Judgment Title: Ryan -v- Danske Bank A/S t/a Danske Bank & anor
Neutral Citation:  IEHC 236
High Court Record Number: 2014 2996 P
Date of Delivery: 29/04/2014
Court: High Court
Composition of Court:
Judgment by: Baker J.
Status of Judgment: Approved
Neutral Citation:  IEHC 236
THE HIGH COURT
[2014 No. 2996 P.]
DANSKE BANK A/S TRADING AS DANKSE BANK AND STEPHEN TENNANT
JUDGMENT of Ms. Justice Baker delivered the 29th day of April, 2014
1. The plaintiff is the owner of two commercial unregistered premises known as Franciscan Hall situated at 1 Henry Street and 2 Sarsfield Street, Limerick, and registered lands comprised in Folio 47241F County Kerry with an address at 31 Gortamullen, Kenmare Holiday Village, Kenmare, Co. Kerry. The first defendant bank ("the Bank") has the benefit of a mortgage over the premises at Franciscan Hall created on the 27th January 2003, and a first charge over the folio lands registered on the 12th November, 2003. The Bank also has the benefit of a mortgage or charge over the plaintiff’s principal private residence at the Cottage Lemonfield, Crecorca, Co. Limerick where he resides with his wife Susan Halvey.
2. The Bank by deed of appointment made on the 28th November 2013, appointed the second defendant receiver of the registered lands, and by separate deed of 20th January 2014, receiver of the unregistered premises.
3. In these proceedings the plaintiff seeks declaratory and injunctive relief and pleads that the appointments of the second defendant as receiver over each of the commercial properties are void and of no effect. The matter comes before me on a motion for an interlocutory injunction restraining the second defendant from taking any steps as receiver of either premises, and for an order restraining the first defendant from carrying out any steps pursuant to various loan agreements. An undertaking has been given by the defendants pending the determination of the injunction application.
5. The plaintiff has from time to time suffered from severe anxiety and a depressive illness and he asserts that the Bank was fully aware of this. It is not seriously disputed that the Bank had some knowledge of the plaintiffs depressive condition, although the exact extent of this and that it rendered the plaintiff incapable of dealing with some of his financial affairs at some of the times relevant to these proceedings, is in doubt. The plaintiff asserts on affidavit that the defendant knew from 2010 that he suffered from an illness and that he had at that time suffered a particularly tragic family event in that he and his wife lost their young son.
6. It is not doubted that the plaintiff had loan accounts with the Bank, that the monies advanced by the Bank were secured, that the loans were in arrears, nor that the Bank had a contractual entitlement to appoint a receiver. No technical objection is made to the manner by which the Bank appointed the receiver by deed, nor to the nature and legal effect of the security documents themselves.
7. The plaintiff, however, asserts that there is imported into his contractual relationship with the Bank an obligation on the part of the Bank to behave towards him in a fair and equitable way. In particular, it is argued that this obligation is imported from the Consumer Protection Code, the relevant one being the 2012 Code ("the Code"), and in particular clauses 2 and 8 thereof which, it is argued, import an obligation on the part of the Bank to allow him an opportunity to deal with his acknowledged arrears. He says that during the period when he fell into arrears and without his knowledge or prior notice to him, a receiver was appointed over the Kenmare property, and that a receiver was appointed over the Limerick property at a time when he was attempting to deal with the arrears. He says that the appointments are unlawful in the circumstances.
8. Mr. Ryan says that he has been attempting to engage with the Bank since 18th December, 2013, but that the Bank's sole or overriding concern is to wind up his loans as it is exiting the Irish market, and that it is not acting bona fide in that it has "engineered a default" on his loans for the sole purpose of calling in the loans and "exploiting the securities". He says he has offered to repay most or all of the arrears and to sell the Limerick premises by a self managed sale, and that the Bank owes him a duty at common law and under the Code to fully engage with his proposals.
The sequence of events leading to the appointments
The claim made in the proceedings
Is the plaintiff a consumer?
The legal effect of the Consumer Protection Code 2012
13. The Code was made by the Central Bank pursuant to the statutory regulatory power contained inter alia in s. 117 of the Central Bank Act 1989. Section 117 (1) requires the provisions of any such code to be observed by a holder of a bank licence. Failure to comply with a direction given to a licence holder to comply with the provisions of a code constitutes an offence liable to be tried summarily or on indictment. The Central Bank is also given the power to administer administrative sanction for contravention of a provision of one of its codes.
