Fagan v ACC Loan Management Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice McDermott
• Judgment Date: 10 May 2016
• Neutral Citation: [2016] IEHC 233
• Court: High Court
• Docket Number: [2015 No. 506 JR]
• Date: 10 May 2016

[2016] IEHC 233

THE HIGH COURT

JUDICIAL REVIEW

McDermott J.

[2015 No. 506 JR]

BETWEEN

DECLAN FAGAN

AND

BERNADETTE FAGAN

APPLICANTS/DEFENDANTS

AND

ACC LOAN MANAGEMENT LTD.

RESPONDENT/PLAINTIFF

Banking & Finance – Summary judgment – Failure to pay debt – Declaration of Bankruptcy – Order for possession – Judicial review – Arguability – Family Home Protection Act, 1976 – S. 61 (4) of the Bankruptcy Act 1988 – Fair hearing

Facts: In the present telescoped hearing, the applicants sought leave to apply for judicial review and an order of certiorari for quashing the order of possession made by the Circuit Court in favour of the respondent in the proceedings instituted by the respondent to realise the amount of judgment that was not discharged by the applicants. The applicants contended that since they were declared bankrupts, the relevant property against which the legal charge was created to secure the loan from the respondent, became vested with the official assignee and thus, the denial of the official assignee for defending the possession proceedings would amount to disposition of property in contravention of s. 61 (4) of the Bankruptcy Act 1988. The respondent contended that it being a secured creditor could claim entitlement to the property without reference to the official assignee by virtue of power granted under s. 136 (2) of the Act of 1988. The respondent contended that the applicants did not have locus standi to challenge the validity of the respondent's security, which was objected to by the applicants claiming a breach of the right of possession of the family home under art. 40.3 of the Constitution and denial of a fair hearing.

Mr. Justice McDermott refused to grant leave to the applicants. The Court held that before granting leave, an applicant must satisfy the Court that he had a stateable ground to seek relief by way of judicial review. The Court, in consonance with the judgment of the Supreme Court in Dellway Investments Ltd v. NAMA [2011] 4 I.R. 1, held that the right of fair hearing would envisage compliance with the requirements of notice, foreseeability and an independent determination of the objective necessity for the delivery of possession of property. The Court found that in the present case, the applicants were on notice of the said proceedings for possession and had availed every opportunity to advance the defence, and thus, it could not be said that there was a denial of fair hearing to them. The Court held that it was bound by the judgment of the High Court delivered in an earlier proceedings initiated by the applicants for possession of the relevant property wherein the issue regarding locus standi had been decided to the effect that it was the official assignee and not the bankrupts who had the legal right to challenge the charge created in favour of the bank. The Court found that since the plaintiff had litigated the issue of locus standi at the High Court and the Circuit Court, he was estopped from raising that issue again before the present forum.

JUDGMENT of Mr. Justice McDermott delivered on the 10th day of May, 2016

1 On the 7th September, 2015 the applicants sought leave to apply for judicial review for an order of certiorari in respect of an order for possession of property comprised in Folio 7758 Co. Westmeath granted to the respondent by Her Honour Judge Flanagan on the 28th July, 2015. Leave to apply for judicial review was not granted on that application, but the High Court (White J.) directed that the order for possession be stayed until the determination of an application for leave to apply for judicial review and that a notice of motion be served upon the proposed respondent (ACCLM previously ACC Bank plc) pursuant to O. 84 r. 24 of the Rules of the Superior Courts. That motion was adjourned from time to time and affidavits were exchanged between the parties. The matter comes before this Court by way of a ‘telescoped’ hearing whereby the application for leave will be determined and if successful arising out of the evidence and exhibits contained in the affidavits exchanged between the parties, the court will proceed to determine the issue as to whether an order for certiorari should issue on such grounds upon which leave may be granted, if any. Mr. and Mrs. Fagan were not legally represented. The sides were satisfied that the hearing should proceed on this basis. The court received extensive submissions from the parties in respect of the issues raised in these proceedings.

