Supreme Court

Kennedy and Others v Allied Irish Banks PLC and AIB Finance Limited 

257/95 

29 October 1996 

HAMILTON CJ: [Nem Diss.]

This is an appeal brought by the above named plaintiffs, and each of them, against the judgment of the High Court (Murphy J) delivered on the 18 day of May 1995 and the order made in pursuance thereof which was perfected on the 26 day of May 1995, whereby the plaintiffs claim against each of the respondents for damages alleged to have been suffered by them and each of them by reason of the defendants' alleged breach of contract and duty owed to them, and each of them, as bankers was dismissed and judgment was granted in favour of the first named defendant on its counterclaim in the following terms viz that the first named defendant do recover 

(1) as against the third named plaintiff the sum of £220,510.50 (being a principal sum of £160,658.63 together with interest thereon up to the 15 day of March 1995 in the sum of £59,851.87) on account no 13562001; 

(2) as against the fourth named plaintiff the sum of £245,639.00 (being a principal sum of £184,548.48 together with interest thereon up to the 15 day of March 1995 in the sum of £61,090.52) on account no 02652011; 

(3) as against the fifth named plaintiff the sum of £66,680.08 (being a principal sum of £50,096.77 together with interest thereon up to the 15 day of March 1995 in the sum of £16,583.31) on account no 20903016; 

(4) as against the first and second named plaintiffs in respect of the indebtedness of the third named plaintiff the sum of £143,563.49 (being a principal sum of £110,000 together with interest thereon up to the 15 day of March 1995 in the sum of £33,563.49) pursuant to the terms of a guarantee in writing dated the 8 day of January 1991; 

(5) as against the first and second named plaintiffs in respect of the indebtedness of the fourth named plaintiff the sum of £54,754.82 (being a principal sum of £43,000 together with interest thereon in the sum of £11,754.82) pursuant to the terms of a guarantee in writing dated the 8 day of January 1991; 

(6) as against the first and second named plaintiffs in respect of the indebtedness of the fifth named plaintiff the sum of £66,680.08 (being a principal sum of £50,096.77 together with interest thereon up to the 15 day of March 1995 in the sum of £16,583.31) pursuant to the terms of a guarantee in writing dated the 8 day of January 1991. 

By consent it was ordered that the second named defendant's counterclaim be dismissed. 

The plaintiffs' claim against the defendants arose out of the following circumstances. 

The first and second named plaintiffs/appellants are and were at all times material hereto Co-Directors of the third, fourth and fifth named Plaintiff Companies, hereinafter consecutively referred to as "Methuen", "Cargagh" and "Towerlough". 

The first named plaintiff, Mr Patrick Kennedy was the owner of 50% of the shareholding in each of the said companies and the second named plaintiff, Mr McGill was the owner of 50% of the shareholding in "Cargagh" and "Towerlough". The first named plaintiff's wife was the owner of the balance of the shareholding in "Methuen". 

Both the first and second named plaintiffs were property developers, carrying on their business through the medium of the said Companies, viz 'Methuen', 'Cargagh' and 'Towerlough'. 

Though the said companies are legal entities separate and distinct from each other and from the first and second named plaintiffs, the activities of each of the said plaintiffs were, as the evidence at the trial disclosed, so interlinked that the learned trial judge correctly regarded them as being in partnership. 

In April, 1990, Methuen owned lands situate at Cabinteely on which it was intended to build fifty detached houses in respect of which planning permission and bye-law approval had been granted by the local authority. 

"Cargagh" were the owners of three acres of land situate at Loughlinstown and known as Sunnyhill, Bray Road in the County of Dublin. 

"Towerlough's" main business was the purchase and running of a hotel known as O'Meara's Hotel, Nenagh in the County of Tipperary, which purchase was completed in October 1990. 

The plaintiffs were customers of the Defendant Companies, Allied Irish Banks Plc (hereinafter referred to as AIB and AIB Finance Limited (hereinafter referred to as AIBF) and as found and stated by the learned trial judge were in the spring and summer of 1990 "treated as highly favoured customers; given very substantial facilities and permitted to effect their financial transactions with a minimum of formality or enquiry and perhaps even a suggestion of irregularity". 

The learned trial judge however went on to say that "this privileged position was not continued in the following year". 

Methuen 

In or about the beginning of 1990 it was decided that Methuen would develop their lands at Cabinteely and it was alleged by the plaintiffs that the Defendant Banks agreed to finance the said development and provided Current Accounts and Term Loans to Methuen. 

On the 7 day of March 1990 the first and second named plaintiffs applied on behalf of Methuen to the defendants for a Business Advance, which included £500,000 from the second named defendant for what was described as "working capital" and stated to be required for "3/4 months maximum". 

By letter dated the 18 day of April 1990 AIBF agreed to provide to Methuen the sum of £500,000 subject to the terms and conditions contained in the said letter. These included the conditions that:- 

(i) the entire facility was subject to quarterly review and that the interest payable in respect thereof be serviced quarterly; 

(ii) the securities required comprised the following:- 

(a) equitable mortgage over freehold title to c.8 acres at Johnstown Road, Cabinteely, zoned residential; 

(b) Guarantee: Cargagh Construction Ltd for £375,000 supported by an equitable mortgage over freehold site known as Sunnyhill, Bray Road comprising c.8 acres with SPP for 3 houses; 

(c) Guarantee: Hugh McGill for £500,000 

Paddy Kennedy for £500,000 

(iii) The Bank reserved the right to withdraw this offer or vary the repayment requirements or any other terms and conditions of sanction at any time should the Bank at its sole discretion consider it prudent so to do. 

