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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Kearney -v- KBC Bank Ireland Plc & Anor [2014] IEHC 260 (16 May 2014)
URL: http://www.bailii.org/ie/cases/IEHC/2014/H260.html
Cite as: [2014] IEHC 260
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Judgment Title: Kearney -v- KBC Bank Ireland Plc & Anor Neutral Citation: [2014] IEHC 260 High Court Record Number: 2012 9180 P Date of Delivery: 16/05/2014 Court: High Court Composition of Court: Judgment by: Birmingham J. Status of Judgment: Approved |
Neutral Citation: [2014] IEHC 260 THE HIGH COURT [2012 No. 9180 P.] BETWEEN THOMAS KEARNEY PLAINTIFF AND
K.B.C. BANK IRELAND PLC AND JOHN REYNOLDS DEFENDANTS JUDGMENT of Mr. Justice Birmingham delivered the 16th day of May 2014 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. 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 1st 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 24th 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 28th September, 2012. The second loan facility involved three loan letters dated the 10th January, 2005, in the amount of €1.2m, the 9th June, 2005, in the amount of €154,700 and the 13th 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. All 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 20th 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 28th September, 2012. 3. The third loan facility was advanced on foot of a letter of offer dated the 3rd 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 31st 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 18th December, 2012. 4. The fourth loan facility was advanced on foot of a letter of offer dated the 11th 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 1st November, 2005 and a supplemental indenture of mortgage of the 10th 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 19th October, 2012. 5. Loan facilities 5 and 6 related to properties in Great Britain. There were two loan offers dated the 27th November, 2007 and the sums advanced were Stg£163,000 and Stg£113,080.15. 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 rather than his solicitor. The funds in question were drawn down by the plaintiff. The loan facilities were secured by two mortgage deeds both dated the 15th February, 2008 over Apartment 25 and Apartment 32, Arena View, Clement Street, Birmingham. In these cases a receiver was appointed to the secured property on the 3rd October, 2012. 6. The present proceedings were commenced by the issue of a plenary summons on the 11th September, 2012. Somewhat unusually the plenary summons was accompanied by a grounding affidavit. On the 22nd October, 2012, two different statements of claim were served. One statement of claim was directed to the position of the first named defendant and the second statement of claim was directed to the position of the second named defendant. The second named defendant, it may be noted was the then Chief Executive of the first named defendant bank. 7. The plaintiff’s pleadings, might, I think fairly be described as diffuse and do not easily lend themselves to being summarised. In the circumstances I have decided to append to this judgment the plenary summons, the grounding affidavit and the two statements of claim. 8. Notwithstanding, the difficulties in summarising the plaintiff’s pleadings which has led me to appending the pleadings, counsel on behalf of the defendant has undertaken that task. I did not understand the plaintiff to take significant issue with the summary presented and so I will make use of the defendants’ summary. Counsel for the defendant has offered the following summary of the plaintiff’s claim as against the bank.
(b) The bank has acted in breach of the loan agreement from the outset. (c) The bank fraudulently misrepresented and wilfully misled the plaintiff in relation to a property development in Birmingham, England in order to unjustly enrich the bank and its employees and agents. (d) The loan facilities and/or mortgages were sold or securitised. On this basis, the plaintiff contends that the bank no longer holds full ownership of the loans and as a result is not a “real party of interest” and accordingly does not have the right to enforce the loans. (e) The bank failed to obtain the consent of the plaintiff to the securitisation of the loans, which constituted a breach of the Central Bank Asset Securitisation Document. (f) The bank offered the plaintiff a loan of money, but instead created a debt or deposit. (g) The bank did not fund the loans advanced to the plaintiff and never informed the plaintiff of its plans to ‘outsource’ the funding of the loans/mortgages. (h) The bank, by way of the loans advanced to it, created a financial instrument, which could be sold or assigned to a third party. On this basis, it is contended that the bank had committed ‘a criminal offence of creating currency’. (i) The bank was not entitled to appoint a receiver to the secured properties, absent documentation evidencing the existence of lawful contracts as between the bank and the plaintiff. (j) The bank has failed to prove that it is a solvent bank with the right to trade and to repossess property.
