Michael Leahy and Kathleen Leahy v Bank of Scotland Plc and Pentire Property Finance Ltd T/A Pentire and Pepper Finance Corporation (Ireland) Ltd T/A Pepper Asset Servicing and Tom Kavanagh
| Jurisdiction | Ireland |
| Judge | Ms. Justice Faherty |
| Judgment Date | 12 July 2021 |
| Neutral Citation | [2021] IECA 194 |
| Docket Number | Appeal Number: 2019/244 |
| Year | 2021 |
| Court | Court of Appeal (Ireland) |
[2021] IECA 194
Faherty J.
Haughton J.
Binchy J.
Appeal Number: 2019/244
THE COURT OF APPEAL
Banking and finance – Loan agreements – Transfer – First defendant seeking to dismiss proceedings on the basis that same were frivolous and vexatious and/or disclosed no reasonable cause of action – Whether the first defendant acted unlawfully in transferring the plaintiffs’ loans to an unregulated entity
Facts: The plaintiffs, Mr and Ms Leahy, appealed to the Court of Appeal against two orders of the High Court (Simons J) both dated 5 April 2019 the first of which dismissed their claim as against the first defendant, Bank of Scotland plc (the Bank), pursuant to O.19, r.28 of the Rules of the Superior Courts (RSC). In the second order, the High Court dismissed the reliefs sought by the plaintiffs against the Bank by way of final orders, including declarations in relation to implied contractual rights and to have the Bank’s defence to their proceedings struck out. The plaintiffs raised the following grounds in the appeal: the trial judge erred in relying on Launceston Property Finance Ltd v Burke [2017] IESC 62 and similar jurisprudence to reject the plaintiffs’ contention that the Bank was precluded in law from transferring their loans to the second defendant, Pentire; the alleged non-entitlement of the Bank to rely on Condition 14.2 of Bank of Scotland (Ireland) Ltd’s “General Conditions Applicable to Loan Facilities” (the General Conditions); Condition 27 of the General Conditions prohibited the transfer of the loans to Pentire; the alleged breach of constitutional rights; the alleged error of the trial judge in finding no loss accrued to the plaintiffs as a result of the transfer of their loans to Pentire; and the alleged failure of the trial judge to determine the plaintiffs’ complaint that the Bank failed to apprise Pentire that the plaintiffs were residing in the secured property.
Held by Faherty J that the plaintiffs had not persuaded the Court that the trial judge erred in striking out their claim against the Bank pursuant to O.19, r.28 RSC. Faherty J held that even if the matters pleaded by the plaintiffs would prevail at the trial, the plaintiffs’ case against the Bank was bound to fail. Paraphrasing Clarke J in Lopes v Minister for Justice, Equality and Law Reform [2014] IESC 2, Faherty J held that their claim against the Bank “must be vexatious” and, accordingly, must be dismissed under the RSC. Faherty J affirmed the order of the trial judge and the trial judge’s order striking out the plaintiffs’ motion dated 4 February 2019.
Faherty J held that the Bank should be entitled to its costs.
Appeal dismissed.
JUDGMENT of Ms. Justice Faherty dated the 12th day of July 2021
This is the plaintiffs' appeal against two Orders of the High Court (Simons J.) both dated 5 April 2019 the first of which dismissed their claim as against the first defendant (“the Bank”) pursuant to O.19, r.28 of the Rules of the Superior Courts (“RSC”). In the second Order, the High Court dismissed the reliefs sought by the plaintiffs against the Bank by way of final orders, including declarations in relation to implied contractual rights and to have the Bank's defence to their proceedings struck out.
In 2004, Bank of Scotland (Ireland) Limited (“BOSI”) provided loan facilities to the plaintiffs. By way of Facility Letter dated 29 July 2004, BOSI advanced the sum of €600,000 to the second plaintiff which was drawn down on 20 August 2004. The second loan agreement dated 5 October 2004 was executed by the first and second plaintiffs on 24 November 2004 and the amount advanced was €140,000. Both loans related to premises consisting of nine commercial units, two shell units and two apartments in County Kilkenny. In respect of both loans, the respective Facility Letters contained an endorsement to the effect that the plaintiff/borrower confirmed “that for the purposes of the Consumer Credit Act, 1995, in availing of the facility and drawing down the loan” they were “acting within our business, trade and profession”.
