The High Court has refused Bank of Ireland’s application for summary judgment against Alan Burns over a €250,000 loan, ruling that his defence should be heard at a plenary hearing.
Mr Justice Meenan said the defendant had established a “real or bona fide defence” to the bank’s claim for the amount outstanding under a 2007 credit agreement. The court did not decide whether that defence would succeed. It said it would hear the parties on directions for pleadings.
The five-year loan was intended to fund an investment in CHC Prime Property Fund 1, a qualifying investment fund associated with Custom House Capital (CHC). The money was drawn down in March and April 2008 but, according to the judgment, was used to acquire other assets outside the fund. Those assets were transferred to the fund in 2010, by which time their value had collapsed. The judgment says the fund was not established until December 2009 and that a statement Burns received in May 2009 showing a portfolio value of €250,000 was “bogus”. His investment was ultimately worth nothing.
Burns argued in an affidavit that he relied on the regulated nature of the investment and the prospectus’s identification of the bank as the fund’s custodian. The prospectus described the custodian’s responsibilities as including holding fund assets and reporting on their net asset value. The judgment says it appeared the bank did not act as custodian; the bank’s affidavit said Bank of America Custodian Services held that role.
The bank said it had not provided the prospectus to Burns, was not a party to or subscriber to the fund, and could not be held liable for errors in a third-party document. It also disputed his suggestion that it had been on notice of governance issues. Burns contended that, in the circumstances, it would be unconscionable to require him to repay the loan.
In assessing whether the claim should proceed summarily, Mr Justice Meenan applied the test that a defendant need only show a fair or reasonable probability of a real or bona fide defence. He found Burns’s questions about the bank’s role and its appearance in the prospectus reasonable, and said they deserved a better and more detailed response than the bank had given. The court concluded that the issues required a plenary hearing and refused summary judgment.