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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Danske Bank A/S trading as Danske Bank -v- Higgins & anor [2015] IEHC 371 (05 June 2015)
URL: http://www.bailii.org/ie/cases/IEHC/2015/H371.html
Cite as: [2015] IEHC 371
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Judgment
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Neutral Citation [2015] IEHC 371 THE HIGH COURT [2013 No. 3696 S] BETWEEN DANSKE BANK A/S TRADING AS DANSKE BANK PLAINTIFF AND
MICHAEL HIGGINS AND MAUREEN HIGGINS DEFENDANTS JUDGMENT of Mr. Justice McDermott delivered on the 5th day of June, 2015 1. The plaintiff seeks summary judgment in the amount of €253,959.68 pursuant to the terms and conditions of a loan facility made available to the defendants in accordance with the terms of a letter of the 14th November 2012 which was duly accepted by the defendants on the 25th November 2012 and drawn down to their account and which they have failed to repay despite a demand to do so. 2. An initial letter of demand issued on the 2nd October 2013 followed by a further letter from the plaintiff’s solicitors dated the 29th October. 3. A summary summons issued on the 8th November, 2013 and an appearance was entered on the 16th December. A motion for judgment was issued on the 23rd January 2014 grounded on the affidavit of Ms. Niamh Fitzmaurice. 4. The defendants contend that they have a bone fide defence to the plaintiff’s claim and that the matter should be sent for trial by way of plenary hearing. The Legal Test
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case, there being several ways in which this may best be done; (iii) in so doing the court should assess not only the defendant's response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff, being mindful at all times of the unavoidable limitations which are inherent on any conflicting affidavit evidence; (iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use; (v) where however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure; (vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought, is evidently not required for a better determination of such issues; (vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, "is what the defendant said credible?", which latter phrase I would take as having as against the former an equivalence of both meaning and result; (viii) this test is not the same as and should be not elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence; (ix) leave to defend should be granted unless it is very clear that there is no defence; (x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action; (xi) leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally; (xii) the overriding determinative factor, bearing in mind the constitutional basis of a person's right of access to justice either to assert or respond to litigation, is the achievement of a just result, whether that be liberty to enter judgment or leave to defend, as the case may be.” The Proposed Defence
b) The defendants contend that the plaintiff was in breach of an implied term to deal with them fairly and in particular in accordance with the Code of Conduct on Mortgage Arrears (CCMA) (Central Bank of Ireland 2013). c) The defendants claim that the provisions of s. 30 and 54 of the Consumer Credit Act 1995 ought to have applied to the loan facility and that these proceedings issued in breach of the protections provided by the Act. 7. The defendants obtained a fixed rate home loan from National Irish Bank (now the plaintiff) pursuant to a letter of offer dated 6th June, 1997. The primary purpose of the loan was the purchase of the family home at 6 Woodhaven, Merlin Park, Galway and it was secured on that property and 80 acres at Kilkerrin, Mount Bellew, Ballinasloe, Co. Galway. This loan was for a period of 20 years from the drawdown of funds. The amount advanced was £290,000. 8. Mr. Higgins was running a farm business from the lands at Kilkerrin and Mrs. Higgins having taken redundancy from the Bank of Ireland in or about 1997 commenced to run a bed and breakfast business in the family home from about that time. 9. Additional loan facilities were granted by the bank from time to time. On the 2nd April 2007 an amount of €265,000 was advanced primarily for the purpose of obtaining an advance of €20,000 to assist in the construction of a new slatted shed but also to restructure all existing term borrowings. The letter of offer stated that it superseded and cancelled the bank’s facility letters dated the 6th June 1997, 24th April 2003, 7th October 2005 and 26th June 2006. This loan covered 118 months of instalments of capital and interest commencing on the date of drawdown of the loan. 10. A further restructuring of loan accounts was secured by the provision of additional loan facilities again by letter of loan offer dated 25th June 2008 in the amount of €281,000. Once again a provision of new funds in the sum of €25,000 was advanced to assist in the construction of a farm building. This letter of loan also stated that it superseded and cancelled the bank’s letter dated 2nd April 2007. It was repayable by interest only repayments for the first 24 months followed by 156 consecutive monthly payments of interest and capital. It continued to be secured on the property and lands at Kilkerrin, Ballinasloe. 