Supreme Court dismisses appeal against summary judgment on bank loan debt consolidation transactions.

THE SUPREME COURT

[Appeal No: 2014/22]

Clarke J.

Laffoy J.

Dunne J.

Between/

National Asset Loan Management Limited

Plaintiff/Respondent

and

Tom Coyle

Defendant/Appellant

Judgment of Mr. Justice Clarke delivered the 9th April, 2014.

1. Introduction

1.1 A very net question about banking transactions arises on this appeal. The defendant/appellant ("Mr. Coyle") had a significant

banking relationship with Anglo Irish Bank plc ("Anglo Irish"). His loans were taken over by the plaintiff/respondent (which, as it is a

subsidiary of the National Asset Management Agency, I will refer to as "NAMA"). Subsequently, NAMA issued proceedings claiming both

euro and pound sterling sums with a combined value in excess of €60 million. The proceedings were admitted into the Commercial List

of the High Court and, having been brought by summary summons in respect of a claim for a liquidated sum, were brought in the

ordinary way before the Court on a motion for summary judgment.

1.2 The High Court (McGovern J.) delivered a reserved judgment on that motion and, for the reasons therein set out, granted

summary judgment in the sum of €49,856,925.50 and Stg. £10,567,723 (see National Asset Loan Management Ltd v Coyle [2013]

IEHC 606). Mr. Coyle appealed to this Court. In that context, it should also be noted that Mr. Coyle had sought, but had failed to

obtain, a stay on the judgment granted by McGovern J. In those circumstances, Mr. Coyle applied to this Court for a stay. At an early

stage of the hearing of the stay application it became apparent that one of the major issues which would need to be determined on

the stay application was as to whether Mr. Coyle really had sufficient grounds for appeal to meet the established criteria for a stay. It

is, of course, well settled that one of the issues which this Court is required to assess on a stay application is as to whether, on the

materials available, it can properly be said that there are significant grounds for the appeal. The absence of such grounds would

weigh very heavily against the granting of any stay. However, with that in mind, it became clear that it would be an unnecessary use

of scarce court resources to hear detailed submissions on the merits of the appeal solely for the purposes of deciding whether or not

to grant a stay when, in reality, it would not take much longer to analyse those same grounds for the purposes of determining the

substantive appeal. In those circumstances, it was arranged that the appeal would come on for hearing in early course.

1.3 It must, of course, be recalled that the judgment granted by McGovern J. in the High Court in these proceedings was on a motion

for summary judgment. The issues before McGovern J. and, therefore, the issues before this Court on appeal, are not, therefore, as to

whether Mr. Coyle must necessarily succeed on his defence but rather whether he has a sufficiently arguable defence to meet the

undoubtedly low threshold specified in the jurisprudence in respect of the grant of summary judgment. While that jurisprudence is now

very well rehearsed, it will be necessary to touch briefly on it in due course.

1.4 However, the basis on which Mr. Coyle asserted that he had an arguable defence became focused at the appeal before this Court

on one point. It is necessary, in that context, to identify that argument.

2. The Defence as argued

2.1 It is not in dispute but that Mr. Coyle's loan facilities with Anglo Irish had been in difficulties from some time in 2008. He had a

very large number of bank accounts. In 2009, a number of rearrangements occurred in respect of those bank accounts which had the

effect of significantly narrowing the total number. In October 2008, Mr. Coyle had approximately 16 separate loan accounts with

Anglo Irish. By the end of that year, it appears that this had grown to 21 different accounts. On the 23rd January, 2009, 10 of these

separate loan accounts were amalgamated into a single new account. This appears to have been done through the debiting of money

from the new account and the transfer of those monies to the then existing accounts so as to leave them with a zero balance. Once

a zero balance was thus reached, the old accounts were then closed. A similar process was carried out at about the same time which

brought three other loans together in a separate account. These transactions were not expressly authorised by Mr. Coyle at any

point. It is said that these changes were the product of the implementation by Anglo Irish of a new banking system known as T24.

