Alexandra O'Donnell and Others v Governor and Company of Bank of Ireland and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian J. McGovern
• Judgment Date: 31 July 2013
• Neutral Citation: [2013] IEHC 375
• Judgment citation (vLex): [2013] 7 JIC 3109
• Court: High Court
• Date: 31 July 2013

[2013] IEHC 375

THE HIGH COURT

[7554 P/2012]

[169 COM/2012]

O'Donnell v Bank of Ireland & Ors

No Redaction Needed

COMMERCIAL

BETWEEN

ALEXANDRA O'DONNELL, BLAISE O'DONNELL, BLAKE O'DONNELL AND BRUCE O'DONNELL

PLAINTIFFS

AND

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND, BANK OF IRELAND PRIVATE BANKING LIMITED AND TOM KAVANAGH

DEFENDANTS

REGISTRATION OF TITLE ACT 1964 S31(1)

REGISTRATION OF TITLE ACT 1964 S92

PREST v PETRODEL RESOURCES LTD 2013 3 WLR 1

SALOMON v A SALOMON & CO LTD 1897 AC 22

MACAURA v NORTHERN ASSURANCE CO LTD 1925 AC 619

AGIP (AFRICA) LTD v JACKSON 1989 1 WLR 1367

VARKO LTD, IN RE UNREP GILLIGAN 3.2.2012 2012/45/13480 2012 IEHC 278

ROLLED STEEL PRODUCTS (HOLDINGS) LTD v BRITISH STEEL CORPORATION 1986 CH 286

ULSTER FACTORS LTD v ENTONGLEN LTD & MALONEY UNREP LAFFOY 21.2.1997 1997/12/3886 1997 IEHC 34

BELMONT FINANCE CORPORATION v WILLIAMS FURNITURE LTD (NO.2) 1980 1 AER 393

COMPANIES (AMDT) ACT 1986 S2

COMPANIES (AMDT) ACT 1986 S4

REGENTCREST PLC v COHEN 2011 2 BCLC 80

GREENHALGH v ARDERNE CINEMAS LTD 1950 2 AER 1120

FOSS v HARBOTTLE 1843 67 ER 189

STEIN v BLAKE 1998 1 AER 724

COURTNEYS LAW OF COMPANIES 3ED 2012 PARA 13.140

HURST, IN RE 1892 67 LT 96

CONTRACT

Security

Application seeking, inter alia, security void and of no legal effect - Equity - Trust - Breach - Appropriate party to issue proceedings alleging wrongdoing - Company law - Ultra vires - Constructive knowledge of transaction performed in alleged breach of trust - Trust set up in favour of plaintiffs - Property bought in trust for company - Property subsequently transferred to company - Property given as security - Statutory declaration subsequently given to say that plaintiffs had no interest in property - Whether company full legal and beneficial owner of property - Whether plaintiffs had interest in property - Whether bank aware of asserted interest of plaintiffs - Whether directors acted ultra vires in providing property as security - Whether plaintiffs appropriate party to allege wrong done to company - Whether manifest breach of trust by permitting security to be provided against borrowings of persons excluded from trust - Whether statutory declaration signed by plaintiffs stated subsisting legal positon - Prest v Prest [2013] UKSC 34, [2013] 2 AC 415; Salomon v Salomon & Co [1897] AC 22; Macaura v Northern Assurance Co. [1925] AC 619; In Re Varko Ltd [2012] IEHC 278, (Unrep, Gilligan J, 3/2/2012); Rolled Steel Ltd v British Steel Corpn [1986] Ch 246; Regentcrest plc (in liq) v Cohen [2001] 2 BCLC 80; Greenhalgh v Arderne Cinemas Ld. [1951] Ch 286; Foss v Harbottle (1843) 67 ER 189; Stein v Blake [1996] AC 243 and In re Hurst (1892) 67 LT 96 approved - Agip (Africa) Ltd v Jackson [1991] Ch 547; Belmont Finance v Williams Furniture (No 2) [1980] I All ER 393; The Royal British Bank v Turquand (1856) 6 E & B 327 and Ulster Factors Ltd v Entonglen Ltd (in liquidation) (Unrep, Laffoy J, 21/2/1997) considered - Registration of Title Act 1964 (No 16), ss 31(1) and 92 - Companies (Amendment) Act 1986 (No 25), s 2 and 4 - Application dismissed (2012/7554P & 2012/169COM - McGovern J - 31/7/2013) [2013] IEHC 375

O'Donnell v Bank of Ireland

Facts: The proceedings arose over certain securities executed over a property by Vico Limited in relation to the liabilities of the parents of the plaintiffs. The plaintiffs, their children, claimed that the various securities were in breach of trust and sought declarations that the instruments were void and of no legal effect. They also sought declarations that statutory declarations executed by them which purported to affirm that the securities were void. They sought a declaration that they were entitled to the beneficial ownership of the property in question. The Court considered the ownership of the property and the nature of the interest held.

Held by McGovern J. that the plaintiffs were not entitled to the reliefs sought or any reliefs. The plaintiffs were limited to a beneficial interest in Vico limited. The statutory declarations were merely stating the legal position. Vico Limited acquired the beneficial interest in the property by way of transactions based upon a power of attorney scheme.

