Launceston Property Finance Ltd v Burke

• Jurisdiction: Ireland
• Judge: Mr. Justice William M. McKechnie
• Judgment Date: 15 March 2017
• Neutral Citation: [2017] IESC 62
• Court: Supreme Court
• Docket Number: [S.C. No. 363 of 2010],Record No. 363/2010
• Date: 15 March 2017

Between /

LAUNCESTON PROPERTY FINANCE LIMITED

Plaintiff/Respondent

-and-

FRANK BURKE

and

LORNA BURKE

Defendants/Appellants

[2017] IESC 62

McKechnie J.

McKechnie J.

Charleton J.

O'Malley Iseult J.

Record No. 363/2010

THE SUPREME COURT

Land – Legal fees – Right to family home – Appellants seeking to appeal against the judgment and order of the High Court – Whether the loan arrangement fees and interest rate charged, and the legal fees imposed by the respondent were excessive

Facts: The defendants/appellants, Mr and Mrs Burke, appealed to the Supreme Court from the judgment of McGovern J delivered on the 15th March, 2010, and the resulting Order whereby he directed the defendants to deliver up possession to the plaintiff/respondent, Launceton Property Finance Ltd, of, first, the lands comprised in Folio 25639F County Galway, Freehold Register (the Clarinbridge Property), and, secondly, a parcel of unregistered land upon which the family home of Mr and Mrs Burke is situated, which was generally known as No. 5 Averard, Galway City, County Galway (Taylor’s Hill). A stay of three months was granted in respect of the former lands, and six months in respect of the family home; costs were awarded to the plaintiff. The appellants’ grounds of appeal were that: (i) the delineation of the Taylor’s Hill property, in the relevant mortgage and charge, was incorrect (it was inaccurately described as including a turning bay); (ii) as the plaintiff was not a “regulated body” under the Central Bank Act 1997, it could not take any further steps to enforce the underlying security; (iii) the loan arrangement fees and interest rate charged, and the legal fees imposed by the plaintiff, were excessive and thus were in the nature of a penalty, unenforceable at law; and (iv) Article 8 of the European Convention on Human Rights applies so that when the appellants’ rights to their family home are measured against the respondent’s property rights, the Court should decline to exercise its discretion and thus should refuse to uphold the Possession Order made by the High Court.

Held by McKechnie J that if it was open to the appellants to argue a new ground of appeal, they would have to do so in proceedings taken at trial level and which were appropriate to that end. McKechnie J held that he interest which Anglo Irish Bank once had in the credit facilities the subject matter of the proceedings was validly transferred to Launceston Property. McKechnie J held that, on the basis of the appointment by Launceston Property of Pepper Asset Servicing as its agent or intermediary as required by legislation, Launceston Property was lawfully entitled to act as a respondent for the purposes of this appeal. Regarding the appellants’ argument that certain excessive charges, loan arrangement fees, high interest rates and legal fees constituted a penalty and, therefore, were unenforceable, McKechnie J held that this issue did not require determination in the instant case. McKechnie J held that the mortgagee’s right to possession and sale of the properties arose as a matter of contract law, pursuant to an arrangement between private parties; accordingly, it was difficult to see how Article 8 of the Convention, or Article 1 of the First Protocol, could in some way debar the respondent’s right to enforce the contract so entered. McKechnie J held that nothing suggested that the making of the Possession Order by the trial judge was in any way disproportionate in all the circumstances of the case.

McKechnie J held that the appellants’ appeal must be dismissed.

Appeal dismissed.

JUDGMENT of Mr. Justice William M. McKechnie delivered on the 15th day of March, 2017

Introduction

1 This is an appeal from the judgment of McGovern J. delivered on the 15th March, 2010, and the resulting Order whereby he directed the defendants to deliver up possession to the plaintiff of, first, the lands comprised in Folio 25639F County Galway, Freehold Register (‘the Clarinbridge Property’), and, secondly, a parcel of unregistered land upon which the family home of Mr. and Mrs. Burke is situated, which is generally known as No. 5 Averard, Galway City, County Galway (‘Taylor's Hill’ or ‘the family home’). A stay of three months was granted in respect of the former lands, and six months in respect of the family home; costs were awarded to the plaintiff/respondent.

