Anthony Freeman and Another v Bank of Scotland Plc and Others

JurisdictionIreland
JudgeMr. Justice Brian J. McGovern
Judgment Date29 May 2014
Neutral Citation[2014] IEHC 284
CourtHigh Court
Date29 May 2014
Freeman v Bank of Scotland PLC & Ors

BETWEEN

ANTHONY FREEMAN AND MIRIAM FREEMAN
PLAINTIFFS

AND

BANK OF SCOTLAND PLC. SIMON DAVIDSON AND LLOYD DALY & ASSOCIATES LIMITED
DEFENDANTS

[2014] IEHC 284

[No. 8705 P/2012]

THE HIGH COURT

Husband and wife - Purchase of six investment properties - Mortgage - Loan for a period of 20 years - Cross-border merger - Default on loan facilities - Appointment of receiver - Securitisation - Alleged breach of Central Bank Codes of Practice - Effect of s.64 and s.90 of Registration of Title Act 1964 - Error in interest calculation causing or contributing to default in payment

Facts The plaintiffs are husband and wife. Over a period of ten years they purchased six investment properties which were financed by First Active Building Society and mortgages were created in favour of the Society. In 2006, the plaintiffs refinanced their loan with Bank of Scotland (Ireland) Ltd. (BOSI). They re-mortgaged the properties with BOSI, offering them as security for a sum of €1,406,000 which was borrowed. On 31st December, 2010, BOSI was the subject of a cross-border merger with Bank of Scotland plc (the Bank) by virtue of which all the assets and liabilities of BOSI transferred to the Bank. The defendants contend that as a result of this cross-border merger, the Bank stands in the shoes of BOSI so far as the agreements between the plaintiffs and BOSI are concerned. The plaintiffs defaulted on the loan facilities granted to them by BOSI and failed to repay the sums due when demanded. The Bank appointed a receiver pursuant to its contractual rights. The plaintiffs seek to invalidate the appointment of said receiver and wish to argue further issues as detailed in their statement of claim: the issue of securitisation; the alleged breach of Central Bank Codes of Practice; the effect of s.64 and s.90 of the Registration of Title Act 1964 and the alleged error in interest calculation.

Held The judge confirmed, in relation to securitisation, that after the cross-border merger, the Bank stood in the position of BOSI. In applying for the loans, the plaintiffs accepted the entitlement of BOSI to securitise their loans. Securitisation of the loans was properly effected and did not in any way alter the obligations of the plaintiffs so far as repayment of the loans was concerned. As the legal title in the charge over the properties was held by the Bank, the Bank was the proper body to appoint a receiver and could rely on the contractual power to do so which was formerly vested in BOSI. The judge therefore rejected the plaintiff”s claim that the Bank was not entitled to appoint a receiver. In relation to the alleged breach of the Central Bank Codes of Practice, the judge applied the principle expressed in ACC Bank plc. v. Deacon [2013] IEHC 427 and Ryan v. Danske Bank [2014] IEHC 236: compliance is not a prerequisite of a bank establishing liability against a debtor and that failure to comply with the code does not extinguish the loan or furnish a defence to the borrower. Thus the judge concluded that non-compliance with a statutory code does not relieve a borrower from his obligations under a loan to repay the lender, nor does it deprive the lender of its rights and powers under the loan agreement. The plaintiff”s claim concerning the Registration of Title Act 1964 alleging that the Receiver was not appointed by the registered owner of the charges was rejected. The judge agreed with the sentiments of Birmingham J in Kavanagh v. McLaughlin [2013] IEHC 423 and found no merit in such argument. The final argument as to a miscalculation in terms of interest causing or contributing to the plaintiff”s default in payment was corrected by the Bank and was subsequently dismissed.

-Claim dismissed.

FREEMAN v BANK OF SCOTLAND (IRL) LTD & ORS UNREP GILLIGAN 31.5.2013 2013/20/5873 2013 IEHC 371

REGISTRATION OF TITLE ACT 1964 S64

REGISTRATION OF TITLE ACT 1964 S90

HUDSON LAW ON FINANCIAL DERIVATIVES 5ED 2012 PARA 1-185

WELLSTEAD v JUDGE WHITE & FETHERSTONHAUGH UNREP PEART 25.11.2012 2011/49/13927 2011 IEHC 438

KAVANAGH & BANK OF SCOTLAND PLC v MCLAUGHLIN UNREP BIRMINGHAM 30.9.2013 2013/27/8054 2013 IEHC 453

EEC REG 56/2005

CENTRAL BANK ACT 1989 S117

ZURICH BANK v MCCONNON UNREP BIRMINGHAM 4.3.2011 2011/50/14278 2011 IEHC 75

FRIENDS FIRST FINANCE LTD v CRONIN UNREP HERBERT 15.2.2013 2013/20/5935 2013 IEHC 59

STEPSTONE MORTGAGE FUNDING LTD v FITZELL 2012 2 IR 318 2012/43/12851 2012 IEHC 142

IRISH LIFE & PERMANENT PLC v DUFF UNREP HOGAN 31.1.2013 2013/26/7742 2013 IEHC 43

ACC BANK PLC v DEACON UNREP RYAN 28.6.2013 2013 IEHC 427

RYAN v DANSKE BANK UNREP BAKER 29.4.2014 2014 IEHC 236

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS 2008 SI 158/2008 ART 19(2)

