Thomas Kearney v K.B.C. Bank Ireland Plc and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Birmingham
• Judgment Date: 16 May 2014
• Neutral Citation: [2014] IEHC 260
• Court: High Court
• Date: 16 May 2014

Kearney v KBC Bank Irl PLC & Reynolds

BETWEEN

THOMAS KEARNEY

PLAINTIFF

AND

K.B.C. BANK IRELAND PLC AND JOHN REYNOLDS

DEFENDANTS

[2014] IEHC 260

[No. 9180 P./2012]

THE HIGH COURT

Banking and finance – Loan agreements – Reasonable cause of action – Defendants seeking an order striking out the plaintiff”s claim – Whether plaintiff”s pleadings disclose a reasonable cause of action

Facts: The first defendant, KBC Bank Ireland Plc, advanced six loans to the plaintiff, Mr Kearney, a property investor/developer. The loan facilities were secured by way of mortgages over various investment properties. The proceedings commenced by the issue of a plenary summons in 2012. Two statements of claim were served, directed to the position of the defendant bank and the second defendant, Mr Reynolds, chief executive of the defendant bank. The plaintiff claimed that the bank has failed to prove that the plaintiff entered into a binding loan agreement with the bank; that the bank engaged in the illegal creation of currency; that the bank does not retain the entitlement to enforce the loans following the securitisation of the loans; that the bank acted in breach of the Central Bank Asset Securitisation Document in failing to obtain the consent of the plaintiff to the securitisation of the loans; that the bank was not entitled to appoint a receiver to the plaintiff”s properties without court application; that the bank is or was insolvent or has failed to prove that it is solvent; and that the bank, its servants or agents fraudulently misrepresented matters in relation to a property development in Birmingham in order to unjustly enrich the bank and its employees and agents. The defendants sought an order, pursuant to O.19, r. 28 of the Rules of the Superior Courts and the High Court”s inherent jurisdiction, striking out the plaintiff”s claim on the grounds that the pleadings disclose no reasonable cause of action, and that they are frivolous, vexatious and bound to fail.

Held by Birmingham J that regarding the alleged failure to prove binding contract between plaintiff and bank, the form of acceptance appended to each of the letters of offer, each signed by the plaintiff and witnessed by the plaintiff”s solicitor or financial adviser, provide that the loan is governed by the terms and conditions set out in the letter of offer, the particulars of advance, the bank”s general conditions, the special conditions, the bank”s standard form mortgage and the assignment of life policy; hence there could be no doubt as to the contractual basis for the loans. Considering Freeman v Bank of Scotland Ireland [2013] IEHC 371, Birmingham J held that the argument that the bank engaged in the illegal creation of currency was devoid of merit as the plaintiff drew down funds and thereby took on the responsibility to repay. Concerning the claim that bank does not retain entitlement to enforce loan following securitisation, Birmingham J held that in accepting the facility letters and in executing the mortgages, the plaintiff acknowledged the bank”s right, without seeking further consent from or notice to the plaintiff to securitise the loans, relying upon Wellstead v Judge White and Ors [2011] IEHC 438. Regarding the alleged failure to comply with securitisation documents and the contention that the bank has failed to prove its solvency, Birmingham J held that neither would serve to render invalid the loan agreements and mortgages. Concerning the appointment of receiver, as the plaintiff was relying upon the Start Mortgages v Gunn [2011] IEHC 275 line of authority Birmingham J held that there is a distinction between saying that the repeal of a statute may avail a party by providing a shield against certain procedures when invoked, and suggesting that the repeal provides a sword capable of striking down agreements freely entered into and obliterating an obligation to repay loans that were drawn down. Birmingham J held that the allegations of fraudulent misrepresentation were not particularised as required by O.19, r. 5(2), that they were made without any sense of probity or responsibility, and that the alleged fraudulent misrepresentation of matters in relation to the property development in Birmingham does not provide the plaintiff with a cause of action.

Birmingham J held that the pleadings were frivolous and vexatious and that the proceedings are so unmeritorious as to amount to an abuse of process and are bound to fail. Birmingham J acceded to the defendants” application and struck out the proceedings, pursuant to O.19, r. 28 and the inherent jurisdiction of the Court.

Application granted.

RSC O.19 r28

SUN FAT CHAN v OSSEOUS LTD 1992 1 IR 425 1991/10/2412

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 3ED 2012 PARA 1606

IRISH BANK RESOLUTION CORP LTD v CAMBOURNE INVESTMENTS INC & ORS UNREP CHARLETON 14.6.2012 2012 IEHC 262

ACC BANK PLC v DEACON UNREP RYAN 28.6.2013 2013 IEHC 427

MCLEAY & ORS MONEY CREATION IN THE MODERN ECONOMY 2014 1 BEQB 14

FREEMAN v BANK OF SCOTLAND (IRL) LTD & ORS UNREP GILLIGAN 31.5.2013 2013 IEHC 371

MEADS v MEADS 2013 3 WWR 419 2012 ABQB 571

DATA PROTECTION ACT 1988 S8(H)

