High Court: Revised payment structure is no defence to summary judgment

Clones Credit Union have been granted summary judgment for the principle sum owed by members who borrowed in excess of €212,000 in 2008.

Finding that the defendants had failed to satisfy the low hurdle needed to send the matter to plenary hearing (as per Aer Rianta and Harrisrange), Mr Justice Max Barrett rejected the argument that the revised repayment structure settled between the parties in 2012 represented a binding standstill contract and was satisfied that promissory estoppel did present itself on the facts of the case.

Background

In July 2008, Liam Strain and Peter Lynch borrowed €212,000 from Clones Credit Union.

In the High Court, following default under the terms of that agreement, the credit union sought summary judgment for the principal sum owing under the agreement plus interest and certain ancillary reliefs.

Arguing that the mater should be sent to plenary hearing, the defendants pointed to a revised repayment structure that was settled between them and the credit union in June 2012. Pursuant to this revised structure, the defendants were to continue paying annual instalments of a lesser amount than the total annual amount required to be paid by them under the terms of the agreement; and they considered that this was to apply until complete repayment was made of all amounts owing under the credit agreement.

The defendants maintained that the revised repayment structure had been met at all times, and in this context they claimed to be “perplexed by the commencement of the within proceedings”.

The Rule in Pinnel’s case

The Credit Union submitted that the defence must fail pursuant to the rule in Pinnel’s case (1602) 5 Co. rep. 117; however Justice Barrett rejected this. Justice Barret said that the effect of the rule in Pinnell’s case was that “if a liquidated sum is owed by A to B, a promise by B to take a lesser sum in satisfaction of the larger debt will not bind B”. Justice Barrett pointed out that the Credit Union did not agree to take a lesser sum – all that was agreed was that lesser monthly repayments would be accepted for a time and the totality of the debt continued.

Standstill Contract

Justice Barrett said that the core of the defence was that a binding standstill contract arose between them and the Credit Union whereby proceedings would not be initiated as long as the revised monthly payments were paid. Considering ACC Bank plc v Kelly [2011] IEHC 7, Justice Barrett explained that “a bare agreement on the part of a lender to forbear does not, of itself, give rise to a contract in the absence of consideration moving from the borrower” – and in the present case there was no consideration from the defendants.

Promissory Estoppel

Justice Barrett explained that in certain circumstances, such a standstill arrangement may be capable of enforcement through the doctrine of promissory estoppel. However, referring to Healy v Ulster Bank Ireland Ltd [2018] IEHC 12, Justice Barrett was satisfied that the defendants had not altered their positions to the detriment on the strength of any clear and unambiguous promise or assurance from the credit union which was intended to effect legal relations.

In fact, Justice Barrett considered that the defendants had altered their position to their betterment, and there was nothing to suggest that it was unconscionable for the Credit Union to seek or be granted summary judgment.

As such, “the essential plinth on which any defence of promissory estoppel must rest” did not present itself in the present case.

Conclusion

Considering the low hurdle which the defendants had to satisfy in order to send the matter to plenary hearing (as per Aer Rianta cpt v Ryanair Limited [2001] 4 IR 607 and Harrisrange Ltd v Duncan [2003] 4 IR 1), Justice Barrett considered that:

  1. It was very clear that the defendants had no case when it comes to the application now made,
  2. To the extent that issues fell to be tried, they were simple and easily determined, and
  3. The defendants failed to disclose any arguable defence.

Mindful of that “discernible caution” in Harrisrange, Justice Barrett said that the Court was nonetheless coerced as a matter of law into concluding that summary judgment sought should be granted.

  • by Seosamh Gráinséir for Irish Legal News