Family Home Protection Act
Cases
Bank of Ireland v Smyth
[1993] 2 IR 102; [1993] ILRM 790 Geoghegan J
This is a claim for possession by the plaintiff of the house and lands comprised in numbers 1, 2 and 3 of Folio 9173F of the Register of Freeholders, County Tipperary, pursuant to s. 62(7) of the Registration of Title Act 1964. The plaintiff is registered as owner of a charge purported to have been created by instrument of charge. The first named defendant is the registered owner of the property and the second named defendant is his wife.
The defendants between them have defended this action on a number of quite separate grounds of defence. Three of these grounds were rejected by this Court when they were raised on an application for a non-suit at the end of the plaintiff’s case. The first was that there was non-compliance with O. 9, r. 9 of the Rules of the Superior Courts in that at the time the proceedings were instituted the first named defendant’s mother was allegedly in possession or in receipt of rents and profits within the meaning of the rule because she enjoyed a right of residence and a right of support charged on the property. I ruled against the first named defendant on the grounds that:
(a) Having regard to s. 81 of the Registration of Title Act 1964, the mother’s right of residence was a lien for money’s worth. The entitlement to that right or to the right of support did not constitute her a person in possession or in receipt of rents and profits within the meaning of the rule. As to whether a county registrar executing an order for possession could require the mother, if she were still alive, to vacate is quite another matter and did not fall to be determined in this action.
(b) The mother is, at any rate, now dead. I took the view that even if the mother ought to have been served with the summons under the rules, I should not dismiss the action for failure to do so, but on the contrary should dispense with the requirement having regard to the fact that she is now deceased. If and insofar as service on the mother was required therefore I dispensed with that requirement.
The second ground of application for non-suit was a related ground. It was submitted that the action ought to be dismissed or struck out for failure to comply with O. 9, r. 14 of the Rules of the Superior Courts. I considered that having regard to paragraph 10 of the first affidavit of Mr David Dowley, manager of the relevant branch of the plaintiff bank, there was sufficient compliance with the rule. I also took the view that even if there was not strict compliance nobody was prejudiced and that it would be wrong to non-suit the plaintiff on this account.
The third ground of application for non-suit was that the evidence seemed to indicate that the consent of the second named defendant to the charge under the Family Home Protection Act 1976 was signed after the instrument of charge had been signed by the first named defendant. However, when on my request Mr Dowley, the manager at the time of the transaction was recalled, he stated that he could not really remember which document was signed first but that he was satisfied he would have complied with the guidelines which had come from headquarters and which had been put in evidence. I refused the non-suit on the grounds that this defence had not been pleaded. Before doing so, I indicated that I would favourably entertain an application for an adjournment by the second named defendant to amend her defence, provided that her counsel could assure me that her client would be testifying that she signed the consent after the 793 husband signed the charge. The invitation was not taken up. Even if the absence of prior consent had been pleaded, I would take the view that, as a matter of reasonable inference from the evidence, the instrument of charge could not have been treated as having been unconditionally signed, sealed and delivered by the first named defendant prior to the signature of his wife on the form of consent under the Family Home Protection Act 1976. Pending the wife’s signature, the deed of charge would have been considered as signed and sealed but not yet delivered or alternatively delivered as an escrow. This view is in line with the judgment of O’Hanlon J in Bank of Ireland v Hanrahan (High Court, 1985 No. 1000Sp, 10 February 1987) where in the analogous situation of an equitable mortgage by deposit of title deeds, the learned judge decided that even though the document had been handed to the bank prior to the signing of the spouse’s consent, the mortgage was valid as not having been intended to take effect until the consent was signed.
Following on the refusal of the non-suit the only witness who gave evidence was the second named defendant. At the close of the defendants’ case two substantive grounds of defence were argued. The first was that the consent of the second named defendant was not a true consent in that she was not advised to obtain independent legal advice and that she did not have a proper understanding of what she was signing. It was submitted that the charge was void, both because on the evidence the plea of non est factum in relation to the consent had been sustained and because in signing the consent, the second named defendant was allegedly entering into an improvident transaction without the benefit of independent legal advice and without a proper understanding of the transaction involved.
The second substantive ground of defence was based on the judgment of Denham J in First National Building Society v Ring [1992] 1 IR 375, a case involving the exercise of discretion under s. 4 of the Partition Act 1868. By analogy with Denham J’s interpretation of the section in the Partition Act, it has been argued that upon the wording of s. 62(7) of the Registration of Title Act 1964, I have a discretion as to whether I order possession in this case or not. I will now discuss each of these substantive defences separately.
To determine the consent issue it is necessary to analyse carefully the provisions of s. 3 of the Family Home Protection Act 1976. S. 3, subject to four statutory exceptions, renders void a purported conveyance by a spouse of any interest in the family home, unless either there is a prior consent in writing by the other spouse or a court order dispensing with such consent. Of the four statutory exceptions, the only one which would be relevant to this case is the exception under subs. (3)(a) of a conveyance to a purchaser for full value. ‘Conveyance’ is defined in s. 1 of the Act as including (inter alia) a ‘mortgage’. ‘Mortgage’ is in turn defined as including (inter alia) ‘a charge on registered land’. Accordingly the charge in this case is a ‘conveyance’ within the meaning of the 1976 Act.
The expression ‘full value’ is defined in subs. (5) as meaning ‘such value as amounts or approximates to the value of that for which it is given’. In the context of a mortgage or a charge there has always been some doubt as to the meaning of ‘full value’. But this question does not arise for decision in this case in that the plaintiff is relying on the existence of a valid consent and not on any suggestion that it is a purchaser for value. This was a proper approach for the plaintiff to take because on the particular facts of the case, if the consent is invalid on any of the grounds contended for by counsel for the respective defendants, the plaintiff had or ought to have had knowledge of the vitiating elements and therefore could not be a ‘purchaser’ within the artificial definition of that expression in the 1976 Act. In order to be a ‘purchaser’ within the meaning of the Act, the plaintiff would have had to be a chargeant acquiring ‘in good faith’ the interest in the property (see s. 3(6) of the Act). The Supreme Court in Somers v W. [1979] IR 94 has held that the words ‘in good faith’ import the equitable doctrine of notice. Since the bank in this case had full notice of all the factors alleged by the defendants to vitiate the consent, it follows that if the consent is invalid by reason of any of those factors, the bank is not a ‘purchaser’. Accordingly the escape route of the statutory exception in favour of a ‘purchaser for value’ is not available to the bank. It is only necessary to consider therefore was the consent invalid?
Counsel for the second named defendant, Ms Kennedy, submits that a consent by a wife under the Family Home Protection Act 1976, to a mortgage or charge in favour of the bank is not valid unless the wife understands the nature and consequences of the transaction. She cannot normally be said to have such understanding unless:
(1) She is told of the amount of the loan involved, and if the security is to cover future advances that she is informed of that.
(2) She is explained the repayment terms.
(3) She is explained the consequences of non-payment and in particular that possession of her family home may be recovered by the bank and may be sold.
(4) She is recommended to obtain independent legal advice.
In making this submission Ms Kennedy relies heavily on Barclay’s Bank v O’Brien [1992] 4 All ER 983. That was a case before the Court of Appeal in England in which a wife joined in a charge over the matrimonial home jointly owned by her and her husband as security for a personal guarantee by her husband in favour of the bank. Scott LJ delivered the principal judgment and I believe that the views expressed by him represent Irish law particularly having regard to the line of Irish cases dealing with voluntary deeds. I do not find it necessary to quote at length from the judgment because the head-note accurately sets out what the court held. The relevant part of the head-note reads as follows:
Held — as a matter of policy married women who provided security for their husbands’ debts and others in an analogous position such as elderly parents on whom pressure might be brought to bear by adult children, were to be treated as a specially protected class of sureties so that where the relationship between the surety and the debtor was one in which influence by the debtor over the surety and reliance by the surety on the debtor were natural and probable features of the relationship, the security given by the surety would in certain circumstances be unenforcable notwithstanding that the creditor might have had no knowledge of and not have been responsible for the vitiating feature of the transaction. The circumstances in which equity would hold that the security given by a surety in that protected class was unenforceable were:
(i) if the relationship between the debtor and the surety and the consequent likelihood of influence and reliance was known to the creditor,
(ii) if the surety’s consent to the transaction was procured by undue influence or material misrepresentation on the part of the debtor or the surety lacked an adequate understanding of the nature and effect of the transaction,
(iii) if the creditor, whether by leaving it to the debtor to deal with the surety or otherwise, failed to take reasonable steps to try and ensure that the surety entered into the transaction with an adequate understanding of its nature and effect and that the surety’s consent to the transaction was a true and informed consent. Accordingly although each case within the protected class depended on its own facts, as a general rule a creditor who took security from a married woman for her husband’s debts ought to take reasonable steps, such as advising her to take independent advice or, if she declined to do so, offering a fair explanation of the security document before she signed it, to see that she understood the transaction she was entering into….
In my opinion Ms Kennedy’s reliance on this case is fully justified. I do not think that any valid distinction can be drawn between that case and the present case on the grounds either that the second named defendant is not a co-owner of the family home or on the grounds that the liability of the husband being secured was a primary liability and not a guarantor liability. The rights of a spouse conferred by the 1976 Act are very important quasi proprietary rights even if they are not ownership rights.
Applying Scott LJ’s criteria, it is obvious that Mr Dowley was well aware of the husband and wife relationship with the consequent inherent likelihood of influence and reliance. He was equally well aware that the wife’s understanding of the transaction depended essentially on what he told her. He should have realised that what he told her and what he advised her were inadequate. He did not take adequate steps to ensure that the second named defendant fully understood the transaction. In particular he did not advise her to take independent advice.
It is only fair to say at this juncture, that I reject the second named defendant’s evidence that Mr Dowley did not use the expression ‘family home’ but merely referred to the property generally. Mr Dowley is certain that he did refer to the family home and I believe him. Having regard to the fact that this was the first legal charge with which Mr Dowley was involved after the 1976 Act was enacted, I think it highly unlikely that he would not have explained in a general way the purpose of the consent as referred to in the guidelines. However I do not think that the second named defendant was deliberately giving false evidence. I suspect that she was engaging in some wishful thinking and she had no clear memory as to what exactly was said at the discussion with Mr Dowley. It may well be that in Mrs Smyth’s mind she thought that as there was a first charge on her home in favour of ACC because of a loan of £8,000 from ACC to build the house, the bank would be unable to sell or take possession of the home. At one point in her evidence Mrs Smyth spoke of the house as being owned by the ACC. But if these matters were in her mind Mr Dowley could not reasonably have been expected to be aware of them. But the bank via Mr Dowley did not adequately explain to Mrs Smyth the potential liabilities secured by the charge and above all did not explain to her that in the event of default the property including the matrimonial home could be sold by or at the instance of the bank or that an order for possession could be sought by the bank. These are vital matters of which Mrs Smyth should have been made aware before she signed the consent. Furthermore she was not recommended to obtain independent advice. I am reasonably satisfied that Mr Dowley did tell Mrs Smyth that she would be signing a consent to a mortgage of the family home but having regard to Barclay’s Bank v O’Brien, I do not consider that that was sufficient. Accordingly, in my view, while there was a document purporting to be a consent in writing there was in fact no consent within the meaning of the 1976 Act. In coming to that conclusion I prefer to rely on the equitable principles referred to by Scott LJ rather than the doctrine of non est factum which would not apply in this case in my view. The charge is therefore void and for the reasons indicated the bank is not a ‘purchaser’ within the meaning of the Act. That is sufficient to dispose of this action but in case the matter goes further I think I should indicate my views on the other substantive of ground of defence.
It is submitted on behalf of the defendants that as a matter of discretion I ought to refuse the application for possession. It is suggested that the wording of s. 62(7) of the Registration of Title Act 1964 gives the court this discretion and that the judgment of Denham J in First National Building Society v Ring supports the view that I should exercise it against the plaintiff. I disagree. I do not think that First National Building Society v Ring has any relevance to this case. The decision of Denham J turned on an interpretation of s. 4 of the Partition Act 1868. But the wording of that section is totally different from the wording of s. 62(7) of the Registration of Title Act 1964. The words ‘may, if it so thinks proper’ in s. 62(7) mean no more in my view than that the court is to apply equitable principles in considering the application for possession. This means that the court must be satisfied that the application is made bona fide with a view to realising the security. But Mr Dowley establishes this essential proof in paragraph 11 of his first affidavit and it is not disputed in either a replying affidavit or the pleadings or at the hearing. It had been held in Northern Banking Co. Ltd v Devlin [1924] 1 IR 90 that even though the Registration of Title Act 1891 conferred on a registered owner of a charge the rights of a legal mortgagee under the Conveyancing Act 1881 nevertheless a registered owner of a charge unlike a legal mortgagee could not obtain an order for possession for the purposes of a sale out of court because the legal mortgagee’s right to possession arose by virtue of his estate in the land at common law and not by virtue of the Conveyancing Act 1881. This yawning gap in the rights of a legal chargeant was heavily criticised by Glover in his Registration of Land in Ireland which was published in 1933.
The position was corrected by s. 13 of the Registration of Title Act 1942 which is in identical terms to s. 62(7) of the Registration of Title Act 1964. The historical background to the subsection therefore re-enforces me in the interpretation which I give to it. I do not believe that the Oireachtas intended a wide discretion which could take sympathetic factors into account. If, therefore, I had been of the view that the consent of the second named defendant was a valid consent for the purposes of the 1976 Act I would have made the order for possession. But as I have held that there was in fact no valid consent I must refuse the application.
Supreme Court Blayney J.[1996] 1 I.L.R.M. 241
The first named respondent Michael Joseph Smyth is a farmer and is the owner of the lands comprised in Folio 9173F of the Register of Freeholders, County of Tipperary, which are situate at Lelagh, Rathcabbin, Roscrea. There are approximately 124 acres in the folio and the respondents’ family home is situate on part of the lands comprised in the folio.
On 25 May 1978 the first named respondent (Mr Smyth) executed an indenture of charge in favour of the Governor and Company of the Bank of Ireland (the bank) to secure all monies then owing or which should thereafter become owing on a general balance of account or otherwise from Mr Smyth to the bank. The second named respondent (Mrs Smyth) signed a form of consent endorsed on the said charge whereby she consented for the purpose of s. 3 of the Family Home Protection Act 1976 to the said charge. The said consent was in the following form:
I, Una Smyth of Lelagh, Rathcabbin, Roscrea, being the spouse of Michael *244 Smyth hereby consent for the purpose of s. 3 of the Family Home Protection Act 1976 to the within mortgage to be created by the said Michael Smyth in favour of the Governor and Company of the Bank of Ireland for all liabilities, present and future, either solely or jointly whether as principal or surety with another or others and hereby consent to the registration in the mortgage.
Dated 25 May 1978.
Signed by the said Una Smyth.
In the month of June 1988 there was a sum of £180,289.38 due and owing by Mr Smyth to the bank on foot of the charge dated 25 May 1978. The bank thereupon issued a special summons pursuant to s. 62(7) of the Registration of Title Act 1964 seeking an order for possession of the lands described in the said Folio 9173F of the Register of Freeholders, County of Tipperary.
The summons was heard by Geoghegan J on oral evidence on 5 and 9 March 1993 and in a reserved judgment dated 26 March 1993 the learned trial judge decided that the bank was not entitled to an order for possession of Mr Smyth’s lands and dismissed the claim of the bank. The bank now appeals against that dismiss.
A number of issues were raised in the High Court but the sole issue with which this Court is concerned is the single issue on which the learned trial judge decided in favour of the respondents. He held that ‘while there was a document purporting to be a consent in writing, there was in fact no consent within the meaning of the Act of 1976.’
The circumstances in which Mrs Smyth came to give her consent to the transaction were not in dispute and might be summarised as follows. On 12 May 1978 Mr Dowley wrote to Mr Smyth as follows in connection with the proposed charge:
Dear Mr Smyth
Further to recent correspondence I have now received from the bank’s law department the necessary legal papers for benefit of your signature.
Mrs Smyth’s signature will also be required and I shall be obliged if both of you will call on me as soon as convenient in order that we may complete the matter in hand.
Yours sincerely
D.E. Dowley
Manager.
In pursuance of this request, Mr and Mrs Smyth called to the bank on 24 May. In the course of an interview with Mr Dowley which lasted between ten and fifteen minutes, Mrs Smyth signed the form of consent. Mr Dowley did not *245 explain to Mrs Smyth that she would lose her home if the payments were not made. And he did not suggest to her that she should get independent advice. The learned trial judge accepted that Mr Dowley explained to Mrs Smyth that she was signing a mortgage on her family home. However, it was accepted by counsel for the bank in the course of his submissions to this Court that Mrs Smyth in fact believed that the charge did not affect the family home. Their house had been built with a loan of £8,000 from the ACC and there was a mortgage on the farm to secure this sum, and Mrs Smyth believed that because of this the bank would be unable to sell or take possession of the family home. Counsel for the bank referred to this as being a unilateral mistake on the part of Mrs Smyth and submitted that it did not affect the validity of her consent as Mr Dowley, and accordingly the bank, could not reasonably have been expected to be aware of what was in her mind.
The main case made by the bank was that it had no duty at common law or in equity, or under the provisions of the Family Home Protection Act 1976, to explain to Mrs Smyth the nature of the charge to which she was giving her consent or the effect or consequences it could have for her.
Accordingly, as there had been no breach of duty on the part of the bank, it was entitled to rely on the consent signed by Mrs Smyth even though there had been a unilateral mistake on her part in regard to the nature of the charge she was signing.
On behalf of Mrs Smyth it was submitted that before her consent could be a valid consent under the 1976 Act it had to be established that she fully and freely consented to what she was doing. As the bank had failed to establish this, it could not rely on the consent.
The net issue in the case is, accordingly, whether the consent signed by Mrs Smyth was a sufficient consent for the purposes of the 1976 Act having regard to the circumstances in which her consent was given and, in particular, having regard to her understanding of what she was doing. It was common case that, as required by the 1976 Act, she had signed the consent before her husband executed the charge, and accordingly this was not an issue in the case. The onus of proving that it was a sufficient consent is in my opinion on the bank. It is relying on the charge as giving it title to recover possession of Mr Smyth’s farm and, accordingly, the validity of the charge is an essential proof in the case and this depends on Mrs Smyth having given a valid consent to the charge. In the absence of such a consent s. 3(1) of the 1976 Act makes the charge void. That subsection provides as follows:
3
(1) Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subs. (2) and (3) and s. 4, the purported conveyance shall be void.
It is common case that subs. (2) and (3) and s. 4, to which the provisions of subs. (1) are subject, do not affect the position here, and accordingly do not have to be considered. The court is concerned solely with whether there was a valid ‘prior consent in writing’ given by Mrs Smyth. It is clear from the definitions in s. 1 of the Act that a charge is a conveyance within s. 3(1).
The question of what the requirements are which a consent has to comply with in order to be valid has not as yet been considered by any court. It seems to me that they have to be deduced from the object of the Act itself and from dicta of this Court explaining it, and also from authorities setting out what requirements have been laid down for consents which are required in other contexts.
The long title of the Act is:
An Act to provide for the protection of the family home and for related matters.
The aim thus clearly set out requires no explanation and it is plain that the section which essentially gives effect to it is s. 3. It follows that the purpose of the provision in s. 3 is to enable a spouse to protect the family home for her own benefit and also for that of her children. This is set out in very clear language by Henchy J in his judgment in Hamilton v. Hamilton [1982] IR 466; [1982] ILRM 290 where he said at pp. 485-6/303:
The Act of 1976 provides for the protection of the family home, presumably as an implementation of the constitutional duty that falls on the State to protect the family and to guard with special care the institution of marriage. To this end, the Act of 1976 (as I have pointed out) created a new right whereby (save in excepted cases) the non-disposing spouse is given a right to veto the disposition to a third party of any legal or equitable interest in the family home. But the Act goes further than giving just a power of veto. Even in cases where the non-disposing spouse does not profess to exercise the right to veto (because, for example, he or she does not know of such a right), or where such spouse is willing to refrain from exercising the right to veto and has expressed such willingness orally, nevertheless, if the prior consent in writing has not been given by the non-disposing spouse, the purported conveyance (save in the excepted cases) is rendered void by s. 3 of the 1976 Act. This, to my mind, shows that the legislature, in order to preserve inviolate the dual and interlocking rights of the spouses in the family home, intended the penalty of voidness to apply in order to prevent either a legal or an equitable interest in the family home being disposed of to a third party by the unilateral action of one of the spouses.
This passage emphasizes an important aspect of the right given to the spouse — it is given for the protection of the family, and not simply for the protection *247 of the spouse. So in considering whether a valid consent has been given, this aspect must also be taken into account.
In Somers v. W. [1979] IR 94 Griffln J also referred to s. 3 of the Act. The plaintiff there had purchased the family home of the defendant from the defendant’s husband. The couple were separated at the time of the sale and the conveyance had been executed without obtaining the defendant’s prior written consent. Griffin J said in his judgment at p. 113:
… the prohibition [i.e. in s. 3] covers every conceivable type of disposition of the family home by the defendant’s husband. If, therefore, the husband intends to sell the family home, or to raise a mortgage on the security of it, unless the exceptions in s. 3 apply, he cannot do so without first discussing the matter with the defendant and obtaining her prior consent in writing.
This passage would seem to suggest that the responsibility for obtaining the consent is that of the other spouse after the matter had first been discussed between them.
There are two areas in which the requirements for a valid consent have been considered by the court — marriage and adoption. In N. (otherwise K.) v. K. [1985] IR 733; [1986] ILRM 75 four of the judges dealt with the nature of the consent required for a valid marriage. Finlay CJ said at pp. 742/82:
Consent to the taking of such a step [i.e. entering into a valid marriage] must, therefore, if the marriage is to be valid, be a fully free exercise of the independent will of the parties.
Whilst a court, faced with a challenge to the validity of a marriage, based on an absence of real consent, should conduct its enquiry in accordance with defined legal concepts such as duress or, what has been described by O’Hanlon J, as ‘the related topic of undue influence’, these concepts and the legal definition of them must remain subservient to the ultimate objective of ascertaining in accordance with the onus of proof whether the consent of the petitioning party was real or apparent.
Griffin J said at pp. 751/90:
It is therefore of the utmost importance that the contract of marriage should be entered into with the full and free consent of the contracting parties, and if, as the Chief Justice has stated in his judgment, the apparent decision to marry on the part of one of the parties has been caused to such an extent by external pressure as to lose the character of a fully free act of that party’s will, no valid marriage has taken place.
Hederman J said in his judgment at pp. 753/91: *248
A personal and full internal and informed consent is essential to a valid marriage.
McCarthy J at pp. 754/93 refers to:
The need of a true voluntary consent, based upon adequate knowledge and freed from vitiating factors, commonly described as undue influence or duress particularly those emanating from third parties.
And on pp. 755/94 of his judgment he stated:
The test — whether or not each party to the contract brought an informed and willing consent to it — in my view, is a subjective one, and the burden of proof lies upon the petitioner for a declaration of nullity.
In the area of adoption, in the case of G. v. An Bord Uchtála [1980] IR 32 Walsh J said in his judgment at p. 74:
There is no definition in any of the Acts of the phrase ‘the placing of the child for adoption’. However, I think one may reasonably assume that it means either the handing over of the child for the purpose of its being adopted or even, if the mother retains the child, the giving of a clear and unambiguous indication that it is her desire to surrender her natural rights in respect of the child and that it be adopted. I am satisfied that, having regard to the natural rights of the mother, the proper construction of the provision in s. 3 of the Act of 1974 is that the consent, if given, must be such as to amount to a fully-informed, free and willing surrender or an abandonment of these rights.
The consequences of a consent given under s. 3 are not as far-reaching as the consequences of a consent to marry or to place a child for adoption but one of the elements required for the validity of the consent in each of these cases is in my opinion applicable in the case of a consent under s. 3 also. This is the requirement that the consent must be an ‘informed consent’. Both Hederman J and McCarthy J used this particular term, and McCarthy J also refers to ‘the need of a true voluntary consent based upon adequate knowledge.’ And in G. v. An Bord Uchtála Walsh J says that the consent to place a child for adoption must be a fully informed consent.
In my opinion a consent under s. 3 must satisfy this requirement. It must be a fully informed consent. The spouse giving it must know what it is that he or she is consenting to. Since giving ones consent means that one is approving of something, obviously a precondition is that one should have knowledge of what it is that one is approving of.
In the instant case I am satisfied that Mrs Smyth did not know what she was consenting to. She believed that the charge would affect the land only and would not affect the family home. She was not aware that the charge covered the family *249 home as well. Her consent, therefore, was not a fully informed consent and on that ground was in my opinion invalid.
It was submitted on behalf of the bank, however, that as Mr Dowley could not have known what was in Mrs Smyth’s mind, the bank was not affected by the fact that she did not know that the charge included the family home as well as the land. I reject this submission for two reasons. Firstly, on the facts here the validity of the consent depends solely on whether Mrs Smyth had full knowledge of what she was doing. That the bank was not aware of her lack of knowledge is immaterial. Secondly, the bank would be treated as having constructive notice of her lack of knowledge. This arises under s. 3 of the Conveyancing Act 1882, the relevant part of which is as follows:
(1) A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing unless
(i) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him.
If Mr Dowley had enquired as to the state of knowledge of Mrs Smyth in regard to what was covered by the charge, he would have discovered that she believed that it did not apply to the family home, and accordingly he is deemed under the section to have constructive notice of this since it would have been reasonable for him in the circumstances to make such an enquiry. The bank was concerned to get a good title under the charge, and this involved getting a valid consent from Mrs Smyth, which in turn required that Mr Dowley should make enquiries as to what she knew about the charge in order to ensure that she understood what she was being asked to consent to. If Mr Dowley had made these enquiries, he would have discovered her lack of knowledge and been able to remedy it. And since the enquiries ought reasonably to have been made in the circumstances, the bank is treated as having constructive knowledge of what the enquiries would have revealed.
It was argued on behalf of Mrs Smyth in the High Court that the bank had a duty to explain the charge fully to Mrs Smyth and to suggest to her that she should get independent advice. In my opinion this is not correct. The bank did not owe any duty to Mrs Smyth to take these steps. The reason they ought to have been taken by Mr Dowley was to protect the bank’s own interests since if Mrs Smyth had consented to the charge after it had been fully explained to her and after she had received independent advice it is unlikely that her consent could have been challenged. So it is correct that the bank ought to have done these things, but not because it owed Mrs Smyth any duty to do so. The reason was to ensure that it got a good title to the land which was the subject of the charge.
I am satisfied in the circumstances that the charge given by Mr Smyth to the bank is void by reason of his wife’s consent having been invalid.
It was further submitted on behalf of the bank that even if the consent were held to be invalid an order for possession should nonetheless be made of the land excluding the family home. It was argued that s. 3 made the charge void in respect of the interest in the family home only and did not affect the interest in the remainder of the land. This submission had not been made in the High Court and the respondents submitted that the court should follow its well-established jurisprudence that a matter which had not been raised at first instance should not be allowed to be argued on the appeal.
The court has occasionally made exceptions to this rule but in my opinion it should not do so in the instant case. There is no evidence before the court as to the boundaries of what the bank says would constitute the family home. S. 2(2) provides that the family home ‘includes any garden or portion of ground attached to and usually occupied with the dwelling or otherwise required for the amenity or convenience of the dwelling.’ Before this Court could enter on a consideration of this submission, it would have been necessary that the High Court should have decided how much of the land should be included with the dwelling as forming part of the family home. If that had been done, and the issue had been argued, this Court could have considered the point, but since there has been no finding as to what constitutes the family home, this is not possible.
It was submitted on behalf of the respondents that the charge constituted a single conveyance which could not be severed. This view found favour with Costello J in Hamilton v. Hamilton where a wife was refusing to consent to a conveyance of a holding of 215 acres which included a family home. Costello J said in his judgment at pp. 490/306:
The effect of the proposed conveyance will be to convey this family home, even though there will be conveyed with the family home additional land which may not form part of it. Once a proposed conveyance includes a family home then, it seems to me, the provisions of s. 3(1) of the Act of 1976 apply to it and the written consent mentioned in the subsection is required — unless the transaction falls within one of the four exceptions set out in the section.
No arguments were advanced to support the alternative plea that the court should sever the property and decide that written consent was required to a conveyance of the portion of the property comprising the family home but that no such consent was required to a conveyance of the remainder of the property. I do not think that such a contention is sustainable. I am satisfied that the court is concerned with a proposal to convey a family home within the meaning of the Act of 1976 and that the written consent of the non-disposing spouse to this proposed conveyance is being withheld.
Since I am rejecting the bank’s submissions for the reasons I have already *251 given, it is not necessary to decide whether it would have been possible to sever the charge and declare it void in respect of the family home only. My inclination would be to agree with the view expressed by Costello J but I think it preferable to reserve this point for decision on another occasion when the matter would be fully argued.
Counsel for the bank referred the court to an unreported decision of Johnson J in the case of Governor and Company of the Bank of Ireland v. Slevin, which was a circuit appeal in which judgment was given on 16 February 1989. In that case the bank had been given a charge by way of deposit of title deeds on a farm which included the family home. The charge had been created in September 1977 by the defendant and it would appear that it did not have the prior consent in writing of his wife. Johnson J held that the charge could be severed with the result that it was void in respect of the family home only. As I have already indicated, I am not going to decide the issue of severance in the instant case so I express no view on the correctness or otherwise of Johnson J’s decision, but the manner in which he dealt with the issue would support my conclusion that the court could not make an order of severance in the instant case. Having indicated that he would grant a charge on such portion of the lands as did not comprise the family home, Johnson J went on to say:
But I require a proper map to be produced setting out clearly the family home, the offices attached thereto, the land which constitutes the amenity and convenience thereof including the avenue which Mr Slevin has indicated is not contained in the map. The map itself I find quite inadequate and in the event of it being difficult to make a map then it should have been done by way of aerial photography.
This passage indicates the type of evidence which ought to have been given in the High Court if this contention was going to be made. The question of the extent of the family home would then have become an issue and the High Court could have made a finding on it based on the evidence. In the absence of such a finding it is not possible now for this Court to consider the issue.
I would dismiss the appeal and confirm the decision of the learned High Court judge.
