Bank of Ireland Mortgage Bank v Coleman

JurisdictionIreland
JudgeMiss Justice Laffoy
Judgment Date06 November 2006
Neutral Citation[2006] IEHC 337
CourtHigh Court
Date06 November 2006

[2006] IEHC 337

THE HIGH COURT

No. 72 SP/2006
BANK OF IRELAND MORTGAGE BANK v COLEMAN
IN THE MATTER OF:-DANIEL COLEMAN, A SOLICITOR
AND IN THE MATTER OF:-AN UNDERTAKING IN WRITING DATED
15TH SEPTEMBER, 2003
BETWEEN/
BANK OF IRELAND MORTGAGE BANK
PLAINTIFF

AND

DANIEL COLEMAN Practising under the style of Coleman & Company
DEFENDANT

ASSET COVERED SECURUTIES ACT 2001 ( APPROVAL OF TRANSFERS BETWEEN THE GOVERNOR & COMPANY OF THE BANK OF IRELAND & BANK OF IRELAND MORTGAGE BANK) ORDER 2004 SI 421/2004

FAMILY HOME PROTECTION ACT 1976

CORDERY ON SOLICITORS 1996 -

UDALL v CAPRI LIGHTING LTD 1987 3 AER 262

JOHN FOX v BANNISTER KING & RIGBEYS (A FIRM) 1987 1 AER 737

MYERS v ELMAN 1940 AC 282 1939 AER 484

IPLG LTD & HOUGHTON FRY & ORS PRACTISING AS WILLIAM FRY SOLICITORS v DONALD O STUART & AN POST 19.3.1992 1998/22/8252

SOLICITORS ACT 1954 PART III

SOLICITORS (AMDT) ACT 1960 S7

SOLICITORS (AMDT) ACT 1960 S8

IN THE MATTER OF A SOLICITOR 1919 53 ILTR 51

SCR O 3 r22

RULES OF THE SUPERIOR COURTS (NO 2) (AMDT OF O 3) 2001 SI 269/2001

SCR O 3 r21

CIVIL LIABILITY ACT 1961 S34(1)

Abstract:

Practice and procedure - Solicitor’s Undertaking - Compensation - Mortgages - Whether the plaintiff was entitled to be compensated for the defendant solicitor’s failure to fulfil an Undertaking made by him in relation to a residential mortgage.

The defendant acted as the solicitor for a Borrower in the purchase of a certain property and in the mortgage thereof to the Bank as security for a loan from the Bank to the Borrower. In pursuance of his role as solicitor for the Borrower, the defendant gave an Undertaking to the Bank, essentially promising to furnish the Bank with good security on the Mortgaged Property in accordance with the terms of the Offer Letter, which was accepted by the Borrower. The defendant accepted that he was in breach of the Undertaking in that he failed to perfect the Borrower’s title or the Bank’s security. By virtue of the Borrower’s default in meeting the instalment repayments to the Bank, the Bank instituted proceedings by way of Special Summons seeking amongst other reliefs, compensation for loss suffered as a result of the defendant’s actions in releasing the sum of Eur250,500 in contravention of the Undertaking and without the authority of the Bank. The plaintiff did not seek to recover the debt from the Borrower.

Held by Laffoy J. in dismissing the plaintiff’s claim: That the plaintiff’s claim for compensation by way of repayment of the sum of Eur250,500 together with interest as a means of enforcing the Undertaking was misconceived. It was reasonable to infer from the evidence that the defendant did not comply with the Undertaking. However, it was still possible for the defendant to fulfil the overall purpose of the Undertaking and his ultimate obligation and if that obligation was carried out, there would be no relief which the court could give to the plaintiff in the exercise of its inherent jurisdiction. Furthermore, the relief sought by the plaintiff was not commensurate with compensating the plaintiff for the loss it suffered as a result of the defendant’s failure to implement his obligation pursuant to the Undertaking.

Reporter: L.O’S.

1

Judgment of Miss Justice Laffoy delivered on 6th November, 2006 .

The parties
2

The plaintiff is a licensed bank and is a subsidiary of the Governor and Company of the Bank of Ireland to which the Irish residential mortgage business and Irish residential mortgage assets of Bank of Ireland were transferred in 2004 in accordance with a Transfer Scheme under the Asset Covered Securities Act, 2001(Approval of Transfers between the Governor and Company of the Bank of Ireland and Bank of Ireland Mortgage Bank) Order, 2004 ( S.I. 421 of 2004). In this judgment the expression "the Bank" will be used to refer to the Governor and Company of the Bank of Ireland before the transfer became effective and the plaintiff thereafter.

3

The defendant is a solicitor practising under the name Coleman and Company, who acted for John Lane (the Borrower) in the purchase of property in County Cork and in the mortgage thereof to the Bank as security for a loan from the Bank to the Borrower in the circumstances hereinafter outlined from 2003 to date.