Further similar activity occurred throughout 2009 and 2010, resulting ultimately in six streamlined accounts.

2.2 However, on the 20th July 2010, a facility letter was issued by Anglo Irish to Mr. Coyle which specified six facilities lettered "A to

F". It is worth quoting the facilities and their respective purposes in full. The details of each facility are set out in section 1 of the

letter:

Facility A:

Palace Street The maximum amount of GBP £8,004,000 (Eight Million and Four Thousand Pounds Sterling) with a current balance of

£7,965,596, together with interest accrued and due thereon.

Facility B:

Palace Street Interest A/c The maximum amount of GBP £1,028,000 (One Million and Twenty Eight Thousand Pounds Sterling) with a

current balance of £1,262,863, together with interest accrued and due thereon. Please note this account is currently in excess of the

approved limit of £1,028,000 and that the excess referred to above is not ratified by the Bank.

Facility C:

Investment Properties The maximum amount of €29,814,000 (Twenty Nine Million, Eight Hundred and Fourteen Thousand Euro) with a

current balance of €30,654,404, together with interest accrued and due thereon. Please note this account is currently in excess of

the approved limit of €29,814,000 and that the excess referred to above is not ratified by the Bank.

Facility D:

Investment Prop Interest A/c The maximum amount of €1,149,000 (One Million, One Hundred and Forty Nine Thousand Euro) with a

current balance of €1,611,601, together with interest accrued and due thereon. Please note this account is currently in excess of the

approved limit of €1,149,000 and that the excess referred to above is not ratified by the Bank.

Facility E:

54 Apart Suites & Kasterlee The maximum amount of €10,680,000 (Ten Million, Six Hundred and Eighty Thousand Euro) with a current

balance of €9,608,872, together with interest accrued and due thereon.

Facility F:

Private Banking The maximum amount of €3,518,000 (Three Million, Five Hundred and Eighteen Thousand Euro) with a current balance

of €3,826,639, together with interest accrued and due thereon. Please note this account is currently in excess of the approved limit

of €3,518,000 and that the excess referred to above is not ratified by the Bank.

Section 2 sets out the purpose of each facility:

Facility A

Renewal & Amalgamation of previous existing Facilities at an increased level to fund working capital requirements totalling £82,000 to

the 31st of December 2010.

Facility B

Continuation of existing Facility at its existing level to the 31st of December 2010.

Facility C

Renewal & Amalgamation of previous existing Facilities at an increased level to fund working capital requirements of €232,000 to the

31st of December 2010.

Facility D

Continuation of existing Facility at its existing level to the 31st of December 2010.

Facility E

Continuation of existing Facility until the 31st of December 2010 at an increased level to fund the fit out of the 54 apart-suites at

Ballytivnan, Co. Sligo and various professional fees.

Facility F

Transfer of debt held under Tom Coyle (client number 9511085) into client number 9712985 and extend the Facility to the 31st of

December 2010.

2.3 A number of points need to be noted about that facility letter. First, most of the reorganisation measures taken in respect of Mr.

Coyle's accounts had already occurred by the time the facility letter in question was issued. Second, some of the facilities

(specifically facility C and facility F) contemplated some degree of further reorganisation. Third, some of the facilities (B and D)

contemplate that the facility in question was used to pay interest on other accounts. Fourth, the facility letter was accepted in the

ordinary way by Mr. Coyle. Although it is a point to which it will be necessary to return, it should be noted at this stage that part of

the case made on behalf of NAMA before this Court was that, whatever the merits of any points raised on behalf of Mr. Coyle as to

events which occurred after that facility letter, it is said that, by accepting the facilities in that form, Mr. Coyle must be taken to

have accepted any rearrangement of his accounts which either occurred before the time of that facility letter or which are

contemplated by the terms of the letter itself.

2.4 Be that as it may, the argument raised on behalf of Mr. Coyle is to the effect that, in putting in place the arrangements which led

to a reorganisation of his accounts, Anglo Irish acted without authority so that, it is said, Anglo Irish could no longer have any claim

arising out of its contractual relations with Mr. Coyle. On that basis it is said that, likewise, NAMA, as a successor in title to Anglo

Irish, could not maintain any claim based on those contracts.

