AIB Leasing Ltd v Quin & anor [2019] IEHC 758 (13 November 2019)

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Cite as: [2019] IEHC 758

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THE HIGH COURT
[2019] IEHC 758
[2013 No. 804 S]
BETWEEN
AIB LEASING LIMITED
PLAINTIFF
AND
NIALL QUIN & PETER CANTWELL
DEFENDANTS
JUDGMENT of Mr. Justice Barr delivered on the 13th day of November, 2019
Introduction
1.       This is an application brought by the plaintiff seeking summary judgment in the sum of
€92,496.09 against the first defendant on foot of a contract of guarantee allegedly
entered into by him on 18th April, 2008, whereby he guaranteed the repayments due
from a company called Colinwell Systems Limited (hereinafter “the company”) to the
plaintiff in respect of a leasing agreement concerning goods allegedly used in the fit out of
the company’s showrooms.
2.       The first defendant and the second defendant were Directors of the company. The second
defendant also signed the leasing agreement and the contract of guarantee dated 18th
April, 2008. On 16th March, 2016, the second defendant consented to judgment in
favour of the plaintiff against him in the sum of €92,429.09, with no Order being made as
to costs against him.
3.       In resisting this application, the first defendant has made a number of serious allegations
against the plaintiff and some of its employees. In summary, he alleges that the leasing
agreement between the company and the plaintiff was a complete sham, in that it did not
relate to goods which were required for the fit out of the company’s new showroom as
alleged in the agreement, but was in fact a means of providing working capital whereby
the company could buy stock for sale in the ordinary course of its business. The first
defendant has stated that he was unaware of the true nature of the leasing agreement
until he was furnished with the relevant invoices in the course of the current proceedings.
The first defendant further alleges that the evidence furnished to the Court by an
employee of the plaintiff, Ms. Sandra Hempenstall, to the effect that she witnessed him
signing the leasing agreement and the guarantee, is untrue, as he was not on the
company premises on the day that she called out to it and as a result the document was
left on his desk and he signed it at some later time when Ms. Hempenstall was not
present. The first defendant further alleges that the alleged agency agreement allegedly
dated 1st November, 2007, was a complete fabrication and was created at a time some
number of months later. In all of these circumstances, the first defendant has submitted
to the Court that it is not appropriate to grant the plaintiff summary judgment, but
instead the matter should be remitted to plenary hearing.
4.       There was a total of eleven affidavits filed in the course of this application. There were
six affidavits filed on behalf of the plaintiff; the first defendant filed four affidavits sworn
by him and one further affidavit sworn by a former bookkeeper of the company, in
support of his case. It is not necessary to go through each of these affidavits in great
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detail. However, given the seriousness of the allegations made by the first defendant, it
is necessary to set out hereunder the broad parameters of the areas that are in
contention between the parties.
The Plaintiff’s Case
5.       The plaintiff’s action herein commenced by issuance of a summary summons on 14th
March, 2013, seeking judgment in the sum of €92,496.09 on foot of the guarantee
furnished by the first defendant on 18th April, 2008, in respect of the liability of the
company under a leasing agreement of the same date, whereby the company leased
goods which had been purchased by the plaintiff for use by the company in the fit out of
its new showrooms. After entry of an appearance by a solicitor on behalf of the first
defendant, the plaintiff issued a motion seeking summary judgment in the amount
claimed in the summary summons by notice of motion dated 9th July, 2014. That
application was grounded on an affidavit sworn by Ms. Dymphna Kenny on 3rd July, 2014.
Subsequently, it was necessary for the plaintiff to submit a fresh grounding affidavit due
to the fact that the previous deponent, Ms. Kenny, had not specified which averments in
her original affidavit were made from her own knowledge and which were made from her
examination of the books and records of the plaintiff. As Ms. Kenny had left the
employment of the plaintiff, a fresh grounding affidavit in more or less identical terms to
that sworn by Ms. Kenny, was sworn by Mr. Gordon Hill on 17th October, 2016.