Reporter’s Note: S. 2(2) of the Family Home Protection Act 1976 has been amended by s. 54 of the Family Law Act 1995 so that it now provides:
In subsection (1), ‘dwelling’, means any building or part of a building occupied as a separate dwelling and includes any garden or other land usually occupied with the dwelling, being land that is subsidiary and ancillary to it, is required for amenity or convenience and is not being used or developed primarily for commercial purposes, and includes a structure that is not permanently attached to the ground and a vehicle, or vessel, whether mobile or not, occupied as a separate dwelling.
n National Irish Bank Ltd. v Graham [1994] 1 ILRM 372 Costello J The Grianan estate, a large estate of some 3,000 acres, is situated near Lifford in County Donegal. In the early part of 1989 it was purchased by Mr Robert Graham and his two sons, Eric Graham and Robert George Graham, with the aid of money borrowed from the National Irish Bank Ltd. Part of the estate comprised land registered in the Register of Freeholders of the County of Donegal and part unregistered land. As security for the loan a deed of mortgage was entered into on 9 August 1989 by Mr Robert Graham, his wife Sarah and his two sons Eric and Robert George, and their solicitor Mr John E. Keenan (who had purchased the property in trust for the Graham family). By this mortgage the unregistered land was demised to, and the registered land charged *374 in favour of the bank in the manner therein appearing. The deed of mortgage contained the usual terms relating to repayment and conferred on the bank the usual power of sale in the event of default.
For some unexplained reasons very serious default occurred in the agreed repayments. On 22 January 1993 the bank was owed £3,303,838.87. Payment was demanded, a receiver appointed and these proceedings instituted seeking an order for possession of the land to enable the bank to exercise its power of sale. These claims have been resisted while the liability to the bank has been accruing at a daily rate of £1,001.31.
After the first mortgage, on 21 February 1991 the family, with the consent of the bank, had transferred between themselves some of the lands included in the first mortgage and executed three further mortgages in favour of the bank. What has been called the second mortgage was executed by Mr Eric Graham and Mr Robert Graham by which the lands specified in the second schedule of the summons were granted and conveyed to the bank on terms similar to those of the first mortgage. What has been called the third mortgage was executed by Mr and Mrs Graham senior. By this mortgage the lands specified in the second part of the first schedule and in the third schedule of the summons were granted and conveyed to the bank on terms similar to those of the first mortgage. What has been called the fourth mortgage was executed by Eric Graham and his wife Charis Graham. By this mortgage the lands specified in the fourth schedule of the summons were granted and conveyed to the bank on terms similar to those of the first mortgage.
For reasons to be explained in a moment, and without in any way abandoning its rights under the three mortgages of 21 February 1991, the bank’s claim is that it is entitled to an order for possession by virtue of the provisions of the first mortgage. This claim is contested by the defendants mainly because of their submission that it is void under the provisions of the Family Home Protection Act 1976.
Family Home Protection Act 1976
S. 3 of the Act provides:
‘Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subss. (2) and (3) and s. 4, the purported conveyance shall be void.
S. 2 contains a definition of ‘family home’. It provides:
In this Act ‘family home’ means, primarily, a dwelling in which a married couple ordinarily reside. The expression comprises, in addition, a dwelling in *375 which a spouse whose protection is in issue ordinarily resides or, if that spouse has left the other spouse, ordinarily resided before so leaving.
It is claimed that all four mortgages are void because of the operation of s. 3 of the Act.
I will deal firstly with the validity of the first mortgage of 29 August 1989. All the land now sought to be recovered in these proceedings was comprised in this mortgage, the land being conveyed and granted by Mr and Mrs Robert Graham senior and their sons Robert George Graham and Eric Graham (as well as by their solicitor Mr Keenan). At that time Mr Robert George Graham was not married. He married Ingrid Graham on 17 November 1990 and then began to reside on part of the lands comprised in Folio 20588. So it is clear that he was not a ‘spouse’ within the meaning of s. 3 of the Act on 29 August 1989 and that the section has no application as far as he was concerned. Mr Eric Graham was married to Charis Graham at that time and so when the mortgage was executed four of the mortgagors were ‘spouses’ within the meaning of s. 3. But were any of them conveying by the deed of mortgage any interest in a ‘family home’ when the mortgage was executed? I think it is clear that they were not. The lands had been purchased the previous May, the purchase being taken by Mr Keenan in trust for the Graham family. The sale was not closed until 29 August 1989. Up to that date possession had not been taken and both Mr and Mrs Robert Graham and Mr and Mrs Eric Graham were residing elsewhere.
When, therefore, Mr George Graham conveyed his interest in the lands to the bank, on the day he was not conveying any interest in ‘a family home’. Neither was Mr Eric Graham. As neither the prior consent of Mrs Sarah Graham nor the prior consent of Mrs Charis Graham was required to the deed of mortgage, it is not void under s. 3 of the Act.
It was urged that as Mr George Graham and Mr Eric Graham had an equitable interest in the lands arising from the May 1989 contract for sale and that as the lands were purchased, inter alia, to provide a home for themselves and their wives, it followed that the 1976 Act conferred rights on their wives even before they had taken possession of the lands. I cannot agree that this is so. I do not think that their equitable interests existing prior to 29 August 1989 in any dwelling on the lands could operate to transform such dwellings into the family home of either Mr George Graham or Mr Eric Graham.
It was also urged on the defendants’ behalf that if the Act was not construed in the way they sought, the protection intended to be afforded to wives by the Act would be nullified. Again, I cannot agree. When a husband buys a dwelling for the purpose of residing in it with his wife it is by no means unusual, and it was by no means unusual when the Act was passed, that the husband would obtain a loan for the purpose and mortgage the house to a lending institution before he took up occupation. At that point in time the wife has no legal rights *376 in the dwelling. But as soon as she and her husband commence to reside ordinarily in it then the Act confers rights on her. It then becomes a family home and it cannot be alienated without her consent. This is the protection which the Act was designed to confer on married women. To give this protection I do not think that I am required to construe ‘a family home’ within the meaning of the Act not only as a dwelling in which a married couple reside but also as a dwelling in which a married woman intended to reside on the date of its purchase.
Post-August 1989 developments
(a) After the execution of the August 1989 mortgage Mr and Mrs Robert Graham went to live on the lands. The dwelling which became their family home was built on land comprised in Folio 8131R. By transfer of 21 February 1991 portion of that folio was transferred to them. The bank released its security over this family home and it is now mortgaged to the Presbyterian Mutual Society. The bank has no claim in these proceedings for its possession.
(b) After the execution of the 1989 mortgage the dwelling on lands comprised in Folio 8101 constituted the family home of Mr Eric Graham and Mrs Charis Graham. By transfer of 21 February 1991 part of the lands comprised in this folio was transferred to them. The bank joined in this deed of transfer and it expressly provided that it was subject to the mortgage of 29 August 1989. On the same date the Grahams mortgaged the property back to the plaintiff bank by a deed which is called the fourth mortgage. Whilst the bank claims that it has a right to possession under this mortgage also, it is not basing its claim today on that document because it accepts that a dispute of fact has arisen on the affidavits filed relating to Mrs Charis Graham’s knowledge of her rights under the 1976 Act, which could only be resolved on a plenary hearing. As her consent to the 1989 mortgage was not required, summary judgment on foot of that document can be granted.
For a reason unconnected with the defendants’ submission, the bank asked me to adjourn the claim for possession of the lands comprised in Folio 8101. This is because the bank has not been able to register its ownership of these lands, the land certificate having been lost, not by the bank, it is said. An application for a duplicate land certificate has been lodged, but until one is forthcoming the bank cannot be registered as owner and it accepts that it cannot today obtain an order for possession. The order to be made today will therefore exclude Folio 8101, the claim for possession being adjourned with liberty given to either party to re-enter the matter.
(c) After August 1989 Mr Robert George Graham married Ingrid Graham and they are now residing in a dwelling on lands comprised in Folio 20588. It, too, was subject to the arrangements made in February 1991. The lands were transferred to them and remortgaged to the bank. The bank does not seek *377 possession of the lands by virtue of the second mortgage. It bases its claim today on the first mortgage which, as I have said, is a valid one.
Other issues
(a) It was submitted that an order for possession should not be made because of the unresolved disputes relating to the second, third and fourth mortgages, particularly disputes relating to the milk quota which was subject to the second mortgage. But once it is established that the plaintiff bank has a right to exercise its power of sale under the first mortgage and is entitled to an order for possession to enforce that right, then the existence of other unresolved disputes cannot be a ground whereby the court should not give effect to the rights which the plaintiff bank enjoys.
(b) Paragraph 22 of the affidavit of 28 May 1993 sworn by Mr Gerard Ryan on behalf of the plaintiff refers to the fact that contracts for the sale of some of the land the subject of the first mortgage have been entered into with the consent of the bank and that the bank does not intend to seek to recover possession of such land. The lands referred to in the schedule to that affidavit will therefore be excluded from the order for possession. Should the sales fall through for any reason, then the matter can be re-entered if either of the parties thinks fit.
(c) Mr Eric Graham and Mr George Graham agreed to sell property known as ‘Inch Lake’ to a company called Inch Lough Developments Ltd and have obtained the consent of the plaintiff bank to the sale and its agreement to release its security over these lands. This property is contained in Folios 20594 and 21382. The bank has instituted proceedings for a declaration that its consent was invalidly procured, and these proceedings are still pending. I think that the lands the subject of these folios should be excluded from the order for possession with liberty given to re-enter the matter.
In conclusion, therefore, as there is a substantial sum due on foot of the mortgage of 29 August 1989, as the bank has power to sell the lands under the terms of the mortgage, and as, in my opinion, the evidence establishes that possession is necessary to enable the lands to be sold, I will, subject to the qualifications I have mentioned, grant the order, sought.
Ulster Bank Ireland Ltd. v. Fitzgerald
[2001] IEHC 159
JUDGMENT of Mr. Justice Diarmuid B. O’Donovan delivered on the 9th day of November, 2001 .
1. At the outset, on the application of Counsel for the Plaintiffs to which the Defendants did not object, I amended the title to these proceedings by substituting the name Ulster Bank Ireland Limited for the name Ulster Bank Limited as Plaintiffs.
2. The Plaintiffs claim herein, as against the First Named Defendant, is for the sum of £203,971.85, together with interest thereon, and, as against the Second Named Defendant, for the sum of £106,832.92, together with interest thereon. The said sums of money are alleged to be due and owing by the Defendants to the Plaintiffs; firstly, in respect of monies advanced by the Plaintiffs to and at the request of the Defendants and each of them on foot of a joint and several personal Current Account number 53631019 (hereinafter called the “Current Account”) maintained by the Defendants at the Tralee Branch of the Plaintiffs Bank situate at 43-44 Ash Street, Tralee in the County of Kerry, secondly being monies due and owing to the Plaintiffs by the Defendants for principal and interest under and by virtue of a guarantee in writing dated the 16th October, 1997 whereby the Defendants and each of them, in consideration of the Plaintiffs giving time, credit, banking facilities or other accommodation to Fernhill Developments Limited of 11 Denny Street, Tralee, County Kerry (hereinafter called “the Debtor”), guaranteed payment to the Plaintiffs on demand of all present or future or actual contingent liabilities of the Debtor to the Plaintiffs howsoever incurred and, thirdly, monies due and owing by the Defendants to the Plaintiffs for principal and interest under and by virtue of a guarantee in writing dated the 12th March, 1998 whereby the Defendants and each of them, in consideration of the Plaintiffs giving time, credit, banking facilities or other accommodation to the said Debtor guaranteed payment to the Plaintiffs on demand of all present or future or actual or contingent liabilities of the Debtor to the Plaintiffs howsoever arising.
3. By Order of this Honourable Court made herein on the 26th June, 2000, it was Ordered ( inter alia ) that the Plaintiffs do recover from the First Named Defendant a sum of £215,881.34 and the cost of these proceedings, when taxed and ascertained.
4. The Plaintiffs claim aforesaid against the Second Named Defendant came on for hearing before me on Wednesday 10th October, 2001. At the commencement of the hearing, Counsel for the Second Named Defendant indicated to me that, in accordance with paragraph 12 of an Affidavit sworn herein by the Second Named Defendant on the 4th February, 2000, she accepted liability to the Plaintiffs for the principal sum of £10,169.35, together with interest thereon amounting to £1,036.57, on foot of the Current Account aforesaid and, for their part, Counsel for the Plaintiffs indicated that they were satisfied to accept the said sums in satisfaction of their claim against the Second Named Defendant on foot of the said Current Account.
5. Insofar as the Plaintiff’s claims against the Second Named Defendant on foot of the said guarantees in writing, respectively dated the 16th October, 1997 and the 12th March, 1998, were concerned, the Second Named Defendant, through her Counsel, maintained that the said guarantees in writing were not enforceable against her for the reason that, while she accepted that the signatures to the said guarantees, which purported to be hers, were, in fact, made by her, she asserted; on the one hand, that she, personally, had no financial interest in either of the said guarantees and, on the other, that she had been persuaded to execute the said guarantees by an undue and wrongful influence exercised over her by the First Named Defendant who is her husband; a wrongful influence of which the Plaintiffs were aware, or are deemed to have been aware.
6. In the course of the hearing before me, I heard evidence from a number of witnesses and, in particular, I heard evidence from Mr. Teddy Reynolds, who was the Manager of the Branch office of the Plaintiff’s Bank situate at Ash Street, Tralee in the County of Kerry at the material time, and from the Second Named Defendant, Catherine Williams (otherwise Fitzgerald). Mr. Reynolds gave sworn testimony that he had witnessed the signatures of both of the Defendants to the said guarantees respectively dated the 16th October, 1997 and the 12th March, 1998 and he said that both guarantees were signed by each of the Defendants on the dates upon which each guarantee purported to have been signed and that they were signed by each of the Defendants in his presence and, in his office at the Plaintiff’s Bank at Ash Street aforesaid. He agreed that the Defendants were not present together, on the occasions upon which each of the said guarantees had been executed by them. However, he said that, before each of the Defendants had executed the said guarantees he had explained to each of them the meaning of the guarantees and the reason why they were required by the Plaintiff bank. Moreover, he was adamant that, before the Second Named Defendant had executed either of the said guarantees, he had told her that she could obtain legal advice with regard to the guarantees. However, notwithstanding that advice, she had signed the guarantees on the spot. Mr. Reynolds’ testimony was challenged on two grounds; firstly, it was put to him that, while the Second Named Defendant conceded that she had executed both of the said guarantees and while she conceded that she could not recall exactly when and where she had executed them, she would say that they had not been signed by her in his presence. Furthermore, it was put to him that the First Named Defendant could not, as Mr. Reynolds had asserted, have signed the said guarantee of the 16th October, 1997 in his office at the Defendant’s bank at Ash Street aforesaid because the fact of the matter was that, on that date, the First Named Defendant had attended a conference in Dublin and, accordingly, had not been physically present in the town of Tralee during banking hours. In that regard, the Second Named Defendant gave a sworn testimony that, while she accepted that she had executed both of the said guarantees and that she could not recall, precisely, when and where the said guarantees had been executed by her (she thought, perhaps, that she had signed them at her home), she was adamant that she had never signed either guarantee in the presence of Mr. Reynolds in his office. Moreover, the Second Named Defendant gave sworn testimony that, on the 16th October, 1997, her husband, the First Named Defendant, had attended a conference in Dublin and, accordingly, had been away from the town of Tralee for the entire of the day and, therefore, could not, as Mr. Reynolds had asserted, have signed a letter of guarantee on that date in Mr. Reynolds office. Furthermore, I heard evidence from a Ms. Renee McManus who, at the material time, was Personnel and Administration Manager of the C.I.F and who said that, on the 16th October, 1997, she had been responsible for organising a conference hosted by the C.I.F. in the city of Dublin; a conference which had commenced at 8 o’clock am. Ms. McManus produced a register purporting to the list the names of the persons who had attended that conference and, among those names, is that of Kenneth Fitzgerald. However, Ms. McManus could not say for how long the person named as Kenneth Fitzgerald on the said list, had attended the said conference; nor, indeed, did she ever say that she had actually seen the First Named Defendant at the said conference. The clear implication of the evidence of Ms. McManus, when taken in conjunction with that of the Second Named Defendant, was that the First Named Defendant could not having signed the said guarantee of the 16th October, 1997 in the office of Mr. Teddy Reynolds at the Plaintiff’s bank at Ash Street aforesaid, as Mr. Reynolds had asserted and that, therefore, Mr. Reynolds testimony in that behalf was, to say the least of it, unreliable and, accordingly, he could not be considered to be a credible witness. However, although I was advised by Counsel for the Second Named Defendant that the fact of the matter was that the First Named Defendant had been in Court at all material times throughout the hearing of these proceedings, he was never called as a witness to contradict Mr. Reynolds’ evidence that he had signed the said guarantee of the 16th October, 1997 on that date and that he had signed it in Mr. Reynolds office aforesaid. In those circumstances and, given that Mr. Reynolds positively denied the suggestion that Kenneth Fitzgerald had not signed the said guarantee dated the 16th October, 1997 on that date in his office, I do not accept that he did not do so. As judgment has already been obtained against Mr. Fitzgerald and, therefore, he could not be prejudiced by giving evidence and exposing himself to cross examination, I think that I am entitled to infer from his failure to do so that he is not prepared to give sworn testimony that he did not, as Mr. Reynolds has said that he did, sign the said guarantee of the 16th October, 1997 on that date in Mr. Reynolds’ office. Accordingly, notwithstanding the evidence of the Second Named Defendant and that of Ms. McManus, I accept Mr. Reynolds’ evidence that Kenneth Fitzgerald did indeed sign the said guarantee of the 16th October, 1997 on that date and in Mr. Reynolds office aforesaid. Moreover, as it follows that I consider that the evidence of Catherine Williams (Catherine Fitzgerald) in that behalf is, to say the least of it, unreliable, I also prefer the evidence of Mr. Reynolds that Ms. Williams (Fitzgerald) signed both of the guarantees aforesaid in Mr. Reynolds office, in his presence and upon the dates upon which each guarantee purports to have been executed to the evidence to the contrary given by Ms. Williams (Fitzgerald).
7. While, as I have already indicated, Catherine Williams (Catherine Fitzgerald) accepted in evidence that she had executed the said guarantees in writing respectively dated the 16th October, 1997 and the 12th March, 1998, she maintained that she could neither recall the dates upon which she had executed either of those documents or where she was at the time that she had executed them. Moreover, she was adamant that she had not executed them in an office at the Tralee Branch of the Plaintiff’s Bank at Ash Street aforesaid and that she had not executed them in the presence of Mr. Reynolds. As I have also indicated, I do not accept her evidence in that regard because I prefer the evidence of Mr. Reynolds with regard to when and where Ms. Williams (Fitzgerald) executed those guarantees. Ms. Williams (Fitzgerald) also asserted in evidence that, when she was signing the guarantees, she did not appreciate what she was signing but that she did so because her husband prevailed upon her to do so. In that regard, she said that, had she not signed the guarantees at the request of her husband, there would have been extra problems between them; particularly, as he had insisted that he knew what he was doing and that she should trust him. In that context, Ms. Williams (Fitzgerald) gave evidence that, towards the end of the year 1997 and early in the year 1998, her marriage to Mr. Fitzgerald was in difficulties, that he worked long hours and was rarely at home, and when he was, he was inclined to drink to excess, became intoxicated and verbally abusive to her. She maintained that the situation was compounded by the fact that, during that period, their daughter, Laura, was very unwell and spent some time in hospital with the result that she and her husband were kept further apart. Indeed, Ms. Williams (Fitzgerald) made it very clear to me that she believed that her marriage was breaking up but that, after her husband had made an appointment for marriage counselling for both of them, which in fact, he subsequently cancelled, the relationship between them improved and he reduced the extent of his drinking. This would have been in the month of March, 1998 and Ms. Williams (Fitzgerald) offered this improvement in the relationship as one of the reasons for acceding to her husbands’ insistence that she execute the said guarantee of the 12th March, 1998, in that, had she not done so, she was convinced that it would cause further trouble between them and again threaten their marriage. She also told me that her husband had told her that, had she not signed the guarantee of the 12th March, 1998 there would have been insufficient monies available to pay the staff of the creditor with the result that the business of the creditor would collapse. In that regard, I was persuaded by the evidence of Ms. Williams (Fitzgerald) that she and her husband and children were dependant on the income from the business of Fernhill Developments Limited for their daily living.
8. In the light of the foregoing, I am prepared to accept that Kenneth Fitzgerald may, indeed, have exercised inordinate pressure on his wife to execute the guarantees aforesaid and I am prepared to accept that she believed that she had little option but to sign them. Moreover, while I do not think it necessary for the purposes of this Judgment to determine whether or not the influence in that regard exercised by Kenneth Fitzgerald over his wife was unlawful, I think that it may well have been so. However, whether or not it was, I heard no evidence whatsoever to suggest that Mr. Reynolds, or, indeed, any other representative of the Plaintiff Bank had even an inkling that there were difficulties in the marriage of Kenneth Fitzgerald and Catherine Williams (Catherine Fitzgerald) or that there was any other reason why Catherine Williams (Catherine Fitzgerald) might not had been a free agent; in the sense that she not do so of her own free will, when she executed the said guarantees. Accordingly, if the Second Named Defendant executed the said guarantees as a result of undue influence exercised over her by her husband, which, as I have indicated, may well be so; although I do not think it necessary for me to come to any conclusion on that point, I am satisfied that the Plaintiffs were not aware of that fact. Moreover, as it is well settled that, where they are parties to the same contract, the relationship of husband and wife does not give rise to a presumption of undue influence and, accordingly, the burden of proving undue influence is on the party alleging it, I am not persuaded that the Plaintiffs had constructive notice that the Second Named Defendant executed the said guarantees as a result of undue influence exercised over her by her husband; if that be the case.
9. Apart from the foregoing, Counsel on behalf of Ms. Williams (Fitzgerald) submitted that, as she had no financial stake in the business of the Debtor and her husband, Kenneth Fitzgerald, had, the Plaintiffs were on notice that there was a risk that she may have been unduly influenced by her husband to execute the said guarantees and, accordingly, they were obliged to urge that she obtain independent legal advice before she executed them. In that regard, Counsel submitted that it was not sufficient that Ms. Williams (Fitzgerald) be advised by the Bank that she was entitled to seek independent legal advice before executing the guarantees, as Mr. Reynolds said that he had advised her. Counsel argued that, in this case, it was especially necessary that Ms. Williams (Fitzgerald) be urged to obtain independent legal advice before executing the said guarantees because, by executing them, she was putting her family home at risk. Insofar as these submissions are concerned, I have to say that, I do not accept that Ms. Williams (Fitzgerald) did not have a financial stake in the business of the creditor. Certainly, she gave sworn testimony to that effect and, in particular, she said that she was neither a shareholder, nor a director of Fernhill Developments Limited and, that, while she may have signed documents in which she is described as the secretary of the company, she was not aware that she was the secretary thereof. Apart from the fact that that evidence appears to me to be inconsistent with the contents of an Affidavit which Ms. Williams (Fitzgerald) swore herein on the 4th February, 2000 in which she seems to acknowledge she was a shareholder and director of Fernhill Developments Limited, as I have already indicated, I was persuaded by her evidence that her family, which included herself, relied on the income generated by the business of Fernhill Developments Limited for their day to day living and, accordingly, I have no doubt but that she had a financial stake in the business of the company. Moreover, there is absolutely no substance to the suggestion that, by signing the said guarantees, Ms. Williams (Fitzgerald) was putting her family home at risk because, in the event that the Plaintiffs enforced the said guarantees against her, their only relief would be a money Judgment which would not necessarily affect the family home.
10. In the circumstance thus I am satisfied that a presumption of undue influence does not arise merely because the two defendants (being husband and wife) executed the said guarantees respectively dated the 16th October 1997 and the 12th March 1998 and given that I am also persuaded that Catherine Williams (otherwise Fitzgerald) had a financial stake in the business of Fernhill Developments Limited, I do not consider that there was any obligation on the plaintiffs to urge on Ms. Williams (Fitzgerald) that she should obtain legal advice with regard to the said guarantees before she executed them. In that regard, there is no doubt but that the courts are not required to intervene to protect a contracting party from ill-advised action and, therefore, if it be the case that it was ill-advised for Ms. Williams (Fitzgerald) to execute the said guarantees (I am not convinced that it was) the court is not entitled to relieve her of her obligations thereunder merely because a more prudent person might not have signed them. Neither, in the absence of any actual or constructive knowledge that Ms. Williams (Fitzgerald) was not a free agent when she executed the said guarantees (if it be the case) were the Plaintiffs under any obligation to take any special steps to ensure that she obtained independent legal advice. Indeed, given that the actual forms of guarantee executed by Ms. Williams (Fitzgerald) contained a note at the top headed by the words “IMPORTANT” strongly recommended that any persons signing the guarantee should seek independent legal advice before doing so, I think that it was above and beyond the call of duty for Mr. Reynolds to advise Ms. Williams (Fitzgerald) to seek independent legal advice before signing those guarantees, as I am satisfied that he did. In this regard, I was referred to a number of authorities; the suggested import of which was that, in the particular circumstances of this case, there was an obligation on the part of the Plaintiffs to warn Ms. Williams (Fitzgerald), before she signed the said guarantees, that she and her matrimonial home were potentially liable for the debts of the creditor and that, therefore, it was essential that she obtain independent legal advice before so doing. In particular, I was referred to the cases of Barclays’ Bank Plc. .v. O’Brien and Anor. ([1994] 1 AC 180) and The Governor and Company of the Bank of Ireland .v. Michael Joseph Smyth and (by order) Una Smyth ([1995] 2 IR 459). However, both of those cases were concerned with a direct threat to a family home; the Barclays’ Bank .v. O’Brien case arising from a bank’s attempt to enforce a surety executed by a wife with regard to a transaction in which she had no financial stake and the Bank of Ireland .v. Smyth , arising from a bank’s attempt to recover possession of a family home in respect of which the wife was alleged to have executed a consent pursuant to the Family Home (Protection) Act 1976. In this case, however, as I have already indicated, I am satisfied that no threat to Ms. Williams’ (Fitzgerald) family home resulted from the guarantees aforesaid executed by her and, in any event, she had a financial stake in both of those guarantees. In those circumstances, I reject the contention that the said guarantees are not enforceable against her.
11. As I have already indicated, the Second Named Defendant has accepted liability to the Plaintiffs for a principal sum of £10,169.35 with interest thereon amounting to £1,036.57 on foot of the current account aforesaid and, in the light of the evidence which I heard, I am satisfied there is currently due and owing to the Plaintiffs by the Second Named Defendant on foot of the said guarantee dated the 16th day of October 1997 a sum of £50,000 for principal and accrued interest thereon calculated to the 21st day of September 2001 amounting to £12,021.39 together with continuing interest thereon from the 21st day of September 2001 at a rate of £13.36 per day and on foot of the said guarantee the 12th day of March 1998 a sum of £45,000 for principal and accrued interest thereon calculated to the 21st day of September 2001 amounting to £11,514.59 together with continuing interest on the said sum at a rate of £12.02 per day the date of payment. Accordingly, there will be judgment for the Plaintiffs against the Second Named Defendant for a sum of £129,741.90 together with continuing interest at a rate of £25.38 per day from the 21st day of September 2001 to date of payment.
Bank of Ireland Mortgage Bank v Peter Cody and Heather Cody
S:AP:IE:2020:000038
Supreme Court [Approved]
14 April 2021
unreported
[2021] IESC 26
Baker J.
April 14, 2021
JUDGMENT
1. This appeal concerns the statutory provision for the grant of summary possession found in s. 62(7) of the Registration of Title Act 1964 (“the Act of 1964”). It is the appeal of Bank of Ireland Mortgage Bank (“the Bank”) of the order of Simons J. made on 28 February 2020, setting aside an order for possession of certain registered lands in County Wexford for the reasons set out in his written judgment delivered on 31 January 2020 ([2020] IEHC 34).
2. By ancillary order Simons J., for the reasons set out in his second written judgment delivered 28 February 2020 ([2020] IEHC 99), refused the application of the Bank to remit the proceedings to plenary hearing, and gave the parties liberty to apply in the event that further proceedings for possession were taken against the second defendant pursuant to s. 62(7) of the Act of 1964.
3. The first defendant, Mr. Cody, took no part in the action before the Circuit Court and has not engaged with this appeal. Ms. Cody therefore is the sole respondent.
4. Briefly, the Bank sought possession pursuant to a charge registered against lands at Kilmurray, County Wexford comprised in Folio 25003F. The charge was created by instrument of 12 January 2007 to secure two loans said to have been granted on the conditions set out in letters of loan offers of September and October 2005, for the total amount of €650,000. On 21 December 2007 the charge was registered as a burden on the folio. The Bank is the owner of the charge. The lands are in joint names, the loans were said to have been advanced to Mr. and Ms. Cody jointly, and the charge has the appearance of being executed by both of them.
5. The premises is the principal private residence of Ms. Cody, but was not at the time of the Circuit Court hearing the family home of the couple. It is part of Ms. Cody’s case that at the material time her former husband did not reside there.
6. A separate charge registered earlier on 20 June 2007 in favour of another Bank of Ireland entity is not in issue in these proceedings.
7. The loans were called in on 10 June 2016, and on 28 June 2016 the Bank demanded possession. Thereafter proceedings were had in the Circuit Court and on 12 February 2019 the Circuit Judge made an order for possession with a stay of execution for 15 months. Simons J. was hearing the appeal from that Circuit Court order as a judge of the High Court on Circuit under Part IV of the Courts Act 1936, as amended.
8. The proceedings in the Circuit Court under s. 62(7) were brought by civil bill grounded on affidavit, and Ms. Cody in her replying affidavits made allegations that the documentation on foot of which the loans were made and the charge created was executed without her knowledge or consent. The Bank argues that she did no more than make generalised assertions insufficient to establish a ground to refuse possession at a summary hearing.
9. Simons J. dismissed the proceedings as he considered that the Bank had not proved the case on the facts, and thereafter in his second judgment declined to adjourn the summary proceedings for possession to plenary hearing in accordance with Order 5B, r. 8(2) of the Circuit Court Rules, on the grounds that he had no jurisdiction at that stage to adjourn the proceedings to plenary hearing, and that he had become functus officio.
10. The Bank also appeals that part of the order by which Simons J. limited the entitlement of the charge holder to bring further proceedings for possession and argues that this part of his order was wrong in law and procedure.
11. Ms. Cody was not represented before the High Court but she is now represented by solicitor and counsel, the leave to appeal being conditional upon the Bank being responsible for the reasonable costs of such representation.
The issues in the appeal
12. The appeal raises a number of questions concerning the jurisdiction to grant summary judgment in possession cases, and while the appeal to this Court is from a decision of Simons J. sitting in the exercise of his statutory jurisdiction hearing an appeal from the Circuit Court, the principles to be considered will apply to proceedings in the Circuit Court, of which the appeal to the High Court was a de novo hearing.