2.5 It is also important to note that certain transactions took place when the loans concerned were transferred from Anglo Irish to

NAMA on the 1st November, 2010. The precise mechanism used for those transfers will need to be explored in somewhat more detail

in due course. However, the substance of what appears to have occurred is that, in respect of each relevant existing account with

Anglo Irish, a new account was opened in Mr. Coyle's name with NAMA (even though the new accounts continued to be managed by

Anglo Irish). A transaction was then put in place in respect of each account which led to the creation of an indebtedness in the new

NAMA account in an identical sum to that which had previously appeared as a debt in the corresponding Anglo Irish account together

with a transfer of the relevant sum to that latter account leading to it being cleared of its indebtedness and then closed. There is not

doubt that the substance of the situation was that, immediately after what occurred on the 1st November, however characterised,

Mr. Coyle was in exactly the same position, having the same set of liabilities divided into six facilities as he had before even though

the accounts on which those liabilities arose after those transactions were new accounts held with NAMA, rather than the old

accounts held with Anglo Irish. The terms and conditions of the six respective accounts were, likewise, unchanged.

2.6 While Mr. Coyle does not dispute but that NAMA was entitled to take over the loans from Anglo Irish, it is argued on his behalf

that the method adopted, whereby new accounts were created, funds drawn down from those accounts and transferred to the old

accounts, thus paying off and leading to the closure of those old accounts, was unauthorised. As a consequence, it is said that Mr.

Coyle cannot be liable on the old accounts because they have been cleared and closed and cannot be liable on the new accounts

because they were not authorised.

2.7 It is, in fairness to Mr. Coyle, important to emphasise that his counsel did not argue that there might not be a legal method by

which, in those circumstances, NAMA might be able to seek to recover from him. However, it is said that, for the technical reasons

just identified, NAMA is no longer entitled to sue on a summary summons and obtain summary judgment in respect of sums said to be

owing as a simple contract debt. McGovern J. rejected that argument as providing an arguable defence. It is argued on behalf of Mr.

Coyle that it is an arguable defence and that the case should, therefore, go to plenary hearing.

2.8 In that context, it is appropriate to refer briefly to the test for the grant of summary judgment.

3. The Summary Judgment Test

3.1 In Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 I.R. 607, Hardiman J. reviewed the authorities on the test to be applied in

summary judgment applications and concluded at p. 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 defendant's affidavits fail to disclose even an arguable defence?”

3.2 This passage was also cited more recently by Denham J. in her judgment in Danske Bank v. Durkan New Homes [2010] IESC 22.

That judgment also cited my High Court judgment in McGrath v. O'Driscoll [2007] 1 I.L.R.M. 203, which addressed the question as to

whether it was appropriate to determine issues of law or construction in the context of a summary judgment application. At p. 210, I

held:

“So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve

such questions (including, where appropriate, questions of the construction of documents), but should only do so where

the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by

determining those questions within the somewhat limited framework of a motion for summary judgment.”

3.3 I would propose applying those tests on this application. The threshold is as specified by Hardiman J. in Aer Rianta. It is

undoubtedly a low one. However, the Court retains the entitlement, in considering whether there is a sufficient defence to meet that

admittedly low threshold, to finally determine straightforward questions either of law or construction of documents where there is no

real risk that, in so doing within the confines of a summary judgment application, any injustice can follow. Before turning to a

discussion of the issues which arise in this case, it is necessary to set out briefly how these questions were dealt with by McGovern

J. in the High Court.

4. The High Court Judgment

4.1 After outlining the facts of the case and the law in this area, McGovern J. turned to Mr. Coyle’s arguments. McGovern J. was

satisfied that the streamlining and re-allocation of Mr. Coyle’s 21 accounts into 6 consolidated accounts with the same terms and

conditions was “a book-keeping exercise which did not in any way alter the terms or conditions of the defendant’s loans or the

amount due on foot of them.” He further held that, in so doing, Mr. Coyle had suffered no prejudice. He, therefore, held that this

consolidation did not constitute a bona fide defence to NAMA’s claim. Claims based on estoppel and conflicts of interest were also

dismissed. Those later issues were not raised on this appeal.

