Daragh McCarthy and Others v Bank of Scotland Plc and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Gerard Hogan
• Judgment Date: 02 July 2014
• Neutral Citation: [2014] IEHC 340
• Court: High Court
• Date: 02 July 2014

[2014] IEHC 340

THE HIGH COURT

[No. 10545 P/2012]

McCarthy & Ors v Bank of Scotland PLC & Cotter

BETWEEN/

DARAGH McCarthy, PATRICK BEVAN AND DAFYYD HUGHES

PLAINTIFFS

AND

BANK OF SCOTLAND PLC AND MICHAEL COTTER

DEFENDANTS

RSC O.19 r28

BANKS MONETARY ANALYSIS DIRECTORATE MONEY CREATION IN THE MODERN ECONOMY BANK OF ENGLAND QUARTERLY BULLETIN 2014 Q1

DEMPSEY & ORS v ENVISION CREDIT UNION & ORS 2006 BCSC 750 2006 BCJ NO 1073

FREEMAN v BANK OF SCOTLAND (IRL) LTD & ORS UNREP GILLIGAN 31.5.2013 2013 IEHC 371

KEARNEY v KBC BANK IRL PLC & REYNOLDS UNREP BIRMINGHAM 16.5.2014 2014 IEHC 260

FARLEY v IRELAND UNREP SUPREME 1.5.1997 1998/6/1512

NOWAK v DATA PROTECTION CMSR 2013 1 ILRM 207 2012/34/10011 2012 IEHC 449

DATA PROTECTION ACT 1988 S10(1)(B)

BARRY v BUCKLEY 1981 IR 306 1981/9/1485

Contract of loan – Damages – Illegally created currency – Plaintiffs seeking damages for theft, deception, breach of duty, misrepresentation, causation, fraud, deceit, non-performance, breach of contract, breach of promise, attempted damage by perjury, dishonest and insolvent trading and counterfeiting – Whether proceedings should be struck out as unsustainable in law

Facts: In 2006, the predecessor in title of the defendant bank (Bank of Scotland Plc) advanced loan facilities in favour of the three plaintiffs (Mr McCarthy, Mr Bevan and Mr Hughes); the object of these loans was to enable the plaintiffs to acquire two commercial properties. The plaintiffs defaulted on their loans. These loans were called in 2012 and a receiver, the second defendant (Mr Cotter), was subsequently appointed. The plaintiffs claimed damages for goods and property allegedly stolen, and damages for theft, deception, breach of duty, misrepresentation, causation, fraud, deceit, non-performance, breach of contract, breach of promise, attempted damage by perjury, dishonest and insolvent trading and counterfeiting. The plaintiffs also claimed that the receiver”s appointment was invalid. The plaintiffs submitted to the High Court that the defendant bank did not advance them loans of money but rather illegally created currency, so that there is no valid contract of loan, referring to an article in Bank of England Quarterly Bulletin, 2014, Q.1 entitled ‘Money Creation in the Modern Economy’ by members of the Bank”s Monetary Analysis Directorate. It was also contended that the bank was insolvent at the time it made the loans. The defendant bank moved to seek to have the proceedings struck out as unsustainable in law, whether pursuant to O. 19, r. 28 or pursuant to the inherent jurisdiction of the High Court.

Held by Hogan J that, concerning the illegally created currency argument of Mr McCarthy that a loan could only be valid if something tangible (such as notes or coin) had been exchanged, it is a measure of the desperation of some litigants as a result of the collapse in the property market from 2008 onwards that arguments of this kind have been seriously advanced, referring to a version of this fanciful theory advanced in Dempsey v Enviston Credit Union [2006] BCSC 750. Hogan J held that this argument lacks both merit and any relationship to contractual or other legal realities, referring to Freeman v Bank of Scotland Ireland [2013] IEHC 371. Hogan J held that the source of the bank”s funds is irrelevant so far as the obligation to repay the loan is concerned; he held that it would be entirely unrealistic to suggest that any customer would inquire as to the source of a bank”s funds and the argument as thus advanced by the plaintiffs was entirely spurious and absurd. Hogan J held that the same could be said of the contention that a loan must be somehow be made by way of coin or notes, since this runs entirely contrary to modern realities. Hogan J held that while the plaintiffs invoke the concept of fraud, nothing whatever has been advanced to support this claim and it is accordingly quite impossible to see how any kind of fraud is involved. Referring to Kearney v KBC Bank Ireland plc [2014] IEHC 260, Hogan J held that the plaintiffs have drawn down funds, obtained the benefit of these funds and now have an obligation to repay these loans. Referring to Freeman, Hogan J held that even if the bank was insolvent at the time it made the loans, this would not affect the validity of these loans.

Hogan J held that the plaintiffs entered into perfectly valid contracts of loan with the defendant bank on which they have now defaulted, resulting in the appointment of a receiver. Hogan J held that they cannot be allowed to obstruct this process by commencing proceedings which are entirely devoid of merit and in so doing advance arguments that are both spurious and foolish. Hogan J concluded that these proceedings should be struck out pursuant to O. 19, r. 28 on the ground that they are frivolous and vexatious.

Judgment approved.

1 1. In August. 2006 the predecessor in title of the first defendant bank advanced loan facilities in the sura of €2.2m in favour of the three plaintiffs. The object of these loans was to enable the plaintiffs to acquire two commercial properties in Enniscorthy, Co. Wexford. Like many property investments which were made at this particular time, this investment has not proved to be a success. The two properties in question were charged with separate mortgages. The plaintiffs have indeed defaulted on their loans. These loans were called in April, 2012 and a receiver (who is the second defendant) was subsequently appointed on 1 ^st May, 2012.

2 2. The plaintiffs commenced the present proceedings in October. 2012. They claim damages for goods and property which have been allegedly stolen. They also claim damages for theft, deception, breach of duty, misrepresentation, causation, fraud, deceit, non-performance, breach of contract, breach of promise, attempted damage by perjury, dishonest and insolvent trading and counterfeiting. It is only fair to say that no claims have been against the receiver, Mr. Cotter, save that his appointment is invalid. That claim is really contingent on the quite separate claims as against the Bank, the basis for which can now be examined.

3 3. While the plaintiffs have filed an affidavit in support of these claims, it has to be said that the nature of the averments are not the easiest to follow. In many respects the plaintiffs - who are litigants in person - have perfected a style of legal writing which can, without any disrespect, be fairly described as a pastiche copy of the high style of the 19 ^th century pleader. Almost any number of the thirty three paragraphs of this supporting affidavit could be cited for this purpose, but the opening paragraph may serve to give a flavour of what was later to come

"This Honourable Court should in all that is Equitable and Just grant all reliefs sought by the Plaintiffs on foot of the Defendants' unlawful intentions, actions and collusions to wilfully steal the Plaintiffs' property and wantonly destroy their business."

4 4. Much of the remainder of the pleadings...