About this case:

• Citation:
  [2024] IEHC 252
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Ms Justice Siobhán Stack

Delivering judgment for the High Court, Ms Justice Siobhán Stack determined that the transactions were improvident, and that the presumption of undue influence between the deceased guarantor and his son was unrebutted. The High Court also determined that the deceased had received independent but inadequate legal advice, but that “the bank had no notice of this inadequacy or the resulting misunderstanding of the deceased”.

Background

The plaintiff brought an application for liberty to enter judgment as against the defendant, being the legal personal representative and widow of Mr John Joseph Flood, for €11,637,422.35 on foot of two guarantees executed on 25 May 2007 by the deceased in favour of his sons.

The guarantees were provided as security for an overdraft of €1.5 million and a loan of €12,715,000 which were provided by the plaintiff’s predecessor in title, Allied Irish Banks, to the sons who were engaged in property development as the Flood Partnership.

On 2 May 2007, the deceased had also executed inter alia an “all sums due” deed of charge over his lands in favour Allied Irish Banks. Those lands comprised in Folio 5536F, County Meath, amounted to 59 acres of quarry lands, 12 acres of unexploited agricultural lands, and a substantial dwelling house.

The project for which the loans were advanced failed and so the security was called in.

The High Court

Ms Justice Stack examined the affidavits of Mr David Flood, a son of the deceased, for the purpose of exploring his credibility. The defence pleaded inter alia that the deceased lacked capacity on the date that he executed the charge and guarantees and so they were voidable, and that the deceased was unduly influenced by David Flood in doing so and/or the transactions constituted an improvident transaction or unconscionable bargain.

Capacity

Ms Justice Stack firstly considered the deceased’s capacity. The only evidence adduced by the defendant on this issue was that of David Flood, who suggested that a representative of the bank had met the deceased in the Navan branch on 16 April 2007 and should have known that he lacked capacity. He also alleged that he told the representative on 23 February 2007 that his father was unwell.

The court preferred the evidence of the bank’s representative, finding that the deceased had not attended the branch on 6 April 2007, that no person on behalf of the bank was given information suggesting that the deceased lacked capacity and that the deceased did not lack capacity at the time of his execution of the guarantees and charge in any event.

Actual undue influence

David Flood asserted that he had pressurised his father to such an extent that the deceased did not exercise his own independent will and judgment in executing the guarantees and charge, and that the relationship between himself and his father gave rise to a presumption of undue influence.

The court rejected the evidence of David Flood that he had accompanied his father into the meetings with his solicitors in which the guarantees and charges were executed.

Ms Justice Stack was satisfied that the deceased’s solicitors were aware that they could not give independent legal advice to a client “who was proposing to guarantee a family member’s debts and then allow a close family member who stood to benefit from the provision of the guarantee into the meeting” and that the deceased’s solicitors met him on his own whilst advising him in relation to the transaction. As such, the court determined that no evidence of actual undue influence arose.

Presumed undue influence

Having considered the relevant case law, the court found that the nature of the transaction, allowing the plaintiff recourse to the deceased’s entire assets, justified the raising of a presumption that it was procured by the undue influence of David Flood for the benefit of himself and the Flood Partnership.

Ms Justice Stack considered that whilst the deceased was not significantly incapacitated or mentally infirm, he relied on the kindness and assistance of David Flood, who managed his bills, financial affairs and post. As such, a presumption arose that David Flood had influence over the deceased, and the court found that he had controlled the sequence of events by which the deceased came to execute the charge and guarantees.

The court noted in particular that the fact that the deceased agreed to everything so quickly and had agreed to go to a solicitor who had not acted for him previously supported the inference that he had reposed trust in his son and was willing to sign papers “without applying his own mind to the desirability of what he was doing or considering his own interests”.

Accordingly, the court considered that the presumption of undue influence arose, and that the onus shifted to the plaintiff to rebut the presumption by adducing evidence that independent and adequate legal advice was given to the deceased and/or that the gift was a “spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor’s will” as per Allcard v Skinner (1887) 36 Ch. D.

The court considered that whilst the deceased had intended to assist his sons by in effect gifting them the quarry lands by giving the bank recourse to them, there was no evidence that he had intended to place his family home or other assets on the line and he had mistakenly done so.

Independent and adequate legal advice

The court was satisfied that the legal advice given to the deceased in respect of the transactions was independent as the solicitors involved were not conflicted and had acted solely for the deceased.

However, the court considered that the adequacy of the advice fell short as neither solicitor had investigated the deceased’s financial position, nor the value of the lands concerned and so could not have advised the deceased as to whether the transactions were in his interest. Had same been undertaken, the solicitors would have learned that the loss of the secured lands would have resulted in the loss of the deceased’s and his wife’s sole source of income, the rents from the lands. It was clear that all parties erroneously believed that only the quarry was at risk.

Unconscionable bargain

The court considered that the execution of guarantees exceeding the deceased’s entire assets were improvident transactions and in light of his dependency on his son to manage his affairs, and in light of the misunderstanding as to the nature of the transactions, the transactions fell within the parameters of those impugned by Carroll v. Carroll [1999] 4 IR 241.

Notice

The court considered that whilst the bank was ‘on enquiry’ as it knew that the deceased was of advanced age, was not a member of the Flood Partnership and was not named as a borrower or beneficiary of the facilities, the bank had taken the reasonable steps required of it to satisfy itself that the charge and guarantees were “the product of a full and free, informed consent, by the person giving them”.

In this regard, the bank had sent a letter to him directly stressing the need for him to take legal advice. Turning to Tynan v. Kilkenny County Registrar & Anor [2011] IEHC 250, the court considered whether the bank had satisfied itself that the deceased had received the independent legal advice or whether it was on notice that the advice was inadequate. In this regard, Ms Justice Stack observed that the deceased’s solicitors assured the bank that they had provided independent legal advice to the deceased at the relevant times, and so the bank was not on notice of the inadequacy of the advice provided.

Conclusion

Accordingly, the High Court entered judgment for the plaintiff.

Everyday Finance DAC v. Joan Flood [2024] IEHC 252