6.       The plaintiff’s case as set out in the affidavits sworn by Ms. Kenny and Mr. Hill is
reasonably straight forward. It was alleged that at all material times the defendants were
Directors of the company, which used the trading name of Instacom. That company
specialised in the provision of high-end audio and visual equipment. The plaintiff’s case
was that by agency agreement dated 1st November, 2007, the company as agent, agreed
to lease from the plaintiff goods which were to be used in the fit out of a showroom,
which goods were to be purchased by the bank at a price of €120,714.17. Under that
agreement the company, as the bank’s agent would purchase the goods on behalf of the
bank. That agency agreement was signed by the second defendant on behalf of the
company.
7.       The plaintiff alleges that on 15th April, 2008, the company presented the bank with
original invoices from the suppliers of the goods. These were exhibited in the affidavit
sworn by Mr. Hill. On the same date, the company presented the bank with an invoice for
the total price of the goods, being invoice number 21319. As appeared therefrom, the
total price of the goods was €120,714.17.
8.       It was alleged by the plaintiff that the company’s accountant confirmed by letter dated
18th April, 2008, that the company had paid for and fully owned all the items on invoice
number 21319. That letter was signed by Mr. Ger Gill, who described himself as
Instacom Accountant”. It confirmed that all the items on the stated invoice were fully
paid for and were fully owned by the company. It also confirmed that the goods were
unencumbered.
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9.       By leasing agreement dated 18th April, 2008, the bank agreed to lease the goods to the
company for a period of six months on the terms and conditions contained therein. Under
those terms the company as lessee, agreed to keep the goods at all times in its
possession and control and further agreed not to sell, assign, mortgage or otherwise
dispose of or deal in or encumber the goods or any interest therein. The terms and
conditions further provided that if there was a failure on the part of the lessee to comply
with any of the terms of the agreement, the lessor was entitled to terminate the
agreement. The terms further provided that it was expressly understood that ownership
of the goods did not pass to the lessee by virtue of the agreement and that the lessee had
no right to purchase the goods or otherwise to acquire the property therein. The leasing
agreement was signed by both defendants.
10.       By way of a guarantee and indemnity contained within the leasing agreement, the
defendants in their personal capacity, jointly and severely agreed to pay on demand any
sum due to the plaintiff under the leasing agreement which remained unpaid in breach of
the terms of the agreement and to indemnify the plaintiff against all loss in connection
with the leasing agreement. The leasing agreement was exhibited to the affidavit.
11.       Mr. Hill averred that on or about 18th April, 2008, the plaintiff paid the company the sum
of €118,036.20 on foot of invoice number 21319. He exhibited a statement of account in
this regard. He went on to state that in breach of the terms and conditions of the leasing
agreement the company failed to make the agreed rental payments on specified dates.
In accordance with the terms and conditions of the leasing agreement, by notice
addressed to the company dated 31st March, 2010, the plaintiff terminated the leasing
agreement. A liquidator was appointed to the company on 26th May, 2010. Mr. Hill
averred that the bank had not recovered possession of any of the goods.
12.       It was stated that as of the date of termination of the leasing agreement the total sum of
€92,496.09 remained due and owing by the company to the plaintiff pursuant to the
leasing agreement. By letter dated 5th March, 2013, the plaintiff’s solicitors demanded
that the first defendant pay the bank the said sum, representing the full amount then due
and owing by him to the plaintiff on foot of the contract of guarantee/indemnity. He
exhibited copies of the letters of the demand that had been sent to each of the
defendants.
13.       Mr. Hill went on to state that despite the demand made, the defendants had failed,
refused and/or neglected to pay the sum of €92,496.09, or any part thereof, due under
and pursuant to the indemnity. He stated that that sum remained due and owing by the
defendants to the plaintiff.
14.       That is the plaintiff’s case against the first defendant. The remaining affidavits that were
sworn on behalf of the plaintiff, were sworn in response to allegations and issues raised
by the first defendant in his replying affidavits, so it is appropriate to deal with these
affidavits later in the narrative, when dealing with the first defendant’s case.
The First Defendant’s Case
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15.       As the first defendant has sworn four affidavits in response to this application, it is
appropriate to take his main grounds of defence in a summary form, rather than go
through each of the affidavits in turn.
