Tom Kavanagh v Bank of Scotland Plc and Others

• Jurisdiction: Ireland
• Judge: Mr Justice Birmingham
• Judgment Date: 30 September 2013
• Neutral Citation: [2013] IEHC 453
• Court: High Court
• Date: 30 September 2013

Kavanagh & Bank of Scotland PLC v McLaughlin

BETWEEN

Tom Kavanagh

And

Bank of Scotland plc

Plaintiffs

And

Patrick McLaughlin

And

Roseann McLaughlin

Defendants

[2013] IEHC 453

[No. 11977P/2012]

THE HIGH COURT

Mortgage loans - Repayment - Validity of appointment as receiver - Declaratory relief - Cross border merger of companies

This case concerned two separate claims by the plaintiffs. Tom Kavanagh, the first plaintiff, sought declaratory relief in respect of the validity of his appointment as receiver. The second plaintiff, Bank of Scotland plc, sought judgment for the amount of €4,022,734.92 against the defendants in respect of loans made by Bank of Scotland Ireland to the defendants. It is significant to note that there had been a merger of Bank of Scotland Ireland and Bank of Scotland plc.

It was not disputed that the loans were provided and not repaid. A series of defences, however, were raised. Firstly, it was contended that at the time of receiver appointment, that repayment of the loans was not due. On this issue, it was argued that before declaring an event of default, the bank never served a notice specifying the breach of mortgage agreement as required under the terms of the contract. Secondly, it was argued that the mortgages upon which Bank of Scotland relied were not transferred when Bank of Scotland plc and Bank of Scotland Ireland merged. This was premised on the contention that the mortgage did not constitute an asset under Council Directive 05/56/EC. Thirdly, the defendants argued that the appointment of receiver was invalid as Ms. Whitmore, who executed the appointment, did not have the authority to do so.

On the first contention, it was held that the maxim qui facit per alum facit per se applied. Acting through Byrne Wallace Solicitors, Bank of Scotland plc wrote to both defendants complying with the service of notice requirement in the mortgage contract. The court held that the letter, having been written by the solicitors rather than by the plaintiff was in full compliance with the necessary procedures, and that the defendant”s argument to the contrary was without substance. On the second argument, it was held, following analysis of Council Directive 05/56/EC and the European Communities (Cross-border Mergers) Regulations 2008, that the mortgage did constitute an asset, and that the loans and the security underlying them were transferred during the merger. On the third contention, following tracing the chain of Ms. Whitmore”s authority to execute documents, it was concluded that Ms. Whitmore acted as an agent of the bank, and acted with their approval and authority—and that the document created on the 28 ^th of May 2012 and accepted by the first plaintiff on the 6 ^th of June was a duly authorised document. Ultimately, Birmingham J. held that money was owed, had not been repaid, and that the plaintiffs were entitled to the relief sought as the defences raised had failed.

The court therefore decided that the first plaintiff was entitled to a declaration to the effect that he stood validly appointed as receiver, and that the second defendant was entitled to judgment against the defendants in the sum of €4,022,734.92.

COMPANIES (CROSS-BORDER MERGERS) REGS 2007 SI 2974/2007 (UK)

EEC DIR 2005/56 RECITAL 1

EEC DIR 2005/56 RECITAL 2

EEC DIR 2005/56 RECITAL 3

EEC DIR 2005/56 ART 2

EEC DIR 2005/56 ART 2(2)(C)

EEC DIR 2005/56 ART 14

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS 2008 SI 157/2008 REG 19(1)(A)

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS 2008 SI 157/2008 REG 19(1)(G)

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS 2008 SI 157/2008 REG 19(1)(H)

EEC DIR 2005/56 ART 14(3)

EUROPEAN COMMUNITIES (CROSS-BORDER MERGERS) REGS 2008 SI 157/2008 REG 19(2)

REGISTRATION OF TITLE ACT 1964 S31(1)

REGISTRATION OF TITLE ACT 1964 S64

WINDSOR REFRIGERATOR CO LTD & ANOR v BRANCH NOMINEES LTD & ORS 1961 CH 375 1961 2 WLR 196 1961 1 AER 277

RA CRIPPS (PHARMACEUTICAL) & SON LTD v WICKENDEN & ANOR 1973 1 WLR 944 1973 2 AER 606

LAW OF PROPERTY (MISCELLANEOUS PROVISIONS) ACT 1989 S1(1)(C) (UK)

COMPANIES ACT 2006 S44(1) (UK)

JENNINGS v BANK OF SCOTLAND PLC & ORS UNREP MCGOVERN 5.12.2012 2012/19/5505 2012 IEHC 515

COMPANIES ACT 1963 S316

1 JUDGMENT of Mr Justice Birmingham delivered the 30th day of September, 2013.

2 1. The present proceedings involve separate claims by both plaintiffs. The first named plaintiff is seeking declaratory relief in relation to the validity of his appointment as receiver, while the second named plaintiff is seeking judgment in the sum of €4,022,734.92 on foot of loans advanced by Bank of Scotland Ireland to the defendants.

