The High Court has allowed two guarantors to join the borrower as a third party in a bank debt case, but stayed their third-party proceedings until the bank’s summary judgment application is determined.
Allied Irish Banks plc is seeking €400,000 plus interest from Daniel O’Reilly and Teresa O’Reilly under guarantees they gave in 2009 for loan facilities extended to their son, John O’Reilly. The bank alleges that the borrower did not repay the loan and that the guarantors failed to pay after demand. Those claims remain for determination; this judgment dealt only with the guarantors’ application to bring the borrower into the case.
The guarantors argued that they may be entitled to a contribution or indemnity from the borrower if they are held liable to the bank. The bank opposed joinder, including on the basis that the summary procedure and a clause in the guarantees made it inappropriate.
Mr Justice David Barniville held that the third-party procedure under Order 16 can be used in proceedings begun by summary summons. For the purpose of deciding the application, he proceeded on the basis that the borrower had failed to repay the loan and the guarantors were liable under their guarantees. On that basis, he found they and the borrower were “concurrent wrongdoers” responsible to the bank for the same damage under the Civil Liability Act 1961, and could seek contribution through third-party proceedings.
The judge did not decide whether clause 8 of the guarantees would prevent the guarantors from ultimately recovering contribution or an indemnity. He said that question should be decided when the third-party proceedings are heard.
The court granted leave to issue and serve the third-party notice, subject to conditions. Within 28 days of the order, the guarantors must serve the borrower with the notice, the summary summons, the bank’s motion for liberty to enter final judgment, and the affidavits supporting that motion. The third-party proceedings are stayed so the bank’s summary judgment application can be heard without interruption.
The stay will lapse if the bank obtains summary judgment or if the case is adjourned for plenary hearing. In the latter event, the borrower may take part in the trial as directed by the trial judge, and the question of any contribution or indemnity may be tried at or after the bank’s action. The judge reserved the precise terms of the order for a further hearing. He made no ruling on the bank’s underlying claim for judgment against the guarantors.