Bank of Scotland Plc v Anne Hickey

JudgeMr. Justice Ryan
Judgment Date11 April 2014
Neutral Citation[2014] IEHC 202
CourtHigh Court
Date11 April 2014

[2014] IEHC 202


[No. 306 Sp/2012]
Bank of Scotland Plc v Hickey
No redaction required





Mortgage - Loan agreement - Purchase and refurbishment of property - Commercial transaction or personal relationship? - In the course of business and trade - Security for loan repayment - Equitable mortgage over property - Whether bona fide defence - Alleged undue influence - Legal advice - Signing of legally binding document - Joint and severally liable

Facts: The defendant, Ms Anne Hickey, entered into a loan agreement alongside her then partner, Mr. Declan Porter, with the plaintiff bank, Bank of Scotland (Ireland) Limited. A loan of €212,000 was made for the purchase of No.19 Pairc Mhuire, Saggart Village, Co. Dublin and the other, €100,000, was to be used to refurbish the neighbouring property, No. 20 Pairc Mhuire. The defendant and Mr. Porter were required to provide security in the form of legal mortgages over three properties, including No.19 Pairc Mhuire. These terms were accepted in writing. The loan payments subsequently fell into arrears and the bank demanded repayment in the sum of €155,841.73.

Counsel for the plaintiff argues an entitlement to an equitable mortgage over the property at No. 19 Pairc Mhuire. Counsel for the defendant argues, following Roche, that the defendant and Mr. Porter were engaged in a personal relationship, and as such, an onus was placed on the plaintiff bank to take certain steps upon enquiry as to whether there was any vulnerability in the person proffering or providing the security. The issue before the Court is whether the defendant has an arguable defence.

Held: Applying Aer Rianta v. Ryanair [2001] 4 I.R. 607, the credibility test in First National Commercial Bank v. Anglin [1996] 1 I.R. 75 and the principles in Harrisrange Ltd v. Duncan [2003] 4 I.R. 1 the judge arrived at a conclusion. The judge decided it was not a defence for Ms. Hickey to show that most of the money went on purposes other than those for which it was borrowed. Pursuant to Clause 25.1 of the Bank”s General Conditions, the defendant and Mr. Porter agreed to be jointly and severally referred to as ‘the borrower’. They were therefore jointly and severally liable for the outstanding liabilities. The judge indicated there was no evidence to suggest that Ms. Hickey had been unduly influenced by Mr. Porter. No information was provided and no example was given as to how the alleged coercion was exercised. The judge acknowledged the defendant had legal representation in the execution of the loan and mortgage documents and clarified that separate legal advice would only be necessary in circumstances whereby the principles established in Etridge (No. 2) were in operation. The judge confirmed the loan was for a commercial purpose. It was a case of joint borrowing by a person describing herself as a company director acting in the course of her business or trade. The judge applied the decision of Kelly J in Irish Bank Resolution Corporation Limited v. Quinn & Anor. [2011] IEHC 470 whereby a person who signs a potentially legally effective document without properly considering it or understanding it, will be prima facie bound to accept any consequences which may later arise.

-No arguable defence established by defendant. Relief sought by plaintiff granted.


JUDGMENT of Mr. Justice Ryan delivered on the 11th April, 2014


By special summons dated 31 st May, 2012. the plaintiff seeks a declaration that by virtue of an Indenture of Mortgage and Charge dated 27 th September, 2001, made between the plaintiff and the defendant, the plaintiff is entitled to and holds a mortgage and charge over all the lands at No. 19 Pairc Mhuire, Saggart, County Dublin (Folio No. 38788F); a declaration that there is due by the defendant the sum of €155,841.73; judgment in respect of this sum; costs and other consequential orders and reliefs.


By a cross-border merger pursuant to the European Communities (Cross-Border Mergers) Regulations 2008 of Ireland and the Companies (Cross-Border Mergers) Regulations 2007 of the United Kingdom approved by the High Court of Ireland on the 22 nd October, 2010 and approved by the Scottish Court of Session on the 10th December, 2010, all of the assets and liabilities of Bank of Scotland (Ireland) Limited transferred to the plaintiff on the 31 st December, 2010 and Bank of Scotland (Ireland) Limited was dissolved without going into liquidation.


As the mortgage in this case pre-dated the commencement of the Land and Conveyancing Law Reform Act 2009, this case is considered on the basis of the law as it stood before that legislation came into effect.

