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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Irish Bank Resolution Corporation Ltd (in special liquidation) -v- Lavelle [2015] IEHC 321 (21 May 2015)
URL: http://www.bailii.org/ie/cases/IEHC/2015/H321.html
Cite as: [2015] IEHC 321, [2015] 5 JIC 2115
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Judgment
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Neutral Citation [2015] IEHC 321 THE HIGH COURT [2013 No. 2190 S] BETWEEN IRISH BANK RESOLUTION CORPORATION LIMITED (IN SPECIAL LIQUIDATION) PLAINTIFF AND
PETER LAVELLE DEFENDANT JUDGMENT of Ms. Justice Baker delivered on the 21st day of May, 2015 1. This is a motion by Stapleford Finance Limited (“Stapleford”) to be substituted as sole plaintiff in these proceedings in place of Irish Bank Resolution Corporation Ltd. (In Special Liquidation), (“IBRC”). Stapleford claims to have purchased the defendant’s credit facilities including all rights and benefits thereunder from IBRC and makes the application for substitution in that context. 2. The defendant opposes the application for substitution, and contends that IBRC ought not be removed from the proceedings. While the opposition to the application was originally voiced as opposition to the joining of Stapleford to the proceedings, in the course of argument counsel for the defendant accepted that her opposition was primarily to the removal of IBRC as plaintiff, and she does not object to the continuation of the proceedings by IBRC and Stapleford as co-plaintiffs. 3. IBRC supports the application by Stapleford. The law 5. Each of the judgments listed above were applications for substitution following the sale of loan books by lending institutions, and indeed most of them are made in proceedings in which IBRC had commenced proceedings. In each case IBRC was removed from the proceedings and substituted by the purchaser of the relevant loan book. Counsel for the defendant does not contend that Stapleford may not make the application although it is not yet a party to the proceedings: Bank of Ireland Finance Limited v. Browne (Unreported, High Court, 24th June 1996, Laffoy J.). 6. Although the law is well established, and ought not to have caused much difficulty, the defendant raises a number of issues in respect of which no authority expressly on point has been identified. It is contended by counsel for the defendant that certain proofs have not been met by the applicant as follows:-
2) That a substitution application may not be made under to O.17 r.4 of the Rules. 3) That a substitution order may not be made under O.15 r.14, and that a party may be added and not substituted under that Order. 4) That O.15 r.2 is available to an applicant in limited circumstances only, not applicable in this case, namely where there was a bona fide mistake at the commencement of the action. 5) Because this defendant has advanced a counterclaim to which s. 12(2)(b) of the Irish Bank Resolution Corporation Act 2013 applies, and by virtue of which IBRC retains obligations, it ought not to be removed from the proceedings. The proceedings 9. The application for substitution was brought by Stapleford by notice of motion dated the 23rd July, 2014 and has been adjourned from time to time for the purposes of completing the affidavit evidence. In all, six affidavits have been sworn in the motion, including an affidavit of Peter Lavelle, the defendant, sworn on the 27th November, 2014. While it is the case that applications for substitution may be brought ex parte the application was brought on notice in the light of correspondence from the solicitors for the defendant requesting that they be given notice of the application, and identifying the fact that the defendant asserts a counterclaim against IBRC. 10. The motion seeks relief pursuant to O.17 r.4 and/or O.15 r.14 and ancillary orders dispensing with the need for further service. Having regard to the objections raised by Mr Lavelle, I turn now to deal with the applicable provisions of the Rules on which he relies, but will first deal with the assignment of the debt and how this is said to have been done. Section 28 of the Supreme Court Judicature Act (Ireland) 1877
13. In IBRC v. Comer & Anor, Kelly J. identified the test applicable to an application for substitution, namely that there be prima facie evidence of an assignment of the relevant debt. His judgment has been approved in a number of later cases, specifically by Finlay Geoghegan J. in IBRC (In Special Liquidation) v. Morrissey and Costello J. in IBRC (In Special Liquidation) v. McCaughey and more recently by Peart J. in IBRC (In Special Liquidation) v. O’Driscoll. The rationale for this approach is found in the old case of Long v. Crossley [1877] CH 388, referred to by Costello J. in her judgment, that the object of the Rules was that a case be framed so that it can be adjudicated upon by the court. Peart J. in IBRC (In Special Liquidation) v. O’Driscoll commented that the matter was “procedural and simple”, and was so characterised notwithstanding that applications for substitution are brought on notice. This approach is consistent with the general approach of the courts that the function of pleadings is to ensure that all issues are before the court. 14. The evidence before me that Stapleford has taken an assignment is as follows: By loan sale agreement dated the 28th March, 2014 IBRC, acting through its special liquidators, agreed to “sell, assign, transfer, convey and deliver the Assets to the purchaser subject to the existing right of redemption of the obligors”. The purchaser thereby agreed to “purchase the Assets and assume the Obligations with effect from the Completion Date.” 15. As can be seen from that extract various terms, identified in upper case letters, were defined in the agreement. The “Obligor” was Mr. Lavelle, the borrower, and no challenge is now made to this fact. 16. The agreement was completed by deed of transfer made on the 23rd May, 2014 which relied on some of the definitions in the agreement, called therein the “Loan Sale Deed”. By the operative part of the deed, IBRC, through its special liquidators,:-
