Drawdown Trumps Unfulfilled Valuation Preconditions in Commercial Lending: Borrowers Have No Right to Bank Valuations Absent Assumption of Responsibility

Case: Allied Irish Banks PLC & Everyday Finance DAC v Thomas Doran [2025] IEHC 515 (High Court, Owens J., 31 July 2025)

Introduction

This decision resolves a long-running dispute arising from two loans advanced by Allied Irish Banks plc (AIB) to Mr Thomas Doran in 2006 and 2007 to purchase two adjoining parcels of farmland at Irishtown, Mullingar. The lands were marketed and priced on the basis of perceived future development potential despite being unzoned for residential development under the 2002 Westmeath Development Plan.

Mr Doran defended AIB’s debt claim (now pursued by assignee Everyday Finance DAC) and counterclaimed for deceit, negligence, and breach of contract. He alleged that an AIB official (Ms Sharon Scanlon) promised to procure independent valuations for his benefit, misled him into believing such valuations existed and confirmed market value, and that preconditions in the facility letters requiring “independent valuations” were not met. He further alleged he had been orally assured that the AIB “Prime” rate equated to the ECB rate, and contended the purported valuations on the bank file were bogus. He sought to avoid repayment, rescission, and/or damages, including all interest paid.

The central legal issues were:

• Whether a bank’s “valuation” special conditions in commercial facility letters impose duties to the borrower or confer borrower-facing rights.
• Whether drawdown in the absence of a conforming valuation terminates or vitiates the loan contract, or whether the borrower remains bound to repay.
• Whether misrepresentation/deceit was proved, including reliance and loss.
• Whether oral statements could vary the written “Prime” interest rate terms (parol evidence rule).
• Whether the assignment of the loans to Everyday Finance DAC complied with s.28(6) of the Supreme Court of Judicature (Ireland) Act 1877.

Summary of the Judgment

• Credibility and reliance: The Court rejected Mr Doran’s account, finding he did not ask for, did not rely on, and was indifferent to any valuations for decision-making, and had committed to the second purchase before approaching AIB. He never sought copies of valuations.
• No advisory duty: AIB owed no contractual or tortious duty to this commercial borrower to advise on value or ensure he was paying market price. Any valuations were for AIB’s purposes. The special conditions did not amount to a promise to refuse lending without valuations or to warn of deficiencies.
• Valuation conditions and drawdown: Even if valuation conditions were not met or valuations were objectively weak, once the bank allowed drawdown the loan obligations stood; the borrower cannot avoid repayment by invoking unmet internal preconditions. The remedy for any bank breach is damages (if loss is proven), not rescission or discharge from repayment obligations.
• Deceit and misrepresentation: Fraud was not proved. The valuations were “worthless” in quality but not proven forgeries, and there was no proof that the bank knowingly misled Mr Doran. In any event, he did not rely on valuations.
• Interest rate: The parol evidence rule barred reliance on alleged oral statements equating “Prime” to ECB. The signed facility letters and general terms governed; “Prime” is a bank-set commercial rate, not the ECB rate.
• Loss: Mr Doran failed to prove any compensable loss. He led no evidence that the lands were worth less than he paid or that alternative use of funds would have yielded quantifiable gains.
• Assignment: The debts were absolutely assigned to Everyday, with written notice, satisfying s.28(6) of the 1877 Act. Everyday was entitled to judgment; alternatively, it could sue as equitable assignee with the assignor joined.
• Orders: Judgment for Everyday in the sum of €4,853,061.92 (totals at 11 February 2015/2025 as specified), dismissal of the counterclaim, provisional refusal of a stay, and costs against Mr Doran.