Cargagh 

By letter dated the 26 day of February, 1990 'Cargagh' was informed by John Pardy, Development Manager, Commercial (Dublin) of AIBF that AIBF had sanctioned accommodation for 'Cargagh' in the sum of £175,000 subject to the terms and conditions set forth in the said letter. 

This accommodation was stated to be by way of bridging finance to assist in the purchase of the property situate at Sunnyhill, Bray Road, Cabinteely and repayment was to be at the pleasure of the Bank "it being noted that clearance will be effected within three months from date of drawdown" and that the interest payable thereon was payable quarterly in arrears each year. 

The security for the said loan required by the Bank was in the said letter stated to be:- 

"1. Registered Equitable Mortgage over freehold site known as Sunnyhill, Bray Road, Cabinteely comprised of c 3 acres with SPP for three houses vesting in the name Cargagh Construction Limited. 

2. Letters of Guarantee signed by Mr Hugh McGill and Mr Paddy Kennedy for the total amount borrowed together with interest." 

The Bank reserved the right to withdraw the said offer should it at its sole discretion consider it prudent to do so. 

Towerlough 

By letter dated the 18 day of April, 1990 signed on behalf of the aforesaid Mr Pardy, AIBF sanctioned accommodation for 'Towerlough' in the sum of £595,000 as an advance to purchase O'Meara's Hotel in Nenagh, Co Tipperary subject to the terms and conditions set forth in the said letter. 

Though O'Meara's Hotel was purchased by 'Towerlough' in 1990 the facilities afforded by the said letter were not availed of by the plaintiffs for that purpose and alternative funding for the said purchase was arranged by the plaintiffs. 

The alternative funding arranged by the plaintiffs for the purchase of O'Meara's Hotel consisted of 

(i) a loan of £55,000 made by "Cargagh" to "Towerlough"; and 

(ii) a mortgage for £500,000 from the Irish Nationwide Building Society which was sanctioned on the 31 May 1990 and re-issued on the 12 day of October 1990. 

As appears from the letter of offer of this loan dated the 12 October 1990 it was condition of such offer that "Towerlough" would deposit £100,000 with the Irish Nationwide Building Society and that sum would remain on deposit with the Society until the debt was reduced to £250,000. 

In order to raise the sum of £100,000 which was required to be deposited with the Irish Nationwide Building Society, Towerlough agreed to make a letting of the disco facilities and bar area to one John Joyce, a brother-in-law of Mr Kennedy subject to a rent and fine of £100,000. 

Mr Joyce obtained the said sum of £100,000 by way of advance for AIBF, who as found by the learned trial judge were aware of the fact that this sum would be applied for the benefit of the plaintiffs. 

Drawdowns 

Prior to the 30 day of May 1990 there had been no drawdown by Methuen of the funds made available to it by the letter dated the 18 day of April 1990 but 'Cargagh' was indebted to the second named defendant in the sum of £175,000 being the entire of the amount which had been sanctioned. 

On the 30 day of May, 1990 at a meeting attended by Miss Margaret Kiernan, who was Security Officer of AIBF and Mr Kennedy and Mr McGill, the following amounts were drawn down on the Methuen account and cheques were issued viz £100,000 in favour of AIB and lodged to the account of Towerlough and £218,000 in favour of AIBF which was lodged to the account of a company called Abbotswood, making a total of £318,000. 

It is clear from the evidence of Miss Kiernan that it was the intention or wish of the defendants that the amount then due by "Cargagh", £175,000 plus interest would be cleared by a cheque drawn upon the "Methuen" account but Mr Kennedy and Mr McGill did not agree to this and wished "Cargagh" to be kept separate. 

The sum of £218,000 payable to "Abbotswood" was to be lodged by it on deposit with the AIBF. 

As a result of these transactions "Cargagh" remained indebted to AIBF in the sum of £175,000 plus interest and "Methuen" became indebted in the sum of £318,000 plus interest. 

On the 21 day of September, 1990 Mr John O'Mahony, Secured Lending Manager -- Commercial of AIBF wrote, on its behalf to Methuen in the following terms:- 

"I refer to your letter of sanction dated 18 April, 1990. In order to comply with the terms of sanction we shall require the following. 

(a) Abbotswood Limited: to give a letter of Guarantee for IR £218,000.00 plus interest, supported by a lien over on AIB Finance Limited held deposit account for the sum of IR £218,000.00. We note the present balance on the deposit account is currently only IR £182,617.00, we shall require this figure to be immediately increased to IR £218, 000.00. 

We shall also require a copy of the above company's Memorandum and Articles of Association together with an up to date Company Office Search. Please also confirm if this company is trading and if please provide a copy of up to date audited accounts. 

(b) A Company Office Search against Methuen Park Investments Limited shows a number of charges registered against this company. I shall require written confirmation from your solicitors that the charges do not relate directly or indirectly to the site, the subject matter of their undertaking dated 29 May, 1990 and that this bank shall be getting a good and marketable title. In conjunction with this we shall require sight of the lands planning permission and Bye Law Approval. 

(c) Cargagh Construction Limited: Guarantee held for IR £285,000.00 plus interest supported by an equitable mortgage overfreehold site known as Sunnyhill, Bray Road, Cabinteely. A Company Office Search has shown charge in favour of Irish National Building Society. I shall require written confirmation from your solicitors that this charge in no way affects our property and they will provide the bank with a good and marketable title. 

(d) In view of the fact Cargagh Construction Limited account has not been discharged as agreed, the bank shall now require a cross Guarantee from Methuen Park Investments Limited for IR £189,000.00 plus interest. 

(e) All interest accrued to date on your total liabilities should be discharged in accordance with the terms of letters of sanction. 

