Supreme Court: Directors of construction company have appeal against 2011 summary judgment dismissed

The directors of a construction company who, along with their wives, signed guarantees in respect of the indebtedness of their company to the Bank of Ireland, have lost their Supreme Court appeal against the €1 million summary judgment granted by the High Court in 2011.

Finding that there was no arguable claim regarding the validity of the guarantees signed, and rejecting arguments raised in relation to the bank’s ability to benefit from a historic valuation of securities given prior to the property collapse, Ms Justice Mary Finlay Geoghegan upheld the finding in the High Court that the appellants had failed to meet the low threshold in Aer Rianta v Ryanair.


The defendants/appellants, Edmund Heaphy, Regina Heaphy, Oliver O’Sullivan, and Mary O’Sullivan, gave guarantees in writing to the Governor and Company of the Bank of Ireland (BOI) in respect of the indebtedness of Lockson Construction Limited. The directors of Lockson Construction, Messrs Heaphy and O’Sullivan, each gave six guarantees; Mrs Heaphy two guarantees; and Mrs O’Sullivan one guarantee. Prior to July 2010, a liquidator had been appointed to Lockson Construction.

High Court

In the High Court in July 2011, Mr Justice Iarfhlaith O’Neill granted BOI summary judgment against Messrs Heaphy and O’Sullivan for €768,016.37 together with costs and interest and against Mrs Heaphy and Mrs O’Sullivan for €223,533.73 together with interest and costs. 

Contending the application for summary judgment, it was argued that:

  1. BOI had failed to provide the defendants with the contractual and other documentation pertaining to the underlying debt of Lockson Construction alleged to have been guaranteed by the defendants, and that BOI should be required to do so prior to the application being determined; and
  2. In Mr Heaphy’s capacity as a banking consultant, he had come upon information with the potential to undermine the validity of securities for the entire Irish banking system in general and the guarantees in issue in these proceedings.

Rejecting the existence of an arguable defence, and granting the summary judgment, Mr Justice O’Neill found that:

  1. In circumstances where the defendants had admitted they had signed the guarantees the manner in which they were executed was irrelevant;
  2. The defendants in their capacity as directors of Lockson Construction whose debt they had guaranteed were deemed to have knowledge of Lockson Construction’s financial position and transactions; and
  3. The defendants had failed to set out on affidavit the nature of any alleged underlying flaw in the Irish banking system and its impact on the present proceedings.

Additional Evidence

Mr Heaphy, a banking consultant, filed a detailed affidavit exhibiting materials which the appellants sought to rely upon in the appeal.

The affidavit set out the regulatory regime which applied to the banks including BOI following the Asset Covered Securities Act 2001 and the Asset Covered Security (Amendment) Act 2007 and regulations made thereunder.

The affidavit also exhibited a number of the regulatory notices promulgated pursuant to those Acts, the terms and conditions of the Central Bank and Financial Services Authority of Ireland when acting as correspondent central bank with respect to credit claims, and other documents.

Supreme Court

In the Supreme Court, the appellants argued:

  1. That BOI had not put before the High Court admissible evidence which entitled it to summary judgment in respect of the debt claimed pursuant to the guarantees; and
  2. That by reason of the statutory and regulatory regime which was put in place following the banking crisis in 2007, BOI was able to benefit from a historic valuation of securities given by the appellants in support of their guarantees which neither Lockson Construction not the appellants could do; that BOI had been able to obtain credit in reliance upon those securities with historic valuations and was not obliged to repay in full credit which it had so obtained; and that this was a benefit obtained by BOI in reliance inter alia on the valuations of securities received from the appellants whilst the appellants in turn, by reason of the property collapse had not been able to realise those values but yet remain liable to BOI for the full amount of the personal debt under the terms of the guarantee. 

Ms Justice Finlay Geoghegan explained that ‘[w]hilst the alleged securitisation by [BOI] of loans including those to which the guarantees relate was referred to in the written submissions…the appellants correctly did not contend that securitisation of itself could give rise to an arguable defence’.

Considering the affidavit of a senior business manager at BOI, and citing Ulster Bank v. O’Brien [2015] IESC 96; [2015] 2 I.R. 656, Ms Justice Finlay Geoghegan was satisfied that a prima facie case had been made out by BOI that the appellants were each indebted to BOI in the sums deposed to by the senior business manager; and that in the absence of a denial with some evidence in support a court may grant summary judgment. Furthermore, the amounts allegedly owed by Lockson Construction were not disputed.

Ms Justice Finlay Geoghegan was also satisfied that there was no evidence which could give rise to any arguable claim as to the invalidity of the guarantees signed by the appellants.

In considering the second strand of the appeal, Ms Justice Finlay Geoghegan said that there was a lack of clarity as to what was actually being contended for to meet the low threshold in Aer Rianta v Ryanair. Stating that she would leave admissibility to one side, Ms Justice Finlay Geoghegan said that she did not consider the additional affidavit of Mr Heaphy to be evidence which could support an arguable defence or counterclaim that the appellants might be entitled to set off against their contractual liability pursuant to the guarantee.

Stating that no arguable basis had been made out ‘upon which it could be said that any lawful provision made by statute or regulatory provision to a bank could affect the guarantees’, Ms Justice Finlay Geoghegan dismissed the appeal.

  • by Seosamh Gráinséir for Irish Legal News
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