WELLSTEAD v JUDGE WHITE & FETHERSTONHAUGH UNREP PEART 25.11.2011 2011/49/13927 2011 IEHC 438

PARAGON FINANCE PLC v PENDER 2005 1 WLR 3412 2005 2 P & CR DG18 2005 AER (D) 307 (JUN) 2005 EWCA CIV 760

ZURICH BANK v MCCONNON UNREP BIRMINGHAM 4.3.2011 2011/50/14278 2011 IEHC 75

STEPSTONE MORTGAGE FUNDING LTD v FITZELL 2012 2 IR 318 2012/43/12851 2012 IEHC 142

IRISH LIFE & PERMANENT PLC v DUFF UNREP HOGAN 31.1.2013 2013 IEHC 43

START MORTGAGES LTD v GUNN UNREP DUNNE 25.7.2011 2011/46/13101 2011 IEHC 275

REGISTRATION OF TITLE ACT 1964 S62(7)

LAND & CONVEYANCING LAW REFORM ACT 2009 S8

KAVANAGH & LOWE v LYNCH & ST ANGELAS STUDENT RESIDENCES LTD UNREP LAFFOY 31.8.2011 2011/29/8022 2011 IEHC 348

MCENERY v SHEAHAN UNREP FEENEY 30.7.2012 2012 IEHC 331

RSC O.19 r5(2)

KEANEY v SULLIVAN & ORS UNREP FINLAY GEOGHEGAN 16.1.2007 2007/32/6500 2007 IEHC 8

BULA HOLDINGS & ORS v ROCHE & ORS UNREP EDWARDS 6.5.2008 2008/5/773 2008 IEHC 208

FARLEY v IRELAND & ORS UNREP SUPREME 1.5.1997 1998/6/1512

1 JUDGMENT of Mr. Justice Birmingham delivered the 16th day of May 2014

2 1. The matter before the court sees the defendants seeking an order pursuant to O. 19, r. 28 of the Rules of the Superior Courts and/or pursuant to the inherent jurisdiction of the court striking out the plaintiff's claim on the grounds that the pleadings disclose no reasonable cause of action and that the proceedings are frivolous, vexatious and bound to fail. The factual background is that the bank has advanced six loans to the plaintiff, who is a property investor/developer. The loan facilities were secured by way of mortgages over various investment properties mainly located in Ireland, but in the case of two apartments in Birmingham in England.

3 2. In summary, the position in relation to the loans was as follows. The first loan facility was advanced on foot of a letter of offer dated the 1 ^st November, 2004, and was in the amount of €156,000. A form of acceptance that was appended to the letter of offer was signed by the plaintiff and witnessed by his solicitor. This loan was secured by way of a mortgage dated the 24 ^th December, 2004, in respect of 21 Pearse Court, Athlone, Co. Westmeath. A letter of demand issued and in a situation in which the sum demanded was not repaid, a receiver was appointed on the 28 ^th September, 2012. The second loan facility involved three loan letters dated the 10 ^th January. 2005, in the amount of €1.2m, the 9 ^th June, 2005, in the amount of €154,700 and the 13 ^th February, 2007, in the amount of €180,000. Forms of acceptance were appended to each loan letter and were signed by the plaintiff and witnessed by his solicitor. Ail three elements of the loan facility were drawn down by way of a cheque made payable to his then solicitors. The loans in question were secured by way of a mortgage dated the 20 ^th April, 2005, over a number of properties in Castlegar, Co. Galway, a second legal charge was in place over three other properties. A letter of demand was served, but the sum demanded was not repaid and a receiver was appointed on the 28 ^th September, 2012.

4 3. The third loan facility was advanced on foot of a letter of offer dated the 3 ^rd June, 2005, in the amount of €267,600. Again the form of acceptance appended to the letter of offer was signed by the plaintiff and witnessed by his solicitor and drawn down by way of loan cheque payable to the plaintiff's solicitor. This loan was secured by way of a mortgage dated the 31 ^st August, 2005, over two properties in Tarmonbarry, Co. Roscommon. When the sum demanded through a letter of demand was not repaid, a receiver was appointed in this case on the 18 ^th December, 2012.

5 4. The fourth loan facility was advanced on foot of a letter of offer dated the 11 ^th August, 2005 and the sum involved was €300,000. On this occasion the plaintiff's wife was a party to the loan and the form of acceptance was signed by both the plaintiff and his wife and was witnessed by their solicitor. This loan was secured by way of a mortgage dated the 1 ^st November, 2005 and a supplemental indenture of mortgage of the 10 ^th November, 2005, over Apartment 13, Amhra House, St. Brendan's Avenue, Co. Galway. In this case a receiver was appointed over the secured property on the 19 ^th October, 2012.

6 5. Loan facilities 5 and 6 related to properties in Great Britain. There were two loan offers dated the 27 ^th November, 2007 and the sums advanced were Stg£l63,000 and Stg£l13,080.15. As in the case of the earlier loans the form of acceptance that was appended to the facility letters was signed by the plaintiff, but on these occasions, was witnessed by his financial consultant...