16.       The essence of the first defendant’s defence is that he was unaware until he received the
various invoices as exhibited to Mr. Hill’s affidavit, that the leasing agreement and the
contract of guarantee, both of which he signed on 18th April, 2008, were a sham
transaction and as such were a fraud perpetrated on him. He states that the alleged
agency agreement which was allegedly dated 1st November, 2007, could not have come
into existence at that time, but was drawn up at a later date so as to support the
contention that the leasing agreement was a bona fide leasing agreement in respect of
goods purchased by the company for the fit out of their new showroom. He pointed to
the fact that the date which had been initially typed in at the top of the agency agreement
read the “[blank] day of [blank], 2008”. The year had subsequently been written over so
as to read “2007”.
17.       He further alleges that the leasing agreement which he signed simply described the goods
as follows: “Fit out of new showrooms as per invoice no 21319 dated 15/04/2008 from
Colinwell Systems Limited”. The first defendant stated that at no time prior to the
proceedings herein, did he have sight of invoice number 21319. When he was furnished
with that invoice, when it was exhibited to the original grounding affidavit sworn by Ms.
Kenny, it was clear to him that the goods documented therein were not the type of goods
that one would purchase when fitting out a new showroom, but were in fact stock in trade
that the company would purchase and sell on to its customers in the usual course of its
business.
18.       In response to that allegation, an affidavit was sworn by Ms. Sandra Hempenstall, an
employee of the plaintiff, on 9th November, 2017. She stated that she had prepared the
documents which were central to the proceedings herein, being the leasing agreement
and the guarantee. She stated that she met with the defendants and witnessed the
signatures of the defendants on both the agency agreement and the leasing agreement.
She denied that the guarantee and indemnity, which had been furnished by the first
defendant had been obtained from him by any false representation or fraudulent promise.
She stated that it was apparent from the agency agreement that the company acted on
behalf of the plaintiff in purchasing the assets required for the fit out of their premises.
The company following purchase of the goods invoiced these assets to the plaintiff. The
company were paid for the assets by the plaintiff and the assets were leased back to the
company through the leasing agreement. The defendants had submitted the invoices to
her on the basis that the invoices were for the fit out of the company’s new audio/cinema
showroom. It was based on the representation that had been made to her by the
defendants, that she fitted out the leasing agreement by describing the goods in the
manner contained therein. She stated that there was no suggestion of any kind made to
her that the goods being purchased by the plaintiff were in fact stock. In this regard she
referred to the clauses in the leasing agreement which prohibited the company from
selling or otherwise disposing of the goods the subject matter of the agreement.
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19.       She stated that she had relied solely on the representations of the defendants, which
were made on behalf of the company and she relied on their word when she was shown
around the premises, that the goods described in the invoices had been used to fit out the
company’s new showroom. She explicitly denied that she was aware of the fact that the
goods described in the invoices provided were stock, rather than the constituents of a
showroom fit out, as alleged by the first defendant. She stated that the defendants had
represented to her that the goods purchased were used and would be retained by them,
as fit out of a new showroom and she believed what she had been told by them. The
company issued an invoice to the plaintiff for the assets which also meant that the assets
were no longer the company’s to sell.
20.       Ms. Hempenstall stated that the plaintiff does not provide funding for stock and certainly
does not purport to lease stock to any party. The conditions of the Leasing Agreement
reflected that position, since it would not have been possible for a lessee to comply
therewith, if they were to sell the goods the subject of the agreement. She further stated
that as the leasing agreement included the indemnity and as these were the first such
agreements that the company and the defendants had entered into with the plaintiff, she
was absolutely sure that she would have explained each and every section of the
agreement and the indemnity to the defendants prior to their execution of same.
21.       An affidavit was sworn on the same date by Mr. Matt Grimes, an employee of the plaintiff,
wherein he set out efforts that he had made to reclaim possession of the goods upon
termination of the leasing agreement. He stated that in a telephone call which the first
defendant had with Mr. Cliff Kenny, the repossession agent employed on behalf of the
plaintiff, the first defendant informed Mr. Kenny that all of the stock was gone and that
there was nothing to recover. He exhibited a copy of the note of that telephone
conversation. He also took issue with the description by the first defendant that he was
primarily engaged in “sales” within the company and that he had little involvement in the
finance elements of the company’s business. He stated that that was surprising in light of
the fact that the first defendant signed off on the company’s accounts and was one of two
signatories on the company’s current account.
