Sunday 24 June 2018

Woman who 'unwittingly' signed business guarantees for live-in-lover brought before courts

The Four Courts, Dublin
The Four Courts, Dublin

Ray Managh

A Galway woman who claims she unwittingly signed business guarantees for her live-in lover and business partner may now have to repay his loans, a court has heard.

The court had been told that Mary Geraghty from Headfort was a co-director with her partner James Kearney, Ballinasloe, Co Galway, in Rostaff Property Development Limited, Unit 8, Clonberne Enterprise Centre, Ballinasloe, and that judgment had already been obtained against Kearney and the company.

The judge said Ms Geraghty in 2009 and in 2012 had signed documents guaranteeing all sums of money at any time owing to AIB by Rostaff. Subsequently a loan default scenario arose and the bank demanded repayment of company loans.

Ms Geraghty, a hairdresser, said she met Kearney in 1996 and, after developing a romantic relationship with him, he moved into her home. He started up his own construction company giving her a 49 per cent interest as unpaid company secretary after she invested €17,500.

Six months later Kearney had said her input was no longer required and took full control of the company.  By 2001 the company was not doing well and she began to receive calls from Revenue Sheriff Bailiffs, angry tradesmen and builders’ providers looking for money.

Ms Geraghty said she had done what he had asked of her in the hope of making their relationship work but by November 2013 he had left her home and told her their relationship was over.  He had returned later and asked her to sign over her shares which she did.

“I accept that it is my signature on the documents the bank says I signed but I did not knowingly sign a personal guarantee,” she told the court.  She said she had trusted Kearney, never having been made aware she would be held liable for company debts.

In a reserved judgment Mr Justice Max Barrett stated in the High Court that in cases of emotionally transmitted debt the principal debtor often was a man and the person taking on economic liability for his business borrowings or debts of his company was his wife or romantic partner.

“However, in our more enlightened times, when a variety of lawful adult relationships between partners….heterosexual, homosexual, bisexual etc., are properly recognised to exist, the issue of emotionally transmitted debt is clearly one that can affect a more vulnerable or less business savvy partner in any such relationship,” the judge said.

“A variant of emotionally transmitted debt can also present for parents who may be asked by their young adult children to assist them in acquiring a first home,” Judge Barrett added.

He added that “emotionally transmitted debt” can destroy relationships even families.

He said the court did not consider that summary judgment was appropriate in the case and referred the proceedings to a full hearing.

Judge Barrett said a person asked to become a personal guarantor to a loved one should ask how much they were being asked to guarantee? Could they pay back the amount without difficulty? Did they have to put up assets as security?  Could they afford to lose their assets?  Why was the guarantee necessary?  Had the loved one explored other means of obtaining the funds and could they be trusted to pay all of their bills.

He said his suggestions were by way of general indication only and were not a substitute for obtaining independent legal advice.

The proceedings against Ms Geraghty now stand adjourned.




Blind love may leave you homeless was the strong underlying warning behind a judge’s remarks Thursday concerning ill-advised romantic engagements in business affairs.


“Emotionally transmitted debt” whereby legal liability is spread from a debtor to a romantic partner can destroy relationships even families, today.


He was deciding if the court should direct summary judgment involving a significant financial threat to the home of a Galway woman who claims she unwittingly signed business guarantees for her live-in lover and business partner.


Judge Barrett told barrister Andrew Walker, counsel for Allied Irish Banks plc, that its financial claim for summary judgment against Mary Geraghty, Headfort, Co Galway, on foot of guarantees, should go to full plenary hearing before the court.


The judge said the court was repeatedly presented with summary debt proceedings in which persons had acted ‘out of the goodness of their heart’ when deciding to provide a guarantee to a loved one or accepting a company directorship.

“Much of the financial misery that has followed for such individuals when the company fails could likely have been avoided or ameliorated by availing of the services of a solicitor….the cost of which pales in comparison with the financial risk and personal stress that can arise when a company fails,” the judge said.


“Giving a guarantee for the debts of a loved one or private company engaged in lawful business is effectively taking a gamble that all will go well or if things go badly the loved one will act as one expects.”


Unfortunately it was a feature of life that companies fail and people do not always act as one might expect so it was important to be cautious before ever giving a personal guarantee.

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