ACC Loan Management Ltd v Browne

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 10 November 2015
• Neutral Citation: [2015] IEHC 722
• Court: High Court
• Date: 10 November 2015

ACC Loan Management Ltd v Browne

BETWEEN

ACC LOAN MANAGEMENT LTD.

PLAINTIFF

AND

SEAN BROWNE AND GERALD BROWNE

DEFENDANTS

[2015] IEHC 722

[No. 2812 S./2013]

THE HIGH COURT

Banking & Finance – Non-payment of loan – Summary Judgment – Consumer Credit Act, 1995 – Housing loan – Bona fide defence

Facts: The plaintiff sought an order for summary judgment against the defendants for certain sum of money together with interest on account of non-payment of loan advanced to the defendants by virtue of a loan agreement. The defendants alleged that the loan was not enforceable against them as there was non-compliance with the provisions of the Consumer Credit Act, 1995. The plaintiff asserted that even if the defendants were held to be consumers, the alleged loan, being a housing loan, was out of the ambit of the Act of 1995.

Ms. Justice Baker refused to grant an order for summary judgment to the plaintiff. The Court observed that in order to determine the nature of the loan, the Court had to consider the purpose for which the loan was taken and the relevant loan in the present case was taken to refinance the existing bank loan and to finance renovations on the borrowers' primary residence. The Court found that since the bank's internal documents stated the purpose of the prior loan being residential and the relevant loan being commercial, the defendants had proved that the case being arguable and there being conflict of facts, the summary judgment could not be granted in the present case. The Court observed that when a contract had a dual purpose, the predominant purpose of the contract must be considered, which in the present case was to renovate the dwelling house of the defendants and therefore, the defendants were consumers within the Consumer Credit Act, 1995. The Court held that a housing loan was a loan obtained either to buy a house or buy land to construct a house or improve a house already used as a principal residence. The Court held that since the purpose of the relevant loan was to refinance the existing loan and refurbishment of certain land on which there was no erection of any building, the said loan could not be classified as a housing loan and hence the provisions protective of the borrowers as consumers applied.

1 1. The plaintiff, ACC Loan Management Ltd. (the "Bank"), seeks summary judgment against the defendants in the sum of €103,997.51, together with continuing interest on the principal sum of €100,424.57, stated to be owed by the defendants, jointly and severally, by virtue of a loan agreement entered into between the parties under the terms of the facility letter dated the 9 ^th April, 2008.

2 2. The defendants assert that the loan is unenforceable as certain provisions of the Consumer Credit Act, 1995 (the "Act of 1995") were not complied with. The plaintiff denies that the defendants or either of them were consumers within the meaning of that legislation.

3 3. As a separate matter, the plaintiff asserts that were the defendants to be classed as consumers for the purposes of the Act of 1995, that the loan was a housing loan and as such does not fall within the Act of 1995.

4 4. The defendants also raise a number of other defences. In the case of the second defendant, it is asserted that the loan was unconscionable, and that the relevant documentation was not executed such that a plea of non est factum arises. Both the defendants and the plaintiff argue that an estoppel by conduct and/or representation arises.

5 5. I will deal with the individual elements of the subject transaction which are relevant to the defences raised in the course of the judgment and as they arise for consideration.

Background

6 6. The defendants are brothers. The first defendant works for a taxi company and lives in Bandon, Co. Cork. The second defendant is a retired member of the Irish Defence Forces and lives at Suncroft in Co. Kildare.

7 7. The facility letter which gives rise to the claim in these proceedings is dated the 9 ^th April, 2008 and contained an offer on the part of the Bank to advance the sum of €100,000 over a period of nine years at an identified interest rate. The loan was made to the two defendants jointly and severally, and the purpose of the loan was stated as follows:

"... to refinance existing ACC loan reference 10039193; and to release equity on lands at Meenreagh, Killygordon, Co. Donegal to finance renovations to Borrowers' primary dwelling-house."

8 8. The loan was to be repaid by monthly instalments over a period of nine years in accordance with the schedule attached to the facility letter. The loan offer was accepted by the signature on the memorandum of acceptance by both borrowers on the 22 ^nd April, 2008. The two borrowers, by their signature, also waived their right to a ten-day cooling-off period.

