O'Meara v Bank of Scotland

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 28 October 2011
• Neutral Citation: [2011] IEHC 402
• Court: High Court
• Date: 28 October 2011

[2011] IEHC 402

THE HIGH COURT

[No. 5874P/2010]

O'Meara v Bank of Scotland Plc

BETWEEN

CLAIRE O'MEARA

PLAINTIFF

AND

BANK OF SCOTLAND PLC

DEFENDANT

DELANY EQUITY & LAW OF TRUSTS IN IRELAND 5ED 170

C (J) v (HC) J UNREP KEANE 4.8.1982 1982/14/2814

F (R) v F (M) 1995 2 ILRM 572

LYNCH v BURKE 1995 2 IR 159

PAGETS LAW OF BANKING 13ED 2007 PARA 11.28

THOMSON v CLYDESDALE BANK LTD 1893 AC 282

DEMPSEY v BANK OF IRELAND UNREP SUPREME 6.12.1985 1985/7/1943

DERHAM LAW OF SET OFF 4ED 2010 739

WESTMINISTER BANK LTD v HILTON 1926 43 TLR 124

INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY (NO 1) 1998 1 WLR 896 1998 1 AER 98

ANALOG DEVICES BV v ZURICH INSURANCE COMPANY 2005 IR 274

WESTMINISTER BANK v HALESOWEN 1972 1 AER 641

BANK OF IRELAND v MARTIN 1937 IR 189

GELDOF METAALCONSTRUCTIE NV v SIMON CARVES LTD 2010 4 AER 847

FEDERAL COMMERCE v MOLENA ALPHA INC 1978 3 AER 1066

PAGETS LAW OF BANKING 13ED 2007 29.27

BHOGAL v PUNJAB NATIONAL BANK 1988 2 AER 296

O'KEEFFE v O'FLYNN EXHAMS & PARTNERS & AIB UNREP COSTELLO 31.7.1992 1992/14/3937

MOOREVIEW DEVELOPMENTS & ORS v FIRST ACTIVE & ORS UNREP CLARKE 6.3.2009 2009/40/9929 2009 IEHC 214

ROYAL BANK OF SCOTLAND & ETRIDGE (NO 2) 2001 4 AER 449

MEE UNDUE INFLUENCE & BANK GUARANTEES 2002 37 IR JUR 292

DELANY EQUITY & LAW OF TRUSTS IN IRELAND 5ED 176

DORAN v THOMPSON LTD 1978 IR 223

BANKING LAW:

Accounts

Joint accounts - Doctrine of advancement - Ownership of monies -Right of set-off - Effect of death of joint account-holder - Common law right of set-off - Equitable right of set-off - Contractual right of set-off - Rectification - Estoppel - Equitable obligation to fulfill purpose - Priority of equitable right - Relationship between bank and customer - Joint deposit accounts opened in name of plaintiff and husband - Husband died - Monies used to set-off against loan of husband - Whether plaintiff and deceased beneficial owners of monies in account when opened - Whether monies impressed with trust for benefit of plaintiff and her children - Interpretation of application form - Whether common law right to set-off against loan - Whether equitable right to set-off - Whether contractual right to set-off - Whether defendant entitled to rectification - Whether plaintiff estopped from denying set-off permitted - Purpose of transfer of monies - Whether equitable obligation took priority over any beneficial ownership in monies - Whether plaintiff entitled to monies in accounts - Lynch v Burke [1995] 2 IR 159; Dempsey v Bank of Ireland (Unrep, SC, 6/12/1985); Analog Devices B.V v Zurich Insurance Company [2005] IESC 12, [2005] 1 IR 274; Bank of Ireland v Martin [1937] IR 189; Irish Life Assurance Co Ltd v Dublin Land Securities Ltd [1989] IR 253 and Doran v Thompson Ltd [1978] IR 223 applied; C(J) v C(JH) (Unrep, Keane J, 4/8/1982); RF v MF [1995] 2 ILRM 572; Thomson v Clydesdale Bank Ltd [1893] AC 282; Westminster Bank Ltd v Hilton (1926-27) 43 TLR 124; ICS Ltd v West Bromwich BS [1998] 1 WLR 896; Nat Westminster Bank v Halesowen Presswork [1972] AC 785; Hanak v Green [1958] 2 QB 9; Government of Newfoundland v Newfoundland Railway Co. (1888) 13 App Cas 199; Federal Commerce v Molena Alpha [1979] AC 757; Rawson v Samuel (1838) 59 ER 428; Bhogal v Punjab National Bank [1988] 2 All ER 296; Moorview Developments Ltd v First Active plc [2009] IEHC 214, (Unrep, Clarke J, 6/4/2009) and Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773 approved; Geldof Metaalconstructie v Simon Carves [2010] EWCA Civ 667, [2010] 4 All ER 847 and O'Keeffe v O'Flynn Exhams and Partners and Allied Irish Banks (Unrep, Costello J, 31/7/1992) distinguished - Declaration granted (2010/5874P - Laffoy J - 28/10/2011) [2011] IEHC 402

O'Meara v Bank of Scotland plc

Facts: The proceedings related to monies in two deposit accounts of the plaintiff and her late husband and the effect inter alia of the death of her husband on the right of set-off vested in the defendant. The primary relief sought by the plaintiff was a declaration that all monies standing in both accounts were the property of the plaintiff. The defendant alleged that the set-off by the defendant of the monies standing to the credit of those accounts was valid on foot of a loan account in his sole name as it wished to set-off the sum in the joint account against the loan facility. The Court had to consider inter alia the beneficial ownership of the monies, rectification and estoppel.

