Allied Irish Banks Plc v McKeown & anor

Factual and Procedural Background

The Plaintiff, a banking corporation operating within the State with its registered office in The City, refinanced three loan facilities granted to the Defendant, a professional landlord couple residing in The City, who own a portfolio of commercial properties. The refinancing was formalized by a letter of loan offer dated 20th May 2013, which included repayment terms described as "on demand at the pleasure of the Bank subject to repayment/refinance on 31/12/2013." The Defendants accepted and signed the facility letters, and the funds were drawn down as refinancing of existing loans. The loans were neither repaid nor refinanced by the expiry date.

The Plaintiff also held two guarantees from the second Defendant, dated 2nd March 2009 and 1st December 2009, securing the loans up to specified amounts. The Defendants do not dispute the existence of the facilities or the drawdown of funds but contest repayment obligations and seek liberty to defend the summary judgment application.

Between 2013 and the commencement of proceedings in January 2017, there were numerous negotiations, offers, counter-offers, and complaints relating to restructuring and the terms of the loans. The Plaintiff issued letters of demand in late 2015 and 2016, which were not complied with, leading to the initiation of proceedings and appointment of a receiver over the Defendants' investment properties.

Legal Issues Presented

1. The proper construction of the May 2013 loan facilities, specifically whether they were repayable on demand subject to refinancing obligations or contained implied terms requiring the Plaintiff to offer reasonable refinancing opportunities.
2. Whether the Plaintiff acted with improper motives or in bad faith in its dealings with the Defendants, particularly in seeking summary judgment.
3. Whether the guarantees provided by the second Defendant were discharged by material alteration of the underlying loans or other conduct of the Plaintiff.

Arguments of the Parties

Defendants' Arguments

• The May 2013 facility was not simply repayable on demand but was subject to an implied term obliging the Plaintiff to provide a reasonable opportunity to refinance the loans.
• The Plaintiff acted improperly and in bad faith, including allegations of excessive security demands, wrongful arrears classification, unfair treatment regarding the family home mortgage, flawed property valuations, and improper appointment of a receiver.
• The guarantees from the second Defendant were discharged due to material alteration of the loans and the Plaintiff's failure to obtain fresh guarantees during refinancing.
• The Defendants asserted a counterclaim for damages arising from the Plaintiff's alleged premature and improper calling in of the loans and overcharging of interest.

Plaintiff's Arguments

• The facilities were repayable on demand as expressly stated in the loan agreements, and the Plaintiff was entitled to call in the loans without obligation to refinance.
• The allegations of improper motives lack evidential support and do not constitute a defence to repayment claims.
• The guarantees are continuing and enforceable; the Plaintiff was entitled to vary the loans without discharging the guarantees, and no obligation existed to obtain fresh guarantees.
• The counterclaim is nebulous, unquantified, and does not provide a defence or ground to stay judgment; the alleged overcharging is minor relative to the sums owed and cannot offset the Plaintiff’s claims.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Aer Rianta CPT v. Ryanair Ltd [2001] 4 IR 607	Requirement for a defendant to demonstrate a fair or reasonable probability of a real or bona fide defence in summary judgment applications.	The court applied this standard to assess whether the Defendants had an arguable defence justifying liberty to defend.
Harrisrange Ltd v. Duncan [2003] 4 IR 1	Clarification of the test for granting liberty to defend in summary judgment proceedings.	Used alongside Aer Rianta to confirm the threshold for allowing defence in this case.
IBRC v. McCaughey [2014] 1 I.R. 749	Assessment of whether document construction issues raise arguable defences; factual assertions unsupported by evidence may not constitute a defence.	The court examined the Defendants' document construction arguments and found them untenable; also dismissed unsupported allegations of bad faith.
National Asset Management Ltd v. McNulty [2013] IEHC 369	Interpretation of "on demand" loan repayment clauses with fixed future repayment dates.	Relied upon to affirm that "on demand" facilities are repayable upon demand notwithstanding future repayment dates.
ACC Bank Ltd Plc v. Kelly [2011] IEHC 7	Clarification of "on demand" repayment terms and their ordinary meaning in commercial lending.	Supported the Plaintiff’s interpretation of the loan agreements as repayable on demand.
BP Refinery (Westernport) Pty Ltd; Shire of Hastings [1977] 16 A.L.R. 363	Principles governing implication of terms in contracts.	Applied to reject the Defendants' argument that an implied term qualified the express repayment clause.
Carroll v. An Post National Lottery Company [1996] 1 IR 443	Contractual interpretation and implication of terms.	Used to support the court’s rejection of implied terms inconsistent with express contract terms.
Aga Khan v. Firestone [1992] ILRM 31	Contractual interpretation and the limits on implying terms.	Reinforced the court’s approach to the construction of the loan agreement terms.
Moohan v. S & R Motors Donegal Ltd [2008] 3 IR 650	Principles applicable to set-off and cross claims in summary judgment proceedings.	Guided the court’s analysis on the Defendants’ counterclaim and set-off arguments, leading to refusal of stay on judgment.

Court's Reasoning and Analysis

The court first addressed the construction of the May 2013 loan facilities. It held that the phrase "repayable on demand at the pleasure of the Bank subject to repayment/refinance on 31/12/2013" must be interpreted according to its ordinary commercial meaning, consistent with established precedents. The court rejected the Defendants’ argument that an implied term required the Plaintiff to provide reasonable refinancing opportunities, emphasizing that implying a term contradicting the express contract was impermissible. The Plaintiff was entitled to demand repayment once the facility expired.

Regarding the allegations of improper motives and bad faith, the court found these to be unsupported assertions lacking evidentiary foundation and held that even if proved, such allegations would not constitute a defence to the repayment claim on an expired on-demand facility.

On the guarantees, the court found them to be continuing and unconditional, permitting the Plaintiff to vary or enlarge the credit facilities without discharging the guarantees. The refusal of the second Defendant to provide further guarantees did not affect the enforceability of the existing guarantees.

Finally, the court considered the Defendants’ counterclaim and set-off arguments. It found the counterclaim to be unquantified and nebulous, insufficient to constitute a defence or justify a stay of judgment. The minor alleged overcharging of interest was insufficient to offset the substantial sums owed. The court exercised its discretion to refuse a stay on the judgment.

Holding and Implications

SUMMARY JUDGMENT ENTERED IN FAVOR OF THE PLAINTIFF

The court granted summary judgment against the Defendants for the full amounts claimed by the Plaintiff under the loan facilities and guarantees. The Defendants were not permitted liberty to defend the proceedings as they failed to establish a bona fide defence. The guarantees remain enforceable despite the refinancing and alleged material alterations. The Defendants’ counterclaim for damages and alleged overcharging did not constitute a defence or justify a stay of execution. No new legal precedent was established; the decision reinforces established principles concerning the interpretation of on-demand loan facilities, the enforceability of continuing guarantees, and the threshold for defending summary judgment applications.