The High Court has sent Allied Irish Banks plc’s claim against two guarantors to a plenary hearing, finding that the question of the borrower’s capacity when he took out the loans raised an arguable defence that could not be resolved summarily.
AIB sought summary judgment against defendants anonymised as DX and TX. The bank’s claim concerned capped all-sums guarantees they signed on 21 October 2009 for non-consumer loan facilities provided to a third party, anonymised as JX.
The defendants argued that the case should proceed to a full hearing. DX said in an affidavit that he and TX had not known JX was experiencing depression when they signed the guarantees. He questioned whether JX had capacity to enter the loan agreement and said the bank should have taken steps to assess his condition. He also argued that the loan might be void as an improvident transaction and that this could affect the guarantees.
Justice Max Barrett said the evidence showed that the defendants and JX lived at the same residence at the relevant times. He considered it unconvincing to suggest the bank should have known of mental health issues that those living with JX said they did not know about. The judge also said the evidence did not establish that an AIB official had identified JX as suffering from depression at the time of the loan.
The judge rejected the suggestion that AIB’s decision to sue the guarantors without joining JX showed it was avoiding scrutiny of his capacity. He said the bank was entitled to proceed against the guarantors alone. He also found no evidence that the loan terms were unconscionably improvident or that the transaction was at an undervalue.
Capacity remained in issue. The judgment said AIB began treating JX as a “vulnerable consumer” around 2015, after being notified of mental health issues. The court noted medical evidence that JX had experienced mental health difficulties in 2009, while saying it was unclear whether any limited capacity existed when the loans were agreed.
Applying the test for summary judgment, the judge concluded that the defence had a reasonable foundation. He refused to determine the claim summarily and sent it to plenary hearing. The judgment did not decide whether JX lacked capacity, whether the guarantees were valid, or whether AIB was entitled to recover under them.