22.       In his subsequent affidavits, the first defendant denied absolutely that he had signed the
leasing agreement or the guarantee in the presence of Ms. Hempenstall. He described
the circumstances in which he signed those agreements in his fourth affidavit sworn on
10th July, 2018. He stated that in or about April 2008, he had returned to the company’s
premises in Clondalkin after-hours from major company contract works in county Clare.
He found the leasing agreement on his desk and he signed it in four locations, including in
the space relating to the guarantee/indemnity. He stated that Ms. Hempenstall was not
present in his office when he signed the leasing agreement or the guarantee. He stated
that she never explained anything to him concerning that agreement. The leasing
agreement was not accompanied by any other document when he signed it.
23.       The first defendant averred that he did not deal with Ms. Hempenstall and he did not
meet her at any time in relation to the transaction the subject matter of these
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proceedings. He stated that he never submitted any invoice to Ms. Hempenstall. He
never made any suggestion or representation to Ms. Hempenstall at any time concerning
the goods. He did not conduct any negotiations with Ms. Hempenstall.
24.       There is a very clear dispute between the first defendant and Ms. Hempenstall in this
regard. In a further affidavit sworn by her on 14th May, 2018, she averred that the first
defendant had signed the leasing agreement in four places to indicate his acceptance of
the terms and conditions therein. He had never denied that he had signed the document
in multiple places. She then stated: “He signed the leasing agreement in my presence
and I am absolutely certain of that.”. Later in the same affidavit she stated “I am also
absolutely certain each of the defendants signed the leasing agreement and indemnity in
my presence.”. She stated further “furthermore, I specifically recall dealing with both
defendants when dealing with their application for funding by way of leasing agreement”.
25.       In that affidavit she went on to state that it was not correct for the first defendant to
assert that the plaintiff had “called out” to the company premises in an effort to “sell
money”. She stated that in fact, the company had approached Allied Irish Banks PLC
seeking to finance the fit out of their premises and was referred to the plaintiff by Allied
Irish Banks PLC to arrange for finance by way of a leasing agreement. She averred that if
the defendants had sought funding for stock, Allied Irish Banks PLC could have
progressed an application for a business loan facility. No leasing agreement would have
been offered unless there were goods to lease.
26.       On 9th July, 2018, an important affidavit was sworn on behalf of the first defendant by
Mr. Gerard Gill. He was employed as the office and accounts manager by the company at
the time of the transactions the subject matter of these proceedings. He had worked for
the company for the preceding five years. His affidavit contains a number of significant
averments. Firstly, he stated that the company commenced doing business with Allied
Irish Bank PLC when it opened a company account with them on 6th March, 2008. He
stated that AIB had made a number of attractive facilities available to the company to
entice them to switch their business from another bank to AIB. This included increasing
the overdraft facility to €100,000. He said that at that time the company wanted
approximately €120,000 by way of additional finance to effectively replenish the working
capital of the company, which had been spent on the fit out of the Clondalkin premises.
He stated that he did not meet with the plaintiff, or its servants or agents until sometime
after 6th March, 2008, in relation to this transaction. His recollection was that Allied Irish
Bank PLC decided on the leasing finance option and that as a result of that Ms.
Hempenstall became involved and visited the Clondalkin premises. He stated that he
showed Ms. Hempenstall around the Clondalkin premises, but that had been in the nature
of a general introductory tour of the company’s premises and was not about and was not
for the purpose of indicating any items that would be become the subject matter of a
leasing agreement.
27.       Mr. Gill stated that Ms. Hempenstall arranged for a meeting to sign documents in April
2008 at the company’s offices. Mr. Gill and the second defendant were there when Ms.
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Hempenstall arrived. She produced the documents that required signing. The second
defendant signed them at that time. However, the first defendant was not in attendance,
as he was away from the offices working at a customer’s premises, which Mr. Gill believed
were in county Clare. He stated that after the agreement had been signed by the second
defendant, Ms. Hempenstall left the leasing agreement with Mr. Gill and he placed it on
the first defendant’s desk for his signature on his return.
