Company - Banking - Bank had mortgage on company premises in respect of debts - Particulars of mortgage not registered in time - Defendant directors gave personal guarantees up to £60,000 - Final judgment entered against directors in respect of £60,000 - Whether agreement reached to release personal guarantors in return for con- sent to late registration of particulars of mortgage - Whether defendants had bona fide defence to claim - Companies Act 1963 (No 33), section 100.
The Supreme Court (Mr Justice Keane, Mr Justice Murphy, and Mr Justice Barron); judgment delivered (ex tempore) 16 July 1998.
While it was not possible to finally resolve the substantive matter at this stage it appears that the defendants have a fair and reasonable probability of having a real or bona fide defence to the bank's claim on the basis of an alleged agreement to release the guarantors from personal responsibility in return for their consent to late registration of the particulars of the bank's mortgage in the Companies Office.
The Supreme Court so held in allowing the defendants' appeal against an order for final judgment and remitting the action for plenary hearing.
Pauline McRandal BL for the plaintiff; Simon Boyle BL for the defendants.
Mr Justice Keane said that this was an appeal from the decision of Mr Justice Johnson in the High Court entering final judgment for the sum of £60,000 in two actions brought by the plaintiff bank against the defendants. This claim arose from personal guarantees, to a limit of £60,000, given by them for liabilities to the bank of Senior Property Holdings Ltd of which they were directors. It was common case that the defendants were trying to dispose of their interest in the company in favour of new purchasers who would take over the company and its liabilities. While the bank was well disposed in principle to this being done this was conditional on the transfer being effectively completed and new guarantees being entered into. In the event this was not done. The bank also had a mortgage on the premises of the company in respect of its liabilities to the bank.
At some the stage the bank became aware that the particulars of the mortgage had not been delivered to the Companies Office within the time required by section 100 of the Companies Act 1963 which could have raised a question as to the validity of this security. The bank applied for an extension of time to give these particulars and notified the company of this. There followed a telephone conversation between the solicitor acting for the defendants and the company and the solicitor for the bank, one Mr Barker. The solicitor for the defendants swore that an agreement had been reached between him and Mr Barker that, subject to the approval of Mr Barker's superiors, the directors would be released from their personal guarantees in return for their consent to late registration of the particulars of the mortgage. The defendants said that it was on that basis that they faxed a letter giving their consent to the bank and therefore the bank was now estopped from enforcing the personal guarantees. In the alternative they submitted that the agreement to release them constituted a contract. The bank, however, argued that they were entitled to enforce the guarantees and that as the consent of the directors was not necessary for late registration it was immaterial from their point of view whether the directors consented or not.
Mr Justice Keane said that while obvious difficulties would arise in establishing the defendants' argument the matter could not be fully resolved at this stage. However, the court must look at the whole situation and decide whether the defendants have satisfied the court that there is a fair and reasonable probability of the defendants having a real or bona fide defence. Having regard to what was averred to in the affidavit of the defendants' solicitor this threshold requirement had been met and therefore the action should be remitted to the High Court for plenary hearing.
Solicitors: John Larney (Dublin) for the plaintiff; James Cody and Son (Carlow) for the defendant.