13. The issues in the appeal may conveniently be grouped as follows:
(a) whether the trial judge was correct that the Bank had not established its claim, and that Ms. Cody had deposed to sufficient facts to repudiate the execution of the loan documentation or instrument of charge, and the drawdown of the secured monies;
(b) whether the trial judge was correct to refuse to adjourn the Bank’s application for possession to plenary hearing and whether he treated or was entitled to treat counsel’s election not to apply for a plenary hearing as conclusive of his jurisdiction;
(c) allied to this, the point in the process where the jurisdiction of a court to adjourn summary possession proceedings to plenary hearing ceases;
(d) whether the trial judge was correct to conclude that his refusal to make an order for possession on foot of the civil bill, meant by implication that the Bank be restricted from bringing further proceedings against the respondent pursuant to s. 62(7) of the Act of 1964.
Section 62(7) Registration of Title Act: summary proceedings
14. Section 62(7) of the Registration of Title Act 1964 makes provision for the summary disposal of an action seeking possession of registered land:
“When repayment of the principal money secured by the instrument of charge has become due, the registered owner of the charge or his personal representative may apply to the court in a summary manner for possession of the land or any part of the land, and on the application the court may, if it so thinks proper, order possession of the land or the said part thereof to be delivered to the applicant, and the applicant, upon obtaining possession of the land or the said part thereof, shall be deemed to be a mortgagee in possession.”
15. The jurisdiction conferred by that section applies to proceedings for possession by the registered owner of a charge once monies secured by the charge have become due. The subsection does not identify what is meant by the making of an application “in a summary manner”, but the Court is given a discretion, if it so thinks proper, to order possession of the land to be delivered up, the consequence whereof is that the owner of the charge thereupon becomes a mortgagee in possession.
16. In Bank of Ireland v. Smyth[1993] 2 IR 102, [1993] ILRM 790, Geoghegan J. rejected the notion that s. 62(7) confers a wide discretion which enables a court to refuse an application for possession on grounds of sympathy. He thought the words “may, if it so thinks proper” simply mean that the court should apply equitable principles in considering the application for possession, but not “sympathetic factors” and thus ensure that the application is made bona fide with a view to realising the security:
“The words ‘may, if it so thinks proper’ in s. 62, sub-s. 7 mean no more, in my view than, that the court is to apply equitable principles in considering the application for possession. This means that the court must be satisfied that the application is made bona fide with a view to realising the security.” (p. 111)
17. The procedure was explained in the decision of this Court in Irish Life and Permanent v. Dunne[2015] IESC 46, [2016] 1 IR 92, in which it held that any court seeking to make an order for possession under s. 62(7) must first ask itself whether, as a matter of law, it can properly be said that the monies are secured and are due.
18. The subsection is contained within s. 62 of the Act which makes provision for the creation of charges on registered land and for remedies on default of the loan thereby secured. The charge is deemed by s. 62(6) to operate as a mortgage by deed within the meaning of the Conveyancing Acts 1881-1911. The Land and Conveyancing Law Reform Act 2009 makes some changes to the statutory provisions, most of which are not relevant to this judgment. Section 62(7) was repealed by that Act and replaced by s. 97(2) which makes no mention of the application being brought by summary means. Section 62(7) was expressly saved by s. 1 of the Land and Conveyancing Law Reform Act 2013 as respects a mortgage created prior to 1 December 2009. Section 3 of that amending Act of 2013 provides that proceedings for possession of the principal private residence of the mortgagor or his or her spouse or civil partner shall be brought in the Circuit Court.
19. This judgment concerns one of the procedures for enforcement of the security provided expressly by the 1964 Act and the Rules of the Circuit Court.
The Procedure
20. Applications for summary possession in the Circuit Court are governed by O. 5B of the Rules of the Circuit Court S.I. No. 264 of 2009, as amended, which applies to any proceedings in which the plaintiff claims inter alia recovery of possession of land on foot of a legal charge. The Order provides for the commencement by a detailed civil bill in the prescribed form to contain a special endorsement which shall “state specifically and with all necessary particulars the relief claimed and the grounds thereof”.
21. The civil bill does not stand alone but is to be accompanied by a verifying affidavit in prescribed form by which the deponent shall verify and support the claim in the civil bill.
22. A defendant intending to defend proceedings enters an appearance in the prescribed form within ten days and the defence is by way of a replying affidavit setting out that defence.
23. The procedure therefore does not contemplate the service by either the plaintiff or defendant of a pro forma pleading and the defence is not a mere traverse of the claim.
24. The contents of the affidavit grounding the civil bill for possession are set out in Form 54 of the Rules and it is apparent that considerable detail is required of the property, of those in possession or occupation, of the security, loan agreement, arrears, and with regard to the Central Bank Regulatory Codes. Equally, in light of the requirements of O. 5B r. 5 and 6, the defendant must set out his or her defence on affidavit, and having regard to the fact that the matter is heard on affidavit, save where oral evidence is admitted in accordance with r. 6, the affidavit of defence must set out and swear to facts which support a defence.
25. Order 6 contemplates that the proceedings are to be heard on affidavit and that oral evidence may be adduced only by leave of the judge in specific circumstances or where a notice to cross-examine the deponent is on affidavit. It is useful to quote this in full:
“6.(1) No party shall have the right in proceedings to which this Order applies to adduce any evidence otherwise than by affidavit, except—
(a) by leave of the Judge,
(b) where permitted in accordance with rule 7(4) or rule 8(1), or
(c) where the proceedings have been adjourned for plenary hearing in accordance with rule 8(2).
(2) Any party desiring to cross-examine a deponent who has sworn an affidavit filed on behalf of the opposite party may serve upon the party by whom such affidavit has been filed a notice in writing requiring the production of the deponent for cross-examination, and unless such deponent is produced accordingly his affidavit shall not be used as evidence unless by the special leave of the Court.”
26. The civil bill is listed before the County Registrar who may make an order for possession where an appearance has not been entered nor an affidavit setting out a defence delivered. The County Registrar may also rule a consent order for possession, or any order on consent including an order striking out the proceedings, granting possession with or without a stay or subject to any other conditions.
27. The County Registrar may not determine any contested issue of law or fact, and once he or she is satisfied that that affidavit of defence has disclosed a prima facie defence, the County Registrar is mandated by r. 7(2) to transfer the civil bill to the judges’ list at the first opportunity.
28. Rule 8 provides an extensive set of procedural and substantive powers in the court, including the power to settle the issues to be tried, to permit evidence as to fact to be given orally or by affidavit, or partly orally and partly by affidavit. The power to adjourn to plenary hearing is set out in r. 8(2) as follows:
“The Judge may, where he considers it appropriate, adjourn a Civil Bill listed before him under this Order for plenary hearing as if the proceedings had been originated otherwise than in accordance with this Order, with such directions as to pleadings or discovery as may be appropriate.”
29. Rule 8(2) is important for the second part of this appeal.
30. Further powers, not relevant to this appeal, permit the adjournment of the proceedings where it appears likely that the mortgagor is likely to be able to pay arrears or to remedy any breach of obligation arising under the charge.
31. Order 28 of the Rules of the Circuit Court permits the grant of summary judgment even after an appearance has been entered or a defence delivered in certain other kinds of claims including those for debt or liquidated sums, for the delivery of a chattel, for the performance or enforcement of a trust, or for ejectment including where the relationship of landlord and tenant exists between the parties.
32. The procedure provided by O. 5B of the Rules of the Circuit Court, while it has some similarity to O. 28, has a number of differences. It does not require that a plaintiff aver on affidavit to a belief that the defendant has no bona fide defence to the claim or that an appearance or defence, if any had been delivered, was solely for the purposes of delay. Nonetheless the grounding affidavit must set out the full proofs to obtain judgment. Options available to the court under O. 28 r. 5 permit a judge to enter judgment unless the defendant prima facie has a good defence or pays into court such sum as may be deemed sufficient to entitle him to defend. The options available when the court does not enter judgment are expressly provided for in O. 28 r. 7 as follows:
“Where the Judge does not order judgment to be entered for the plaintiff he may:
(a) Dismiss the application, or
(b) give the defendant leave to defend unconditionally, or subject to such terms as to giving security, or as to the time and mode of trial, or otherwise, as he may think fit, or
(c) with the consent of all the parties, treat the hearing of the application as the trial of the action, and dispose of the same in a summary manner.”
33. Order 28 seems to envisage a difference between the hearing on consent of the trial in a summary manner and the giving of leave to defend, and O. 28 r. 7(c) makes a distinction between the “trial of the action” and the hearing of a motion for summary judgment.
34. A defendant to possession proceedings under O. 5B does not need leave to defend, but defends by affidavit evidence or, where leave is given, by oral evidence. Thus the procedure under O. 5B provides for the hearing of the trial of the action on affidavit but gives the judge power to adjourn to plenary hearing without constraint, such that the proceedings will thereafter continue as if they had originated otherwise than in accordance with the order.
35. The Circuit Court action for summary possession mirrors and is broadly similar to the procedure in the High Court under O. 38 of the Rules of the Superior Courts (“RSC”) which governs proceedings commenced by special summons. An action for summary judgment under O. 37 RSC is more akin to the procedure provided by O. 28 of the Rules of the Circuit Court.
Historical context
36. This form of procedure is not new, and the statutory provision for the making of an order for possession of registered land in summary proceedings has a long history. The need for legislative intervention arises by reason of the fact that a mortgagee of unregistered land takes an assurance of the legal title (whether by the conveyance of the fee simple or by creation of an interest by sub demise), and the legal estate carries with it the right to possession, albeit constrained by the terms of the security, including an agreement either express or implied that possession will not be taken if the terms of the security are met. But in regard to registered land since the Local Registration of Title Act 1891 a security is created by a charge over the lands in favour of a lender, and the key difference is that there is no conveyance or transfer of the lands to the lender, simply an entry in the Register of the charge on the folio.
37. The Act of 1891 had granted to charge holders all the rights of a mortgagee. However, the statutory provision that the owner of a charge has the powers of a mortgagee under s. 19(1) of the Conveyancing Act 1881 is limited by the fact that the charge creates no estate in the property. The Court of Appeal of Northern Ireland (Andrews L.J.) in Northern Ireland v. Devlin[1924] 1 I.R. 20 held that the court had no jurisdiction to put a registered charge holder into possession of property as they had no legal or equitable estate in the land. (see the comments of Dunne J. in Start Mortgages Ltd v. Gunn[2011] IEHC 275 at para. 46.)
38. Glover at p. 166 of his A Treatise on the Registration of Ownership of Land in Ireland (Falconer, 1933) considered that the proposition that the owner of a charge had no right to possession did not need authority and noted that the requirement that the owner of a charge would obtain a court order for possession was neither to “the advantage of the mortgagor or mortgagee; the expense and inconvenience falls on both”. He called for an amendment of the Act to enable an owner of a charge to obtain possession to facilitate the realisation of a security.
39. This lacuna led to the enactment of s. 13 of the Registration of Title Act 1942, which provided a statutory entitlement to a charge holder to apply for possession in a summary manner, later re-enacted by s. 62(7) of the 1964 Act.
40. A charge of registered land can carry an express right to possession as was found in Gale v. First National Building Society[1985] IR 609 where Costello J. upheld the right of an owner of a charge to enter into possession on foot of a contractual licence by which it was entitled to take possession on default of payment and subject to a proviso that the power did not become exercisable unless a default had occurred for three months. Many modern charges do contain a right to possession but, as no estate or interest passes, no right to take or be in possession without court order exists at common law and none was created by the scheme of the 1964 Act, or by the previous Registration of Title Act 1891 and the amending legislation. The charge registered against the folio of Mr. and Ms. Cody does contain a contractual right to take possession on default, but a court order is now required by reason of s. 97(1) of the Act of 2009, which provides that a mortgagee may not take possession of mortgaged property without a court order, except with the written consent of the mortgagor.
41. The procedures governing the grant of possession by summary means was analysed in some detail in the case of Re Jacks[1952] IR 159 where what was under consideration was whether the action was commenced by summary summons, or whether a motion for judgment before the Land Judge was required. The Supreme Court divided on the issue, the majority holding that the correct procedure was the commencement of an action by summary summons.
42. That the availability of a summary type process is desirable in the interests of justice, and that there be a relatively inexpensive, accessible and quick process to provide relief in certain cases where no defence exists was considered by this Court in the decision in Prendergast v. Biddle (Unreported, Supreme Court, 21 July 1957)), where Lavery J. (Maguire J. concurring), dealing with summary judgment in claims for debt, thought summary disposal desirable “in order to enable speedy justice to be done”, where the issues are simple and capable of being easily determined. This reflects the idea that expedience and the efficient use of court resources is in the interests of the administration of justice generally, and can in many cases benefit the individual interests of the parties by avoiding lengthy and costly actions.
43. The judgment of McKechnie J. in Ulster Bank v. Beades[2019] IESC 83 (with whom the other members of this Court agreed) provides guidance on why summary procedures are desirable in the interests of justice:
“When properly invoked and applied, an aggrieved party cannot be heard to have a complaint that his Constitutional or Convention rights to a fair trial has been abridged. This is because the nature of the case and the evidence adduced not only permits, but indeed demands a conclusion at that point. Furthermore, if a defendant cannot meet the threshold set out in the case law so as to have the proceedings remitted to plenary hearing, it follows that justice is best served by entering judgment for the plaintiff. Finally every judge in every court is by the Constitution and the Convention obliged to ensure fairness of process: in light of these safeguards I am entirely satisfied that when properly applied the summary procedure is robust and suitable for use.”
44. He added that, where properly utilised, there is nothing fundamentally wrong with summary procedures:
“It is envisaged as being a speedier process and a more efficient manner of dealing with cases to which it applies: in addition, there is less cost and expense involved. However, whatever its virtues may be, it must be acknowledged that where judgment results at this point in the proceedings, the overall process falls short of the more complete hearing inherent in the plenary process. Where appropriately utilised however, there is nothing fundamentally wrong with this procedure.”
45. For these reasons the procedure by which possession of land can be obtained summarily in s. 62(7) does not offend the requirements of fairness to a defendant: see for example the analysis of MacGrath J. in KBC v. Brennan[2020] IEHC 247 at para. 38.
46. In light of the above, it can be said that, when a court is considering the limited question of whether a plaintiff has proven that the legal right to possession has arisen, there are circumstances in which the nature of the case and the evidence adduced demand a conclusion at that point.
47. To say that an action is to be brought in a summary manner does not mean that the solemnity of the process, the verification of the facts, or the relevant laws of evidence are not applied with the same robustness as in other litigation. What is denoted by the expression is a process by which a lengthy action with oral evidence is avoided and, at least in straightforward or commonplace actions, this is a perfectly appropriate way of seeking possession where no difficult issues of fact arise for consideration. The proceedings are not to be treated as a sort of shortcut or a less satisfactory administration of justice. The process is still a trial of a claim in which the burden lies on the plaintiff to establish its case. It may be, as in many or most possession claims, that the proofs are relatively familiar and readily identifiable, but that does not mean that the defendant is to be denied the right to defend, and the process is judicial and not administrative.
48. This approach is consistent with, and supported by, the statutory provisions which make entries of ownership on the Register of Titles conclusive of ownership.
Section 31 Registration of Title Act 1964: conclusiveness of the Register
49. The owner of a charge who seeks to obtain possession pursuant to s. 62(7) has to prove two facts:
(a) That the plaintiff is the owner of the charge;
(b) That the right to seek possession has arisen and is exercisable on the facts.
50. The summary process is facilitated by the conclusiveness of the Register as proof that the plaintiff is the registered owner of the charge is a matter of the production of the folio, and, as the Register is by reason of s. 31 of the Act of 1964 conclusive of ownership, sufficient evidence is shown by that means: see the discussion in the Court of Appeal in Tanager DAC v. Kane[2018] IECA 352. The judgment of the Court of Appeal inter alia held that the correctness of the Register cannot be challenged by way of defence in summary possession proceedings, and that a court hearing an application for possession pursuant to s. 62(7) of the Act of 1964 is entitled to grant an order at the suit of the registered owner of the charge, or his or her personal representative, provided it is satisfied that the plaintiff is the registered owner of the charge and the right to possession has arisen and become exercisable.
51. The Register reflects the ownership of land and burdens affecting the interest of the registered owner. The Register may contain errors and provision is made for rectification on the grounds of actual fraud or mistake: s. 31(1); or where an administrative error is made in registration of an instrument: s. 32. Some interests affect without registration: e.g. under s. 72. A challenge to the correctness of the Register is brought by an action for amendment or rectification in which inter alia the Property Registration Authority would be a defendant or notice party, and such proceedings would almost invariably include other defendants or notice parties such as prior registered owners or other persons asserting an interest. If such proceedings are in being then that might amount to a ground to adjourn the action for possession, or indeed to list it to run after the rectification or amendment proceedings have been concluded (see the judgment in Tanager DAC v. Kane at para. 86), but no such proceedings have been commenced or threatened in the present case. Section 31 means that in possession proceedings the proof on foot of which a plaintiff claims an entitlement to possession takes as its conclusive starting point the registration on a folio of a charge of which that plaintiff is shown to be legal owner on account of entry on the register.
52. The statutory provisions which make the Register conclusive evidence of title to the charge were not raised in the hearing before Simons J. but the conclusiveness of the Register means that one of the proofs required to establish the claim for summary possession was met by evidence of the registration of the charge on the folio, and this appeal must therefore be seen to concern whether the debt had become due and whether the right to seek possession had arisen and become exercisable.
Family Home Protection Act 1976
53. Counsel for the respondent argues that the fact that the premises were the family home of the couple has the effect that the Bank failed to pass the preliminary hurdle of establishing that the security could not be created without the express and informed consent of Ms Cody by reason of the statutory protection afforded to the family home under the Family Home Protection Act 1976 (“the Act of 1976”). I propose to consider this point first as counsel has argued that it provides a full answer to the appeal
54. Ms Cody was not represented in the hearing before Simons J. but she was represented by solicitor, senior and junior counsel on the appeal. Although her notice of response to this appeal was prepared without their input, she mentions that the premises is her “family home” in many places in her replying pleading, but without specific reference to the Act of 1976 which is raised expressly for the first time in the written legal submissions now filed on her behalf.
55. It is also worth noting that at para. 13 of her second affidavit sworn 21 December 2018, Ms. Cody expressly said that the Bank did not have any signed “family home declaration”. It seems to me she did there raise a general argument regarding protection for her home, although the provisions of the Act of 1976 were not argued by either side in the High Court.
56. Her counsel now argues that the provisions of s. 3 of that Act arise because the possession proceedings are those envisaged by s. 3 of the Land and Conveyancing Law Reform Act 2013 which applies when a mortgagee seeks possession of land which is a principal private residence of the mortgagee or relevant person without whose consent a conveyance would be void by reason of the Act of 1976, or the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010. It is argued therefore that the question of the consent of Ms. Cody arises as part of this appeal and that the effect of s. 3 is to place an evidential burden on the appellant in the light of the fact that the Bank is “on notice” of the assertion by Ms. Cody that the loans and security were obtained fraudulently, and that therefore the Bank has to establish that she did consent to the loans and the creation of security. Counsel for the appellant argues in reply that it is not appropriate that any issue under the Act of 1976 should fall for consideration now, as it was not raised either in the Circuit Court or on the appeal before Simons J.
57. My view is that the provisions of the Act of 1976 do merit some consideration in this appeal having regard to the link expressly made in s. 3 of the Land and Conveyancing Law Reform Act 2013 to that Act, and while I am not persuaded that Ms. Cody had in her mind the provisions of the Act of 1976 when she made reference to her “family home” and indeed used that expression in bold or capital letters in many places in her replying notice, the interests of justice, as explained in Lough Swilly Shellfish v. Bradley[2013] 1 IR 277, would best be served by some consideration of the effect, if any, of the Act of 1976 on the proceedings. This is especially so as it is difficult to decouple the argument on the possession proceedings from the fact that the premises are the principal private residence of Ms. Cody, was at one point in time the family home of the couple and the point is not an entirely new point and fairly does arise on the appeal, and some consideration of the Act of 1976 would benefit the appeal.
58. Section 3 of the Act of 1976 provides as follows:
“3(1) Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subsections (2) and (3) and section 4, the purported conveyance shall be void.”
59. It is sometimes said that the section has no application to a jointly owned family home and authority for that proposition is said to be found in the decision of this Court in Nestor v. Murphy[1979] IR 326.
60. Section 3(1) in its terms does not exclude from its avoidance provisions any conveyance or purported conveyance of jointly held land, and the judgment of Henchy J. on a claim by a purchaser for specific performance of a contract for sale executed by a husband and wife, joint tenants of the relevant premises, rejected the argument that the contract for sale was void on account of s. 3(1) because the wife had not given a separate written consent to the contract prior to execution. He noted that a literal appraisal of the subsection might be thought to give support to the argument that a separate consent of the wife to the contract entered into by her husband was required to satisfy the subsection. As Henchy J. said, the purpose of the subsection was to give a right of avoidance to a spouse who was not a party to the transaction, the protection being to the non-disposing spouse from the disposition by the other spouse of an interest in the family home. As both parties had joined in the contract, protection for the spouse whose consent was argued to be a necessary statutory element for validity was not needed. The purpose being the protection of the family home, it would have led to a pointless absurdity if a separate consent was required when both spouses had entered into a contract of sale which on its face came within the section. That literal reading, he held, would defeat the obvious intention of the legislation.
61. Henchy J. did not say that the subsection did not apply to jointly held land, but the import of his decision was that, as what was agreed to be sold was the entire interest in the family home, both husband and wife had to contract to sell their respective interests, and therefore the transaction could not be described as a contract or purported contract or conveyance by one spouse without the joinder of the other. To say that the section does not “apply” to jointly held land is no more than shorthand for that more general proposition, which must flow from the fact that if property is held jointly, both joint owners must join in a conveyance when the entire is sold, and each must execute a contract for sale, either personally or through an authorised agent.
62. It goes without saying, as it would in regard to any agreement, whether for the sale of land or otherwise, that the contract must be one freely entered into by a person or persons with an understanding of the nature and effect of the agreement. This Court’s decision in Bank of Ireland v. Smyth[1995] 2 IR 459 is authority for this proposition, if authority is needed.
63. I do not consider that the provisions of the Act of 1976 elevate the burden or standard of proof on the Bank to prove its claim in the present case. If, as is asserted by the respondent, the Bank was on notice of the fact that the husband and wife did not reside together, and that the premises intended to secure the loan agreements had been or were a family home or were the principal private residence of one spouse only, the question becomes more one of whether that spouse or owner or co-owner agreed to the creation of the security interest, and did so with knowledge of its import and nature.
64. That is a question of fact and the mere assertion of fraud does not shift the burden of proof or elevate the standard to be met, nor does the fact that the premises are or were a “family home” within the meaning of the Act of 1976.
65. The argument of the respondent that the Act of 1976 provides a complete answer to the claim should be rejected.
Had the plaintiff established its case?
66. Order 5B requires a plaintiff to set forth a prima facie case for an order for possession, and Simons J. accepted, correctly in my view, that the evidence adduced on affidavit had “sufficient indications of reliability” (para. 42). He refused the application of Ms. Cody to adduce further evidence pursuant to s. 37(2) of the Courts of Justice Act 1936, and although the appeal was to be treated as a de novo appeal, it was therefore determined on the evidence before the Circuit Court.
67. Certain background facts do not give rise to dispute: The Bank’s charge is one to secure “present and future advances repayable with interest”, and the signatures of Ms. Cody affixed to the two letters of loan offer/acceptance and the instrument of charge identify her by her maiden name, and have the appearance of having been signed by her and her signature is recorded as having been witnessed. Ms. Cody swore in all five affidavits before the Circuit Court and exhibited a number of documents she obtained from the Bank through a data request under the Data Protection Act 1988. She swears in different parts of her affidavits that her signature or purported signature was witnessed when she was not present, and that loans and securities were created in her name jointly with that of her husband without her knowledge or consent. The letters of loan offer were sent to the business address of the firm of solicitors in which Mr. Cody was then a partner, and Simons J. commented (at para. 25) that the affidavit evidence did not confirm that the special conditions in the loan offers had been satisfied or whether the monies had been received.
68. This part of the appeal concerns whether the High Court judge erred in his approach to the evidence and whether he misdirected himself in treating the averments by Ms. Cody in her affidavits as enough to displace the prima facie evidence of the loan agreements. The appellant argues that her affidavits taken together amount to no more than generalised assertions and are wholly uncorroborated and do not meet the test in the authorities and in particular that recently considered in IBRC v. McCaughey[2014] 1 IR 749, or in RAS Medical v. Royal College of Surgeons[2019] IESC 4.
Options available to a court hearing an application for summary judgment
69. Before analysing the factual matters in contention in the present appeal it is useful to examine the range of responses available to a court in an action for summary judgment with a view to positioning the facts and arguments in the present case within that range.
70. On one end of the range are cases where a plaintiff establishes its claim on the affidavit evidence, as the defendant is not able to persuade the judge either that the evidence is incomplete or that there is a basis on which a credible defence exists. That approach to both the law and the facts is established in the authorities and a court hearing a claim for summary judgment, whether that be for summary judgment for debt or for summary possession, must be satisfied that the plaintiff has established its claim and that the defendant has not put forward a basis for a credible defence either on the facts or on the law.
71. By way of illustration, the recent decision of the Court of Appeal in Doyle v. Houston[2020] IECA 86 was a judgment mortgage suit where, in the light of the conclusiveness of the Register by reason of s. 31 of the Registration of Title Act 1964, Costello J., with whom the other members of the court agreed, held that the judgment was well charged against the interest of the defendant. She also rejected the argument regarding jurisdiction in the light of s. 3 of the Land and Conveyancing Law Reform Act 2013, and held that the judgment mortgage had been registered on foot of a certificate of taxation validly made, and that the plaintiff had proved her case on the evidence and was entitled to well charging relief on a summary basis.
72. Another illustration of that class of cases is the judgment of Laffoy J. in Allied Irish Banks Plc v. Richard McKenna and Another[2013] IEHC 194 where, having regard to her conclusion that no issue of fact remained to be resolved on a special summons heard on affidavit, and that the error in the grounding affidavit concerning the loan agreement had been plausibly explained and the bank evidence cross-examined on behalf of the defendants, she held that the plaintiff had established its case and that allegations raised by the defendants did not inhibit the entitlement of the plaintiff to summary possession on foot of the mortgage.
73. That judgment illustrates how factual disputes are capable of resolution in summary proceedings, albeit that was a case where witnesses were cross-examined, and legal arguments, depending on the degree of complexity, may be resolved on a summary basis if the trial judge is satisfied that this may fairly be done: see ACC Loan Management Ltd v. Dolan[2016] IEHC 69 where it was possible to resolve the arguments concerning the validity of guarantees on a summary basis.
74. At the other end of the range of possible results are cases where a defendant either positively establishes a defence either at law or on the merits, or persuades the judge that the plaintiff has not established its proofs. The claim will then fail. Most of the examples are cases where the defendant has advanced an unanswerable legal defence, as for example in the judgment of Dunne J. in Start Mortgages v. Gunn where the repeal of s. 62(7) of the Act of 1964 by s. 8 of the Land and Conveyancing Law Reform Act 2009 meant that there was no legal basis in some of the claims there under consideration on which the court could grant possession.
75. Another example is the judgment of Laffoy J. in GE Capital Woodchester Home Loans Ltd v. Reade and Another[2012] IEHC 363, and supplemental decision [2012] IEHC 459, where she accepted the argument of the defendant that the plaintiff had not established its case on the evidence as the plaintiff could not show compliance with the charge provisions that required formal demand to render the monies due and payable. The claim was dismissed as that defendant had positively established that the monies secured had not become due, the power of sale had not become exercisable, and therefore the plaintiff was not in a position to rebut that argument.
76. Many applications for summary judgment would fall between these two extremes and will involve the proffering of evidence or argument by a defendant by way of defence which is not sufficient to rebut the evidence of the plaintiff to enable the judge to make a positive finding against the plaintiff, but which offers enough doubt as to the truth or completeness of the plaintiff’s evidence, or credibly presents reasonable arguments or evidence that a defendant has a basis of defence which merits further scrutiny, evidence or argument. In that instance the trial judge is constrained by the inability to decide between contested affidavit evidence of fact, or resolve complex questions of law, the action cannot therefore be disposed of summarily and will be adjourned to plenary hearing.
77. What is contemplated by s. 62(7) is a trial on affidavit or a mixed trial with or without oral evidence and with cross-examination as the case may be. The more complex the facts, the more detailed the cross-examination, and the more doubts that are raised the less likely it is that the matter can be dealt with summarily, and a speedy resolution may not be possible. In those circumstances the court has a power under Order 5B r. 8 to adjourn the civil bill for plenary hearing and to give directions, order discovery, etc. as may be appropriate.
78. In my view for the reasons I now turn to examine the matters averred to by Ms. Cody cannot be said to have established that the Bank had not made out its proofs, nor has she established either a factual or legal basis on which the trial judge could dismiss the action. Rather she made a number of averments and assertions which threw sufficient doubt on the veracity or completeness of the facts leading to the making of the loans to require that the action be adjourned to plenary hearing.
The facts in contention
79. Paragraph 5 of Ms. Cody’s first affidavit makes a generalised broad assertion that the mortgage was part of a “systemic fraudulent practice” and that the loans were created in her name “without my knowledge or consent”. Her third affidavit sworn on 4 January 2019 makes similar generalised allegations of fraud by her former husband and of collusion with the Bank including an averment at para. 28 that “there is evidence that my signature has been forged” on documentation supporting loans and securities. These averments taken alone would not be sufficient as the documentation exhibited by the plaintiff had at least the appearance of establishing otherwise, and the documentation exhibited in the affidavits from the authorised bank officials show loan offers with signified acceptance and a charge registered against the folio which must be treated for present purposes as conclusive.
80. Ms Cody avers in paragraph 6 of the first affidavit that she was not present when her signature was purported to have been witnessed by Bank of Ireland personnel, although the documentation she exhibits is a mortgage protection declaration form and could not be regarded as a central document in the chain of documentation creating the loan. At para. 7 she says that the staff at her husband’s former practice likewise purported to witness her signature when she was not present. She does exhibit one document on which she says her signature was forged, but again that document, a notice of interest or cessation of interest in a fire policy, is not a central document in the chain of documents by which the loan or security were created. However, she went somewhat further and in her third affidavit she says, at para. 8, that she never received any statements for the mortgage accounts, and that all documentation and all statements were sent to an address at which she did not live and which was either the address of her husband’s legal practice or his separate residential address, and the discrepancy or doubt arises because the address used on some of the documentation is an amalgam of both. She makes these averments by reference to the documents exhibited by the Bank in the form of letters of loan offer, signature at the foot whereof was deemed to be acceptance.