The loan agreements were subject to BOSI's “General Conditions Applicable to Loan Facilities…” (“the General Conditions”). Condition 14.1 of the General Conditions provided that the borrower “shall not be entitled to assign or transfer all or any of its rights, benefits or obligations…”. Condition 14.2 provided that BOSI “may at any time, without the prior consent of the Borrower, assign, novate or transfer any of its rights and benefits and transfer any of its obligations under any of the Finance Documents to any person, firm or company or subparticipate or subcontract any of its rights or obligations under the Finance Documents”.
Pursuant to Condition 27.1, the Loan Agreements were to be “governed by, and shall be construed in accordance with, the laws of Ireland and the Borrower hereby submits, for the benefit of the Bank, to the jurisdiction of the Courts of Ireland for all purposes in the (sic) connection with the Loan Agreement”.
By Deed of Mortgage and Charge dated 20 August 2004 the second plaintiff granted a mortgage over the properties the subject of the loan agreements which was duly registered in the Registry of Deeds.
At one minute to midnight on 31 December 2010, BOSI merged with the Bank in accordance with Directive 2005/56/EC on cross-border mergers of limited liability companies and Regulation 13 of the EC (Cross-Border Mergers) Regulations 2008. The effect of the merger was that all of the assets and liabilities of BOSI transferred to the Bank. BOSI was then dissolved without going into liquidation.
It is common case that in 2015, ownership of the plaintiffs' loans was transferred to the second named defendant (“Pentire”) as part of the sale of a large number of loans by the Bank. This transfer was completed on 20 April 2015.
Some three months or so subsequent to the transfer by the Bank to Pentire, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the 2015 Act”) was enacted on 8 July 2015 and commenced on that date.
The within proceedings were commenced on 25 July 2016. It appears, however, that prior to the institution of the proceedings, the plaintiffs sought, unsuccessfully, to obtain leave to seek judicial review. The first set of judicial review proceedings are entitled Michael Leahy, Applicant, and Bank of Scotland plc, Respondent. They bear record number 2016 No. 347/J.R. The Bank was put on notice of the leave application. Leave to apply for judicial review was refused by the High Court (Humphreys J.) on 20 June 2016. The second set of proceedings are entitled Michael Leahy, Applicant, and The Minister for Finance, Respondent and Bank of Scotland plc, Notice Party. They bear record number 2016 No. 500/J.R. Leave was refused on foot of the first plaintiff's ex parte application on 11 July 2016. The first plaintiff has appealed this refusal.
In their plenary summons the plaintiffs claim as against the Bank, damages for breach of contract and breach of duty (including statutory duty), and damages for negligence.
The first version of the statement of claim was delivered on 24 October 2016. It comprised some one hundred and eleven narrative paragraphs. A notice for particulars was delivered by the Bank on 2 December 2016. On 6 December 2016, the first plaintiff advised the Bank that the plaintiffs were declining to “accept service” of the notice for particulars and requested the Bank's defence within seven days. The Bank issued a notice of motion on 11 January 2017 compelling replies to particulars, or alternatively seeking to dismiss the plaintiffs' claim for failing to reply to particulars. On 9 January 2017, the other defendants issued a motion seeking to strike out part of the statement of claim for prolixity and/or dismissing or striking out the claim for being improperly pleaded, scandalous, frivolous, vexatious and/or bound to fail.
On 11 July 2017, prior to the hearing of both those motions, the plaintiffs delivered an amended version of the statement of claim. On 13 November 2017, the High Court made an order providing for the delivery of a revised version of the amended statement of claim of 11 July 2017 and gave directions for the service of notices for particulars and delivery of defences. The second amended statement of claim was duly delivered on 27 December 2017.
The following factual matrix is alleged in the plaintiffs' pleadings (and augmented by the written and oral submissions of the first plaintiff). It is not in dispute that the plaintiffs fell into arrears in respect of the Loan Agreements. It is pleaded that the monthly repayments of €3,500 on the second plaintiff's €600,000 loan were discharged by the second plaintiff between 2004 and 2009, with the first plaintiff taking on responsibility for the loan repayments between 2009 and December 2014. This was due to the depletion of the rental income available to the second plaintiff from 2009 onwards. It is said that the Bank was aware of this from its six-monthly reviews.
It is pleaded that on a date prior to November 2011, the plaintiffs informed BOSI and/or the Bank that they had taken up residence in the secured property. It is said that the Bank acquiesced in this arrangement, and that latterly, the second and third defendants did likewise.
In June 2014 the first plaintiff met with an employee of Certus (a service provider to the Bank). According to the second amended statement of claim, at this meeting the first plaintiff apprised the Bank via Certus that he required relief from paying the second...
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