(f) Financial Information, Audited Accounts for both Methuen Park Investments Limited and Cargagh Construction Limited should be provided. 

Should you have any queries in respect of the above, please do not hesitate to contact me." 

It is clear from the said letter that AIBF were seeking to regularise the position between them and the plaintiffs, particularly as the Cargagh account had not been discharged as agreed and the interest had not been discharged in accordance with the letters of sanction. 

On the 12 day of October 1990 the total amount due by 'Methuen' was £335,423.53 and by 'Cargagh' was £191,565.00. 

By letters dated 12 day of October 1990 and addressed to 'Methuen' and 'Cargagh' respectively, AIBF sanctioned accommodation, subject to the terms and conditions set forth in the said letters, which were stated to "supersede all previous letters of offer", of the said amounts due by each of the aforesaid companies. 

On that date, the first and second named plaintiffs signed cheques, which had been prepared by Miss Kiernan, discharging the amounts due by Methuen and Cargagh on foot of the accommodation provided by the letters of offer dated the 18 day of April, 1990. 

The effect of the these transactions was that the financial accommodation granted to the plaintiffs was exhausted and no further facilities were available to them from the defendants. 

It is clear from the evidence and finding of the learned trial judge that in addition to signing the said cheques, the first and second named plaintiffs signed a very considerable amount of documentation consisting in part of guarantees, declarations and minutes of various companies. 

There was considerable dispute between the parties with regard to the purpose of the meeting on the 12 day of October, 1990. 

The plaintiffs, Mr Kennedy and Mr McGill alleged that between the end of September and the beginning of October 1990 there had been a number of meetings between them and Mr John Pardy on behalf of AIBF at which inter alia the affairs of Methuen and Cargagh were discussed and Mr Kennedy informed Mr Pardy that a further facility of £250,000.00 would be required. 

Mr Pardy is alleged to have stated that he would have to get approval from his superiors, that he would have 'to run it past the boys upstairs' and that some days later he informed Mr Kennedy by telephone that the loan of £250,000 was 'OK'. 

Both Mr Kennedy and Mr McGill stated that at the meeting on the 12 day of October 1990 Mrs Pardy stated that the signing of the documentation had to be done 'as part of a shuffle in order to get the £250,000'. 

Mr Pardy denied that he agreed to provide or was asked to provide in September 1990 the sum of £250,000 for the development of the Cabinteely site or that he made the statement in relation to the transaction of the 12 October being a shuffle in order to get the £250,000. 

The learned trial judge rejected the claim made by the first and second named plaintiffs that Mr Pardy on behalf of AIBF or at all had entered into any agreement in September or October as alleged by the said plaintiffs to grant to Methuen or Cargagh the sum of £250,000. 

The learned trial judge held that the purpose and effect of executing the documents on the 12 day of October was to replace the loan made by AIBF to Cargagh of £175,000 in pursuance of the facility letter in that sum and the loan actually made to Methuen of £318,000 in pursuance of the facility letter in the sum of £500,000 with two loans, one for £191,565 to Cargagh and the other for £335,423.53 to Methuen each of which would be used to repay the original loans together with interest accumulated thereon up to the 12 day of October, 1990. 

These findings by the learned trial judge, viz 

(i) that there was no agreement made by Mr Pardy in September/October 1990 to grant to the plaintiffs, or any of them, a further facility of £250,000; and 

(ii) that the purpose and effect of executing the documents on the 12 day of October, 1990 was to replace the existing loans of 'Methuen' and 'Cargagh' and not to provide any additional facility to the plaintiffs 

are findings of fact made by the learned trial judge after hearing and considering the evidence in regard thereto, and, as there was credible evidence to support such findings, it is not open to this Court to interfere with such findings (vide Hay v O'Grady [1992] 1 IR 210). 

In their Statement of Claim, the plaintiffs had pleaded that the offer to Methuen contained in the letter of offer dated the 12 day of October, 1990 was to provide a further sum of £335,423.00 additional to the sum of £500,000 referred to in the letter of offer dated the 18 day of April 1990 and that the second named defendant was in breach of contract and negligent in failing to provide the said sum. They further pleaded that the letter dated the 12 of October, 1990 addressed to Cargagh was to provide a sum of £191,556 to 'Cargagh' and that the second named defendant was in breach of contract and negligent in providing the said sum. 

In view of the finding by the learned trial judge that the purpose and effect of the said letters of offer dated the 12 day of October 1990 was to replace and discharge the existing loans of 'Methuen' and 'Cargagh' and not to provide any additional facility to the plaintiffs and the fact that the monies provided in pursuance of the said offer were in fact used to discharge the said existing loans, the learned trial judge was correct in dismissing the claim for damages for breach of contract against the defendants arising from these transactions and the plaintiffs' appeal against the findings of the learned trial judge must be dismissed. 

These findings included a finding by the learned trial judge that there was no agreement made by Mr Pardy on behalf of AIBF in September/October 1990 to grant to the plaintiffs, or any of them, a further facility of £250,000 and the learned trial judge was entitled to dismiss that portion of the plaintiffs claim based on such alleged agreement and the plaintiffs appeal against such findings must be dismissed. 

It was further alleged by the plaintiffs that in or about the 15 day of May 1991 two senior officials of AIBF, namely, Mr O'Mahony and Mr Pardy had informed the first named plaintiff, Mr Kennedy, that the sum of £250,000 alleged to have been agreed to be released would be released on behalf of the third named plaintiff, Methuen, and further represented to him that he should lodge a sum of £13,000 of his own personal funds to the credit of the fifth named plaintiff, Towerlough and that sum would be repaid to him out of the said £250,000. 

