In a recent High Court decision, Ms. Justice O’Regan refused to remit a summary claim for over €6 million to plenary hearing on the basis that the claimant, Allied Irish Bank (“AIB”) had acted negligently in failing to provide the defendant with independent legal advice prior to signing a guarantee for the full indebtedness of his company.

There has been significant judicial interpretation on the construction of guarantees, particularly over the past 10 years and this decision is further confirmation of the Irish Courts position where parties to such documents do not seek independent legal advice prior to forming an agreement. Judge O’Regan referred to the decision in Irish Bank Resolution Corporation Ltd v Cambourne Investments Inc & Ors 2012 IEHC 262, wherein Charleton J stated “If on a proper construction of a contract, a term is exclusively for the benefit of a particular party by whom it is waived, that term may be rendered inoperative by that waiver”.

The requirement on a party to obtain independent legal advice was considered a benefit for the bank, on the basis that the effect of independent legal advice would exclude any potential defences a guarantor might claim. As such the bank was entitled to waive this requirement, rendering it severable from the balance of the document.

Furthermore the condition of the loan offer letter requiring independent legal advice was held not to be a condition precedent but rather a “Special Condition”. Judge O’Regan considered that “Special Conditions” are also drafted for the benefit of a bank.

For a link to the full judgment, please click here.