The Court of Appeal has dismissed John Flanagan and Gerard Lillis’s appeal against summary judgment for the Governor and Company of the Bank of Ireland over loans totalling €1,743,896.15, plus accruing interest.
The judgment, delivered on 19 March 2015, upheld a High Court decision refusing to send the bank’s claim to a plenary hearing. The appeal concerned whether the borrowers had shown a bona fide defence meeting the threshold for a full hearing. The Court of Appeal said they had not.
The bank’s claim arose from loan facilities, including a €1.5 million facility in 2006 secured by a commercial mortgage for the purchase of a guesthouse and restaurant in Doolin, Co Clare, and a €230,000 bridging loan in 2007. The loans were later restructured under a March 2009 facility letter, which the court said reorganised existing borrowings rather than advancing additional funds.
The borrowers argued that the bank’s failure to put in place a deed of covenant over a liquor licence gave them a defence. The licence had been transferred to other premises after planning difficulties, and its value was later lost when the company owning those premises went into receivership. The Court of Appeal concluded that the bank had waived a security condition that benefited it, and that the loss of the licence did not provide a defence to repayment of the loans.
The court also rejected arguments that continued discussions after the 2009 facility letter meant there was no completed contract, or that the restructuring was unenforceable because no cash was physically drawn down. It said the restructuring replaced earlier arrangements and that the previous borrowings were repaid through an internal accounting exercise.
Other grounds included an allegation that the bank misrepresented the loans for regulatory reporting and an assertion that repayment was limited to trading profits from the hotel business. The court said the regulatory allegation was unsupported by evidence and, even if correct, would not relieve the borrowers of their repayment obligations. It found no objective basis for the claimed limit on the bank’s recourse.
The borrowers accepted that repayments had not been made as the bank expected, while disputing whether a formal default had occurred and whether they had received warning. The Court of Appeal agreed that missed payments constituted an event of default under the facility terms, and said the bank was not legally obliged to offer an opportunity to remedy the default before seeking recovery.
The court dismissed the appeal, leaving the High Court judgment in place.