Donal Hurley v Pepper Finance Corporation (Ireland) Designated Activity Company

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 20 May 2022
• Neutral Citation: [2022] IEHC 299
• Court: High Court
• Docket Number: [2020 No. 625P.]

Between

Donal Hurley

Plaintiff

and

Pepper Finance Corporation (Ireland) Designated Activity Company

Defendant

[2022] IEHC 299

[2020 No. 625P.]

THE HIGH COURT

Credit agreement – Consumer Credit Act 1995 – Bound to fail – Defendant seeking an order dismissing the proceedings – Whether the proceedings were bound to fail

Facts: The plaintiff, Mr Hurley, by an action commenced by plenary summons issued on 27th January, 2020, claimed: a declaration that for the purposes of a loan agreement dated 19th November, 2001 he was a consumer for the purposes of the Consumer Credit Act 1995; and a declaration that the credit agreement and mortgage were unenforceable by reason of the provisions of s. 38 of the 1995 Act. Following the delivery of the statement of claim on 11th March, 2020 and a request for particulars which was duly replied to, a defence was delivered on 26th February, 2021, which commenced with a preliminary objection that the claim that the loan and security were unenforceable was bound to fail. The action was set down for trial on 27th July, 2021 but before it was certified a motion was issued on behalf of the defendant, Pepper Finance Corporation (Ireland) DAC (Pepper). The case came before the High Court on foot of a notice of motion issued on 1st October, 2021 by which Pepper asked for an order pursuant to the inherent jurisdiction of the court and/or pursuant to O. 19, r. 28 dismissing the proceedings on the grounds that they disclosed no reasonable cause of action, were bound to fail, were frivolous and/or vexatious and/or constituted an abuse of the process of the court. On the motion, it was submitted that Mr Hurley had, at the very least, an arguable case.

Held by Allen J that if the statement of claim disclosed an arguable question of law, the true test was whether the argument had a reasonable prospect of success. In the application of that test it was submitted on behalf of Mr Hurley, and accepted on behalf of Pepper, that the onus was not on Mr Hurley to demonstrate that he had a reasonable prospect of success, but on Pepper to show that he plainly and clearly did not. Allen J was persuaded that Pepper had met the requisite threshold and that Mr Hurley had no prospect of making out his case that his credit agreement with Irish Nationwide Building Society was an agreement to which the requirements of Part III of the 1995 Act applied.

Allen J held that there would be an order in the terms of the notice of motion striking out the statement of claim and dismissing the action.

Action dismissed.

JUDGMENT of Mr. Justice Allen delivered on the 20th day of May, 2022

Introduction

1 This case raises an interesting question as to the correct interpretation of the Consumer Credit Act, 1995, as enacted.

2 The core legal issue in the action is whether a loan agreement made in 2001, the purpose of which was to fund the purchase of a site and the building of a house – as opposed to the purchase of an existing house – was a “housing loan” for the purposes of the Act. Or, as it was put by counsel, the issue is whether the existence of a house is a prerequisite to the existence of a housing loan.

3 As I will come to, the Act of 1995 has been amended since the loan agreement the subject of these proceedings was made by the substitution of a new definition of “housing loan”. This judgment deals with the construction of the original definition.

The agreed facts

4 By a mortgage offer dated 19th November, 2001 Irish Nationwide Building Society (“INBS”) offered to Mr. Donal Hurley a loan in the sum of IR£112,500, repayable with interest over 25 years by instalments of combined principal and interest, on the security of a first legal mortgage over what was to be Mr. Hurley's principal private residence at 10 Tallon Heights, Castletownbere, County Cork. The stated purpose of the loan was “To Purchase a Principal Private Residence”. Mr. Hurley accepted the offer by endorsement on 4th December, 2001.

5 By agreement in writing in the Law Society of Ireland standard form (1991 edition) dated 17th December, 2001, made between John Power and Margaret Power as vendor and Mr. Hurley as purchaser, Mr. and Mrs. Power agreed to sell and Mr. Hurley to purchase that part of the property comprised in Folios 27298 and 26876 of the Register of Freeholders, County Cork, as therein more particularly described and known as No. 10 Tallon Heights, Castletownbere, Co. Cork for the price of IR£35,000. The contract provided for the payment of a deposit of IR£3,500 which, by the special conditions, was to be released to the vendors rather than held by their solicitor as stakeholder. The site purchase contract was tied by the special conditions to a building agreement to be executed by the parties but provided for completion of the site purchase within two weeks from the date thereof.

