Couple’s challenge to validity of guarantee dismissed by Court of Appeal, Justice Hogan dissenting
The Court of Appeal has dismissed a couple’s challenge to the validity of a guarantee in regards to which the High Court granted Ulsterbank a summary judgment for €126,000.
Mr Justice George Birmingham, with whom Mr Justice Michael Peart agreed, found that neither the husband or wife had an arguable case in regards to the guarantee.
Mr Justice Gerard Hogan dissented with the judgment of Justice Birmingham to the extent that he found that the wife had made an arguable defence that the Bank were under an affirmative duty to insist that she obtain independent legal advice before she executed a guarantee of her husband’s business debts.
Mr Walter DeKretser and Ms Gillian Fox sought to appeal the judgment of the High Court granting Ulsterbank (Ireland) Ltd liberty to enter final judgment of €126,077 (€89,350 with interest).
Mr DeKretser was a stonemason by trade and an expert in restoration. He started Stone Finishes Supply Ltd in 1999 and it grew into a business with a turnover of over €1.1 million per annum.
In late 2007 the company came under significant pressure, and when when two of its biggest clients became insolvent in 2008, the company went into voluntary liquidation.
In June 2007, Mr DeKretser and Ms Fox had entered into a joint and several guarantee in writing in respect of the obligations of Stones Finishes Supply Ltd, of which they were both directors.
The guarantee was a condition for the granting of an overdraft facility to the company for €100,000 plus interest.
The company defaulted on its obligations under the facility and a demand was consequently made under the guarantee for €89,350; thereafter a summary summons was issued in respect of that sum plus interest in 2009.
In the High Court, Mr DeKretser and Ms Fox were unsuccessful in challenging the validity of the guarantee, and the trial judge therefore granted Ulsterbank a summary judgment for the amount owed.
Court of Appeal
Mr DeKretser and Ms Fox appealed the decision of the High Court, and the three-judge Court of Appeal had to consider whether the guarantee was valid, whether Ms Fox was subject to undue influence in executing the guarantee, and whether there was a positive or affirmative duty on the bank to ensure that Ms Fox understood the nature of the guarantee
Justice Birmingham was satisfied that Ms Fox was not unfamiliar with the execution of personal guarantees, and had already executed personal guarantees in favour of her husband’s company on four earlier occasions in 2002, 2003 and 2006. Additionally, he emphasised that Ms Fox was a businesswoman in her own right in that she ran her own company, Heavenly Spa Ltd.
Harrisrange Limited v. Duncan 4 IR 1 considered, Justice Birmingham stated that he would a approach the appeal on the basis that “Ms Fox should be given leave to defend unless it is very clear that she has no defence, not even one which could be described as arguable”.
Considering Ulster Bank Ireland Limited v. Fitzgerald IEHC 259; Ulster Bank Ireland Limited v. Roche and Buttimer IEHC 166; Irish Bank Resolution Corporation v. Quinn IEHC 470; and Royal Bank of Scotland plc v. Etridge (No. 2) 2 AC 773; Justice Birmingham said that while an interesting and developing legal issue had been identified, in his view they failed to engage with the facts
He went on to say that these types of cases are very fact specific, and that Mr DeKretser and Ms Fox could not “escape from the fact that they had a long history of interaction with the bank and that the bank clearly knew that Ms Fox was an experienced business woman in her own right, with a long history of commercial interaction with it”.
Insofar as Mr DeKretser’s affidavit corroborating her averment that he had put her under undue influence to sign the guarantee, Justice Birmingham held that “the trial judge was entitled to place very little weight on what on any view had to be seen as a self-serving assertion”
Justice Birmingham went on to say that if “one party was a dominant business person and the other partner entirely without business expertise the situation might indeed be different” (as per Ulster Bank Limited v. Roche and Buttimer).
Accordingly, with Justice Peart concurring, Justice Birmingham dismissed the appeal and held that the trial judge was entitled to grant liberty to enter final judgment.
Justice Hogan dissenting
Mr Justice Gerard Hogan dissented with the judgment of Justice Birmingham to the extent that he found that Ms Fox had made an arguable defence.
Considering the test for summary judgment set out in Aer Rianta c.p.t. v. Ryanair Limited 4 I.R. 607, “and in the light of cases such as Etridge (No.2) and Roche”, Justice Hogan was satisfied that Ms Fox raised an arguable case that the Bank were under an affirmative duty to insist that she obtain independent legal advice before she executed a guarantee of her husband’s business debts.
In the light of this case-law, Justice Hogan could not agree that Ms Fox had no case so far as her Etridge-style defence to the guarantee was concerned.