(b) The second defendant had the ultimate responsibility within the bank to ensure that the bank adhered to the trading requirements laid down by Irish law, and failed in that responsibility. (c) The second named defendant ‘stood by’ while the bank committed the acts complained of. (d) The second defendant knows that the bank committed the acts complained of. (e) The second defendant has failed to provide the plaintiff with information that he requested from the bank. (f) The second defendant officiated over the bank and therefore shares responsibility with the bank for fraudulently misrepresenting and wilfully misleading the plaintiff in relation to a property development in Birmingham. (g) The second named defendant allowed the bank to commit the offence of creating currency. (h) The second named defendant has failed to explain the basis upon which receivers were appointed to the plaintiff’s property by the bank.
12. The defendants have gone on to seek to distil the claims against them further. Again, the plaintiff did not seem to dissent significantly from this summary though placing particular emphasis in oral argument on two matters. The summary offered by the defendants was as follows:-
(ii) that the bank engaged in the illegal creation of currency; (iii) that the bank does not retain the entitlement to enforce the loans following the securitisation of the loans; (iv) 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; (v) that the bank was not entitled to appoint a receiver to the plaintiff’s properties without court application; (vi) that the bank is or was insolvent or has failed to prove that it is solvent; and (vii) that the bank, its servants or agents fraudulently misrepresented matters in relation to a proper development in Birmingham in order to unjustly enrich the bank and its employees and agents. 13. The plaintiff has written repeatedly to the bank calling on it to provide:-
(ii) verification of the bank’s claim against the plaintiff by a sworn affidavit or signed invoice; and (iii) a copy of the contract binding on both parties.
16. The form of acceptance appended to each of the letters of offer, each signed by the plaintiff and, in one case also signed by his wife, and each witnessed by the plaintiff’s solicitor or, in the case of the Birmingham loans by the plaintiff’s 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. 17. In my view, there can be absolutely no doubt whatever about the contractual basis for the six loans. There are two other aspects. There is something somewhat incongruous about the plaintiff alleging a failure on the part of the bank to prove a binding contract when it is the plaintiff that has commenced the proceedings. The obligation on the bank to prove its case will arise if and when it issues proceedings. Furthermore, even if there was some issue in relation to the form of contract which there does not appear to be, that would not necessarily relieve the plaintiff of the liability to repay the loans. In Irish Bank Resolution Corporation v. Cambourne [2012] IEHC 262, in a situation where there were difficulties with the facilities letters, Charleton J. still held that the defendant was liable to repay money loaned. Again, in ACC Bank v. Deacon [2013] IEHC 427, a case where there was a dispute about whether certain documents had been signed, Ryan J. commented, if the bank had been unable to establish the terms on which it had advanced the funds to Mr. Deacon, there would have been an implied obligation on him to repay in a reasonable time after demand. “The bank engaged in the illegal creation of currency” 19. The argument is not a new one. The thrust of the allegation which is that the bank did not advance to the plaintiff a loan of money, but created currency has been canvassed in other cases. Specifically the same argument was considered by Gilligan J. in Freeman v. Bank of Scotland Ireland [2013] IEHC 371. There, he referred to the case of Meads v. Meads, a decision of the Alberta Queens Bench. He did so in these terms:-
Bank does not retain entitlement to enforce loan following securitisation
24. In relation to the emphasis that the plaintiff places on the issue of securitisation; observations made by Peart J. in Wellstead v. Judge White and Others [2011] IEHC 438, are very much on point. There, Peart J. observed:-