4.2 It should also be noted that Mr. Coyle had submitted that interest had been improperly charged to some of his accounts and that

this provided at least a partial defence to the application. Mc Govern J. held that the conflict of fact on the affidavits on this issue

could not be resolved in a summary judgment application and, therefore, the question of the calculation of interest was allowed to go

forward to plenary hearing. No appeal has been taken against that finding.

4.3 With the issue of the appropriate calculation of interest being sent forward to plenary hearing, the only question which arises on

this appeal is as to whether McGovern J. was correct to conclude that the argument put forward on behalf of Mr. Coyle, to the effect

that no claim for a debt or liquidated sum can now be maintained by NAMA, provides a sufficient arguable defence to meet the low

threshold identified by Hardiman J. in Aer Rianta. I turn to that question.

5. Is there an arguable defence?

5.1 It is important to start by recalling that, as determined in McGrath v. O'Driscoll (as approved by this Court in Danske Bank v.

Durkan New Homes), it is permissible for the Court, on a motion for summary judgment, to determine straightforward issues of law and

construction of documents provided that, in so doing, no real risk is run of injustice. It seems to me that the issues which arise on

this appeal are properly characterised as straightforward questions of law and construction of documents.

5.2. The starting point of any analysis of the legal relationship between NAMA and Mr. Coyle must be the facility letter of the 20th

July, 2010. As noted earlier, that letter was accepted by Mr. Coyle and no issue either of law or fact is raised which questions its

validity.

5.3 A number of consequences seem to me to flow from that letter. First, the letter, having been accepted by Mr. Coyle, constitutes

the terms of a contract between him and Anglo Irish and must also be the basis of his continuing contractual obligations to NAMA

after his loans were taken over. Much of the consolidation of accounts which occurred predate that facility letter. It seems to me to

be beyond argument that, by signing the facility letter, Mr. Coyle accepted any pre-existing consolidation of accounts by accepting,

in terms, that, thereafter, he would only have six facilities.

5.4 Likewise, it seems to me to be beyond argument that the further consolidation of accounts expressly contemplated in the facility

letter must be taken to be part of the contractual arrangements between Mr. Coyle and Anglo Irish and which now bind his

contractual relations with NAMA. As noted earlier, facility C (which is an amount of just over €29 million, but in respect of which the

balance specified, as on the day of the facility letter, was over €30.5 million) is, in its terms, stated to be for the purpose of a

"Renewal and Amalgamation of previous existing Facilities". On the basis of the evidence placed before the High Court on behalf of

NAMA, it is clear that the amalgamation to which reference is made is between accounts 02314865, 02431997 (to which monies were

paid and then closed) and 02227336 (into which the amalgamated debts were transferred).

5.5 Likewise, facility F specifies a transfer of debt under client number 9511085 to client number 9712965.

5.6 The question which then must be asked is as to what further transactions took place after the facility letter was in place, which

were not in furtherance of the consolidation or transfers expressly contemplated by the facility letter itself. At the hearing before this

Court, counsel for Mr. Coyle went through the relevant bank statements in some detail. With the exception of two matters, or types

of matters, to which I will shortly turn, it seemed to me to be beyond argument that the only transactions which occurred after the

facility letter were those to which reference has already been made and which are actually contemplated by the facility letter itself.

5.7 The two exceptions concern, first, the transactions which occurred on the 1st November, 2010 when the relevant loans were

taken over by NAMA, and, second, a series of transactions whereby interest which had arisen in respect of one of the facilities was,

while initially debited to that facility, in substance borne by a different account. This was achieved by means of that different

account being debited for the sum of the interest with the sum in question being credited to the account on which the interest

originally arose, thus, offsetting the interest charge on that original account. I propose dealing with each of those types of

transactions in turn.

