Brendan O'Rourke v Diane O'Rourke (Removed by Order of the Court), Dermot O'Rourke, Perle O'Rourke and Ulster Bank Ireland DAC

• Jurisdiction: Ireland
• Judge: Ms. Justice Faherty
• Judgment Date: 14 March 2022
• Neutral Citation: [2022] IECA 59
• Docket Number: Record Number: 2017/322, 323, 471 Record Number 2018/479
• Court: Court of Appeal (Ireland)

Between/

Brendan O'Rourke

Plaintiff/Appellant

and

Diane O'Rourke (Removed by Order of the Court), Dermot O'Rourke, Perle O'Rourke and Ulster Bank Ireland DAC

Defendants/Respondents

Between/

Ulster Bank Ireland DAC

Plaintiff/Respondent

and

Brendan O'Rourke

First Named Defndant/Appellant

and

Mountview Construction UK Limited

Second Named Defendant

[2022] IECA 59

Faherty J.

Murray J.

Pilkington J.

Record Number: 2017/322, 323, 471

2018/481

Record Number 2018/479

THE COURT OF APPEAL

UNAPPROVED

JUDGMENT of Ms. Justice Faherty delivered on the 14 ^th day of March 2022

1 . There are five appeals before the Court, four of which are brought by Brendan O'Rourke (“hereinafter “the plaintiff” or “Brendan O'Rourke”) in the High Court proceedings bearing record number 2016/ 10451P (hereinafter “the Equity Proceedings”), with the fifth appeal brought by Brendan O'Rourke as defendant in the High Court proceedings bearing record number 2012/9106P (hereinafter “the Bank Proceedings”). For ease of reference, in relation to the four appeals in the Equity Proceedings I will refer to the “substantive appeal” and “the procedural appeals”.

Background

2 . The Equity Proceedings were commenced by Equity Civil Bill on 10 August 2012. The plaintiff sought declaratory and injunctive relief relating to property known as “Furness Hall”, Naas, County Kildare. The reliefs included:

• (a) A declaration that Brendan O'Rourke has a legal and beneficial interest in Furness Hall;

• (b) An injunction restraining the fourth named defendant (“the Bank”) from interfering with the property; and,

• (c) An order for directions in relation to the validity of two mortgages dated 16 September 2004 and 12 February 2008 in respect of Furness Hall.

3 . The Bank Proceedings were commenced on 7 September 2012 whereunder the Bank sought, inter alia, injunctive relief restraining the defendants from trespassing on the lands at Furness Hall held by the Bank as mortgagee in possession on foot of a mortgage made on 16 September 2004, a declaration that the Bank's title as mortgagee in possession was unaffected by the claims advanced by Brendan O'Rourke in the Equity Proceedings and damages for trespass and nuisance.

4 . By her judgments dated 25 October 2018, 3 November 2018 and 5 December 2018 and Order of 5 December 2018, O'Hanlon J. dismissed the claim in the Equity Proceedings, allowed the second and third defendants and the Bank their costs, and ordered Brendan O'Rourke to make interim payments on foot of the costs order. Undertakings were given by the defendants' solicitors to the effect that in the event of taxation realising a smaller sum than that directed to be paid on account, any such overpayment would be repaid. An application for a stay on all of the orders was refused by the trial judge, a decision that was upheld by the Order of this Court on 25 January 2019.

5 . By her judgment and Order dated 5 December 2018 in the Bank Proceedings, O'Hanlon J. granted the Bank an interlocutory injunction restraining Brendan O'Rourke and Mountainview Construction Limited (“Mountainview”) from remaining on or entering or occupying Furness Hall.

6 . Before turning to the judgments, and to better understand the issues in the appeal, it is appropriate to set out in some detail the background to the institution of both sets of proceedings and their procedural history to the dates of the relevant judgments.

Background

7 . Brendan O'Rourke and the first defendant were married on 7 August 2004. The second and third defendants are the parents of the first defendant.

8 . On 10 June 2004, some two months or so prior to the marriage, the second defendant, (otherwise “Dermot O'Rourke”) agreed to purchase Furness Hall for a sum of €3.65m. He paid a booking deposit of €70,000. The contract for sale dated 9 July 2004 shows him as the purchaser in trust. The purchase of Furness Hall was funded by a loan facility of €2.92m from First Active plc (the predecessor to the Bank) with the balance of the purchase price, including stamp duty, fees and expenses, provided by Dermot O'Rourke and the third defendant from their personal funds. Documents generated by First Active on or about 13 July 2004 show that the purpose of the loan was to “part fund the acquisition of a residential property at Furness Hall… The property will be acquired by way of a discretionary trust controlled by Mr & Mrs Dermot O'Rourke as trustees for the benefit of their daughter Diane O'Rourke. The acquisition price is €3.65m plus fees and stamp duty. The borrowing requirement is €2.92m (80% of cost).” The term of the loan was to be “[u]p to 20 years but subject to review after 3 years or on dissolution of the trust structure”. Repayment of the loan was to be by way of interest only for years 1–3 with monthly capital and interest payments thereafter to amortise the loan.