KAVANAGH & LOWE v LYNCH & ST ANGELA'S STUDENT RESIDENCES LTD UNREP LAFFOY 31.8.2011 2011/29/8022 2011 IEHC 348

MORAN v AIB MORTGAGE BANK & ORS UNREP MCGOVERN 27.7.2012 2012/29/8485 2012 IEHC 322

EEC REG 56/2005 ART 40(3)

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS 2008 SI 158/2008 ART 19(1)(H)

1

JUDGMENT of Mr. Justice Brian J. McGovern delivered on the 29th day of May 2014

2

1. The plaintiffs are husband and wife. Between 1996 and 2006, they purchased six investment properties which were financed by First Active Building Society and mortgages were created in favour of the Society. In 2006, the plaintiffs refinanced their loan with Bank of Scotland (Ireland) Ltd. (BOSI). They re-mortgaged the properties with BOSI, offering them as security for a sum of €1,406,000 which was borrowed. Their borrowings with First Active were approximately €800,000 at the time of the refinancing, so when they obtained the loan from BOSI, there was a surplus of approximately €600,000 released to them after discharging the debts due to First Active.

3

2. The properties offered as security for the loan from BOSI were:

4

(i) 52 Huntstown Drive, Blanchardstown, Dublin 15 (Folio 26512F Co. Dublin);

5

(ii) 55 Huntsdown Wood, Blanchardstown, Dublin 15 (Folio 34131F Co. Dublin);

6

(iii) 27 Willowood Lawn, Blanchardstown, Dublin 15 (Folio 61206F Co. Dublin);

7

(iv) 15 Ventry Drive, Cabra West, Dublin 7 (Folio 53190L);

8

(v) 23 Dunsink Green, Finglas, Dublin 11 (Folio 13478L);

9

(vi) 1 Drumcliffe Drive, Cabra West, Dublin 7 (Folio 42656F).

10

The loans were for a period of twenty years and the repayment method was "interest only".

11

3. On 31 st December, 2010, BOSI was the subject of a cross-border merger with Bank of Scotland plc. ("the Bank") by virtue of which all the assets and liabilities of BOSI transferred to the Bank. The Bank is the first named defendant in these proceedings. The defendants contend that as a result of this cross-border merger, the Bank stands in the shoes of BOSI so far as the agreements between the plaintiffs and BOSI are concerned. The second named defendant was appointed by the first named defendant as receiver over the above mentioned properties of the plaintiffs on 17 th November, 2011. The third named defendant was appointed by the first and second named defendants to sell certain assets, the property of the plaintiffs.

12

4. The plaintiffs defaulted on the loan facilities granted to them by BOSI and failed to repay the sums due when demanded. On 17 th November, 2011, the Bank appointed the second named defendant as receiver over the properties and purported to do so pursuant to its contractual rights. On 28 lh August, 2012, the plaintiffs commenced these proceedings in which they seek, inter alia, to invalidate the appointment of the receiver.

13

5. In these proceedings, the plaintiffs made numerous allegations and raised many issues and the defendants brought an application to dismiss the plaintiffs' claim as frivolous, vexatious and bound to fail. In a judgment delivered on 31 st May, 2013 ( Freeman v. Bank of Scotland [2013] IEHC 371), Gilligan J. dismissed the plaintiffs' claim, save only for "the issues raised by the plaintiffs in relation to securitisation and alleged non-compliance with Central Bank Codes". The learned judge struck out the other heads of claim and directed the plaintiffs to deliver an amended statement of claim. There were various amended statements of claim. For the purpose of this trial, the relevant statement of claim is that amended pursuant to order of Gilligan J. made on 21 st January, 2014 ("the amended statement of claim"). As appears therefrom, in addition to the securitisation issue, the plaintiffs were granted liberty to amend their pleadings to include a plea that, were it not for an error in interest applied to the account - which error was corrected by the Bank and the amount overcharged refunded with interest - the plaintiffs would not have defaulted on their loans. In submissions dated 8 th May, 2014, and delivered to the defendants shortly before the commencement of the trial, the plaintiffs raised a new issue based on an interpretation of the Registration of Title Act 1964. While the defendants claimed that the plaintiffs were not entitled to raise the issue because it was neither pleaded nor among the issues permitted to go forward to trial by Gilligan J., the defendants have withdrawn that objection and have invited the court to consider the point taken by the plaintiffs on this issue and to rule on it.

14

6. There are four issues to be considered in this case, namely:

15

(i) the issue of securitisation;

16

(ii) the alleged breach of the Central Bank Codes of Practice;

17

(iii) the effect of s. 64 and s. 90 of the Registration of Title Act 1964, and

18

(iv) whether the error in interest calculation and consequent overcharging caused or contributed to the default of the plaintiffs on their loans.

Securitisation
19

7. The plaintiffs claim that the Bank is not entitled to enforce loans that were...

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