18. The deed as first exhibited was redacted, and the redaction of loan sale agreements and/or deeds, in the context of substitution applications has been the subject matter of comment in a number of cases, including by Kelly J. in IBRC v. Comer & Anor. The defendant makes one argument with regard to redaction, namely that he, and his loans, are not specifically identified. I reject this argument, without coming to any conclusion as to the proprietary of the redaction, and noting that my function at this stage is to determine whether a prima facie argument has been made that the loan book, and the rights and obligations arising thereunder, have been assigned to Stapleford, and I do so noting the inclusion of the defendant’s loans in the schedules, and also noting that by the deed there was assured the assets, including all loan facilities and all “ancillary rights and claims” in respect of these. This phrase, incorporated into the deed from the loan sale agreement, is prima facie sufficient to establish that Stapleford has taken an assignment of the defendant’s loan facilities and the rights arising thereunder, which prima facie includes the right to sue for recovery of the loan. I note the schedule identifying the borrower was exhibited in a supplemental affidavit and not in the initial affidavit, but any argument with regard to this can be dealt with at trial. 19. My finding that a prima facie case has been made out does not prevent the defendant seeking to challenge the assignment at the hearing. In that regard Finlay Geoghegan J. has identified the effect of an order in a decision in the Court of Appeal in IBRC v. Halpin [2014] IECA 3:
21. I turn now to consider the jurisdiction to make an order substituting Stapleford as plaintiff. The application is brought in the alternative under O.15 r.14, and/or O.17 r. 4 of the Rules. I consider each in turn. Order 15 rule 14
23. Order 15 rule 13 provides for the striking out of parties improperly joined as plaintiffs or defendants, and the addition of parties, whether as plaintiffs or defendants
25. In none of the cases relied on by the applicant was the issue of the appropriateness of making a substitution order under O.15 r.13 canvassed. 26. I accept the argument by counsel for the defendant that the purpose and effect of O.15 r.14 is to fix the time at which an application to add, strike out or substitute a plaintiff or defendant may be made, and it is not an empowering provision. I also accept her argument that O.15 r.13 does not provide for the substitution of parties, save in place of parties improperly joined when the proceedings were commenced. She makes the argument however that O.15 r.13, which she implicitly accepts does give a jurisdiction to the court to add Stapleford as co-plaintiff, permits an application to be made by an existing party or on the court’s own motion, and not by the proposed new party. I accept that she is correct in this. IBRC (In Special Liquidation) v. Morrissey was a joint application by a non-party and the existing plaintiff in the proceedings, and is not authority for the proposition that the order may be availed of by a non-party. 27. It is clear however that O.15 r.13 does give the court a discretion of its own motion to add a co-plaintiff, and that may be done in any case where it is necessary to enable the court to effectually and completely adjudicate upon the case. This brings me back to Long v. Crossley and the admirably short judgment of Fry J. where he made an order adding a party. That action was for specific performance and Fry J. asked whether the presence of the remainder persons was necessary to enable the court to “effectually and completely” adjudicate upon and settle the question. He went on to deal with the standard of proof required at that stage of the process and having answered that question, made the following comment:-
Order 17 rule 4
30. Counsel for the defendant argues that O.17 r.4 may not be availed of in the circumstances of this case. She points first to the language of the O.17 r.4 itself and submits, in my view correctly, that the deed of assignment did not effect a “transmission” of any rights from IBRC to Stapleford, and the word “transmission” imports an assurance by operation of law, which is not what is asserted to have occurred. 31. She secondly argues that as what is asserted to have occurred is a transfer by assignment or assurance in writing of contractual rights or rights in personam, as is governed by s. 28 of the Act of 1877, and that no “interest” has “changed”. She argues that the word “interest” denotes such classes of rights as interests in real property, the transmission of interest on death or by other devolution and that this precise language is found the Chancery Ireland Act of 1868 (30 & 31) Vict.c 44, and earlier in the Chancery Ireland Act of 1853 (16 & 17) Vict.c.113. She argues that the expression “change or transmission of interest” is a term of art confined in its meaning to the transmission of interest or liability from death or other causes, and is not sufficiently wide to encompass the transfer of a legal right which became possible only after the enactment of the Act of 1877 which for the first time provided a means for a legal assignment of debt, such assignments sounding in equity only up to the date of the Judicature Act. She argues that it cannot have been intended that this wholly new means of legal assignment or assurance can be read as governed by the language of the old equivalents of pre-1877 Order 17, enacted precisely to deal with the legal effect of death or bankruptcy, but not the legal effect of an assignment of a debt or other chose in action after 1877. Discussion 33. In the Court of Appeal decision in IBRC v. Halpin a substitution order was not made and another co-plaintiff was added, but the Court’s reasons for doing so found their origins in its role as an appellate court, and in the exercise of the appellate function it would be concerned with the evidence that was before the High Court. 34. However, in IBRC v. O’Driscoll, Peart J. did make the order under O. 17 r. 4 and emphasized the expression “or any event” in the Rule. At para. 9 he made the following comment:-
