The Governor and Company of The Bank of Ireland v Kelly & anor [2019] IECA 300 (28 November 2019)
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McGovern J.
Costello J.
Donnelly J.
THE COURT OF APPEAL
Record No. 2017/455
BETWEEN/
THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND
RESPONDENT
- AND–
PÁDRAIG KELLY AND BRIDGET (OTHERWISE BRIDIE) KELLY
APPELLANTS
JUDGMENT of Mr. Justice McGovern delivered on the 28th day of November 2019
1. This is an appeal from an order of Noonan J. made on 27 July 2017 wherein he granted
summary judgment against the appellants in favour of the respondent in the sum of
€117,184.96.
2. The proceedings were commenced on foot of a guarantee provided by the appellants as
security for the provision of credit to Ballymitty Supply Stores Limited (“the company”).
The appellants were directors of the company. The company went into voluntary
liquidation on 1 September 2010.
3. There are a significant number of grounds of appeal but they can be distilled into the
following:-
(a) the trial judge erred in proceeding with the motion for summary judgment before
hearing the appellants’ motion to compel the respondent to furnish all bank
statements and loan offers for all loans taken out by the company since 1981. The
appellants claim that if their motion had been heard first it would have had a
material effect on the outcome of the respondent’s claim;
(b) the trial judge erred in finding that the bank statements covering a period of just
one year could be safely relied on in ascertaining the ultimate balance due on all
accounts which were secured by the personal guarantees of the appellants;
(c) the trial judge erred in holding that the allegations of overcharging of interest on
the company’s account was a bare assertion and did not constitute an arguable
defence in circumstances where the total amount of overcharging was likely to be
roughly equivalent to the alleged debt;
(d) the trial judge erred in law in holding that the allegation that the respondent had
forced the company into liquidation thereby discharging the personal guarantee did
not constitute an arguable defence;
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(e) the trial judge erred in law in holding that the personal guarantee being relied on
had been validly executed and in holding that the guarantee was unenforceable in
the absence of legal advice;
(f) the trial judge erred in law in refusing to allow the appellants’ solicitor to outline in
detail the legal principles governing the exercise of summary jurisdiction.
4. In paragraph one of the appellants’ written legal submissions they state:-
“The nub of the defence to this claim was that the plaintiff had forced [the
company] into liquidation to deprive its manager of her capacity as co-executor of
the estate of the late Paddy Donnelly to scrutinise his alleged will of 4 December
2009 and its passage through probate as the plaintiff had a hidden interest in that
estate. The defendants further contend that the plaintiff had deliberately frustrated
the sale of the business premises of [the company] for sums of €180,000 and
€175,000 to ensure the business premises was sold at a lower price thereby
ensuring that there would be residual debt to enable the plaintiff to enforce the
guarantee against the elderly mother and brother of the said manager and co-
executor and thereby neutralise the said manager in her capacity as co-executor of
the said will of the late Paddy Donnelly”.
However, the grounds of appeal which have been filed do not include any issue referable
to the administration of the estate of the said Paddy Donnelly deceased and it is difficult
to see how this matter could have had any relevance to whether or not the respondent
was entitled to summary judgment against the appellants. In any event this issue was
not canvassed or pursued on the appeal and it is not therefore necessary for this court to
consider the matter further.
5. There was no disagreement between the parties concerning the legal principles applicable
to an application for summary judgment. These are to be found, inter alia, in Aer Rianta
CPT v. Ryanair Limited (No 1) [2001] 4 IR 607 (“Aer Rianta v Ryanair”), Harrisrange
McCaughey”). The principle emerging from these cases are so well known and accepted
that it would be otiose to repeat them here other than in the most general terms. If
summary judgment is to be granted it must be “very clear” to the court that the
defendant has no case and that there are either no issues to be tried or only issues which
are simple and easily determined. A mere assertion in an affidavit sworn by or on behalf
of a defendant is not sufficient to enable a defendant to be granted leave to defend. The
court must look at the whole situation and decide whether there is a fair or reasonable
probability of a real or bona fide defence and that any assertions made are credible in the
light of established facts. The appellants argue that the High Court judge did not follow
the principles to be found in this line of jurisprudence and that it could not be said to be
“very clear” that the appellants had no defence, nor one which could be described as
arguable.
