Judge: Blind love can leave you homeless
“Emotionally transmitted debt”, whereby legal liability is spread from a debtor to a romantic partner, can destroy relationships, even families, Mr Justice Max Barrett warned in the High Court yesterday.
He was deciding if the court should direct summary judgment involving a significant financial threat to the home of a Galway woman who claims she unwittingly signed business guarantees for her live-in lover and business partner.
Judge Barrett told barrister Andrew Walker, counsel for AIB, that its financial claim for summary judgment against Mary Geraghty, Headfort, Co Galway, on foot of guarantees, should go to full plenary hearing before the court.
The judge said the court was repeatedly presented with summary debt proceedings in which persons had acted “out of the goodness of their heart” when deciding to provide a guarantee to a loved one or accepting a company directorship.
“Much of the financial misery that has followed for such individuals when the company fails could likely have been avoided or ameliorated by availing of the services of a solicitor… the cost of which pales in comparison with the financial risk and personal stress that can arise when a company fails.
“Giving a guarantee for the debts of a loved one or private company is effectively taking a gamble that all will go well or if things go badly the loved one will act as one expects.” Unfortunately it was a feature of life that companies fail and people do not always act as one might expect so it was important to be cautious before ever giving a personal guarantee, the judge said.
The court had been told Ms Geraghty was a co-director with James Kearney, Ballinasloe, Co Galway, in Rostaff Property Development Ltd, Unit 8, Clonberne Enterprise Centre, Ballinasloe, and judgment had already been obtained against Mr Kearney and the company.
The judge said Ms Geraghty in 2009 and in 2012 had signed documents guaranteeing all sums of money at any time owing to AIB by Rostaff. Subsequently, a loan default scenario arose and the bank demanded repayment of company loans.
Ms Geraghty, a hairdresser, said she met Mr Kearney in 1996 and, after developing a romantic relationship with him, he moved into her home. He started up his own construction company giving her a 49% interest as unpaid company secretary after she invested €17,500.
Six months later Mr Kearney had said her input was no longer required and took full control of the company. By 2001 the company was not doing well and she began to receive calls from Revenue Sheriff Bailiffs, angry tradesmen and builders’ providers looking for money.
Ms Geraghty said she had done what he had asked of her in the hope of making their relationship work but by November 2013 he had left her home and told her their relationship was over. He had returned later and asked her to sign over her shares which she did.
“I accept that it is my signature on the documents the bank says I signed but I did not knowingly sign a personal guarantee,” she told the court.
She had trusted Mr Kearney, never having been made aware she would be held liable for company debts.
Judge Barrett, in a reserved judgment, said that in cases of emotionally transmitted debt the principal debtor often was a man and the person taking on economic liability for his business borrowings or debts of his company were his wife or romantic partner.
“However, in our more enlightened times, when a variety of lawful adult relationships between partners… heterosexual, homosexual, bisexual etc., are properly recognised to exist, the issue of emotionally transmitted debt is clearly one that can affect a more vulnerable or less business savvy partner in any such relationship.”
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