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Banking - Execution of guarantees - Assignment of life policy to bank - Nature of guarantees - Discharge of liability

Posted 9/12/2016

Meagher, James J M v Ulster Bank Ireland Ltd
3/11/2016 No. 2013/7927 P [2016] IEHC 628


Facts: The present case concerned the effect of the termination of guarantees for a deceased person’s estate on the proceeds of a life policy. The key issue for consideration was whether the deceased was indebted to the defendant/bank on foot of the guarantees because the said life policy was the subject of an assignment by way of a mortgage executed by the deceased in favour of the bank. The said guarantees were joint guarantees that allowed the bank to recover “actual or contingent liabilities” of the deceased. The plaintiff being the personal representative of the deceased sought declarations to the effect that he was legally entitled to the proceeds of that life policy and that the guarantees in question were lawfully terminated by him. The plaintiff contended that the bank had not made a demand within a month of notice of termination for the relevant guarantees and did not take action to recover the money and thus, the said guarantees against the bank were not enforceable.
Held: Mr. Justice Tony O’Connor refused to grant the declarations sought by the plaintiff. The Court found that clause 3 of the guarantees in question mentions the term ‘recoverable’ that supported the position of the bank that the determination of the guarantees crystallized the bank’s entitlement to demand the estate of the deceased to give effect to the arrangements concluded between the bank, deceased and the co-guarantors under the guarantees. The Court found that the plaintiff as the personal representative of the deceased was entitled to identify the liabilities of the deceased. The Court found that the parties, the company and the co- guarantors all signed up to an arrangement whereby the proceeds of the said life policy could be used to discharge any liability of the company to the bank at the date of the death of the deceased when the bank called for same. 
Meagher, James J M v Ulster Bank Ireland Ltd
3/11/2016 No. 2013/7927 P [2016] IEHC 628

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