81. At para. 8 of her first affidavit she says that she could not prepare a defence without sight of the Bank documentation, and no offer was made to furnished this to her, nor was any further documentation added to the suite of documents on foot of which the Bank moved, and in this she echoes the point made by Clarke J. (as he then was) in GE Capital Woodchester Ltd v. Aktiv Kapital Asset Investment Ltd.[2006] IEHC 195, [2007] ILRM 203 that sometimes a court considering an application for summary judgment must have regard to the fact that a defendant may not have the relevant evidence to support a credible defence but can show a credible basis that such facts exist. See also the Court of Appeal decision in Templecrone Co-Operative Agricultural Society Limited v. McLoughlin[2015] IECA 14 where there was a credible basis to suggest that discovery might produce such evidence. In a similar vein in her affidavit of 31 December 2018 her main request was for an adjournment until the court order of 10 April 2017 for disclosure of the documents the subject of the data protection request had been complied with. Her fifth affidavit too was sworn to support her application for an adjournment of the Circuit Court hearing. Ms. Cody does not put forward a broad statement that there may well be documentation which would assist her defence, but she does say that until she obtains the original and a full suite of documents, she is not in a position to say more at this stage in the process by way of defence.
82. I am far from saying that every defendant who argues or who avers on affidavit that further information is required to defend a claim for possession has thereby put an onus on the owner of the charge to establish further evidence by affidavit, but there is no substantive replying affidavit at all from the Bank to deal with her assertion that she needed sight of Bank documents and none at all to the second, third, fourth and fifth affidavits of Ms. Cody, the last of which was sworn on a date in February 2019, the precise day of swearing not being clear in the copy on the papers.
83. These averments could not be described as broad and generalised averments, but are more properly to be seen as supportive of her general averment that she had not received or seen the relevant documentation or the loan accounts or statements relevant to the loans and mortgage over the years. It is curious that thereafter the Bank did not seek to adduce further evidence that the loan offers and mortgage and other relevant documentation had in fact been sent to Ms. Cody or to the address at which she resided, nor was any evidence adduced that her husband had acted on her authority or behalf. Instead Mr Pullan’s affidavit contains no further averment of fact and it consists primarily of legal argument as to what was not contained in Ms. Cody’s replying affidavit and an averment (at para. 6) that nothing therein discloses a defence to the claim. The balance of the affidavit evidence is concerned with updating the debt figures.
84. At the least her averments provide some, albeit not determinative, evidence to support the general statement contained in her first affidavit that the loan and securities were created without her knowledge or consent.
85. Counsel for the appellant argues that the affidavit evidence of Ms. Cody amounts to no more than generalised assertions with no credible basis or other corroborative evidence either to throw sufficient doubt on the claim of the plaintiff that monies were borrowed and fell into arrears, or that those loans were secured by a registered charge on foot of which the Bank sought possession.
86. It is pointed out that Ms. Cody does not deny that the monies advanced were received by her or her husband, she does not say she was coerced into signing, and that even though she denies that the charge binds her interest in the lands, she does not deny that she signed the loan documents, but rather relies on an absence of proper witnessing, the precise relevance or importance of which it is argued is nowhere asserted.
87. In my view, the replying supplemental affidavits furnished on behalf of the Bank did not deal adequately with the assertions made in the affidavits of Ms. Cody, and whilst it cannot be said that she anywhere expressly denied having executed the documents, Simons J. took the view, and in my view was entitled to do so, that the implication to be drawn from her affidavit evidence was that the fact that her signature was not witnessed on the documents amounted to an assertion that the documents were not hers. She has presented a picture of a series of events to support her statement that she did not know of the transaction, which taken together throw some and not an unreasonable level of doubt on the sufficiency of the evidence adduced by the Bank. It is in my view relevant that she was not represented when the affidavits were prepared, and that she sought to adjourn the hearing to obtain further documentation by discovery or data request.
88. Further, it is apparent from an examination of the documents exhibited by the Bank in support of its claim that special condition (iii) of the first loan offer of 8 September 2015 suggests that the appellant Bank was aware of the marriage breakdown. While of itself this cannot be read as fully supportive of Ms. Cody’s general averment that she was unaware of the loan or securities, it does add some weight to her general denial, and means in my view that she had by the combination of her evidence and assertions in affidavit raised more than an implausible or generalised or vague denial, and she did present a sufficient basis to support a request for further enquiry which, taken with the fact that the Bank did not positively respond to her assertions, was broadly sufficient to make summary disposal unsatisfactory.
89. Simons J. was met with evidence he found credible that the documents, and in particular the signatures on the loan agreements and charge, were not as they appeared, what was described by Clarke C.J. in RAS Medical v. Royal College of Surgeons at para. 90 as “contested questions of fact” which he considered he could not decide in favour of the Bank. Having recited the basis of the Bank’s claim and the dispute raised by Ms. Cody in her affidavits, he concluded that the Bank had not discharged the onus of proof upon it as moving party and that its case had failed. He had relied largely on the fact that the Bank had not sought to cross-examine Ms. Cody on her affidavit and, relying on para. 88 of the judgment in RAS Medical v. Royal College of Surgeons in which Clarke C.J. found that it is incumbent on a party that wishes to assert that evidence tendered by an opponent lacks credibility or reliability to cross-examine that witness, held that as a consequence the Bank was not competent to argue that her evidence lacked either reliability or credibility.
90. It is not for this Court to consider whether it would have so found, and the correct approach to the facts at this level of appeal is to determine whether the trial judge had sufficiently considered the evidence, assessed it in the light of the standard of proof required to be met, and made a decision as to whether the proofs are met.
91. In my view he did have sufficient facts and his conclusions are adequately supported by those facts and the inferences he drew from the facts and absence of rebuttal by the Bank, and for that reason and in deference to his detailed analysis of the facts, I would not reverse his conclusion that Ms Cody had made out a credible case that she had a stateable defence to the claim.
92. This consequence is fortified by the fact that summary proceedings commenced by the Bank against both Ms. Cody and her former husband have resulted in the consent order of 28 February 2020 that the claim for judgment against Ms. Cody be adjourned to plenary hearing and in which directions for pleadings and other management steps have been made. The Master of the High Court had made an order on 5 May 2019 adjourning the motion for judgment to plenary hearing, that decision was appealed by the Bank and on consent the appeal was dismissed. There is for that reason an acknowledged bona fide dispute yet to be determined regarding the indebtedness of Ms. Cody to the Bank. There might also be a potential unfairness if that claim is to proceed to plenary hearing while the possession proceedings are disposed of summarily, as the arguments are broadly similar. That approach was adopted by Kelly J. in Anglo Irish Bank Corporation Ltd. v Sherry2010 IEHC 271 because of the similarity in the evidence and arguments.
The second judgment: dismiss or adjourn to plenary hearing?
93. This conclusion would have in most cases led to a decision to adjourn the hearing to plenary hearing, and Simons J. before he reserved his judgment invited the Bank to make application for an adjournment to plenary hearing, an invitation he thought was inexplicably declined. Thereafter he reserved his decision, delivered his written judgment concluding the Bank had not proved its case and the matter giving rise to the second judgment then evolved.
94. Having concluded that the appeal against the order for possession was to be allowed the trial judge very properly permitted the parties to consider his written judgment before dealing with the costs of the proceedings, and on 21 February 2020 at the adjourned hearing an application was made on behalf of the Bank to have the appeal remitted to plenary hearing. Simons J. refused and concluded that as he had finally determined the appeal in his first judgment he did not have jurisdiction to then remit the matter to plenary hearing and that the sole matter left for determination after he had delivered his first judgment was the question of costs. He did not consider that any circumstances existed that permitted him to revisit his judgment, such as envisaged in Bailey v. Commissioner of An Garda Siochána[2018] IECA 63. He also rejected the suggestion that he had in his first judgment merely found that there was a conflict of evidence that he could not resolve, as in the first judgment he had unequivocally found that the Bank had not proved its case. He thought he had no role to “come to the rescue of a plaintiff who had failed to establish its proofs”, especially as the plaintiff had been represented and the defendant had not. As discussed above, I do not consider that this was correct as Ms. Cody had not done enough to permit the dismissal of the claim.
General observations on adjournment to plenary hearing
95. Order 5B r. 8(2) provides that the judge hearing summary proceedings for possession on foot of the procedure created thereby may “where he considers it appropriate” adjourn a civil bill for plenary hearing and the proceedings are then to be continued as if they had originated otherwise than in accordance with the order. The rule is silent as to the stage of the process at which this may be done. Whilst there are no constraints, whether of time or sequence, which can be said to govern the adjournment of a possession action to plenary hearing, certain matters that could have arisen in the course of the trial could fairly obviously lead a judge to do so, including an application on consent or a conclusion that the evidence was finely balanced and would benefit from cross-examination or further examination in chief.
96. The rule seems to contemplate that the trial judge may adjourn the proceedings to plenary hearing even in the absence of an application by either party, and there is nothing in the rule that limits the judge from doing so of his own motion and the power is expressed as discretionary. The interests of justice in some cases will require a plenary hearing, notwithstanding the desirability at the root of s. 62(7) that there be a cost effective means of resolution, and the trial judge must on that account be seen as having a power to adjourn to plenary hearing even without request.
97. In National Irish Bank v. Graham[1995] 2 IR 244 the first ground of appeal was whether a special summons seeking possession by summary means ought to have been adjourned to plenary hearing. Finlay C.J. (at p. 249) found that there was no general principle or requirement of justice which made a plenary hearing necessary:
“The purpose of a plenary hearing instead of a summary judgment in a case of this description is for the purpose of resolving a dispute of fact which remains between the parties and the determination or resolution of which is necessary for the decision in the case.”
98. Dunne J. in Anglo Irish Bank Corporation plc v. Fanning[2009] IEHC 141 relied on that dicta of Finlay C.J. that the power to remit special summons proceedings to plenary hearing is a discretionary order.
99. The parties cannot by their choices constrain this discretion, and in the present case the fact that the Bank refused the offer to adjourn to plenary hearing was not determinative of the matter. The procedures available, such as cross-examination, an application to adjourn to plenary hearing, an application for the admission of oral evidence etc, are procedural steps to assist both sides to a dispute and the court in coming to a view of the evidence. But it is for the court to decide itself whether it can reach a conclusion on the evidence, and how and whether other procedures would assist or should be brought to bear in the interests of justice and to enable a decision to be made. That counsel for the Bank had opted not to elect to have the matter heard by plenary action could not constrain the discretion of the High Court, and I do not think Simons J. made his decision on that basis.
100. The adjournment to plenary hearing is a matter ultimately for the judge hearing the summary action and the discretion to do so is not constrained by the choices made by the parties. This is illustrated by Bayworld Investments v. McMahon[2004] IESC 39, [2004] 2 IR 199 in which this Court rejected an argument that a special summons seeking access to documents be remitted to plenary hearing. The defendants had not requested a plenary hearing prior to the commencement of the hearing and served notices to cross-examine the witnesses of the plaintiff a few days before it commenced. McCracken J. considered that the defendant had not been curtailed in any way from raising any relevant points at the hearing and that the trial judge was correct in determining the proceedings under the special summons process.
101. The jurisdiction is one vested by the Rules of the Circuit Court, but may properly be said to be one that exists in any case heard on affidavit. It is perhaps the default position in any case where the affidavit evidence is evenly balanced, where there is a conflict on the affidavits between the parties which cannot be or has not been resolved by way of further affidavit, where the court considers that a matter raised on affidavit, particularly one raised in defence, might have such a bearing on the outcome that its credibility deserves to be fully tested, or where a judge considers that in the light of certain averments which are credible, but not dispositive, it would be either difficult or unfair to resolve the matter without giving both sides the opportunity to further advance that evidence or, where necessary, to test it. The adjudicative function is not a matter of box ticking or a purely logical engagement with a checklist of proofs that must be met by a plaintiff. Certain evidential presumptions or burdens can make the task of adjudication at times appear almost effortless, but the fact remains that a judge met with evidence, whether contested or not, must weigh that evidence, assess its veracity, credibility, and importance for the purposes of proving those matters that are required to be established. In a case where the action is heard on affidavit, courts are vigilant to consider the option to adjourn the matter for plenary hearing. The vigilance derives from the fact that affidavit evidence of its nature is often in terms which have a tone of certainty which is not always found in oral testimony, particularly where that is cross-examined, and because the affidavits are often drafted by lawyers with a view to the legal test.
Application to present appeal
102. I consider that Simons J. fell into error in not adjourning the action to plenary hearing. As can be seen from my analysis of the affidavit evidence, Ms Cody did not positively establish a defence to the claim, and did not rebut the evidence of the Bank regarding the grant of the loans. She has not commenced proceedings to have the charge set aside. At best she raises questions which are not answered, but the Bank had established a prima facie case and she did not displace its evidence, and her averments fall short of denying her signature on the documents or that she received the money. She did raise questions and they were sufficient to be more than generalised assertions, but her evidence and arguments are well short of the sort that enabled a court to dismiss the claim of the Bank, as happened in the cases mentioned above at paras. 74 and 75 above.
103. The respondent argues that an adjournment to plenary hearing was unfair as it amounts to giving the Bank an opportunity to mend its hand. But Ms. Cody did not either positively establish a defence or persuade Simons J. that the Bank had not met its proofs, and was not therefore entitled to an order dismissing the claim. Simons J. did not accept her assertions that the documents were the result of a fraud or that they were not her documents, and it is worth repeating that she did not make a positive averment that the signatures were not hers, and that even had she done so the resolution of that factual dispute could not have been fairly done without giving the parties the opportunity to test the evidence. Rather she raised a sufficient doubt to prevent the grant of judgment on a summary basis and without a plenary hearing.
104. An additional factor in the present case is that the Bank asked Simons J. to adjourn the matter to plenary hearing after he had dismissed the action. As Simons J. noted, O. 5B r. 8(2) provides for the adjournment to plenary hearing of an action “at any stage during the course of proceedings” and, while the language of the rule is not dispositive, it does not contemplate the adjournment after judgment is delivered. I accept that the order of the court had not been drawn, but the decision of the judge was pronounced in his written judgment and that decision was that the Bank had not established its claim, which accordingly had to be dismissed. Laffoy J. in GE Capital Woodchester Home Loans Ltd v. Reade and Another permitted the revisiting of the finding that the letters of demand were insufficient but confirmed her first conclusion in the supplemental judgment. The application of the Bank was not an application of that type.
105. I agree with Simons J. that once he had concluded that the claim was not proven he had determined the action and was no longer competent to adjourn that action to plenary hearing, but for the reason explained I do not consider that he was correct to dismiss the claim without a further hearing.
Plenary hearing in the High Court?
106. Because of the conclusion he reached Simons J. did not have to consider whether an adjournment of the appeal to plenary hearing is to the Circuit Court or to the High Court in its appellate jurisdiction. Little assistance is afforded by the Act or the Rules, but it seems to me that from first principles the power is to adjourn to plenary hearing the hearing of the appeal. The adjournment therefore is to trial by plenary hearing before the High Court exercising its appellate jurisdiction, i.e. the High Court vested by statute with the same jurisdiction as the Circuit Court. An argument that adjournment is back to the Circuit Court fails in my view to recognise that the order under appeal was the determination of an action for possession, albeit an action heard on affidavit, and that the action had concluded in the Circuit Court. The remittal to the Circuit Court for hearing would involve the High Court judge adjourning back to the Circuit Court an action which had already been disposed of by that court.
107. Where an action has concluded in the Circuit Court, a High Court judge hearing a statutory appeal is the sole court then vested with the right to determine the appeal. There is no statutory jurisdiction to remit to the Circuit Court, and no such jurisdiction is required to be implied. Indeed, it would in my view potentially lead to an injustice, and a failure to recognise the finality for which s. 39 of the Courts of Justice Act, 1936 provides, were the High Court judge hearing the appeal to remit an action to the Circuit Court for rehearing, when in turn the decision from that remitted hearing would be open to a further appeal. The aim of finality would suggest an alternative interpretation. It must be different with regard to an interlocutory order made in the Circuit Court and dealt with by appeal to the High Court but that proposition derives from the nature of an interlocutory order which does not conclude the action.
108. I would conclude that the power to adjourn summary possession proceedings to plenary hearing cannot be a power to remit the matter to the Circuit Court for further hearing. Rather the power is one to adjourn to plenary hearing in the High Court exercising its statutory appellate jurisdiction, as that court continues to have seisin of the evidential and legal matters raised in the appeal, and has sole jurisdiction by virtue of the fact that the Circuit Court action has concluded.
109. This conclusion underlines the difference between an action completed in a summary manner on affidavit, and an interlocutory motion, and the fast-track process by which summary judgment may be obtained in a mortgage suit provides for the hearing of an action on affidavit, and once that action has been heard the Circuit Court cannot be revisited with jurisdiction to hear the matter as if it had been commenced by equity civil bill on title.
The mode of hearing of the plenary action: “special leave” under s. 37(2)?
110. In the light of that conclusion it is necessary to make some observation regarding the mode of hearing the appeal by plenary action. The High Court judge considered that the provisions of s. 37(2) of the Courts of Justice Act 1936 precluded the adjournment to plenary hearing because the Bank had not sought or given any reasons why “special leave” would be granted to adduce further evidence on the appeal.
111. The hearing of all Circuit appeals is done by rehearing of the action or motion, as the case may be. Section 37(2) provides that in appeals from the Circuit Court in civil cases heard without oral evidence “special leave” of the appeal judge is required to adduce new evidence:
“37(2) Every appeal under this section to the High Court shall be heard and determined by one judge of the High Court sitting in Dublin and shall be so heard by way of rehearing of the action or matter in which the judgment or order the subject of such appeal was given or made, but no evidence which was not given and received in the Circuit Court shall be given or received on the hearing of such appeal without the special leave of the judge hearing such appeal.”
112. It might seem self-evident that a judge who considers that an action for possession is to be adjourned to plenary hearing would implicitly have accepted that new or different evidence was required, or at least that the existing evidence required to be tested by cross-examination or that new evidence could emerge, and the grant of special leave does not seem to me to be a statutory impediment which is to be interpreted restrictively, as the adjournment of an action to plenary hearing will almost invariably require the giving of directions as to pleadings, the preparation of an issue paper, discovery, interrogatories, particulars or even in certain cases witness statements and the evidence emerging would be “new” or different, more detailed or nuanced. There would be little point in making orders for discovery if the delivery of particulars and interrogatories of “new” or different evidence that emerged was not admissible without “special leave”.
113. Order 5B r. 8(2) provides that a civil bill adjourned for plenary hearing is to proceed as if it had originated otherwise than in accordance with this order, and that would seem to infer that special leave could then not be required for the admission of fresh evidence, as none would have been required had the proceedings been commenced by ordinary or equity civil bill in the normal way.
114. In many or most cases adjourning to plenary hearing would be pointless if that hearing was to proceed on the self-same evidence as that produced on affidavit, albeit given orally. The purpose of an adjournment to plenary hearing is not merely to facilitate the testing of evidence, as that may be done within the framework of the summary proceedings by the service of a notice to cross-examine (see RAS Medical v. Royal College of Surgeons). The adjournment to plenary hearing must in my view envisage that more and different evidence will be adduced, usually orally, and without the limitation that made the adducing of such further evidence conditional upon leave of the court. It is consistent with the fact that the appeal is a complete rehearing, and that the determination of the decision of the High Court on an appeal under Part IV of the Act is final and conclusive, as the power of the High Court judge hearing the statutory appeal could result in an injustice when that court was, for reasons of lack of evidence or because he or she found the evidence to be inconclusive, unable to determine the matter in a way that did justice between the parties.
115. Further, in an action adjourned to plenary hearing the evidence previously proffered by affidavit is then, save where otherwise agreed by the parties, to be adduced by oral testimony in accordance with Order 39 rule 1 RSC, and subject to the limited discretion of the trial judge to permit proof by affidavit as considered by this Court in Phonographic Performance (Ireland) Ltd. v. Cody[1998] 4 IR 504, and the recent decision in Whelan v. Allied Irish Banks plc.[2014] IESC 3, [2014] 2 I.R. 199 where part of the evidence was adduced on affidavit. Thus all the evidence at the plenary trial will be “new” to that extent, and the course of the plenary trial could not be constrained by s. 37(2). Evidence given orally will almost always be different even if the differences are one of emphasis or tone.
116. I am satisfied in those circumstances that s. 37(2) does not impose a restriction on the admission of new and additional evidence in the hearing of an appeal adjourned to plenary hearing in accordance with O. 5B r. 8(2). The hearing of the action should proceed in the High Court by plenary hearing and subject to directions, further pleadings, issue paper or submissions as the judge shall determine.
Conclusion and summary
117. The arguments and evidence of Ms. Cody were not sufficient to displace the prima facie evidence of the Bank that the right to seek possession by reason of default in payment of the money secured by the registered charge had arisen and become exercisable. She did however make more than generalised and bald general assertions and her affidavits were sufficient to entitle her to a trial of the action for possession on a plenary basis.
118. I would for that reason allow the appeal and order that the action for possession now proceed before the High Court by way of appeal under Part IV of the Act of 1936, and without any requirement that either party be required to seek special leave to adduce such evidence as they may deem appropriate at the hearing. The order restricting the right of the charge holder to commence further proceedings for possession against Ms. Cody must as a consequence also be set aside.
Bank of Ireland v Purcell SC
[1990] ILRM 106 Walsh J
On 1 April 1975 the defendant deposited with the plaintiffs, without a note or memorandum in writing signed by the defendant at the plaintiffs’ branch in Tipperary, Co. Tipperary the land certificate for the property contained in Folio 7906 of the Register of Freeholders for the County of Limerick. It was to be held by the plaintiffs by way of equitable mortgage to secure all liabilities of the defendant both then and in the future, either solely or jointly with another or others and whether it was principal or surety together with interest at current bank rates. The lands in question comprise of 47 acres 2 roods and 26 perches situated in Co. Limerick. Since the passing of the Family Home Protection Act 1976, the house on the property which was and is the home of the defendant and his wife has been the family home of the defendant and his wife within the meaning of that expression as contained in s. 2 of the Family Home Protection Act 1976.
Since the coming into force of the Act of 1976 the plaintiffs have always been aware of and have had notice of the fact that the house in question was the family home of the defendant within the meaning of the latter Act. The defendant’s wife never gave her consent to the making of any conveyance or mortgage or the making of any advances by the bank in accordance with the provisions of s. 3 of the Act nor was she ever asked to do so.
The present case arises out of the efforts of the plaintiff company to recover advances made after the passing of the Act of 1976 and for that purpose the plaintiffs sought a declaration that the lands the subject of the land certificate stand charged by way of equitable mortgage for the sums including interest thereon amounting in whole to £10,788.49 together with further interest on the principal until payment.
It was submitted on behalf of the plaintiffs that because deposit of the title deeds was made before the passing of the Act of 1976 the defendant had effectively mortgaged the lands by way of deposit of title deeds and that all advances made after the coming into force of the Act were made on foot of a mortgage created before the passing of the Act of 1976. Accordingly the plaintiffs submitted that the provisions of s. 3(1) of the Act of 1976 did not apply.
That section provides that where a spouse
without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to s. 4(2) and (3) the purported conveyance shall be void.
‘Conveyance’ is defined by that Act as including ‘a mortgage’ and ‘interest’ is defined by the Act as meaning ‘any estate, right, title or other interest, legal or equitable.’
Deposit of title deeds is a well established method of creating mortgages in Ireland and has been given statutory recognition in the Registration of Title Acts of 1964 and 1970 so far as registered land is concerned. Furthermore such an equitable mortgage by deposit need not be registered in the Land Registry as a burden on the land in order to secure priority against subsequent transactions relating to it. As the learned trial judge pointed out an equitable mortgage by deposit of title deeds which is not accompanied by any note, memorandum or other document, cannot be registered because there is no document which can be registered.
What the plaintiffs contend in the present case is that the deposit of the land certificate gave an equitable estate in the lands and so long as the deposit remained that interest existed whether or not money advanced had been repaid. A statement to that effect appears in the judgment of Kenny J in Allied Irish Banks v Glynn [1973] IR 188 at 192 upon which the plaintiffs rely.
The Family Home Protection Act 1976 is a remedial social statute enacted to protect the interest of the non-owning spouse in the family home and to deal with and to seek to remedy the social problem which was created or could be created by the fact that the spouse who owned the family home could effectively put the other spouse out on the street by selling it or mortgaging it. This was sometimes done out of vindictiveness and against which the other spouse had no redress. Most frequently the victimised spouse was the wife. She and her children could be left to fend for themselves so far as accommodation was concerned. It was to secure the position of such a spouse the Act was passed. It made provision for barring a spouse from the family home even when that spouse is the owner of that home, if such spouse was misbehaving in a manner contemplated by the Act.
In particular the Act secured the position of the non-owning spouse by s. 3 which provided that the owning spouse could not, without the prior consent in writing of the other spouse, purport to convey any interest in the family home to any person except that other spouse.
This statute is not to be construed as if it were a conveyancing statute. As has been frequently pointed out remedial statutes are to be construed as widely and liberally as can fairly be done. The first consideration in construing s. 3 is to ascertain the purpose of the section. That purpose was what I have already pointed out. I agree with the opinion expressed by the learned trial judge that while a mortgage by deposit of deeds can constitute the conveyance of an interest in the family home for the purpose of s. 3(1) of the Act the extent of the interest so conveyed depends upon the amount which has been borrowed against it. As the learned judge pointed out each time a further advance is made the interest in the property which is being charged is altered. As deposed to in the affidavit filed on behalf of the plaintiffs the deposit of title deeds made on 1 April 1975, without any writing, was intended to secure all liabilities present and future. Thus the transaction contemplated future charging of the interest in the land in question by way of mortgage. If at any time no monies were due on foot of the mortgage then for the purpose of s. 3 the property was unencumbered, notwithstanding the deposit of deeds and the bare equitable interest therein by the deposit of deeds was not the substantive interest in the property contemplated by s. 3. If such was the position on the date the deposit was made then the family home was not encumbered. If some monies were due on that date then the family home was encumbered only to that extent. As it is clear that at all material times the plaintiffs had notice that the lands comprised the family home any interest of the type I have mentioned was after the coming into force of the 1976 Act created without the consent of the defendant’s wife and therefore was void as a mortgage though leaving untouched the personal liability of the borrower to the bank. I am satisfied that the statute never contemplated the position whereby a family home could be endangered by encumbrances created by advances made subsequent to the coming into force of the Act by an equitable deposit created before the Act (or even by a legal mortgage made before the Act for advances subsequent to the Act) any more than a second legal mortgage could achieve the same result simply because there was already a first mortgage on the property executed before the coming into force of the legislation.
I would uphold the order of the High Court judge that the declaration in this case should be made to the effect that no security was created in favour of the plaintiff over the family home in respect of advances made after the date upon which the Act came into force. The fact that by reason of the personal debt of the husband the matter may ultimately give rise to the creation of a judgment mortgage does not effect the matter now before the court. I do not find it necessary to offer any opinion on the situation which would arise concerning the right of the other spouse in the event of a judgment mortgage being registered in respect of advances made after the coming into force of the 1976 Act.
I am of opinion that the appeal should be dismissed.
Bank of Ireland v Philip Purcell HC
[1988] I.L.R.M. 480
BARRON J
delivered his judgment on 9 November 1987 saying: The plaintiff holds an equitable charge over the defendant’s lands by virtue of a deposit of the title deeds thereto in the year 1975 to secure both present and future advances. The said lands include the home of the defendant and his wife and since the passing of the Family Home Protection Act 1976 have been the family home of the Defendant within the meaning of that expression as contained in s. 2 of that Act. Following the creation of the charge, the plaintiff made further advances to the defendant from time to time both before and after the date upon which the Act came into force. It is accepted that at all material times the plaintiff had notice that the said lands comprised the family home of the defendant. The defendant’s wife was never asked for nor did she ever give her consent to the making of any such advances in accordance with the provisions of s. 3 of the Act. The defendant submits that as no such consent was given, advances made after the passing of the Act were unsecured. The plaintiff on the other hand submits that no such consent was necessary.
S. 3 (1) of the Act is as follows:
Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subsections (2) and (3) and section 4, the purported conveyance shall be void
‘Conveyance’ is defined by the Act as including:
a mortgage, lease, assent, transfer, disclaimer, release and any other disposition of property otherwise than by a will or a donatio mortis causa and also includes an enforceable agreement (whether conditional or unconditional) to make any such conveyance
‘Interest’ is defined by the Act as meaning ‘any estate, right, title or other interest, legal or equitable’.
It is submitted on behalf of the plaintiff that the interest of the defendant in the said lands passed to the bank by virtue of the deposit of the land certificate and that accordingly when the further advances were made no further interest in the lands could have passed to the bank. Counsel referred to In re O’Byrne’s Estate (1885) 15 LR Ir 373 in which it was held that further advances were not a disposition of the estate which required registration for the purposes of s. 4 of the Irish Registration Act 1708. That is because there is no document which is required to be registered. Such further advances are in exactly the same position as an original advance on foot of an equitable deposit. Admittedly, Naish, C., refers to the disposition of the estate as being effected by the original deed of mortgage, but he does refer to the further advances as transactions. At p. 377 he says:
The Registration Acts must be taken as applying to deeds to secure future advances as well as to others. There is nothing in the Acts excluding such deeds from their operation, or preventing such deeds from sharing in and enjoying the advantages and priorities they confer. This being so, what is there which can be registered except the original deed itself? The making of the advance across the bank counter, or by placing a sum of money to the credit of the mortgagor is not a transaction which can be registered. It was said the Bank might insist on the execution by the mortgagor of a memorandum, and then register it; but in such case the security would be created in reality, not by the original deed, but by the memorandum; whereas, in reality the security which is acquired in case of a deed to secure future advances, for such future advances, is derived from the deed itself, and when registered the Registry Act does not detract from its force of efficacy as against persons claiming through the mortgagor, and who cannot prove notice so as to affect the conscience of the first mortgagee
It seems clear from this passage that it is the security which derives from the original transaction or agreement. Further transactions may take place without affecting the security, but equally clearly must alter its amount. In my view, this case does not bear upon the question to be decided.
I was also referred to a passage from the judgment of Kenny J. in Allied Irish Banks Ltd v Glynn [1973] IR 188 at p. 191. There Kenny J. said:
The deposit, as security, of documents of title to land which is not registered gives the person with whom it is made an equitable estate in the lands until the money secured by it is repaid.
Undoubtedly the deposit of the land certificate gives to the bank an estate in the lands, but the word ‘interest’ in the subsection is defined more widely than a reference to an estate. The conveyance of the estate in lands is the conveyance of an interest for the purposes of the section, but the fact that the estate has already been conveyed need not prevent a subsequent transaction from conveying an ‘interest’ in the lands. In the case of a mortgage the extent of the estate depends upon the amount which has been borrowed. Even in a case of a legal mortgage where there is a conveyance of the fee simple the interest of the mortgagor and of the mortgagee in the lands so mortgaged will depend at any given time upon the extent of the moneys lent and borrowed. No doubt so long as any moneys are charged on the lands the fee simple estate will be in the mortgagee. However, that of itself does not mean that thereafter the mortgagor cannot purport to convey a further interest to the mortgagee, because in that situation the value of the equity of redemption is being altered on the occasion of each further advance. The same situation arises in the present case. Each time there is a further advance the amount which is being charged on the lands is altered and accordingly the interest of the mortgagor in those lands is altered. I have no doubt that future further advances are the conveyance of an interest in the lands for the purposes of s. 3 of the Act.
