LSREF III Stone Investments Ltd v Morrissey

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 05 October 2015
• Neutral Citation: [2015] IEHC 603
• Docket Number: [2015 No. 5501P]
• Court: High Court
• Date: 05 October 2015

LSREF III Stone Investments Ltd v Morrissey

COMMERCIAL

Approved Judgment

BETWEEN

LSREF III STONE INVESTMENTS LIMITED

PLAINTIFF

AND

JOHN MORRISSEY

DEFENDANT

[2015] IEHC 603

[No. 1548 S/2011]

[No. 86 COM/2011]

THE HIGH COURT

Banking and Finance – Non-payment of loan – Judgment for money – Assignment of loan sale agreement – S. 12 of the Irish Bank Resolution Corporation Act 2013 – S. 28 (6) of the Supreme Court of Judicature (Ireland) Act 1877

Facts: Following the judgment for recovery of money obtained by the Bank against the defendant for the recovery of loans, the Bank assigned the relevant loans to the plaintiff before the enforcement of judgment, subsequent to which the plaintiff instituted the present proceedings for challenging the validity of the assignment of loans asserting the constitutionality of s. 12 of the Irish Bank Resolution Corporation Act 2013 after the separate plenary proceedings brought by the defendant had been stricken off by the Court.

Ms. Justice Costello held that the plaintiff was entitled to the judgment against the defendant for the said amount of money. The Court observed that in order for an assignment to be valid under s. 28 (6) of the Supreme Court of Judicature (Ireland) Act 1877, four conditions needed to be satisfied: that the assignment was of a debt, the assignment was absolute, it was in writing under the hand of the assignor and express notice was given to the debtors. The Court found that all the conditions were met in the instance case and thus, it was a valid assignment. The Court observed that the relevant clause inserted in the facility letter also gave an absolute authority to the Bank to assign any loan of the defendant without notice and the defendant having signed the same could not be held to challenge the validity of the same. The Court held that the service of the notice of assignment to the attorneys of the defendant would be sufficient. The Court held that since the issues concerning the validity of the assignment of loan had been adequately dealt with, the question of the constitutionality of s. 12 of the Irish Bank Resolution Corporation Act 2013 did not arise in the present case.

1 1. This is an application for judgment in the amount of €30,180,489. There have been a number of previous hearings in relation to this matter which has proceeded by way of a modular trial. During the course of the previous five substantive judgments delivered initially by Finlay Geoghegan J. and laterally by myself, it has been determined that the monies, the subject of this application, were advanced by Anglo Irish Bank Corporation Plc ("the Bank") to the defendant and that it was entitled to call in the loans advanced when it did. There was no fiduciary relationship between the Bank and the defendant. The Counterclaim raised by the defendant has been dismissed. The quantum due on foot of the loans was decided by Finlay Geoghegan J. as of 4 ^th June, 2014, in her judgment on quantum (save that allowance has to be made for any receipts received by the plaintiff from the Receiver appointed over the properties, the subject matter of the facility).

2 2. In calculating the quantum due, Finlay Geoghegan J. has given credit for overcharging of interest by the Bank both during the duration of the facilities and after the commencement of the proceedings. Despite the fact that there was overcharging in the sum of €143,676.64, Finlay Geoghegan J. held that the sum of €31,542,125.93 was due and owing by the defendant to the Bank's successor in title, Irish Bank Resolution Corporation (In Special Liquidation).

3 3. The only reason judgment was not entered in favour of IBRC (In Special Liquidation) on that date was because in March, 2014, it had entered into a loan sale agreement with the plaintiff for the sale of various facilities which included the facility the subject matter of these proceedings. IBRC (In Special Liquidation) says it transferred the facilities to the plaintiff by a deed of transfer dated 11 ^th July, 2014. The legality of this Deed and the effectiveness of the Assignment was the subject of the hearing before this Court on 21 ^st July, 2014.

4 4. The latter part of the litigation has been concerned with the validity of the sale and subsequent assignment of the defendant's loan facilities and the plaintiff's right to recover judgment against the defendant in these proceedings. The defendant has argued that the Loan Sale Agreement was void on the basis that it amounted to trafficking in litigation and the Agreement was champertous. This argument was rejected by Finlay Geoghegan J. The plaintiff was substituted as the plaintiff in the proceedings in lieu of IBRC (In Special Liquidation) by Order dated 10 ^th November, 2014. The Summary Summons was amended to reflect the fact that the plaintiff had been substituted as the plaintiff in the proceedings and the defendant was directed to file a defence to that Amended Summary Summons in respect of the remaining issue in the case. Finlay Geoghegan J. indicated that the remaining issue in the case related to the validity of the Assignment of the defendant's facility to the plaintiff.