By letter dated the 25 day of January, 1991 Mr O'Mahony, Lending Manager of AIBF, had written to the Directors of Methuen informing them, inter alia, that the Banks facilities were subject to quarterly review and required their written proposals for dealing with the repayment of capital and servicing interest as their application for renewal of sanction was being submitted to the Credit Committee of AIBF on the 31 day of January, 1991. 

By letter dated the 30 day of January, 1991 the first named plaintiff, Mr Kennedy, wrote to Mr O'Mahony as follows:- 

"Thank you for your letter of the 25 January. 

As you are aware Building and Development works are going on apace on our site at Cabinteely. Roadworks, drainage, and services either have gone in, or are in process of going in, servicing approximately 28 sites. Fourteen of the houses, are completed to slab level ie foundations, and sub-floors are in. The cost of getting the houses to this level is approximately £5,000 apart from the cost of development and services, which in effect means that the value of Work in Progress on the houses to date is £70,000. The value of Road Works and Services done to date is approximately £50,000, and Planning Contributions etc have been £60,000 approx. The value of the site therefore has increased by some £200,000 approximately. 

In order to maximise, and capitalise on the work which we have done to date, we would like to complete the slabs for another 14 houses, at a further cost of £70,000, complete roadwork, drainage and services at an approximate cost of £70,000, and build two showhouses relating to the different houses types which we have, at a further cost of £100,000. This in effect would mean that we are looking for accommodation for a further £250,000. 

I think you will appreciate that you are well covered by way of security, and that the proposed works will enhance that security considerably. 

Repayment of monies borrowed we would propose to repay out of Sales, and we estimate selling prices on our house types as £110,000 for Type C, £135,000 for Type B, and £145,000 for Type A. At present we have no sales, but have had a number of enquiries, despite no marketing campaign having started yet. We would also consider selling off a number of the serviced sites, which we feel are readily marketable, if we had to. Our selling agents are quite confident of selling the houses at the prices referred to, and being realistic, we should achieve considerable sales on such a good site. 

We would be grateful if you would bring this matter before your Credit Committee at their meeting of the 31 January, and look forward to continuing to do business with you." 

In this letter, Mr Kennedy sought accommodation for a further £250,000. 

In this letter he does not refer to the agreement alleged to have been made in September/October 1990 to make this facility available. 

This application for the extended facility of £250,000 was considered by the Credit Committee of AIBF on the 22 March, 1991 and refused on that date. 

However, the application was reconsidered by the said Credit Company of AIBF on the 15 day of May, 1991 and the granting of the facility was proposed by Mr O'Mahony and supported by Mr Pardy. 

The Credit Committee of AIBF approved of the granting of the facility of £250,000, subject to certain specified conditions. 

The granting of such facility by AIBF was subject to and conditional upon the approval of the Credit Committee of AIB. 

The learned trial judge found as a fact that in the circumstances which existed at the time that "the approval of the AIB Finance Credit Committee was in fact subject to and conditional upon approval by or endorsement from the Credit Committee of the Bank (AIB)". 

He went on to state that:- 

"A wide range of witnesses on behalf of the defendants gave evidence that the structures and procedures of the defendants required that in the circumstances which existed, the application for the loan would require the sanction not merely of AIB Finance but also of the Bank. Not only do I accept that this was so as a matter of fact but I see no objection to procedure as a matter of law. The fact that the two defendants are separate legal entities, each holding a banking licence, does not in any way preclude them from entering into arrangement under which particular decisions would be made by the two companies jointly." 

The application for the extended facility of £250,000 was considered by the Credit Committee of AIB, the first named defendant herein, at a number of meetings, the first of which was held on the 23 day of May, 1991 and the final meeting on the 9 day of July 1991 when the sanction sought was refused by AIB and no further facilities were made available to the plaintiffs, or any of them. 

However, the first and second named plaintiffs alleged that they had been informed both by Mr O'Mahony and Mr Pardy that the application for the facility of £250,000 had been granted by the AIBF Credit Committee on the 15 day of May, 1991 subject to the conditions which had been noted by Mr Kennedy and which did not include the condition that the decision was subject to or required the approval of the Credit Committee of AIB, the first named defendant. 

That being so, the learned trial judge identified the real issue between the parties as one of fact and that issue was whether 

"the agents of the defendants, namely Mrs O'Mahony and/or Mr Pardy, communicated to Mr Kennedy or Mr McGill, acceptance of an offer in relation to financial accommodation." 

Evidence with regard to this issue was given by Mr Kennedy and Mr McGill on behalf of the plaintiffs and by Mr O'Mahony and Mr Pardy on behalf of the defendants. 

While their evidence was contradicted by both Mr Kennedy and Mr McGill both Mr O'Mahony and Mr Pardy gave evidence that they had contacted both Mr McGill and Mr Kennedy on the car telephone after the meeting and informed them in effect that they had "crossed the first hurdle", that the application had been recommended by the AIB Finance Credit Committee and informed Mr Kennedy of the conditions under which the loan had been recommended. 

Mr O'Mahony stated that he informed Mr Kennedy that the Committee had recommended the application to the AIB Group Credit Committee and Mr Pardy stated that he had informed Mr McGill that "we had jumped the first hurdle" and that the matter would then go to the AIB Credit Committee and that there were a number of conditions to be complied with. 

Both Mr Kennedy and Mr McGill denied that they had been informed that the matter had to go to and be considered by the AIB Finance Credit Committee and alleged that the communications received by them from Mr O'Mahony and Mr Pardy constituted an agreement by them to grant the said facility. 

The learned trial judge considered this fundamental issue, namely, whether the acceptance or approval communicated by Mr Pardy or Mr O'Mahony was expressed to be subject to or conditional upon the subsequent sanction of the Bank's Credit Committee. 

