High Court: Judgment for €4.85 million granted against developer Thomas Doran

About this case:

• Citation:
  [2025] IEHC 515
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Alexander Owens

Delivering judgment for the High Court, Mr Justice Alexander Owens summarised: “Thomas Doran’s real claim is that he should be allowed to walk away from his liabilities because he can embarrass the bank by showing that the daughter of his former friend and business associate put dubious valuations on the bank’s file so that he could draw-down his loans.” 

Background

In or about 2006–2007, the defendant was a successful developer in London. 

The defendant borrowed sums of €926,500 and €2,600,000 from AIB bank on the terms of two facility letters dated 3 January 2006 and 23 July 2007 for the purpose of purchasing two blocks of farmland in Mullingar, which, at the time, were perceived to have development potential but were not zoned for residential development. 

The defendant defaulted on the repayment of the loans. 

In resisting the proceedings brought by the first plaintiff and its predecessor in title to the loans and associated security, Everyday Finance DAC, the defendant claimed that an AIB bank official, the daughter of an former friend of his, agreed to get valuations to establish whether the lands represented value for money and that he was deceived into agreeing to purchase the lands and borrowing the sums owed.

The defendant further asserted that he was told that the AIB Bank “Prime” rate of interest applicable to commercial lending was the ECB lending rate, and counterclaimed for deceit, negligence and breach of contract and sought rescission of the loan contracts.

The High Court

At the outset of his judgment, Mr Justice Owens noted the duty of care owed to consumers in the procurement of survey reports for the purposes of the lender and borrower, noting that in consumer relationships it is fair and reasonable for the law to impose a duty and foreseeable that a borrower will rely on any report obtained, but that a lender is not responsible for ensuring that its customer has driven a good bargain.

As to the defendant’s situation, the judge explained: “In general, a bank does not owe any duty to business borrowers, such as property developers or speculators, to ensure or offer a view on whether the cost of land which they acquire with bank finance represents value for money, adequate security for a loan, is suitable for intended development, has good title or will be rezoned to permit development.”

The court emphasised that “these borrowers must do their own due diligence in relation to intended purchases” and that “absent any contractual term or a duty of care arising from some special circumstance of their relationship, a bank has no contractual or other obligation to consider the financial interests of a customer”.

Mr Justice Owens considered the evidence concerning the valuations procured by AIB, finding that the 2006 valuation of the first block of land had inaccurately stated that it comprised 25.5 acres. 

The court also noted that the 2007 valuation of the second block of land inaccurately stated that it had extensive road frontage onto a public road and that the first block of land was adjacent to residentially zoned lands in the 2002 Westmeath Development Plan, where in fact, that land was separated from residentially zoned lands by the second block of land.

Explaining that the “worthless” valuations had been treated as proof of compliance with the special conditions in the facility letters for the advancement of the loan monies, the court found that there was no evidence that the bank official or any other AIB official had given any consideration to their content. 

On that basis, Mr Justice Owens determined that the defendant failed to prove that the official deceived him for the purpose of misleading him into buying the lands and taking the loans.

The judge further considered that even if the AIB official suspected that the valuations were not genuine, that would not avail the defendant as there was no evidence that he had relied on AIB having valuations for the lands when he drew down the loans and completed his purchases.

Noting that the only contractual issue which could arise in the case was whether the defendant had a cause of action for breach of contract entitling him to compensation for any loss sustained as a result thereof, the court proceeded to analyse the contractual relationship between the parties.

Mr Justice Owens highlighted that whether a borrower is entitled to rely on a representation of compliance with a valuation condition as a basis for non-payment of a loan depends on the terms of the contract between bank and borrower, and whether there was a contractual promise by the bank not to advance money to the borrower without a valuation of the sort specified in the special condition or to ensure that any valuation was of the kind which an objective person could have confidence in.

The judge confirmed that absent a special relationship of proximity giving rise to a duty of care to the borrower on part of the bank, there was no reason to suppose that a bank and a commercial borrower were not in the normal position of contracting parties dealing with each other at arm’s length.

Mr Justice Owens observed “There is no acceptable evidence in this case that Thomas Doran was ‘the ordinary borrower seeking funds on the basis of a valuation conducted by a bank’. This was not the factual background to either of the transactions or the context in which valuation special conditions were included in either of these facility letters. The contractual purpose of valuation clauses in these facility letters was to satisfy AIB Bank that property has some quantified value or minimum value which it set.”

The judge pointed out that it is not the business of the courts “to foist obligations” on a party to a contract which that party would never have expressly agreed to, and that there was nothing in the facility letters relating to these loans which would lead to an inference that AIB assumed a contractual responsibility to the defendant to get valuations which would meet some objective standard or showed that the lands were worth what he had agreed to pay for them.

The court was satisfied that any such assumption was not necessary to give business-efficacy to the loan contracts.

Mr Justice Owens was further satisfied that the special conditions in the loan facility letters regulated the circumstances in which a provisional commitment by AIB to advance money to the defendant ceased to be provisional and the bank came to be obliged to make an advance to him, noting that “non-satisfaction of a proof which the bank was contractually entitled to insist on as a pre-condition to permitting draw-down of Thomas Doran’s loans did not necessarily result in automatic termination of the contracts embodied in the facility letters”.

The judge concluded that there was no evidence that the defendant had suffered loss as a result of alleged deceit, negligence or breach of contract on part of AIB. 

As to the defendant’s allegations concerning the interest rate which was to be applied to the loans, the court determined that the conversations relied upon by the defendant were superseded by written contracts embodying AIB’s “General Terms and Conditions relating to Business Lending” and were not admissible to contradict those terms and conditions.

Conclusion

Accordingly, the High Court granted judgment for €4,853,061.92 against the defendant and dismissed his counterclaim.

Allied Irish Banks PLC & Anor v Thomas Doran [2025] IEHC 515