5 5. In January, 2015, the defendant delivered a very lengthy defence and counterclaim. He also issued separate plenary proceedings against, inter alia, the plaintiff, IBRC (In Special Liquidation), Ireland and the Attorney General and delivered a lengthy statement of claim in those proceedings. Motions were issued by the plaintiff in these proceedings ("the debt proceedings") and by the defendants (other than the state defendants) in the plenary proceedings ("the plenary proceedings"), seeking to strike out all or part of the pleadings on the basis that the defendant in the debt proceedings/plaintiff in the plenary proceedings was seeking to raise matters which had been the subject of prior decisions of Finlay Geoghegan J. in the debt proceedings or which, for a variety of reasons, could not properly be maintained by the defendant.

6 6. I delivered two related judgments on 11 ^th March, 2015. I struck out the vast portions of the Amended Defence and Counterclaim in the debt proceedings on the basis that they related to matters which had either been determined by Finlay Geoghegan J. or it was not open to the defendant to raise at this point in time for the reasons set out in that judgment. I directed that the Defence in the debt proceedings was to proceed on the basis of specified paragraphs which I did not strike out and these were collated in an addendum to the Defence.

7 7. The addendum to the Defence delimited the sole grounds upon which the defendant was permitted to defend the case and to challenge the plaintiff's entitlement to judgment pursuant to the Assignment of 11 ^th July, 2014.

8 8. In relation to the plenary proceedings, I also ruled that most of it was to be struck out on the basis that it offended against the rule in Henderson v. Henderson or had already been determined by Finlay Geoghegan J. in her prior rulings in the debt proceedings. The sole matter remaining to be determined in the plenary proceedings related to the constitutionality of s. 12 of the Irish Bank Resolution Corporation Act 2013.

9 9. The defendant in the debt proceedings pleaded that insofar as the plaintiff relied upon s. 12 of the Act of 2013 to establish the validity of the Assignment of the defendant's loans and the benefit of the litigation that the section was unconstitutional. In my two related judgments of 11 ^th March, 2015, I held that the defendant in the debt proceedings/plaintiff in the plenary proceedings was entitled to maintain this plea but that he could only do so in one set of proceedings. He must decide whether he wished to raise the issue in the debt proceedings by way of defence or whether he wished to maintain it in the plenary proceedings, in which case he could not rely upon it as a defence in the debt proceedings. He was asked to consider whether he wished to have the matter dealt with in the debt proceedings, in which case he would need to comply with the requirements of O. 60 of the Rules of the Superior Courts and discontinue the plenary proceedings. He could not continue the plea in both proceedings.

10 10. In the event, the defendant herein failed to clarify his position. In effect, he continued to maintain the plea in both the debt proceedings and the plenary proceedings. At a hearing for directions in relation to the debt proceedings, McGovern J. directed in the circumstances that the defendant could maintain his challenge to the constitutionality of s. 12 of the Act of 2013, in the plenary proceedings and he could not maintain it as a defence in the debt proceedings. When the matter came back before me on a motion for discovery, I refused to reverse the directions of McGovern J. It is to be noted that the plaintiff undertook that in the event that judgment is awarded to the plaintiff in the debt proceedings and if the judgment is based upon the s. 12 of the Irish Bank Resolution Corporation Act 2013, that it will not seek to enforce the judgment until the issue of the constitutionality of the section has been determined in the plenary proceedings.

11 11. Accordingly, the hearing before me proceeded on the basis that the constitutional challenge to s. 12 was not being pursued in these proceedings. It was to be maintained in the plenary proceedings and those proceedings remain to be determined.

12 12. Thus, there were two matters for resolution when the matter came before this Court for hearing:-

(i) the amount of the credits, if any, to be afforded to the defendant and to be deducted from the quantum held to be due and owing as of 4 ^th June, 2014; and

(ii) whether the loan, the subject matter of these proceedings, had been effectively assigned to the plaintiff.

The assignment...