Kavanagh v McLaughlin

JudgeMr. Justice Clarke,Ms. Justice Laffoy
Judgment Date19 March 2015
Neutral Citation[2015] IESC 27
CourtSupreme Court
Docket Number[S.C. No. 473 of 2013]
Date19 March 2015
Kavanagh & Bank of Scotland Plc v McLaughlin
Tom Kavanagh and Bank of Scotland plc


Patrick McLaughlin and Roseann McLaughlin

[2015] IESC 27

Clarke J.

Laffoy J.

Dunne J.

[Appeal No: 473/2013]


Land – Cross–border mergers – Creation and effect of a charge on registered land – Transfer of a charge–Enforcement of securities – Entitlement to appoint a receiver – Whether validly appointed receiver – s.62 Registration of Title Act 1964

Facts The case concerned an issue raised on appeal. The issue arose from the fact that BOS had not been registered as the owner of a charge over registered land created by the McLaughlins in favour of BOSI. A cross–border merger of BOSI into BOS by absorption took effect on 31st December 2010. The McLaughlins contended, in the absence of the registration of BOS as owner of the relevant charge on the relevant folio in the Land Registry, BOS was precluded from enforcing the charge against them, including enforcement by way of the appointment of a receiver.

Held There was no doubt that, when the cross–border merger of BOSI and BOS took effect, the securities held by BOSI over the McLaughlins" property passed to BOS, as thereafter BOSI ceased to exist. The judge said the fact that BOS was not registered on the relevant folio as the owner of the 2006 Charge did not prevent it from appointing the Receiver over the registered property secured by charge in question. The registration of BOS as owner of the charge was not necessary to enable it as a successor of BOSI to exercise its statutory powers.

The judge directed that if BOS sought to avail of any of the protections afforded by s.62 Registration of Title Act 1964 it had to become registered as the owner of the relevant charge on the relevant folio in order to exercise the statutory powers conferred by the Act.

–The judge held BOS had power to appoint the Receiver, independently of the provisions of the 1964 Act and that the Receiver had been validly appointed. He further specified that if BOS sought to avail of the statutory rights conferred by s. 62 of the 1964 Act in order to enforce the 2006 Charge, it had to comply with the requirement that it be registered as owner of the charge.


Judgment of Mr. Justice Clarke delivered the 19th March, 2015.


Judgment of Ms. Justice Laffoy delivered the 19th day of March, 2015


Judgment delivered by Clarke, J. & Laffoy, J.

1. Introduction

2 1.1 This is yet another case which stems from the collapse of the property market. Before the property crash, and in connection with a series of transactions relating to the sale, purchase and partial redevelopment of houses, the defendants/appellants ("The McLaughlins") borrowed significant sums of money from the Irish subsidiary of the second named plaintiff/respondent ("BOS"). That subsidiary was called Bank of Scotland Ireland Limited ("BOSI"). In circumstances which are of some relevance to one of the issues which arises on this appeal, BOSI ceased to exist as a result of a cross-border merger under relevant European legislation to which it will be necessary to refer in due course. In that context, BOS claims to be entitled to stand in the shoes of BOSI for all purposes connected to those loans.


3 1.2 There is no doubt but that the relevant loans have not been repaid. It was in that context that BOS appointed the first named plaintiff/respondent ("the Receiver") as receiver of some of the properties which were the subject of the relevant loans.


4 1.3 Disputes having arisen between the parties, these proceedings were commenced, in which the Receiver sought declaratory relief designed to confirm the validity of his appointment as such. BOS sought judgment in respect of the monies which were said to be owing on foot of the various loans. Both legs of the claim were successful, and the High Court (Bermingham J.) made an order declaring that the Receiver was validly appointed over certain properties specified in the order. In addition, it was ordered that BOS was entitled to recover a sum of €4,064,138.01 from the McLaughlins. An order for costs was also made against the McLaughlins.


5 1.4 The McLaughlins have appealed to this Court against those orders. The course that the appeal to this Court took is of some relevance to the way in which it is appropriate to approach the issues now before the Court. Therefore I propose to outline some aspects of that process.

