High Court refuses to grant AIB summary judgment for guarantee provided by ‘exploited’ partner

About this case:

• Judgment:
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Referring the matter to plenary hearing, Mr Justice Max Barrett stated that the Court could not properly conclude that the woman had no arguable defence.

Background

In 2009 Ms Mary Geraghty entered into a guarantee and guaranteed all sums of money at any time owing to AIB from or by Rostaff Property Development Limited (a company owned by her partner, Mr James Kearney), provided that the total amount recoverable should not exceed a particular sum. In September, 2011 and February, 2012 certain credit facilities were granted by AIB to Rostaff.

By guarantee in writing of 13th February, 2012, and for like consideration to that described in the context of the guarantee of 15th July, 2009, Ms Geraghty guaranteed all sums of money at any time owing to AIB from or by Rostaff

Each of the guarantees aforesaid was in addition to, and not in substitution for, any other guarantee or security for the obligations of Rostaff given by Ms Geraghty. At some point after the giving of the second guarantee, a loan default scenario arose; thereafter AIB demanded repayment of such amounts owing to it.

Judgment was previously obtained against Rostaff and Mr Kearney; in the High Court, summary judgment was sought against Ms Geraghty pursuant to her guarantees.

Ms Geraghty’s situation

In her affidavit, Ms Geraghty explained that she had been in a romantic relationship with Mr Kearney since 1996, and that when he started Rostaff Property Development Limited in 1999 she invested €17,500 into the business, in return for 49% of the share capital.

in November 2013, Mr Kearney ended the relationship, and shortly afterwards asked her to sign over her shares in Rostaff, to his nephew

Ms Geraghty stated that the documents she signed at this time were a personal guarantee, but that she did not knowingly agree to this. She said that she was not made aware by AIB that she would be held liable for the debts of Rostaff, that she was not given any advice as to this, and was not advised to seek independent legal advice. She stated that she was not told at any stage that her family home was at risk.

Ms Geraghty averred, inter alia, as follows:

“I want to set out at the outset the legal Defences I will rely upon. These are the legal Defences of undue influence, unconscionable bargain, non est factum, misrepresentation and mistake….It is clear that I was under the undue influence of my former romantic partner, Mr James Kearney; that I was under emotional pressure at the time; that the signing of the guarantees was an unconscionable bargain as the signing of the guarantees was a contract which no sensible person would enter into, and which no honest person would accept…that the document was not presented to me as a guarantee and I believed it was a meaningless document; that there was a misrepresentation in that I was led to believe the guarantees did not potentially open me up to a financial liability and that I was mistaken as to what I was signing…”

Ms Geraghty stated that the bank “should have gone to greater efforts to ascertain whether I knew what I was signing and…this failure to do so nullifies their case” – as such, the failure of AIB, Mr Kearney, and Rostaff to act in a conscionable manner and one required by law, resulted in AIB seeking to claim the amounts sought.

The legal test applicable

As per Aer Rianta, Justice Barrett stated that it must be very clear that there is no case, no issue to be tried (or only issues that are simple and easily determinable). There must be no arguable defence.

The four defences Ms Geraghty intends to rely on at any plenary hearing are undue influence, unconscionable bargain, non est factum, misrepresentation and mistake.

There is a dispute on the evidence before the court as to whether, (a) Ms Geraghty was the victim of undue influence (as opposed to foolish in love), or (b) (as contended for by AIB) that she has merely entered an appearance for the purposes of delay and has no bona fide defence.

The court cannot properly conclude at this time, in the context of such a dispute, and on the evidence before it that she “did not benefit in any way from the activities of Rostaff”, that it is very clear that Ms Geraghty has no case, that there is no issue to be tried, that the issues raised in this regard are simple and easily determined, or that she has no arguable defence to the amounts now sought of her by AIB.

Unconscionable bargain

Justice Barrett stated that there was a dispute on the evidence before the court as to whether:

(a) the conclusion of the guarantee represents an unconscionable bargain given an alleged exploitation by Mr Kearney of Ms Geraghty’s alleged vulnerability at the time when the contracts of guarantee were concluded (with her allegedly acting as she did in a bid to safeguard her romantic relationship at a time when it was allegedly deteriorating), or

(b) (as contended for by AIB) that she has merely entered an appearance for the purposes of delay and has no bona fide defence. The court cannot properly conclude in the context of such a dispute, and on the evidence before it, that it is very clear that Ms Geraghty has no case, that there is no issue to be tried, that the issues raised in this regard are simple and easily determined, or that she has no arguable defence to the amounts now sought of her by AIB.

In all the circumstances, the Court did not consider, by reference to the decisions in Aer Rianta and bringing to bear that discernible caution, that this was a case in which summary judgment was appropriate. As such, the court referred the matter to plenary hearing.