The High Court has entered judgment for AIB Mortgage Bank against Patrick Hayes and Helena Crowley Hayes for €3,972,093.57 over a loan secured on 22 residential units.
In a judgment delivered on 6 May 2016, Ms Justice Baker found the bank had agreed to review the borrowers’ interest-only repayment arrangement after five years. But she rejected the claim that the arrangement would automatically continue for another five years, and found the bank had not breached its agreement by refusing a further extension after the review.
The €4 million facility was agreed in 2005 for a 20-year term at a tracker rate of 1% above European Central Bank rates. The borrowers accepted that the loan remained outstanding. Their defence and counterclaim centred on whether they had been promised ten years of interest-only repayments. The bank’s position was that interest-only repayments applied for five years, followed by repayment of both principal and interest, subject to a review.
The court found that the signed loan offer did not contain the whole agreement. Emails and a loan sanction letter showed that the facility would be reviewed after five years. The judge held that the review provision had contractual effect, or operated as a preliminary or collateral contract. The bank had also indicated that, “all things being equal”, it expected an extension to be possible.
However, the judge found there was no agreement for automatic renewal. The review was to take account of the parties’ financial circumstances. By 2010, property values and the borrowers’ rental income had fallen, and the loan-to-value position had worsened. The court concluded that the bank was entitled to refuse to extend the interest-only period beyond 2011. It found that the bank had conducted the promised review and had not breached the agreement.
The borrowers also alleged negligent misrepresentation. The judge found they had not relied on the bank’s statements when choosing its loan over an offer from Bank of Ireland. She cited other considerations, including the cost and inconvenience of transferring loans and securities, the bank’s contribution towards fixed-rate break costs, and the borrowers’ reluctance to provide additional security. The counterclaim in negligent misrepresentation failed.
The judgment records that the amount said to be due when the loan was called in on 8 November 2012 was €3,987,139.94. The final judgment entered was for €3,972,093.57. The source does not explain the difference between those figures. The separate proceedings brought by the defendants against the bank and its receiver over secured properties had been adjourned pending the determination of these judgment proceedings; this judgment does not determine those proceedings.