The High Court refused ACC Loan Management Limited’s application for summary judgment against Gerard Sheehan over a guarantee for a company loan. The application sought liberty to enter final judgment for €183,732.14. The court did not decide the underlying claim after a full hearing; it found Sheehan had an arguable defence concerning the legal advice he received when signing the guarantee.
The loan facility was for €151,500 and was provided to Newmarket Foods Limited to help set up a factory in Castlemahon, County Limerick. Sheehan and his brother, Vincent Sheehan, were directors. The judgment records that Sheehan held 5% of the company’s shares, though he said he did not know of that shareholding. He accepted that he worked for the business, unloading deliveries and handling orders, for about €500 a week until it went into liquidation in July 2010.
Sheehan signed a guarantee and indemnity on 12 March 2008, supported by a charge over a warehouse and two acres at Gorteen, Dromcollogher, County Limerick. After the company defaulted, the lender demanded payment in June 2013 and issued summary proceedings that October.
Sheehan advanced two potential defences. He argued that his brother had exerted undue influence and that the lender should have been alert to the non-commercial element of the guarantee because the men were siblings. He also argued that the advice from the borrower’s solicitor was inadequate and was not independent.
The judge rejected undue influence as an arguable defence on the evidence before the court. She said a willingness to help a brother who was also involved in the same business did not establish undue influence. The court did not decide whether the lender had constructive notice of a risk of undue influence, saying it was unnecessary to do so.
The legal advice issue led to a different result. Before releasing the loan, the lender had asked for a letter confirming that the guarantors had received independent legal advice. The borrower’s solicitor instead told the lender that the brothers had been offered advice, waived it, and had the guarantee explained to them. The lender accepted that assurance without seeking signed waivers from the guarantors.
The judge noted that no evidence had been given by the solicitor about the nature or extent of his advice to Sheehan. It might prove adequate at a full hearing, she said, but on the evidence then available Sheehan had an arguable defence that he should not be bound by the guarantee. The court therefore refused the lender’s motion for liberty to enter final judgment. It made no final determination of liability or of whether the advice was deficient.