The Governor and Company of the Bank of Ireland v Carey and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Rory Mulcahy
• Judgment Date: 07 July 2023
• Neutral Citation: [2023] IEHC 388
• Court: High Court
• Docket Number: Record No.: 2022/113 SP

Between:

The Governor and Company of the Bank of Ireland

Plaintiff

and

Timothy Carey and Finola Colgan Carey

Defendants

[2023] IEHC 388

Record No.: 2022/113 SP

Record No.: 2022/114 SP

THE HIGH COURT

JUDGMENT ofMr. Justice Rory Mulcahydelivered on the 7th day of July 2023

Introduction

1 This judgment concerns two sets of proceedings, both commenced by way of special summons, by which the Plaintiff (“ the Bank”) seeks various reliefs relating to a sum owing on a loan facility extended to the Defendants in 2010, and to a judgment obtained on 12 September 2016 in summary proceedings brought on foot of the Defendants' failure to repay that loan facility for the sum of €597,435.44 plus €396 costs.

2 In the proceedings bearing Record No. 2022/113 SP (“ the first Proceedings”), the Bank seeks an Order that the sum of €597,435.44 plus €396 costs, together with interest on the said judgment stands well charged on lands and premises comprised in Folio WH2639, Folio WH16939F and Folio WH2997 all in County Westmeath both by virtue of a judgment mortgage in favour of the Bank in respect of the said lands and by virtue of a registered lien registered on the lands comprised in Folio WH2639 on 1 March 2017. The Bank also seeks an Order for sale of the said lands in default of payment and other ancillary relief.

3 In the proceedings bearing Record No. 2022/114 SP (“ the second Proceedings”), the Bank seeks an Order for possession pursuant to section 62(7) of the Registration of Title Act, 1964 of lands comprised in Folio 7693F of the Register of Freeholders County Westmeath and Folio 2513 of the Register of Freeholders County Westmeath.

4 The Defendants raise a number of arguments by way of defence to the Plaintiff's claims, but their principal objection is that the sum in respect of which the Plaintiff obtained judgment is based on an incorrect calculation of interest.

Factual Background

5 Both sets of proceedings arise from lending by the Bank to the Defendants, who are husband and wife, which was restructured in 2010. By letter of offer dated 5 August 2010, the Bank extended a loan facility in the sum of €532,500 to the Defendants. The purpose of the loan was stated in the letter as being “[t]o assist with the restructure of existing facilities”. Five separate account numbers, referable to the existing facilities, were listed.

6 The loan offer letter provided that the facility would expire on 31 October 2010 and set out repayment terms. The security held by the Bank is then detailed. A number of items are specified, but for present purposes, the following are relevant:

“First Legal Mortgage/Charge over the property at Greevebeg (Folio No: 7693F Co: Westmeath) comprising 0.12 hectares registered in the name of Mrs Finola Colgan-Carey & Mr Timothy Carey.

First Legal Mortgage/Charge over the property at Glengorm, Co Westmeath (Folio No: 2513 Co: Westmeath) comprising 31.8 hectares in the name of Mr Timothy Carey.

Registered Lien over the property at Toorlisnamore (Folio No: 2639 Co: Westmeath) comprising 16 acres registered in the name of Mr Timothy Carey.”

7 In the grounding affidavits filed on behalf of the Bank, Mr Andrew Larkin, described as a bank official, avers that this offer was made and accepted by the Defendants in writing on 2 September 2010. The loan offer letter exhibited in the proceedings is signed by each of the Defendants on that date. An affidavit of the second Defendant (sworn on behalf of both Defendants) does not dispute the extension of the loan facility, but states that it commenced from 6 September 2010. Nothing seems to turn on this discrepancy.

8 Mr Larkin avers that following the Defendants' failure to repay the loan in accordance with the terms of the loan offer, the Bank initiated proceedings by way of Summary Summons on 4 December 2013, Record Number 2013/4066 S, seeking the amount owing at that time, said to be €541,396.28 plus interest.

9 On foot of those summary proceedings, on 12 September 2016, judgment in default of appearance was entered in the Central Office of the High Court in the sum of €597,435.44 plus €396 for costs (the “ Default Judgment”). That judgment sum was based on an affidavit of debt sworn on behalf of the Bank on 9 August 2016 by Mr Brendan Murphy, described as a business manager. The affidavit sets out how interest had been calculated on the Defendants' loan facility up to 8 August 2016. At paragraph 9, the affidavit states that “ the Plaintiff hereby waives its claim to further interest from the 9th day of August 2016.” The Defendants place some reliance on this averment.