1. Background

By letter dated 21 st September, 2001, Bank of Scotland (Ireland) Limited entered into two loan facilities with the defendant, Ms. Hickey, and her then partner, Mr. Declan Porter. A loan of IR£212,000 was for the purchase of No. 19 Pairc Mhuire, Saggart Village, Co. Dublin and the other, IR£100.000, was to be used to refurbish the neighbouring property, No. 20 Pairc Mhuire.


The defendant and Mr. Porter were required to provide security in the form of first legal mortgages over three properties, including No. 19 Pairc Mhuire. These terms were accepted in writing on the 24 th September, 2001. The defendant's then solicitor, Mr. David Walsh, gave an undertaking to the Bank that the defendant would acquire good, marketable title to the property and would put in place a first legal charge over the property in favour of the plaintiff prior to negotiating the loan cheques or proceeds. The defendant completed this action on 27 th September. 2001. The schedule to the mortgage described the property as:-

"ALL THAT AND THOSE the dwelling-house and premises at No. 19 Phairc Mhuire, Saggart, County Dublin comprised in Folio 38788F of the Register of Freeholders County Dublin".


The loan repayment terms were varied by agreement set out in a letter dated 28 th November, 2006, which was accepted by the defendant and Mr. Porter on the 30 th November, 2006. The loan in respect of the purchase of No. 19 Pairc Mhuire fell into arrears in January, 2009, with the Bank demanding repayment from the defendant and Mr. Porter by letter dated 22nd December, 2009. No repayments have been made since that time and the defendant and Mr. Porter remain indebted to the Bank in the sum of €155,841.73.


The plaintiff has been unable to secure registration of the mortgage on Folio No. 38788F and seeks to rely on the equitable charge which they argue was created in their favour by; (1) the terms of the loan agreement; (2) the provisions of the mortgage which allowed for the creation of security over the property in favour of the Bank; (3) the terms of the undertaking; and, (4) the payment of loan money pursuant to the loan agreement.


The defendant in her replying affidavit dated 8 th May, 2013, does not dispute these particulars. She deposes to the following facts as a basis for contending that the plaintiff is not entitled to seek an equitable mortgage and that she has a bona fide defence:-


(i) Although the money was borrowed to fund the refurbishment of No.20 and the purchase of No. 19, nothing was spent on No. 19 and only a small amount went to No.20.


(ii) Mr. Porter spent the great bulk of the money for his own purposes exclusively.


(iii) The defendant "executed the relevant documents at the behest and direction of Mr Porter."


(iv) Mr. Porter and the defendant did not have legal advice and she was not advised by the plaintiff or Mr. Porter to get independent legal advice.


(v) Because the funds were drawn down to benefit Mr. Porter solely, any money now due and owing is exclusively owed by Mr. Porter.


The plaintiff's position is that none of the issues raised constitutes a defence to the reliefs sought nor do they justify the matter being adjourned to plenary hearing. The plaintiff argues that as equitable mortgagee of No. 19 Pairc Mhuire, in circumstances where the defendant has failed to repay a demand facility, it is entitled to enforce its security without the requirement for a plenary hearing.

2. The Plaintiff's response

In an affidavit sworn on the 5th June, 2013, Ms. Ruth Halpin, Assistant Manager, in the Customer Debt Management department of the plaintiff refers to the defendant's deposition about the use of the funds and deposes that by virtue of clause 6 of the Bank's General Conditions, the defendant and Mr. Porter undertook that they would only use the loan for the purposes stated in the loan agreement. Further, by the letter of variation of the 28 th November, 2006, executed by the defendant and Mr. Porter on the 30 November, 2006, the parties agreed that the loan was subject to the conditions set out in the Bank's Standard Conditions which provide at clause 8(1)(a) that the borrower undertakes that the loan will only be used for the purpose for which it was granted.


Ms. Halpin argues that the defendant is in breach of covenant insofar as the loan money was not used for the agreed purpose. This deponent says that any other use of the funds borrowed is inconsistent with the loan agreement under which the defendant and Mr. Porter are jointly and severally liable. In respect of the defendant's claim that she did not have legal advice, Ms. Halpin deposes that Mr. David Walsh was the defendant's solicitor when the loan agreement was entered into. Ms. Hickey irrevocably authorised Mr. Walsh to act on her behalf in giving the Bank an undertaking in connection with the purchase of No. 19 Pairc Mhuire.

3. Plaintiff's Argument and Submissions

The plaintiff submitted that O. 3. r. 15 RSC provides that a claim for "sale, delivery of possession by a mortgagor, or redemption,...

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