BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
High Court of Ireland Decisions |
||
|
You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Allied Distributive Merchants Ltd. v. Kavanagh & Anor [2002] IEHC 181 (1 February 2002) URL: http://www.bailii.org/ie/cases/IEHC/2002/181.html Cite as: [2002] IEHC 181 |
||
[New search] [Printable RTF version] [Help]
THE HIGH COURT
2001No317S BETWEEN
ALLIED DISTRIBUTIVE MERCHANTS LIMITED
PLAINTIFFS
AND
BRIAN KAVANAGH AND KAREN KAVANAGH
DEFENDANTS
Judgment of Mr Justice O'Neill delivered the 1st dav of February 2002
The Plaintiffs in this case seeks liberty to enter final judgment for the sum of £211,13432. Their proceedings are by way of summary summons and the matter came before the Master of the High Court on foot of a notice of motion claiming the relief in question and in due course the Master transferred the matter into the Judges list where it was heard by me on the 17th December 2001.
The appropriate test to be applied by me in deciding whether or not to give the defendants leave to defend these proceedings so that the matter can proceed to a plenary hearing or alternatively give liberty to the plaintiff to enter final judgment is set out in the case of First National Commerce Bank PLC v Anglin 1996 1IR at 75. In that case, the Supreme Court (Murphy J.) held as follows:-
"In my view the test to be applied is that laid down in Banque du Paris v de Naray [1984] 1 Lloyds Law Reports 21 which was referred to in the judgment of the President in the High Court and reaffirmed in National Westminster PLC v Daniel [1993] 1 WLR1453. The principle laid down in the Banque du Paris case is summarised in the head note thereto in the following terms '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 bonafide defence'.
In the National Westminster Bank case Glidewell L.J. Identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:
'I think it right to ask, using the words ofAckner L.J. In the Bank du Paris case at p 23, 'is there a fair or reasonable probability of the defendants having a real or bonafide defence?'. The test posed by Lloyd L.J. In the Standard Charter Bank case, Court of Appeal (Civil Division, Transcript No. 699 of 1990 'is what the defendant says credible?', amounts to much the same thing as I see it If it is not credible then there is no fair or reasonable probability of the defendant having a defence'.
I turn then to apply those principles to the facts of the present case."
The plaintiffs claim is based upon a guarantee entered into by the defendants with the plaintiffs on the 7th day of December 1999, whereby the defendants agreed to guarantee the liabilities of a company known as Brian Kavanagh Newsagents Limited to the plaintiffs, in respect of the supply to the said company of various goods. The existence or validity of this guarantee is not in dispute. Neither is there any dispute that the goods were sold and delivered "to the customer51 i.e. Brian Kavanagh Newsagents Limited nor is there any dispute as to the default of Brian Kavanagh Newsagents Limited or indeed any dispute as to the amount which is claimed to be owed by that company to the plaintiffs.
The nature of the defence which the defendants propose if given leave to defend, as revealed from the two affidavits sworn by Brian Kavanagh and the submissions of Mr. Clarke may be summarised as follows.
They contend that this court must construe the guarantee strictly in accordance with law and with the terms and conditions of trading as between the plaintiffs and Brian Kavanagh Newsagents Limited. They say that if the guarantee is in force then at law it crystallised on the occurrence of the event provided for Le. default in payment of money due by the customer to the plaintiff. They say that the guarantee document should be construed strictly and in favour of the guarantor and construed in this way they say that the only sum which is lawfully due on foot of the guarantee is the sum of £1,864.11 which was the amount due on the date, of the first default being the 6th of October 2000. They contend that notwithstanding any such alleged default on the part of the customer that this default was not pursued by the plaintiffs and they claim furthermore that balances were carried forward and have been incorporated and added to further sums of money alleged to be due and owing by the customer to the plaintiffs and they say that these said sums cannot be due and owing hi accordance with the terms and conditions of trading of the plaintiff company.
They draw attention to the fact that Clause 2 of the guarantee purportsto limit the extent of the guarantor's liability to a stated sum of money but that the form of guarantee exhibited in the proceedings has not been completed in that regard in full or at all. They say that by reason of this, the guarantee document is ambiguous as in the absence of any limitation of the liability of the guarantor, it must be treated as null and void and of no effect
The defendants contend that the outstanding indebtedness of the customer is the outstanding indebtedness as provided for by the condition precedent in paragraph 1 being the event stated namely default in payment They further say that on the occurrence of this event there was an obligation on the part of the plaintiff company to inform the guarantor of this default and thereafter to pursue the customer for payment or in the alternative the guarantors. They say that this default was ignored by the plaintiffs but the indebtedness was carried forward and was added to or incorporated with additional alleged sums arising on foot of contracts which must have been outside the terms and conditions of trading which contracts were not recognised or provided for in the contract of guarantee.
