McAteer and Another v Sheahan
| Jurisdiction | Ireland |
| Judge | Ms Justice Iseult O'Malley |
| Judgment Date | 19 June 2015 |
| Neutral Citation | [2015] IEHC 391 |
| Date | 19 June 2015 |
| Court | High Court |
| Docket Number | [Record No. 2012/4744P] [Record No. 2012/12130P] [Record No. 2013/5089P] [Record No. 2012/724Sp] |
[2015] IEHC 391
[Record No. 2012/4744P]
[Record No. 2012/12130P]
[Record No. 2013/5089P]
[Record No. 2012/724Sp]
THE HIGH COURT
Banking & Finance – Repayment of loan – Land & Conveyancing Law Reform Act, 2009 – Appointment of receiver – Whether receipt of cheques post-litigation amounts to agreement of settlement of litigation
Facts: In the four proceedings concerning the borrowings by the borrowers through the bank, the validity of the demands made, appointment of the receiver, dealings of the bank in accepting the cheques post litigation were challenged. The receiver in the first proceedings sought an order for possession of the relevant properties and specific performance of agreements by way of a counterclaim. The defendant in the third proceedings contended the existence of an agreement for settlement between him and the bank by virtue of the conduct of the bank in accepting the cheques tendered by the said defendant for discharge of debts pertaining to relevant accounts.
Ms. Justice Iseult O'Malley granted the order in favour of the banks. The Court held that the borrowers had failed to explain any discrepancies, unreasonableness in its dealings with the bank and merely because the demands made by the bank for payment of amount of debt exceeded beyond the amount actually due would not make it invalid. The Court held that the encashment and retention of cheques for the purpose of clearing the debt had always been a strong evidence of acceptance; however, in the absence of clear intention of the parties, it could not be said to be conclusive proof. The Court found that the tendering of a cheque post-litigation, in lieu of letters for demand of arrears by the defendant in the third proceedings, and its acceptance by the bank would not constitute a concluded contract as the bank never accepted those with the intent that payment were made to discharge the borrowers from their obligations to pay the entire debt.
These proceedings have a somewhat complex history. However, due to the fruitful efforts of the parties in the case management process, the issues were streamlined and dealt with simultaneously. Without prejudice to the onus of proof in any given case, Mr. McAteer (‘the receiver’) and/or Bank of Ireland Mortgage Bank (‘the bank’, or ‘BOIMB’)) and/or the Governor and Company of the Bank of Ireland (‘GovCo’) acted as the moving party throughout the hearing.
All of the cases relate to borrowings by Joseph Sheahan and his brother Frank Sheahan Junior. It is accepted by the Sheahans that they entered into the various agreements and drew down monies on foot thereof. It is also accepted that letters of demand in relation to each of the loans were issued on the 1st November, 2011, (although the validity of the demands is in issue).
In the first case (the ‘receiver proceedings’), the receiver seeks, primarily, an order for possession of certain properties on the basis of his appointment as receiver by the bank. The defendant disputes the validity of the appointment and counterclaims that the bank has acted in breach of various agreements with him. He seeks, in the counterclaim, an order for specific performance of the agreements and/or damages for breach of contract; a declaration that the loans are unenforceable and the securities pertaining to them are void, and an order directing the sale of the properties.
In the second case, (the ‘Sheahan plaintiff’ proceedings) the plaintiffs (not including Mymortgages Limited, which has served a notice of discontinuance) seek various orders restraining the defendants from interfering with the properties and a declaration that the appointment of the receiver was unlawful.
The parties are agreed that there is no necessity for the court to consider the evidence relating to allegations made by each side as to unlawful conduct after the appointment of the receiver, since the determination of the validity or otherwise of the appointment will determine which side has acted correctly.
In the third case (the ‘Beechgrove’ proceedings), the receiver seeks an order as against Joseph Sheahan for possession of a property known as Beechgrove and also orders restraining the defendant from interfering with the exercise of his functions. The defendant relies on the claims made by him in the Sheahan Plaintiff case.
