High Court

AP Byrne & Company Ltd (In Liquidation) v Allied Irish Banks Plc 

1995 No 29 Cos 

7 March 1997 

COSTELLO P: 

The company which is now in liquidation and whose liquidator has instituted these proceedings against Allied Irish Banks plc had maintained an account in the Terenure branch of the bank. The company's business had been a "Cash and Carry" one. Its cigarette suppliers required that their account with the company be guaranteed by a bank and on the 8 April 1992 the bank issued two guarantees in favour of two major suppliers of the company. A third guarantee was issued on the 25 November following. Naturally, the bank sought security for these guarantees and on the 25 November the manager of the Terenure branch wrote to the company confirming that the facility of guarantee had been granted and setting out the terms on which it had been granted. One of these referred to "security" and required that the company would grant a counter indemnity and a "lien" over £100,000 "cleared funds" on a deposit account. This referred to moneys on deposit in the name of the company in a subsidiary of the bank, AIB Finance Limited. In an affidavit sworn on the 3 March 1955 Mr Giffney stated that the Terenure branch had been advised "at about the same time" by the legal and securities department that it would be more appropriate to take an assignment over the funds on the deposit with AIB Finance Limited rather than a lien and that "as a result it was agreed with the company that, instead of a letter of lien, such an assignment would be executed in favour of the bank". In its points of defence the bank pleads that "the respondent changed the conditions of the offer of the 20 November 1992 by requiring in substitution for the lien an assignment of the joint deposit funds as security for the facilities then on offer". On the 23 December 1992 the company by resolution of its Board of Directors authorised the assignment of "£100,000 or such balance found due and owning by AIB Finance Limited" to the company to the bank and authorised the signing by Anthony P Byrne, a director, of a letter of assignment. On the 14 January 1993 Mr Byrne signed a letter of assignment in respect of "£200,000 or such other balance found due by AIB Finance Limited to the company" in favour of the bank. 

On the 23 February 1993 a petition to wind up the company was presented and on the 24 February a provisional liquidator appointed to the company. The three guarantees were called in by the cigarette suppliers and paid by the bank. On the 10 March the bank appropriated money standing to the credit of the company in its account with AIB Finance Limited in the sum of £300,000. On the 15 March 1993 the company was ordered to be wound up. 

In these proceedings the validity of the letter of assignment of the 14 January 1993 is challenged. 

In the course of the proceedings an order for discovery was made. In the course of making discovery a controversy arose concerning a report of the 8 March 1993 on the handling of the company's account in the Terenure branch. After examining this report I concluded that it was relevant. In an affidavit of the 28 November 1996 objection was taken to its production (along with six other letters and a memorandum of the 28 November 1994). The liquidator has accepted that items six and seven of the schedule are privileged but has denied that the report (at item one) and the letters at items two to five are entitled to privilege. I have examined these documents. I am satisfied that each came into existence at a time when litigation was in contemplation and for the purpose of obtaining legal advice thereon. In the circumstances a claim of privilege is justified.