28.       Mr. Gill gave the opinion that the agency agreement was a fabrication, which had been
created by the plaintiff and dated and filled in by the plaintiff in or about April 2008, or at
a later date and only after he had provided a series of invoices and documents to the
plaintiff on or about 18th April, 2008. He stated that the sum of €120,714.17 as a total
amount, or sum of money did not exist and was not calculated until 15th April, 2008.
This arose because Ms. Hempenstall explained to him that the advance could only be
made once paperwork was produced by the company that would back a figure of
approximately €120,000, which was the amount of the intended advance. The only
requirement was that the sum would relate to cases where the company had already paid
suppliers for goods. Mr. Gill stated that as a result of that, he worked with the company’s
computer accounts programme on 15th April, 2008, and extracted a list of substantial
stock invoices that the company had paid for during the previous six months, which
amounted in total to the sum of €120,714.17, inclusive of VAT. He stated that he also
signed a letter dated 18th April, 2008, which had not been in his own words, but was in a
format and with content, as had been directed by the plaintiff. Mr. Gill stated that many
of the details contained in handwriting in the so called agency agreement and in the
leasing agreement could only have been filled in by the plaintiff on or after 18th April,
2008.
29.       Mr. Gill averred that the plaintiff, its servants or agents, knew at all material times that
the agency agreement was a doctored fabrication created by the plaintiff and that the
leasing agreement and stock invoices were a sham method of securing loan finance
business between the plaintiff and the company and giving further effect to the transfer of
the company’s banking business to AIB bank. He stated that excluding the meeting
described above, at which the second defendant signed the documents and at which Mr.
Quin was not present, he was not aware of any other meeting or discussion or negotiation
or communication between Ms. Hempenstall and either of the defendants in relation to
the transactions the subject matter of these proceedings.
30.       Finally, in his fourth affidavit sworn on 10th July, 2018, the first defendant outlined the
history of the relationship between the company and Allied Irish Banks PLC. In essence,
he stated that the company only switched its business to Allied Irish Banks PLC on 6th
March, 2008, as a result of overtures that had been made to it by servants or agents of
AIB. In this regard, he exhibited a statement from the business current account plus held
by the company with AIB, which showed that the account was opened on 6th March,
2008. He went on to state that as far as he was concerned the company did not initially
seek out leasing type finance from AIB. Rather, AIB Bank PLC decided that leasing type
finance was the most appropriate option for the bank to provide further financing to the
Page 8 ⇓
company. He stated that in these circumstances, Ms. Hempenstall as an employee of the
plaintiff, would have first visited the company premises in Clondalkin only after 6th
March, 2008, in relation to this transaction. He stated that the company did not and
could not have entered into any business relationship, or any contract, or any agreement
or any arrangement whatsoever with the plaintiff prior to 6th March, 2008. For this
reason, he alleged that the so called agency agreement dated 1st November, 2007, was a
complete fabrication. He stated that it could have only have been created and produced
by the plaintiff after 6th March, 2008, to suit what the plaintiff required as paperwork and
could only have been completed by the plaintiff in its handwritten monetary amount after
15th April, 2008.
31.       The first defendant stated that the plaintiff had purposely provided leasing finance to the
company in the full knowledge that the entire arrangement was a sham involving stock,
which could not and would not be retained by the company in the ordinary course of its
trade.
Conclusions
32.       The approach which the Court should take to an application such as this, is well settled in
law. The relevant test was set down by the Supreme Court as far back as 1996 in First
National Commercial Bank v. Anglin [1996] 1 IR 75. In that case Murphy J., giving the
judgment of the Court, endorsed the following test laid down in Banque de Paris v. De
Naray [1984] 1 Lloyd's Law Rep 21, which had been referred to in the judgment of the
President of the High Court and reaffirmed in National Westminster Bank PLC v. Daniel
[1993] 1 WLR 1453:
“The mere assertion in an affidavit of a given situation which was to be the basis of
a defence did not of itself provide leave to defend; the Court had to look at the
whole situation to see whether the defendant had satisfied the Court that there was
a fair or reasonable probability of the defendants having a real or bona fide
defence.”
33.       The test set down in the Anglin case has been applied in a number of cases in the
intervening years. The appropriate test was more recently set out in Aer Rianta CPT v.