2 Although there were many grounds advanced in the Notice of Appeal, which was received on the 30th September, 2010, only three of those therein nominated were canvassed in the hearing before us. These, along with a further issue sought to be advanced for the first time, can be described as follows:

(i) that the delineation of the Taylor's Hill property, in the relevant mortgage and charge, was incorrect; it was inaccurately described as including a turning bay, which was in error;

(ii) that as the plaintiff was not a ‘regulated body’ under the Central Bank Act 1997, as amended (‘the 1997 Act’), it could not take any further steps to enforce the underlying security;

(iii) that the loan arrangement fees and interest rate charged, and the legal fees imposed by the plaintiff, were excessive and thus were in the nature of a penalty, unenforceable at law; and, finally,

(iv) that Article 8 of the European Convention on Human Rights applies so that when the appellants' rights to their family home are measured against the respondent's property rights, the Court should decline to exercise its discretion and thus should refuse to uphold the Possession Order made by the High Court.

Background

3 From the year 1999 onwards, both Mr. and Mrs. Burke, then solicitors, had a banking relationship with Anglo Irish Bank Corporation (‘Anglo Irish Bank’ or ‘the Bank’) which resulted in the Bank advancing to them certain sums of money in the years which followed. There are three such arrangements which are relevant to this case: first, a letter of offer dated the 7th January, 2003, which provided loan facilities up to a maximum sum of €855,000; second, a ‘Housing Loan Agreement’ dated the 6th October, 2005, which increased that sum to a maximum of €974,500; and, third, a Credit Agreement dated the 14th August, 2006. Each such arrangement was in substitution for other facilities then existing, with the amount said to have been advanced under the Credit Agreement being approximately €1,088,000.

4 The terms and conditions of these facilities, inter alia, specified an interest rate of 3.5% above the three month Euribor plus RAC, with the Bank also charging what it called an ‘Arrangement Fee’ for each separate advance. In 2003, that sum was €5,000; in respect of the 2005 Housing Loan Agreement it was €20,000, and in respect of the Credit Agreement of August, 2006 the sum was €2,000, which was to increase to €20,000 if an adjoining property known as No. 6 Averard, Taylor's Hill, was not sold by the Burkes on or before the 31st December, 2006.

5 The common security underpinning each transaction was (i) a first legal charge over the Clarinbridge Property and (ii) a first ranking mortgage over what I have termed, purely for descriptive purposes, as the family home at Taylor's Hill. The charge was duly notified on the Folio on the 22nd February, 2000, with Mr. and Mrs. Burke executing the mortgage in respect of the unregistered land on the 22nd May, 2001. In addition, there is a reference to a letter of undertaking over the net proceeds of sale of No. 6 Averard, Taylor's Hill, Galway, for earlier finance. This is, however, not of direct relevance to this appeal.

6 Default having allegedly been made as and from January, 2007, Anglo Irish Bank, by letter of demand dated the 22nd February, 2008, called on the defendants to pay the entirety of the sum then outstanding, which, when interest was added, amounted to €1,214,118.47. This was followed by the issue of a Special Summons on the 18th June, 2005, in which possession of the registered property was sought under section 62(7) of the Registration of Title Act 1964, and possession of the family home under Order 3, Rule 15 and Order 54, Rule 3 of the Rules of the Superior Courts (R.S.C.). Several affidavits were filed on behalf of both parties prior to the matter coming on for hearing before McGovern J., who, as above stated, granted the Possession Order as sought on the 15th March, 2010. From that a Notice of Appeal was served on the 30th September, 2010, in which the grounds of challenge then intended were set forth. These grounds bear little resemblance to the issues which counsel on behalf of Mr. and Mrs. Burke sought to agitate at the hearing before us. Each such issue will be addressed later in this judgment.

7 Although referred to in the papers as having some connection to this case, it does not appear that either the previous loan arrangements entered into by the parties prior to January, 2003, are material, or that the security the Bank had, or should have had, in respect of No. 6 Averard, Taylor's Hill, Galway, is relevant; save that the No. 6 agreement remains of interest, but only to the question of fees, charges and levies. Likewise with the proceedings which the appellants issued against Anglo Irish Bank in 2008 (for background: see the judgment of Birmingham J., delivered on 15th December, 2011 [2011] I.E.H.C. 478). Therefore, none of these matters will feature further in this judgment.

A Point to Note

8 Before considering the grounds of appeal relied upon, it should be noted that the appellants do not dispute the fact that they entered into the transactions above described, that the monies were advanced, that default has occurred within the meaning of the relevant facility letters and the charge/mortgage instruments, and that the mortgagee has a power of sale thereunder. Moreover, it is not in challenge that the Court has the power to grant a Possession Order under section 62(7) of...