Under a mortgage for present and future advances, the mortgagee thereunder may continue to make such future advances without affecting the priority of his security until he has notice of any subsequent mortgage. Once he has such notice, then his rights in respect of further advances are subordinated to the rights of the subsequent mortgagee of which he has notice. It accords with this principle that when the mortgagee has notice of any other subsequent right then his rights in respect of further advances are similarly subordinated to such right.
If the plaintiff had not had notice that the lands were a family home for the purposes of the Act, the right of the spouse would have been subordinated to that of the plaintiff. That is not the case here. There will be a declaration that no security was created in favour of the plaintiff over the family home of the defendant in respect of advances made after the date upon which the Act came into force.
Allied Irish Banks plc v. O’Neill
[1995] 2 IR 475
Laffoy J. 475
In these proceedings the plaintiff claims, inter alia, a declaration that the sum of £50,303.94 together with continuing interest at the court rate stands well charged on the interest of the second defendant in the lands registered on Folio 503 of the Register of Freeholders, County Carlow and an order that payment of the said monies be enforced by a sale of the said lands or by the appointment of a receiver or both.
The lands formerly registered on Folio 503 of the Register of Freeholders, County Carlow, which are now registered on Folio 7308F of the Register of Freeholders, County Carlow, comprise 63 acres 0 rood and 26 perches statute measure. On the 12th December, 1991, the second defendant deposited the land certificate in relation to the lands registered on Folio 503 of the Register of Freeholders, County Carlow, of which she was then registered as full owner, with the plaintiff and the deposit was intended by way of equitable mortgage to secure her indebtedness to the plaintiff. On the 21st July, 1993, the plaintiff obtained judgment in this court against both defendants in the sum of £48,071.23 representing the indebtedness of the defendants to the plaintiff on foot of joint term loan accounts, and £181.00 costs.
It is common case that on the 12th December, 1991, the defendants, who were married to each other, were ordinarily resident in a dwellinghouse located on the lands registered on Folio 503. The prior consent of the first defendant for the purposes of s. 3 of the Family Home Protection Act, 1976 (the Act of 1976) to the equitable mortgage in favour of the plaintiff intended to be created by the deposit of the land certificate was not obtained. It is conceded by the plaintiff that, in the absence of such consent, the deposit of the land certificate with the plaintiff did not create a valid equitable mortgage on the “family home” within the meaning of the Act of 1976, of the defendants. However, having filed in these proceedings an affidavit sworn by George Sothern, an estate agent and auctioneer, which exhibits a map designed to show the portion of the lands now registered on Folio 7308F which comprises the dwellinghouse and “such lands as are enjoyed with and form the garden surrounding the dwellinghouse”, the plaintiff contends that it has a valid equitable mortgage on the balance of the lands registered on the folio and that it is entitled to the relief claimed in these proceedings in relation to the balance of the lands.
By consent of the parties the court tried the following issue:”
Whether, notwithstanding the absence of the prior consent in writing of the first defendant who was and is the second defendant’s husband, the deposit by the second defendant with the plaintiff of the land certificate in relation to Folio 503 of the Register of Freeholders, County Carlow constituted a valid and effective equitable mortgage of so much of the lands comprised in that folio as did not constitute the family home of the defendants or whether the court has power to apportion the lands comprised in the said folio or to sever so much of the said lands as do constitute the family home of the defendants so as to render the said deposit a valid and effective equitable mortgage.
The Act of 1976 is described in its long title as “an Act to provide for the protection of the family home and for related matters”. Section 3, sub-s. 1, provides as follows:”
“Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subsections (2) and (3)and section 4, the purported conveyance shall be void.”
None of the exceptions provided for in sub-ss. 2 and 3 and s. 4 is relevant to the issue which arises here. In s. 1 of the Act of 1976 the word”conveyance” is defined as including certain specified forms of disposition, including a mortgage, and “any other disposition of property otherwise than by a will or a donatio mortis causa” and it is stipulated that the word “convey” shall be construed accordingly. The word “mortgage”is defined as including an equitable mortgage. The word “interest” is defined as meaning “any estate, right, title or other interest, legal or equitable”. In sub-s. 1 of s. 2 the expression “family home” is defined as meaning “primarily, a dwelling in which a married couple ordinarily reside”. For the purpose of determining the issue which arises here, it is unnecessary to consider the secondary meaning ascribed to that expression in sub-section 2. Sub-section 2 of s. 2 provides:”
“In subsection (1) ‘dwelling’ means ”
(a) any building, or
(b) any structure, vehicle or vessel (whether mobile or not)
or part thereof, occupied as a separate dwelling and includes any garden or portion of ground attached to and usually occupied with the dwelling or otherwise required for the amenity or convenience of the dwelling.”
Counsel for the plaintiff submitted that to strike down the entire equitable mortgage would be to extend the scope of the Act of 1976 beyond what was intended by the legislature, in that the farm land which comprises the balance of the lands now registered on Folio 7308F when the family home, as defined in the Act, is segregated was never intended to come within the scope of the Act of 1976. There are two conditions, it was argued, which must be satisfied if land is to be part of the family home, as defined: it must be attached to the dwelling and it must usually be occupied with the dwelling or otherwise required for the amenity or convenience of the dwelling. The first defendant, it was submitted, is effectively inviting this court to disregard the second stipulation and to treat as the family home the dwelling and any land, however extensive, attached to it. He submitted that the extent of the protection afforded by the Act of 1976 can hardly depend in logic or justice on the accident of the paper title on foot of which the land is held. He relied on the decision of the Supreme Court in Nestor v. Murphy [1979] I.R. 329 and contended that when one adopts the purposive approach to the construction of the relevant provisions of the Act of 1976, which the Supreme Court held one must, to declare void the equitable mortgage of the entirety of the lands would lead to a wholly unreasonable result, and a result which would do great violence to the definition of “family home” in section 2. As to the general approach which should be adopted in determining the issue, it was submitted on behalf of the plaintiff that the question which must be addressed is the extent to which the equitable mortgage is void and that it is unhelpful to approach the determination by asking the question whether the family home can be “severed”. It is a question of fact for the court to decide in each case what comprises the “dwelling” and what land comes within the boundaries of the “dwelling”.
On behalf of the defendants it was submitted that sub-s. 1 of s. 3 contemplates a single conveyance which would be either wholly valid or wholly void. The word “conveyance” having a statutory meaning ascribed
to it, if one applies sub-s. 1 of s. 3 to this transaction, it must be the equitable mortgage itself which is void. If the legislature had intended to effect partial invalidity, it would have been a simple matter to add to sub-s. 1 a formula such as “insofar as it affects the family home”. Counsel for the defendants relied on the judgment of Costello J., as he then was, in Hamilton v. Hamilton [1982] I.R. 466, as authority for the proposition that it is not possible to apportion lands included in a conveyance so as to isolate the family home and ensure partial validity of the conveyance and he also referred to the passage from Farrell, Irish Law of Specific Performance, at p. 156, in which the judgment of Costello J. is considered. An equitable mortgage created by the deposit of the land certificate, it was argued, affects all the lands comprised in the land certificate: there being no memorandum, there is nothing that is severable and by its nature the transaction is indivisible and stands or falls in its entirety. Further, severance of such an equitable mortgage would be contrary to two basic rules of the doctrine of severance: first, it would not be possible to strike out the offending part, there being nothing in writing from which the offending part could be deleted; secondly, severance would alter the scope and intention of the transaction, it being the intention of the parties to charge all the lands. It was also submitted on behalf of the defendants that severance would give rise to insuperable practical difficulties in deciding where the dividing line should be drawn and would also raise the question of subdivision of the folio.
The issue in Hamilton v. Hamilton [1982] I.R. 466 was whether the prior consent pursuant to s. 3 of the Act of 1976 of the plaintiff, who was the wife of the first defendant, was necessary to render valid a conveyance by the first defendant to the second defendant of a mansion house and 215 acres of land pursuant to a contract for sale entered into between the first defendant, as vendor, and the second defendant, as purchaser, prior to the enactment of the Act of 1976. The Supreme Court held that the Act of 1976 did not have a retrospective effect. Costello J., in his judgment, having stated that the second defendant, Mr. Dunne, accepted that the dwelling and the garden attached to it constituted a family home within the meaning of the Act of 1976 went on to say at page 490:”
“But once this concession is made, as indeed it had to be made, it seems to me that Mr. Dunne’s argument must fail. The effect of the proposed conveyance will be to convey this family home, even though there will be conveyed with the family home additional land which may not form part of it. Once a proposed conveyance includes a family home then, it seems to me, the provisions of s. 3, sub-s. 1 of the Act of 1976 apply to it and the written consent mentioned in the subsection is required ” unless the transaction falls within one of the four exceptions set out in the section.
No arguments were advanced to support the alternative plea that the Court should sever the property and decide that written consent was required to a conveyance of the portion of the property comprising the family home but that no such consent was required to a conveyance of the remainder of the property. I do not think that such a contention is sustainable. I am satisfied that the Court is concerned with a proposal to convey a family home within the meaning of the Act of 1976 and that the written consent of the non-disposing spouse to the proposed conveyance is being withheld.”
The issue of severance was not addressed in any of the other judgments delivered in the Supreme Court.
The issue of severance or separation of the “family home” within the meaning of the Act of 1976 from a larger holding might have been but was not addressed by either this court or the Supreme Court in Bank of Ireland v. Purcell [1989] I.R. 327. In that case, the issue to be determined was whether advances made by the plaintiff after the coming into operation of the Act of 1976 to the defendant without the prior consent of the defendant’s wife were validly secured on a farm comprising over 47 acres, which included the family home of the defendant and his wife, the advances having been made on foot of an equitable mortgage by deposit of the land certificate made prior to the coming into operation of the Act of 1976 to secure both present and future advances. Both the High Court and the Supreme Court held that advances made after the coming into operation of the Act of 1976 were not secured.
It is perhaps worth recording that since the issue in these proceedings was argued by counsel in this court, the Supreme Court has delivered judgment in Bank of Ireland v. Smyth [1995] 2 I.R. 459 in his judgment in that case, which was delivered on the 15th November, 1995, Blayney J. reserved for decision on another occasion when the matter would be fully argued the question whether it is possible to sever a charge on the family home and additional land so as to declare the charge void in respect of the family home only, where there has been non-compliance with s. 3 of the Act of 1976. However, having quoted part of the passage from the judgment of Costello J. in Hamilton v. Hamilton [1982] I.R. 466, which I have quoted above, Blayney J. intimated that his inclination would be to agree with the view expressed by Costello J.
The determination of the issue in these proceedings, in my view, is primarily a matter of ascertaining the proper construction of sub-s. 1 of s. 3 of the Act of 1976.
In Nestor v. Murphy [1979] I.R. 326, Henchy J., delivering the judgment of the Supreme Court, stated that what has been called “a schematic or teleological approach” must be adopted in construing sub-s. 1 of section 3. He went on to say at page 329:”
“This means that s. 3, sub-s. 1 must be given a construction which does not overstep the limits of the operative range that must be ascribed to it, having regard to the legislative scheme as expressed in the Act of 1976 as a whole. Therefore, the words of s. 3, sub-s. 1, must be given no wider meaning than is necessary to effectuate the right of avoidance given when the non-participating spouse has not consented in advance in writing to the alienation of any interest in the family home.”
Earlier in his judgment, at p. 328, Henchy J. had analysed sub-s. 1 of s. 3 to ascertain its purpose and had stated:”
“The basic purpose of the sub-section is to protect the family home by giving a right of avoidance to the spouse who was not a party to the transaction. It ensures that protection by requiring, for the validity of the contract to dispose and of the actual disposition, that the non-disposing spouse should have given a prior consent in writing. The point and purpose of imposing the sanction of voidness is to enforce the right of the non-disposing spouse to veto the disposition by the other spouse of an interest in the family home. The sub-section cannot have been intended by Parliament to apply when both spouses join in the ‘conveyance’. In such event no protection is needed for one spouse against an unfair and unnotified alienation by the other of an interest in the family home.”
The purpose of the Act of 1976 was also considered by the Supreme Court in Bank of Ireland v. Purcell [1989] I.R. 327. In his judgment, Walsh J. said at page 333:”
“The Family Home Protection Act, 1976, is a remedial social statute enacted to protect the interest of the non-owning spouse in the family home and to deal with and to seek to remedy the social problem which was created or could be created by the fact that the spouse who owned the family home could effectively put the other spouse out on the street by selling it or mortgaging it. This was sometimes done out of vindictiveness and the other spouse had no redress. Most frequently the victimised spouse was the wife. She and her children could be left to fend for themselves so far as accommodation was concerned. It was to secure the position of such a spouse that the Act of 1976 was passed . . . In particular the Act of 1976 secured the position of the non-owning spouse by s. 3 which provided that the owning spouse could not, without the prior consent in writing of the other spouse, purport to convey any interest in the family home to any person except that other spouse.
This statute is not to be construed as if it were a conveyancing statute. As has been frequently pointed out remedial statutes are to be construed as widely and liberally as can fairly be done. The first consideration is construing s. 3 is to ascertain the purpose of the section. The purpose was what I have already pointed out.”
The Act of 1976 contains a number of provisions, apart from s. 3, the purpose of which is to protect the family home and to safeguard not just a vulnerable spouse, but also his or her family and, in particular, his or her dependent children. However, the most radical and unquestionably the most effective provision in the Act designed to effectuate the purpose of the legislature is section 3.
In defining the expression “family home” and in delimiting the extent of the property to which the protection afforded by s. 3 and the other provisions of the Act of 1976 should apply, the legislature clearly recognised that the family home might be part of a larger holding. Moreover, in defining the expressions “family home” and “dwelling”, the legislature itself theoretically severed such a larger holding and theoretically created new holdings: the family home, being the dwelling together with any garden or portion of ground attached to and usually occupied with it or required for its amenity or convenience, on the one hand, and the balance of the holding, on the other hand. Had the legislature intended that an instrument or transaction intended to effect a disposition of a family home, as defined, and other property, would be wholly and entirely void for non-compliance with s. 3 and individible, such theoretical severance would have been unnecessary.
In sub-s. 1 of s. 3 what the legislature declared should be void is a purported conveyance of “any interest in the family home” by an owning spouse without prior consent in writing of the non-owning spouse. Given the clear recognition by the legislature in the Act that the family home may constitute portion only of a larger holding in my view, on a literal interpretation of sub-s. 1 of s. 3, by reference to the definitions in the Act, the legislature can only have intended to render void the purported conveyance or disposition insofar as it affected the family home. To interpret sub-s. 1 as rendering void not only the conveyance or disposition insofar as it affects the family home portion but also insofar as it affects other property included in the conveyance or disposition, is to ignore the fact that what the legislature by the words it has used has rendered void is a purported conveyance of an interest in the “family home”, to which expression the legislature has ascribed a specific meaning. Therefore, in my view, when sub-s. 1 is literally interpreted giving the words and expressions “convey”, “interest”, “family home” and “conveyance”, the meanings ascribed to them by the legislature, the inescapable conclusion is that the intention of the legislature was that the effect of non-compliance with the prior consent requirement of sub-s. 1 in relation to a conveyance which purports to convey an interest in the family home, as defined, and other property is to render void only the conveyance of the interest in the family home.
Moreover, in my view, whether a literal approach or a purposive approach is adopted to the construction of sub-s. 1 of s. 3 to ascertain the intention of the legislature as to the effect of non-compliance with the prior consent requirement in relation to a conveyance of the family home, as defined, and other property included in the same instrument or transaction, the result is the same. The purpose of the Act of 1976 is to protect the family home defined therein. A construction of sub-s. 1 which limits the invalidating effect to the family home, as defined, is entirely consistent with the legislative scheme as expressed in the Act of 1976 as a whole and fulfills its purpose.
While the construction of sub-s. 1 of s. 3 which I believe properly reflects the intention of the legislature, namely, that the invalidating effect of non-compliance with the prior consent requirement is limited to the interest in the family home, as defined, purported to be conveyed and not any other property comprised in the transaction, undoubtedly creates difficulties between the disponer and the disponee, they are not difficulties which the law is incapable of resolving nor, I would suggest, are they less susceptible of resolution on a fair and equitable basis than the problems which ensue from the alternative construction, namely, that the invalidity extends to the entire transaction. The consequence of limiting the invalidating effect to the family home, as defined, is that the title to the family home remains in the disponer but the title to the balance of the property vests in the disponee. A similar consequence ensues when a disponer has title to and a disposing power over part of the property the subject of a transaction, but has no title to or, alternatively, no disposing power over the remainder of the property. If the disponee in the latter situation seeks a remedy against the disponer in court, by the application of legal and equitable principles the court will determine the entitlement, if any, of the disponee to a remedy against the disponer and the nature of the remedy. In my view, there is no reason why similar principles cannot be deployed to deal with the consequences of rendering partially void a transaction for non-compliance with the prior consent requirement of sub-s. 1 of section 3. While the application of the principles may vary depending on the nature of the transaction, whether it is an outright transaction or by way of security, and whether it is for value or voluntary, and whether it remains at contract stage or the contract has been completed. In the context of the issue to be determined here, suffice it to say that the consequence of construing sub-s. 1 in such a way as to render a disposition partially invalid is not to give rise to insuperable difficulties.
In the instant case, the disposition by the second defendant to the plaintiff was intended to be by way of security. If on the proper construction of sub-s. 1 of s. 3, the equitable mortgage of the family home, as defined, is rendered void because of non-compliance with the prior consent requirement of sub-s. 1 and, as regards the balance of the lands registered on the folio, the equitable mortgage is valid, which I consider to be the case, this court must make a finding of fact as to the extent of the family home portion, on the one hand, and the balance of the lands, on the other hand. Making such a finding does not present any insuperable difficulty. Indeed, had the plaintiff and the second defendant adverted in December, 1991, to the impact of the Act of 1976 on the proposed transaction and had the second defendant created an equitable mortgage on what she and the plaintiff considered to be the balance of the lands registered on the folio after the segregation of the family home as defined (which, of course, would have involved the preliminary step of procuring a separate land certificate in relation to the balance of the lands), and had the first defendant subsequently contended that the purported segregation did not properly have regard to the definition of the family home, it could hardly be suggested that this court could not determine where the dividing line should be and whether the second defendant had purported to include in the equitable mortgage part of the family home, as defined.
The bargain between the second defendant and the plaintiff was that the second defendant’s indebtedness to the plaintiff would be secured on all of the lands now registered on Folio 7308F. To hold that the equitable mortgage only effectively charged part of the lands registered on the folio is not to alter the scope and intention of the transaction or to rewrite the bargain between the parties: it is merely to recognise that the parties only partially effectively implemented their bargain, as would have been the case if, say, the second defendant had lost title to part of the lands registered on the folio prior to deposit of the land certificate by operation of the Statute of Limitations, 1957, against her.
Accordingly, on the issue I find as follows:”
Notwithstanding the absence of the prior consent in writing of the first defendant, the deposit by the second defendant with the plaintiff of the land certificate in relation to Folio 503 of the Register of Freeholders, County Carlow constituted a valid and effective equitable mortgage of so much of the lands comprised in that folio (being the lands now registered on Folio 7308F of the Register of Freeholders, County Carlow) as did not constitute the family home of the defendants, as defined in the Act of 1976.
I propose to adjourn the proceedings to enable the defendants to respond to the affidavit of George Sothern and at the resumed hearing I will hear submissions from the parties on ”
(a) where the dividing line should be drawn between the family home, as defined, and the balance of the lands on the folio, and
(b) whether consent of the Land Commission pursuant to s. 12 of the Land Act, 1965, to the sub-division is necessary or whether the sub-division will be covered by the general consent procedure provided for in Circular No. S.R. 13/77 dated the 8th December, 1977.
Morrissey & anor v The National Asset Management Agency & ors
[2019] IEHC 576 (02 July 2019)
JUDGMENT of Ms. Justice Ní Raifeartaigh delivered on the 2nd day of July, 2019
Section 1: Preliminary Matters
Nature of the case
1. This case raises issues relating to NAMA’s dealings with Mr. Morrissey in connection with a portfolio of loans acquired by NAMA. The loans were originally taken out from Irish Nationwide Building Society (“INBS”). Mr. Morrissey obtained substantial loans in an amount of approximately €27 million from INBS between 2004 and 2006 in connection with his acquisition of seven investment properties. The loans were secured by mortgages over those properties. There were problems with the repayments from as early as 2006. The loans and related security were acquired by NALM in 2010 pursuant to the National Asset Management Agency Act in 2009 (“the Act of 2009”) when the loans were in serious default. In 2014, NAMA decided to call in the loans and related security by demanding the outstanding sum of some €32 million and, following non-satisfaction, by appointment of receivers over the properties. The receivers have since sold the seven investment properties and the net sums received by the sales have been applied in reduction of the debt due.
2. A sum of €3.75 million was also borrowed in 2005 to finance the purchase of a family home of both plaintiffs at Palmerston Road, Dublin 6 and the loan was secured upon the house. This loan is also substantially in default. NAMA has not yet taken a decision to enforce against this loan but Mr. and Mrs. Morrissey have requested the Court in these proceedings to declare that NAMA does not have valid security over the family home for reasons that will become apparent in this judgment.
3. Mr. Morrissey responded to NAMA’s decision to appoint receivers in January 2014 by issuing a plenary summons on the 27th February, 2014. An appearance was entered on behalf of NAMA and Capita on the 6th March, 2014. NAMA then issued a summary summons bearing Record No. 2014/1104S on the 17th April, 2014 and Mr. Morrissey entered an appearance to those proceedings “under protest” on the 1st May, 2014. NAMA issued a notice of motion dated the 16th May, 2014 seeking liberty to enter final judgment in the sum of approximately €32 million with interest. The High Court subsequently gave directions that both sets of proceedings be dealt with together and fixed a timetable for pleadings, affidavits and discovery. It was agreed that the summary claim of NALM would be dealt with by way of counterclaim in the proceedings against NAMA.
The reliefs sought by the plaintiffs
4. The plenary proceedings brought by the plaintiffs raise a multiplicity of legal issues. The reliefs sought can be summarised and paraphrased as follows:-
i. Declarations that the acts of the defendants, their servants or agents in the purported exercise of their statutory and non-statutory functions in respect of the second plaintiff’s properties, including the family home at 36 Palmerston Rd in Dublin 6, including the failure to act fairly and reasonably in respect of the valuation and disposition of the properties, including the appointment of a receiver, and in threatening further interferences with the plaintiff’s constitutional rights, had breached certain constitutional rights of the plaintiffs. The constitutional rights identified included the right to inviolability of the dwelling, rights and duties as spouses, right to property, right to marital autonomy, equality, human dignity, access to the courts and the right to litigate;
ii. Damages for breach of constitutional rights, negligence, negligent misrepresentation, breach of statutory duty, breach of section 3 of the European Convention on Human Rights Act 2003, breach of statutory rights under the Guardianship of Infants Act 1964 and “causing loss by unlawful means”;
iii. An order restraining future breaches of the plaintiff’s rights;
iv. Orders declaring that sections 17, 182, 192, 189, and 195 of the NAMA Act 2009 do not apply to the plaintiff’s claims in respect of their claims of breach of constitutional rights. In the alternative, they seek orders that insofar as these sections of the Act restrict the plaintiff’s access to the courts, they are invalid having regard to the Constitution;
v. An order that the actions of the defendants breached and threatened further interference with the rights of the second-named plaintiff under Article 41.2 of the Constitution;
vi. An order that the actions of the defendants breached and threatened further interference with the first-named plaintiff’s right to earn a livelihood under Article 40.3 of the Constitution;
vii. An order that the above-mentioned sections of the Act of 2009 violate Articles 6, 8, 13 and 14 of the European Convention on Human Rights as well as Article 1 of the first protocol thereof;
viii. Finally, they seek, if necessary, the leave of the Court for bringing proceedings pursuant to section 182(2) of the Act of 2009.
The plaintiffs’ case as set out in the Statement of Claim
5. The Statement of Claim is very lengthy, running to sixty-four pages. Here, I will set out only the broad parameters and repeated themes within it as it contains detailed factual assertions and a vast number of legal claims. Part 1 identified the parties and set out some general background. Part II claimed that the first named defendant had acted unlawfully with regard to Mr. Morrissey’s Business Plan. Part III alleged that the first named defendant unlawfully delegated its authority. Part IV set out complaints concerning alleged unlawful demands as to a business plan letter and Part V dealt with an alleged “further unlawful demand”. Part VI dealt with a claim that NAMA had failed to adequately consider loan disposal or other asset management strategies. Part VII was entitled “NAMA and the Irish Property Market” and Part VIII was entitled “NAMA’s Lifespan and Debt Redemption Targets”. Part IX set out an alleged interference with the independence of NAMA by the Minister for Finance. Part X dealt with the first named defendant’s “unlawful decision to take enforcement action” and the appointment of receivers. Part XI addressed “additional claims against the second named defendant”. Part XII alleged that because INBS had engaged in unlawful conduct, this rendered bank assets void or a nullity. Part XIII contained the claims regarding the family home at 36 Palmerston Road, Dublin 6. Part XIV dealt with an extension of time issue. Part XV contained challenges to provisions of the NAMA Act 2009 and final sections dealt with the European Convention on Human Rights and the EU Charter of Fundamental Rights.
6. Each of the above sections sets out particular facts and went on to make particularised complaints. Certain themes were repeated – that NAMA had: acted ultra vires ; had taken into account irrelevant matters; had failed to give meaningful consideration to Mr. Morrissey’s proposals and plans or to consider alternative methods of managing his bank assets; had adopted strategies that were not in accordance with its statutory functions; had given reasons for their decisions that were vague, inadequate, invalid, and unintelligible; had not afforded Mr. Morrissey fair procedures; had made errors of fact and failed to ascertain the true facts; had made numerical errors; had unlawfully fettered their discretion; had been unlawfully and improperly influenced by the Minister for Finance; had wrongfully relied upon his alleged lack of cooperation; and had engaged in abuse of power, abuse of process and subjected Mr. Morrissey to economic duress. These are not exhaustive, but I think they capture the flavour of the case and the claims made.
The position of the first and second defendants (NAMA and Capita Asset Services (Ireland) Limited
7. The first and second named defendants raised a number of preliminary objections in their written defence which included the following: (1) that Mrs. Morrissey lacked the standing necessary to maintain her claim where she had no interest in the family home capable of being enforced against NAMA; (2) that the plaintiffs had failed to seek the leave of the Court to bring proceedings pursuant to s. 182 of the National Asset Management Agency Act 2009 (“the Act of 2009”); (3) that the plaintiffs were not entitled to challenge decisions of NAMA or Capita where leave to seek judicial review had not been sought within the time limits prescribed by s. 193(1) of the Act of 2009; (4) that the plaintiffs were estopped from challenging the decisions of NAMA or Capita by reason of their conduct including acquiescence or acceptance of various decisions; (5) that the matters raised in Sections VII, VIII and IX of the Statement of Claim were not justiciable; and (6) that claims relating to legal wrongs allegedly committed by INBS could not be brought by reason of s. 105(2) of the Act of 2009.
8. On the substantive issues, the first and second named defendants pleaded numerous denials corresponding with each of the plaintiffs’ claims. These included, among other things, a denial that in deciding to reject Mr. Morrissey’s business plan, it failed to have regard to the Act of 2009, fair procedures, constitutional justice or constitutional rights. It denied that any of its conduct was unlawful, coercive or ultra vires . It denied that it failed to afford Mr. Morrissey a meaningful opportunity to make representations or submissions during the process. It denied that the decision to take enforcement action on the 20th January, 2014 and/or the appointment of receivers was unlawful. With regard to the claim that INBS had an agreement with Mr. Morrissey, it pleaded that s. 101 prevented any such agreement being enforceable as against NAMA; and that, in any event, none of the terms of the alleged agreement were disclosed to NAMA in writing before the acquisition of the loans.
9. As to the facts, NAMA’s case is essentially as follows. It says that it attempted to work consensually with Mr. Morrissey, but experienced a difficult relationship with him because of the manner in which he approached matters. It was submitted that Mr. Morrissey sought to blame INBS for the position in which he found himself; that he felt entitled to link issues relating to his INBS loans and other Anglo loans which were not a matter for NAMA; that he appeared to believe that the loans and mortgaged properties were assets that he should have been entirely free to deal with, including by way of seeking to arrange purchasers on terms he believed appropriate; that he believed the family home was untouchable; and that he threatened to embroil NAMA in litigation if they sought to enforce. NAMA says that its decision to enforce in January 2014 arose in circumstances where Mr. Morrissey had been in receipt of over €200,000 per annum by way of rental income from the investment properties but failed to mandate this income to NAMA and instead retained the bulk of it for his own purposes, including the funding of the litigation against Irish Bank Resolution Corporation Limited (“IBRC”); that, despite repeated requests, he failed to furnish a sworn statement of affairs in the NAMA format, which included a requirement to detail asset transfers; and that he failed to put all of the investment properties for sale on the open market. It submits that an objective evaluation of the facts demonstrates that NAMA acted lawfully at all times, that due process rights were afforded, that there was no bona fide defence to the claim for judgment, and that the security over the family home was valid.
10. The first and second named defendants in their counterclaim referred to their summary proceedings and indicated that by agreement of the parties, the summary proceedings were stayed with summary claim to be dealt with by way of counterclaim in the plenary proceedings.
11. The third, fourth and fifth defendants also put in a full defence denying, inter alia , that any of the legislative provisions impugned were invalid having regard to the Constitution or the European Convention on Human Rights. They also denied that the Minister had engaged in any interference with the decision-making process of NAMA.
12. The plaintiffs delivered a reply and defence to the counterclaim of the first and second named defendants.
Section 2: Chronology of Key Events/Correspondence
The Evidence in the Case
13. The hearing of both the plaintiffs’ claims and the counterclaim lasted for six days. Pursuant to directions previously given by the Court, numerous affidavits had been sworn and these (together with extensive documentary exhibits) constituted the evidence in the trial. Although the pleadings had previously been prepared by counsel, the plaintiffs were not legally represented and conducted their own case at the hearing, No sworn oral evidence was given by anyone at the hearing, and there was no application to cross-examine any deponent.
