Governor and Company of the Bank of Ireland v Phelan

• Jurisdiction: Ireland
• Judge: Mr. Justice Michael MacGrath
• Judgment Date: 21 July 2020
• Neutral Citation: [2020] IEHC 484
• Docket Number: [2019 No. 159 CA]
• Court: High Court
• Date: 21 July 2020

BETWEEN

GOVERNOR AND COMPANY OF THE BANK OF IRELAND

PLAINTIFF

AND

JOANNE PHELAN

DEFENDANT

[2020] IEHC 484

Michael MacGrath J.

[2019 No. 159 CA]

THE HIGH COURT

Order for possession – Overcharging of interest – Letter of demand – Plaintiff seeking an order for possession of property – Whether the defendant had an arguable defence on the issue of the overcharging of interest

Facts: This was an appeal from an order for possession made pursuant to s. 62(7) of the Registration of Title Act 1964 on 4th April, 2019 by Judge Quinn in respect of the premises of the defendant, Ms Phelan, comprised in Folio 62708F, County Meath (the mortgaged property). This was her principal private residence. A stay of twelve months was placed on that order.

Held by the High Court (MacGrath J) that the defendant had an arguable defence on the issue of the overcharging of interest. MacGrath J was satisfied on the evidence that the defendant had fallen into arrears in her repayments, even if she was successful in her argument regarding the overcharging of interest. In those circumstances, he held that the plaintiff, the Governor and Company of the Bank of Ireland, as owner of the charge and in accordance with the terms of the loan and mortgage was entitled to demand repayment of the full amount due, failing payment of which it was entitled to seek possession. He held that, in accordance with s. 62(7) of the 1964 Act, as a matter of principle, if the demand was valid the plaintiff was entitled to an order for possession of the property subject to any issue concerning a stay.

MacGrath J held that an issue arose from a consideration of G.E. Capital Woodchester Homeloans Ltd v John Reade and Dympna Reade [2012] IEHC 459 which Ms Phelan produced to the court; it was clear from that decision that the letter of demand must be valid and if the defendant was correct it would seem to follow that the full amount demanded in the letter of 8th January, 2016 may be in excess of that which was owed. This issue was not expressly articulated by the parties but given the defendant’s reliance on Reade, and in the interests of justice, the court required the assistance of the parties on the following issues: (i) (a) in the event that the defendant might be ultimately successful on the issue of alleged overcharging of interest, whether this has the potential to affect the validity of the letter of demand; and (b) whether this issue, i.e. the validity or invalidity of the letter of demand is in the circumstances capable of being determined on a summary application; (ii) in the event that the court should conclude that the letter of demand is valid, the court invited submissions on the extent to which the issue of alleged overcharging ought to be addressed, if at all, in the context of the exercise by the court of its jurisdiction regarding the potential imposition of a stay, or the terms of any such stay. Therefore, the court invited the parties’ further assistance on these issues.

Judgment approved.

JUDGMENT of Mr. Justice Michael MacGrath delivered on the 21st day of July, 2020.

1 This is an appeal from an order for possession made pursuant to s. 62(7) of the Registration of Title Act, 1964 on 4th April, 2019 by His Honour Judge Quinn in respect of the defendant's premises comprised in Folio 62708F, County Meath (“the mortgaged property”). This is her principal private residence. A stay of twelve months was placed on that order.

2 On the 20th February, 2006 the ICS Building Society (“the Society”) offered the defendant, Ms. Phelan, facilities for the purchase of the mortgaged property in the sum of €600,000 repayable over 35 years. The loan offer was accepted and is stated to have been signed by the defendant on the 12th July, 2006. A deed of mortgage was executed on the 22nd August, 2006 between Ms. Phelan and the Society. On the 20th August, 2007 a charge was registered on the folio in favour of the Society.

3 On 5th June, 2014, pursuant to the Central Bank Act, 1971 (Approval of Scheme of Transfer between the Society and the Governor and Company of the Bank of Ireland) Order, 2014 (S.I. 257 of 2014), the interest of the Society in the mortgaged property was transferred to the plaintiff.

4 The plaintiff maintains that the defendant fell into arrears and defaulted in her repayments. A letter of demand was sent to her on the 8th January, 2016. The arrears were stated to be €96,914.16. The plaintiff demanded repayment of the total sum outstanding, inclusive of the amount advanced, being €607,075.45. A letter demanding recovery of possession of the premises was sent to her on the 6th July, 2016. Proceedings for possession were issued in the Circuit Court on 14th September, 2016.

