Pepper Finance Corporation (Ireland) Ltd v Michael Macken and Patricia Watson

JudgeMr. Justice Murray
Judgment Date25 January 2020
Neutral Citation[2021] IECA 15
Date25 January 2020
CourtCourt of Appeal (Ireland)
Docket NumberCourt of Appeal Record No.: 2018/360
Pepper Finance Corporation (Ireland) Ltd
Michael Macken and Patricia Watson

[2021] IECA 15

Haughton J.

Murray J.

Collins J.

Court of Appeal Record No.: 2018/360

High Court Record No.: 2013/46 S.P


JUDGMENT of Mr. Justice Murray delivered on the 25 th day of January 2020


. The original plaintiff in these proceedings (in which orders are sought for possession of a property comprised in Folio 11582F County Roscommon) was Danske Bank A/S trading as Danske Bank. Following her judgment of 15 June 2018 ( [2018] IEHC 356, [2019] 1 IR 677) Costello J. made an order (a) substituting Pepper Finance Corporation (Ireland) DAC (‘Pepper’) as plaintiff in the action and (b) setting aside a judgment obtained in the proceedings on 2 November 2015. In this appeal, Mr. Macken, contends that Costello J. erred in making the first of these orders (itself made on foot of an appeal by Mr Macken against a decision of the Master) because, he argues, Pepper had failed to adduce sufficient evidence to ground its asserted entitlement to proceed with the claim.


. The basis on which Pepper sought to be substituted in the case was set forth in an affidavit of one of its directors, Cormac Ryan, sworn on 31 January 2018 to ground its substitution application. In the course of that affidavit Mr. Ryan made the following relevant averments:

  • (i) The application arose from the ‘ sale’ of the loans and security alleged to give rise to the entitlement to the relief claimed in the action by Danske Bank, to Pepper;

  • (ii) On 23 October 2017 Danske Bank executed a loan portfolio sale and purchase deed whereby it agreed to sell and Proteus Funding DAC (‘PF’) agreed to purchase certain assets (‘ the purchased assets’). The purchased assets included those loans and security. This deed was duly exhibited.

  • (iii) That deed provided that the purchase of the assets in question was subject to the proviso that legal title to those assets shall be transferred to Pepper, which would hold those assets on trust for PF. It was averred by Mr. Ryan that ‘ legal title shall be held by Pepper with beneficial title being transferred to and held by [PF]’.

  • (iv) On 15 December 2017 Danske Bank assigned to Pepper (insofar as not otherwise granted, conveyed, assigned, transferred and assured pursuant to certain transfer deeds and life policy assignment) all such rights, title and interest as Danske Bank may have had in the purchased assets. That deed was exhibited.

  • (v) On 15 December Danske Bank executed a deed of transfer of charge in the form of Land Registry Form 56 whereby it transferred to Pepper as purchaser, the charges listed there, including the charge asserted to ground the relief claimed in the action. The Form 56 was exhibited.

  • (vi) Mr. Ryan averred that a notification was sent to the defendants on 18 October 2017, which he described as a ‘ Notification of Agreement to Sell’. This notification was exhibited. It described PF as ‘ the beneficiary’ and stated that details relating to the defendants' accounts would be provided to ‘ the Beneficiary’ and that these details would be used by Pepper and ‘ the Beneficiary’ for the continued administration of the defendant's accounts and for related legal and regulatory purposes. It stated (and Mr. Ryan averred accordingly):

    Pepper … will hold the benefit of your Account(s) on trust for the benefit of [PF]’

  • (vii) Mr. Ryan averred that a further letter was sent to the defendants on 18 December 2017. This letter was exhibited. Mr. Ryan said that this letter outlined to the defendants ‘ that, from 15 December 2017 Pepper held the benefit of the defendants' facilities … on trust for [PF]’. In point of fact, the letter was worded differently from that sent on 18 October. It not merely stated that Pepper held the benefit of the assets on trust for PF, but made it clear that at some point this might change:

    From 15 December 2017, Pepper holds the benefit of the Account(s) and Finance Agreements on trust for [PF], or such other beneficiary of such trust from time to time …’.

    (Emphasis added).

  • (viii) Mr. Ryan finally exhibited a letter sent by Pepper's solicitors – Maples & Calder – on January 9 2018. The purpose of that letter was to advise the defendants of Pepper's intention to apply to be substituted as plaintiff to the proceedings. That letter inter alia referred to the Loan Sale Deed, and the fact that it provided that the legal title to the assets in question would be transferred to Pepper which should hold the assets on trust for PF.