14. Before I proceed to set out the chronology in the case, I pause to note the recent clarification by the Supreme Court in RAS Medical Ltd t/a Park West Clinic v. RCSI [2019] IESC 4 as to when it was appropriate, and when not, to reach conclusions as to facts in dispute in circumstances where the evidence was solely on affidavit (as it was in the present case). The Supreme Court had sounded a warning note as to the reaching of conclusions adverse to the evidence of a deponent who had not been cross-examined and said:
“… I am also satisfied that it is inappropriate for either a trial court or an appeal court to reject sworn affidavit evidence by reference either to other sworn affidavit evidence or to documentary materials without giving the deponent concerned an opportunity to answer any reasons why the sworn evidence should not be regarded as credible or reliable. The onus is on a party who wishes to urge on a court that sworn affidavit evidence should not be accepted, in respect of any point of fact material to the court’s final determination, to ask the court to take appropriate measures such as granting leave to cross-examine, so that questions concerning the credibility or reliability of the evidence concerned can be put to the witness and the court reach a sustainable conclusion as to the accuracy or otherwise of the evidence concerned.” (Clarke C.J. at para 10.4)
The Court must bear the above in mind in the present case, in circumstances where there was no cross-examination despite certain conflicts of fact.
15. The chronology of events set out below is unfortunately very lengthy. This is a necessary feature of this judgment because the essence of the plaintiffs’ complaint is that NAMA did not properly engage or give meaningful consideration to Mr. Morrissey’s proposals. This cannot be assessed without examining the relevant interactions in detail, and these took place over a number of years. Despite my reluctance to encumber a judgment with such level of factual detail, it seems to be unavoidable in view of the issues raised by the plaintiffs. The chronology has been constructed from: (a) the affidavits sworn in the proceedings together with their exhibits which included the following; (b) contemporaneous correspondence (by letter and email); (c) contemporaneous records kept by entities such as Irish Banking Resolution Corporation or Capita recording their account of what was said at meetings with Mr. Morrissey and his advisers; and (d) documents submitted by Mr. Morrissey to NAMA as well as internal NAMA documents. Mr. Morrissey disputed the accuracy of some of the documents, but as there was no cross-examination by him of their authors, they carry at least some evidential weight and I propose to factor them in to the chronology.
The original loans with INBS
16. Between 2004 and 2006, the second named plaintiff, Mr. Morrissey, drew down approximately €27,278,000 from a series of eighteen loan facilities which were secured by way of mortgage and other security granted by the plaintiff over eight separate properties located primarily in Dublin 6. A sum of €3,750,000 was drawn down in respect of a loan for the purchase of the family home at Palmerston Road, Dublin 6. The offer letter dated 21st September, 2005 set out a sum of €12,031.25 as the monthly repayment in respect of the family home mortgage.
17. Difficulties began to arise on some of the accounts in January 2006. By June 2008, cumulative arrears of €734,538.84 had built up on the eight loan accounts. This was not disputed by the plaintiffs.
18. By letter dated 12th June, 2008, Irish Nationwide Building Society (“INBS”) wrote to Mr. Morrissey demanding repayment of the outstanding sum within seven days and requesting that he remit all rental proceeds to the Society in order to reduce his liabilities.
19. By letter dated 5th September, 2008, INBS wrote to Mr. Morrissey saying that it was prepared to defer legal proceedings and/or the appointment of a receiver on a number of conditions including that he continue to pay the full monthly repayment due on the mortgage over the family home (36 Palmerston Road, Dublin 6). By letter dated 2nd October, 2008, Mr. Morrissey replied to INBS proposing that he allocate a market rent of €5,500 in respect of the family home. This was rejected by INBS who, in response by letter dated 9th October, 2008, said that the family home was a separate matter and that he would have to ensure that the repayments on the family home were met from a source other than from rent owing to the other investment properties mortgaged to INBS.
20. On 27th November, 2008, INBS issued a formal demand letter demanding immediate repayment on the loan facilities relating to the seven investment properties. By letter dated 12th December, 2008, INBS said that it would hold off on instituting legal proceedings and the appointment of a receiver if Mr. Morrissey, inter alia , continued to meet the repayments on the family home from a source other than rent being generated from the other properties mortgaged to INBS.
The alleged agreement in respect of the family home
21. By letter dated 5th February, 2009, Mr. Morrissey wrote to INBS and offered to pay €5,000 per month in respect of the family home. The letter said that they had no other source but rent from which to make the payments on the family home mortgage. This proposal was accepted by INBS on a temporary basis. Their letter of 27th March, 2009 stated: “You pay the sum of €5,000.00 monthly towards the mortgage on your PPR 36 Palmerston Road. Although this sum will not discharge the interest due on the mortgage, the Society is prepared to accept same in part discharge of the repayments until October 2009”.
22. In his affidavit, Mr. Morrissey said that he had reached an agreement with INBS that payments be reduced on the family home mortgage to €4,000 per month, and later to €3,200 per month. There is no written evidence of any such agreement. The contemporaneous correspondence (described below) includes letters from or on behalf of the Morrisseys in which they inform INBS of the reduced sums they will pay in respect of the family home mortgage (described below), but there is no written record of INBS’ agreement to the reduced sums other than the above letter which clearly envisaged a temporary arrangement until October 2009 only.
23. On 12th October, 2009, Messrs Baker Tilly Ryan Glennon (“Baker Tilly”), acting as accountants on behalf of Mr. Morrissey, wrote to INBS outlining that their services had been engaged and requesting a meeting “to explore opportunities for restructuring the Irish Nationwide financed portfolio”. A formal restructuring proposal was made on 23rd November, 2009.
24. On 17th February, 2010, a meeting took place between Mr. Morrissey and INBS in which the Society refused Mr. Morrissey’s proposals in relation to a debt write down, structure or refinance with INBS. On 13th April, 2010, INBS wrote to Mr. Morrissey setting out the payments he had made in the form of rent in respect of the family home for the year to date and confirmed that the Society had agreed to hold enforcement action until the end of 2010 on the condition that an agreement be reached in relation to the payment of rents to the Society.
25. By letter dated 1st December, 2010, INBS wrote to Mr. Morrissey notifying him that arrears of €841,353.23 had accrued and that these should be cleared within seven days.
26. By letter dated 17th December, 2010, Mr. Brian Hyland of Baker Tilly wrote to Mr. Shane McGowan of INBS enclosing a cheque representing a rental payment for the relevant properties. The letter went on to say: “As you will see from the attached schedules one of the properties namely 36 Palmerston Road, Rathmines, Dublin 6 is the principal private residence of John Cearuil and their children. We propose to continue a payment of €4,000 per month throughout 2011.”
27. A letter dated 15th November, 2011 from Mrs. Morrissey to INBS stated: “Please find attached a cheque for €9,600 representing the agreed net payments due (€3,200 per month) on the above account for August, September and October 2011.” Later letters use a similar formula.
28. By letter dated 24th May, 2013, Irish Banking Resolution Corporation (which had, by that date, taken over the role of service provided to NAMA) responded to Mr. Morrissey stating “as previously advised IBRC (In Special Liquidation)/NAMA has no agreement with you regarding payments on your principal private residence. The participating institution dispute that an alleged agreement was ever in existence and note that the offer letter dated 21st September, 2005 sets out monthly repayments of €12,031.25 in respect of the principal loan amount (€3,750,000). (emphasis added)
Acquisition of loans and assets by NALM
29. Meanwhile, in December 2009, the National Asset Management Agency (“NAMA”) had been established pursuant to the provisions of the National Asset Management Agency Act 2009 (“the Act of 2009”). INBS was subsequently designated a participating institution by the Minister for Finance and directed by NAMA to provide relevant services in respect of acquired bank assets in accordance with section 131(3) of the 2009 Act.
30. Mr. Morrissey’s loan facilities were acquired by National Asset Loan Management Limited, now National Asset Loan Management Designated Activity Company on 10th December, 2010. Following NAMA’s acquisition of the loan facilities, INBS initially continued to manage the loan facilities as service provider to NAMA. There was no challenge in these proceedings to the acquisition of the loans by NAMA.
Statement of Affairs and business plan of 31st May, 2011
31. On 18th February, 2011, Mr. Morrissey – through INBS – furnished NAMA with a statement of affairs which revealed that he was significantly indebted to a number of separate financial institutions with liabilities in excess of €88 million. By letter dated 28th March, 2011, INBS wrote to Mr. Morrissey requesting the submission of a business plan setting out a full account of his financial affairs and an asset value maximisation strategy in relation to the eight properties secured by the loan facilities. The deadline for submission of same was initially 29th April, 2011 and was subsequently extended, on consent, to 13th May, 2011.
32. On 31st May, 2011, a formal business plan was submitted by Mr. Morrissey which acknowledged his indebtedness in respect of all properties (including the family home).
33. On 8th June, 2011, a recommendation was made by INBS to NAMA to appoint statutory receivers to the investment properties and a formal decision confirming same was taken on 20th June, 2011. However, despite this decision, NAMA met Mr. Morrissey to hear his views in mid-2011.
IBRC takes over role of managing the facilities from INBS
34. On 1st July, 2011, the business of INBS transferred to Anglo Irish Bank Corporation Limited pursuant to a Transfer Order issued by the High Court. On 3rd October, 2011, Anglo Irish Bank Corporation Limited changed its name to Irish Bank Resolution Corporation Limited (“IBRC”) and from this point on, IBRC took over the role of managing Mr. Morrissey’s loan facilities as service provider to NAMA.
35. On 12th December, 2011, IBRC issued a demand letter to Mr. Morrissey requiring immediate repayment of the amount of €28,834,043.53 arising from the loan facilities relating to the seven investment properties. This was responded to by Baker Tilly by letter of 15th December, 2011 which pointed out that Mr. Morrissey was still awaiting a response to the business plan he had lodged with NAMA more than six months previously.
Meeting of 16th February, 2012
36. On 16th February, 2012, a meeting was held between Mr. Morrissey, together with his advisor from Baker Tilly, and representatives of IBRC. The meeting note prepared by Mr. Shane McGowan of IBRC records that Mr. Morrissey opened the meeting with discussions about his litigation with Anglo, and stated that he believed that the timing of the demand letter from IBRC for his NAMA debt was connected with this litigation and that Anglo/IBRC could not get summary judgment against him and “therefore they decided to come after him from another angle on his NAMA debt”. The IBRC representatives told him that this was “merely a coincidence” and that they were not aware of the summary judgment proceedings outcome in question. They then enquired about the NAMA portfolio rent which was “outstanding since December 2010”. Mr. Morrissey is recorded as saying that he “held the rental income in an attempt to bring NAMA to the table” and that 40% of the rents were being used for insurance and maintenance of properties, a small amount was being apportioned to live on in additional to his capital D income, and “the remainder of the rents [were being] used to fund his Anglo defence”. He was told that this was “not acceptable” to NAMA and that he had left them with no alternative but to issue demand letters and move to the appointment of a receiver. Mr. Morrissey is recorded as saying that he would not vacate the family home and that he would fully resist NAMA in giving up his family home. He said that he might be able to formulate a strategy to extract his family home from the NAMA portfolio by substituting it with a property of similar value in his Bank of Scotland portfolio. He was requested to submit a proposal in writing together with a Sworn Statement of Affairs in the NAMA format and he advised that he would arrange the latter with his advisors.
37. Following the meeting, Mr. Morrissey wrote to IBRC by letter dated 27th February, 2012 stating that the business plan had been recast to address NAMA’s goals and concerns. It proposed that, on receipt of the relevant bank account details, Mr. Morrissey would write to the tenants of five of the investment properties to mandate rentals directly to IBRC; that he would continue to manage the properties on an interim basis; and that he was focusing on keeping the portfolio together so it could re-capitalised and restructured into a corporate entity as a going concern designed around a strong beginning, which would represent for NAMA a better option than a fire sale.
38. On 18th April, 2012, IBRC wrote to Mr. Morrissey again requesting a Sworn Statement of Affairs in the NAMA format.
Letter of 15th May, 2012 from NAMA expressing dissatisfaction with existing business plan
39. By letter dated 15th May, 2012, NAMA informed Mr. Morrissey that, following an assessment by IBRC, it was not satisfied that the business plan met with NAMA’s statutory objectives. There were particular concerns surrounding the proposed timelines for disposal of assets which were said to be “not within NAMA guidelines” and the proposed debt write down which was also said to be “not within NAMA guidelines”. It said that if there was to be any basis for considering the possibility of supporting the connection, a number of issues would need to be addressed. This was followed by a detailed list of the issues.
40. By reply dated 29th May, 2012, Mr. Morrissey wrote to IBRC saying that he had spent much of the previous twelve months working on attracting third party investors to fund a new company which would take over his portfolio of loan facilities and that he had not been afforded the opportunity to meet with NAMA to discuss his business plan. A meeting was scheduled for the following day (30th May, 2012) to discuss the contents of the letter of 15th May, 2012.
Meeting of 30th May, 2012
41. Mr. Morrissey averred that there was no discussion at the meeting in relation to his business plan and that the principal item under discussion was IBRC’s “conflict of interest”.
42. The minutes of the meeting kept by IBRC record that Mr. Shane McGowan reiterated that the debtor was required to mandate all rental income on various properties immediately and to place the properties on the market. It was also stated that IBRC (non-NAMA) and IBRC (NAMA) were different entities and had no contact concerning Mr. Morrissey’s affairs. It was stated that “the two main issues” with the portfolio were the timing of the assets sales and the family home. Mr. Morrissey’s adviser said that the immediate sale of all assets would realise a greater loss than a staggered asset disposal. Mr. Morrissey raised the issue of his ongoing litigation with IBRC (non-NAMA) and advised that he was considering taking litigation against INBS for legacy issues, on the basis that he had been told at a certain point that development finance would not be forthcoming to him unless former CEO Michael Fingleton could be joined in personally on the projects. The notes record that IBRC (non-NAMA) were not aware of any of this and could not comment and “attempted to bring [Mr. Morrissey] back to the main point of dealing with IBRC (NAMA) debt reduction”. Mr. Morrissey was advised that NAMA would prefer to deal with him on a consensual basis but that if this was not achievable, they would have to appoint a receiver. They said that they would welcome strategies and proposals from him for the disposal of assets, and that if rental income was mandated immediately, there may be some basis for working consensually with him.
43. The notes also record that Mr. Morrissey said that the gross rental income was €240,000 per annum and that the expenses of running the properties were €40,000, which left a net income of €200,000 per annum. He said that if he were to manage the properties during an asset disposal period, he would requirement a management fee of €3,000 per month. Regarding the Signed Statement of Affairs, he advised that he would have to consult his legal advisers and that he might be able to provide a copy of one given to the courts in December 2011. The note records that the meeting concluded with an agreement that he should provide certain listed information by the 7th June, 2012 which included:
“1. Proposal for the mandating of all rental income achieved on the properties, reasonable expenses to be deducted etc.
2. Proposal for the disposal of assets and debt reduction including a timeframe for various stages of disposals.
3. Proposal for the management of the assets during the disposal period and any management fee proposed for same.
4. Proposal for completing the requirement of a Sworn Statement of Affairs in the required NAMA format.”
Mr. Morrissey’s proposal of 8th June, 2011
44. By letter dated 8th June, 2012, Baker Tilly wrote to IBRC outlining that Mr. Morrissey was willing to instruct tenants of five out of the seven properties to pay rent directly to IBRC/NAMA and to forward a schedule of all rental property controlled by him. It stated that Mr. Morrissey was of the view that six properties could be marketed for sale per year without disturbing the market. It said that NAMA was already in receipt of a Sworn Statement of Affairs, attached as an Appendix to the Business Plan already sent in. An offer was made to send NAMA a copy of the affidavit covering the Statement of Affairs he had filed in the Anglo proceedings.
45. By response dated 19th June, 2012, IBRC (NAMA) provided that in order to progress matters, Mr. Morrissey was required to return a signed business plan together with covering letter.
46. On 4th July, 2012, IBRC wrote to Mr. Morrissey again reiterating that his business plan did not meet NAMA’s statutory objectives, and reminded Mr. Morrissey of his outstanding requirements, including a requirement that all rental income be mandated and a that a Sworn Statement of Affairs be provided by 14th July, 2012.
47. By email dated 15th July, 2012, Mr. Morrissey responded to IBRC’s letter of 19th June expressing concern about signing a document which would not simultaneously bind both parties and alleging that this business plan had received little more than cursory consideration. It also reiterated Mr. Morrissey’s “deep concerns” about IBRC continuing to act as manager of the properties because it would be a party to information that it would not be entitled to receive in the Anglo proceedings. It said that he would be happy to provide substantially all of the information required by NAMA but only in the context of a definitive overall agreement.
48. A letter from IBRC on 27th November, 2012 stated that a signed business plan letter was a fundamental requirement of the NAMA process and that no progress could be made without it.
Decision of NAMA to commission PWC report
49. An internal meeting was held in NAMA’s offices on 12th December, 2012. NAMA recommended that IBRC undertake an independent review of Mr. Morrissey’s business plan in order to obtain an independent evaluation with regard to the substance of same. PricewaterhouseCoopers (“PwC”) was instructed to carry out the independent business review on 21st February, 2013.
Mr. Morrissey’s proposal of 4th January, 2013
50. On 4th January, 2013, a letter was sent on behalf of Mr. Morrissey attaching the signed business plan letter dated 15th May, 2012 with seven conditions added by him including, inter alia , a legal standstill agreement until December 2013. It further set out that he was willing to place three of the investment properties on the market for sale and to mandate the rents from three of the investment properties to NAMA, subject to acceptance of his proposal. The letter stated that NAMA was already in receipt of a Sworn Statement of Affairs and that Mr. Morrissey was willing to provide them with a copy of the Affidavit of Means filed with the Commercial Court in IBRC v. Morrissey . Another one of the conditions sought by Mr. Morrissey was “that the issue of overcharging by IBRC (as determined by Nuevabridge Ltd.) be addressed and reviewed, with any credit due being applied against the agreed quarterly payments due on the PDH” (the family home).
51. IBRC replied by letter dated 12th February, 2013, rejecting his conditions and stating that should he fail to put all of the properties on the market for sale immediately, mandate all gross rental income to NAMA immediately, as well as submit a schedule of all properties and expenses together with a signed business plan letter within seven days, IBRC would have no alternative but to deem him uncooperative and make an enforcement recommendation to NAMA. It also stated, among other things, that any overcharging issue was a matter for IBRC non-NAMA.
From IBRC to IBRC (In Special Liquidation)
52. The Minister for Finance, pursuant to the Irish Bank Resolution Corporation Act 2013, appointed Joint Special Liquidators and ordered the winding up of IBRC which then became known as IBRC (In Special Liquidation) from 7th February, 2013 onwards.
53. By letter dated 5th March, 2013, IBRC (In Special Liquidation) wrote to Mr. Morrissey reiterating that he had previously been advised of the power available to NAMA should he continue to be uncooperative and withhold rental income.
54. By letter dated 13th March, 2013, Baker Tilly replied to IBRC (In Special Liquidation) questioning the characterisation of Mr .Morrissey as uncooperative, and referring to “some considerable delay” on the part of IBRC in responding to Mr. Morrissey who had “sought merely to protect his position in a situation where the financial institution that provided the facilities, through no fault of his own, has gone bankrupt”. The letter discussed the conditions, provided some clarifications and said that Mr. Morrissey had now “substantially agreed to all of these conditions”. It said that it anticipated “continuing to make the agreed payments on the family home”. The letter went on to say that Mr. Morrissey had recently been approached by “two separate credible third parties who have expressed an interest in purchasing all of Mr. Morrissey’s loans, including his loans with NAMA”.
The PWC report to NAMA
55. The draft independent business review (“the review”) carried out by PwC was received in March 2013 and sent to NAMA for comment. In the review, PwC noted that there was a lack of detail in Mr. Morrissey’s business plan and concluded that NAMA had two options: (1) to support Mr. Morrissey and allow him to auction the properties as proposed in the business plan; or (2) to appoint a receiver. PwC came to the conclusion that the second option was the best solution for NAMA on the basis that it would “result in increased control over the assets/associated income particularly when the borrower has been uncooperative” and would allow for “greater control, management and transparency in the sale process”. The review also concluded that Mr. Morrissey’s statement of affairs was out of date and that his net loss position, therefore, could be greater than previously known; it recommended that NAMA seek a second charge over the assets not yet under receivership.
56. IBRC wrote on 8th April, 2013 again reminding Mr. Morrissey that he had yet to put the properties on the market, and requesting him to mandate the rental income and submit the signed business plan letter. They requested that he complete a Form A request in relation to the two interested parties. The letter also referred to the suggestion that there was an agreement in place in relation to payments on the family home and stated that neither IBRC (In Special Liquidation) nor NAMA had any agreement with Mr. Morrissey regarding payments on the family home.
57. Mr. Morrissey then wrote to IBRC (In Special Liquidation) on 3rd May, 2013 attaching a redrafted and signed copy of the business plan letter which described the alleged agreement with respect to the family home and asserted that the agreement, which permitted net payments of €3,200 per month, predated both IBRC and NAMA and that it would continue to be adhered to once the “interest overcharging” credit had been agreed and fully utilised. Thus, Mr. Morrissey was at this point (unilaterally) proposing to depart from the alleged agreement in respect of the family home repayments on the basis of deductions for alleged interest overcharging by INBS.
58. This was replied to by IBRC (In Special Liquidation) by letter of 24th May, 2013 in which it again stated that neither it nor NAMA had an agreement with Mr. Morrissey regarding payments on the family home. The letter further enclosed a statement of account confirming the amount of rental income received which, according to IBRC (In Special Liquidation), did not represent fulfilment of the condition that all rents from the secured properties be mandated to NAMA. It also referred to the position regarding the placing of properties on the market.
59. By email dated 22nd May, 2013, Mr. Morrissey emailed IBRC (In Special Liquidation) describing an approach by a third party to purchase the loan facilities and seeking guidance as to how this should be managed. A follow-up email of 29th May, 2013 explained that Mr. Morrissey was proceeding to empty all of the investment properties to ready them for sale and that, as a result, there would be no mandating of rentals going forward as the tenancies would have ceased to exist. A follow-up letter was sent by Mr. Morrissey on 19th June, 2013 which made reference to serving the tenants with termination notices and requested resolution of the issue of reserve prices.
60. On 11th July, 2013, a Notification of Decision issued from NAMA to IBRC (In Special Liquidation) approving its recommendation to issue a letter seeking representations from Mr. Morrissey in relation to the seven investment properties. This was communicated to Mr. Morrissey by letter dated 15th July, 2013 which explained that IBRC (In Special Liquidation) was recommending that, in light of Mr. Morrissey’s failure to comply with requests to place all of the properties on the market for open sale, a decision be made to take enforcement action up to and including the appointment of statutory receivers. The letter requested that representations be made within seven days. By reply dated 22nd July, 2013, the then solicitors for Mr. Morrissey wrote to IBRC (In Special Liquidation) asserting that, contrary to the contents of the letter dated 15th May, 2013, the investment properties had already been placed on the market for sale as previously advised notwithstanding that reserve prices were yet to be confirmed by NAMA.
Meeting of 25th July, 2013
61. A meeting was arranged for 25th July, 2013 to provide Mr. Morrissey with an opportunity to make representations in advance of NAMA’s decision to enforce. Mr. Morrissey alleges that he was not afforded any meaningful opportunity to make submissions or representations. A detailed meeting note was kept by IBRC (NAMA). The note records that Mr. Morrissey opened the meeting by asking Mr. Mark Ryan of IBRC (NAMA) to introduce each of the attendees and to explain the separation between IBRC Bank and the “IBRC NAMA unit”. The note provides that it was explained to Mr. Morrissey that the IBRC Bank was completely separate to the IBRC NAMA unit. Mr. Morrissey then commented that he had made a proposal in January 2013 “to sell all properties to include the deduction of costs along with a sales strategy” which did not receive a response. It was explained to Mr. Morrissey that he had only agreed to place three properties on the market, and that he had been asked on numerous occasions to mandate all rental income to the participating institution, to which Mr. Morrissey replied that the IBRC bank had restricted him from doing so, and that he had been served with a High Court order to that effect. Mr. Morrissey was advised that if he wished to proceed, he would need to “provide an in depth explanation on the missing rent of approx. €500k, then put forward an agreement to place all properties on the open market and adhere to the NAMA process (Form A, B, tender for sales agents) etc.” Mr. Morrissey stated that all missing rent had been used on legal fees and that there were invoices to confirm same to which Mark O’Donnell of IBRC (NAMA) commented that “NAMA will not look favourably on the rent leakage as they did not consent to using NAMA’s money to pay for outstanding legal fees.” Thus, it was clear that Mr. Morrissey was using rent from the properties connected to the INBS loans to fund his litigation in respect of his Anglo loans.
62. The note records that Mr. Morrissey then said that he was told in January 2013 to “empty all properties in an attempt to get the assets on the market for sale”. IBRC (NAMA) responded by saying that at no point in time did they instruct Mr. Morrissey to empty the properties and said that two things were required from Mr. Morrissey: (1) to mandate all rent to the participating institution (i.e., IBRC); and (2) to agree to sell all properties. IBRC (NAMA) referred to NAMA’s policy and guidance in which there are certain procedures which must be adhered to. Mr. Morrissey asked to be guided through the process and drew comparisons with the Bank of Scotland process. Mr. Morrissey was then asked to present his proposal to agree to sell all properties, including details of the tender process and an explanation on the missing rent. He was also asked to include any sales costs which would need to be deducted from the gross sales prices. He was also told that the meeting was not a decision-making forum and that the ultimate decision lay with NAMA. Mr. Morrissey stated that any decision to appoint a receiver would be contested. Mr. Sean Tobin replied that he had agreed to work consensually with IBRC at the meeting of 30th May, 2012 but that nothing had happened since that time to the reflect the agreement. Mr. Morrissey then agreed to liaise with the IBRC team and to submit a Form A proposal by the week ending 2nd August outlining a sales proposal along with supporting documentation in relation to the rent used to pay for legal costs.
63. Following the meeting, Mr. Mark Ryan of IBRC (In Special Liquidation) emailed Mr. Morrissey requesting that all properties be placed on the open market for sale and that gross rental income be mandated to NAMA.
Notice of Recommendation to take enforcement action and invitation to make representations of 15th July 2013
64. By letter dated the 15th July, 2013, IBRC (In Special Liquidation) wrote to Mr. Morrissey informing him that it was recommending that a decision be taken to take enforcement action, including the appointment of statutory receivers, and requesting representations from him within seven days.
65. On 31st July, 2013, Mr. Morrissey wrote to IBRC (In Special Liquidation) stating that he was willing to ensure that either all of the properties would be vacated with a view to their immediate sale, or some of them would continue to be rented with a monthly reconciliation in respect of rental income. He mentioned that he had been using rental income to fund “legal and restructuring costs” but said that he did not have a “readily available schedule of the rents received of the same 30-month period” because the properties were in his personal name and reconciliations were carried out only once a year for the purposes of the November personal tax filing. He submitted a completed “Borrower Credit Proposal Form A” in which he sought approval to place all of the investment properties on the market for sale; it also sought consent to reserve prices being placed on the properties in accordance with prices set out by Mr. Morrissey in his email of 28th July, 2013. It is noteworthy that at this stage, Mr. Morrissey appeared to have agreed with work with NAMA with a view to the sale of the properties and the mandating of rental income.
The Capita Phase
66. On 12th August, 2013, Capita Asset Services (Ireland) Limited (“Capita”) took over the role of service provider to NAMA in respect of Mr. Morrissey’s loan facilities. Mr. Morrissey was notified by this change by way of email dated 14th August, 2013.
67. On 20th August, 2013, the independent business review was finalised by PwC.
68. On 29th August, 2013, a meeting was held between Capita and Mr. Morrissey following which Mr. Morrissey sent an email explaining that although he was willing to facilitate the immediate sale of the properties, he wanted to set individual reserve prices. He also said that he had been working with a number of potential portfolio buyers.
69. By letter dated 9th September, 2013, Capita responded by saying that NAMA was not willing to permit Mr. Morrissey to set individual reserve prices, but that it gave approval for the seven investment properties to be placed on the market, each with an individual reserve price, the cumulative price of which was €6.43 million. It also approved the appointment of sales agents for the properties, solicitors to act in the sales, and approved sale by private treaty.
70. By email of 20th September, 2013, Mr. Morrissey wrote to Capita listing twelve potential bidders for some or all of the loans and requested guidance on how such bids should be conveyed to NAMA.
71. On 30th September, 2013, Mr. Morrissey submitted a completed “Borrower Credit Proposal Form A” to Capita seeking approval from NAMA for the sale of “all John Morrissey loans” together with underlying security packages. Thirteen potential purchasers were listed. This proposal included the sale of the loan attaching to the family home. It stated that preliminary marketing had taken place and that bidding levels had risen to the point where the tender price was expected to be in the range of €7.4 to €7.5 million, and that this was greater than his previous estimate of €6, 664,273.13 provided on 24th September 2013 (with a price for the family home of €830,293.33).
Meeting of 2nd October, 2013
72. NAMA and Capita met with Mr. Morrissey on 2nd October, 2013. There is a conflict of fact as to what was said at this meeting. I will start with the NAMA meeting note, which records as follows. NAMA stated at the outset that Mr. Morrissey had failed to comply with his undertaking to mandate all rental income to NAMA. This was followed by a discussion of Mr. Morrissey’s explanation as to why this had happened, and Mr. Ben O’Donoghue of Capita said that NAMA were ready to appoint an insolvency practitioner because Mr. Morrissey had been “uncooperative with all requests to date”. The note records that Mr. Morrissey was asked if he would sign the sales contracts if he were to receive “excellent offers on two of the properties”. Mr. Morrissey replied that he would sign the initial contracts “but would not lose leverage over the IBRC legal matters progressing through the courts and the matter of his PDH”; that this leverage would reduce as the litigation progressed over the next 12-18 months but that he would not sign the final contracts until this matter was agreed. The note records that “as one final means of demonstrating a willingness to cooperate with NAMA”, Mr. Morrissey was asked to forward a sworn commitment – which he agreed to do – by close of business on 4th October, 2013 stating that:
“1. Any and all tenants have been directed to mandate gross rental monies to the accounts provided in NAMA’s Notification of Decision of the 9th September 2013.
2. That all the properties above will be on the market by Friday 11th October 2013. For the avoidance of doubt, the properties must have Sales boards erected, be advertised on Lisney website and also on the myhome.ie portal.
3. That should a purchaser be approved by NAMA for any of the above properties, you will execute any sales contract NAMA require you to and that your cooperation shall not be dependent on nor subject to any caveats raised by you.”