26. In summary then as far as this issue is concerned, and it is worth repeating that it is relevant to only two of the loans, the defendant bank retains legal title to the loan facilities and mortgages and the interest that was transferred by the bank to the special purpose vehicles was an equitable interest only and accordingly the bank is clearly entitled to enforce the loan facilities and the security for same. Alleged failure to comply with Central Bank of Ireland Asset Securitisation Documents 28. In Zurich Bank v. McConnon [2011] IEHC 75, a case dealing with a commercial loan to fund a supermarket/shopping centre development, I took the view that any alleged breach of the Consumer Protection Code would not exempt a borrower from repaying. It is true that a somewhat different approach is to found in the cases of Stepstone Mortgaging Funding Limited v. Fitzell [2012] 2 I.R. 318, and Irish Life and Permanent plc v Duff [2013] IEHC 43. Indeed, this difference in approach between these two cases and the Zurich v. McConnon line of cases caused Gilligan J. to refrain from striking out this aspect of the proceedings in Freeman v. Bank of Scotland [2013] IEHC 371. If matters rested there, I would have been minded to take the same approach as Gilligan J. However, I have been referred to the decision of Ryan J. in ACC Bank v. Deacon [2013] IEHC 427, who rejected a contention that a failure to comply with the Central Bank Codes of Conduct for lending to S.M.E.’s rendered a loan invalid. He distinguished Fitzell and Duff on the basis that these decisions related to claims for repossession of family homes. 29. It seems to me that there is a world of difference between suggesting, that a failure to comply with the Code may be relevant to how a court will exercise its discretion whether to grant possession of a family home or not, and on the other side of the coin a suggestion that a failure to comply with a non-statutory voluntary code provides a cause of action, so as to allow a borrower invalidate a transaction and secure an exemption from repaying monies that he has borrowed. Appointment of receiver to plaintiff’s properties 31. However, the plaintiff’s position has, as I have indicated evolved somewhat. In his fourth affidavit, delivered on the 21st March, 2014, the plaintiff argued that in circumstances where the mortgages made reference to the Conveyancing Acts 1881 to 1911, which have been repealed by the Land and Conveyancing Law Reform Act 2009, the power of sale does not arise and contends that the appointment of the receiver “was in contravention of the repealed Act and thus unlawful”. This leads the plaintiff to seek an order for the immediate dismissal of the receivers and an order to have all money “stolen” by the receivers returned to him. It seems to me to be clear that what the plaintiff is seeking to do is to bring himself within the Start Mortgages v. Gunn [2011] IEHC 275, line of authority. The difficulty for the plaintiff is that in Start Mortgages v. Gunn, Dunne J. was dealing with the right to apply for possession in a summary manner and as we know, she held that the right to apply for an order for possession summarily under s. 62(7) of the Registration of Title Act 1964, which was repealed by s. 8 of the Land Conveyancing Law Reform Act 2009, only survives in circumstances where the monies secured by the charge became due and demand was made prior to the 1st December, 2009. 32. The relevance of the Start Mortgages v. Gunn decision on the entitlement to appoint a receiver under a deed of mortgage or charge was considered by Laffoy J. in Kavanagh and Lowe v. Lynch [2011] IEHC 348. Laffoy J. commented:-
34. Furthermore, it seems to me that there is a more fundamental objection to what the plaintiff is seeking to do. It is one thing to say that the repeal of a statute may avail a party by providing a shield against certain procedures when invoked, but it is an altogether different matter to suggest 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. Indeed, the distinction between arguments that may serve as a shield and provide a defence in particular circumstances and what arms a plaintiff on the offensive is not confined to this right to appoint a receiver aspect of the case, but is of a general application in the context of this case. Contention bank is or was insolvent or has failed to prove its solvency Alleged fraudulent misrepresentation 37. These allegations of extraordinary seriousness are scattered about with abandon, but are not particularised. Order 19, r. 5(2) of the Rules of the Superior Courts provides:-
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. 40. In summary then, in my view, the pleadings are indeed frivolous and vexatious in the sense that phrase is used in authorities such as Farley v. Ireland, (Unreported, ex tempore, Supreme Court, 1st May, 1997), judgment of Barron J, but also in the everyday use of that phrase. The proceedings are unmeritorious, so unmeritorious indeed as to amount to an abuse of process and are bound to fail. Accordingly, I will accede to the defendants’ application and strike out the proceedings, doing so pursuant to O. 19, r. 28 of the Rules of the Superior Courts and also pursuant to the inherent jurisdiction of the court.
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