36. The expression “change … in interest” found in O. 17 r. 4 is undoubtedly a somewhat strained use of language and echoes that found in the pre-Judicature Act legislation. But I am not persuaded that the phraseology in O. 17 cannot be distanced from its historical context for the reasons I now consider. 37. The relevant Rules of the Superior Courts were enacted in 1986. The Supreme court in DMPT V Taxing Master Charles A Moran and ors 2015 IESC 36, having identified the history of the amendment of certain Rules, in that case relating to the taxation of costs, considered that the interpretation of the 1986 Rules was required to accord with fair procedure in the light of more recent jurisprudence and in particular Mallak v Minister for Justice 2102 3 IR 297, decided some thirty years after the Rules were enacted. By analogy the interpretation of the Rules at play in this judgment must take into consideration the contemporary meaning of the provisions, provided of course such an approach does not involve a departure from the language of the enactment itself. 38. The provisions of s. 6 of the Interpretation Act 2005 may also assist:
(ii) The interpretative process may be conducted bearing in mind changes in the law, including those effected by the Act of 1877, and changes in the meaning of words that might flow from legislative change or the common law thereafter. (iii) There has been a change in the ownership of the relevant loan book, effected by means of the procedure provided by the Act of 1877, and there has been therefore in the plain meaning of the word a “change”, a change in the identity of the person or body who now owns the chose in action (iv) The word “interest” is a broad term and connotes “rights, titles advantages, duties, and liabilities connected with a thing, whether present or future, ascertained or potential” per “Murdock’s, Dictionary of Irish Law” (5th ed. 1988) page 634. 40. Accordingly I consider that O.17 r.4 as properly interpreted in the light of the factors identified in the previous paragraph, and as the language of the rule does not prima facie admit of ambiguity, permits application to be made to add or substitute a party who has taken a legal assignment of the relevant loan book from the original plaintiff. Such an interpretation further, does not offend the legislative intent, nor depart from the first principle that the issues and parties to disputes be before the adjudicating body as explained above. The alleged counterclaim or set off: section 12 of the IBRC Act, 2013 42. Section 12(2)(a) and (b) of the Irish Bank Resolution Corporation Act 2013 provides:
(a) that person assumes all of the rights and obligations in relation to the cause of action or proceedings which IBRC had immediately before that sale or transfer, other than the obligations of IBRC to which paragraph (b) relates, and (b) IBRC retains obligations in relation to the defence of or liability for any counterclaim or cross-claim which, if successful, would not give rise to a right of set-off and, in respect of such defence or liability, IBRC has full rights in relation to, and is solely liable for, any remedy awarded in relation to any counterclaim or cross-claim which, if successful, would not give rise to a right of set-off.” 44. The counterclaim is said to arise from an investment vehicle alleged to have been mis-sold by IBRC. The fund is not related to these proceedings. As present the alleged counterclaim or right of set off has not been formulated save in the affidavits adduced in opposition to the motion for substitution. The alleged counterclaim or right of set-off has not been raised in the substantive debt proceedings. 45. As a result of the statutory provisions regulating the institution of proceedings against IBRC, created by section 6 of the Act of 2013, leave of the court to maintain such proceedings is required and has not yet been sought. 46. It may transpire that the defendant will obtain an order entitling him to proceed against IBRC, and if so it may be that those proceedings will be listed to be heard in conjunction with these debt proceedings, or that a stay on the execution of any judgment in the summary proceedings could be sought pending the determination of the counterclaim, and the court hearing such applications will best be placed to determine these questions. I do not consider that at this juncture I may keep IBRC in these proceedings on account of the alleged counterclaim or right of set off, as to do so would ignore the requirement of section 6, and would also leave in the proceedings a party who manifestly has no right to seek judgment in the proceedings as currently constituted as proceedings for summary judgment. 47. Without making any decision on the issue of how the proceeding are to be prosecuted, whether the alleged counterclaim may be maintained or whether, if so, the two sets of proceedings should be linked in some way, either as to the substantive claims or in regard to enforcement, I reject the argument that there exists a counterclaim against IBRC that has the effect that I ought not remove it from the proceedings 48. Accordingly, for the reasons stated, I make an order pursuant to O.17 r.4 substituting Stapleford as plaintiff in the proceedings. |