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6. It is against the background of the agreed jurisprudence that this court should assess the
findings of the High Court judge in order to determine whether he was entitled to grant
summary judgment to the respondent.
7. The appellants claim that the trial judge refused to allow the appellants’ solicitor to set
out in detail the legal principles governing the exercise of summary jurisdiction. I have
read the transcript of the summary judgment hearing and it is quite clear that Mr. Maher,
on behalf of the appellants referred to a number of the well known cases on the topic and
the effect of those decisions. He referred to MacEnroe v Allied Irish Banks Ltd
[1980] ILRM 171 (p.10, 12 and 19), Allied Irish Banks plc v Marino Motor Works Ltd [2017] IEHC 522
(p.13), the generally accepted principles relating to applications for summary
judgment (p.16-17), Aer Rianta v Ryanair (p.18 and 21), Harrisrange Limited v Duncan,
and IBRC v McCaughey (p. 18), and Allied Irish Banks Plc v Darcy [2016] IECA 214,
[2016] 1 IR 588 (p.20). At no point in the transcript does it record a complaint from Mr.
Maher that he was not properly allowed to refer to the relevant jurisprudence in an
adequate manner. There was nothing controversial about the jurisprudence referred to
as it is habitually referred to in applications of this nature and the law on the topic is very
well settled. While this complaint was not pursued to any real extent in legal argument
on the appeal I am satisfied that there is no substance to the complaint.
The facts
8. On 5 April 2004 both appellants signed guarantees whereby they guaranteed the
indebtedness of the company. Both appellants were directors of the company.
9. On 20 July 2010 the company wrote to the respondent informing it that it was unable to
pay the monthly premium due on 14 July 2010 in the sum of €921.34 in order to keep the
company premises insured. On 1 September 2010 Mr. Philip Tubritt wrote to the
respondent informing it that at a meeting of creditors of the company held on that date
pursuant to s.266 of the Companies Act 1963 he was appointed liquidator of the
company. This is prima facie evidence that the company was insolvent. In an affidavit
sworn on 19 October 2015 Mr. Michael Murphy, an official with the respondent, stated
that in recent times the company experienced financial difficulties and this was conceded
by the appellants in para. 6 of an affidavit sworn by the first named appellant on 12 June
2015 in which he stated: “We say and believe that during the first six months of 2010 we
were having difficulties with our business as the result of the collapse of the economy”.
Mr. Murphy stated that the respondent had a voluntary scheme in place for customers
who were experiencing trading difficulties whereby an enterprise advisor was appointed to
provide business advice to such companies. Mr. Bob Chestnut was the advisor appointed
in respect of the company which had a significant level of debt at this time.
10. On 9 July 2010 the appellants submitted a proposal which included a request for
additional funding of €60,000 but this request was declined as the company had no
repayment capacity. The respondent claimed that the appellants contacted the
respondent on 20 July 2010 and spoke with Ms. Helen New who noted at the time that
the appellants had informed her they had decided to cease trading on 23 July 2010 as the
company had no working capital and they requested the appointment of a receiver rather
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than liquidation. This request was declined. In an affidavit sworn on 21 October 2015
Pádraig Kelly on behalf of the appellants disputed the figures relied on by the respondent,
denied any valid letters of guarantee and indemnity and claimed that the respondent had
forced the liquidation on the company. The appellants made these assertions in spite of
the fact that the letters of guarantee duly signed by them had been exhibited in the
affidavit grounding the application for summary judgment sworn by Mr. Michael Murphy
on 11 May 2015. The appellants made no attempts to suggest why the figures relied on
by the respondent were wrong. It is clear that the sum claimed on foot of the guarantee
is the balance due on three loan accounts, namely, accounts number 52017795,
38969562 and 40006183. While the appellants claimed that they were not furnished with
all the relevant documentation relating to those accounts there is no doubt that they were
furnished with the relevant details under cover of a letter dated 25 May 2016 which was
fourteen months prior to the hearing before Noonan J. which is the subject of this appeal.