. The essential basis for the application was then described by Mr. Ryan as follows:

as a consequence of the Deed of Assignment, the Form 56 and the Notification of Agreement to Sell, an event has now occurred since the commencement of the within proceedings whereby the interest of the Plaintiff in the Facilities, the Charge and the within proceedings has been transferred to Pepper’.


. Mr. Macken swore two affidavits in response to Mr. Ryan's affidavit. There, (and insofar as relevant to the issues on this appeal) he said inter alia the following:

  • (i) Pepper did not have locus standi and if they had they did not show any evidence of such standing as ‘ purported Trustees’;

  • (ii) Pepper had averred that they were the purchasers of the loan and security;

  • (iii) Pepper was not the purported purchaser of the loans and securities and, in fact, it was more likely to be ‘ a mere Bare Trustee’ and that the evidence Pepper had adduced merely established that they were ‘ merely Bare Trustees and nominees on behalf of Proteus’.

  • (iv) Pepper had exhibited no documentation or supporting evidence of the Trust or their powers under the Trust.


. Pepper did not reply to these affidavits, and the evidence I have thus summarised represented the material before Costello J. when she made the order the subject of this appeal. On the basis of the authorities to which I refer below, she concluded that, as a matter of law, the Court in application of the kind in issue was concerned only with whether the applicant had adduced evidence in a prima facie fashion of its entitlement, by reason of the purported assignments, to pursue the existing claim on the underlying facilities alleged to have been transferred to it. She stressed that the procedural application to substitute a new plaintiff did not determine the issue of the validity of the assignment from the plaintiff and that the Court was not rendering any adjudication upon either the validity of or efficacy of the sale agreement or of the notice given to the defendants of the assignment of the facilities and underlying security.


. From there, Costello J. reviewed the evidence disclosed by the affidavit of Mr. Ryan and the documentation exhibited therein. She said the following of that evidence (noting that where the Court referred to ‘ Proteus’ it was referring to the entity I have been describing as PF) (at para. 44):

‘… they show that if they are valid and effective documents there has been a sale of the loans and associated securities of the defendants by Danske Bank to Proteus and that the parties agreed that the legal interest in the loans and associated securities was to be transferred to Pepper and that Proteus was to be the beneficial owner of the facilities and associated security’.


. That being so, and having regard to the legal principles identified by the trial Judge, she concluded (at para. 49):

I am satisfied that the applicant, Pepper, has adduced evidence on a prima facie basis that there was a sale and assignment of their loans to Pepper on 18 December 2017. The defendants were notified by Danske Bank of the assignment of their loans to Pepper on the 18th December 2017. On this basis I conclude that the applicant is entitled to be substituted as plaintiff in these proceedings in place of Danske Bank and is authorised to continue the proceedings as plaintiff’.


. In advance of the hearing of this appeal, Mr. Macken swore a further affidavit disclosing additional information regarding the purported transfer of the loans and securities giving rise to this application. He derived that information from publicly available documents, a number of which he exhibited. He said that this information disclosed the following components of what he described as ‘ the scheme’, all of which occurred on December 15 2017:

  • (i) Danske Bank sold beneficial and legal title in the relevant assets to PF;

  • (ii) PF ‘ put the legal title into a Bare Trust’ to which Pepper was appointed as Trustee;

  • (iii) Pepper signed Form 56 ‘ on behalf of the Bare Trust’:

  • (iv) PF then sold all its rights, beneficial and legal, to another ‘ Proteus’ entity, Proteus RMBS DAC (‘ PR’);

  • (v) Pepper then transferred any and all of its rights as Trustee for and on behalf of the Bare Trust to PR;

  • (vi) PR then converted all its rights to Notes and issued Notes. He says that this conversion nullified and expunged the individual rights, including the beneficial and legal rights, to each individual mortgage and charge. He says that PR:

    ‘effectively expunged the assets of the Bare Trust by the conversion and eliminated all rights, including beneficial and legal, that the Bare Trust may had briefly had earlier in the day’.

  • (vii) PR appointed Pepper as a Servicer on its behalf to collect monies;

  • (viii) PF and PR both then reverted to €1 shell companies.


. Pepper did not file any responding evidence in advance of the hearing of this matter on January 12 2021. While it did not accept Mr. Macken's interpretation of the legal effect or consequence of the events he thus describes, it did not dispute that some elements of the transaction I have outlined above in fact occurred. In particular, it was clear (based upon the documentary evidence before the Court) that there was on December 15 a...

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