Hortensius Ltd v Bishop

• Jurisdiction: Ireland
• Judge: Mr. Justice Costello
• Judgment Date: 27 January 1989
• Neutral Citation: 1989 WJSC-HC 343
• Docket Number: 1987/3771p
• Court: High Court
• Date: 27 January 1989

1989 WJSC-HC 343

THE HIGH COURT

1987/3771p

HORTENSIUS LTD v. BISHOPS & ORS

BETWEEN

HORTENSIUS LIMITED AND JOHN DURACK

PLAINTIFFS

AND

KENNETH BISHOPS AND OTHERS, TRUSTEES OF THE TRUSTEE SAVINGS BANK, DUBLIN

DEFENDANTS

Citations:

TRUSTEE SAVINGS BANK ACT 1863 S2

TRUSTEE SAVINGS BANK ACT 1863 S5

TRUSTEE SAVINGS BANK ACT 1863 S15

TRUSTEE SAVINGS BANK ACT 1863 S19

TRUSTEE SAVINGS BANK ACT 1863 S22

TRUSTEE SAVINGS BANK ACT 1863 S23

SAVINGS BANKS ACT 1904 S4

TRUSTEE SAVINGS BANKS ACT 1965 S3

TRUSTEE SAVINGS BANKS ACT 1979 S1

TRUSTEE SAVINGS BANKS ACT 1965 S3(2)

UNDERHILL LAW OF TRUSTS 1987 P751

EURO-DIAM LTD V BATHURST 1988 1 WLR 517

SINGH V ALI 1960 AC 167

BELVOIR FINANCE CO V

STAPLETON 1971 1 QB 210

CHITTY ON CONTRACTS 25ED PARA 1169

TRUSTEE SAVINGS BANK ACT 1863 S10

Synopsis:

TRUSTS

Trustees

Duty - Breach - Investment - Illegality - Property acquired by conveyance - Conveyance not illegal - Unlawful use of trust money to effect purchase - Right of grantee to exercise rights of grantor - Trustee savings bank - Trustees having limited powers under statute to invest deposit moneys - Acquisition of property and rights of mortgagee of freehold land - Section 15 of the Act of 1863 states that the moneys received by a savings bank shall be invested in the Bank of Ireland in the manner therein appearing and shall not be paid out in any other manner except for the necessary expenses of the savings bank - Section 3, sub- s. 1, of the Act of 1965 provides:- "The trustees of a trustee savings bank may, with the consent of the Minister for Finance, undertake any business (including, notwithstanding anything in the Acts, the making of loans (whether secured by mortgages of land or any interest in land or otherwise) and the using, for the purpose of making the loans, of money deposited with the bank by depositors) which is, in the opinion of that Minister, calculated to encourage thrift and within the financial capacity of the bank" - Sub-section 2 states that any expenses properly incurred by a savings bank in carrying on any such business shall be deemed part of its necessary expenses within the meaning of s. 2 of the Act of 1863 - The Acts mentioned in sub-s. 1 are the Trustee Savings Banks Acts, 1863 to 1979 - On 6/7/82 the plaintiff company conveyed the fee simple estate in premises at No. 62 Clontarf Road, Dublin, to a mortgagee by way of mortgage to secure the repayment to the mortgagee of the principal sum advanced by him to the plaintiffs, with interest thereon - On 19/12/83 the mortgagee assured to the defendant trustees all moneys payable to the mortgagee on foot of a substantial number of loans made by him, and all securities for the repayment of those loans, in consideration of the payment by the defendant trustees of the sum of #5,340,856.77 - The defendants were trustees of the Trustee Savings Bank, Dublin, and they used moneys deposited with that savings bank for the purpose of acquiring such property of the mortgagee, which property included the property and rights of the mortgagee under the plaintiffs" mortgage dated 6/7/82 - The plaintiffs failed to discharge their obligations pursuant to the mortgage deed and, by agreement, the premises described in that deed were sold and the proceeds of sale were placed on joint deposit pending the determination of the claims made by the plaintiffs in this action - The plaintiffs claimed that the purported acquisition by the defendant trustees of the interest of the mortgagee in the said premises, and of his rights, under the mortgage deed was unlawful, void and ~ultra vires~ the defendants; and the plaintiffs claimed a declaration that the said premises were not well charged with the repayment of the principal sum and interest mentioned in the mortgage - The defendants" general manager informed an official of the Department of Finance, before 19/12/83 of the defendants" intention to acquire the mortgagee's portfolio of loans and securities - After that date there was some correspondent on the subject between the said Department and the defendants, and on 23/2/84 the defendants replied to the Department and clarified certain points which had been raised by the Department - No formal consent was given by the Minister for Finance to the transaction of 19/12/83 and no complaint by the Department about the transaction was made to the defendants after their reply of 23/2/84 - Held that it would be presumed that the Minister for Finance had given his consent, retrospectively and informally, to the transaction of 19/12/83 - Held that s. 3, sub- s. 1, of the Act of 1965 allows for moneys deposited by depositors with a trustee savings bank to be used, subject as therein, for the purpose of making loans, but that it does not authorise the use of such moneys for the purpose of purchasing existing loans - Held, therefore, that the defendants were compelled to rely on the part of sub-s. 1 which lies outside the parenthesis and to show that the Minister had consented to the defendants undertaking a business which, in the opinion of the Minister, was calculated to encourage thrift and was within the capacity of the defendants" bank - Held that, although the Minister appeared to have given his consent to the said transaction, such consent could not be presumed to apply to an unauthorised use of moneys deposited with the defendant bank and that, consequently, the defendants failed to establish that the said transaction was authorised by s. 3 of the Act of 1965 - Held, accordingly, that the defendants had contravened s. 15 of the Act of 1863 - Held that the doctrine of ~ultra vires~ was inapplicable to an unincorporated body such as the defendants - Held that the said transaction was not illegal although it was unlawful for the defendants to have been parties to it - Held that the property acquired by the defendants by virtue of the transaction was held by them upon the same terms and conditions as were applicable to the said mortgagee, that the defendants were entitled to enforce all the remedies of the mortgagee against the plaintiffs and that the defendants were entitled to the purchase money which had been placed on joint deposit - Held that the defendants would have been entitled to exercise the remedies of the mortgagee even if the said transaction had been illegal: ~Singh v. Ali~ [1960] A.C. 167 and ~Belvoir Finance Co. v. Stapleton~ [1971] 1 Q.B. 210 considered - Trustee Savings Banks Act, 1863, ss. 2, 15 - Trustee Savings Banks Act, 1965, s. 3 - (1987/3771 P - Costello J. - 27/1/89)