It is clear from the judgment of the learned trial judge that having considered all the evidence he was satisfied to accept the evidence on this issue of both Mr Pardy and Mr O'Mahony. 

In the course of his judgment, he stated:- 

"I can only conclude that both Mr Kennedy and Mr McGill have misled themselves as to the extent of the approval obtained on that date. To my mind, it is hardly conceivable that both bank officials would have unequivocally assured the customers that the facility was available when they themselves knew that the matter would come before the Banks Credit Committee for approval or rejection in the following week". 

And 

"I am not satisfied that either Mrs Pardy or Mr O'Mahony made the statements or representations alleged by the plaintiffs." 

On the basis of his acceptance of the evidence of both Mr O'Mahony and Mr Pardy on this fundamental issue, it was open to the learned trial judge to hold, as he did, that there was no concluded agreement by AIBF to grant the sanction sought on behalf of the plaintiffs, that such approval as had been conveyed to the plaintiffs was expressed to be subject to the condition that the further approval of the Credit Committee of AIB, was required that such approval was not forthcoming and that consequently there was no contract between the plaintiffs and AIBF to grant the facility sought and to dismiss the plaintiffs claim in contract in relation to this part of the plaintiffs' claim. 

In view of the findings of fact made by the learned trial judge, which were supported by the evidence of Mr O'Mahony and Mr Pardy, and which are binding on this Court, the plaintiffs' appeal against his decision on this issue must be dismissed. 

The foregoing claims in contract related to the activities of 'Methuen' and 'Cargagh'; in addition to those claims, the plaintiffs claimed that the defendants were in breach of contract in relation to the activities of Towerlough. 

'Towerlough' was the Company which purchased O'Meara's Hotel in Nenagh and in which both the first and second named plaintiff held a 50% shareholding. 

The purchase by 'Towerlough' of the said hotel was financed in the manner already set forth in the course of this judgment. 

'Towerlough' maintained an account in the Terenure Branch of AIB and the amount due to the said Bank had been increasing steadily during the Spring of 1991 and by March 1991 this account was overdrawn by an amount in excess of £100,000. 

The plaintiffs were being pressed by AIB to reduce this indebtedness and on the 7 day of March, 1991 the sum of £100,000 was transferred from the Cargagh account to the 'Towerlough' account. 

On the 8 day of March 1991 after the said transfer had been completed, Mr Fanning, Assistant Manager of the Terenure Branch of AIB, wrote to the first named plaintiff and informed him that the overdraft facilities available to 'Towerlough' were withdrawn. 

On the 27 day of May, 1991 the first named plaintiff, Mr Kennedy wrote to the Terenure Branch of AIB in the following terms: 

"As you are aware the above Company is involved in the ownership and running of O'Meara's Hotel in Nenagh, Co Tipperary, as well as carrying out building works for houses at Cabinteely, Co Dublin. 

In or about November, 1990 it was agreed that a Bank Overdraft facility of some £100,000 would be made available to the Company for the carrying out of substantial repairs and refurbishment work to the Hotel. To this end details of monies that had already been expended, further monies needed to complete the works, and cash flow projections were prepared and submitted to the Bank. 

At that stage the Bank held the personal guarantees of Mr Hugh McGill and myself as security. No property assets were pledged. 

It was already understood that this facility was to be paid off from the Cash Flow generated by the Hotel. 

In or about the beginning of the year ending January, 1991 we informed the Bank that, acting upon the advise of our Accountants that for Tax efficiency reasons, we should carry out building works on our houses at Cabinteely, Co Dublin in the name of the Company, and we accordingly informed the Bank, and funds were lodged from time to time to the Towerlough Property Ltd account to finance these building works. 

In or about February, 1991 a Mr Gerry Fanning phoned and requested that because the Bank was paying a number of standing orders for two other of our Companies namely Cargagh Construction Co Ltd and Methuen Park Investment Ltd that additional security should be given to the Bank. To this end I had my Solicitor pledge properties at Baggot Lane to the Bank. 

Some time after this, in or about March, 1991, Mr Fanning phoned and asked that I draw a Cheque for £100,000 on Cargagh Construction Co Ltd in order to reduce the overdraft in Towerlough Properties Ltd. The reason for this was that the Bank was able to 'Tack on' to its existing mortgage in Cargagh Construction Co Ltd, and thereby secure itself. 

It was clearly understood that our overdraft facility in Towerlough Properties Ltd, as a trading Company would be left intact. You will appreciate that otherwise it would make no commercial or financial sense to have done everything the Bank had requested in order to give the Bank additional security for nothing in return ie worsen our own cash flow position. 

On the 8 of March, 1991 the day following the transfer of £100,000 Mr Fanning wrote to me, stating that any previously implied overdraft facility was now cancelled. 

As a result Standing Orders in our Company were not paid, and cheques have recently been returned to suppliers and subcontractors. No notice whatsoever of the withdrawing of this overdraft facility was given to us. 

It is of course true that additional working capital was requested from Allied Irish Finance, and we understand that this has been approved by Allied Irish Finance subject to certain conditions which we have agreed to had have acted upon. 

The result of this had been devastating. Pension for Mr McGill and myself have been cancelled, the viability of our Companies which are extremely sound, has been put in jeopardy, and it is no exaggeration to state that the livelihood of Mr McGill and myself is on the line and at stake. 

Hitherto we have enjoyed an excellent relationship with the Bank and I would point out that very substantial monies were lodged and held on deposit by the Bank in Hugh McGill and my own name. However I have serious responsibilities to the Companies themselves and to the Companies creditors, and I must therefore ask you that the Bank immediately reinstate our overdraft facilities, so as to minimise the very serious damage that has been caused to us." 