The facts in outline
4

On 8th 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, Meelin, Newmarket, Cork, the purchase price of which was stated to be €295,000. As I understand it, 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 12th 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 its standard "solicitor's pack" to the defendant which contained, inter alia, blank standard forms of the following documents for use in the mortgage transaction:

5

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

6

(b) solicitor's Certificate of Title;

7

(c) cheque requisition form; and

8

(d) deed of mortgage/charge.

9

The defendant sent the completed Undertaking which was signed by him and dated 15th September, 2003 to the Bank in September, 2003. He requisitioned the loan cheque at the same time. The loan cheque, which was dated 29th 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 which I will refer in more detail later, 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.

10

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.

11

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.

12

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 7th 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 furnish the information sought, but that he would deal with all matters when the file was returned.

13

By letter dated 5th May, 2005 the Bank's solicitors, on the basis that the defendant was in breach of the Undertaking, called on the defendant for the immediate return of the sum of €250,500 which it was alleged was wrongfully released by the defendant. The defendant did not comply with the request. These proceedings, by way of Special Summons, were issued on 22nd February, 2006.

14

The plaintiff has not sought to recover the debt from the Borrower in legal proceedings. Nor has it sought to realise against the Borrower such security as is afforded by the Undertaking by proceedings for a "well-charging" order and order for sale.

The claim
15

In these proceedings the plaintiff seeks the following reliefs:

16

a A. an order that the defendant compensate the plaintiff for loss suffered as a result of the failure of the defendant to comply with the terms of the Undertaking, whereby he undertook, inter alia, not to release €250,500 paid to him by the Bank in his capacity as solicitor for the Borrower without first having obtained a duly executed Mortgage by the Borrower in favour of the Bank of the Mortgaged Property, the defendant having released the said monies in contravention of the Undertaking and without the authority of the plaintiff; and

17

b B. further and other relief, including an order that the defendant repay to the plaintiff the monies misapplied by him in breach of the Undertaking;

18

c C. interest; and

19

d D. damages

20

The plaintiff's claim has been presented on the basis that the quantum of its loss occasioned by the defendant's breach of the Undertaking is the sum of €250,500 and interest thereon.

The Undertaking
21

The Undertaking was presented as being in the Law Society approved form (1999 edition). It was expressed to be made in consideration of the Bank agreeing to the drawdown of a loan facility in respect of the Mortgaged Property before the Bank's mortgage security had been perfected. It was subject to the payment through the defendant of the loan cheque, which is what happened. The defendant's obligations under the Undertaking were set out as four distinct steps as follows:

22

1. Under the heading "Good Title", to ensure, where the Borrower was...

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4 cases
  • Allied Irish Banks Plc v Maguire
    • Ireland
    • Supreme Court
    • 13 October 2016
    ...J., 28 July 2009). BBMB Ltd. v. Eda Holdings Ltd. [1990] 1 W.L.R. 409; [1991] 2 All E.R. 129. Bank of Ireland Mortgage Bank v. Coleman [2006] IEHC 337 & [2009] IESC 38, [2009] 3 I.R. 699; [2009] 2 I.L.R.M. 363. Brandeis Ltd. v. Western Transport Ltd. [1981] 1 Q.B. 864; [1981] 3 W.L.R. 181; ......
  • Bank of Ireland Mortgage Bank v Coleman
    • Ireland
    • Supreme Court
    • 5 May 2009
    ...September, 2003. Bank of Ireland Mortgage Bank Plaintiff and Daniel Coleman practising under the style of Coleman & Company Defendant [2006] IEHC 337, [2009] IESC 38, [2006 No. 72 SP]; [S.C. No. 451 of 2006] High Court Supreme Court Solicitors - Solicitor's undertaking - Enforcement of soli......
  • Fitzpatrick v Byrne
    • Ireland
    • High Court
    • 30 May 2016
    ...is that there be no other procedure prescribed by the Rules available to the plaintiff. So for example in Bank of Ireland v. Coleman [2006] IEHC 337, Laffoy J. permitted an application by way of special summons to enforce a solicitor's undertaking on the grounds that there were no existing ......
  • Danske Bank A/S t/a National Irish Bank v O'Ceallaigh t/a O'Ceallaigh & Company Solicitors
    • Ireland
    • High Court
    • 23 May 2011
    ...... charge over property executed prior to negotiating loan cheque - Funds drawn down but no mortgage furnished - Subsequent loan to borrowers from plaintiff - Entire property sold - No proceeds ... Whether plaintiff suffered any loss - Whether matter should go to plenary hearing - Bank of Ireland Mortgage Bank v Coleman [2009] IESC 38, [2009] 3 IR 699 applied - Directions as to exchange of ......

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