The Court of Appeal has dismissed an appeal by Joan Flood, acting as the legal personal representative of her late husband, John Joseph Flood, and held that Everyday Finance DAC can rely on two guarantees he signed in 2007 for debts connected to his sons’ property development venture.
The guarantees, signed on 25 May 2007, covered a €10 million loan to Tom and Alec Flood to buy a site in Sutton, Dublin, and a €1.5 million overdraft facility for the Flood Partnership. They were supported by a charge over lands in County Meath that included a quarry and the family home. The validity of that charge was to be determined in separate Circuit Court possession proceedings, not in this appeal.
The High Court had found that Mr Flood had capacity when he signed the guarantees and was not subject to actual undue influence. It also found a presumption of undue influence arising from his relationship with his son David, and that the transaction was improvident for Mr Flood. The trial judge considered the legal advice he received inadequate, but held that the Bank had no notice of that inadequacy and could enforce the guarantees. Judgment was entered against the estate for €10,782,867.58.
On appeal, Ms Flood argued that the Bank should not have relied on the solicitors’ letters confirming advice, particularly after the arrangement changed and Mr Flood’s total guaranteed exposure rose from €10 million to €11.5 million. The appeal court treated the changes as part of one financing transaction. It said the Bank could read the solicitors’ letters of 2 and 29 May together and was not required to investigate the advice given or confirm separately that the solicitors had been instructed by Mr Flood.
The court held that the Bank had taken the reasonable steps required where a proposed guarantor may be vulnerable to undue influence. It could rely on the solicitors’ confirmation that they had explained the nature and consequences of the guarantee, unless it knew or had reason to suspect that the explanation was inadequate. The court also rejected the argument that the Bank had failed to disclose relevant information about the land or Mr Flood’s banking relationship.
The Court of Appeal agreed with the High Court that Everyday was entitled to rely on the guarantees and dismissed the appeal. Its preliminary view was that Everyday should receive the appeal costs. Ms Flood was given ten days to request a short hearing on costs; the judgment did not finally determine that issue.