10 On 1 March 2017, a judgment mortgage was registered by the Bank on Folios in which the Defendants (either jointly or individually) were said to have an estate or interest, those Folios being: WH7693R, WH2513, WH2639, WH2997, WH16939F all in the Register County of Westmeath.

11 Following an application from the Defendants, the Default Judgment was set aside by Order of the High Court on 29 May 2017. The Bank appealed the Order setting aside the Default Judgment to the Court of Appeal.

12 The Court of Appeal allowed the appeal against the Order of the High Court ( [2018] IECA 109). As set out in the judgment of the Court of Appeal (Irvine J), the onus lies on a defendant in an application to set aside a default judgment to show that the judgment was irregularly obtained. If the judgment is obtained irregularly, it must be set aside irrespective of the merits of any defence. If, however, a defendant cannot satisfy that onus, that defendant must establish that there is a possible defence to the claim which has a reasonable prospect of success.

13 The Court of Appeal was satisfied that the judgment in default of appearance had not been obtained irregularly and that the Defendants had not discharged the burden of showing that they had a defence to the claim which had a reasonable prospect of success. It appears that the Defendants did not raise any issue regarding overcharging as a potential defence before the Court of Appeal.

14 By Order dated 10 May 2018, the Court of Appeal set aside the High Court Order and reinstated the Default Judgment.

15 The amount said to be due and owing by the Defendants to the Bank as of 13 June 2022 is €640,056.36.

16 The second Defendant, on behalf of both Defendants, now says that the Default Judgment entered was predicated on an incorrect calculation of the amount owing by the Defendants to the Bank as there was overcharging by the Bank of interest on one of the accounts which was restructured by the 2010 loan facility. The second Defendant exhibits a report of a firm of chartered accountants and registered auditors, Candor, that is said to demonstrate the overcharging. That report calculates that as of 17 July 2019 the amount overcharged by the Bank, and the cost of financing the excess interest, may have been up to €16,000. The Defendants say that this has certain consequences for the judgment mortgage registered by the Bank, which I will return to below.

17 On 26 July 2019, the Defendants issued a motion in the Court of Appeal seeking to strike out or set aside the Default Judgment and the judgment mortgage registered on foot thereof in March 2017. However, by email dated 29 July 2019, the Defendants were advised by the Office of the Court of Appeal that the motion should not have been accepted “ as the Court of Appeal does have jurisdiction to deal with the reliefs sought”. The motion was returned to the Defendants, and they were told that they could apply for a refund of any stamp fees paid.

18 The second Defendant sought clarification of this email and the apparent conflict between the statements in it regarding the motion not being accepted and the Court having jurisdiction to deal with the reliefs sought. Although the second Defendant avers that there was no response to this request, it seems clear that the email from the Office of the Court of Appeal was intended to state that the Court of Appeal did not have jurisdiction to deal with the motion which is why it was not being accepted. In any event, no further action was taken by the Defendants until the commencement of these two sets of proceedings.

The first proceedings

19 The first proceedings concern three different folios: Folio WH2639, which comprises agricultural land of c. 16 acres, Folio WH16939F, which includes an incomplete dwelling house, and Folio WH2997, which comprises 20.9273 hectares of land that is part of a stud ground residence. The Bank seeks a declaration that the sum of €597,435.44, plus €396 for costs, together with interest stands well charged against the interests of the Defendants in those Folios. The basis for these claims is the judgment mortgage registered against all three Folios. In addition, the Bank has a registered lien in its favour in relation to Folio WH2639.

20 The registered lien is referred to in the letter of offer described above. Mr Larkin explains in his affidavit that it was an equitable lien in the Bank's favour obtained by deposit of the land certificate for Folio WH2639 which was subsequently registered on 4 November 2008 pursuant to s. 73(3) of the Registration of Deeds and Title Act 2006 (“ the 2006 Act”). Whether a registered lien is capable of securing future advances, in particular advances made after 31 December 2009 has been clarified by the Court of Appeal (Pilkington J) in Promontoria (Oyster) DAC v. Fox[2023] IECA 76. I will return to this later.

21 As set out in the grounding affidavit to the Special Summons, on 29 September 2015, inhibitions were registered in respect of Ms Claire Clancy on Folio WH2639 and Ms Bernadette Colgan on Folio WH16939F. In both cases, the inhibition prohibits the registration of a disposition from the registered owner without the consent of the person in whose favour the inhibitions were registered. In the case of Ms...