6 By a building agreement in the Law Society of Ireland and Construction Industry Federation printed standard form of the same date, 17th December, 2001, between Mr. Hurley and SWD Properties Limited (“SWD”), Mr. Hurley agreed to employ SWD and SWD agreed to build and finish in a good, substantial and workmanlike manner the house specified in the plans agreed on the site at Tallon Heights for the sum of IR£90,000, inclusive of VAT. The agreement provided for the payment of the contract price by seven instalments as the building work progressed, between the date of the signing of the agreement and the practical completion of the works.

7 On 11th March, 2002 Mr. Hurley duly executed a deed of mortgage in the INBS printed standard form over:-

“ALL THAT AND THOSE piece or plot of ground being part of the lands at Derreenataggart Middle and Cametringane, Barony of Beara and County of Cork being part of the property comprised in Folio 92889F of the Register of Freeholders, County of Cork as more particularly delineated and described on the map attaching to the Deed of Transfer dated 11th March 2002 made between Joseph Power and Margaret Power of the One Part and Donal Hurley of the Other Part and thereon outlined in red and known as Site No. 10, Tallon Heights, Castletownbere, Co. Cork.”

8 The mortgage deed defined “The Mortgaged Property” as meaning “that land described in the Third Schedule hereto with any buildings now erected or in the course of erection thereon and every part thereof.”

9 It is evident from the date of the transfer in the description of the property in the mortgage that the site purchase was not completed within two weeks.

10 Mr. Hurley was in due course registered as the owner of the property in a new Folio 105723F, County Cork and on 6th February, 2004 the charge over the property in favour of INBS was duly registered on that folio. In about 2019 Mr. Hurley's loan and mortgage were transferred to Pepper Finance Corporation (Ireland) DAC (“Pepper”) and on 25th July, 2019 Pepper was duly registered as the owner of the charge.

The pleadings

11 This is one of a number of actions in which borrowers have challenged the enforceability of loans which have been assigned to Pepper on the same ground and there are a couple of glitches in the statement of claim as to dates and lenders which appear to be attributable to copying and pasting.

12 Although the statement of claim does not say so, the plaintiff's case is that as of the date of the loan agreement there was no building or part of a building on the site at 10 Tallon Heights which was used or was suitable for use as a dwelling: and that is accepted by Pepper for the purposes of the application now before the court.

13 Mr. Hurley's case is that at the time of the loan agreement, and at the time of the mortgage, INBS failed to comply with the requirements of s. 30 of the Consumer Credit Act, 1995 and that in consequence Pepper, as the assignee of INBS, is not entitled to enforce the loan agreement or any security given for it. For the purpose of this application, Pepper admits that the requirements of s. 30 of the Act of 1995 were not complied with: or more accurately, that what s. 30 requires to be done was not done. The issue is whether s. 30 applied to the loan.

14 The action was commenced by plenary summons issued on 27th January, 2020 by which the plaintiff claimed a declaration that for the purposes of a loan agreement dated 19th November, 2001 he was a consumer for the purposes of the Consumer Credit Act, 1995; and a declaration that the credit agreement and mortgage were unenforceable by reason of the provisions of s. 38 of the Act of 1995. Following the delivery of the statement of claim on 11th March, 2020 and a request for particulars which was duly replied to, a defence was delivered on 26th February, 2021, which commenced with a preliminary objection that the claim that the loan and security were unenforceable was bound to fail.

15 The action was set down for trial on 27th July, 2021 but before it was certified the motion now before the court was issued on behalf of Pepper.

The motion

16 The case now comes before the court on foot of a notice of motion issued on 1st October, 2021 by which Pepper asks for an order pursuant to the inherent jurisdiction of the court and/or pursuant to O. 19, r. 28 dismissing the proceedings on the grounds that they disclose no reasonable cause of action, are bound to fail, are frivolous and/or vexatious and/or constitute an abuse of the process of the court.

17 From the time I first read the papers I was engaged by the procedure adopted by Pepper. The plenary summons and statement of claim were settled by responsible counsel and appeared to me to raise an question of law. While in this particular case the statement of claim did not lay the ground in fact for the legal argument, it was one of a number in which the facts – that there was no house on the site at the date of the loan agreement – had been pleaded and, correctly as it turned out, I did not understand the...