9 . Details of the proposed trust structure and the purchase were set out in an email sent to First Active on 13 July 2004 by Mr. Paraic Madigan of Matheson Ormsby Prentice Solicitors, the solicitor then acting for the second and third defendants in respect of the purchase of the property. The email outlined “both the tax consequences of the proposed transaction and the salient provisions of the enclosed discretionary settlement”, as follows:

“1. TAX CONSEQUENCES OF PROPOSED TRANSACTION

The purpose of the proposed transaction is for Mr. O'Rourke to assist his daughter Diane in the purchase of a dwelling in tax efficient manner and in particular to ensure that she obtain an exemption from Capital Acquisitions Tax …without incurring additional tax expenses.

The structure of the proposed transaction is as follows:

• a) Mr. O'Rourke will create a discretionary settlement listing all of his children, their spouses and their children as potential beneficiaries.

• b) The property will be acquired by the trustees and taken in their names.

• c) The trustees would then permit Diane to occupy the residence on an annual basis. It is my view that this free use of property does not, pursuant to the CAT legislation, give rise to any adverse tax consequences.

• d) After Diane has occupied the property for three years, the trustees can then appoint the property to her absolutely.”

Mr. Madigan went on to advise that the discretionary settlement would provide that Dermot O'Rourke would settle certain funds on discretionary terms, that he and the second defendant would act as trustees, that the trustees would stand possessed of the trust fund and the income arising thereof for the benefit for any one or more of the beneficiaries as the trustee shall from time to time appoint, “that any monies settled may be invested in stock, funds, securities, or other investments or property of whatever nature, including the purchase of a dwelling house for any of the beneficiaries.” The draft discretionary settlement also contained other provisions including that the trustees would have the usual additional powers in relation to managing the trust fund and that they would have the power to borrow money. On foot of the provision of the draft terms of the settlement, First Active was requested to confirm that it was in a position to provide finance to the trustees on the terms of the proposed settlement.

10 . In a letter of the same date to Dermot O'Rourke, with the subject heading “Discretionary Trust”, Mr. Madigan wrote as follows:

“Further to our recent discussions in relation to your wish to purchase a house for your daughter Diane, I now enclose in Appendix 1 details of the proposed structure, in Appendix 2 a draft of the proposed discretionary settlement and in Appendix 3 a draft letter of wishes.

1. PROPOSED STRUCTURE

The structure as outlined in Appendix 1 is that you, as settlor, would settle certain funds on discretionary terms which the trustees, currently propose to be you and Perle, would use to purchase the property.

Diane would then be given a licence to occupy the property on an annual basis provided that she occupied the property for 3 years from the date of the gift and did not at the date of the gift own any other property, the property could be appointed out to her in three years free of Capital Acquisitions Tax… In addition, as explained in Appendix 1, no Capital Gains Tax… or additional Stamp Duty… should be payable by the trustees on this appointment. In other words, the only tax cost will be the SD payable on the purchase of the property.

2. DISCRETIONARY SETTLEMENT

I enclose at Appendix 2 a draft discretionary settlement. [The] salient provisions of the settlement are as follows:

• (i) You, as settlor, will settle certain funds on discretionary terms for a class of beneficiaries which include Diane, her husband and any children they may have.

• (ii) The trustees may appoint the capital and income of the trust fund to any of the beneficiaries as they see fit.

• (iii) The trustees have the usual powers in relation to making investments.

• (iv) None of the beneficiaries can compel the realisation of any investments.

• (v) The trustees are provided with the usual indemnities.

• (vi) The settlement is professed to be irrevocable.”

The document went on to refer to a letter of wishes.

11 . An internal document generated by First Active on 14 July 2004 referred to the acquisition of a substantial property and a borrowing requirement of €2.9m. It went on to state:

“DOR is purchasing the property for his daughter through a discretionary trust as part of his tax planning and is being advised in this by Matheson Ormsby Prentice. We have been furnished with a copy of the structure which our solicitor is to be satisfied. We understand that after 3 years the trust can be collapsed and the property will pass to DOR's daughter, though the Bank's consent will be required to this.”

Under the heading “Repayment Structure/Capacity”, it was stated that:

“Interest only will be in...