11. The defendants acknowledge that they had financial difficulties during 2011 and early 2012 which were caused by poor weather and the reduced profitability of the farm. They maintained communication with the bank concerning these difficulties and sought restructuring of the loan to overcome them. They claim that they sought a restructuring by way of six monthly repayments to cover interest and partial capital in the sum of €2,000 per month by way of a temporary moratorium. The Agreed Terms 13. The defendants submit that the terms included in the loan facility letter and the interpretation by the bank of its entitlements are contrary to the express agreement reached with the bank concerning a moratorium subject to a review after six months. In particular, they submit that the loan term now contended for by the bank had the opposite effect to a moratorium in that by stipulating repayment by June 2013, it increased the defendants exposure to the bank which was contrary to the recommendation in the bank’s own file which stated that as of 29th July 2010 “exposure not to be increased”. Furthermore, they contend that documentation held by the bank indicates that a moratorium was agreed on the loan on the 8th November 2012. Mrs. Higgins wrote to the bank on the 28th November 2012 agreeing payments of €2,000 per month for the next six months “with a further review of proposals for the future”. 14. The agreement is evidenced in writing by the letter of loan facility of 14th November 2012 signed by the defendants. The defendants interpretation of the agreement is contrary to the clear terms set out in the letter. It is clear from the loan letter that the plaintiff agreed to grant a loan facility to the defendants repayable within six months and containing an express condition that repayments of €2,000 per month be made. The full amount was payable at the end of the six months period. The defendants in seeking to raise the defence of non est facum must demonstrate that there is a fair or reasonable probability based on credible cogent evidence beyond a mere assertion that:-
b) that the mistake was as to the general character of the document as opposed to the legal effect; and c) that there was a lack of negligence i.e. that they took all reasonable precautions in the circumstances to find out what the document was. 15. In applying the Saunders decision in this jurisdiction, Morris J. (as he then was) in Tedcastle, McCormack and Co. Ltd. v. McCrystals (unreported High Court 15th March 1999), stated that the defendant must take “all reasonable precautions to find out what the document was”. (See also Allied Irish Banks Plc. v. Higgins and others [2010] IEHC 219). There is no credible evidence that the defendants did not understand the clear meaning of the words set out in the document which they signed. I am not satisfied that there is any credible evidence of a difference between what the defendants signed and what they thought they were signing or that there could be any mistake as to the general character of the document signed or its legal effect. I am not satisfied that the defendants were given any information by the bank which could have misled them as to the true effect of the document. 16. The defendants also claim that the plaintiff agreed to grant a moratorium, accept payments of €2,000 per month and review their case after the six month period. However, even if that is correct, that review and the maintenance of the moratorium was conditional on the monthly payment of €2,000 in accordance with the new facility. 17. The defendants acknowledge that they missed three payments on the facility but claim that they also made a number of payments which brought the facility almost back into line with one payment outstanding by August 2013. It is clear that the defendants did not and could not pay the entire amount outstanding within the period of six months. Even on the defendants own interpretation of the terms, the bank was not obliged to carry out a review after a period of six months if payments had not been met. Thus whether the agreement is to be interpreted in accordance with the bank’s submissions or the defendant’s submissions, the bank was entitled to demand the full amount of the loan as it did in October 2013. The six months had expired and there had been default. 18. It should be noted also that, in the meantime, in June 2013 the defendants accept that they made further proposals for the payment of €2,000 per month on an ongoing basis by way of an alternative payment agreement which was refused by the bank on the 27th August 2013 following a consideration of the cash flow of the business which was not proven to be sustainable. This was the subject of an appeal process internally which was again refused on the 1st October 2013 for the same reason. It suggests that there was indeed a review process carried out by the bank after the six month period notwithstanding the default by the defendants in making payments under the terms of the loan facility. 19. I am satisfied, in the circumstances that the evidence adduced does not give rise to an arguable defence of non est factum or that the interpretation of the loan facility letter could possibly be that contended for by the defendants. However, even if the defendants’ interpretation is correct, it is clear not only that the bank waited for the six month period to expire before taking any action against the defendants, but also engaged with them when they proposed a restructuring of the loan which was refused following a review by the bank of the defendants’ financial circumstances. The letters of demand only issued following a negative risk review. I am not satisfied that the defendants have any arguable defence on these grounds. Code of Conduct for Mortgage Arrears 21. A primary residence is defined in the Code as:-