5 The application for possession is grounded on the affidavit of Mr. John Reid sworn on the 2nd September, 2016. He is an employee and legal case manager of the plaintiff. He avers that his legal advice is that on service of the letter of demand, the entire loan became immediately due and payable in full, that monthly instalments ceased to fall due and there was therefore no longer any arrears of such instalments (i.e. overdue monthly instalments) as immediate repayment of the entire loan had been demanded and the plaintiff's enforcement powers under the mortgage became immediately exercisable. Nevertheless, and for the assistance of the court, Mr. Reid exhibits a form of statement of the loan account “prepared as if the entire loan had not been called in as it was”. This statement, which is dated 2nd September, 2016, was produced under Mr. Reid's direction by mechanical means directly from the Mortgage Accounting System (“MAS”) and was compared by him with the original MAS data and shows “what would now have been the continued accrual of instalments, and what would have been the current ‘arrears’ of such instalments, had the entire loan not been called in as it was”. He avers that as appears from the statement, the monthly instalments would then have been €893.45, the current arrears would then have been €105,639.65 which represented 54 months of missed repayments. Mr. Reid avers that the original borrowings from the Society and the current liabilities to the plaintiff, amounted to €605,442.45. The statement shows that Ms. Phelan made the required repayments until February, 2009 when arrears began to accrue. Ms. Phelan explained that her business encountered difficulty due to the downturn in the economy. She continued to make payments, albeit not always of the full required amount and not always in a regular manner, until 24th October, 2016. The closing balance on the account as per the statement of 2nd September, 2016 was €605,442.45. A statement exhibited in a later affidavit sworn by Mr. Reid on 29th August, 2016 indicates that at the end of August, 2018 the arrears would have grown to €151,099.05. Two further payments of €500 were made by Ms. Phelan in October, 2016. An updated statement prepared as of 23rd January, 2019 shows that arrears would have grown to €160,033.55.

6 The plaintiff is subject to the regulatory codes drawn up by the Central Bank/ the Irish Financial Regulation Authority as provided by s. 117 of the Central Bank Act, 1989 including the Code of Conduct on Mortgage Arrears (” CCMA”) published by the Financial Regulator in February, 2009. Mr. Reid avers that the plaintiff complied with its obligations under the CCMA. Ms. Phelan was advised that the Bank had decided that an alternative repayment arrangement (“ARA”) was not appropriate because her mortgage repayment history was not satisfactory. A previous repayment arrangement had been put in place, but she was unable to comply with its terms. Ms. Phelan was advised that she had a right to appeal that decision to the Mortgage Appeals Board and that her loan was being dealt with outside the plaintiff's Mortgage Arrears Resolution Process (” MARP”). Options such as voluntary sale, voluntary surrender, trading down and participation in a mortgage to rent scheme were outlined. She was written to on 19th August, 2016 by the solicitor representing the plaintiff who informed that while she was outside the MARP process, it was not too late for her to attempt to reach an alternative repayment arrangement. She was urged to take legal and/or financial advice including if appropriate advice from the local MABS office and that if she had any new or realistic proposals to make she could contact the plaintiff directly and forward an up to date vouched standard financial statement setting out such new proposal. The letter concluded that if something could be agreed, the legal process may be put on hold.

Points of Defence

7 Pursuant to directions given by the County Registrar on the 27th November, 2017, Ms. Phelan, who does not have legal representation, served and filed a replying affidavit which was sworn by her on 12th January, 2018. She raised the following points of defence:

1. The Circuit Court did not have jurisdiction to deal with the application.

2. She did not owe the plaintiff the sum claimed.

3. Confirmation, to be sworn on affidavit, was sought by her that she was never overcharged.

4. A forensic report which she had obtained proved that she had been consistently overcharged throughout the life of the mortgage.

5. The plaintiff had failed to provide her with full discovery of original documentation and information despite a request under the Data Protection Acts. Discovered documents had been redacted.

6. She was not afforded the opportunity to inspect the original property deeds.

8 Mr. Reid in reply, by affidavit sworn by on 29th August, 2018, avers that the proceedings were properly brought in the Circuit Court as the mortgage was created by deed executed before the commencement of the Land and Conveyancing Law Reform Act, 2009 (“the Act of 2009”). The Circuit Court had exclusive jurisdiction pursuant to the provisions of ss. 3(1) and...