High Court: Summary judgment refused where documentation unclear on assignment of loan and guarantee

About this case:

• Citation:
  [2024] IEHC 701
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Micheál O’Higgins

Delivering judgment for the High Court in November, Mr Justice Mícheál P. O’Higgins emphasised that the principal wording relied upon by the plaintiff referred “to the borrower and the lenders — but does not refer to the guarantor”, concluding that it was arguable that “para. 9 does not do what the plaintiff says it does, namely, effect the all-important transfer of the legal interest in the personal guarantee to the plaintiff”.

Gary Hayes BL, instructed by OSM Partners LLP, appeared for the plaintiff and the defendant appeared as a litigant in person.

Background

The plaintiff sought an order pursuant to O.37, r.4 of the Rules of the Superior Courts granting liberty to enter final judgment as against the defendant for a sum said to be due and owing on a loan advanced to the borrower, Digital Skills Enablement Services Limited.

The loan contract was accepted in writing on behalf of the borrower by the defendant in his capacity as its then-director, in respect of which he also signed a personal guarantee to pay all sums due under the loan contract in the event of default.

The borrower subsequently defaulted and the plaintiff issued proceedings. The matter was transferred to the judges list and the motion came on for hearing in October 2024. 

The defendant in his replying affidavits identified a number of alleged frailties in the plaintiff’s proofs, including that his electronic signature on the personal guarantee was not witnessed, that the personal guarantee was unclear and lacked certainty as to the identity of the parties to the agreement where the loan contract identified the lender as the name and address set out in the schedule thereto, the schedule apparently being sent separately in an email which was not exhibited or produced in court.

The defendant further suggested that the personal guarantee was not in compliance with the Distance Marketing of Consumer Financial Services Directive, that no evidence was provided that that the signature on behalf of the plaintiff’s predecessor which read “LF Contracts” was the signature of a natural person authorised to sign agreements on its behalf, and that the loan was made to the borrower in advance of the signing dates of the loan agreement or the provision of same to the defendant.

The defendant also adopted a new point in his oral submissions which had originally been raised by the court, as to whether the benefit of the guarantee had been assigned or transferred to the plaintiff. 

The High Court

The High Court considered inter alia that counsel for the plaintiff indicated that he was in a position to deal with this new point on the basis of the materials already before the court and that there was no separate deed of assignment transferring the benefit of the guarantee from the plaintiff’s predecessor to the plaintiff.

Counsel submitted that the transfer had instead been affected under and by virtue of an automatic transfer of the interest arising from the terms and wording of the loan contract itself.

In all the circumstances, Mr Justice O’Higgins exercised his discretion to permit the “assignment point” to be relied upon by the defendant.

The judge considered the plaintiff’s submissions that the loan contract included the guarantee agreement between its predecessor and the defendant as the loan contract and guarantee were part of one document paginated from “page 1 of 6” to “page 6 of 6”, and were intended to be read collectively.

The court also heard the plaintiff’s submissions that under the “key contract terms” included at page 6 of the document the loan contract embraced not just the loan agreement but also the personal guarantee, and that under the term relating to “Assignment” the benefit of the loan contract was automatically assigned to the plaintiff once an event of default occurred.

Mr Justice O’ Higgins considered that there were a number of “nuggets” in the contractual and guarantee documents that called into question the plaintiff’s core assertion that the benefit of the personal guarantee was assigned to the plaintiff, including inter alia that:

• Although contained within a single set of documents, the loan agreement and personal guarantee are separate instruments and have separate signatory pages.
• There was no mention of the guarantee being tied into the loan contract on the terms of the loan contract.
• The terms of the loan contract contained definitions repeatedly referring to the lenders and borrower only, and the defendant was neither of those parties.
• The express reference to guarantees later in the terms arguably demonstrated that the omission to expressly reference guarantees elsewhere was not accidental.
• The express terms of the contract purported to assign the rights in the loan contract but did not mention the assignment of the guarantee and the borrower, as opposed to the guarantor, was said to be the party deemed to consent to such an assignment.
• The documents exhibited variously referred to “loan”, “loan contract” and “loan agreement” interchangeably and without consistency, arguably giving rise to uncertainty.

The court concluded that in line with McGrath v. O’Driscoll & Ors [2007] 1 ILRM, “I feel the issues I have summarised above are not ‘relatively straightforward’ so as to render them suitable for determination on a summary motion. There would be a risk of an injustice being done to the parties, were I to seek to determine these questions within the limited framework of a motion of summary judgment. In all the circumstances, I am not satisfied that it is ‘very clear’ that the defendant has no defence.”

Conclusion

Accordingly, the court refused the plaintiff’s motion for summary judgment.

Linked Recoveries Limited v Paul Dunne [2024] IEHC 701