11. In an affidavit sworn on 12 June 2015 Padraig Kelly stated that sometime around the last
week of July 2010 Helen New from the respondent’s debt recovery section phoned the
appellants to say that they had seven days to pay off the outstanding loans and that if
they failed to do so they should hand back the keys and close the business. If the court
accepts that evidence as true, for the purposes of an application for summary judgment,
it does not amount to a defence of the claim. All it establishes is that the respondent was
no longer prepared to afford further credit to the appellants. In so far as there was any
controversy about what was said by Helen New it was not necessary for the High Court
judge to resolve that issue in order to determine the application before him.
First ground of defence
12. In an affidavit sworn on 21 October 2016 the first named appellant sets out the
purported defence to the claim for summary judgment. What is described as the “first
grounds of defence” (sic) involves the recital of events leading up to the liquidation
followed by a number of paragraphs under the heading “Explanation for forced
liquidation”. The appellants claim that the respondent acted in a vindictive and deceitful
attack on the company for the purpose of compromising Breda Kelly Walsh (the sister of
the first named appellant, and daughter of the second named appellant) in order to
deprive her of her capacity to raise questions about a will made by Paddy Donnelly
deceased at a time when she was one of two executors of his will. As I have stated
earlier in this judgment this matter was not pursued as part of the appeal and it is difficult
to see how the facts outlined in connection with that matter could raise any possible
defence to the claim for summary judgment.
Second ground of defence
13. The second ground of defence is based on the alleged failure on the part of the
respondent to provide certain documents to enable secured assets of the company to be
sold at their true value. The defence raised consists of nothing more than mere assertion
and is robustly contradicted in an affidavit of John Conville sworn on 12 December 2016
which exhibits extensive documentation to support his averments. This includes a
document entitled “Issues relating to the sale of the property” prepared by the solicitors
acting on behalf of the liquidator. This document sets out in considerable detail why the
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proposed sales did not proceed. There were issues related to the percolation area for a
septic tank, an enforcement notice in respect of commercial rates which had not been
discharged, and a range of valuations between €300,000 and €180,000. At the time of
the liquidator’s appointment the debt due to the respondent was €183,747.32. On 19
May 2011 an offer of €184,500 was made by Mr. Pat Roche for the property but on 7 June
2011, and prior to the respondent reverting to the liquidator in respect of the offer, the
offer was withdrawn. Around the same time an offer of €174,500 was made by Mr.
Brendan Neville and the respondent agreed to release its mortgage over the property
upon receipt of the balance of proceeds of sale after discharge of various liabilities
affecting the properties and the costs of sale. Although contracts issued to Mr. Neville’s
solicitor he withdrew from the transaction on 15 August 2011. In September 2011 an
offer of €100,000 was received for the shop by Mr. Padraig Harris and Mr. Seamus Allis
and a separate offer of €40,000 was made for the yard by Mr. John McKeown. These
offers were accepted and contracts were issued to both parties. Due to title issues and
issues associated with the percolation area from the septic tank and waste water
treatment the figure offered by Messrs. Harris and Allis was discounted by €20,000.
Subsequently the purchasers indicated they would only complete the sale subject to the
grant of planning permission for remedial work which was required. This was not
acceptable to the respondent and ultimately Messrs. Harris and Allis withdrew from the
sale. Mr. Greg Neville indicated he was prepared to purchase the shop for €75,000 and
contracts were issued to his solicitor but he subsequently withdrew from the transaction.
Ultimately Mr. John McKeown offered to purchase the shop for €75,000 and the yard for
€40,000 and this offer was accepted and the matter was concluded after various
deductions, costs and fees the balance of €67,440.17 was forwarded to the respondent
and the mortgages were discharged and credit was giving to the debt owed by the
company and ultimately the appellants.
14. Applying the established jurisprudence to the facts one finds that what were mere
assertions on the part of the appellants were met by a comprehensive response backed
up by evidence which completely undermined the assertions made by the appellants. In
those circumstances the assertions were not credible. Accordingly, this alleged ground of
defence does not meet the threshold required for a plenary hearing.
