High Court: Finance company refused application for summary judgment of almost €17m

About this case:

• Judgment:
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Finding that Stapleford’s application did not satisfy the Aer Rianta threshold, Mr Justice Brian McGovern stated that Stapleford’s argument for summary judgment was too simplistic, and that the facility underpinning the settlement agreement raised questions of potential illegality.

Background

In 2014, liabilities of Patrick Kearney in respect of a facility granted by AIB in 2009, were purchased by Stapleford Finance Designated Activity Company.

In October 2014, the balance due on the said account was €19,256,207.26.

Stapleford agreed to enter into a settlement agreement with Mr Kearney whereby the said debt of €19,256,207.26, was compromised by Mr Kearney paying to Stapleford the sum of €2,360,000 and subject to the terms and conditions in the deed of settlement.

The deed of settlement also provided that the security held by Stapleford over certain subordinated bonds of AIB was to be released to Mr Kearney following payment to Stapleford of the settlement amount of €2,360,000.

In November 2014, Mr Kearney paid the settlement sum of €2,360,000.

Subsequently, Stapleford claimed that it learned that Mr Kearney entered into a transaction whereby the bonds were sold for €6m, which was not disclosed to them at any time.

Accordingly, Stapleford claimed that Mr Kearney was in breach of the deed of settlement and that Stapleford was entitled to judgment against Mr Kearney for the outstanding liability – €16,896,207.26.

In an application to the High Court, Stapleford sought summary judgment against Mr Kearney in the sum of €16,896,207.26, arising under a deed of settlement dated 14th November 2014.

Considering whether Stapleford was entitled to summary judgment, and applying Ryanair v. Aer Rianta 4 I.R. 607, Danske Bank A/S Trading As National Irish Bank v. Durkan New Homes IESC 22, and Harrisrange v. Duncan 4 I.R. 1, Justice McGovern said that leave to defend should be granted unless it is very clear that there is no defence.

Discussion

Considering the facts of the case, Justice McGovern stated that Stapleford’s argument for summary judgment was too simplistic.

The principal issue arising was whether or not Mr Kearney was in compliance with his duty of utmost good faith and that would include a determination based on either of two scenarios:-

Stapleford argued that it did not matter that it may have been aware that Mr Kearney intended to sell the bonds, and that he may have told a representative of Stapleford that the value of the bonds was substantially more than his liability – but that what mattered was that he did not tell Stapleford that at the time of the settlement agreement he had agreed to sell the bonds for a particular price.

Justice McGovern pointed out that there was a dispute about this issue because Mr Kearney claims that a representative of Stapleford was privy to a telephone conversation in which the sale and price was discussed by Mr Kearney with a third party. While this was denied by the representative, Justice McGovern stated that it was an issue which could only be decided by plenary hearing.

Time limit issue

Another issue was whether or not Stapleford was out of time for exercising its right to terminate the agreement by virtue of the provisions of Clause 4.2 of the deed of settlement:

Justice McGovern stated that this was a question of interpretation of the agreement and was best left to a plenary hearing.

Conclusions

Refusing the application, Justice McGovern stated that this was not an appropriate case in which to give summary judgment.

Justice McGovern added that he was “fortified in that view because the defendant has argued that the facility underpinning the settlement agreement was one connected with a share support scheme which he claims raises questions of potential illegality”.