The High Court has ordered Gerard Dillon and Patrick Corrigan, jointly and severally, to pay ACC Bank PLC €5,383,181 under guarantees for loans to Cordill Construction Limited. It also ordered them to pay €1,493,181 in respect of personal borrowings.
In a judgment delivered on 12 November 2012, Mr Justice Charleton rejected the directors’ arguments that their guarantees were unenforceable. He found that the bank had not promised never to seek personal guarantees and that the guarantees were supported by consideration because the bank extended the company’s loans in return for them.
Cordill Construction had received three loans totalling €5.24 million to develop a site at The Claddagh in Galway City. Its directors initially did not give personal guarantees. As the loans became overdue in 2008, the bank sought guarantees as a condition of extending them. The company objected in writing, but the directors later agreed. They signed the guarantee documents on 8 December 2008. The bank appointed a receiver over the company in May 2011.
The directors argued that the bank’s relationship manager had represented that guarantees would never be required and that the bank had pressured them into signing by threatening to appoint a receiver. Gerard Dillon said he feared that receivership would disrupt contracts and cost employees and site workers their jobs. The judge accepted that the negotiations were difficult and the bank had greater bargaining power, but found that appointing a receiver was lawful. He said the defendants had time to consider the decision and had advice from the company’s financial controller. The pressure did not amount to duress.
The court also rejected the claimed assurances and collateral contract, finding insufficient evidence that the bank had agreed never to seek guarantees. It concluded that each loan renewal was a separate transaction and that the bank’s extensions supplied fresh consideration for the guarantees. The judgment said no defence had been established to the personal borrowing claims. The second defendant did not appear at trial.
The court entered decrees for the bank for both sums. The judgment does not specify any further enforcement steps.