Analysis

Precedents Cited and Their Influence

• Ward v McMaster [1988] I.R. 337; Wildgust v Bank of Ireland [2006] 1 I.R. 570 (IESC 16): These consumer mortgage cases establish a lender’s duty of care to obtain and share a proper survey/valuation where the borrower is foreseeably reliant and proximity exists. Owens J distinguished these, stressing they apply to typical home purchasers, not commercial developers/speculators. For commercial borrowers, no such default proximity or duty exists.
• Kennedy v AIB [1998] 2 I.R. 48 (IESC 9): A bank generally owes no duty to consider the financial interests of a customer absent special circumstances. This underpins the Court’s refusal to import advisory obligations to AIB in a commercial lending context.
• Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 (UKHL 28): The “assumption of responsibility” framework. A duty can arise if the bank acts in a way that shows it assumed responsibility to the borrower for a valuation or advice. Owens J finds no such assumption here.
• Northern Bank Finance v Charlton [1979] I.R. 149: Rescission for deceit can unpick a loan if fraudulent inducement is proved and restoration is possible. The Court accepts the principle but finds no deceit or reliance here; rescission was anyway abandoned at trial.
• Sale of Goods and Supply of Services Act 1980, s.45: Statutory rescission for innocent misrepresentation applies only where the misrepresentation precedes the contract. Post-contract statements cannot ground statutory rescission. This limits relief even if misstatements were innocent and subsequent.
• O’Connor v Coady [2004] 3 I.R. 271 (IESC 54): The effect of unfulfilled conditions depends on the agreement (express or implied) and context. Owens J draws on this to reject any automatic termination of loan contracts merely because a precondition (valuation) was not met.
• IRBC v Cambourne Investments [2014] 4 I.R. 54 (IEHC 262): Charleton J held in that context that valuation preconditions were for the benefit of both sides and not unilaterally waivable; he nonetheless affirmed the principle “once lent, money is repayable.” Owens J describes both parties’ reliance on Cambourne as misconceived for this case, clarifies that automatic termination is not a general rule, and emphasizes the primacy of party intention, estoppel by drawdown, and the absence of borrower-facing rights here.
• Irwin v Wilson [2011] EWHC 326 (Ch); Heron Garage v Moss [1974] 1 WLR 148; Hawker v Vickers [1991] 1 NZLR 399; Zurich Bank v McConnon (HC, 4 Mar 2011): Authorities on whether a clause is for the exclusive benefit of one party and unilateral waiver. Owens J accepts the tests but stresses they do not assist where the contract, context, and relationship do not show a borrower benefit or assumption of responsibility.
• Williams & Glyn’s Bank Ltd v Barnes [1981] Com LR 205: Overdrafts are repayable on demand. Used in Cambourne and echoed here to reinforce repayment obligations once funds are advanced.
• Bradford Building Society v Borders [1941] 2 All ER 205; Salmond & Heuston on the Law of Torts: Elements of deceit. Applied to hold deceit unproven on the facts.
• Secretary of State for the Home Department v Rehman [2003] 1 AC 153: “Cogent evidence” generally required to establish fraud in civil proceedings. The Court applied this stricter approach to Mr Doran’s fraud allegations.
• Erlanger v New Sombrero Phosphate (1878) 3 App Cas 1218: Rescission need not restore an exact status quo. Cited in passing; not engaged because deceit and reliance were not proved and rescission was abandoned.
• Supreme Court of Judicature (Ireland) Act 1877, s.28(6); Keeton & Sheridan, Equity: Section 28(6) creates a statutory legal assignment on absolute assignment with notice. Applied to uphold Everyday’s title.

Legal Reasoning

1) No duty to advise commercial borrowers on value

Owens J reaffirms that a bank’s ordinary business is lending, not acting as valuer, surveyor, planning consultant, or property adviser. Unlike homebuyer cases (Ward; Wildgust), commercial borrowers—developers and speculators—are expected to conduct their own due diligence, engage their own experts, and assume business risk. Absent an express term or a special relationship creating proximity and assumption of responsibility, the bank owes no duty to ensure the borrower’s bargain is good value or to warn of valuation weaknesses.

Here, the Court found as fact that Mr Doran never asked for valuations to assist his decision-making, never relied on AIB to advise him on value, and, tellingly, never asked to see any valuation at any stage. His evidence was rejected as “wishful thinking.”