The defendants go on to say that at no stage did they provide any written consent to the amendment or alteration or incorporation of any new terms and conditions in the contract of guarantee dated the 7th of December 1999 and they say that it is clear from the invoices exhibited, that the terms and conditions of trading of the plaintiffs with the customer were not in accordance with those referred to in paragraph 1 of the contract of guarantee and they say that the terms of trading were varied in a manner which is self-evidenth/ substantial and prejudicial to the defendants and was without the written consent of the defendants. Because of these departures from the terms and conditions of trading as between the plaintiff and the customer the defendants contend thatjhe contract of guarantee became void and of no effect
The defendants further contend that the plaintiffs supplied goods to the "customer" in circumstances where the financial circumstances of the "customer" were extremely bleak. In each case where goods were sold and delivered by the plaintiff in accordance with the trading terms they were sold and delivered with provision for a period of twenty eight days credit The defendants contend that it was clear that at the time these transactions took place that the trading between the plaintiff and the "customer" could not have been realistically carried out in accordance with the standard trading terms and conditions, meaning that there was not a realistic prospect that each supply of goods would be paid for specifically within the credit period provided for in the trading terms, having regard to the accumulated debt at that point
In these circumstances it is contended by the defendants that the provision of latitude in the form of extension of time for payment represented a radical departure from the trading terms and conditions and that this departure from the trading terms did not amount to a compromise within the meaning of Clause 3 of the guarantee and hence being a radical departure from those trading terms and conditions, precluded the enforcement of the guarantee. The defendants further aver and submit that a compromise in accordance with Clause 3 of the guarantee document would only relate to a first default
The plaintiffs contest every contention of the defendants as set out in their affidavit What I have to do is to ascertain whether there is a fair or reasonable probability of the defendants having a real or bona fide defence.
In my view the contention by the defendants that the guarantee document is ambiguous because no sum of money is included in Clause 2 of the agreement as limiting the amount of the guarantee cannot be sustained. Either there was a limitation of liability or there was not I note that at no stage in two lengthy affidavits do the defendants claim that there was any limitation on liability which was not included in the copy of the guarantee exhibited in the affidavit of Brian Corcoran. If there was no limitation on the liability of the guarantor then in my view the failure to delete Clause 2 from the agreement and the leaving of the amount blank did not create any ambiguity and did not in my view effect the enforceability of the guarantee.
Central to the defendants proposed defence is their contention that the only default which could be brought under the terms of the guarantee was the first default and that thereafter the guarantee crystallised. I am unable to see any basis for such a contention and I am quite satisfied that such a result was not intended by the parties in making these arrangements, having regard to the fact that the guarantee was manifestly intended to cover the default of the customer in respect of liabilities arising probably on a weekly basis on foot of the daily or weekly supply of goods on the terms and conditions of trading as were agreed by the plaintiff and the customer. In this context the construction of the guarantee contended for by the defendants would render their guarantee virtually meaningless and would clearly deprive the plaintiffs of the intended benefit from this guarantee.
The defendants next substantial contention is that in continuing to supply goods to the customer in circumstances where for each supply of goods there was no realistic prospect of adhering to the credit period provided for in the terms and conditions, having regard to the "bleak" trading situation of the customer which was well known to the plaintiffs and the customer, that there was a significant or radical departure in reality from those terms and conditions which had the effect in law of discharging the defendant from their obligations under the contract of guarantee.
In this context the provisions of Clause 3 of the guarantee come into play. This provides as follows 3 ADM may release or compromise the customers liability to it or grant time to the customer or other indulgence to it without affecting the liability of the guarantor under this guarantee".
I have been referred to The Law Of Guarantees Third Edition by Andrews and Millett and in particular paragraphs 9.29 at page 300 thereof, et seq. Undoubtedly the law is that any material alteration in the terms of the contract between the principal and the creditor, without the consent of the surety, and any extension of time, beyond that contemplated in the original contract given by the creditors to the principal will have the result of discharging the surety.
Mr. Barnaville for the plaintiff does not disagree with these propositions of law but submits that the purpose in placing Clause 3 into the agreement is to exclude those propositions of law so as to ensure that the plaintiffs in this case could grant an extension of time to the customer for the performance of its obligations under the contract between the plaintiff and the customer without discharging the guarantee and he further submits that that is what was done in this case, namely, that upon the occurrence of default by the customer in payment for the goods supplied, the plaintiffs allowed further time to the customer to make these payments.
I am satisfied that the extensions of time or other indulgences granted to Brian Kavanagh Newsagents Limited to enable it to meet its obligations under the contracts with the plaintiffs were covered under the provisions of Clause 3 of the guarantee and hence the extensions or indulgences are properly to be seen as permissible under the terms of both the contract of guarantee and of the principal contract between the plaintiff and Brian Kavanagh Newsagents Limited, rather than as contended for by the defendants a departure from the terms of either of these contracts. I reject the defendants submission that a compromise under Clause 3 of the guarantee could only apply to the first default Clause 3 is cast in broad terms and in my view, the narrow construction of it contended for by the Defendants would have the effect of robbing the clause of the substance which the parties clearly intended it should have, in the context of their ongoing regular trading. Indeed, the meaning of it as urged upon the court by the defendants, would render the clause virtually nugatory.
I am therefore unable to detect in any of the material put forward by the defendants any basis from which it could be said there was a fair or reasonable probability of the defendants having a real or bona fide defence. In that circumstance therefore I must refuse the defendants leave to defend and grant to the plaintiff liberty to enter final judgment for the sum claimed.