2. Relevant Procedural History

2 2.1 It will be necessary, in due course, to identify the specific issues which arose between the parties, both before the High Court and before this Court. However, for present purposes, it is necessary only to note that one of those issues concerns the question of whether the security which BOSI undoubtedly obtained over the relevant properties transferred to BOS as a result of the cross-border merger. I will turn to the relevant European and Irish implementing legislation in respect of cross-border mergers in due course. However, on any view, it was clear that the legal issue raised had the potential to be of significant importance well beyond the scope of this case. The point made on behalf of the McLaughlins was in no way specific to their circumstances. Rather, it was alleged that the cross-border merger effected between BOS and BOSI did not, as a matter of law, transfer the benefit of any security held by BOSI to BOS. If that point were valid, then it would have a profound effect on the position of BOS. It would also, potentially, have an effect on other cross-border mergers where one of the undertakings to be merged engaged in secured lending.


3 2.2 On the basis of the importance of the point concerned, the Chief Justice acceded to an application that the case be afforded priority. Written submissions were exchanged in the usual way, and when the case came to be mentioned some short period before the date on which the appeal was listed to be heard, it was intimated that there had been a change of solicitor on the part of the McLaughlins, but that the appeal would still go ahead. However, on the morning of the appeal when the Court assembled, counsel (who had not previously been instructed in the case) appeared on behalf of the McLaughlins and indicated that he felt in some difficulty, by reason of the lateness of his instructions in the case, in being able to adequately present his clients' case. Counsel did not, in fairness, suggest that he would be unable to present the appeal, but rather indicated that he would not be able so to do as well as he might have wished. On that basis, an adjournment was sought. The adjournment was opposed by counsel who acted for both the Receiver and BOS.


4 2.3 Having taken a little time to consider the matter, the Court ruled that an adjournment would not be appropriate. I should record the reasons for the Court's view. This was a case in respect of which priority had been granted and an early date (at the expense of other cases) allocated. The only intimation of the need for an adjournment came at literally the last moment as the case was about to commence. While a party is more than free to change its legal representation, it cannot do so in circumstances which affect the run of the case or, at least, cannot do so without taking a significant risk that the court will not be sympathetic to an adjournment where that course of action would sufficiently affect the orderly conduct of the court's business (to the detriment of other litigants) and might also prejudice the interests of other parties to the case. It is important that parties realise that a change of legal team must be done in good time in order to allow the new legal team to fully prepare for the case. Unless there is some very compelling reason why the change could not have been effected earlier, a late change will not permit a legitimate argument to be made to the effect that the new team has not had an adequate opportunity to prepare. No reason was put forward to suggest that there were any extraoidinary circumstances about the change of legal team in this case. In the circumstances, the Court declined to allow the adjournment.


5 2.4 Counsel had, as already noted, indicated that he would do his best in such circumstances, and the appeal proceeded. For the record, it is also important to note that counsel identified three issues, raised in the notice of appeal and expanded on in the written submissions, which were stated to be the principal grounds of appeal put forward, and the ones which would be addressed in oral argument. In so doing, it is important, however, to note that counsel was quite clear in indicating that he was not, by adopting that course of action, abandoning any of the other points raised in the written submissions. The Court is, therefore, faced with those three principal issues, but will also have to deal with the additional issues in respect of which counsel rested on the written submissions. I, therefore, turn to the issues.

3. The Issues

2 3.1 In addition to the cross-border merger point already touched on, two other central issues were raised.


3 3.2 First, it was argued that the arrangements between BOSI and the McLaughlins were such that the bank (whether BOS or BOSI) was not entitled to call in the relevant loans until such time as a property known as "Latona", situated in Foxrock in Dublin, had been sold. "Latona" was the residence of the McLaughlins. They wished to move to smaller accommodation, and took out a so-called "bridging loan" to enable them to purchase a property known as 40 Kerrymount Rise. While further variations in the arrangements between the parties occurred at a later stage (including the provision of further loans for other projects), the...

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