A widow has failed to persuade the Court of Appeal that a financial institution should not be allowed to rely on guarantees provided by her late husband for €11.5 million loans in favour of their sons.
The three-judge court found AIB took reasonable steps to ensure the late John Joseph Flood understood the nature of the transaction before executing the guarantees in 2007.
This enables its title successor, Everyday Finance, to rely on the guarantees notwithstanding that they were “improvident” and that there was a presumption of “undue influence” due to his relationship with his son, David, the court held.
Ms Justice Caroline Costello, ruling for the court, said the bank had required the deceased to take independent legal advice before signing the guarantees. The High Court already held that the advice he received from an independent solicitors’ firm was “inadequate” and that he did not appreciate the charge extended beyond his quarry lands and included his family home.
Ms Justice Costello said AIB was entitled to assume the solicitors had fulfilled their obligations to Mr Flood and had explained the nature and effect of the transaction.
The court dismissed the appeal brought by his widow, Joan Flood, and ruled that Everyday is entitled to rely on the guarantees.
The judge said Ms Flood is the sole executrix and beneficiary in the will of her late husband, who ran a successful quarry in Oldcastle, Co Meath before retiring in 1994. He died in 2012 aged 83.
The proceedings arose out of two guarantees Mr Flood executed in May 2007 for loan facilities totalling €12.7 million to his two other sons, Tom and Alec, to aid the purchase of a development site in Sutton, Co Dublin. He also executed a charge in favour of the bank over his lands, comprising 59 acres of quarry lands, 12 acres of agricultural land and his family home.
David was originally to be a co-recipient of the full loan, but, due to personal reasons, this changed before the transactions occurred. However, he provided a guarantee for the full €12.7 million.
Failed property scheme
The Sutton property scheme failed and the site was sold on by the bank at a significant shortfall.
In 2018, the bank secured judgment against David and Alec on foot of the loan and personal guarantee. It issued a letter of demand against their father in 2010.
Everyday sued his estate and later substituted Ms Flood as the defendant.
In defence, Ms Flood claimed, among other points, that her late husband did not obtain adequate legal advice, had been subjected to undue influence by David and that the provision of the guarantees constituted an “unconscionable bargain”.
Last April, the High Court’s Ms Justice Siobhan Stack held that the relationship between the deceased and David was such to raise a “presumption of undue influence”.
David’s evidence, she noted, was that he had pressurised his father to such an extent his father did not exercise his own independent will and judgment in executing the transactions.
She ruled that the legal advice obtained by the late Mr Flood was inadequate, as it seems to have been a “brief explanation” of the nature of the transactions.
He seems to have not understood he would be personally liable for sums greatly exceeding the quarry’s value, she said. There was no evidence he intended to place his family home or other assets “on the line”, but he had mistakenly done so, she said.

Ms Justice Stack held that the execution of guarantees exceeding the deceased’s entire assets were improvident transactions. However, the bank had no notice of the inadequacy of the legal advice or his misunderstanding about the effect of guarantees. Everyday was entitled to judgment against Ms Flood, she ruled.
In her appeal, Ms Flood alleged Everyday failed to rebut the presumption of undue influence and the High Court was wrong to hold that the lender was not on notice of the inadequate legal advice.
In her judgment for the Court of Appeal, Ms Justice Costello said the crucial issue in the case was whether the bank took reasonable steps to ensure the deceased was openly and freely agreeing to provide the security requested.
She was satisfied the bank took “all reasonable steps” to ensure he was properly advised, so it is entitled to rely upon his guarantees and the letters of confirmation from his solicitor.