of law or construction in the context of a summary judgment application. At p. 210, I held:
“So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
3.3 I would propose applying those tests on this application. The threshold is as specified by Hardiman J. in Aer Rianta. It is undoubtedly a low one. However, the Court retains the entitlement, in considering whether there is a sufficient defence to meet that admittedly low threshold, to finally determine straightforward questions either of law or construction of documents where there is no real risk that, in so doing within the confines of a summary judgment application, any injustice can follow. Before turning to a discussion of the issues which arise in this case, it is necessary to set out briefly how these questions were dealt with by McGovern J. in the High Court.
4. The High Court Judgment
4.1 After outlining the facts of the case and the law in this area, McGovern J. turned to Mr. Coyle’s arguments. McGovern J. was satisfied that the streamlining and re-allocation of Mr. Coyle’s 21 accounts into 6 consolidated accounts with the same terms and conditions was “a book-keeping exercise which did not in any way alter the terms or conditions of the defendant’s loans or the amount due on foot of them.” He further held that, in so doing, Mr. Coyle had suffered no prejudice. He, therefore, held that this consolidation did not constitute a bona fide defence to NAMA’s claim. Claims based on estoppel and conflicts of interest were also dismissed. Those later issues were not raised on this appeal.
4.2 It should also be noted that Mr. Coyle had submitted that interest had been improperly charged to some of his accounts and that this provided at least a partial defence to the application. Mc Govern J. held that the conflict of fact on the affidavits on this issue could not be resolved in a summary judgment application and, therefore, the question of the calculation of interest was allowed to go forward to plenary hearing. No appeal has been taken against that finding.
4.3 With the issue of the appropriate calculation of interest being sent forward to plenary hearing, the only question which arises on this appeal is as to whether McGovern J. was correct to conclude that the argument put forward on behalf of Mr. Coyle, to the effect that no claim for a debt or liquidated sum can now be maintained by NAMA, provides a sufficient arguable defence to meet the low threshold identified by Hardiman J. in Aer Rianta. I turn to that question.
5. Is there an arguable defence?
5.1 It is important to start by recalling that, as determined in McGrath v. O'Driscoll (as approved by this Court in Danske Bank v. Durkan New Homes), it is permissible for the Court, on a motion for summary judgment, to determine straightforward issues of law and construction of documents provided that, in so doing, no real risk is run of injustice. It seems to me that the issues which arise on this appeal are properly characterised as straightforward questions of law and construction of documents.
5.2. The starting point of any analysis of the legal relationship between NAMA and Mr. Coyle must be the facility letter of the 20th July, 2010. As noted earlier, that letter was accepted by Mr. Coyle and no issue either of law or fact is raised which questions its validity.
5.3 A number of consequences seem to me to flow from that letter. First, the letter, having been accepted by Mr. Coyle, constitutes the terms of a contract between him and Anglo Irish and must also be the basis of his continuing contractual obligations to NAMA after his loans were taken over. Much of the consolidation of accounts which occurred predate that facility letter. It seems to me to be beyond argument that, by signing the facility letter, Mr. Coyle accepted any pre-existing consolidation of accounts by accepting, in terms, that, thereafter, he would only have six facilities.
5.4 Likewise, it seems to me to be beyond argument that the further consolidation of accounts expressly contemplated in the facility letter must be taken to be part of the contractual arrangements between Mr. Coyle and Anglo Irish and which now bind his contractual relations with NAMA. As noted earlier, facility C (which is an amount of just over €29 million, but in respect of which the balance specified, as on the day of the facility letter, was over €30.5 million) is, in its terms, stated to be for the purpose of a "Renewal and Amalgamation of previous existing Facilities". On the basis of the evidence placed before the High Court on behalf of NAMA, it is clear that the amalgamation to which reference is made is between accounts 02314865, 02431997 (to which monies were paid and then closed) and 02227336 (into which the amalgamated debts were transferred).
5.5 Likewise, facility F specifies a transfer of debt under client number 9511085 to client number 9712965.
5.6 The question which then must be asked is as to what further transactions took place after the facility letter was in place, which were not in furtherance of the consolidation or transfers expressly contemplated by the facility letter itself. At the hearing before this Court, counsel for Mr. Coyle went through the relevant bank statements in some detail. With the exception of two matters, or types of matters, to which I will shortly turn, it seemed to me to be beyond argument that the only transactions which occurred after the facility letter were those to which reference has already been made and which are actually contemplated by the facility letter itself.
