Anthony Freeman and Another v Bank of Scotland (Ireland) Ltd and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Gilligan
• Judgment Date: 31 May 2013
• Neutral Citation: [2013] IEHC 371
• Court: High Court
• Date: 31 May 2013

[2013] IEHC 371

THE HIGH COURT

[No. 8705 P/2012]

Freeman v Bank of Scotland (Irl) Ltd & Ors

BETWEEN

ANTHONY FREEMAN AND MIRIAM FREEMAN

PLAINTIFFS

AND

BANK OF SCOTLAND (IRELAND) LIMITED, SIMON DAVIDSON AND LLOYD DALEY & ASSOCIATES LIMITED

DEFENDANTS

RSC O.19 r28

WELLSTEAD v JUDGE WHITE UNREP PEART 25.11.2011 2011/49/13927 2011 IEHC 438

CENTRAL BANK ACT 1989 S117

IRISH LIFE & PERMANENT PLC v DUFF & ANOR UNREP HOGAN 31.1.2013 2013 IEHC 43

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

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

STEPSTONE MORTGAGE FUNDING LTD v FITZELL UNREP LAFFOY 30.3.2012 2012/43/12851 2012 IEHC 142

BRESLIN BANKING LAW 2ED

AER RIANTA v RYANAIR 2004 1 IR 506

BARRY v BUCKLEY 1981 1 IR 306

INSOLVENCY ACT 1986 S73(2)(D)

INSOLVENCY ACT 1986 S74(6)

EEC DIR 2005/56

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS SI 157/2008

EEC DIR 2005/56 ART 17

THE COMPANIES (CROSS-BORDER MERGERS) REGS SI 2974/2007 (UK) REG 16(3)

NYE (C.L.) LTD, IN RE 1971 CH 442

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

CONVEYANCING ACT 1881

LAND & CONVEYANCING LAW REFORM ACT 2009

MEADS v MEADS ABQB 571

Litigation - Loan facility - Repayment - Mortgage - Strike out application - Reasonable cause of action - Frivolous and vexatious proceedings - Rules of the Superior Court - Husband and wife - Security - Central Bank codes

Facts: The plaintiffs were husband and wife, and customers of the Bank of Scotland Limited (the ‘Bank’) who were granted loan facilities by the latter in 2006 on security of six properties. The plaintiffs encountered financial difficulties and by the 23rd August 2011, the repayment arrears totalled approximately €51,000. The Bank made a demand for payment from the plaintiffs, and when this was not forthcoming, the first named defendant appointed the second named defendant as receiver over the properties. The third named defendant was then instructed by the receiver who subsequently sold a number of the properties with the proceeds being transferred to the Bank.

The plaintiff issued proceedings against the defendants by plenary summons on the 28 ^th August 2012. It was claimed that the appointment of the receiver had been unlawful as the Bank had been in the process of merging with Bank of Scotland plc at the relevant time and was therefore insolvent and because the first named defendant had relied on repealed legislation in making the appointment. It was also argued that the Bank was not entitled to maintain against the plaintiffs any claim in relation to the loans or the security because the loans had been securitised, and that the Bank acted in breach of two Central Bank codes of practice in completing the securitisation scheme. On the 17th January 2013, the defendants brought a motion seeking an order dismissing the plaintiffs claim pursuant to either O. 19, r. 28 of the Rules of the Superior Courts or the court”s inherent jurisdiction on the basis that the claims were frivolous and/or vexatious and that the pleadings disclosed no reasonable cause of action.

Held by Gilligan J that in determining whether to strike out proceedings on the grounds of frivolous and vexatious heads of claim, the Court was obliged to bear in mind that the party defending against such an application only had to overcome a low threshold in convincing the court that were was merit in their argument.

In terms of the plaintiffs” argument that the appointment of the receiver was unlawful due to the Bank being insolvent at the relevant time or because such appointment was made pursuant to repealed legislation, it was held that these heads of claim did not meet the low threshold described above and should be struck out. It was determined that the argument had no merit as there was no solvency requirement for the appointment of a receiver in circumstances of a cross-border merger. Similarly, it was said that the appointment was made pursuant to a contract, specifically the deed of mortgage, and not in accordance with legislation.

