Arguable that Bank on Notice of Undue Influence

In ACC Bank plc v Walsh & Anor [2017] IECA 166 both husband and wife defendants appealed a High Court order for summary judgment however, only Mrs Walsh appeared at the appeal when she told the Court that the defendants had separated in November 2006.

Mrs Walsh claimed:

• that she had not made any application to the Bank for the loan, on foot of which the Bank was seeking to recover judgment and at no stage did she ever visit the Bank or speak to any of the Bank's staff;
   
• that her signature to some of the Bank documents was not her signature;
   
• that she did not benefit in any way from the proceeds of the loan which were used solely in connection with her husband's business in which she had no interest;
   
• that, in so far as she did actually sign any loan documentation, she did so under the undue influence or duress of her husband;
   
• that the Bank failed to advise her to seek, or otherwise ensure that she received independent legal advice;
   
• that the loan in question was used in part to pay off a previous loan made to her husband alone for the purchase of a property in his sole name; and
   
• that it was her husband who made submissions on their joint behalf in the High Court, and she was therefore prevented from making her case properly and fully to that Court.

The Bank claimed that Mrs Walsh signed the loan agreement and the proceeds of the loan were drawn down into a joint account. It also stated that both defendants were sent bank statements, and any suggestion that Mrs Walsh was unaware of the fact or substance of her dealings with the plaintiff was not credible.

Court of Appeal

The Court of Appeal had to decide whether Mrs Walsh had established a sufficient factual basis for her assertion that she acted under the undue influence of her husband, so that the Bank could arguably be said to have had constructive notice of that undue influence such that it was on inquiry, and required to take reasonable steps to ensure that she fully understood what she was doing, and entered into the joint loan freely such as by ensuring that she received independent legal advice.

The Court noted that a mere assertion of undue influence would not suffice. There would have to be other facts which Mrs Walsh could point to which, if proved at trial, would likely support the assertion of undue influence. The Court also noted that it could consider all the surrounding circumstances.

The Court observed that the Bank did not deny Mrs Walsh's contention that she did not apply for the loan jointly with her husband. Neither did it contradict the assertion that some of the proceeds were used to pay off an earlier loan to her husband alone. Furthermore, the Bank did not dispute that at no stage had Mrs Walsh met anybody from the Bank in connection with the loan.

Accordingly, the Court was satisfied that Mrs Walsh had established at least an arguable case that she acted in relation to this joint loan under the undue influence of her husband.

Therefore, the Court had to decide whether it was arguable that the Bank was fixed with knowledge of that undue influence, and was on inquiry to the extent that it was obliged to take steps to ensure that Mrs Walsh fully understood the implications of the joint loan, and was entering into it freely.

The Court was of the view that while the Bank was aware that the defendants were husband and wife there was no evidence that it was aware that there were any difficulties in that relationship. On the other hand the Bank could be taken to have known that Mrs Walsh had no direct involvement in her husband's business, albeit that she was a nominal director.

Given the circumstances, which were not contradicted by the Bank, the Court held that Mrs Walsh had put forward an arguable case that the Bank had constructive notice of undue influence, and was therefore on inquiry to the extent that should have ensured that Mrs Walsh entered into the loan transaction fully understanding the obligations she was undertaking, and freely doing so. The Court noted that one of the ways in which the Bank could have discharged that onus would have been to ensure that Mrs Walsh received independent legal advice but there was no evidence that they did so, or took any other any other step which might be considered reasonable in all the circumstances.

Accordingly the Court remitted the matter to plenary hearing.

For further information please contact Paula Mullooly or your usual contact in A&L Goodbody.

Date published: 18 July 2017