5.7 The two exceptions concern, first, the transactions which occurred on the 1st November, 2010 when the relevant loans were taken over by NAMA, and, second, a series of transactions whereby interest which had arisen in respect of one of the facilities was, while initially debited to that facility, in substance borne by a different account. This was achieved by means of that different account being debited for the sum of the interest with the sum in question being credited to the account on which the interest originally arose, thus, offsetting the interest charge on that original account. I propose dealing with each of those types of transactions in turn.
5.8 However, it is important to start by emphasising that the contractual relations between Mr. Coyle, on the one hand, and either Anglo Irish or NAMA, on the other, are governed by the facility letter. In substance, the facility letter, in the main, concerns the extension of existing loans, although in some cases it may have been contemplated that some additional funding might be made available. Be that as it may, the obligation on Anglo Irish under the facility letter was simply to provide the six specified facilities whether by extending the terms of existing loans or providing fresh funds or, indeed, both. There is no suggestion that either Anglo Irish or NAMA were in breach of that obligation.
5.9 Equally, it is clear that, under the facility letter, Mr. Coyle's obligation was to repay those loans. The loans are expressed to be repayable on demand but, in any event, by the 31st December, 2010, in the event that demand was not made. It is equally clear, therefore, that the monies became due under the terms of the facility letter.
5.10 It is against that background that the relevant transactions need to be assessed. While the bank account documentation in respect of the transfer of some of the loans from Anglo Irish to NAMA was not available, it was suggested on behalf of Mr. Coyle that the one account in respect of which such detailed information was available was sufficient to allow the point raised to be argued in respect of each of the accounts. Given the low threshold which Mr. Coyle has to meet, I am satisfied that counsel was correct in that regard. From the statements of account in question, it is clear that, on the same day, a NAMA account was opened (although managed by Anglo Irish) corresponding to each of the six existing Anglo Irish accounts. On each account there appears a debit of an amount equivalent to the balance due on a corresponding Anglo Irish account. On that same day a credit appears in the relevant Anglo Irish account thus reducing it to a zero balance. The previously existing Anglo Irish accounts are, thereafter, closed. The argument put forward on behalf of Mr. Coyle is that there was no authority either for the opening of the new NAMA account, the debiting of any money from such an account, or the transfer of monies from that account to an old or existing corresponding Anglo Irish account.
5.11 In that context, attention was drawn to the extensive powers of set off and consolidation which are contained in the general conditions used by Anglo Irish at the time in question and which were annexed to the facility letter. There is no doubt but that there is no express authorisation in those general conditions for transactions of this type. Counsel for NAMA argued that the absence of any express provision prohibiting a transaction of the type in question meant that it was authorised. Counsel for Mr. Coyle argued that the absence of an express provision meant that it was not authorised.
5.12 It seems to me that this is a straightforward issue of law which is more than capable of being dealt with within the confines of a summary judgment motion. The underlying contractual terms which applied between Mr. Coyle, on the one hand, and Anglo Irish or NAMA, on the other, are to be found in the facility letter. The facility letter simply provides, once the loans are either continued or advanced by Anglo Irish, for an obligation on the part of Mr. Coyle to repay and for the imposition of interest in accordance with the contractual terms set out. The transaction is to lend money on specified terms and conditions. There is nothing which requires that those monies should stand as a debit obligation on the part of Mr. Coyle in any particular account or accounts. Those monies (subject to the interest issue which has gone to plenary hearing) clearly remain due and owing under the terms of the facility letter. I can see no legal basis on which, however characterised, the transactions entered into, when the loans were taken over by NAMA, could change that situation. It does not seem to me that the precise mechanism used for transferring the liability on the six specified Anglo Irish accounts to six identical NAMA accounts can affect that situation.