In regards to the claim of securisation and breaches of the Central Bank codes, it was held that recent case law demonstrated that the status of Central Bank codes was not particularly clear and often depended on the specific circumstances of each case. It was clear however that the securisation argument was interlinked with the Central Bank codes argument. Given the confusion regarding the law in relation to Central Bank codes, it was not possible at that stage to say the court was satisfied that the head of claim was doomed to fail. As a consequence of the fact that the Court was slow to strike out heads of claim for being frivolous and vexatious unless it was sufficiently clear that they lacked merit, the Court was obliged to refuse the defendants” application in respect of these two arguments. However, the plaintiffs were ordered to serve amended statements of claim clarifying these arguments.

1 Judgment of Mr. Justice Gilligan delivered on 31 ^st day of May, 2013

2 1. By notice of motion issued on 17 ^th January, 2013, the defendants seek "an Order pursuant to O. 19, r. 28 of the Rules of the Superior Courts dismissing the claim of the plaintiffs herein on the grounds that the claim as pleaded is frivolous and/or vexatious and the pleadings disclose no reasonable cause of action". Further, or in the alternative, an Order is sought "pursuant to the inherent jurisdiction of this Honourable Court dismissing the plaintiffs' claim herein on the grounds that the claim as pleaded is bound to fail". This application is grounded upon an affidavit sworn by Mr. Gary Collins on 16 ^th January, 2013. The plaintiffs in these proceedings are litigants in person.

Background

3 2. The plaintiffs are husband and wife and were customers of Bank of Scotland Limited (BOSI) which, in 2010, was the subject of a cross-border merger with Bank of Scotland plc. In 2006 the plaintiffs applied for and were granted loan facilities on security of six properties, namely, 52 Huntstown Drive, Blanchardstown; 55 Huntstown Wood, Blanchardstown; 27 Willowood Lawn, Blanchardstown; 1Drumcliffe Drive, Cabra; 15 Ventry Drive, Cabra 23 Dunsink Green, Finglas. The plaintiffs set out in their statement of claim that the loans were for the refurbishment and upkeep of the properties. Unfortunately, the plaintiffs encountered financial difficulty and became unable to pay instalment repayments due and on 23 ^rd August, 2011, the mortgage accounts were in arrears amounting to approximately €51,000. The Bank made a demand for payment and following a failure to pay the sums due, in February 2012 the first named defendant appointed the second named defendant as receiver over the properties. The receiver instructed the third defendant who sold a number of the properties and the net proceeds of sale were remitted to the Bank. The affidavit of Mr Gary Collins sets out the details of the mortgage accounts and the amounts currently outstanding after the sale of the properties.

4 3. The plaintiffs instituted proceedings by plenary summons dated 28 ^th August, 2012. The procedural history of the proceedings is summarised in the grounding affidavit of Mr Gary Collins. By notice of motion filed on 7 ^th September, 2012, the plaintiffs sought injunctive relief to restrain the first and second defendants from selling three of the named properties. On 29 ^th November the proceedings were before Laffoy J. and counsel for the defendants indicated that they would be agreeable to undertaking not to dispose of the remaining two properties until the trial of the action. This was not accepted by the plaintiffs. The matter was again before this Court on 13 ^th December, 2012, where Murphy J. confirmed that the defendant's motion to dismiss, together with the plaintiff's injunction, should issue returnable for 26 ^th February, 2013.

5 4. The plaintiffs make a number of allegations against the defendants which can be summarised as follows - that the Bank was insolvent at the time of the cross-border merger and as a result, the appointment of the second named defendant as receiver was ultra vires; the first named defendant relied on repealed legislation in appointing the second named defendant as receiver and the appointment is therefore null and void; because some of the loans were securitised the Bank is not entitled to maintain against the plaintiffs any claim in relation to the loans or the security; the Bank acted in breach of two Central Bank codes of practice in completing the securitisation scheme; senior members of the Bank conspired to fraudulently obtain a cross-border merger; the Bank did not advance the plaintiffs a loan of money but instead misled and deceived the plaintiffs by 'creating currency'; the first named defendants have committed offences under the Criminal Justice (Theft and Fraud Offences) Act, 2001. It is further pleaded that the plaintiffs suffered defamation of character and damage to reputation. A number of allegations are also made against the second and third named defendants.

6 5. All of these allegations are denied by the defendants. Counsel for the defendants submits that none of the matters pleaded, even if true, disclose a reasonable cause of action and that the plaintiffs' claim is therefore frivolous, vexatious and bound to fail. The plaintiffs contend that they have established a number of reasonable causes of action which would be better tried at a substantive hearing. I will now consider each of the plaintiff's claims in turn.

Securitisation and the codes of practice

7 6. Paragraph 11 of the plaintiffs' statement of claim submits that the "loans have been settled by a third party (Special Purpose Vehicle)" under a securitisation...