Ryanair Limited [2001] 4 IR 607 in which case Hardiman J. stated as follows at page 623:
“In my view the fundamental questions to be posed on an application such as this
remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to
be tried or only issues which are simple and easily determined? Do the defendants
affidavits fail to disclose even an arguable case?”
34.       In Harrisrange Limited v. Duncan [2003] 4 IR 1, McKechnie J. having analysed the
relevant case law, set out a helpful summary of the relevant principles. It is not necessary
to set these out in this judgment, as they are very well known. The Court has had regard
to all of these cases and to the principles set out in Harrisrange in reaching its
determination herein.
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35.       The Court has also had regard to the dicta of Moriarty J. in Allied Irish Banks v. Killoran
[2015] IEHC 850, where he warned that the Court should not accord substantive relief to
defendants in summary judgment motions who raise spurious, fanciful or conjectural
contentions to resist judgment. He advised that courts must be alert to defendants who
seek merely to defer the evil day on the basis of arguments that do not pass muster, and
must remain mindful of the de minimis rule in assessing summary judgment applications,
see paragraph 56 of the judgment.
36.       In reaching its conclusion on this application, the Court has had regard to the serious
factual disputes that arise on the affidavits. The first of these concerns whether Ms.
Hempenstall was present, as she alleges she was, when Mr. Quin signed the leasing
agreement and guarantee/indemnity. Ms. Hempenstall has been very clear in her sworn
affidavit evidence that she was present when the document was signed in four places by
the first defendant. The first defendant has been equally clear in his affidavit evidence
that she was not present when he signed the document. He states that he only signed
the document upon his return to the company’s premises after business hours, when he
had returned from a site visit down the country. His account in this regard is supported
by the affidavit of Mr. Gill. The Court must give significant weight to the averments
contained in Mr. Gill’s affidavit. While Mr. Gill was a relatively high ranking employee of
the company for a number of years leading up to the transaction the subject matter of
these proceedings, the company has been in liquidation for many years, so Mr. Gill would
derive no financial or other benefit from failing to give an accurate and honest account of
his recollection of the matters in issue between the parties. For the purpose of this
application, the Court must take Mr. Gill at face value, as being an independent third
party who provides significant supporting evidence to the first defendant in relation to his
assertions concerning who was present when he signed the agreement.
37.       Mr. Gill also gives significant evidence in relation to the veracity of the agency agreement
dated 1st November, 2007. Even leaving aside the typographical error that has been
corrected in handwriting concerning the year on which the agreement was purportedly
drawn up, Mr. Gill has stated that it would not have been possible for the figure which is
contained in handwriting in that agreement to have been inserted thereon in November
2007, for the simple fact that it was based on invoices that did not come into being until
some months later, largely between December 2007 and March 2008. There seems to
me to be considerable substance in this point.
38.       The discrepancy that arises between the handwritten sum entered into the agency
agreement of 1st November, 2007, and the subsequent invoices furnished some months
later, tend to support his averments as to how he came to supply the various invoices and
how the figure of €120,714.17 was arrived at, as set out at paragraph 8 of his affidavit
sworn on 9th July, 2018.
39.       The Court has also had regard to the content of the invoices as set out in invoice number
21319 as furnished by the company on 15th April, 2008. In argument before the Court,
the first defendant stated that the majority, if not all, of the goods specified in that
Page 10 ⇓
invoice were normal stock in trade of the company, rather than the usual types of items
that would be involved in the fit out of a new showroom. While counsel for the plaintiff in
the course of a very able and detailed submission, argued that some of these goods may
have been items used for display, they would therefore be regarded as goods required to
fit out a showroom for a company engaged in the line of business that the company was
engaged in. I am not sure that that argument holds good in respect of the bulk of the
material set out in that invoice. This is a matter on which oral evidence will be necessary
to explain what the items were and whether or not they were of a type that would be
normally used in the fit out of a new showroom.
40.       In the course of argument, the plaintiff’s counsel, Ms. Connaughton-Deeny B.L.,
submitted that even at its highest, the assertions put forward by the defendant did not
establish an arguable defence to the plaintiff’s claim herein. Even if the Court accepted
that the leasing agreement entered into between the company and the plaintiff was a
sham leasing agreement, in that it related to stock rather than to fit out goods for the
showroom, as alleged by the first defendant, that did not provide any defence to the
plaintiff’s action against him on foot of the contract of guarantee/indemnity.