3 2. So far as the claim for judgment is concerned it is a striking feature of this case that it is not in dispute that the sums in question were borrowed and have not been repaid. Neither is there any dispute, at least for the purpose of these proceedings, as to the figures involved. However, a series of technical defences have been mounted.

4 3. In broad terms the arguments canvassed on behalf of the defendants is that at the time of the purported appointment of the receiver the loans were not due and this in circumstances where there had been a merger of Bank of Scotland Ireland Limited and Bank of Scotland Plc, a merger by absorption. Then, it is argued that even if the loans were due and there was a power to appoint a receiver, that Mr. Kavanagh has not been validly appointed essentially because the officer of the bank who appointed him had not been validly delegated with the power to do this.

5 4. So far as the merger is concerned, the defendants contend that the security for the loans issued by BOSI, the mortgages, were not transferred on merger and did not form part of the assets which were transferred as part of the Bank of Scotland Ireland Limited/Bank of Scotland Plc merger. Moreover, it is argued that the Bank of Scotland Plc is not the registered owner of a charge and that as a matter of law not being registered does not have entitlement to execute powers.

The loans had not fallen due

6 5. Consideration of the argument that the monies had not fallen due requires an examination of the terms of the contract. Clause 9 of residential mortgages housing loans standard conditions so far as they are material is in these terms:-

"Events of default"

7 We may declare that an Event of Default has occurred upon or at any time after the happening of any of the following events and

8 (g) You break any of the terms and conditions of this agreement or

9 (h) You are in breach of the terms and conditions of any security given by you to us or

10 (i) You do not pay on time any of the amounts due under the agreement […].

11 If we declare that an Event of Default has occurred we may at (or any time after) the time of making the declaration

12 (a) Cancel any undrawn amount of the loan; and/or

13 (b) Demand immediate payment of the sums outstanding in which case the sums outstanding will become immediately due and payable by you (or declare that the sums outstanding shall become due and payable on demand; and/or

14 (c) Charge to you any costs and expenses incurred by us in enforcing our rights under this loan agreement or in protecting or enforcing our security,

15 (d) Charge interest on any arrears balance in accordance with the terms of Clause 5(c) hereof

16 Before declaring an Event of Default, we will serve a notice specifying the Breach and informing you what must be done to remedy the Breach in the time specified. If you do not remedy the Breach within 21 days of the service on you on the notice, we will then terminate the agreement and enforce our rights against you as set out above."

17 6. On behalf of the defendants it is argued that the bank never, before declaring a event of default served a notice specifying the breach and informing the defendants what had to be done to remedy the breach within the time stipulated. The argument is that the power to appoint a receiver arises after a power of sale has arisen and that a power of sale does not arise until there has been a default and there is no default until there has been demand.

18 7. The argument is made notwithstanding the fact that on the 19 ^th April, 2012 Byrne Wallace Solicitors wrote separately to each of the defendants. That letter identified their clients as Bank of Scotland Plc and identified the matter of the letter as six "Facility Letters". It began:-

"We are authorised and instructed to issue this letter to you in relation to the facility letters".

19 The letter then referred to the merger and continued:-

"As you are aware, the loan facility advanced to you pursuant to the facility letters are in default, notwithstanding the fact that they are demand in nature. The bank has attempted to resolve your default with you in a reasonable manner which efforts have not resulted in any agreement. As of the 16 April 2012, the unpaid sum together with interest accrued amount to €3,902,976.99 which amount can be broken down in the following manner".

20 A breakdown is then set out and the letter continues:-

"We now hold instructions from the Bank to issue proceedings for the full amount of the sum due and continuing interest and to take such further or other measures to protect the Bank's position."

21 No step will be taken in this regard, however, within the period of 21 days next from the date of service of this notice on you.

22 Should the bank not receive full repayment of the said sum of €3,902,976.99 and accrued interest within the said period of 21 days from the date of service of this notice on you, then the Bank will, not less than 10 days thereafter proceed to enforce its rights, under the Facility Letters to recover this debt and/or enforce its right under...