The High Court has ruled that Sean McCann remains liable under a guarantee for a loan to Killorglin Ventures Ltd, but only at the original interest rate. It held that a purported 2008 loan variation, which raised the rate from 2% to 3% over EURIBOR, was ineffective against him because it had been procured through a forged signature and company records.
ACC Bank sought judgment against McCann for €7,842,284.34, including interest. The €5.555 million facility was sanctioned in 2006 to help Killorglin buy and develop a site in County Kerry. The company defaulted, and the loan remained unpaid. ACC had previously been refused summary judgment; after a full hearing, Mr Justice Hogan ruled on the bank’s claim against McCann as guarantor.
McCann argued that a 2007 extension of the deadline for planning permission had been made without telling him, and that the 2008 amendment was both outside the guarantee and forged. The judge accepted that McCann had not been notified of the 2007 extension, but found the guarantee expressly covered amendments to the facility. That extension therefore did not release him from liability.
The 2008 amendment followed An Bord Pleanála’s reversal of planning permission for the proposed development. The judgment found that McCann did not attend the company meeting whose minutes recorded his presence, and that his name was added to the acceptance of the revised terms without his authority or knowledge. ACC did not dispute the forgery, but argued that the company was bound by the resolution under the rule in Royal British Bank v Turquand.
The court held that the rule could bind the company in its dealings with the bank, but did not bind McCann in his separate capacity as guarantor. The guarantee’s provision covering amendments did not extend to an amendment procured by fraud. The judge therefore treated the 2008 change as ineffective against McCann and left the original loan terms in place, subject to the 2007 extension. The attempted increase to 3% was not effective against him.
The judge rejected McCann’s further argument that the failed planning proposal and the bank’s decision to continue the credit arrangement had fundamentally changed the loan and discharged the guarantee. Because the 2008 amendment was ineffective against him, the original repayment obligation remained. The judgment concluded that McCann remained liable under the guarantee at the original interest rate. It did not set out the final form of order: the judge said he would hear counsel on that question.