5.8 However, it is important to start by emphasising that the contractual relations between Mr. Coyle, on the one hand, and either

Anglo Irish or NAMA, on the other, are governed by the facility letter. In substance, the facility letter, in the main, concerns the

extension of existing loans, although in some cases it may have been contemplated that some additional funding might be made

available. Be that as it may, the obligation on Anglo Irish under the facility letter was simply to provide the six specified facilities

whether by extending the terms of existing loans or providing fresh funds or, indeed, both. There is no suggestion that either Anglo

Irish or NAMA were in breach of that obligation.

5.9 Equally, it is clear that, under the facility letter, Mr. Coyle's obligation was to repay those loans. The loans are expressed to be

repayable on demand but, in any event, by the 31st December, 2010, in the event that demand was not made. It is equally clear,

therefore, that the monies became due under the terms of the facility letter.

5.10 It is against that background that the relevant transactions need to be assessed. While the bank account documentation in

respect of the transfer of some of the loans from Anglo Irish to NAMA was not available, it was suggested on behalf of Mr. Coyle that

the one account in respect of which such detailed information was available was sufficient to allow the point raised to be argued in

respect of each of the accounts. Given the low threshold which Mr. Coyle has to meet, I am satisfied that counsel was correct in

that regard. From the statements of account in question, it is clear that, on the same day, a NAMA account was opened (although

managed by Anglo Irish) corresponding to each of the six existing Anglo Irish accounts. On each account there appears a debit of an

amount equivalent to the balance due on a corresponding Anglo Irish account. On that same day a credit appears in the relevant

Anglo Irish account thus reducing it to a zero balance. The previously existing Anglo Irish accounts are, thereafter, closed. The

argument put forward on behalf of Mr. Coyle is that there was no authority either for the opening of the new NAMA account, the

debiting of any money from such an account, or the transfer of monies from that account to an old or existing corresponding Anglo

Irish account.

5.11 In that context, attention was drawn to the extensive powers of set off and consolidation which are contained in the general

conditions used by Anglo Irish at the time in question and which were annexed to the facility letter. There is no doubt but that there

is no express authorisation in those general conditions for transactions of this type. Counsel for NAMA argued that the absence of any

express provision prohibiting a transaction of the type in question meant that it was authorised. Counsel for Mr. Coyle argued that the

absence of an express provision meant that it was not authorised.

5.12 It seems to me that this is a straightforward issue of law which is more than capable of being dealt with within the confines of a

summary judgment motion. The underlying contractual terms which applied between Mr. Coyle, on the one hand, and Anglo Irish or

NAMA, on the other, are to be found in the facility letter. The facility letter simply provides, once the loans are either continued or

advanced by Anglo Irish, for an obligation on the part of Mr. Coyle to repay and for the imposition of interest in accordance with the

contractual terms set out. The transaction is to lend money on specified terms and conditions. There is nothing which requires that

those monies should stand as a debit obligation on the part of Mr. Coyle in any particular account or accounts. Those monies (subject

to the interest issue which has gone to plenary hearing) clearly remain due and owing under the terms of the facility letter. I can see

no legal basis on which, however characterised, the transactions entered into, when the loans were taken over by NAMA, could

change that situation. It does not seem to me that the precise mechanism used for transferring the liability on the six specified Anglo

Irish accounts to six identical NAMA accounts can affect that situation.

5.13 There are very good reasons why banks may wish, in their standard terms and conditions, to confer on themselves rights of set

off and the like. If a person has a demand deposit account in which they have €5,000 and, at the same time, an overdraft account on

which they owe €5,000, the contractual arrangements between that person and their bank entitle the person concerned to demand

€5,000 to be withdrawn from their deposit account without reference to the fact that they also owe the bank a similar sum on an

overdraft account. Without having a specific power to amalgamate or set off (and in the absence of the occurrence of any

circumstances specified in the relevant contract as a condition to the exercise of the power), then the substance of the entitlement

of the customer concerned is to take the money out of the deposit account without reference to the overdraft account. Likewise, if

monies are held in different accounts where the terms and conditions of those accounts are not identical, then any attempt by a

bank to amalgamate or consolidate such accounts would be a clear breach of obligation unless there was an express power in that

regard. Likewise, carrying out transactions involving third parties, such as the payment of cheques, direct debits or the like, clearly

require a client's authority or must be covered by terms and conditions permitting the bank so to act.