5.13 There are very good reasons why banks may wish, in their standard terms and conditions, to confer on themselves rights of set off and the like. If a person has a demand deposit account in which they have €5,000 and, at the same time, an overdraft account on which they owe €5,000, the contractual arrangements between that person and their bank entitle the person concerned to demand €5,000 to be withdrawn from their deposit account without reference to the fact that they also owe the bank a similar sum on an overdraft account. Without having a specific power to amalgamate or set off (and in the absence of the occurrence of any circumstances specified in the relevant contract as a condition to the exercise of the power), then the substance of the entitlement of the customer concerned is to take the money out of the deposit account without reference to the overdraft account. Likewise, if monies are held in different accounts where the terms and conditions of those accounts are not identical, then any attempt by a bank to amalgamate or consolidate such accounts would be a clear breach of obligation unless there was an express power in that regard. Likewise, carrying out transactions involving third parties, such as the payment of cheques, direct debits or the like, clearly require a client's authority or must be covered by terms and conditions permitting the bank so to act.
5.14 But no such considerations apply here. As McGovern J. pointed out, there was no change at all of substance between the obligations of either party immediately after the relevant transactions occurred on the 1st November, other than that the monies were thereafter owed to NAMA as opposed to Anglo Irish, but on exactly the same terms and conditions. On the day before those transactions occurred, Mr. Coyle had six separate obligations (each arising under a separate facility) to repay monies to Anglo Irish. On the day after the transactions occurred, Mr. Coyle had an exactly equivalent set of six obligations to repay the same monies to NAMA. His contractual obligation under the facility letter has not changed save that the monies were now owed to NAMA. I am not satisfied, therefore, as a matter of law, that there was any breach of any obligation which occurred by putting those transactions into effect in the way in which they were. The situation might well be otherwise if it were possible to point either to a specific term in a facility letter or in general conditions which precluded such transactions, or if it could be shown that the effect of the transactions was to alter, in any way, the legal obligations of either party other than the transfer of the benefit of the debt from Anglo Irish to NAMA. No such consequence has been pointed to in this case.
5.15 Like considerations apply to the question of interest payments. There is no suggestion that the transactions whereby the substance of the burden of interest payments were, in effect, transferred from one account to another, affected the obligations on Mr. Coyle to repay. If the interest charged is excessive, then that matter can be dealt with at the plenary hearing which still stands. But the point with which I am now concerned is simply the transfer of the burden of what ever amount of interest may have been properly charged from one account to another.
5.16 It was said in argument, placing reliance on expert accountancy evidence placed before the High Court on behalf of Mr. Coyle, that the interest transactions with which I am now concerned may have given the false impression that accounts were performing in the sense that, looking at one account in isolation, it might have appeared that the interest obligations on that account were being serviced whereas the true position was that the burden of the relevant interest was simply being transferred to another account, thus increasing the indebtedness on that second account. Even if that were the case, it does not affect the legal obligations of Mr. Coyle to repay his loans and to meet any interest properly due on them. What auditors or regulators might have to say about such transactions in an entirely separate question. Therefore, for like reasons to those analysed in some greater detail in respect of the transactions which had the effect of transferring the loans themselves from Anglo Irish to NAMA, I am also satisfied that the interest transactions did not breach any legal obligations on the part of either Anglo Irish or NAMA.
5.17 For those reasons, I am satisfied that, as a matter of law, the transactions to which attention has been drawn were regular. In those circumstances, I am not satisfied that they provide any basis for a defence to NAMA's claim.
6. Conclusions
6.1 For the reasons which I have sought to analyse, I am, therefore, satisfied that McGovern J. was correct to conclude that the transactions whereby money was drawn down from new NAMA accounts, transferred to existing Anglo Irish accounts and used to discharge and, thus, close those Anglo Irish accounts, were regular. Likewise, the transactions whereby interest on certain accounts was, in substance, met by a transfer from an alternative account, were also regular.
6.2 In addition, all of the other consolidation measures adopted either predated the facility letter accepted by Mr. Coyle or were expressly contemplated by it. By signing acceptance of the facility on those terms, Mr. Coyle is clearly precluded from seeking to reopen any issues which either predate or were contemplated by the facility letter.
6.3 For those reasons, I am not satisfied that any arguable defence has been made out. It follows that McGovern J. was correct to grant summary judgment in the form in which he did (subject to referring certain questions as to the calculation of interest to plenary hearing). I would, therefore, dismiss the appeal and affirm the order of the High Court.
