The Bank of Nova Scotia v Hogan

• Jurisdiction: Ireland
• Judge: Mr Justice Francis D Murphy
• Judgment Date: 01 January 1997
• Neutral Citation: [1996] IESC 2
• Court: Supreme Court
• Docket Number: [S.C. No. 52 of 1993]
• Date: 01 January 1997

[1996] IESC 2

THE SUPREME COURT

O'Flaherty J

Blayney J

Murphy J

52/93

BANK OF NOVA SCOTIA v. HOGAN

The Bank of Nova Scotia

Plaintiff/Respondent

AND

Ben Hogan & Margaret Hogan

Defendant/Appellant

Citations:

NATIONAL WESTMINSTER BANK PLC V MORGAN 1985 1 AER 821

BANK OF IRELAND V SMYTH 1995 2 IR 459

BARCLAYS BANK V O'BRIEN 1993 QBD 109, 1994 1 AC 180

FAMILY HOME PROTECTION ACT 1976 S3(1)

BANK OF MONTREAL V STEWART 1911 AC 120

YERKEY V JONES 1939 63 CLR 649

Synopsis:

EQUITY

Bank loan - security provided by way of equitable deposit of title deeds to three residential properties - husband provided security by way of deposit on two of the properties and wife did same for third property - failure to repay - claim by wife that bank did not provide her with independent legal advice and that undue influence was exercised over her with regard to deposits - whether undue influence exercised by husband - whether bank in a fiduciary position - whether bank acted negligently and in breach of fiduciary relationship — Held: No undue influence exercised by husband - no equity against him to have transaction set aside - no undue influence exercised by bank - (Supreme Court: O'Flaherty J., Blayney J., Murphy J. - 06/11/1996)

|Bank of Nova Scotia v. Hogan & Anor.|

1 Judgment of Mr Justice Francis D Murphy delivered the 6th day of November 1996. [NEM DISS]

2 This is an appeal against the order and judgment of Mr Justice Keane made and given herein on the 21st of December 1992.

3 The order made by Keane J declared that the sum of £263,992.77 was secured, first, by the equitable mortgage created by the deposit made on the 2nd day of February 1987 by the first named Defendant/ Appellant, Ben Hogan, of the deeds to the lands specified at numbers 1 and 2 in the schedule to the order (the premises known as numbers 77 Roebuck Downs, Dublin 14, and 32 Brookevale Downs, Rathfarnham, Dublin 14) on Mr Hogan's interest on the said lands and premises and, secondly, by the equitable mortgage created by the deposit made on the 26th day of May 1987 by the secondly named Defendant, Margaret Hogan, of the title deeds to the lands described as number 3 in the said schedule (being the lands and premises known as St Rita's, Kilternan, County Dublin) on Mrs Hogan's interest in those premises. The order of Mr Justice Keane went on to set out the directions and provisions ordinarily contained in a primary order in mortgage proceedings.

4 The particular issue which Mr Justice Keane tried on oral evidence evolved from a pleading contained in paragraph 7 of the Defence filed by the Defendants herein on the 25th day of October 1991. Having averred that Mrs Hogan did not give any security to the Plaintiff/ Respondents the pleadings went on to allege as follows:-

"If the second named Defendant did give any such security (which is denied) which was valid (which is denied) same was obtained from her improperly or unconscionably and by reason of the inequality of bargaining power which existed between herself and the Plaintiffs and by reason of their undue influence over her and ought to be declared void on that account and by reason of the fact that the Plaintiffs by their servants or agents represented and agreed that as a condition of and in return for a deposit of title deeds by her they would advance the sum of£75,000 to the first named Defendant or to Drefflane Associates Limited if he so directed, which advance the Plaintiffs failed or refused to make."

5 The background against which that issue fell to be considered may be summarised by reference to the judgment of the learned trial judge in the following terms. On the 23rd of January 1987, the Plaintiffs (the Bank) agreed to advance the sum of £150,000 to the first named Defendant (Mr Hogan). As security for that advance Mr Hogan made an equitable deposit with the Bank of the title deeds to three residential properties which he owned, ie., numbers 69 and 77 Roebuck Downs, Goatstown Road, Dublin 14, and 32 Brookevale Downs, Rathfarnham, Dublin 14. The sum was duly advanced and on the 28th of January 1988 the amount due by Mr Hogan on foot of the advance to the Bank including interest, was £189,285.79. On that date, by agreement between the Bank and Mr Hogan, the then existing facility was converted into a term loan from the Bank to Mr Hogan in the sum of £190,000 which was to be repaid with interest in five equal annual instalments, the first instalment to be paid one year from the date of the agreement.

6 The title deeds to St Rita's, Kilternan, were deposited with the Bank on the 26th of May 1989 by Mrs Hogan and controversy existed as to the purpose for which such deposit was made or perhaps, more particularly, the extent of the security which it was intended thereby to create.

7 It is common case that the advance in January 1987 was made to Mr Hogan to enable him to purchase as an investment the two properties, namely, 77 Roebuck Downs and 32 Brookevale Downs. Mr Hogan was also, a controlling shareholder of a company called Drefflane Associates Limited ("the Company"). The Company was advanced substantial sums from time to time by the Bank. Ultimately the Bank called in their loans to the Company and, payment not being forthcoming, appointed a receiver under the powers in that behalf contained in the mortgage debenture which they held over the assets and undertaking of the Company. It was part of the defence of Mr and Mrs Hogan that the Bank was at all times in a fiduciary position in relation to them and also exercised a position of dominance over them. Mr and Mrs Hogan contended that the sum claimed by the Bank was not a loan to Mr Hogan but was part of, and related to, the finances made available to the Company and that the Bank negligently and were in breach of their fiduciary duty so acted in relation to the Company as to render it incapable of carrying on business.

8 In 1989 Mr Hogan wished to sell two of the properties the title deeds to which had been lodged by him with the Bank by way of security, namely, number 69 and 77 Roebuck Downs. The Bank contended that they had agreed to release the two properties from the equitable mortgage provided that the title deeds of St Rita's were lodged with them in substitution for the deeds of the properties being sold. In the event only number 69 was sold and the title deeds of St Rita's were undoubtedly deposited with the Bank. Mr and Mrs Hogan put forward a different explanation of the arrangement. They said that the Bank had agreed to advance the sum of £75,000 on the security of the deeds of St Rita's and further that this loan would be repaid out of the profits of the Company. The borrowers maintained that they had been assured that this was a temporary arrangement and that the deeds would be returned to Mrs Hogan within a few months. More particularly the Defendants contend that Mrs Hogan made the deposit when she was acting under the influence of the Bank and without independent legal advice.

9 It was not disputed that Mrs Hogan purchased St Rita's for a sum in the order of £79,000 of which approximately £71,000 was made available to her by the Company. The amount so paid by the Company to Mrs Hogan - with the knowledge of the Bank - represented the repayment of monies advanced by her to the Company to pay staff wages from time to time. Messrs Orpen Franks & Company, Solicitors, acted for Mr and Mrs Hogan in relation to the purchase of the various properties with which these proceedings are concerned. In addition they acted for the Bank from time to time.

10 Arrangements were made for Mrs Hogan to deposit with the Bank the title deeds to St Rita's. The deposit was to be made on the 26th of May 1989. A few days before that Mr Jackson of Orpen Franks & Co told Mrs Hogan that the title deeds were required by the Bank to secure the advances made to Mr Hogan. Some discussion took place between Mr Jackson and Mrs Hogan in the course of that conversation in relation to the transaction.

11 On the occasion of the deposit on the 26th of May 1989 there was present, Mr John Farrell a manager of...