73. The note goes on to record that Mr. Morrissey asked for an update on his Form A and, in particular, the proposal to sell his loans as part of a loan sale as there were numerous parties interested in acquiring his loans. It continues:
“[Ben O’Donoghue] advised [Mr. Morrissey] that he could not process the Form A as there was no offer or decision to make. An indication of offer was outlined at up to €7.5m but no one party had offered this to acquire [Mr. Morrissey’s] loans. [Michael Broderick] advised [Mr. Morrissey] that NAMA own the [Mr. Morrissey] loans and it is not up to [Mr. Morrissey] to decide to sell his loans. NAMA decide this. However [Michael Broderick] advised that there is a procedure for loan sales where a loan sales broker is appointed and all requests to acquire loans are directed to NAMA. [Michael Broderick] advised that NAMA do not carry out loan sales below €10m as the transaction costs were too high. [Mr. Morrissey] outlined his proposal for Lisney to act for him on the disposal of his loan sales. [Michael Broderick] advised [Mr. Morrissey] that Lisney are not a loan sales broker and that this was rejected. [Brian Hyland] discussed the proposal that Lisney market all properties and should the interested party have an interest in acquiring all assets as part of a loan sale, that this could be considered by NAMA. [Michael Broderick] advised that this would have to include the PDH [family home] and that the PDH would have to be openly marketed. [Mr. Morrissey] rejected this and advised that his family would not agree to the house being openly marketed. [Brian Hyland] noted NAMA policy that all properties had to be openly marketed. [Ben O’Donoghue] asked [Mr. Morrissey] how he intends to deal with the matter of the debtors PDH. [Mr. Morrissey] stated that any means of foreclosing, selling or otherwise on the PDH and he would litigate immediately. [Brian Hyland] asked [Mr. Morrissey] to calm down before advising that the PDH would have to be discussed as part of the overall settlement and asked what the options were.”
74. I turn now to the affidavit evidence concerning the verbal exchange concerning the family home. With regard to the discussion of the family home, Mr. Morrissey alleges that Mr. Ben O’Donoghue of Capita explained that “optically”, NAMA needed “a result” and that the family home “would have to be sold”. Mr Morrissey also alleges that he was informed that his wife “would not be allowed to purchase the family home, even at full market value in an open auction situation, should such an event arise “.
75. Mr. Ben O’Donoghue, in his affidavit, gave his version of events in the following terms:
“20. At the October Meeting, it was explained to Mr Morrissey that his total indebtedness stood in excess of approximately €36,000,000 at the time and that the sale of all the security (excluding 36 Palmerston Road) would leave a residual debt of greater than €25m. In these circumstances, I told Mr Morrissey that NAMA would not be prepared to allow him remain in 36 Palmerston Rd – which also remained NAMA security – without any proposal from Mr Morrissey to address this level of remaining indebtedness.
21. It was explained to Mr Morrissey that 36 Palmerston Rd would be considered by NAMA to be a “trophy home” and that NAMA would not agree to allow Mr Morrissey remaining in such a high value home when the property formed part of NAMA’s security package and the associated loan was not being serviced but was in very significant default. NAMA’s duty to the taxpayer to recover as much money as possible was explained to Mr Morrissey. I accept that I questioned how “optically” it would look to the taxpayer if NAMA was to allow Mr Morrissey and his family to continue residing in 36 Palmerston Rd whilst owing NAMA over circa €25m in residual debt (ie: the debt remaining after the Investment Properties have been sold and the proceeds remitted). NAMA holds a first legal mortgage over 36 Palmerston Road and the amount outstanding on the loan secured by this property is in excess of over €4.7 million.
22. As such, I told Mr Morrissey that in the absence of proposals from Mr Morrissey to address this residual debt, 36 Palmerston Rd would also have to be sold and the proceeds applied in debt reduction. I suggested that NAMA might be prepared to allow Mr Morrissey to move his family to another property within the portfolio, namely 3 lower Churchtown Road, and to nominate that as his principal dwelling house and that we may be able to come to some arrangement with him in the event he agreed to allow 36 Palmerston Rd to be consensually sold and in consideration of his full cooperation. I should say that at 2 October 2013, 36 Palmerston Road had an approximate value of circa €1,800,000 to €2,000,000, while 3 Lower Churchtown Road had an approximate value of circa €800,000.
23. Mr Morrissey became extremely agitated and stated that under no circumstances would he agree to sell 36 Palmerston road or even to allow the viewing of the property to potential purchasers. Mr Hyland of Baker Tilly queried whether Mr Morrissey’s family or wife would be allowed to purchase the house from NAMA. Mr Morrissey had previously suggested that a price of circa €830,000 was a fair price for 36 Palmerston Rd based on arrangement he claimed was being offered by the Special Liquidators of IBRC and calculated by Mr Morrissey as follows:
Calculation of 36 Palmerston
Road Buyout Price
Annual payment 38,400.00
Special Liquidator Discount Rate 4.50%
Capitalized Amount 853,333.33
Special Liquidator Expense
Allowance 2.70%
Buyout Price 830,293.33
24. Notwithstanding the fact that IBRC (In Special Liquidation) and NAMA are completely different entities and notwithstanding the fact that Mr Morrissey could produce no evidence of transactions occurring at “buyout prices” such as the one suggested by him, I explained that NAMA and Capita believed that 36 Palmerston Road to be worth far more than €830,000 and was in fact perhaps the most valuable piece of security in Mr Morrissey’s portfolio. 36 Palmerston Road was estimated to be worth over €1,000,000 in excess of the value Mr Morrissey was attributing to it.
25. I should also say that Mr Morrissey’s “buyout price” was calculated based on an alleged agreement that NAMA would accept lower mortgage repayments of €3,200 per month. While Mr Broderick deals with this issue in his affidavit, I wish to point out that the mortgage loan originally taken out on 36 Palmerston Road was for a principal amount of €3,750,000 and the offer letter dated 21 September 2005 refers to monthly repayments of €12,031.125
26. I further clarified NAMA has a policy of openly marketing all properties as only a full open marketing campaign allows NAMA determine the actual market value of a property and what the market is willing to pay at any given time. Mr Morrissey’s assertion that his family would not allow the open marketing and viewing of the property, would preclude NAMA determining the actual market value of the property, and as such, his wife (nor any other party) would not be allowed purchase the property. Mr Morrissey threatened to litigate immediately if NAMA commenced any sale or enforcement action in respect of 36 Palmerston Road. For information purposes, given the default that has occurred, the total debt on 36 Palmerton Road as at 12 September 2014 was €4,861,285.62.
27. I did not say that Mr Morrissey’s wife would not be entitled to purchase 36 Palmerston Road, even at full market value in an open auction situation, should such an event arise. Rather, I informed Mr Morrissey that his wife would not be permitted to purchase the property at a figure of €830,293.33 and/or without the property being openly marketed. For information purposes, even on the most conservation valuation of 36 Palmerston Road, the figure of €830,293.33 would not come close to representing its market value. Had Mr Morrissey been prepared to openly market the property and had Mrs Morrissey been prepared to pay full market value, the fact that she is the spouse of Mr Morrissey would not in itself preclude her from purchasing 36 Palmerston Road.
28. Mr Morrissey’s assertions as to what I said in the October meeting regarding Mrs Morrissey’s ability to purchase the property are presented by him entirely out of the context. The fact remains that to date, neither Mr Morrissey nor Mrs Morrissey have given any viable proposal to Capita/NAMA in respect of 36 Palmerston Road that was even remotely in tune with the proper value of this property.”
76. On 3rd October, 2013, Capita wrote to Mr. Morrissey threatening to appoint a statutory receiver should they not receive a sworn commitment by 4th October, 2013 demonstrating a willingness to cooperate with the NAMA process, specifically, that all tenants had been directed to mandate gross rental monies to NAMA; that all properties would be on the market by the 11th October, 2013; and that he would execute any sales contract NAMA required and without caveat if NAMA approved a purchaser. Referencing the Form A proposal of 30th September, 2013 which sought approval to market the loans, the letter confirmed that NAMA rejected the proposal on the basis that it failed “to comply with NAMA’s processes and procedures regarding Loan Sales”.
77. By reply dated 3rd October, 2013, Mr. Morrissey sent Capita a statutory declaration which confirmed his willingness to mandate all gross rental monies from the investment properties to NAMA; to place all of the investment properties on the market by 11th October, 2013; and that should a purchaser be approved by NAMA for any of the properties, he would execute any sales contract NAMA required and that his cooperation would not be dependent on nor subject to any caveats. It concluded by saying that this affidavit was made at the specific request of Capita and to demonstrate his willingness to comply with the NAMA process. The cover letter to the statutory declaration does not contain any protest or caveat. I note in particular that nothing was said by him in this communication about the alleged comment that NAMA would not allow his wife to buy the family home. I find it very surprising that there is no reference to this at a time when the memory of the meeting was fresh in everybody’s mind and having regard to the level of prominence it subsequently attained in the plaintiffs’ pleadings and submissions in this case.
78. Capita then wrote a letter specifically relating to the family home. By letter dated 8th October, 2013 with the heading “36 Palmerston Road, Dublin 6”, Capita wrote to Mr. Morrissey seeking his proposal as to how he intended to dispose of 36 Palmerston Road, Dublin 6 and remit the sales proceeds to NAMA in order to reduce the outstanding balance owing. The letter pointed out that the facilities to the connection remained in default. Again, I note that there is no reference in this letter to any offer from Mrs. Morrissey to buy the house or any reference to her not being allowed to buy the house because of her status as wife of the debtor. The Bagnall Loan Purchase proposal
79. On 18th October, 2013, Capita was provided with a letter dated 15th October, 2013 from Bagnall & Associates (“Bagnall”) indicating a willingness to make an offer to purchase all of Mr. Morrissey’s loans and associated security, including the family home. The letter was addressed to Lisney who passed it on to NAMA. Mr. O’Donoghue said that should Bagnall wish to submit a bid, NAMA would consider it, but pointed out that NAMA had already turned down a request from Mr. Morrissey to market his loans for sale for reasons already explained to him. Meanwhile, discussion continued by email between Lisney and NAMA about interest and bids in respect of the properties, estimated valuations, and other matters. When Lisney reported certain concerns of Mr. Morrissey concerning early sales, Mr. O’Donoghue replied on the 22nd October outlining that NAMA did not share Mr. Morrissey’s “anxiety in relation to not bringing the bidding process to a conclusion” and that he “would prefer to see a sale agreed in the short term” but that this was “subject to your recommendation obviously”. On the 23rd October, Mr. Byrne of Lisney in an email discussing guide prices commented: “As has been shown with 79 Palmerston Road and 185 Rathgar Road I believe the best way to ultimately test and obtain the maximum market value for these properties is to let the market dictate the value”.
80. A letter dated 24th October, 2013 came from Mr. Declan Bagnall, described as Chartered Surveyor of Bagnall Associates, offering to purchase Mr. Morrissey’s loans and related security (including the family home) for €7,325,000. As before, the letter was sent to Lisney rather than to NAMA but was passed on. The letter stated that the figure had been discussed with Mr. Morrissey and that “he has estimated that this equates to a gross offer price for the properties of approximately €8,000,000”. It went on to list the breakdown of this overall figure, putting a value of €830,000 on the family home. It may be noted that Bagnall’s valuation of the family home appears, therefore, to have based upon Mr. Morrissey’s own valuation.
81. Between 24th and 25th October, 2013, a series of emails ensued between Capita, Lisney and Mr. Morrissey whereby Bagnall’s offer was discussed. Mr. O’Donoghue’s immediate reaction was that the offer looked “very light” and that the offer for the family home appeared “particularly poor” but he asked Mr. Byrne of Lisney for his opinion. There then followed a discussion between Mr. O’Donoghue and Mr. Morrissey in which Mr. O’Donoghue pointed out that NAMA was “being asked to take an 8.5% haircut” in circumstances where the property portfolio had a cumulative guide price of €8,000,000 but Bagnall’s offer only amounted to €7,325,000. Mr. Morrissey replied to this comment by explaining that a portfolio bid would negate “the VAT and other costs” associated with the sale of the properties on a “one by one” basis. He further explained that the loan bid of €7,325,000 was, in fact, the net proceeds that NAMA would ultimately receive following the completion of sale as that figure was “approximately equal to combined gross assets sales of €8 million”. Mr. O’Donoghue, addressing Mr. Byrne of Lisney, commented that he couldn’t “see it working” but would “put it to NAMA” anyway once the relevant information had been provided. Mr. Morrissey commented that it was “a much more efficient structure than the alternative (where NAMA incurs additional unnecessary costs/taxes of approximately €675,000)”. Mr. Morrissey concluded by advising Mr. Byrne that before presenting the offer to NAMA, he should provide Mr. Bagnall with “the best offers on [two of the properties] and see if Bagnall’s client is willing to increase the offer.” He noted that the prices bid by Bagnall on those properties were higher than the individual bids as of that morning.
82. Capita, referring to NAMA’s position on debt forgiveness, queried by email on the 25th October whether Mr. Morrissey would be willing to consent to judgment for the difference in amount between the par loan value and the net proceeds of any potential transaction. Mr. Morrissey refused to consent. His response was that if NAMA wanted a judgment, it would “have to go through a High Court process like everybody else” and that he had “a capable legal team that has, to date, successfully resisted over the past four years prolonged efforts by IBRC, Ulster Bank, Investec and AIB to achieve same”. He also “reminded” Capita of his counterclaim against INBS, work done on Euribor fraud, and issues with the Irish Bank Resolution Corporation Act 2013 and s. 172 of the NAMA Act “which we remain ready to challenge if necessary”. He also alleged that Capita was motivated by “consistent bias” and guilty of the prejudgment of bulk offers. Capita responded to each of his points and suggested that they await the opinion of Lisney.
83. In the meantime, there was email discussion between Mr. Morrissey and Mr. O’Donoghue as to whether there was sufficient information about the financial resources of the third party bidder. Mr. Morrissey sent a letter to NAMA for information purposes. The letter was addressed to Mr. Arnow and confirmed that Mr. Arnow was a client of Deutsche Bank, and that he owned “assets worth not less than $10,000,000.00 with Deutsche Bank as of October 25th, 2013”. The letter also said that he “may not rely on this letter as an official statement of account(s).”
84. Mr. Byrne of Lisney responded at some length by email dated 29th October, 2013. His opinion ultimately was that the only way for NAMA to fully maximise the value of each property was to proceed to offer the remaining properties on the open market individually and let the market dictate the value of each property. He estimated the value of the portfolio to be in the region of €7,650,000 to €8,430,000, excluding the family home. He commented that over the past few months they had seen a noticeable upswing in activity and values.
85. By email dated 29th October, 2013, Capita wrote to Mr. Morrissey informing him that they would not be pursuing Bagnall’s offer and that they did not entertain loan bids less than €10 million.
86. By letter dated 31st October, 2013, the then solicitors for Mr. Morrissey wrote a robustly worded letter to Capita saying that there were “claims and counterclaims between the parties” and that they had agreed with their client that the best solution was to arrange to have a third party purchase his loans from NAMA at a price that provided an “optimal return” to NAMA “while appropriately compensating Mr. Morrissey for the irregular actions and interest overcharging that took place at Irish Nationwide and IBRC”. The letter also requested the basis (legislative or other authority) for NAMA’s position that it would not consider loan bids of less than €10 million. It also said that Mr. Morrissey recognised that there was a certain momentum to the sales processes currently taking place with regard to two of the properties and was agreeable to those proceeding on certain conditions.
87. By reply dated 4th November, 2013, Capita set out that the loan sale proposal failed to comply with NAMA’s procedures and processes on loan sales and that NAMA did not permit a debtor to market his loans for sale because the loans are owned by NAMA. The letter further outlined that if Capita did not receive a completed Form A request or a proposal for full repayment of the loans by 6th November, 2013, the loans would be demanded and enforcement action initiated. It also said that while he had referred to irregular actions and interest overcharging at INBS and IBRC, he had failed to produce any evidence of this despite repeated requests.
88. On the 5th November, 2013, Mr. Byrne of Lisney forwarded an email from Mr. Bagnall with a revised offer of €7.55 million.
89. On 6th November, 2013, Mr Morrissey’s then solicitor submitted a Form A request seeking approval to bring the sales processes for certain properties to completion. It asserted that Mr. Morrissey “continues to cooperate fully with NAMA in the sales process for the above properties”. It referred to the Bagnall proposal and requested information as to how offers were being compared (“…a fundamental issue that needs resolution when comparing offers and that is the issue of sale of assets versus the more tax efficient sale of loans…we are unfortunately not happy with the responses previously received from Capita on this subject and have written to you on a number of occasions seeking clarity on this key matter and the legal framework within which NAMA’s policies have been designed”). It suggested that the sale of the assets, instead of the loans, might result in unnecessary expenses of up to €700,000. Another issue addressed in the letter was that of overcharging; it referred to the lodging of papers in the High Court, and a preliminary forensic investigation of overcharging by INBS which had identified irregularities.
90. An assessment dated 7th November, 2013 decided that the Bagnall bid was unacceptable to NAMA. It said, inter alia : “We have been unable to establish who Bagnall’s ultimate client is – the Debtor advises that it is a wealthy American investor however we have no evidence of same”. It referred to the suggestion that Mr. Morrissey would consent to judgment for the difference between the par value of the loans and the net proceeds of any transaction if NAMA were to consent to the loan sale and recorded his rejection of that suggestion. It set out Lisney’s estimates of property values. The assessment said that the bid did not represent value to NAMA for a number of reasons. One of these was: “The Bagnall bid values the Debtor PDH at €830k, Lisney however verbally advise that it is a superior property to 70 Palmerston Road (current bid of €1.83 million) and should command c. €2m on the open market”. The other reasons included:
“2. Lisney estimates if the current market value of the properties are significantly in excess of the Bagnall bid;
3. Using Lisney estimates, and including 36 Palmerston ~Rd at fair value shows a net return to NAMA of €9.3m, almost €2m in excess of the Bagnall bid;
4. Acceptance of the Bagnall bid would constitute “Debt Forgiveness” as NAMA’s ability to pursue the debtor personally would be foregone through a loan sale;
5. Acceptance of a bid for the loans, rather than a bid for the individual properties denies the Exchequer c. €600k worth of VAL and €130k in stamp duty that would ordinarily be payable;
6. Taking the above into account, Capita recommend that aby bid less than €10m (€9.3m + €730k taxes revenue forgone) for the loans does not represent value – particularly given the par debt level of over €35m.”
The assessment also contains the following: “The debtor has been very clear that his favoured method of disposing of the properties is via a loan sale to Bagnall & Associates. The Debtor argues that this represents the best return to NAMA due to not having to pay VAT, agency fees etc on the disposal. However, it appears to us that the Debtor’s overriding concern is to escape his Personal Guarantees on the loan and secure the release of his PDH, 36 Palmerston Road on favourable (to him) terms… The Debtor expressed his disappointment with the response to his loan sale proposal and was not willing to entertain any discussion in relation to his PDH. Capita/NAMA made a suggestion that perhaps the Debtor would consider nominating 3 Lower Churchtown Rd as his PDH and that NAMA may come to an agreement as part of an overall solution, however the Debtor rejected this proposal and refused to continue any discussion in relation to this.”
91. A letter of 8th November, 2013 from Capita to Mr. Morrissey’s then solicitor confirmed its refusal to the loan sale and set out the reasons as follows:
• “NAMA maintains its right to dispose of its loans on its terms and will not entertain a Debtor led Loan Sale process. NAMA has sole discretion as to whether to sell its loan assets or not;
• All decisions to proceed with a Loan Sales process (and the final decision to sell to a preferred bidder) must be approved by the relevant Delegated Authority (DA) in line with DA policy;
• All NAMA Loan Sales, which do not fully recover PAR debt, must be openly marketed;
• If a Loan Sale proposal is approved by the relevant DA, NAMA will conduct a Loan Sale process and will appoint an external loan sale agent from NAMA’s panel (the “Loan Sale Agent”) to act on ANAM’s behalf in the Loan Sale process;
• A Loan Sale will be subject to the qualifying bidders satisfying NAMA fully as to its bona fides (including usual considerations as to ability to fund and conditionality attached to bid etc).
The Bagnall & Associates bid for Mr. Morrissey’s loans is unacceptable to NAMA for the following reasons:
1. The bid is Debtor led;
2. The bid has not been made to NAMA – all correspondence to date has been addressed to Lisney who are not a NAMA Loan Sale Agent. Furthermore, the identity of the bidder has not been revealed;
3. Notwithstanding the above, the quantum of the bid being proposed, is insufficient for NAMA to give due consideration to the proposal. As pointed out to your client at our meeting on 2nd October 2013, a far higher bid would be required before NAMA would consider accepting same, any such bid being subject to the usual NAMA Loan Sales approval process.
4. NAMA set minimum acceptable monetary levels for Loan Sales, these minimum levels are based upon the likely returns to NAMA after all associated transaction costs have been deducted and differ loan to loan. This bid does not meet the minimum acceptable monetary level associated with your client’s loan value;
5. The loans have not been openly marketed by a NAMA appointed Loan Sale Agent.”
Notice of recommendation of enforcement and invitation to make representations (Second)
92. By letter dated 13th November, 2013, Capita wrote to Mr. Morrissey repeating the reasons why the Bagnall bid was rejected and inviting him to make final representations as they were recommending to NAMA that a decision be made to take enforcement action against him.
93. NAMA also continued to engage in relation to the proposed sale of some of the investment properties. I note that as of 19th November, 2013, Mr. Declan Bagnall was corresponding with Mr. Byrne of Lisney by email, seeking to buy either all of the loans or all of the properties and related security in one lot, and suggesting that he was the highest bidder, and that a letter dated 20th November, 2013 from Lisney to Mr. Morrissey set out the details of the best bids and indicating which one they would recommend to NAMA.
Notice of recommendation of enforcement and invitation to make representations (Third)
94. By letter dated 6th January, 2014, Capita placed Mr. Morrissey on notice of outstanding requirements, including a Sworn Statement of Affairs and outstanding rent, and stated that his continued failure to comply with all of the requirements left Capita with no alternative but to recommend enforcement action to NAMA. He was invited to make representations by 9th January, 2014.
95. On 13th January, 2014, Capita prepared a Form C requesting approval from NAMA to proceed with the appointment of a statutory receiver over the seven investment properties. This included all of Mr. Morrissey’s submissions and representations from 6th January, 2014.
96. On 16th January, 2014, a Notification of Decision issued from NAMA approving the appointment of Mr. Neil Hughes of Hughes Blake Chartered Accountants as statutory receiver. On 20th January, 2014, a second Notification of Decision issued from NAMA approving the appointment of a second statutory receiver, a Mr. Joseph Walsh.
Letter of demand for €32 million dated 22nd January, 2014
97. By letter dated 22nd January, 2014, NAMA formally wrote to Mr. Morrissey demanding repayment of the sum of €32,131,530.21 owing in respect of the loans attaching to the seven investment properties.
98. The within proceedings issued by way of plenary summons on 27th February, 2014 and the proceedings took their course as described earlier.
Section 3: The plaintiffs’ legal claims
99. As described above, the plaintiffs’ statement of claim ran to sixty-four pages and raised a wide range of issues, including claims that numerous constitutional rights had been breached as well as a claim that there had been a violation of the European Convention on Human Rights. The reliefs sought included various types of declaration, damages, and an injunction. The case, both as pleaded and presented at hearing, was rather lacking in focus. Essentially, Mr. Morrissey articulated a wide range of grievances in respect of NAMA’s dealing with him without seeking to demonstrate how these grievances translated into precise legal claims or to correlate the precise evidence with the necessary ingredients of each claim. This has presented certain challenges in structuring this judgment but I have decided to deal with the issues raised in the following sequence: (1) the claim for damages in respect of NAMA’s decision to enforce in respect of all properties except for the family home; (2) all the issues relating to the family home; (3) miscellaneous (non-constitutional) issues, and (4) any residual constitutional issues arising at the conclusion of the above examinations. It is well established law that constitutional issues should only be dealt with if necessary and after other aspects of the case have been dealt with. As stated by Henchy J. in T he State (P Woods) v. Attorney General [1969] I.R. 385 (at page 399): “Because of the constitutional proprieties involved in the judicial review of legislation and the inherent limitations of the judicial review process, the rule has been evolved that a court should not enter upon a question of constitutionality unless it is necessary for the determination of the case before it.” This approach has been re-iterated on numerous occasions, including in Murphy v. Roche [1987] I.R. 106, McDaid v. Sheehy [1991] 1 IR 1 and Carmody v. Minister for Justice [2010] 1 IR 635. However, as will be seen, I conclude that in the circumstances of the case and by reason of other conclusions I have reached, it will not be necessary or appropriate in this case to express views on any constitutional issue in the present case.
100. The main parts of my analysis are with regard to (1) and (2) above. Within item (1), the claim for damages in respect of NAMA’s decision to enforce in respect of all properties except for the family home, I have created a number of different sub-headings: (a) the issue raised by the plaintiffs with regard to s. 182 of the Act of 2009; (b) whether NAMA breached any rights of fair procedure in the process leading to the decision to enforce; (c) whether the NAMA decision to enforce was substantively unlawful. With regard to (2), the family home section, I deal with a number of distinct factual and legal questions as well as whether s. 101 of the Act of 2009 applies to the situation.
1. The claim for damages in respect of NAMA’s decision to enforce in respect of all properties except for the family home
Section 182 and the parameters for bringing a damage claim against NAMA
101. The plaintiffs pleaded and submitted that s. 182 of the National Asset Management Agency Act 2009 (“the Act of 2009”) was unconstitutional because it placed unfair restrictions on their right of access to the courts and the right to litigate. Section 182 permits an action for damages against NAMA to be commenced only with leave of the Court within 30 days of the accrual of the cause of action. NAMA formally pleaded that the plaintiffs were precluded from bringing the proceedings by reason of s. 182 of the Act of 2009. However, NAMA put in full submissions responding to each of the issues on the merits and at the trial, submitted that the constitutionality of the provision did not arise in circumstances where, despite the fact that the plaintiffs were manifestly out of time in seeking leave of the Court, the claims had been defended on the merits. Therefore, it seems that NAMA was content to allow the Court proceed to deal with the plaintiffs’ claims on their merits and not to press the time-limit issue.
102. I note that the issue of time-limits in connection with the Act of 2009 (albeit in s. 193 and not s. 182) was discussed at some length by Charleton J. in National Asset Loan Management Ltd v. Barden [2013] 2 IR 28 and National Asset Loan Management Ltd v. McMahon [2015] 2 IR 385. I would have been inclined to take the view that s. 193 would be at least as relevant as s. 182 in the present case, because (as discussed below) much of the plaintiffs’ case amounted to a claim based on public law issues. However, by reason of the stance adopted by the defendants, it does not seem to me to be necessary to deal further with the issue of time-limits or the question of leave of the Court in the present case. In circumstances where the defendants appear to have decided not to rely upon s.182 as a defence to the plaintiffs’ claims, the constitutionality of the statutory provision does not arise for determination. I will therefore proceed to an assessment of NAMA’s conduct in respect of the plaintiffs.
What is the legal nature of the plaintiff’s claim for damages?
103. The first issue is to identify the precise nature of the plaintiffs’ claim. The plaintiffs pleaded and made numerous submissions concerning alleged unfairness in NAMA’s dealings with them. Certain themes repeatedly featured under different headings, as I noted earlier. These included that NAMA: had acted ultra vires ; had taken into account irrelevant matters; had failed to give meaningful consideration to Mr. Morrissey’s proposals; had adopted strategies that were not in accordance with their statutory functions; had given reasons for their decisions which were vague, inadequate, invalid, and unintelligible; had not afforded Mr. Morrissey fair procedures; had engaged in abuse of process; had coerced Mr. Morrissey to enter agreements under economic duress; had made errors of fact and failed to ascertain the true facts; had made numerical errors; had unlawfully fettered their discretion; and had wrongfully relied upon his alleged lack of cooperation. Even this is not an exhaustive list, but I think it captures the main points sufficiently for analysis. What is clear from the matters listed is that the essence of the complaint centred on what would be regarded in law as a public law type of claim, i.e. a claim for damages based upon the alleged unlawfulness of the NAMA decision.
104. However, there appears also to be a negligence claim embedded within the statement of claim. The plaintiff’s claim for damages was formally pleaded as one for:
i. “Breach of constitutional rights;
ii. Negligence ;
iii. Negligent Misrepresentation ;
iv. Breach of statutory duty;
v. Breach of Section 3 of the European Convention on Human Rights Act 2003;
vi. Breach of Statutory Rights, under the Guardianship of Infants Act, 1964 as amended;
vii. Causing loss by unlawful means.” (emphasis added)
105. The legal parameters of a claim for negligence against a public decision-making body were discussed by the Supreme Court in Pine Valley Developments Ltd v. Minister for the Environment, Ireland and the Attorney General [1987] IR 23. That case concerned a Ministerial decision to grant outline planning permission which was later found to be invalid. The plaintiff sought damages for the loss it had suffered by reason of the invalidity of the decision. The Court held that no liability in negligence arose where the Minister had followed the advice given to him in good faith. The issue of the relationship between the advice given to a decision-maker and whether or not a decision can be said to have been negligently reached was also discussed in Glencar Exploration v. Mayo County Council (No. 2) [2002] 1 IR 84; so too was the issue of whether the decision-maker, by reason of his statutory duty, owed a duty of care to the particular plaintiff as distinct from the world at large. This is a crucial issue because in the law of negligence, it is necessary to prove that there was a relationship of sufficient proximity between the plaintiff and the defendant. None of these issues were addressed by the plaintiffs in the present case and there was no attempt to grapple with the numerous questions that would have presented themselves if the plaintiffs had engaged in any serious way with the negligence claim rather than simply pleading it on a formal basis. Accordingly, I reject the claim in negligence on the basis that the plaintiff has failed to satisfy the Court that the necessary ingredients for the tort have been established by the evidence. I will now turn to the main basis for the claim in damages, namely the public law issues.
The public law claim for damages: initial comments
106. Something which was absent from the plaintiffs’ case was any imprint of the views of the Supreme Court in such leading cases as Pine Valley Developments Ltd v. Minister for the Environment, Ireland and the Attorney General [1987] IR 23, and Glencar Exploration v. Mayo County Council (No. 2) [2002] 1 IR 84. These two leading Supreme Court decisions explain the various matters which a plaintiff must establish in order to obtain damages when his or her claim is one for loss allegedly caused by a public body exercising a decision-making function pursuant to statute.