5.14 But no such considerations apply here. As McGovern J. pointed out, there was no change at all of substance between the

obligations of either party immediately after the relevant transactions occurred on the 1st November, other than that the monies

were thereafter owed to NAMA as opposed to Anglo Irish, but on exactly the same terms and conditions. On the day before those

transactions occurred, Mr. Coyle had six separate obligations (each arising under a separate facility) to repay monies to Anglo Irish.

On the day after the transactions occurred, Mr. Coyle had an exactly equivalent set of six obligations to repay the same monies to

NAMA. His contractual obligation under the facility letter has not changed save that the monies were now owed to NAMA. I am not

satisfied, therefore, as a matter of law, that there was any breach of any obligation which occurred by putting those transactions

into effect in the way in which they were. The situation might well be otherwise if it were possible to point either to a specific term in

a facility letter or in general conditions which precluded such transactions, or if it could be shown that the effect of the transactions

was to alter, in any way, the legal obligations of either party other than the transfer of the benefit of the debt from Anglo Irish to

NAMA. No such consequence has been pointed to in this case.

5.15 Like considerations apply to the question of interest payments. There is no suggestion that the transactions whereby the

substance of the burden of interest payments were, in effect, transferred from one account to another, affected the obligations on

Mr. Coyle to repay. If the interest charged is excessive, then that matter can be dealt with at the plenary hearing which still stands.

But the point with which I am now concerned is simply the transfer of the burden of what ever amount of interest may have been

properly charged from one account to another.

5.16 It was said in argument, placing reliance on expert accountancy evidence placed before the High Court on behalf of Mr. Coyle,

that the interest transactions with which I am now concerned may have given the false impression that accounts were performing in

the sense that, looking at one account in isolation, it might have appeared that the interest obligations on that account were being

serviced whereas the true position was that the burden of the relevant interest was simply being transferred to another account,

thus increasing the indebtedness on that second account. Even if that were the case, it does not affect the legal obligations of Mr.

Coyle to repay his loans and to meet any interest properly due on them. What auditors or regulators might have to say about such

transactions in an entirely separate question. Therefore, for like reasons to those analysed in some greater detail in respect of the

transactions which had the effect of transferring the loans themselves from Anglo Irish to NAMA, I am also satisfied that the interest

transactions did not breach any legal obligations on the part of either Anglo Irish or NAMA.

5.17 For those reasons, I am satisfied that, as a matter of law, the transactions to which attention has been drawn were regular. In

those circumstances, I am not satisfied that they provide any basis for a defence to NAMA's claim.

6. Conclusions

6.1 For the reasons which I have sought to analyse, I am, therefore, satisfied that McGovern J. was correct to conclude that the

transactions whereby money was drawn down from new NAMA accounts, transferred to existing Anglo Irish accounts and used to

discharge and, thus, close those Anglo Irish accounts, were regular. Likewise, the transactions whereby interest on certain accounts

was, in substance, met by a transfer from an alternative account, were also regular.

6.2 In addition, all of the other consolidation measures adopted either predated the facility letter accepted by Mr. Coyle or were

expressly contemplated by it. By signing acceptance of the facility on those terms, Mr. Coyle is clearly precluded from seeking to

reopen any issues which either predate or were contemplated by the facility letter.

6.3 For those reasons, I am not satisfied that any arguable defence has been made out. It follows that McGovern J. was correct to

grant summary judgment in the form in which he did (subject to referring certain questions as to the calculation of interest to plenary

hearing). I would, therefore, dismiss the appeal and affirm the order of the High Court.