The Court of Appeal has dismissed ACC Loan Management Limited’s appeal against an order sending its claim against Gerard Sheehan to a plenary hearing. The dispute will proceed on the confined issue of whether the bank’s handling of its requirement for independent legal advice may provide a defence to enforcement of Sheehan’s guarantee. The appeal court did not decide whether the guarantee is enforceable or predict the outcome of the full hearing.
The bank seeks €166,746 plus interest under a personal guarantee and indemnity Sheehan signed in March 2008 for a loan to Newmarket Foods Limited. The company later defaulted. The bank demanded payment from Sheehan in June 2013 and began proceedings by summary summons in October that year.
Sheehan’s affidavit evidence was that he understood his exposure to be limited to a warehouse and two acres of land, while the guarantee could put his wider farm at risk. He said the borrower company’s solicitor did not advise him about the full extent of the guarantee and was not independent because he acted for the company. The bank disputed that this made the guarantee unenforceable, arguing that the solicitor’s letter confirmed Sheehan had waived independent advice and that any deficiency in advice was a matter between Sheehan and the solicitor.
The bank had made receipt of a solicitor’s letter confirming independent legal advice a condition for releasing the loan funds. The solicitor instead wrote that the guarantors had been offered independent advice, waived it, and had the guarantee explained to them. The Court of Appeal said the bank later accepted that the defendant had not received advice about the guarantee’s contents before signing it.
The High Court had found an arguable defence on the legal-advice issue and refused the bank’s motion for liberty to enter final judgment. The Court of Appeal held that the bank’s decision to impose the advice-confirmation condition, then waive it based on the solicitor’s letter, could arguably provide a defence. Whether the condition benefited the guarantor as well as the bank, and whether it could be waived unilaterally, would require assessment of the evidence at trial.
The appeal court stressed that its decision was only about whether there was an arguable issue for trial. It made no finding on the ultimate merits. It dismissed the appeal and said the defence at the plenary hearing should be limited to the legal-advice issue; undue influence was not in the case. The court said it would hear the parties on whether the High Court order needed to be varied to make that limit clear.