Fund cannot seek to recover €1.6m from doctor, appeals court rules

Three-judge court finds High Court erred in fact and in law in not holding that bank was permanently estopped from offsetting funds in doctor's account and from pursuing him over debt.
Fund cannot seek to recover €1.6m from doctor, appeals court rules

Paur secured a €3.4m loan from Ulster Bank Ireland and both provided guarantees for the borrowings. File picture: Sasko Lazarov/

A fund has been permanently prevented by the Court of Appeal from seeking to recover some €1.6m from a doctor arising from a loan issued by Ulster Bank Ireland in 2007.

The three-judge Court of Appeal on Friday granted an appeal by Neil Healy against a High Court decision that Promontoria (Aran) Ltd is entitled to recover that sum from him.

The High Court finding was made in 2018 following a rehearing of proceedings by Dr Healy, with an address at Lough Sheever Corprate Park, Mullingar.

The Supreme Court in 2015 directed the hearing after allowing Dr Healy's appeal over a 2009 High Court rejection of his claim that Ulster Bank wrongly appropriated some €667,000 monies in a deposit account to set off against his disputed liability concerning a €3.4m loan.

Mr Healy had claimed he was released from his guarantee of the €3.4m loan during a meeting, in August 2007, with an Ulster Bank official. The Supreme Court held the 2009 High Court decision "failed to engage" with evidence of his mother, which was supportive of her son’s account of being given certain assurances by the bank official.

Dr Healy had planned to develop an old hospital facility at Coole in Westmeath in 2005 with a medical colleague. They secured a €3.4m loan from Ulster Bank Ireland and both provided guarantees for the borrowings.

They agreed in 2007 to terminate the arrangement on the basis of Dr Healy receiving €2.2m and his ex-partner taking over assets and liabilities of the partnership.

The bank claimed Dr Healy's liability for the original loan was still in place and, in August 2008, deducted €667,210 from the €2.2m against the debit balance outstanding on the €3.4m.

Dr Healy claimed the bank had no right to do that and he had only deposited the €2.2m with it after being assured at a meeting with Alan Leech, relationship manager at the Mullingar branch, on August 1, 2007, that he was "in the clear" in relation to his liability for the Coole project. His mother, who had attended the meeting, gave evidence supporting his account.

Following the rehearing, the High Court dismissed Mr Healy’s proceedings in March 2018 and ordered that Promontoria recover €1.63m from him, plus costs.

In the Court of Appeal judgment allowing Mr Healy’s appeal, Ms Justice Mary Faherty noted the bank had not cross-appealed the High Court finding the assurances given by Mr Leech extended to all liabilities regarding the Coole project.

The salient consideration in this appeal was whether the bank is estopped in equity from pursuing Dr Healy in respect of the Coole liabilities, she said.

She found the High Court erred in fact and in law in not holding the bank was permanently estopped from offsetting the funds in Dr Healy’s account and from pursuing him over the Coole debt.

Any reasonable person in Dr Healy’s shoes who had just completed the series of transactions at issue, in respect of which the bank was centrally involved, would have treated Mr Leech’s words as clearly representing Dr Healy’s liabilities regarding the Coole project were at an end, she said.

Dr Healy’s “entirely reasonable” reliance on the bank’s assurances also had the effect of depriving him of the opportunity to take steps to safeguard his position in relation to agreements with his former business partner.

The judge said it was “unconscionable” for the bank, after August 1, 2007, to allow Dr Healy proceed for a year to utilise his monies in the belief he was free from the Coole debt without disturbing him of that belief. It was unconscionable for it to apply the set off, in August 2008, in the face of the assurance given to him a year earlier.

Promontoria, as assignee of the loans, is bound by the bank's representations and is estopped, by reason of the bank’s conduct, from pursuing Dr Healy, she further held.

Final orders arising from the judgment will be made on a later date.

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