A couple who guaranteed a € 400,000 loan made in 2009 by AIB to their son, since described by the bank as a "vulnerable customer", can defend its claim for judgment against them on grounds their son lacked capacity at the time, a High Court judge has ruled.
Mr Justice Max Barrett refused AIB's application for summary judgment under the guarantees and instead directed a full hearing of its claim.
The sole defence to judgment that appears to be left standing is whether the son had capacity at the time of the commercial loan transaction in 2009, he said.
The parents had met the legal threshold for a full hearing as they had demonstrated an arguable case on capacity, he held.
There was, he noted, medical evidence pointing to the son having mental health issues back in 2009 and the “quite striking” feature that AIB, which disputes the claim of incapacity in 2009, presently treats the man as of “limited capacity”.
Because of the son’s mental health issues, the judge referred to the parents as DX and TX and the son as JX.
The case arose after the parents executed a capped all sums guarantee in October 2009 in relation to business loan facilities granted to JX.
The father in an affidavit said his son is considered by the bank as a “vulnerable customer” within the meaning of the Consumer Protection Code (CPC) and has suffered from depression for many years.
JX may have been “symptomatic” when the loan facilities were agreed but the parents were not aware of that and would not have executed the guarantee were they so aware, he said.
He believed, was so advised, but “cannot definitely prove”, that JX lacked capacity to enter into the loan agreement and wanted his son joined as a third party for purposes of ascertaining his state of health at the time of the loan and to seek indemnity and contribution from him if found to have had capacity.
If his son was suffering from depression at the time, AIB could have become aware of this had it taken reasonable steps, such as conducting a medical or psychological evaluation, he said.
The bank, he argued, was under a duty to ensure JX got independent legal advice before entering the loan agreement but had not done so and, as a result, the loan may be void. If JX lacked capacity, he was advised the guarantees entered into are also void.
‘Unconvincing’
In sending the case to full hearing, Mr Justice Barrett said AIB was entitled to bring proceedings against the guarantors only and is not required to join the son to the case.
If the parents, who lived with their son at all relevant times, were not aware he was symptomatic at the time of the loan, the notion AIB should or would know his mental health issues was “unconvincing”, he said.
That did not mean JX had legal capacity in 2009, he stressed.
He considered the sole remaining defence is the issue of capacity.
It appeared AIB, sometime in 2015, decided to commence treating the man as a vulnerable customer following notification to it of his mental health issues, he said.
Whether such limited capacity presented at the time of the loan in 2009 is unclear but there is medical evidence JX was experiencing difficulty with his mental health back in 2009, he said.
The bank disputes the claim of incapacity in 2009 and presently treats JX as a man of “limited capacity” but just how limited is unclear, he said.
It did not matter JX is so treated in the consumer context when the loans were commerical loans, he added.