In respect of this transaction the plaintiffs in their Statement of Claim claimed that:- 

"The fifth named plaintiff purchased a hotel known as O'Meara's Hotel, Nenagh, Co Tipperary in or about October 1990. In or about November of 1990 an application was made to the first named defendant for overdraft facilities of IR £100,000 and a term loan of IR £150,000 the purposes of which were to carry out refurbishment work to the fifth named plaintiff's hotel. Two officials from the first named defendant attended a meeting with the first and second named plaintiffs, inspected the property, discussed details of financial requirements and several days later informed the first named plaintiff that an overdraft facility of IR £100,000 would be made available to the fifth named plaintiff but that no decision about the term loan would be made at that time. It was agreed that the IR £100,000 overdraft facility was to be repaid from the cashflow of the Hotel over an 18 month period. 

The fifth named plaintiff proceeded to carry out extensive refurbishment works to the Hotel. In or about March of 1991 the Assistant Manager from the Terenure Branch of the first named defendant requested additional securities to be given to the first named defendant and represented that this security would be used to secure a term loan of IR £100,000 and that the existing overdraft facility to the fifth named plaintiff would be left intact. An undertaking was given in respect of property in Pembroke Row, Baggot Street, Dublin 2. This security was in the name of the fourth named plaintiff. The first named defendant requested that a cheque for the sum of IR £100,000 in the name of the fourth named plaintiff be drawn and that these monies would be lodged to the account of the fifth named plaintiff. The first named defendant represented that it would be able to tack on to an existing mortgage of the fourth named plaintiff and that the overdraft facility of IR £100,000 enjoyed by the fifth named plaintiff would be left intact. Pursuant to the said agreement a cheque was drawn on the fourth named plaintiff and lodged to the credit of the fifth named plaintiff. The fourth named plaintiff received no benefit whatsoever from this transaction and in fact it had increased its indebtedness to the first named defendant and surrendered unencumbered security. 

In breach of the said agreement and in breach of trust, having complied with the request of the first named defendant in respect of this transaction the first named defendant withdrew the overdraft facility of IR £100,000 of the fifth named plaintiff which it had agreed would remain intact causing a huge financial crisis as a result of which the fifth named plaintiff sustained loss, damage, inconvenience and expense. 

Furthermore, the first named defendants withdrew normal banking facilities to the plaintiffs thereby occasioning them loss, damage, inconvenience and expense." 

It is clear from the said Statement of Claim that the plaintiffs alleged that in March 1991 the first named defendant AIB agreed, that upon the lodgment of securities sought by them, they would grant to Towerlough a loan of £100,000 and that the existing overdraft facility would be left intact. 

This claim is inconsistent with the fact that in March 1991 the plaintiffs and in particular Towerlough were, as stated by the learned trial judge, 'being pressed to reduce this indebtedness' by AIB and their requirement that 'Cargagh' transfer the sum of £100,000 to the 'Towerlough' account, which was done. 

When this was done, AIB withdrew any overdraft facilities from Towerlough. 

The learned trial judge found that there was no evidence that AIB at any time expressly by implication expressly or by implication agreed to lend Towerlough the sum of £100,000 or to provide a permanent overdraft in that sum. 

Indeed the admitted evidence that AIB were in March 1991 pressing 'Towerlough' to reduce their indebtedness which had grown to £100,000 and their requirement that 'Cargagh' should lodge £100,000 to the credit of 'Towerlough's' account would indicate that there was no such agreement. 

In the absence of any such agreement, AIB were entitled to terminate any overdraft facilities enjoyed by Towerlough. 

The learned trial judge dismissed the plaintiffs claim in contract and having regard to the findings of fact made by him and outlined in the course of this judgment, I am satisfied that he was entitled so to do and would dismiss the plaintiffs' appeal in respect of that portion of claim which was based on contract. 

Plaintiffs claim in tort 

In addition to the plaintiffs claim against the defendants for damages for breach of contract, the plaintiffs alleged that the defendants were in breach of a duty of care which, it was alleged, was owed by the defendants to the plaintiffs having regard to the existence of a special relationship between the plaintiffs and respondents as found by the learned trial judge and given the existence of substantial contractual relationships between the plaintiffs and the defendants. 

The relationship between the plaintiffs and the defendants was based on contract. 

In the written submissions submitted by the plaintiffs, reference is made to the judgment of the Texas Supreme Court in Montgomery Ward & Company v Scharrenbeck and the passage from the judgment in that case where it is stated:- 

"accompanying every contract there is a common law duty to perform with care, skill, reasonable expedience and faithfulness the things agreed to be done and the negligent failure to observe any of these conditions is a tort as well as a breach of contract." 

It is submitted on behalf of the plaintiffs in this case that the position in this jurisdiction is as outlined in the passage from the judgment of Mr Justice Gannon in Tulsk Co-operative Livestock Mart Limited and Ulster Bank Limited (unreported but delivered on the 13 day of May, 1983) where he stated that:- 

"Although the relation of a customer and banker between the parties warrants the founding of the claim in part on contract and the alleged breach of contract, the essential issues in dispute are subject to the law relating to negligence. The plaintiffs claim is founded more upon alleged failures on the defendants part to measure up to the duties and standards of care appropriate to the purported performance of the contractual obligations rather than on an alleged failure to perform in accordance with the express or implied contractual terms. The nature of the duties which the law imposes depends upon the circumstances of the relationship between the parties and the harm, loss or detriment to either party which would reasonably be foreseeable from such circumstances and relationships." 

