Bank of Ireland Mortgage Bank v Coleman

JurisdictionIreland
JudgeMr. Justice Geoghegan
Judgment Date05 May 2009
Neutral Citation[2009] IESC 38
CourtSupreme Court
Docket Number[2006 No. 72 SP];
Date05 May 2009

[2009] IESC 38

THE SUPREME COURT

Geoghegan J.

Fennelly J.

Finnegan J.

451/06
Bank of Ireland Mortgage Bank v Coleman (t/a Coleman & Co)
BETWEEN/
BANK OF IRELAND MORTGAGE BANK
Plaintiff/Appellant
and
DANIEL COLEMAN (PRACTISING UNDER THE STYLE OF "COLEMAN & COMPANY")
Defendant/Respondent

JOHN FOX (A FIRM) v BANNISTER KING & RIGBEYS (A FIRM) 1988 QB 925 1987 3 WLR 480 1987 1 AER 737

IPLG LTD & WILLIAM FRY SOLICITORS v STUART & AN POST UNREP LARDNER 19.3.1992 1998/22/8252

SOLICITORS (AMDT) ACT 1960

SOLICITORS ACT 1954

GREY (HA), IN RE 1892 2 QB 440

UDALL (T/A UDALL SHEET METAL & CO) v CAPRI LIGHTING LTD 1987 3 AER 262 1988 QB 907 1987 3 WLR 465

MYERS v ELMAN 1939 4 AER 484 1940 AC 282

SOLICITORS

Solicitor's undertaking

Enforcement - Conduct of solicitor - Whether performance of undertaking possible - Whether isolated obligation could be enforced even where performance of undertaking possible - Court's inherent supervisory jurisdiction - Disciplinary nature of jurisdiction - Compensatory nature of jurisdiction - Assessment of compensation - IPLG Ltd v Stuart (Unrep Lardner J, 19/3/1992), Fox v. Bannister [1988] 1 Q.B. 925, Udall v. Capri Lighting Ltd. [1988] 1 Q.B. 907 and Myers v. Elman [1940] A.C. 282 followed - Plaintiff's appeal allowed (451/2006 - SC - 5/5/2009) [2009] IESC 38

Bank of Ireland v Coleman

Facts the plaintiff sought an order from the High Court that the defendant compensate the plaintiff for loss suffered as a result of the failure by the defendant to comply with the terms of his undertaking whereby he undertook, inter alia, not to release €250,500 paid to him by the plaintiff in his capacity as solicitor for a client, the borrower, without having first obtained a duly executed mortgage by the borrower in favour of the plaintiff over the property being purchased by the borrower and without the authority of the plaintiff. The defendant accepted that he was in breach of the undertaking in that he had not perfected the borrower's title or the plaintiff's security. The plaintiff argued that in those circumstances the court, in exercising its quasi disciplinary jurisdiction, should order the defendant to compensate it by requiring him to pay the full sum of €250,500 plus interest. The High Court took the view that construing the undertaking as a whole, the obligation of the defendant was to furnish the plaintiff with proper security on the mortgaged property in accordance with the offer letter but refused to order compensation.

Held by the Supreme Court (Geoghegan J; Fennelly and Finnegan JJ concurring) in allowing the appeal and remitting the case back to the High Court to assess the losses suffered by the plaintiff as a result of the defendant's breach that the inherent jurisdiction of the Superior Courts over solicitors conduct as being officers of the court, which was exercised, not for the purpose of enforcing legal rights, but for the purpose of enforcing honourable conduct on the part of the courts' own officers still existed, despite the passing of the Solicitors Act 1960. That the order which the court made when this special jurisdiction was invoked was discretionary but like all discretionary orders the discretion had to be exercised appropriately. Further criteria applicable to the exercise of the jurisdiction were that: although the jurisdiction was compensatory and not punitive, it still retained a disciplinary slant; if a person had suffered loss the court had power to order the solicitor to make good the loss occasioned by his breach of duty; failure to implement a solicitor's undertaking was prima facie evidence of misconduct even if he had not been guilty of dishonourable conduct; the supervisory jurisdiction was not ousted by defences that might be available to an action at law such as the Statute of Frauds but the court could take these factors into account in deciding whether or not to exercise its discretion and if so in what manner; the summary jurisdiction involved a discretion as to the relief to be granted; where it was inappropriate for the court to make an order requiring a solicitor to perform his undertaking e.g. on grounds of impossibility, the court had a discretion as to whether it should exercise the power to order the solicitor to pay compensation.

Fox v. Bannister [1987] 1 QB 925 applied.

I.P.L.G. Ltd. v. Stuart (Unreported, High Court, Lardner J., 19th March, 1992) considered.

