The High Court has allowed ACC Bank plc to enter summary judgment against a borrower on two loan facilities and against his father on one guarantee, while sending the father’s liability under a second guarantee to a plenary hearing.
Mr Justice Fullam delivered the judgment on 12 February 2015. He also stayed both summary judgment orders for one year, giving the defendants time to take advice on the consequences of recent developments in the borrower’s separate proceedings against the site vendors.
The bank advanced €686,000 in October 2005 to fund the purchase of a development site in Fethard, Co Wexford, and €613,000 in November 2007 to build five houses there. The borrower defaulted. In May 2013, the bank demanded repayment of €2,178,601.49, plus accrued interest, from the borrower and sought the same sum from his father under two guarantees. The judgment recorded that €2,327,705.02 was due as of 14 February 2014.
The borrower argued that he could not give purchasers title to the houses because, he alleged, a vendor had fraudulently obtained title to the site. He had issued proceedings against the vendors in May 2014 and sought an adjournment of the bank’s application. The bank denied involvement in the alleged fraud and said it had no duty to ensure he obtained good title. The judge declined to adjourn the application.
The borrower also said his father had not received independent legal advice and argued that the guarantees were not executed under seal. The father’s counsel submitted that the transaction was improvident for a vulnerable man in his late sixties who had undergone heart surgery. The father did not swear a replying affidavit, despite having been given a further opportunity to do so.
The judge found that the father-son relationship placed the bank on inquiry and required it to take reasonable steps to ensure the guarantees were freely given. For the first guarantee, the bank had obtained a declaration from the father that he had received independent legal advice. The judge considered that a sufficient step, and said the declaration had not been displaced. For the second guarantee, there was no similar declaration or evidence of steps by the bank, so the father’s liability must be determined at a plenary hearing.
The court rejected the argument that the guarantees were invalid because they were not under seal, noting that the requirement for an individual’s guarantee to be executed under seal had been abolished by section 64 of the Land and Conveyancing Law Reform Act 2009. The orders allow judgment on both loans against the borrower and on the first guarantee against his father; the first loan and associated guarantee are joint and several. The second guarantee remains for plenary hearing. The one-year stay applies to both summary judgment orders.