A businessman who loaned €346,000 to former Offaly Fianna Fáil councillor Ger Killally has no case against the bank which handled the monies, the High Court has ruled.
Joseph Delaney, from Edenderry, Co Offaly, had sued AIB claiming it failed in its duty of care to him when dealing with transactions involving money he loaned to Mr Killally who was later declared bankrupt.
Mr Justice Brian Cregan said it appeared Mr Delaney had been "cruelly treated" by Mr Killally. However, he ruled his case against AIB and against two bank-appointed receivers over property he had leased from Mr Killally should be dismissed because it was "doomed to failure as a matter of fact".
The court heard Mr Delaney emigrated from Edenderry in 1975 and worked in construction in the UK before returning in 1998. He operated a small plant hire business on his return and employed Mr Killally as his accountant.
In August 2008, Mr Killally, who was also involved in auctioneering, told Mr Delaney he was having temporary cash flow problems. Mr Delaney agreed to loan him money on condition that if there was any repayment delays, Mr Killally would secure his money.
Between August and September 2008, Mr Delaney’s then-wife Marion, who was handling her husband’s banking, obtained a number of bank drafts,on her husband’s instructions, which were mostly payable to Mr Killally. The sums eventually totalled €346,000.
During one of these withdrawals, an AIB Edenderry staff member asked Mrs Delaney if she was being threatened or forced to withdraw the money. Mrs Delaney replied she was not.
As a result of this, Mr Delaney queried it with Mr Killally because he (Killally) had an account in the same bank. Mr Killally denied there was anything wrong but offered to grant Mr Delaney a €12,000 per annum lease on a business premises in Edenderry which Mr Delaney said he accepted because of his financial exposure to Mr Killally.
However, it transpired Mr Killally first needed AIB’s permission to grant such a lease.
Later, AIB moved to recover various debts Mr Killally had to it and secured judgment against him for €15.5m in July 2009. The bank also appointed receivers over Mr Killally’s assets including the Edenderry premises leased to Mr Delaney.
Mr Killally was then adjudicated bankrupt.
Mr Delaney then brought proceedings against the bank and the receivers claiming he had an entitlement to the premises which he had leased from Killally. He also claimed damages for loss of the premises, and for stress due to the conduct of the bank and receivers in their duty of care to him in relation to Mr Killally.
He claimed the bank failed in its duty to investigate matters in relation to the conduct of Mr Killally as a customer of their bank and and it should have been aware of his (Killally’s) financial difficulties when it gave out the bank drafts for Mr Killally, which were almost immediately relodged in the same bank branch..
The bank and receivers then applied to have Mr Delaney’s case dismissed because it disclosed no reasonable cause of action and/or was bound to fail.
Granting the bank and receivers’ application, Mr Justice Cregan said Mr Delaney loaned money without taking security and when he eventually did, several months later by taking out the lease, did so without legal advice. He also did not seek credit references.
There was “a catalogue of errors” for which Mr Delaney himself “must bear a significant and heavy responsibility.
There was no suggestion in this case of fraud or duress. It was “a simple loan” which Mr Delaney entered into voluntarily and it turned out to be an “unfortunate and improvident transaction”.
It is well-established law that a bank owes no general duty to advise its customers on the wisdom of their commercial projects. the judge said.