2) Valuation “special conditions” are for the bank’s protection; no promise to withhold lending

The facility letters contained special conditions requiring that valuations be received before drawdown (2006) and that minimum values be confirmed (2007). The Court holds:

• Such terms are designed to allow the bank to decide whether to lend; they do not impose an obligation on the bank to refuse lending absent a valuation, nor a promise to advise the borrower that a valuation is absent or weak.
• The bank retains a subjective discretion to treat valuations as satisfactory for its own purposes, even if an objective observer might disagree; the valuations are “for the bank.”
• There is no implied term that the bank will obtain a valuation meeting an objective standard for the borrower’s benefit. Importantly, the 2006 facility letter did not stipulate a minimum value at all.
• Only in special circumstances—e.g., a demonstrated assumption of responsibility to procure and share valuations for the borrower’s decision—could such clauses be read as conferring borrower-facing benefits. That was not the factual matrix here.

3) Drawdown and the effect of unmet preconditions: no automatic termination; repayment due; damages only

Addressing a recurrent argument in Irish banking litigation, the Court clarifies the effect of unmet preconditions:

• There is no universal rule that non-fulfilment of a precondition (such as a valuation) automatically terminates the loan agreement. Per O’Connor v Coady, the consequences depend on the contract and context.
• Once a bank signifies that drawdown may proceed, an estoppel arises: both parties proceed on the basis that preconditions are treated as satisfied or waived. After funds are advanced, obligations under the contract cease to be executory. Neither side may later treat the contract as at an end on that account.
• If the bank breached by permitting drawdown without satisfying a precondition, the borrower’s remedy is damages for breach of contract—but only upon proof of loss. It does not discharge the borrower’s repayment obligations.

This refined analysis situates and limits Cambourne: that case’s suggestion of automatic termination upon unmet preconditions does not translate into a general principle. What survives—and is reinforced—is Charleton J.’s bottom line that “once lent, money is repayable.”

4) Deceit and misrepresentation: high evidential bar; no reliance; rescission unavailable

The Court found the valuations were brief and flawed—indeed “worthless” in quality—but it was not proved that they were forged or that Ms Scanlon knew they were bogus. There was no cogent evidence of fraud (Rehman). Moreover, reliance—the cornerstone of deceit—was absent: Mr Doran never asked for or saw the valuations and had already committed to purchase the second tranche before approaching AIB.

Rescission was abandoned at trial and would not have been available absent deceit causing actionable reliance and a practicable unwinding. The Court also notes the limits of statutory rescission for innocent misrepresentation under s.45 of the 1980 Act (it applies only to pre-contract statements).

5) Interest rate: parol evidence rule defeats oral “Prime = ECB” claim

Alleged oral statements equating AIB’s commercial “Prime” rate to the ECB lending rate were superseded by the written facility letters and the General Terms and Conditions. Those terms define “Prime” as a bank-set category that varies at the bank’s discretion. The parol evidence rule prevents extrinsic oral statements from adding to, varying, or contradicting the written contract. The Court found the oral statements were not made in the manner alleged; in any event, the written terms govern.

6) Loss: none proven

Even if there had been a breach, the counterclaim failed for want of proof of loss. Mr Doran led no expert evidence that the properties were worth less than he paid at the time, nor any quantified case on opportunity cost or interest detriment capable of supporting damages.

7) Assignment: Everyday’s title upheld

The loans were absolutely assigned by AIB to Everyday Finance DAC in 2018, with written notice to Mr Doran. This satisfied s.28(6) of the Supreme Court of Judicature (Ireland) Act 1877, passing legal title to the assignee. Even if there had been any defect, Everyday could sue as equitable assignee using AIB’s name since AIB is a co-plaintiff. Technical title-based defences therefore failed.

