The Court of Appeal has set aside a €3,972,893.57 judgment and possession orders over 22 residential properties in County Cork in a dispute between AIB Mortgage Bank and borrowers Patrick Hayes and Helena Crowley Hayes.
The appeal concerned a 2005 loan, which consolidated existing borrowing and provided additional funding. The borrowers had sought a 10-year interest-only facility. AIB offered five years, with a review after that period. The High Court found that assurances during negotiations, including that an extension would be considered favourably if circumstances were equal, formed part of the agreement.
The Court of Appeal said the promised review was a key factor in the borrowers accepting AIB’s loan rather than an alternative 10-year interest-only offer from Bank of Ireland. It concluded that the review did not take place as promised. The bank employees who handled the file did not consider a further five-year interest-only period, and the relevant manager said she lacked authority to grant one. The bank was not then offering such extensions.
The appeal court held that AIB could not benefit from failing to honour the collateral agreement. It directed that the matter be approached as if the five-year interest-only period had been extended for a further five years. That obligation ended at approximately May 2015, after which the loan became repayable on a capital-and-interest basis.
The court noted that the borrowers continued paying interest between 2010 and 2015. It said AIB could not have issued its 8 November 2012 demand on the basis that they had defaulted by not paying capital, because repayment of capital and interest was not due until May 2015.
The Court of Appeal set aside the High Court’s judgment and possession orders. It did not determine the borrowers’ counterclaim: it ruled that they could proceed with claims for damages for breach of contract, misrepresentation, negligence and breach of duty. The underlying loan remained outstanding and repayable.