2 On the 28th July, 2015 in proceedings entitled ‘The Circuit Court, Midland Circuit, County of Westmeath, Between/ ACC Loan Management Ltd., Plaintiff and Declan Fagan and Bernadette Fagan, Defendants’ Her Honour Judge Flanagan having been satisfied that the defendants were duly served with a Civil Bill for Possession issued on the 18th March, 2014 having read the pleadings and documents filed, and heard submissions by counsel for the plaintiff and the defendants, appearing on their own behalf, was satisfied that the plaintiff was entitled to possession of the premises as claimed in the Civil Bill and made an order:

‘That the plaintiff does recover from the defendant possession of ALL THAT AND THOSE the property comprised in Folio 7758 Co. Westmeath and the court doth further order that the plaintiff do recover from the defendants the costs of the proceedings to be taxed in default of agreement’.

The order was stayed in the event of an appeal.

Background

3 On 13th July, 2004 the plaintiff advanced two loan facilities to Temple Spa Limited comprising loans of €4,750,000.00 and €4,825,000.00. The security provisions of the facility letter required that the company's directors to provide a personal guarantee supported by a full legal charge over Temple House on 14.5 acres at Horseleap, Co. Westmeath. A second guarantee dated 23rd April, 2007 was entered into by the plaintiffs in respect of credit of €307,500.00 provided as working capital to the company.

4 The charge was duly registered as a burden on the property on 17th May, 2007. ACC Loan Management Ltd. were registered as owners of the charge.

5 On the 14th February, 2007 Mr. and Mrs. Fagan entered into a home loan agreement with ACCLM for a facility up to a maximum of €250,000.00 by way of equity release to be applied in reduction of the debt owing by the company to ACCLM. The same security applied in respect of this loan.

6 By letter of demand dated 28th October, 2010 ACCLM demanded payment by the company of the monies due under the terms of the 2004 and 2007 Facility Letters. By a further letter of demand dated 1st November, 2010 payment was sought from the applicants for the monies due by the company under the first and second guarantees. The monies were not discharged.

7 A receiver was appointed on the 16th November, 2010 in respect of the property.

8 ACCLM initiated proceedings by way of summary summons against the applicants seeking payments of monies due under the 2004 and 2007 Facility Letters and judgment was granted in the amount of €5,780,460.28 against the applicants on 9th May, 2011. This sum was not discharged and on the petition of ACCLM the applicants were adjudicated bankrupt by orders dated 21st May, 2012.

High Court Proceedings for Possession

9 Proceedings were issued by way of special summons in the High Court seeking possession of Temple House (the applicant's private dwelling house) and approximately 14.5 acres at Temple, Horseleap, Co. Westmeath comprised in Folio 7758 Co. Westmeath.

10 In a judgment delivered on the 23rd July, 2013 Finlay Geoghegan J. outlined the background to the proceedings [2013] IEHC 346 but refused the relief claimed. I gratefully adopt the chronology of relevant events set out in that judgment.

11 The special summons issued on 7th February, 2013 against Mr. and Mrs. Fagan and was also served on their daughter Ciara who was eighteen years old at the time and due to sit her leaving certificate in June, 2013 and who was living at home. Prior to the commencement of those proceedings the solicitors for ACCLM had been informed by the official assignee in bankruptcy that he had informed Mr. and Mrs. Fagan that having taken senior counsel's opinion, he had determined not to challenge the security relied upon by ACCLM against Mr. and Mrs. Fagan. He would not be opposing any possession proceedings to be taking by ACCLM for the purpose of enforcing its security. The official assignee was not joined in those proceedings and did not appear at the hearing before the High Court.

12 Finlay Geoghegan J. having heard submissions from counsel for ACCLM and Mr. and Mrs. Fagan concerning their entitlement to appear and oppose ACCLM's application for possession having regard to their adjudication as bankrupts and the attitude of the official assignee to ACC's claim, determined that:

‘17. …

(a) Mr. and Mrs. Fagan, by reason of their adjudication as bankrupts, were not entitled to challenge the validity of the charge registered on Folio 7758 Co. Westmeath in favour of ACC as the ownership of the said folio now vests in the Official Assignee; and

(b) As Mr. and Mrs. Fagan were in possession of their private dwelling house, Temple House as their family home and the adjoining 14.5 acres and the proceedings for possession are against them I would permit them to make submissions in opposition to the application for possession, but only upon the basis that ACC is the registered owner of a charge over the property in Folio 7758 Co. Westmeath pursuant to the charge.’

The learned judge was satisfied that upon adjudication as bankrupts all property of Mr. and Mrs. Fagan including their interest in the lands in suit vested in the Official Assignee pursuant to s. 44 of the Bankruptcy Act 1988. Therefore they had no standing to defend any claim in...