14. The statutory regime makes no reference to the impact, if any, a breach of one of the codes might have on the contractual rights of a bank and its customers or on court proceedings for enforcement of those rights. For that reason the legal status of the codes issues by the Central Bank under its statutory regulatory powers has been the subject of what Hogan J. described in Irish Life and Permanent v Duff & Anor 2013 IEHC 43 as "cross-currents of judicial opinion". The question was characterised by Breslin at a para 4.102 in the 3rd edition of his Banking Law in Ireland as whether the provisions of a code are "soft law" devoid of legal effect, and not sounding in a civil claim for damages. Hogan J. in Irish life and Permanent plc (t/a Permanent TSB) v Financial Services Ombudsman and Thomas 2012 IEHC 367 said that the codes are "not entirely a species of soft law, i.e. purely precatory statements not susceptible of legal enforcement" and that the codes "can certainly inform ... the thinking of regulatory authorities in assessing appropriate standards for credit institutions", but that proposition does not in any sense answer the question of whether the codes might import rights or obligations between banks and their customers in private law. Gilligan J. in Freeman v Bank of Scotland (Ireland) Ltd and others 2013 IEHC 371 suggested that the status of the codes is "not absolutely clear and may be dependent on the circumstances of each particular case."
15. Birmingham J. in Zurich v. McConnon 2011 IEHC 75 found as a matter of fact that Mr. McConnon was not a consumer but did raise the question of how a breach of the relevant code might affect contractual obligations and said the following obiter:
18. Ryan J. in ACC Bank Plc v. Deacon & Anor  IEHC 427 suggested that the decisions of Laffoy J. and Hogan J. in refusing relief arose from reasons specific to "claims for repossession of family homes". He said that failure to comply with the relevant code for dealing with small and medium enterprises did not "wipe out the loan or furnish a defence".
Does breach of the 2012 Code give the plaintiff a cause of action?
20. The cases most on point are the judgment of Hogan J. in Life and Permanent Plc v. Duff and that of Laffoy J. in Stepstone Bank v. Fitzell where the court accepted that the defendant was a consumer or personal borrower. Those matters had come before the court on an application for possession, in the case of Irish Life and Permanent Plc v. Duff of unregistered lands, and in the case of Stepstone Bank v. Fitzell of registered lands. The court has a discretion at common law, and now under the Act of 2009 expressly by statute, to grant or refuse possession, and to fix any terms that it considers just, albeit a discretion which is exercised in the light of established jurisprudence. The judgement of Laffoy J. in Stepstone Bank v. Fitzell, correctly in my view, held that the court in its discretion could and must ensure that the plaintiff bank had complied with its obligations, as failure of compliance would have had the indirect effect of rendering the enforcement by the Central Bank of the obligations "nugatory". Similarly in Life and Permanent Plc v. Duff Hogan J. expressly refused to make an order for possession in the exercise of his discretion. In the other cases mentioned above, in which the role of Central Bank codes were considered, the courts were not applying discretionary powers or principles but were called upon to make judgments on contractual rights, and in each case the court held that breach of the relevant code had no effect on the entitlement to relief.
21. The Central Bank codes of conduct, in the light of these authorities, may inform a court exercising its discretionary powers, and a court acting judicially and with due regard to the interest of the mortgagor and mortgagee in ordering possession, or modulating the effect of the order for possession, will take account of the regulatory requirements imposed by the relevant code. The power of the court to make an order for possession expressly imports an element of discretion, and ipso facto fairness to both sides, in the decision to make an order and the fixing of the terms and conditions of such an order. It seems to me not to matter that the premises are a principal private residence, and the central fact is that the power of the court is a discretionary one. An element of discretion does not however become, without more, a ground on which a plaintiff may mount a claim for relief whether in the form of injunctive relief, declaratory relief or damages. The discretion is that of the court, not one that as counsel for the plaintiff has sought to argue, one that is imported into the contractual nexus, or one which itself can found a cause of action.
Conclusion on the Code
An implied term?
