The recent decision of the Court of Appeal in The Governor and Company of the Bank of Ireland v O’Grady & Anor 2018 IECA 180 has confirmed that where an application for summary judgment is made, a defendant must establish that he has “an arguable defence” to the claim if proceedings are to be remitted to plenary hearing.
In this case Bank of Ireland (“The Bank”) sought summary judgment against the defendants in the sum of €290,282.84 which was money payable by the defendants on foot of a Guarantee and Indemnity (“the guarantee”) from November 2000. The guarantee was provided by the defendants in respect of the indebtedness of Lewis Stores Limited and the defendants (respondents in the appeal) were directors of this company.
In the High Court, the defendants had advanced two potential grounds of defence. First, they claimed that the guarantee did not comply with relevant legislation. That argument was rejected. The second was based upon the defendants’ assertion that the guarantee was one which was limited in nature. According to the defendants it had been their understanding that the guarantee required by the Bank was one to be provided by them for the sole purpose of securing payment to the Bank of monies that might become payable on foot of a Life Policy, which they were also to provide to the Bank as partial security of the company’s indebtedness. This defence found favour with the High Court and Binchy J. concluded that the defendants had demonstrated the probability of a credible and bona fide defence to the Bank’s claim.
Binchy J. then directed the summary summons proceedings be remitted for a plenary hearing.
Court of Appeal
The Bank appealed the decision and asserted that the trial judge erred in law and in fact in refusing to grant summary judgment. In particular, the Bank claimed that the respondents had not demonstrated that there was a fair or reasonable probability of them having a real and bona fide defence to its claim. The Court of Appeal held that the position the respondents had put forward was not supported by evidence and even the facility letter put forward did not support the interpretation of the contract of guarantee which they proposed.
The Court of Appeal granted the appeal and granted summary judgment against the respondents. In doing so it stated the principle to be applied on an application for summary judgment was “whether the defendant had established an arguable defence”.
Ultimately, the Court of Appeal found that the Bank had brought proceedings on foot of an all sums guarantee and indemnity, the terms of which could not have been clearer. Additionally, the terms of the guarantee, as suggested by the respondents would have given the Bank no security for the company’s borrowings unless one of them died. It was not credible that the Bank would have taken the guarantee solely to secure the Life Policy. The guarantee could be rendered valueless in the event of the policy holders failing to make such payments as were necessary to keep the policy in place or the termination of the policy for other reasons.
The Court stated that it considered it material that at the time of the execution of the guarantee the respondents both certified that the nature and terms of the guarantee had been explained to them by their solicitor.
This case serves as a reminder from the Court of Appeal of the principles to be applied on an application for summary judgment. Credible evidence must support a claim of “an arguable defence” and if there is no such evidence it is likely that summary judgment will be granted.
Contributed by: Craig Sowman and Joe-Ann Burke