It is clear from these passages, upon which the plaintiffs rely, that the duty of care referred to therein arises out of and in the performance of obligations arising from a contract or relationship entered into between the parties and is not authority for the proposition that such a duty exists independently of a contractual relationship. Gannon J specifically refers to the duties and standards of care appropriate to the purported performance of contractual obligations. 

The nature and extent of the contractual obligations assumed by the defendants herein is of considerable importance for the purpose of determining whether or not the defendants, or either of them, were in breach of a duty of care owed by them to the plaintiffs. 

It is stated in Halsbury (4 Edition, Vol 3(1) Paragraph 149) that:- 

"where the parties are in a contractual relationship, it is not to the advantage of the laws development to search for liability in tort, particularly in a commercial relationship." 

In the course of delivering the judgment of the Privy Council in Tai Hing Cotton Mill Ltd v Lieu Chong Hing Bank Ltd [1986] 1 AC 80 Lord Scarman stated at page 107 of the Report:- 

"Their Lordships do not believe that there is anything to the advantage of the law's development in searching for liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify the duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis; on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, eg in the limitation of action. Their Lordships respectively agree with some wise words of Lord Radcliffe in his dissenting speech in Lister v Romford Ice & Cold Storage Company Ltd [1957] AC 555. After indicating that there are cases in which a duty arising out of the relationship between employer and employee could be analysed as contractual or tortious, Lord Radcliffe said at page 587: 

'Since, in any event, the duty in question is one which exists by imputation or implication of law and not by virtue of any express negotiation between the parties, I should be inclined to say that there is no real distinction between the two possible sources of obligation. But it is certainly, I think, as much contractual as tortious. Since in modern times the relationship between master and servant, between employer and employee, is inherently one of contract, it seems to me entirely correct to attribute the duties which arise from that relationship to implied contract'. 

Their Lordships do not therefore, embark, on an investigation as to whether in the relationship of banker and customer it is possible to identify tort as well as contract as a source of the obligations owed by the one to the other. Their Lordships do not, however, accept that the parties' mutual obligations in tort can be any greater than those to be found expressly or by necessary implication in their contract." 

As pointed out by Lord Goff of Chieveley in the course of his speech in Henderson v Merrett Syndicates Ltd [1994] 3 AER 506 at page 526 "the issue in Tai Hing was whether a tortious duty of care could be established which was more extensive than that which was provided for under the relevant contract". 

At page 532 of the report of his speech he stated that:- 

"It is however my understanding that by the law in this country contracts for services do contain an implied promise to exercise reasonable care (and skill) in the performance of the relevant services; indeed, as Mr Weir has pointed out (XI Int Enc Comp Law ch 12, para 67), in the nineteenth century the field of concurrent liabilities was expanded 'since it was impossible for the judges to deny that contracts contained an implied promise to take reasonable care, at the least, not to injure the other party'. My own belief is that, in the present context the common law is not antipathetic to concurrent liability, and that there is no sound basis for a rule which automatically restricts the claimant to either a tortious or a contractual remedy. The result may be untidy; but, given that the tortious duty is imposed by the general law, and the contractual duty is attributable to the will of the parties, I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him, subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle, the parties must be taken to have agreed that the tortious remedy is to be limited or excluded." 

I accept this to be the correct statement of the law viz that where a duty of care exists, whether such duty is tortious or created by contract, the claimant is entitled to take advantage of the remedy which is most advantageous to him subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle the parties must be taken to have agreed that the tortious remedy is to be limited or excluded. 

In the instant case, the relationships between the plaintiffs and the defendants were created by the contracts or agreements hereinbefore referred to and the obligations arising therefrom were, on the part of the defendants, to perform 'with care, skill, reasonable expedience and faithfulness the things agreed to be done'. 

The learned trial judge held that there was no breach of contract by the defendants and their appeal against that finding has been dismissed. 

In the course of his judgment in the Court of Appeal in the case of National Bank of Greece SA v Pinios Shipping Company No 3 [1988] 2 Lloyd's Rep 126) Lloyd LJ stated:- 

"But so far as I know it has never keen the law that a plaintiff who has the choice of suing in contract or tort can fail in contract yet nevertheless succeed in tort." 

The cases clearly establish that when parties are in a contractual relationship their mutual obligations arise from their contract and are to be found expressly or by necessary implication in the terms thereof and that obligations in tort which may arise from such contractual relationship can not be greater than those to be found expressly or by necessary implication in their contract. 

A duty of care can arise irrespective of contract where a party possessed of a special skill undertakes to apply that skill for the assistance of another person who relies upon such skill (vide Hedley Byrne v Heller & Co Ltd). 

The existence of such a duty was recognised by the High Court in the cases of Tulsk Co-Operative Livestock Market v Ulster Bank Limited (Professional Negligence Law Reports page 55), in Towey v Ulster Bank Ltd [1987] ILRM 142 and TE Potterton Ltd v Northern Bank Limited [1993] 1 IR page 413. 

In these cases it was found as a fact that the customer, to the knowledge of the bank, relied on the bank to perform a particular task, that the bank assumed the responsibility of performing that task and failed to exercise the requisite degree of care in the performance of such task. 

There is no such finding or evidence to support such finding in this case. There is no evidence that the defendants or either of them had undertaken any responsibility to the plaintiffs or either of them other than to comply with the terms of the agreements entered into by them. 

In this case the plaintiffs, and each of them, had sued the defendants both in contract and in tort. 

The gravamen of the plaintiff's claim and complaint in this case is that the defendants were in breach of duty owed to them by the defendants in failing to provide to them the finance necessary to complete the development of certain lands situate at Cabinteely in the County of Dublin and in particular in failing to grant to them the facility for the sum of £250,000 which in the opinion of the relevant plaintiffs was necessary in order to ensure the continued development of these lands and in the consideration of the plaintiffs application for such facility to consider the interests of the plaintiffs as well as considering the defendants own interest. 