Held by Laffoy J. that the monies in the account no. 101 were jointly beneficially owned by Mr. O' Meara and the plaintiff and they passed to the plaintiff by right of survivorship on the death of Mr. O' Meara. The defendant was not entitled to set-off the monies due on the loan account against those monies. The plaintiff was entitled to a declaration that all the monies which were standing to the credit of the account were the property of the plaintiff. The plaintiff did not have a beneficial interest in the monies lodged in joint deposit account No. 102 and the plaintiff was not entitled to any relief in respect of those monies.

Reporter: E.F.

1 Judgment of Miss Justice Laffoy delivered on 28th day of October, 2011.

1. The factual background

2 2 1.1 The defendant in these proceedings was incorporated as Bank of Scotland (Ireland) Limited when the events the subject of these proceedings took place and when the proceedings were initiated. Since then, Bank of Scotland (Ireland) Limited has merged by absorption into Bank of Scotland Plc subsequent to a cross-border merger. Throughout this judgment I will refer to Bank of Scotland (Ireland) Ltd. and Bank of Scotland Plc as the defendant.

3 3 1.2 These proceedings relate to the monies in two deposit accounts in the joint names of John O'Meara (Mr. O'Meara), the plaintiff's late husband, and the plaintiff, which were opened in November and December 2008 with the defendant, the earliest bearing account No. 929260/101, to which I will refer as joint deposit account No. 101, and the later bearing account No. 929260/102, to which I will refer as joint deposit account No. 102. The primary relief sought by the plaintiff is a declaration that all monies standing in both accounts on 28 ^th November, 2009, the day following the death of Mr. O'Meara, are the property of the plaintiff. The defendant's primary answer to that claim is that the set-off by the defendant of the monies standing to the credit of those accounts against the monies due by Mr. O'Meara on foot of a loan account in his sole name bearing No. 471216/128, to which I will refer as the loan account No. 128, which was effected on 5 ^th January, 2010 by the transfer of monies aggregating €1.6m from the joint deposit accounts to loan account No. 128, was valid. The defendant seeks a declaration on its counterclaim to that effect.

4 4 1.3 Mr. O'Meara had been a respected and a valued customer of the defendant for many years prior to October 2008, when the events which have given rise to these proceedings commenced. Indeed, he had become a customer of the defendant's predecessor, ICC Bank Plc, as far back as 1994. Mr. O'Meara was involved in farming and in the beef industry. He reared, and purchased and fattened, livestock, and exported livestock to the Middle East. From the year 2000 onwards he had become involved in property investment, in respect of which he borrowed from various lending institutions, including the defendant. By the end of 2008 he had eleven loan accounts with the defendant.

5 5 1.4 Sometime before 26 ^th November, 2008, probably during the previous week, Mr. O'Meara got in touch by telephone with Mr. Dave Savage (Mr. Savage), who was the divisional director of lending at the defendant and asked to meet him. The meeting took place at the defendant's office at St. Stephen's Green, Dublin, 2. It was attended by Mr. Savage, who was accompanied by Ms. Ruth Corrigan (Ms. Corrigan), a lending executive with the defendant, and by Mr. O'Meara. Mr. O'Meara indicated that he wanted a loan facility in the sum of €1.6m for working capital for his business. Mr. Savage's evidence was that he explained to Mr. O'Meara that the matter was not as straightforward as other loans which had been advanced in the past because the defendant's credit committee was getting "much tighter". Mr. Savage's evidence was that Mr. O'Meara indicated that he could "cash back" the loan facility and that he would put in place a deposit with the defendant. The defendant's officials understood that the monies for the deposit were monies that were coming to Mr. O'Meara from Anglo Irish Bank Corporation Plc (Anglo). The meeting was told that the purpose of the loan was to buy cattle for Mr. O'Meara's business. The joint deposit accounts Nos. 101 and 102 and the loan account No. 128 were put in place as a consequence of that meeting in the circumstances which I will outline below.

6 6 1.5 Joint deposit account No. 101 was set up first. It was the understanding of Mr. Savage and Ms. Corrigan at their meeting with Mr. O'Meara that the funds he had available to set up the deposit account were the sole property of Mr. O'Meara. However, when Mr. O'Meara arrived at the defendant's office on 26 ^th November, 2008 to open the account he had a cheque drawn on Anglo in the sum of €1,534,126.60 on which the payees were named as "John and Claire O'Meara" and which was crossed "Account Payee only". The plaintiff's signature appeared on the back of the cheque. Although the procedures were gone through to do so and Mr. O'Meara signed an application form to open an account in his sole name and the account, which I understand to be deposit account No. 471216/126 referred to in the defence, was set up, it was decided by the officials of the defendant that the cheque could not be used to open a...