1

JUDGMENT of Mr. Justice Geoghegan delivered the 5th day of May 2009

2

Judgment delivered by Geoghegan J. [Nem diss]

3

This is an appeal from the refusal by the High Court (Laffoy J.) to grant relief sought in a special summons whereby the long established inherent jurisdiction of the High Court over solicitors as its officers was invoked. It is important to note at this early stage of the judgment that no other cause of action was included in the proceedings and I will be expressing no views whatsoever as to what, if any, alternative remedies the appellant bank would have or would have had under either plenary or summary proceedings. The jurisdiction invoked in this case is the jurisdiction described by Nicholls L.J. in the English Court of Appeal case of John Fox v. Bannister, King & Rigbeys [1987] 1 Q.B. 925 at 928 as "a jurisdiction which is exercised, not for the purpose of enforcing legal rights, but for the purpose of enforcing honourable conduct on the part of the court's own officers."

4

The two main reliefs which the appellant sought in the special endorsement of claim on the special summons were as follows:

5

a "A. An order that the defendant solicitor compensate the plaintiff for loss suffered as a result of the failure by the defendant to comply with the terms of his Undertaking in writing dated 15 th September 2003 whereby he undertook, inter alia, not to release €250,500 paid to him by the Bank of Ireland in his capacity as solicitor for a client John Lane ("the borrower") without having first obtained a duly executed mortgage by the borrower in favour of the Bank of Ireland over the property being purchased by the borrower at Banane, Meelin, Newmarket, in the County of Cork, the defendant have released the said monies in contravention of his said Undertaking and without the authority of the plaintiff.

6

b B. Further and other reliefs, including an order that the defendant repay to the plaintiff the monies misapplied by him in breach of his said undertaking."

7

The relevant facts are succinctly set out in the judgment of Laffoy J. delivered on the 6 th November, 2006. I would adopt her summary which reads as follows:

"On the 8 th August, 2003 the Bank issued what it described as a Mortgage Loan Offer Letter (the Offer Letter) to the Borrower offering an advance of €250,500 repayable over twenty years on security of property at Banane, Meeling, Newmarket, Cork, the purchase price of which was stated to be €295,000. ...it is common case that the property in question is the property registered on folio 41096 of the Register of Freeholders County Cork (the Mortgaged Property). On 12 th August, 2003 the Borrower signed the acceptance form at the end of that document. In the loan application which the Borrower had submitted to the Bank he had named the defendant as his solicitor. At the same time as the Offer Letter was dispatched the Bank sent it s standard 'solicitor's pack' to the defendant which contained, inter alia , blank standard form s of the following documents for use in the mortgage transaction: "

(a) solicitor's undertaking (the Undertaking);

(b) solicitor's Certificate of Title;

(c) cheque requisition form; and

(d) deed of mortgage/charge.

8

The defendant sent the completed Undertaking which was signed by him and dated 15 th September, 2003 to the Bank in September, 2003. He requisitioned the loan cheque at the same time. The loan cheque, which was dated the 29 th September, 2003, named "Coleman & Company" as the payee. The defendant endorsed the loan cheque in favour of Joseph M. Jordan & Co., the solicitors acting for the vendors in the sale of the Mortgaged Property. In broad terms, the defendant undertook in the Undertaking ... to ensure that the Borrower acquired good marketable title to the Mortgaged Property and to ensure that the Bank obtained a first legal charge on the Mortgaged Property. The defendant accepts that he is in breach of the Undertaking in that he has not perfected the Borrower's title or the Bank's security.

9

The Borrower defaulted in meeting the instalment repayments to the Bank. In December, 2004 the Bank called in the loan. By April, 2006 there was a total sum of €258,620.83 due to the Bank by the Borrower, which included arrears of €27,794.65 representing more than eighteen missed monthly instalment payments.

10

In March, 2004 the Bank, having identified 'apparent irregularities' (the nature of which have not been disclosed by the plaintiff to the court) in the mortgage transaction at issue here and other mortgage transactions, the applications for which had all been introduced to the Bank by the same mortgage broker, made a formal complaint to the Garda Bureau of Fraud Investigation. That investigation is ongoing.

11

In June, 2004 the Gardaí, pursuant to a warrant, removed the defendant's file in relation to the purchase and mortgage transactions from his office. The file is still retained by the Gardaí. By letter dated 7 th October, 2004 the Bank wrote to the defendant enquiring as to the precise status of the transaction and sought details of what was outstanding in order to fulfil the defendant's undertaking. The defendant was asked to complete a questionnaire which was enclosed. The defendant's response was that the Gardaí had his file and that he could not...

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