The High Court has ruled that Friends First Life Assurance Company Limited cannot charge default interest under a personal guarantee signed by Dómhnal Slattery because he did not consent to the later insertion of the default rate. The court allowed interest at the rate specified in the guarantee, but the judgment gives no total amount due.
In a supplemental judgment delivered on 14 May 2013, Mr Justice Brian J. McGovern addressed interest, costs and a stay after delivering an earlier judgment on 15 March 2013. The earlier judgment had been adjourned for consideration of those subsidiary matters.
The court heard that the guarantee was entered into on the basis that the default interest term would be agreed later. In an exchange on 18 March 2008, a rate of 2% above three-month LIBOR was inserted and initialled by Max Doyle, a principal in Claret Capital. Slattery had signed a joint and several guarantee but did not initial that amendment.
Friends First argued Doyle had actual or ostensible authority to bind the other guarantors. The judge found no evidence that Doyle had authority to vary the guarantee in a way that bound the others personally. Slattery said he was unaware of and had not consented to the insertion; the court noted the defendant had called no evidence to challenge that assertion. It held the defendant had to prove the guarantor’s consent to an amendment intended to bind him personally, and disallowed the default rate.
The judge rejected Slattery’s argument that delay in enforcing the guarantee removed the defendant’s general entitlement to interest. The guarantee was executed on 18 March 2008 and a demand letter issued on 10 June 2010. The court considered that timeline in the context of efforts to rescue and refinance the St Regis Hotel deal, and found no exceptional circumstances warranting denial of relief under the guarantee.
On costs, the plaintiff had lost on the main issue concerning the Deed of Pledge, while succeeding on a separate breach of confidence issue. The judge estimated that about 15% of the court’s time related to that claim and ordered that Slattery receive 15% of his costs, with the defendant disentitled to the same share. After setting off the figures, Friends First was entitled to recover 70% of its costs, to be taxed if the parties could not agree.
The court found issues capable of giving rise to a bona fide appeal and granted a stay on execution pending an appeal to the Supreme Court, on Slattery’s undertaking to prosecute it diligently. The order stayed execution; the judgment does not say that registration was stayed.