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Incorporating terms by reference
A recent decision(1) has reaffirmed that, depending on the facts, terms and conditions of lending can be incorporated and apply to a bank/client relationship in circumstances where it is contended that those terms and conditions were never furnished to the borrower as part of a summary judgment application. Although the decision was given in the specific context of a bank/client relationship, it is of broader interest in terms of the incorporation of contractual terms and also sets out a useful overview of the summary judgment jurisdiction, which is typically used for liquidated damages (or debt) claims.
The plaintiff was the national agency which took over non-performing loans from the state's banks. The defendant was involved in a property investment transaction for which money was loaned by one such bank. The loan was subsequently transferred to the plaintiff, which ultimately sought summary judgment against the defendant for over €1.25 million.
Summary judgment process
The court outlined that the summary judgment jurisdiction involves a decree being entered on foot of affidavits exhibiting contracts and scrutinising any replying affidavits to see whether there is a defence. This jurisdiction, it noted, is an exception to the constitutionally mandated requirement that courts should hear witnesses, allow cross-examination and listen to any submissions made at the end of such a process. However, summary judgment is a means whereby liquidated sums can be recovered in short form where there is proof of the existence of a debt and where no defence is disclosed by the defendant. It must be clear that the defendant has no defence. If the defendant shows factual material which, if accepted, could amount to an answer of the claim, the summary proceedings are remitted to plenary hearing to be dealt with in the ordinary way (eg, pleadings, discovery, witness evidence, etc).
The court then examined the relevant case law regarding entering summary judgment and noted that the Supreme Court decision in Danske Bank v Durkan New Homes Ltd(2) summarised the position referring to other authorities – "is it 'very clear' that the defendant has no case"(3) – and that summary judgment should be entered only:
"where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment."(4)
The court stated that it was applying those principles in this case.
The relevant facility letter in this case was from July 2008 and offered an overdraft of €30,000 and a loan of €957,000 continuing a prior facility relating to the purchase of a bar. The court observed that all loans must be repaid unless the contract makes a loan dependent on the success of the underlying business venture. The defendant here contended that the general terms and conditions were not notified to him, and that he had not been provided with a copy of the applicable terms and conditions when the facilities were initially advanced.
However, the court noted that they were in fact mentioned in the very first paragraph of the facility letter. It observed that the specific circumstances will determine whether general terms and conditions are incorporated into a contract which is itself quite detailed. Judge Charleton referred specifically to AIB v Galvin Developments,(5) in which the court had found that the bank's terms and conditions had not been enclosed with the facility letters. However, in that case the court also found that:
"there is an express and clear reference to the incorporation of those terms in the offer [letter]… which was accepted… in writing. [The defendants] could have sought a copy of the Terms if they so wished. They did not do so.
It is a well-established principle of contract law that terms may be incorporated into a written agreement signed by the parties by express reference. The failure to enclose a copy of the conditions does not preclude their incorporation by express reference… the agreement…included, by express reference, AIB's General Terms and Conditions Governing Business Lending."
The defendant also contended that the bank was participating in the venture to the extent that its fortunes and the ultimate repayment of the loan were tied to the success of the venture. In this regard, the defendant sought to rely in particular on a memo to the effect that the bank had agreed that there would be no repayment of capital until the bar was sold. However, since this dated from 2009, the court noted that it post-dated the contract. It pithily observed that "a written contract which incorporates all the relevant terms and conditions is hard to quarrel with and is even more difficult to challenge on the basis of subsequent conduct". Ultimately, it concluded that there was nothing in this claim by the defendant to establish a defence.
The court then had to address the question of whether there was any real defence by reference to the contention that the bank was a participant in the venture as a kind of business partner and would recover moneys only to the extent it succeeded. However, on the terms of the July 2008 facility letter, there was no support for that proposition – it was a normal letter of loan offer related to a particular purpose and secured by a legal charge.
Accordingly, the court stated that it had no option but to enter summary judgment. Here, given the precise factual matrix of the defence asserted, the court was satisfied on the basis of persuasive precedent that the terms were incorporated. It then cited the relevant provisions of those terms which gave the plaintiff the right to seek the immediate repayment of the loan.
In addition to being a useful summary of the law relating to summary judgment applications and the basis for defending them, the decision also reaffirms that terms can be incorporated into a contract by reference even where they are not actually provided. Although each case will necessarily turn on its facts, the failure by a plaintiff actually to provide terms and conditions where they are referenced in another document will not necessarily be fatal.
(1) National Asset Loan Management Limited v Michael Barker  IEHC 216.
(2)  IESC 22.
(3) Aer Rianta cpt v Ryanair Limited  4 IR 607, p623.
(4) McGrath v O'Driscoll  1 ILRM 203, p210.
(5)  IEHC 314.
This article was first published by the International Law Office Litigation newsletter on 3 June 2014.