The High Court has ruled for Allied Irish Banks in its claim against a married couple over a bridging loan used to buy two apartment blocks in Corsica, finding that neither of their defences prevented judgment on the debt.
Mr Justice David Keane delivered the judgment on 14 January 2015. The bank sought €1,986,132.55 plus continuing interest. The borrowers accepted that the amount claimed remained outstanding, but argued the bank was not entitled to judgment.
The €2 million facility was advanced in April 2006 to fund the purchase while the couple awaited proceeds from a proposed sale of seven acres at the first defendant’s farm near Tralee and the sale of a separate property in Castlegregory. The land sale did not complete. The Corsican apartments were later sold back to their original vendor for €500,000, payable in instalments over 15 years, according to the first defendant’s evidence. The bank received €452,106 from proceeds of a compulsory purchase of part of the farm, reducing the debt.
The couple argued that the bank owed them a duty of care or fiduciary duty and should not have entered the loan transaction. They contended, among other things, that the bank should have known the developers who had agreed to buy the land were in poor financial condition. The judge found no basis on the evidence to conclude that the developers were in poor financial condition at the time, or that the bank knew or should have known that they were.
The judge found that the bank’s request for written confirmation of the land-sale contract and security was aimed at protecting its own interest in repayment. The couple had not asked the bank to advise them on the commercial merits of either the land sale or the Corsican investment, and the judge found no evidence the bank had agreed to do so. He concluded the bank had not breached any duty of care it owed in providing the finance. He did not decide whether the broader legal argument that a bank might have to refuse finance involving another customer was correct, saying it could not assist the couple on the facts.
The second defendant separately argued that she was a consumer under the Consumer Credit Act 1995 and should have received its cooling-off protection. The judge found that the couple were acquiring the apartments jointly as an investment for profit, so neither was a consumer for this loan under the Act.
The case had proceeded to a plenary hearing after the court refused the bank’s 2012 application for summary judgment. Following the 2014 trial, the judge concluded that there must be judgment for the bank for monies owed under the loan agreement. The judgment’s conclusion does not state a separate final figure or specify the terms of continuing interest.