9 9. The defendants do not deny that the monies were advanced on the 23 ^rd May, 2008, nor that they defaulted in the monthly repayments, nor that the plaintiff made demand for repayment by letters of demand, the first of which was dated the 18 ^th April, 2012. The first default is stated to have occurred in the monthly payment due in December 2008.

10 10. The defendants provided security for the loan by the creation of a charge over 13 hectares of lands at Meenreagh, Killygordon, Co. Donegal, comprised in folio 2324F Co. Donegal, and the Bank, by a deed of appointment of the 4 ^th May, 2012, appointed a receiver to those lands pursuant to the power contained in the charge. The lands were sold and the net proceeds of €28,619.40 were credited to the loan account of the defendants on the 15 ^th May, 2013. While the defendants initially argued that the Bank had agreed to accept the net proceeds of the sale of the lands in Co. Donegal in full discharge of the liabilities due under the loan, that argument is no longer being made by either of them.

Transactions prior to the 2008 facility

11 11. The two defendants borrowed the sum of €40,000 from the plaintiff in or around the year 1999 for the purpose of purchasing the lands in Co. Donegal, which had been owned by their grandfather. They say that it was not their intention to develop the lands and that they bought them for "sentimental purposes only". At that time Sean Browne, the first defendant, was involved in a number of business ventures, and one of his business associates introduced him to the Bank and, as a result he came to develop a relationship with the Bank. The evidence is that the first defendant, Sean Browne made all, or almost all, of the repayments on the 1999 facility, and that Gerald Browne, the second defendant, encountered financial difficulties almost immediately after the 1999 facility was drawn down.

12 12. The 1999 facility was repaid in full.

13 13. Separately, Sean Browne borrowed in his own name the sum of €30,000 from the Bank in 2006 for the purposes of a deposit of a premises which in the events became his primary residence at 19 Allen Square, Bandon, Co. Cork. The purchase of that property was primarily financed by a secured loan from First Active PLC, and the 2006 facility from the Bank was sought in respect of the deposit. One issue that arises for consideration in this judgment is whether the 2006 loan facility to Sean Browne was in respect of his principal private residence or, as is stated in the loan facility letter itself, for the purchase of a residential investment property. The security for that loan was to be a first legal charge over the lands in Co. Donegal, and this charge was registered on the folio and ranks in priority to the second charge registered as security for the 2008 facility, the subject matter of these proceedings.

14 14. The second defendant Gerald Browne provided a guarantee in respect of the 2006 loan facility for his brother Sean Browne, and that guarantee was agreed to be limited in recourse to the security provided by the charge over the lands in Co. Donegal. The guarantee executed by Gerald Browne did not in fact contain this limitation but the Bank has accepted that the terms of the guarantee were agreed to being so limited in recourse.

15 15. The 2006 loan facility was rolled over into the 2008 facility and, as set out above, the 2008 loan facility was, in part, to refinance the 2006 loan in the sole name of Sean Browne.

Consumer Credit Act: Were the defendants consumers?

16 16. The first defence raised by the defendants is that the loan was a consumer loan within the meaning of the Act of 1995, and the plaintiff denies that this is so. Both counsel agree that the case law establishes unequivocally that whether a loan is a consumer credit loan is a matter to be determined objectively and irrespective of the characterisation that the parties themselves may have applied to the loan. Thus the fact that certain internal documentation of the Bank identifies one or both of the defendants as a consumer is not determinative of the issue.

17 17. Counsel also agree that whether a loan is a consumer loan for the purposes of the legislation is a matter which is determined by reference to the purpose of the loan and not the trade or profession of the borrower. Thus all natural persons are consumers except when they are acting inside their business and for the purposes of his or her trade or profession. This is clear from the definition of "consumer" in s. 2(1) of the Act of 1995 as amended by Schedule 3 Part 12 of the Central Bank and Financial Services Authorities of Ireland Act 2004 which defines a consumer as:

a "(a) a natural person acting outside the person's business, or

(b) any person, or person of a class, declared to be a consumer in an order made under subsection(9);".

A "business" for the purposes of the Act is defined as including a trade or profession.

17 17. Two leading judgments of the High Court on the...