In the fourth case, the bank seeks an order for possession of a property known as Site No. 134, Leslie's Arch, Old Quarter, Ballincollig. These proceedings were instituted for the particular purpose of setting up a special case in relation to the effects of certain provisions of the Land and Conveyancing Law Reform Act, 2009. One of the issues in the special case, in which I gave judgment on the 13th September, 2013 ( McAteer & anor v Sheahan [2013] IEHC 417), was whether the bank had an entitlement to seek possession under the repealed provisions of the Registration of Title Act, 1964. That issue was determined against the bank. However, I also held that the bank's power to appoint a receiver was unaffected by the change in the legislation.
A fifth case (the ‘guarantor’ proceedings) relates to guarantees alleged to have been given by Frank Sheahan Senior and has, by agreement, been held over. The parties to those proceedings have however also agreed that the determination of a particular question by this court will bind the parties in those proceedings, the question being whether two specified loan accounts in the name of Joseph Sheahan were in arrears as of the date of demand.
The Sheahans are a well-known family from Cork. Frank Sheahan Senior is a successful businessman with substantial experience in the world of property investment. His son Joseph, or Joey, was originally an auctioneer before setting up Mymortgages, a mortgage brokerage. Frank Sheahan Junior, or Frankie, was a well-known professional rugby player and retired from the sport in 2009.
For the avoidance of confusion, and not out of any disrespect, I will for the most part refer to Joseph and Frankie by these names and to their father as Mr. Frank Sheahan.
The loans in question were offered between the years 2005 and 2008 inclusive. It is common case that nearly all related to buy-to-let investment properties. However, separate considerations arise in respect of a loan drawn down by Joseph in 2006 for the purchase of Beechgrove. He subsequently moved into the house and there is a dispute as to the circumstances and consequences of that.
Each of the loans provided for an initial period, varying from 5 to 10 years, during which interest only was payable. The written agreements all stipulate that at the end of that period the repayment instalments would include capital. Joseph and Frankie maintain, however, that the bank staff with whom they dealt assured them at all times that this was only a formality, required by internal bank policy, and that the interest-only periods would be renewed as a matter of course.
Each loan agreement specifies as security the property to be purchased (or in some cases renovated) with the loan. In addition, most specify other properties owned by the borrower including those already securing other loans.
Five of the loans are guaranteed by Mr. Frank Sheahan. There are other loans where a guarantee was required in the written agreement but never actually given or called for. Joseph and Frankie say that they were at all times assured that the guarantees would not be called upon save in a ‘worst case scenario’, meaning if the properties had to be sold and there was a shortfall. They contend that all the properties were part of a ‘loan pool’ agreement, such that if a property, the subject of an unguaranteed loan, had to be sold the proceeds would be applied in the first instance to repayment of the guaranteed loans. The ‘loan pool’ arrangement is said to arise on foot of an express or implied term, and/or as a result of a course of dealing.
The bank denies the existence of any such ‘loan pool’ agreement and says that each mortgage was an ‘all sums due’ mortgage – that is, that in each case the secured monies included any sums due either then or in the future on foot of secured lending.
While the guarantees are in issue in the fifth set of proceedings, in which the bank makes claims against Mr. Sheahan, Joseph and Frankie say that by calling on the guarantees the bank has acted in breach of its contract with them. The bank argues that the validity of its actions vis a vis the guarantor is irrelevant to the liability of Joseph and Frankie.
The loans were called in on the 1st November, 2011. The receiver was appointed in respect of various properties on various dates between November 2011 and September 2012.
The Beechgrove property, as noted above, has to some extent to be treated separately arising from the fact that Joseph moved into it as his family home. The original agreement in respect of this house provided, as did all the other agreements, for an initial interest free period. However, when Joseph informed the bank in July 2007 (for the purpose of changing his correspondence address) that he...
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