Third ground of defence
15. This ground appears to be based on excessive interest charges. But other than making
that assertion the appellants have not supported it with any evidence. Bank statements
were exhibited with the affidavit grounding the application for summary judgment and
these show that the company was extensively overdrawn and the interest charged from
time to time was set out. There has been no meaningful attempt on the part of the
appellants to say in what way and to what extent the interest charged was either
incorrect under the terms of the loan agreements or was excessive. The appellants’
assertions in relation to interest charges are no more than that and do not meet the
threshold for establishing an arguable defence.
Fourth ground of defence
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16. In this purported ground of defence the appellants state that the guarantees are invalid
and of no legal effect because the bank acted deceitfully and fraudulently. The alleged
deceit and fraud is that which has already been referred to and rejected as not
constituting an arguable defence. It also appears to include the allegation of
overcharging of interest which was already contained in the third ground of defence. The
facility letters were exhibited and they have been signed and accepted by the appellants.
The guarantee and indemnity signed by each appellant in respect of the debts of the
company have also been exhibited. They are clear on their face, have been signed by
each of the appellants in the presence of witnesses and they have also signed certificates
concerning independent legal advice wherein they stated they did not wish to be so
advised. The appellants cannot simply repudiate the documents which they signed. They
are bound by them. See ACC Bank plc v. Kelly & Another [2011] IEHC 7 where Clarke J.
stated at para. 7.3:-
“I am not satisfied that any person taking the trouble to read the clause in question
could have any difficulty in understanding what it meant. Even if someone had such
difficulty then it is incumbent on such a person to take advice. It must be
remembered that these are not consumer transactions. The Kellys were involved in
quite a significant business and had borrowings in excess of €7m. This was,
therefore, a commercial banking transaction. Many people in such circumstances do
take professional advice whether from accountants or lawyers. There is no
obligation, of course, to do so. But someone who signs commercial banking
documents without taking advice on them runs a risk which they must accept. They
will be bound by the terms which they sign up to.”
17. The appellants have not in any way established an arguable defence but have made a
number of assertions which are either not backed up by any evidence or which are
demonstrably incorrect in view of the documentary evidence furnished by the respondent.
In those circumstances the assertions made by the appellants are simply not credible and
do not meet the test required to have the determination of this claim remitted to plenary
hearing.
The discovery motion
18. The appellants claim that a motion for discovery which they brought in the High Court
should have been heard before the claim for summary judgment. In my view the High
Court judge was quite correct in dealing with the summary judgment application first. It
would have been an unnecessary waste of scarce court time and resources to embark
upon the hearing of a discovery motion until such time as it was determined whether the
case was to proceed to plenary hearing. In Irish Life and Permanent plc trading as
Permanent TSB v. Hanrahan & Another [2015] IECA 125 Kelly J. considered this very
point on an appeal from a refusal by Moriarity J. in the High Court to grant an application
for discovery where a motion for liberty to enter final judgment was still pending in the
Masters Court. Kelly J. observed at p.3 that “It is by reference to the pleadings that the
question of the entitlement to discovery falls to be determined.” In dismissing the appeal
the Court held at p. 3:-
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“In my view, Moriarity J. was correct in taking the view which he did. This is not
the appropriate time for an order for discovery to be made. The issues have not
yet been defined. They have not been identified. They will not be identified until
such time as pleadings have closed between the parties if the case gets to that
stage”.
19. The process of discovery is not to enable a party to identify grounds capable of
establishing a cause of action. See Keating v. Radio Telefís Éireann & ors [2013] IESC 22.
20. In my view the High Court judge was correct in hearing the application for summary
judgment in advance of the application for discovery and I would dismiss the appeal in so
far as it is based on that ground.
21. So far as the substantive appeal is concerned the High Court judge correctly applied the
established jurisprudence to the facts of this case and I am satisfied that no error can be
found in his decision to grant summary judgment.
22. I would dismiss the appeal.
Result: Dismiss appeal; Adjorn re: Costs
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