Danske Bank v Connotes Ltd & anor

Factual and Procedural Background

The Plaintiff bank sought summary judgment against the second named Defendant for the sum of €6,397,301.64 pursuant to a guarantee executed on 24th August, 1998. The guarantee was given by the second Defendant in respect of liabilities owed by the first Defendant company to the Plaintiff, formerly known as National Irish Bank Limited. The guarantee covered all monies due from the first Defendant to the Plaintiff, present or future, actual or contingent, and required the guarantor to pay on demand if the first Defendant defaulted.

The rights under this guarantee transferred to the Plaintiff bank under the Central Bank Act 1971 scheme approved by statutory instrument in 2007. The loan facility in question was entered into on 13th January, 2004, providing a term loan and bridging finance to the first Defendant company for development work on a hotel project. The second Defendant, as director, acknowledged the loan and signed an "All Monies Guarantee" on 3rd March, 2004, supported by a company resolution.

The first Defendant defaulted on loan repayments, and the Plaintiff issued demands for repayment in June 2011. The second Defendant admitted signing the guarantee and related documents but contended he was not properly represented when consenting to earlier affidavits and raised various defenses including misunderstanding the guarantee’s scope and alleged procedural irregularities.

The Plaintiff bank appointed a receiver over the first Defendant’s hotel property in 2011, and the receivership concluded in 2014. The Plaintiff credited the Defendant for sums received from the receivership.

Legal Issues Presented

1. Whether the second Defendant has an arguable defence to the Plaintiff’s claim under the guarantee sufficient to resist summary judgment.
2. Whether the defence of non est factum applies, i.e., whether the Defendant was mistaken as to the nature of the guarantee document he signed.
3. Whether the transfer of banking business from National Irish Bank to the Plaintiff under the Central Bank Act 1971 scheme was valid and binding on the Defendant.
4. Whether the Plaintiff’s claim is statute barred given the time elapsed between the guarantee and the loan facility.
5. Whether any procedural irregularities in loan account management affect the Defendant’s liability under the guarantee.

Arguments of the Parties

Second Defendant's Arguments

• The Defendant acknowledged signing the guarantee but claimed he did not receive proper independent legal advice and did not understand that the guarantee covered future liabilities beyond the original loan.
• He asserted that the offer letter for the 2004 loan was not signed within the stipulated time and that the loan accounts were manipulated without proper authority, causing confusion about the quantum and validity of the debt.
• The Defendant claimed the Plaintiff’s transfer of banking business was unlawful, arguing the Plaintiff lacked proper licensing under the Central Bank Act 1971.
• He contended the claim was statute barred due to the delay between the guarantee execution and the loan facility.
• The Defendant questioned the conduct and quantum following the receivership but did not dispute the underlying default or that monies were drawn down.

Plaintiff's Arguments

• The Plaintiff asserted the guarantee was unconditional and covered all liabilities of the first Defendant, including future loans.
• The Plaintiff maintained that the loan offer was validly accepted despite delays and that the Defendant was duly authorised by company resolutions to accept the loan facility.
• The Plaintiff explained the changes in loan accounts as administrative consolidations benefiting the first Defendant and consistent with the guarantee.
• The Plaintiff argued the transfer under the Central Bank Act 1971 was lawful, supported by European regulations and prior judicial authority.
• The Plaintiff contended there was no arguable defence and that summary judgment was appropriate.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the Defendant’s proposed defences, including non est factum, misunderstanding of the guarantee, alleged procedural irregularities, and the validity of the transfer of banking business. It applied established legal principles requiring that summary judgment be granted only if no reasonable or credible defence exists.

Regarding non est factum, the court found the Defendant was aware he was signing a guarantee and failed to demonstrate the necessary fundamental mistake or absence of negligence. The Defendant’s claim that he did not understand the guarantee’s scope was insufficient to establish an arguable defence.

The court accepted the Plaintiff’s explanation of the loan account consolidations and found these administrative changes did not affect the Defendant’s liability under the guarantee. Documentary evidence contradicted the Defendant’s assertions of confusion or mistake about the loan accounts or the guarantee’s extent.

The court also rejected the Defendant’s challenge to the validity of the transfer of banking business, relying on prior authority that European regulations superseded the licensing requirements under the Central Bank Act 1971. The Defendant’s consent was not required for the transfer.

The court found no factual disputes warranting cross-examination and held that the Plaintiff’s affidavits were properly constituted and supported the claim. The Defendant’s affidavits did not disclose an arguable case, being largely speculative or unsupported by evidence.

Holding and Implications

The court granted summary judgment in favour of the Plaintiff against the second Defendant for the claimed sum under the guarantee.

The direct consequence is that the Defendant is liable to pay the amount claimed without further trial. No new legal precedent was established; the decision reinforces established principles regarding summary judgment, the non est factum defence, and the validity of banking business transfers under applicable legislation and regulations.