a) the residential property which the borrower occupies as his/her primary residence in this State, or b) a residential property which is the only residential property in this State owned by the borrower.” 23. The defendants claim that it was an implied term of the contract that the plaintiff would deal with them in a fair manner in accordance with the CCMA. It is submitted that before issuing proceedings seeking judgment in the amount of the loan that remained outstanding, the plaintiff was obliged to act in accordance with the protections provided to the defendants as “borrowers in arrears” pursuant to the CCMA. 24. The defendants understood that the loan would be dealt with under the CCMA because it was secured on the family home but this was refused by letter dated the 17th April which stated that the property was a commercial premises and did not fall within the scope of the code. In addition, the plaintiff claims that the CCMA is primarily directed towards court proceedings seeking possession of residential properties. In response, the defendants claim that the Code is of wider application and that had it been applied when they requested the loan facility of the 14th November 2012, the summary summons would not have issued as this would have been in breach of clauses 37-39 of the Code. 25. It is clear that the cases to date which consider the legal effect of the CCMA concern applications for possession of residential properties. The legal standing of the Code was considered by the Supreme Court in Irish Life and Permanent PLC v. Dunne and Dunphy [2015] IESC 46. The court held that the Code contained no express provision indicating that it affected the private legal rights and obligations of lenders and borrowers. However, the court considered whether a financial institution must be regarded as being legally debarred from seeking to exercise a right to possession, which it would otherwise enjoy, by reason of a breach of the Code. Clarke J. delivering the judgment of the court stated that the statutory aim of the Code and its enabling legislation was to seek to regulate the way in which “financial institutions seek to repossess properties in cases of mortgage arrears”. 26. The court considered that the purpose of the Code was to provide a window of opportunity in which to explore other solutions to the mortgage problem of the borrower and to take action to put those solutions in place:-
5.23… In the absence of there being some legal basis on which it can be said that the right to possession has not been established or does not arise, then the only role which the Court may have is, occasionally, to adjourn a case to afford an opportunity for some accommodation to be reached.” 30. Clarke J. summarised the court’s conclusion:-
32. It is clear from the letter of 4th March 2013 from the plaintiff to the defendants that the bank initially considered that the family residence could properly be dealt with under the Code and that it was appropriate to deal with the arrears issue under the Mortgage Arrears Resolution Process (MARP) set out in the code. This includes clauses 37-39 which concerns the steps to be followed in dealing with borrowers in arrears and assessing an alternative repayment arrangement that may provide a resolution for their difficulties. It was not accepted that the 80 acres of farmland was subject to the Code. The plaintiff changed its view on the 17th April 2013 when the bank wrote indicating its conclusion that the family residence was a commercial premises and did not fall within the provisions of the CCMA. The arrears issue was therefore dealt with under the SME Business Lending Code. Notwithstanding this decision, the MARP advisor within the bank was consulted. The advisor’s view was that it would not be “unreasonable” to extend the loan term for 12 months on the basis that the loan was converted to a home loan and that €2,000 per month be paid by the defendants. This was not accepted by the bank. It viewed the proposal as unsustainable having regard to the finances of the defendants. 33. The defendants submit that their loan arrangements and the security obtained by the bank by way of mortgage on their family residence are so intertwined as to constitute a “mortgage loan account” pursuant to the CCMA. Even if that is correct, the restrictions on a lender in respect of the commencement of legal proceedings relate to claims for “repossession of a borrowers primary residence”. This is not such an application. The Code does not contain any restriction on the bank seeking judgment for any amount due in respect of a loan facility by reason of default in payments or breach of contract or otherwise in accordance with the terms of the agreement. Clause 56 of the Code is clearly restricted to proceedings seeking “repossession”. Even if the loan on the family residence was incorrectly designated as “commercial” rather than relating to a home loan or “mortgage loan account” in respect of the family residence, the Code, as interpreted in Dunne and Dunphy, does not prevent the bank from seeking judgment in the amount due or because it was said to have breached other clauses of the Code apart from clause 56, which is not engaged. 34. In the circumstances, I am not satisfied that the defendants have established that the initiation of proceedings for the recovery of the monies constitutes proceedings “for repossession” or is tainted by illegality because they were issued without proper adherence to the Code. It appears from the Supreme Court judgment in Irish Life and Permanent PLC v. Dunne and Dunphy that the Code is of limited application. The submissions in relation to the Code do not provide an arguable ground of defence in this case. The Consumer Credit Act 1995 36. I am therefore satisfied that the plaintiffs are entitled, on the evidence adduced, to judgment in the amount claimed. |