1 1. These proceedings arise in relation to various securities executed in favour of the first named defendant over a property at Gorse Hill, Vico Road, Killiney, County Dublin ("Gorse Hill") by Vico Limited. These securities related to the liabilities of Brian O'Donnell and Mary Patricia O'Donnell, as well as various corporate entities controlled by them.

2 2. The plaintiffs are the children of Brian and Mary Patricia O'Donnell. They assert beneficial ownership over Gorse Hill, claiming that the various securities were executed in breach of trust and ultra vires the powers of Vico Limited, and seeking declarations that these instruments are void and of no legal effect. On foot of such declaration, or in the alternative, the plaintiffs seek recission of these instruments.

3 3. The plaintiffs also seek a declaration that statutory declarations executed by them on 15 ^th March, 2011, which purported to affirm the securities in question, are void and of no legal effect on the basis that these were procured on the basis of undue influence, in breach of trust and breach of duty. Again, the plaintiffs seek recission of these instruments.

4 4. Further, the plaintiffs seek a declaration that they are entitled to the beneficial ownership of Gorse Hill, together with a declaration that the appointment of the third named defendant by the first named defendant as receiver of Vico Limited is void and of no legal effect, as well as injunctive reliefs restraining the first named defendant and the second named defendant from taking any step on foot of the securities held by them.

5 5. Finally, the plaintiffs seek damages, including aggravated, exemplary or punitive damages, for breach of trust, negligence and breach of duty.

6 6. The claim arises in the following circumstances. By way of Deed of Settlement dated 16 ^th September, 1997, known as the "Avoca Settlement", a discretionary trust was established in favour of the plaintiffs by Brian and Mary Patricia O'Donnell. All of the plaintiffs were minors at this time. Aundyr Trust Company Limited, a Manx trust management company, was appointed as the initial trustee. This company changed its name in or around 2002 to IFG International Trust Co. Limited and will hereinafter be referred to as "IFG".

7 7. The precise manner in which the trust was structured is in dispute, and will be addressed in due course. It is not disputed, however, that a holding company, Tabasco Limited was incorporated, with IFG being the sole shareholder. This company in turn set up number subsidiary companies to hold the trust assets. In particular, Vico Limited was incorporated in the Isle of Man on 11 ^th December, 1997.

8 8. Gorse Hill had been acquired by way of a contract for sale dated 27 ^th May, 1997, with the purchaser being a solicitor employed by William Fry, in trust for Vico Limited. A second contract for sale was executed in relation a further parcel on 20 ^th April, 2000, with Brian O'Donnell being the purchaser, again in trust for Vico Limited.

9 9. A deed of Mortgage and Charge in favour of the first named defendant was registered against Vico Limited in the Isle of Man on 20 ^th February, 1998. A Power of Attorney had been executed by Vico Limited in favour of the Lower Mount Limited on 1 ^st January. 1998, so as to facilitate this transaction.

10 10. The plaintiffs have been resident at Gorse Lodge since 2000. Brian and Mary Patricia O'Donnell also resided at the property up until 2011, when it is claimed that they moved to the United Kingdom.

11 11. On 20 ^th October, 2000, Brian and Mary Patricia O'Donnell wrote in what was described as a "letter of wishes", addressed to J.FG:-

"Following due consideration, we, the undersigned, confirm and assure you, (he trustees, that we shall at all times care [sic] and support the beneficiaries of the settlement, namely Blake, Bruce, Blaise and Alex O'Donnell. We confirm that we shall use the residence, Gorse Hill, Vico Road, as a residence of ourselves and the beneficiaries for so long as the trustees on behalf of the beneficiary shall permit. It is acknowledged by the trustees and the beneficiaries that any notice given to us to vacate the residence shall be in writing and shall, in the absence of our consent, be at least two calendar years-prior to the vacation date to allow sufficient time for alternative arrangements to be made."

12 12. It is claimed that Brian and Mary Patricia O'Donnell invested significant sums in the construction, renovation and upkeep of Gorse lodge. A promissory note issued in their favour from Vico Limited in the sum of IR£1,055,000 on 4 ^th February, 1998.

13 13. By way of two Deeds of Transfer dated 8 ^th May, 2006, the previous arrangement (described at paragraphs 8 and 9 supra) was terminated and the property at Gorse Hill was transferred outright to Vico Limited. The company's title was registered at the Registry of Deeds on 19 ^th May, 2006, and its ownership of Folio DN 211 was registered at the Land Registry on 18 ^th June, 2006. Gorse Hill was the only asset of the Vico Limited.

14 14. Around this time, Brian and Mary Patricia O'Donnell entered into arrangements with the first and second named defendants whereby Vico Limited would offer security by way of mortgages and guarantees for their personal borrowings, as well as borrowings through the vehicle of a company wholly owned by them, Hibernia (2005) Limited. Subsequently, further arrangements were entered into, involving other corporate vehicles controlled by Brian and Mary Patricia O'Donnell. The security instruments ("Securities") in question are...