The learned trial judge held that in the spring and summer of 1990 the plaintiffs were as they claimed treated as highly favoured customers; given very substantial facilities and permitted to effect their financial transactions with a minimum of formality or enquiry and perhaps even a suggestion of irregularity and that this privileged position was not continued in the following year. 

He further found that "it was patently clear from September 1990 that the Bank was consulting and protecting its own interests both as to the security which it would obtain and as to the monies which it would provide". 

It was submitted by the plaintiffs that in considering their own interests to the detriment of the plaintiffs that they were in breach of a duty owed by them to the plaintiffs. 

In the course of his judgment in Lloyds Bank Plc v Cobb (judgment of the Court of Appeal unreported but delivered on the 18 day of December, 1991) Scott LJ said:- 

"If a customer applies to the Bank for a loan for the purposes of some commercial project, and the bank examines the details of the project for the purpose of deciding whether or not to make the loan, the Bank does not thereby owe any duty to the customer. It conducts the examination of the project for its own prudent purposes as lender and not for the benefit of the proposed borrower". 

With regard to the application by the plaintiffs for the facility of £250,000 made by them in 1991 the learned trial judge held that: 

"the matter was considered solely from the point of view of the Bank and in the circumstances as they actually existed in June 1991 and irrespective of how that situation had arisen. If the Bank owed a duty to the plaintiffs to consider their interest, then unquestionably the Bank totally failed to do so. It may not be an image which any banker, professional person or businessman would wish to project but, put to the test, the fact is that the Bank consulted exclusively their own commercial interests and in the circumstances it seems to me that they had no legal obligation to act otherwise." 

Was there anything in the circumstances of this case which created a duty on the defendants, as bankers to the plaintiffs, to consider the interest of the plaintiffs and in particular the interests of the first and second named plaintiffs, and the third and fourth named plaintiffs? 

The relationship between the plaintiffs and the defendants was based on contract and the learned trial judge held that there was no breach of contract by the defendants in relation to the plaintiffs. 

The relationship between the defendants and "Cargagh" was originally based upon the terms of the letter of offer dated the 20 day of February 1990 which said agreement was altered by the terms of the letter of offer dated the 12 day of October 1990. 

The relationship between the defendants and "Methuen" was based on the terms of the letter of offer dated the 18 day of April, 1990 which was altered by the terms of the letter of offer dated the 12 day of October 1990. 

It is clear that the defendants were not in breach of the agreement in requiring "Cargagh" and "Methuen" to accept the offers contained in the said letters dated the 12 day of October 1990 as both companies were in breach of the terms of the original letters of offer. 

The effect of the latter letters was to discharge the liabilities under the earlier letters of offer and the effect thereof was that no further facilities were at that time available to either "Methuen" or Cargagh". 

The plaintiffs submitted that the defendants were in breach of the duty owed by them to the plaintiffs in not explaining to them that as a result of the transactions affected on the 12 day of October 1990 no further facilities were then available to the said companies. 

The learned trial judge held that -- 

"in the present case there would have been no need for the defendants to advise the plaintiffs, having regard to their experience and qualifications, as to the nature and effect of the documents which they executed or the effect of the transaction as a whole. Taken in conjunction with the letter of the 21 day of September 1990 and the facility letter of the 12 day of October 1990 -- which I accept was available to the plaintiffs on that date -- I cannot see that there was any difficulty in understanding the nature of the transaction." 

He further held that:- 

"the question whether the plaintiffs would obtain further or additional facilities did not, as I have found, arise at that stage". 

The learned trial judge had held that there was no agreement between the plaintiffs and Mr Pardy on behalf of AIBF to grant a further facility of £250,000. 

The application therefor was made by letter dated the 30 day of January, 1991 the terms of which are set forth in the course of this judgment. 

By letter dated the 25 January 1991 AIBF had written to the Directors of Methuen informing them that the Bank's facilities were subject to quarterly review and that their written proposals were required for dealing with the repayment of capital and servicing interest on the facility then enjoyed by them and which was subject to review in accordance with the terms of the said agreement on the 31 day of January, 1991. 

In considering the said application for the additional facility of £250,000 the defendants did not owe any duty, contractual or otherwise, to agree to the granting of the said facility. In considering whether or not to grant the said facility, the defendants were under no duty to consider the said application other than in accordance with their own interests; they were under no duty, contractual or otherwise, to agree to grant the said facility. 

Having carried out what they considered to be the necessary enquiries and investigations as to the viability of granting the said loan, they decided not to grant the said facility. 

I am satisfied that the learned trial judge was correct in holding as a matter of law that the defendants were under no obligation to do otherwise and that the investigations and reports obtained by them were for their benefit and that they were under no obligation to disclose the nature of such reports as they relied upon to the plaintiffs. 

I am satisfied that the evidence adduced at the trial and as found by the learned trial judge, does not disclose the breach of any duty owed by the defendants to the plaintiffs and consequently their appeal must be dismissed. 

The plaintiffs also submitted that the defendants were in breach of the duty of confidentiality which they separately owed to the separate defendants by disclosing information with regard to the financial affairs of the plaintiffs, and each of them, to the other defendants. 

This matter was not dealt with by the learned trial judge as he accepted the defendants submission that it was not open to them on the pleadings to make this case. 

That being so, it is not open to this Court to make any findings with regard to this alleged breach of duty. 

Consequently, I am satisfied that the plaintiffs appeal against the judgment and order made by the High Court including the Order made on the counterclaim should be dismissed and the order of the High Court affirmed.