A financial fund is entitled to judgment for €11.6m against the estate of a deceased Co Meath quarry owner over guarantees executed by him in favour of his sons, a High Court judge has ruled.
While John Joseph Flood intended to assist his sons in 2007 by effectively gifting them his quarry lands through giving Allied Irish Banks (AIB) recourse to them, there was no evidence he intended to place his family home or other assets “on the line”, but he had mistakenly done so, Ms Justice Siobhan Stack said.
It was clear all parties wrongly believed only the quarry was at risk, she said.
The transactions entered into by Mr Flood, who retired in 1994 as operator of his quarry business at Oldcastle, were improvident and executed under undue influence of his son David, she found.
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The deceased had received independent, but “inadequate”, legal advice but Everyday Finance DAC, which took over the AIB security, had no notice of this inadequacy or the resulting misunderstanding of the deceased about the effect of his guarantees, she held.
Everyday, she concluded, was entitled to judgment for some €11.6m against the deceased’s widow, Joan Flood, sued in her capacity as legal personal representative of his estate.
In her recently published judgment, the judge noted Mr Flood (83) died in 2012 unaware the bank was moving to enforce the guarantees.
The proceedings arose from two guarantees executed in May 2007 by Mr Flood in favour of his sons, engaged in property development as the Flood Partnership.
The guarantees were provided as security for an overdraft of €1.5 million made to three of his sons, David, Tom and Alec, and a loan of some €12.7 million, made by AIB to Tom and Alec. The deceased also executed a charge in favour of AIB over his lands, comprising 59 acres of quarry lands, 12 acres of agricultural land, and his family home. The security was called in after the proposed property development failed.
David Flood, the judge noted, still runs the quarry company which paid rent to his parents, income that was presumably dependent on Everyday failing to obtain possession of the lands or to register judgment against the estate on foot of the court’s decision.
The judge rejected arguments the deceased lacked capacity when he executed the transactions at issue.
David Flood’s evidence, she outlined, was that he had pressurised his father to such an extent his father did not exercise his own independent will and judgment in executing the transactions and their relationship gave rise to a presumption of undue influence.
Having found the deceased’s solicitors met him on his own when advising him about the transaction, she concluded no evidence of actual undue influence arose.
However, the nature of the transaction – giving the bank recourse to the deceased’s entire assets – justified raising a presumption it was procured by undue influence of David Flood for the benefit of himself and the Flood Partnership.
While finding the deceased was not significantly incapacitated or mentally infirm, she said he relied on the kindness and assistance of David, who managed his bills, financial affairs and post, and thus a presumption arose David had influence over him.
Having found the presumption of undue influence arose, the judge said it was for Everyday to rebut that by adducing evidence that independent and adequate legal advice was given to the deceased and/or that the gift was a free exercise of the deceased’s will.
The legal advice given to the deceased was independent as the solicitors involved were not conflicted and acted solely for the deceased, she held.
However, the adequacy of the advice fell short as neither solicitor had investigated the deceased’s financial position or the value of the lands, and so could not have advised the deceased whether the transactions were in his interest, she said.
An investigation would have shown loss of the lands would mean losing the rents from them, which was the sole income of the deceased and his wife.
The execution of guarantees exceeding the deceased’s entire assets were improvident transactions, she held.
Everyday took the reasonable steps required of it to satisfy itself the charge and guarantees were the product of his full and free, informed consent, it was not on notice of the inadequacy of the advice provided and was entitled to judgment, she held. Final orders would be made later, she added.
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