|Hortensius Ltd. v. Bishops|

REAL PROPERTY

Conveyance

Validity - Purchase money - Source - Breach of trust - Purchaseby trustees of trustee savings bank - Statutory restriction onapplication of moneys deposited by depositors with bank -Substantial sum applied by trustees in purchasing mortgages -Application of deposit moneys in contravention of statute -Purchase not illegal - Property vested in trustees with sameremedies as vendor -~See~ Trusts, trustees - (1987/3771 P -Costello J. - 27/1/89)

|Hortensius Ltd. v. Bishops|

Trustee Savings Bank - Trustees agreement to purchase loan portfolio of a commercial bank - Consent of Minister for Finance ultra vires h powers - Agreement in breach of Trustee Savings Bank Act, 1863, s15 - Whether rights acquired by Trustees under the agreement are enforceable against the plaintiffs

|Hortensius v. Bishops|

1 Judgment of Mr. Justice Costello delivered the 27th day of JANUARY, 1989.

2 Trustee Savings Bank - Trustees agreement to purchase loan portfolio of a commercial bank - Consent of Minister for Finance ultra vires his posers - Agreement in breach of Trustee Savings Bank Act, 1863, s. 15 - Whether rights acquired by Trustees under the agreement are enforceable against the plaintiffs.

3 By an agreement of 6th July 1982 the Royal Trust Bank (Ireland) Ltd. agreed to lend to the plaintiff company the sum of £125,000 subject to the conditions (subsequently amended) for repayment therein contained. The security for the loan was a legal mortgage of 6th July 1982 over the fee simple interest which the plaintiff company enjoyed in No. 62 Clontarf Road, Dublin and the personal guarantee of the second named plaintiff, a director of and majority shareholder in the plaintiff company. The Royal Trust Bank ceased to carry on its banking business and on 19th December 1983 entered into two agreements with the Trustees of the Trustee Savings Bank, Dublin (the defendants herein) by which it transferred to the defendants

4 (i) monies due to it on loans it had made in its capacity as a banker (including the debt due by the plaintiff company under the agreement of 6th July 1982),

5 (ii) the land and premises it held subject to the mortgages and charges entered into for securing the repayments on the loans it had made (including the land subject to legal mortgage over 62 Clontarf Road, Dublin), and

6 (iii) the benefit of the mortgagee's rights and the guarantees vested in it as security for the repayment of the assigned loans (including the personal guarantee of the second named plaintiff relating to the loan to the first named plaintiff).

7 The consideration for this transaction was £5,340,856.77 which the defendants duly paid. The plaintiff company failed to fulfil its obligations under the Deed of Mortgage and, rightly apprehensive that proceedings on foot of it and on the personal guarantee were highly likely, decided that attack was the best method of defence and instituted these proceedings along with the majority shareholder. They claim declarations that the sale to the defendants of the debt owing by the plaintiff company to the Royal Trust Bank was "unlawful void ineffective and ultra vires the defendants", that the assignment of the mortgage on 62 Clontarf Road was "unlawful, void, ineffective and ultra vires the defendants", that the plaintiff is "not lawfully indebted to the...