Cave Projects Limited V Peter Gilhooley, John Kelly, John Moroney, Roy O'Brien & Joseph O'Hara [2015] IEHC 14

Overview

This case concerned an application for summary judgment against two of the defendants.  The defendants raised a number of defences including breach of fiduciary duties, failure to fulfil a condition precedent, lack of valuable consideration and inadmissibility of evidence.  The loans in question were made by the Governor and Company of the Bank of Ireland (the Bank) and were subsequently acquired by NAMA and sold to the plaintiff. 

Defences raised

The following defences were raised by the 2nd and 5th named defendants:

  • Fiduciary duty: That the bank had a fiduciary duty and owed them a duty of care - €750,000 of the sums advanced was used to purchase one of the Bank's own products – the Bank was therefore  in breach of its own guidelines for lending and of its duties. Counsel for the plaintiff argued that even if a fiduciary duty was owed, there was no evidence of loss having been suffered by the defendants arising out of a breach of that duty.  
  • Condition Precedent: That the loan agreement contained a condition precedent in relation to a valuation of lands and that the Bank failed to adhere to the condition precedent. Counsel for the plaintiff argued that this condition was inserted solely for the benefit of the Bank and the Bank was entitled to waive that condition.  
  • No valuable consideration: That the loan monies were drawn down by parties other than the 2nd and 5th named defendants for purposes not sanctioned by the loan agreement and there was no valuable consideration flowing from the Bank to them to support the contracts. Counsel for the plaintiff argued, in reliance on IBRC v Quinn [2011] and ACC Bank v Kelly [2011], that borrowers entering into commercial banking arrangements had to accept the consequences of signing such agreements whether they read or understood them or not.  
  • Admissibility of documents: That the plaintiff had failed to establish that NALM had acquired the assets, held and assigned the assets and notified the client of the assignment; and that the affidavit from NALM was not shown to be made from the deponent's own knowledge (argued in reliance on Ulster Bank v Dermody [2014])    
  • Mitigation of loss: That the Bank failed to mitigate its loss by refusing to sanction a sale of lands at a time when they were more valuable than they are now.  Counsel for the defendant argued that this defence could not be relied upon as it is only appropriate to a claim for damages, not a debt due.  
  • Reckless lending: That the Bank was engaged in reckless lending which gave rise to the loss of the loan funds.  Counsel for the plaintiff argued that no such tort was known to the law in Ireland and relied on McConnon v President of Ireland [2012]1.

As this was a motion for summary judgment, the Judge had to consider whether or not it was "very clear" that the defendants had no case.  The Judge highlighted three issues that could not be readily resolved and which raised arguable points (i) the fiduciary argument which raised questions about duties owed by the bank to the defendants; (ii) the condition precedent argument – the Judge referred again to IBRC v Cambourne [2012] and noted in that case which involved a condition precedent which was for the benefit of two parties, it could not be waived unilaterally by the bank; and (iii) the admissibility of evidence argument.

The Judge concluded that the summary procedure was not suitable for this case and remitted the matter for plenary hearing.

The full judgment can be accessed here.