24. At paras. 75 - 77 of his grounding affidavit sworn on 6th March, 2014, the plaintiff asserts that certain obligations and corresponding rights exist as necessary indices of the relationship between himself and the Bank. Briefly, these may be summarised as follows:-
(a) That the Bank owes him a duty to act honestly, fairly and professionally towards him, and with all due skill and diligence and in his best interest.
(b) That the Bank has a duty to act in good faith towards him.
(c) That the Bank has a duty to ensure that he was properly consulted in relation to the loans.
(d) That the Bank owed him a duty to inform him of its intention to call in the loans and to seek to rely on the security for those loans.
(e) That he has a right to be heard in relation to the loans and the security, to put his case to the Bank, and a right to a proper and fair appeal of any decision made by the Banlc
(f) That the Bank did not appoint a receiver for proper purpose and/or in good faith.
(g) That the actions of the Bank are unlawful and made in breach of his rights at common law and arising as outlined above.
A fiduciary or special relationship?
Implied term at common law?
27. I am mindful of the strong statement in the judgment of Finlay Geoghegan J. in Irish Bank Resolution Corporation (In Special Liquidation) v. Morrissey  IEHC 208, where at para. 101, she expressly identified the limit of the court's jurisdiction as follows:-
29. It seems to me what the plaintiff asks this Court to do is to take a preliminary view that there exists in the relationship between himself and the Bank an obligation on the part of the Bank to act towards him with a degree of reasonableness or fairness, which is more commonly found in public law. I adopt the rejection of such an imposition of public law principles into private contracts contained in para. 102 of the judgment of Finlay Geoghegan J. in Irish Bank Resolution Corporation (In Special Liquidation) v. Morrissey, where she said as follows:-
A duty of care?
The role of equity
The purpose of appointment of the receiver
34. The plaintiff says that the Bank is exiting the Irish market and that this is so has not been seriously disputed. The suggestion is that the Bank is engaged in bad faith in appointing a receiver and that this is not for the purpose of realising its security. I have heard no cogent evidence that the Bank has appointed the receiver of these properties for reasons other than the acknowledged arrears in the plaintiff's loans. The Bank did engage with the plaintiff since July 2013. A six week gap arose between July 2013 and 11th September, 2013 and then a gap of nearly four months between 11th September, 2013 and 6th January, 2014, the fault for which must lie at the plaintiff’s feet, although it is conceded that the plaintiff was ill during the time. I can find no evidence before me of bad faith and the loans had fallen into arrears such that the express statutory power became exercisable.
The European Convention on Human Rights Act 2003
36. No argument was made before the court that certain rights in the form of additional duties are owed to the plaintiff by the Bank under the Irish Constitution and even were such argument to have been made, it seems to me it would fail having regard to the fact that no specific constitutional provision has been invoked by the plaintiff in asserting such a claim.
The test for granting an interlocutory injunction
39. The plaintiff asserts that he has raised an issue to be tried and the court cannot enter upon the exercise of assessing the strength of the plaintiff’s case or the strength of the defence. He says that he suffers the risk of loosing his family home and that is the type of loss that cannot be compensated by damages. He says that on the balance of convenience, the Bank will suffer little, and indeed, that the Bank cannot show any prejudice. In that regard, I note that the Bank has not asserted that the value of the properties is declining nor has the Bank suggested that a sale has been negotiated and was likely to be lost. He says the real risk must lie with the plaintiff because of the relationship between the loans taken together and the family home and also because of the fact that he will loose his property.
40. Having regard to the continued distinction between equitable and legal rights, and the justifiable reluctance of the courts to import into contractual relationships principles which might more properly be described as equitable principles, I find it impossible to accept the argument advanced by counsel for the plaintiff that the contractual relationship between the plaintiff and the Bank did and must be understood to have contained such rights and principles on which this action is grounded. In the circumstances, I find that the plaintiff has not made out a bona fide or arguable case that there can be imported into the relationship between the plaintiff and the Bank, the high standards which he seeks to import, namely standards which require the Bank to act in his interest, to properly consult him and reasonably engage with him in the management of the arrears and the enforcement of the securities.
41. Accordingly, I hold that the plaintiff has not made out an arguable case on the pleadings and evidence now before this Court.
The position of the plaintiff's principal private residence