Impact

• Commercial lending certainty: This judgment decisively narrows borrower attempts to avoid repayment by invoking valuation conditions as borrower-facing rights. It clarifies that such conditions are internal to the lender’s decision process unless the bank has expressly or impliedly assumed responsibility to the borrower.
• Limiting Cambourne defences: Borrowers cannot rely on Cambourne to argue automatic termination upon unmet conditions once drawdown has occurred. Estoppel and the “once lent, money is repayable” principle prevail.
• Practical drafting and process: Banks already tend to state that valuations are for their purposes only and that borrowers should obtain independent advice. This judgment indicates that, even absent such explicit disclaimers, courts will not readily infer borrower-facing obligations in commercial contexts. Nonetheless, retaining clear disclaimers remains prudent.
• Litigation posture: Allegations of fraud in banking cases require cogent proof. Demonstrating that a valuation is “weak” or even “worthless” is not enough; the borrower must also prove reliance and loss. Oral-rate disputes will generally fail against written terms.
• Consumer vs commercial divide: Consumer borrowers remain protected by Ward/Wildgust where reliance on bank-commissioned surveys is foreseeable. Commercial developers, by contrast, should expect courts to enforce an arm’s-length posture: do your own due diligence; banks are not Good Samaritans to developers.
• Debt sale market assurance: The clean affirmation of statutory legal assignment under s.28(6) (and the equitable fall-back) reinforces the enforceability of transferred loan books, reducing scope for technical challenges by debtors.

Complex Concepts Simplified

• Facility letter: The bank’s written offer setting out loan terms and conditions. When signed, it forms the loan contract.
• Special condition (valuation): A pre-drawdown requirement that the bank receive an independent valuation, sometimes specifying minimum values or bank satisfaction. It is generally for the bank’s internal risk decision, not a promise to advise the borrower or refuse lending in the absence of a valuation.
• Condition precedent vs executory obligations: A condition precedent is something that must occur before a party’s duty to perform arises. Once performance occurs (drawdown), the contract is no longer “executory” as to the advance; the borrower’s repayment obligations stand, with damages as the remedy for any earlier breach.
• Estoppel by representation: If one party indicates that a condition is satisfied and the other acts on that basis, neither can later deny it to undo the deal once funds are advanced.
• Assumption of responsibility: A duty of care can arise if a bank explicitly or implicitly undertakes to advise the borrower for the borrower’s decision-making (e.g., promising to procure and share a valuation for the borrower to rely on). Not present here.
• Parol evidence rule: Courts will not admit prior or contemporaneous oral statements to contradict a clear written contract. Here, written “Prime” rate terms trumped alleged oral assurances linking “Prime” to the ECB rate.
• Deceit: Intentional false statement made to induce reliance, which causes loss. Requires clear proof of falsity, intent, reliance, and loss. Not established.
• Rescission: Undoing a contract to restore parties, as far as practicable, to their pre-contract positions. Available for deceit; limited for innocent misrepresentation; often impractical after performance—especially where the borrower keeps the asset.
• Absolute assignment (s.28(6) 1877 Act): Transfers legal title to a debt if the assignment is in writing, absolute (not by way of charge), and written notice is given to the debtor. The assignee can then sue in its own name.

Conclusion

This judgment sets a clear marker in Irish banking law: in commercial lending, valuation preconditions in facility letters are for the lender’s protection and do not confer a borrower-facing right to rely on a bank’s valuation or to be warned of valuation deficiencies. Absent an express promise or a demonstrated assumption of responsibility, banks do not owe commercial borrowers a duty to ensure that the price paid is market value or to police the borrower’s bargain. Crucially, once drawdown occurs, any unmet preconditions do not terminate the loan; the borrower remains obliged to repay, and the sole remedy for any bank breach is damages upon proof of actual loss.

Mr Doran’s counterclaim failed on all fronts: no reliance, no deceit, no breach imposing advisory duties, no variation of interest terms via oral assurances, and no damages proven. Everyday Finance’s title as assignee was upheld, and judgment entered for €4.853 million. The decision reinforces a bright-line distinction between consumer and commercial borrowers and will likely curb future attempts by developers to avoid repayment by pointing to internal bank valuation mechanics or brief, unsatisfactory valuation reports. The message is simple and commercially realistic: for developers, due diligence is your job; for banks, once you lend, repayment follows—and internal preconditions do not become a borrower’s shield unless you have clearly made them so.