The High Court dismissed four summary proceedings brought by fisherman Brendan McGrath against personal investors in a vessel partnership, after finding his claims could not be pursued through the summary procedure used.
Mr Justice Clarke gave judgment on June 14, 2006. The proceedings sought to recover €6,375,172.78, plus interest and costs, the amount for which Anglo Irish Bank had obtained judgment against Mr McGrath under his personal guarantee. The judgment records that Mr McGrath had not paid the bank.
The investors argued that an unpaid judgment against a guarantor did not entitle him to an unconditional summary order for the same debt against the principal debtors. They also argued that claims for costs not yet quantified made the proceedings unsuitable for summary treatment. The court found it unnecessary to decide the costs issue.
Mr Justice Clarke said a guarantor who has not paid may be able to seek a conditional or prospective order protecting his interests. But such relief was not a claim “only to recover a debt or liquidated demand in money” under Order 2 of the Rules of the Superior Courts. An unconditional order could expose the principal debtors to paying twice if the guarantor did not pass on money received to the bank. The judge therefore dismissed the proceedings as improperly brought by summary summons.
The judgment also addressed what would have happened if the claims had been properly brought. The investors alleged that Mr McGrath or his management company, MSV Solstice II Ltd, had breached agreements connected to the vessel project. The judge noted an accepted failure to deposit certain sums into a secure account and said factual disputes over other alleged breaches could not be resolved on affidavit evidence.
The investors also claimed they had validly exercised an option requiring Solstice to buy the vessel, but Solstice did not do so. Mr McGrath disputed the option’s validity, including whether it could be exercised after the management agreement ended and whether it was exercised too long after the alleged acceleration event. The judge found the investors had an arguable case on the option and on a connected counterclaim that could equal or exceed Mr McGrath’s claim.
The judge said the counterclaim arose from the same package of transactions as the bank debt and could arguably provide an equitable set-off. Accordingly, even if summary procedure had been available, he would have given the defendants liberty to defend on the counterclaim. The judgment did not determine whether the alleged breaches occurred, whether the option was validly exercised, or the ultimate liability of any party.