On 21 August 2012, Dunne J dismissed a bankruptcy summons issued by AIB against former government minister, Mr Ivan Yates on the basis that “real and substantive issues” arose which required to be litigated outside the bankruptcy: Allied Irish Bank plc v Ivan Yates IEHC 360, (Unreported, High Court, Dunne J, 21 August 2012).

Facts
On 13 April 2010 Mr Ivan Yates provided Allied Irish Bank with a personal guarantee to pay, on demand, all liabilities due and owing by one of his businesses, Celtic Bookmakers Ltd (now in liquidation), together with interest thereon from time to time.

A bankruptcy summons was issued against Mr Yates on 14 May 2012 for an outstanding sum of approximately €3.6m. Mr Yates subsequently issued a motion disputing the validity of the summons, on the basis that the sum demanded therein was inaccurate, and seeking to have it dismissed. He submitted that he had wrongfully paid €162,000 to the receiver in respect of fees, which he said had been charged at a rate higher than that agreed between the parties. Both the receiver and the bank denied the existence of any alleged agreement that the receivership costs would not exceed €100,000. Mr Yates also claimed that the bank had incorrectly continued to charge interest after the receiver was appointed to the company despite representations having been made by officials of the bank that no such running interest would be charged on the debt post-receivership. The bank denied any such representations were ever made.
 
Much of the argument in the case centred around the following two issues:
(i) whether the amount claimed on foot of the bankruptcy summons was in excess of what was actually due and, if so, whether that invalidated the summons
(ii) the status of the certificate relied upon by the bank in relation to the amount due pursuant to a conclusive evidence clause in the guarantee provided by Mr Yates

High Court Decision
Dunne J in the High Court observed that if a sum in excess of the debt actually due is claimed in a bankruptcy summons, there is no obligation to pay the excessive sum and a failure to discharge it does not constitute an “act of bankruptcy” by the debtor.
 
Regarding the status of conclusive evidence clauses, Dunne J referred to the decision of the High Court of Australia in Dobbs v National Bank of Australasia Ltd 53 CLR 643 in which it was stated that the manifest object of such a clause is “to provide a ready means of establishing the existence and amount of the guaranteed debt and avoiding an inquiry upon legal evidence into the debts going to make up the indebtedness”. Dunne J indicated that contracting parties are free to provide for conclusive evidence clauses in contracts and that, where so provided, a bank can rely on such a clause against a surety. She added that this does not oust the jurisdiction of the courts, but rather simplifies the proofs in respect of the amount allegedly due. Dunne J further indicated that a certificate provided on foot of such a clause must comply strictly with the terms provided for in that particular contract.

The judge also observed that the existence of, or the furnishing of, the certificate is not a prerequisite to claiming judgment from a debtor and that “a bank recover without the production of a certificate if, by ordinary legal evidence, it proves the actual indebtedness of the customer… The clause, if valid, enables the bank by producing a certificate to dispense with ”.

Mr Yates submitted that the certificate furnished to him did not comply with the terms of conclusive evidence clause contained in the guarantee on the basis that it was undated and failed to identify, amongst other issues, the officer of the bank certifying the liability on the face of the certificate, as per the guarantee wording. He argued that it should therefore be construed against the bank and that the guarantee should be interpreted to mean that he only had to repay the amount due and owing, and not an incorrect amount certified.

Dunne J believed there was undoubtedly an argument to be made as to the validity of the certificate. She was satisfied that, having regard to the decision of McGovern J in Minister for Communications v MW 3 IR 1, Mr Yates had raised real and substantial issues that had a real prospect of success and that such issues required to be litigated separately outside the bankruptcy process. The bankruptcy summons was consequently dismissed.

It was subsequently been reported that, on 31 August 2012, Mr Yates obtained a bankruptcy order from Swansea County Court.

Contributed by Delia McMahon