Start Mortgages Ltd v Hanley

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 14 June 2016
• Neutral Citation: [2016] IEHC 320
• Docket Number: Record No. 2013/3874S.
• Court: High Court
• Date: 14 June 2016

[2016] IEHC 320

THE HIGH COURT

Barrett J.

Record No. 2013/3874S.

Between:

START MORTGAGES LIMITED

Plaintiff

-and-

SHANE HANLEY

Defendant

Banking & Finance – Non-payment of money – Summary Judgment – Appeal – Arguable case – Plenary hearing – Reg. 3 (2) of the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 – Unfair term

Facts: Following the grant of the Master of the High Court giving liberty to the plaintiff to enter summary judgment against the defendant, the defendant had filed an appeal against the said order. The defendant contended that he was not served with a notice of demand until the commencement of the summary proceedings, and thus, the said order of the Master of the High Court suffered from infirmity. The plaintiff contended that mortgages were not required by the loan agreement to issue a notice of demand and that the summons of the summary proceedings would be sufficient to be deemed as the notice.

Mr. Justice Max Barrett allowed the appeal and set aside the order of the Master of the High Court and directed that the matter should proceed by way of a plenary hearing. The Court, however, suggested the parties to find an amicable solution between them. The Court observed that the power to grant summary judgment should be exercised with extreme care in cases where there were no disputed facts. The Court held that the plaintiff had contravened reg. 3 (2) of the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 by extinguishing the need for letter of demand in the relevant loan agreement. The Court rejected the plea put forward by the plaintiff that summons were akin to the notice of demand. The Court held that summons could not be deemed to be a replacement or an alternative to a notice of demand of payment as both the documents were substantially different and had different legal implications. The Court found that the defendant had raised an arguable defence, which could not be resolved summarily and thus, it was appropriate that the matter should go to the plenary hearing.

JUDGMENT of Mr Justice Max Barrett delivered on 14th June, 2016.

Part 1: Overview

1 On 3rd November, 2015, the Master of the High Court ordered that Start Mortgages be at liberty to enter final judgment against Mr Hanley for just under €386k plus costs pursuant to a loan agreement of 18th September, 2007, between plaintiff and defendant, in respect of which a default in repayment had occurred. 2. On 25th January last, following an extension of the period for appeal granted by this Court on 15th December, 2015, Mr Hanley, a litigant in person, entered an appeal against the Master's order. That appeal was heard last week as a de novo hearing of the application for summary judgment.

Part 2: Basis of Appeal

3 In essence, Mr Hanley's appeal is grounded on the assertion that he never received the demand for payment that led eventually to the commencement of the within proceedings and ultimately to the Master's order. Instead, the notice went to some other Mr Hanley with whom the Mr Hanley named in these proceedings has no kinship and of whom he had never heard before the commencement of these proceedings. As a result of the foregoing error, which the court accepts as having occurred, Mr Hanley claims that he was denied the period of continuing and heightened negotiation that would typically follow the issuance of a notice of demand. Instead matters, to borrow a colloquialism, “went legal”, and resulted in the Master's order of last November.

Part 3: Various Contentions of Start Mortgages

I. Overview.

4 At the hearing of the within appeal, Start Mortgages advanced five key contentions. First, Start Mortgages is not required by the loan agreement to issue a notice of demand. Second, if a notice of demand is required, the summons whereby the within proceedings commenced sufficed as notice. Third, Start Mortgages is empowered by the loan agreement to commence whatever post-default proceedings it wants whenever it wants. Fourth, applying the usual case-law on summary judgments, Mr Hanley has no arguable defence to the granting of summary judgment at this time. Fifth, Start Mortgages has been waiting a while now for repayment and should not have to tarry further in enforcing Mr Hanley's liability to it.

II. No Requirement to Issue Demand.

5 Clause 12 of the loan agreement provides, inter alia, as follows:

‘On the occurrence of any of the following [default] events the obligation of the Lender to complete the advance shall absolutely cease and determine and if the advance has been drawn down on foot of the Undertaking referred to the Lender may demand repayment thereof on giving seven days' notice in writing to the Borrower…

(v) if default shall have been made by the Borrower in payment of any of the monthly instalments to the Lender.’

6 Start Mortgages contends in effect that the word ‘may’ in the above-quoted text does not mean “shall” and that Start Mortgages is not obliged to issue a notice of demand.

7 By way of general remark, the court must admit that it has never in practice encountered a lender that would proceed to litigation without first making demand for payment of a borrower in default. At the very least, making demand indicates the seriousness with which a bank views a particular breach of contract and should bring a heightened focus to endeavours to arrive at some form of corrective behaviour and/or compromise without the need for costly court proceedings. Moreover, although this Court is not tasked with policing the Central Bank's Code of Conduct on Mortgage Arrears, it cannot pretend that it has no knowledge of same, and it has some difficulty in seeing offhand how a lender could satisfy the Central Bank that it was (a) in compliance with para.12 of the Code when a most critical communication (the letter of demand) was not even sent to the correct person, never mind received by same, and (b) in compliance with para.29 a) of the Code (assuming the lender has complied with para.28), without apparently serving a form of letter – which in practice is typically a letter of demand – in which it has indicated that legal proceedings can commence immediately.

8 Irrespective, however, of all that the court has observed in the previous paragraph, the court respectfully does not accept Start Mortgage's reading of clause 12 of the loan agreement. Clause 12, as agreed between the parties, provides that ‘the Lender may demand repayment thereof on giving seven days' notice in writing to the Borrower’. This does not give the Lender a discretion whether or not to make demand. Rather, it has the effect that repayment of a loan may only be demanded ‘on giving seven...