41.       In this regard she relied on the decision in Yeoman Credit Limited v. Latter [1961] 1 WLR
828. In that case a finance company had let a car on hire purchase to an infant. When
the infant defaulted under the hire purchase agreement, the finance company sued the
second defendant, who was an adult, under the contract of indemnity/guarantee. It was
argued on behalf of the defendant that the agreement in question was a guarantee which,
since it guaranteed a void contract, was itself void. The Court held that while the contract
between the finance company and the infant was void having regard to the provisions of
the Infant’s Relief Act 1874, the contract entered into between the adult defendant and
the finance company was a contract of indemnity, rather than a contract of guarantee and
as such, it was enforceable against him and was not vitiated due to the fact that the
contract between the infant and the finance company was void. Counsel submitted in this
case, that even if the Court were to find that the agreement between the company and
the plaintiff was a sham, insofar as it related to goods that were stock rather than goods
to be used in the fit out of the new showroom, that did not vitiate the contract of
guarantee/indemnity between the first defendant and the plaintiff.
42.       While acknowledging the force of the argument based on the decision in the Yeoman
Credit case, there is also authority for the proposition that where there has been
misrepresentation, a surety will not be bound by his contract. In Rowlatt on Principal and
Surety, 6th Edition, it is stated as follows as paragraph 5 – 05:
“A surety is not bound by his contract if it was induced by any misrepresentation by
the creditor whether fraudulently made or not of any fact known to him and
material to be known to the surety. Where the contract is voidable on this ground,
the surety may have the contract set aside and any security pledged thereunder
returned. It is no defence to claim that the surety might have found out the truth
by making proper enquiry.”
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43.       In Law of Guarantees, 4th Edition, by Andrews & Millet, the learned authors give the
following opinion at page 132:
“There are dicta which suggest that because of the nature of the contract of
suretyship, it may only take a relatively minor misrepresentation to enable the
surety to avoid the contract. In Davies v. London & Provincial Marine Insurance
Company [1878] 8 Ch. D. 469 at 475 Fry J. expressed the view ‘very little said
which ought not to have been said, and very little not said which ought to have
been said, would be sufficient to prevent the contract being valid’. However, it is
clear that in the case of misrepresentation by concealment, or non-disclosure, only
misrepresentation or concealment of matters which were material to the risk of the
surety and which ought to have been disclosed will make the contract voidable. It is
likely that the same standard of materiality would be applied to positive
misrepresentations: if the misrepresentation is not material to the risk, the
probabilities are that the Court would find that the surety was not induced by it to
enter into the contract of suretyship.”
44.       A broadly similar statement of the law in this jurisdiction is to be found in The Law of
Credit and Security, 2nd Edition, by Mary Donnelly at paragraphs 19 – 81 et seq. Having
regard to these general statements of the law, the Court cannot find that should the facts
asserted by the first defendant be found to be correct; he would have no arguable
defence to the plaintiff’s claim herein.
45.       Having regard to the disputed evidence and the discrepancies outlined earlier, the Court is
satisfied that the first defendant has shown that he has an arguable defence that this
transaction may not have been a normal leasing agreement in respect of goods purchased
for the fit out of a showroom, but was rather a financing arrangement put in place to
effectively provide funds to enable the company to provide stock in trade, that was
dressed up as being a normal leasing agreement. It is not possible for this Court to reach
any conclusion as to whether that was so, based on the affidavit evidence before it.
However, I am satisfied that having regard to the fairly low threshold that exists at Irish
Law as set out in the Aer Rianta and Harrisrange cases, it is not appropriate for the Court
to award the plaintiff summary judgment, but that the matter should be remitted to
plenary hearing. Accordingly, I refuse the plaintiff’s application for summary judgment; I
remit the matter to plenary hearing; I direct that a statement of claim be delivered within
a period of four weeks and a defence is to be delivered within four weeks of receipt of the
statement of claim.


Result:     Plaintiff's application for summary judgment refused and matter remitted to plenary hearing




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