107. Further, the plaintiffs’ submission lacked attention to core judicial review principles when assessing the lawfulness of a decision made pursuant to statute by a public body. Key to these judicial review principles is the important distinction drawn by the courts between the procedural rights of an individual in the process leading to the decision, on the one hand, and the test for examining the decision “on its merits”, on the other. While the courts are careful to ensure that appropriate procedural rights are afforded to an individual, they are much more circumspect about interfering with decisions of administrative bodies in a substantive sense. This conservative approach to substantive review of such decisions is rooted in the constitutional doctrine of the separation of powers as between the executive and the judicial organs of government, as has been explained in the following terms by Mark De Blacam in Judicial Review (3rd edn, Bloomsbury Professional 2017) at pp 110-111:
“[6.33] While a court must not lose sight of its unique role in determining the legality of a public decision, there are sound reasons for the exercise of restraint in the application of the review principles. If the judges overreach, they commit the error which review has been designed to prevent: they abuse jurisdiction. And in doing so, there is the practical danger that they may end up being responsible for decisions which they are not, by training or experience, qualified to make. Specialist bodies are established by legislation often because their members will have particular knowledge of their fields of activity. That knowledge may not necessarily be imparted to or rest in a judge dealing with a review application. Moreover, decision-making in areas of public policy is quite unlike judicial decision-making. The administrator is often concerned with broad considerations of the public interest, whereas the judge tends to focus on the claims of the parties to the case before him. Judicial review, particularly of executive decisions with a substantial policy element, runs the risk that legitimate claims of third parties may be affected, thought they have no input into the litigation. Where, for example, review is granted the effect of which is to require the state to provide funding for the applicant, it is conceivable that funding in other areas of the respondent’s responsibility will be correspondingly reduced. Yet this factor, which is likely to be of the utmost importance to the respondent, may form little or no part of the review application, the concern of the court being only whether the rights of the applicant have been infringed.”
108. Mr. Morrissey’s submissions frequently appeared to conflate the separate questions of procedural fairness with the substantive correctness of the NAMA decision to enforce, and proceeded on the assumption that if he could establish that NAMA had acted unfairly, he would be automatically entitled to damages. The Court, however, has to engage in a more rigorous analysis. I will be examining his claims by applying the appropriate legal tests to each of the following and separate questions: (1) Did NAMA afford him appropriate procedural rights in the process which culminated in the enforcement decision? (2) Does the decision ultimately made by NAMA to enforce satisfy the appropriate legal tests applicable to judicial review of the substance of the decision? (3) If the answer to either of those question is yes, are the plaintiffs entitled to damages?
What decision is under review?
109. Another point which should be clarified is the nature of the NAMA decision which is being challenged in these proceedings. Although Mr. Morrissey made complaints about NAMA’s conduct at many stages of its process, from a legal point of view what is reviewable is the decision to enforce of January 2014. As described in Treasury Holdings & Ors v. NAMA & Ors [2012] IEHC 297, the decision to enforce is “a composite decision to make demands and if such demands were not met, to appoint receivers.” Matters such as the rejection of Mr. Morrissey’s various business plans and the “Bagnall proposal”, or the subsequent appointment of receivers, form the background, lead-up and consequence of the decision to enforce and are relevant to that extent; but in public law terms, the decision which is actually amenable to judicial review is the decision to enforce.
110. I should perhaps note what was not challenged in these proceedings. There was no challenge to the original decision to acquire Mr. Morrissey’s loans and in any event, he is long out of time for challenging that decision. Similarly, while he continued to complain at the hearing about an alleged conflict of interest between IBRC (NAMA) and IBRC (non-NAMA), no challenge was ever brought to their acting as a service provider and, again, he is long out of time for doing so. His continuing to engage with NAMA without challenging either of those two matters at the relevant time would in any event amount to waiver or acquiescence.
Relevant principles and authorities concerning the public law issues
111. There have been a number of decisions of the Supreme Court and Court of Appeal concerning NAMA which are relevant to these proceedings insofar as they contain discussions of the relevant judicial review/public law principles in that particular context. However, it is true that certain basic judicial review/public law principles also apply in the normal way. The legal micro-climate concerning NAMA operates within the broader climate of judicial review principles. Before proceeding to examine some of the authorities in further detail, I think it may be useful to summarise the principles which emerge from the authorities in short form:
(a) Certain procedural rights must be afforded certain borrowers before a decision is made by NAMA to acquire any eligible bank assets related to their credit facilities with participating banks, provided the person’s interests are affected in the manner described in Dellway Investments Ltd v. NAMA [2011] IESC 14. This issue does not arise in the present case.
(b) An individual or entity whose interests are affected to a sufficient degree is entitled to certain procedural rights before a decision is taken to enforce ( Treasury Holdings v. NAMA & Ors [2012] IEHC 297).
(c) When these procedural rights arise, they include the right to be heard or an opportunity to make representations before any decision is taken to enforce ( Treasury Holdings v. NAMA & Ors [2012] IEHC 297, Flynn v. NAMA [2014] IEHC 408).
(d) These procedural rights include the right to be given the real reasons why a decision to enforce is being contemplated in order that the individual can make meaningful representations ( Flynn v. NAMA [2014] IEHC 408).
112. In my view, it is also important to state that I do not see anything in those decisions to suggest that the well-established (and narrow) judicial review tests (as set out in O’Keefe v. An Bord Pleanala [1993] 1 IR 39, St ate (Keegan) v. Stardust Victims’ Compensation Tribunal [1986] IR 642 and Meadows v. Minister for Justice, Equality and Law Reform [2010] 2 IR 701) for reviewing decisions of administrative bodies on their merits have in any way been altered.
113. None of the above principles were disputed by NAMA nor was it disputed that Mr. Morrissey was entitled to the fair procedures identified in Dellway and Treasury . Their contention was that NAMA had taken cognisance of those authorities and that it had afforded Mr. Morrissey the procedural rights in question.
114. I think it appropriate to set out a small number of passages from the relevant authorities by way of further context to the above summary and for further detail as to the approach I must adopt in the present proceedings to the evidence before me.
115. In State (Keegan) v. Stardust Victims’ Compensation Tribunal [1986] IR 624, the Supreme Court considered the test to be applied when reviewing (the substantive aspects of) decisions of administrative bodies. Henchy J., in rejecting the traditional association of unreasonableness with logic (as stated by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Services [1985] AC 374, at page 410), set out the test in the following way (at page 658):-
“I would myself consider that the test of unreasonableness or irrationality in judicial review lies in considering whether the impugned decision plainly and unambiguously flies in the face of fundamental reason and common sense . If it does, then the decision-maker should be held to have acted ultra vires , for the necessarily implied constitutional limitation of jurisdiction in all decision-making which affects rights or duties requires, inter alia , that the decision-maker must not flagrantly reject or disregard fundamental reason or common sense in reaching his decision.” (emphasis added)
116. In O’Keeffe v. An Bord Pleanala [1993] 1 IR 39, Finlay C.J. referred at some length to the decision in Keegan and described the appropriate test as whether the applicant has established, to the satisfaction of the Court, that there was no relevant evidence upon which the decision-maker could have reached the decision he did, thus emphasising that the bar to judicial interference with the decision of an administrative body (on the merits) is very high. He explained the reason for this in the planning context:
“Under the provisions of the Planning Acts the Legislature has unequivocally and firmly placed questions of planning, questions of the balance between development and the environment and the proper convenience and amenities of an area within the jurisdiction of the Planning Authorities and the Board which are expected to have special skill, competence and experience in planning questions. The Court is not vested with that jurisdiction, nor is it expected to, nor can it, exercise discretion with regard to planning matters.”
The same can be said of most, if not all, administrative decision-making contexts and is as true for NAMA as it is for decision-makers in many other areas. If the courts were over-eager to intrude into that area of judicial function, this would be considered a breach of the separation of powers under the Constitution. Hence, the narrowness of the test.
117. The question of procedural fairness is, of course, a different matter. The courts have a well-developed jurisprudence on the need for appropriate rights for those affected by decisions in many different contexts. The extent of these rights depends upon the context; and for present purposes, the most relevant authorities are those concerned with procedural rights in the NAMA process. In Treasury Holdings v. NAMA & Ors [2012] IEHC 297, the applicants sought judicial review of decisions taken by NAMA to proceed with enforcement against the applicant. Finlay Geoghegan J. first examined the question of whether a decision to enforce was amenable to judicial review and reached the conclusion that Treasury was entitled to be heard before a decision was made to enforce. I note that among the matters she took into account in reaching this conclusion on the facts before her were: that Treasury had an equity of redemption; that it was still in a position to manage and conduct its business; that it continued to earn significant management fees and rental income (albeit that 92% was mandated to NAMA); that one of its developments was in negotiation with BNY Mellon in relation to a potential lease and that it was a party to a master development agreement in relation to the Spencer Dock development; that it continued to employ a skilled workforce; and that enforcement would trigger cross-default clauses in relation to other facilities including the Spencer Dock development project. She also took into account a Memorandum of Understanding reached between NAMA and Treasury towards a future restructuring of the group. She concluded that in view of this specific configuration of facts, Treasury had a “right to be heard” before NAMA took a decision to enforce. As to the content of the right to be heard, she said (at para 112):
“In Dellway , Hardiman J. at p. 84, stated that the obligation on NAMA, if applicable, includes an obligation to notify “of the proposed decision and to sufficient detailed information, including criteria as may be necessary to allow the person to be affected to make the best case he can against the decision which he fears”. Counsel for NAMA submits that this requirement of notification goes beyond what is contemplated by the majority of the other judges. Even if this is so in its detail, it appears to me that at minimum, if there is a right to be heard or an obligation to give an opportunity to be heard, then there must be, at minimum, notification that the proposed decision is under consideration and sufficient information about the reasons for which it is proposed. Absent such information, the right to be heard would be meaningless . It is unnecessary, on the facts herein, to consider the level of detailed information which it might be necessary for the decision maker to give. This appears to me to depend upon the individual facts .” (emphasis added)
118. The next section of her judgment in the Treasury case is entitled “duty to act in a fair and reasonable manner”. Nothing in this suggests a departure from the usual principles concerning the review of the (substantive aspects of) an administrative decision. Finlay Geoghegan J. started by referring to the decisions in East Donegal Cooperative Mart Ltd v. Attorney General [1970] IR 317 and McCormack v. Garda Síochana Complaints Board [1997] 2 IR 489 to the effect that proceedings, procedures, discretions and adjudications provided for by Acts of the Oireachtas are to be conducted in accordance with the principles of constitutional justice, which place a duty on a decision-making authority to apply fair procedures in the exercise of its statutory powers and functions. She then went on to say that the applicant, when applying for leave to bring the proceedings, had referred to Zockoll Group Ltd v. Telecom Éireann [1998] 3 IR 287 and Deane v. Voluntary Health Insurance Board [1992] 2 IR 319, but that it had since then clarified that “it was only relying upon the obligation of NAMA to act fairly and reasonably in the procedure followed reaching its decision as distinct from any obligation to take a decision which is objectively and substantively reasonable” (emphasis added). She then went on to consider whether adequate notice of the enforcement decision had been given and whether there had been an adequate opportunity to be heard. This decision cannot possibly be read as seeking to alter in any way the established position regarding judicial review of decisions “on the merits” (as distinct from review of procedural fairness), as discussed in leading authorities such as O’Keefe, Keegan and Meadows . The net point for present purposes is that Finlay Geoghegan J. held that the procedural rights consisted of: (1) notification that the proposed decision is under consideration, and (2) the provision of sufficient information about the reasons for which it is proposed, together with an opportunity to be heard.
119. In Flynn v. NAMA [2014] IEHC 408, a number of different issues arose but I am concerned with only one of them, namely, the right to be heard prior to the decision of NAMA to call in the loans and to be told of the real reasons for the proposed decisions so that one can meaningfully exercise the right to be heard. The Court heard oral evidence and concluded, as a matter of fact, that the real reason for calling in the loan was one party’s denial of the debt and her failure to put in a statement of affairs. Cregan J. said:
“The right to be heard necessarily means that the person affected must know the action which is being proposed and the reasons for that action. This gives them an opportunity to make representations on the issue and to rebut, if they can, the reasons for the action. It follows therefore that the person affected must be informed of the real reasons for the proposed action and not be given misleading or spurious reasons. If a person is not given the real reasons for a proposed decision and/or if he is given misleading or spurious reasons, then his representations cannot deal with the actual reasons. In such a case the right to be heard is not vindicated. It becomes a nullity. That is the case here.”
120. I also note certain comments of Charleton J. in NAMA v. McMahon [2015] 2 IR 385. The case arose out of proceedings brought by NAMA seeking judgment on foot of borrowings and a guarantee which had been acquired by it from AIB under the Act of 2009. Having dealt with a number of legal arguments, including an argument that NAMA was estopped from enforcing the debt, Charleton J. moved on to address whether certain provisions of the Act of 2009 were consistent with the Constitution. He pointed out that an individual interacting with NAMA had certain protections as identified in Dellway and Treasury and, because the agency was in the sphere of public law, an opportunity to invoke an argument as to fair procedures which were additional to rights in private law. He then said:
“47. All of these rights are additional to those in private law. They are both substantive and procedural rights and ones which make a difference in terms of the procedures to be applied and the protections that are available to borrowers. There has been no property right of the defendant that has been unjustly attacked. The defendants has a right to earn a living does not necessarily mean an entitlement to keep the income stream generated from property where those legal rights have been signed away in debt or guarantee obligations. The Court regards the equity of redemption in mortgage contracts as among the most important of property rights. Such rights are like other property rights: entitlements that can be exchanged for value or which can be altered or lost in consequence of legal instruments validly entered into. The property rights in question are respected when proper consideration is given by a lending institution to whether a debt is sustainable and whether the equitable title that remains with a mortgagor can be salvaged by some reasonable arrangement. But here there has been no unjust tearing apart of property rights because the debt burden was overwhelming and the obligations entered into at arms length and in the clear hope of advantage. There is therefore no warrant for any declaration that any part of these two sections offend against the Constitution.” (emphasis added)
This comment points out that while the debtor dealing with NAMA is entitled to certain rights of fair procedure, there is a limit to his or her entitlement. The debtor is not entitled to dictate what should happen but rather is entitled to ” proper consideration [being] given by a lending institution to whether a debt is sustainable and whether the equitable title that remains with a mortgagor can be salvaged by some reasonable arrangement. ” NAMA’s obligation to afford certain procedural rights does not displace the courts’ reluctance to interfere with decisions on their merits unless the Keegan, O’Keeffe or Meadows tests have been satisfied. When reviewing NAMA’s decision to enforce, the Court is not entitled to simply substitute NAMA’s view with its own view of the commercial desirability of one option over another, even if the Court’s views were different from that of NAMA.
Application of the law to the facts of present case
Procedural rights: adequate notice of NAMA’s thinking and opportunity to present his views
121. It is clear from the chronology of events that NAMA gave Mr. Morrissey numerous opportunities to present his case. These included:-
1. Opportunity to provide to NAMA with a written business plan, which he did on 31st May, 2011;
2. Meeting of 16th February, 2012 between IBRC, Mr. Morrissey and Mr. Hyland of Baker Tilly to discuss business plan of previous May 2011;
3. Opportunity to submit a re-cast business plan after that meeting, which he did on 27th February, 2012;
4. Meeting on 30th May, 2012 between IBRC, Mr. Morrissey and Mr. Hyland of Baker Tilly to discuss NAMA’s negative response to the re-cast business plan;
5. Opportunity to present further written proposals which was done on 8th June, 2012;
6. Opportunity to present further written proposals which was done in January 2013;
7. Meeting of 25th July, 2013 between IBRC, Mr. Morrissey, Mr. Black (Mr. Morrissey’s solicitor) and Mr. Byrne of Lisney;
8. Letter of Mr. Morrissey dated 31st July, 2013;
9. Meeting between Capita and Mr. Morrissey dated 29th August, 2013;
10. Meeting between Capita and Mr. Morrissey on 2nd October, 2013; and
11. Numerous exchanges by email and in writing concerning the Bagnall proposal in October 2013.
122. In fact, NAMA made decisions to enforce on several occasions but was persuaded not to proceed on each occasion because of submissions made by Mr. Morrissey. Accordingly, this is very far from a situation where a decision-making body reached a decision on a summary basis without giving the affected person an opportunity to present his case. Mr. Morrissey had numerous opportunities to present his views, whether by sending written submission or by participating in meetings, and there is no doubt that he expressed his views forcefully and with the benefit not only of his own considerable professional and business experience but that of his advisers, Baker Tilly.
123. Nor was it a situation where Mr. Morrissey was kept in the dark as to NAMA’s real reasons for taking the course that it ultimately did. In particular, he was repeatedly told that one obstacle was that he was not remitting the full rental income from the properties to NAMA and, in particular, that he was not entitled to use these monies to fund his Anglo litigation. He was also repeatedly told that NAMA required him to submit a Sworn Statement of Affairs in appropriate format. I do not find anything on the facts which suggest that there was any concealment of the real reason for enforcement as was the case in Flynn described above.
124. The process of ongoing discussion between NAMA and Mr. Morrissey was a difficult one by reason of a number of inflexible positions and unhelpful attitudes he adopted including:-
i. That he was entitled to use some of the rental income to fund his entirely separate Anglo litigation;
ii. That he was absolutely entitled to stay in the family home at Palmerston Road, Dublin 6;
iii. That he was entitled to put information as to his financial circumstances before NAMA in a format of his, rather than its, choice (i.e. the Statement of Affairs issue);
iv. That if NAMA did not do what he wanted them to do, he would involve them in protracted litigation as he had done with Anglo/IBRC;
v. That it was not appropriate for him to furnish the required information to the IBRC (NAMA) on the basis that it had a conflict of interest by reason of his having sued IBRC (non-NAMA) in respect of his Anglo debts;
vi. (After a certain point in time) that he was entitled to cease paying any rent on the family home reason of his view that he had been overcharged by INBS;
vii. That the wrongdoing of Mr. Fingleton in his management of INBS absolved Mr. Morrissey of responsibility for repaying his own debts incurred in respect of loans from INBS.
125. These positions were legally unsound and unhelpful. I do not consider that NAMA was unreasonable both in rejecting those arguments and in considering that Mr. Morrissey’s adherence to them rendered him an unsuitable candidate for ongoing co-operation with Mr. Morrissey in a management role with regard to the portfolio as a whole. His attitude contained a fundamental lack of understanding of his legal position as a defaulting debtor whose loans had been acquired by NAMA.
126. It is, of course, theoretically possible for a decision-making body to observe the trappings of fair procedures without observing their substance. Where a body is required to give an opportunity to a person affected to put forward his views, it must then give meaningful consideration to those views. Insofar as Mr. Morrissey makes the case that the hearing rights he was afforded were a mere cosmetic exercise, I would make several points in this regard. First, it is difficult to see why NAMA would have taken the step of obtaining the independent opinion of PwC if they were engaging in a simple cosmetic exercise of merely being seen to afford Mr. Morrissey his procedural rights rather than actually listening to his views. As has been seen, NAMA consulted PwC in February 2013 and they produced a report for NAMA in August 2013. The same is true for the repeated requests for advice from Lisney on various aspects of Mr. Morrissey’s proposals, which can be seen particularly around the time of the Bagnall proposal in October 2013. Secondly, it is clear from their internal documents put before the Court that consideration was being given to Mr. Morrissey’s proposals on an ongoing basis and that it was not a mere box-ticking exercise. Thirdly, this type of argument must be viewed with caution because it risks a conflation of the issues of procedural fairness and substantive review of the decision itself. It, in essence, says: “NAMA must not have been giving proper consideration to Mr. Morrissey’s arguments because the decision it reached was plainly the wrong decision, and therefore while it was pretending to give him procedural rights, this was a cosmetic exercise rather than an exercise of any substance”, which of course begs the question of whether the decision was “the wrong decision”. It is therefore appropriate to turn now to a review of the decision itself.
The decision to enforce made in January 2014
127. In this exercise, the Court is not entitled to ask: “would I have made a different decision to NAMA?”, or “was NAMA’s decision the most commercially sensible one to make on the information it had at the time”? In State (Keegan) v. Stardust Victims’ Compensation Tribunal [1986] IR 642, Henchy J. said that: “[t]he Court cannot interfere with the decision of an administrative decision-making authority merely on the grounds that (a) it is satisfied that on the facts as found it would have raised different inferences and conclusions, or (b) it is satisfied that the case against the decision made by the [decision-making] authority was much stronger than the case for it”. Rather, the Court must ask: (a) was the decision “fundamentally at variance with reason or common sense” and, if so, “is indefensible for being in the teeth of plain reason and common sense?” (the tests set out in Keegan and O’Keeffe ); or (b) has the plaintiff satisfied the Court that there was “no relevant material” before it which would justify the conclusion it reached? (the test set out in O’Keeffe ).
128. My conclusion on the materials laid before me is that the plaintiffs have not satisfied any of those tests. Mr. Morrissey obviously took a different view of what strategy would be the best business decision and strongly believes that NAMA got it wrong. But I could not characterise the decision reached by NAMA – that Mr. Morrissey’s various alternative proposals were not the best way forward – as a decision “fundamentally at variance with reason or common sense” or that there was “no relevant material” before it which would justify the conclusion it reached. It was a judgment call based on a number of factors and I do not see that the judgment call fell outside the proper range of NAMA’s discretion. To take one example, Mr. Morrissey spent some time trying to persuade the Court that, if one were to take into account the tax aspects of the proposed Bagnall deal as against what NAMA proposed to do, the Bagnall deal was commercially more beneficial. However, it is not the Court’s task to decide which option was commercially more beneficial; it is confined to examining whether there was no basis for the decision reached or whether it was utterly lacking in rationality. In my view, that has not been demonstrated by the plaintiffs. Another example is the issue of whether or not NAMA was entitled to apply a €10 million price threshold to the sale of loan portfolios. Mr. Broderick averred that it was NAMA’s view, as repeatedly explained to Mr. Morrissey, that accepting offers below this amount was not commercially viable for NAMA. This is precisely the type of expertise that NAMA would have which the Court would not. Further, the issue of co-operation is one which NAMA was entitled to factor into the situation and constituted a relevant dimension over and above the commercial aspects of various courses of action. In this regard, matters such as the withholding of rental income from NAMA and spending it on the Anglo litigation, or threatening to embroil NAMA in litigation if they failed to agree with his suggestions, were aspects of Mr. Morrissey’s conduct which NAMA was entitled to take into account in reaching its decision with regard to enforcement. Accordingly, I am of the view that the decision taken by NAMA to enforce does not satisfy the tests for striking down an administrative decision on its merits.
129. In circumstances where I have reached the conclusion that both the process leading up to NAMA’s decision and the decision itself were valid and lawful, the issue of whether damages might follow from an unlawful decision does not arise.
2. The Family Home Issue
130. NAMA had not, at the time of these proceedings, taken any decision to enforce in respect of the family home. The plaintiffs’ claims in their plenary proceedings are therefore pre-emptive. The relief sought was “an order declaring that acts of the [defendants] in the purported exercise of their respective statutory and non-statutory functions in respect of the Second Named Plaintiff’s properties including (but not limited to) the family home at 36 Palmerston Road, Dublin 6, including the failure to act fairly and reasonably in respect of the valuation and disposition of the said properties, (including the appointment of a Receiver), have engaged in breaches of, and threaten further interferences in the exercise by the Plaintiffs of the Plaintiffs’ respective constitutional rights and duties” which are then listed. In addition to damages, what is sought is an order “restraining [the defendants] from conduct that breaches or threatens to interfere with the exercise by the Plaintiffs of their said Constitutional Rights”.
131. The list of constitutional rights of the plaintiffs which are alleged to have been breached include:
“i. Their right to inviolability of their dwelling, under Article 40, Section 5 of the Constitution;
ii. Their rights and duties as spouses, parents and educators of their children under Article 40, section 3, 41 and 42 of the Constitution;
iii. Their right to property, under Article 40, section 3 and 43 of the Constitution;
iv. Their right to marital autonomy, under Article 40, section 3, 41 and 42 of the Constitution;
v. Their right to equality before the law, under Article 40, Section 1 of the Constitution;
vi. Their right to human dignity, under Article 40, Section 1 and 3 of the Constitution;
vii. Their right of access of the courts, under Article 40, Section 3 of the Constitution;
viii. Their right to litigate under Article 40, Section 3 and 43 of the Constitution.”
132. The submissions of the plaintiffs concerning the family home rolled together a number of factual issues with legal issues of both a non-constitutional and constitutional nature. I have separated these out into the following factual and legal questions:
(1) Did Mrs. Morrissey sign the necessary family home protection documentation at the time of the giving of the house as security for the loan (2005)?
(2) Was there an agreement between Mr. Morrissey and INBS that he was entitled to make reduced monthly payments on the family home mortgage (in 2009/2010)?
(3) Is there any written record of any such agreement?
(4) Was NAMA aware of any such agreement when it acquired the loans?
(5) Does s. 101 of the Act of 2009 apply?
(6) If so, is s. 101 of the Act of 2009 constitutionally valid?
(7) Did NAMA refuse to allow Mrs. Morrissey to purchase the family home because she was the wife of the debtor?
(8) If so, was NAMA’s decision in that regard unlawful and ultra vires ?
Factual question No. 1: Did Mrs. Morrissey sign the family home documentation in October and November of 2005?
133. I have examined the documents which include a signed statutory declaration for the purposes of the Family Home Protection Act 1976 (“the Act of 1976”) and the signed endorsement of the mortgage. On their face, they clearly bear the signature of Mrs. Morrissey and the witness, solicitor Áine Gleeson. The document containing the endorsement of the mortgage for the purposes of the Act of 1976 clearly contains the declaration that Mrs. Morrissey had taken independent legal advice. The sworn evidence of Mrs. Morrissey in the proceedings before me did not clearly state her position on the facts and was more in the nature of a formal pleading style which equivocated on whether she had signed the documents or not. In one particular paragraph, she said: “I further say that my consent to the mortgage of the family home was necessary and that, if I provided such consent, and if I received independent legal advice prior to providing such consent, which is denied, I provided such consent on the basis that the Irish Nationwide Building Society, its senior managers, servants and agents (i) had conducted, and would during the currency of the said loans conduct, its business in a lawful manner, (ii) had not acted, and during the currency of the said loans would not act, intentionally, recklessly or negligently in the conduct of its business in such a manner as to damage my security of occupation of the family home.” In another paragraph, she said: “I say and am advised and believe that if I provided such consent, and if I received independent legal advice prior to providing such consent, which is denied, in entering into the said contracts and in respect of the discharge thereof, the Irish Nationwide Building Society owed me, this deponent, a duty of care, including the duty of care not to foreseeably imperil, directly or indirectly, the Second Named Plaintiff’s financial interests or the security of ownership or occupation of the family home and the security for my family of a permanent home within which to raise my four children.” When Mrs. Morrissey addressed the Court orally (by way of unsworn submission), she said that she did not remember signing the documents or receiving independent advice. She also told the court that she was a pharmacist who had given up her employment to work in the family home, from which I take it that she had a good education and has no unusual literacy difficulties.
134. In my view, if Mrs. Morrissey wished to firmly dispute that she had signed the documents (which would implicitly raise a question of forgery), she would need to have done much more by way of putting evidence before the Court to raise a doubt as to the truth and accuracy of what appears on the face of the documents. On the basis of the evidence before me, I find that Mrs. Morrissey did in fact sign the documents at the time and that she had received legal advice before doing so, as is stated on the face of the documents.
135. The normal implications of taking out a mortgage on a family home in terms of the consequential impact on constitutional rights was considered by McKechnie J. in the Supreme Court decision of Launceston Property Finance Ltd v. Burke and Burke [2017] IESC 62 in which the appellants, relying on Article 8 of the European Convention on Human Rights and on Articles 40.3.2°, 41 and 43 of the Constitution, unsuccessfully appealed an order for possession made against them. Addressing the interference with the alleged right to a family home, McKechnie J. stated at para 60 of his judgment:-
“60. The interference with the appellants’ property rights in the present case arises as a result of their personal and voluntary decision to enter into a commercial transaction(s) where, as security for money advanced, they committed the properties in question, including the family home, to the Bank.”
136. Addressing the provisions of the Constitution relied on in the argument that they give rise to a right to a family home and therefore, corresponding constitutional protection, McKechnie J. concluded that they were of no assistance to the appellants in their appeal:-
“63. Moreover, I do not see that the cited provisions of the Constitution can avail the appellants in any way. They have defaulted on their contractual obligation to repay the monies advanced to them in accordance with the terms of the mortgage. They remain in default of that obligation. For certain, the referenced Articles of the Constitution provide foundational protection to the appellants’ property and family rights, but they cannot and do not insulate the appellants from the obligation to repay their mortgage or the consequences of their failure to do so.”
137. There was an attempt by the plaintiffs to construct an argument before me to the effect that when Mrs. Morrissey signed the documents, she could not have foreseen the calamitous events of 2008 and the collapse of the Irish banking system which was to come, and that therefore the overall context in which she had signed the documents had altered so dramatically that it would be unconscionable to allow NAMA to enforce against the family home (if it chose to do so in the future). Needless to say, no legal authority was cited for this unusual proposition. Were there any such principle in Irish law, it would no doubt have been availed of by many a spouse over the decade since the financial collapse in order to resist eviction from the family home. Mrs. Morrissey clearly felt aggrieved by the fact that her family home was now at risk by reason of her husband being a NAMA debtor when she herself was not. However, the risk to the family home was created by her deciding to sign the documents at the relevant time. The Family Home Protection Act 1976 sought to protect spouses against the problem of the family home being put at risk, but if a wife signs away her rights in a private commercial transaction, the courts cannot offer protection if the risk she anticipated unexpectedly becomes far greater by reason of wider events in society at large. In fact, Mrs. Morrissey has been fortunate compared to many others whose property interests in the family home were deeply affected by the banking crisis. She has continued to live in the family home even though the repayments being made constituted a fraction of what had originally been agreed. Further, it will be recalled that NAMA suggested at one point that the family might re-locate to one of the other properties in the portfolio (in the area of Churchtown, Dublin) which was of less value, but this option was rejected by the plaintiffs who insisted that they were entitled to continue living in the property on Palmerston Road in Dublin 6.
Factual question No.2: Was there an enforceable agreement between Mr. Morrissey and INBS to the effect that he was entitled to pay reduced amounts of €4,000 per month, subsequently further reduced to €3,200 per month?
138. Section 101 of the Act of 2009 provides:
101.— (1) If in relation to a bank asset that NAMA or a NAMA group entity has acquired—
(a) it is alleged that a representation was made to, a consent was given to, an undertaking was given to, or any other obligation was undertaken (by agreement or otherwise) in favour of, the debtor or another person by the participating institution from which the bank asset was acquired or by some person acting or claiming to act on its behalf,
(b) no such representation, consent, undertaking or obligation was disclosed to NAMA in writing, before the service on the participating institution of the relevant acquisition schedule,
(c) the records of the participating institution do not contain a note or memorandum in writing of the terms of any such representation, consent, undertaking or obligation or do not contain a record of any consideration paid in relation to any such representation, undertaking or obligation, and
(d) the representation, consent, undertaking or obligation, if made, given or undertaken, would affect the creditor’s rights in relation to the bank asset,
then that representation, consent, undertaking or obligation—
(i) is not enforceable, and cannot be relied on, by the debtor or any other person against NAMA or the NAMA group entity,
(ii) is enforceable, and can be relied on, by the debtor or any other person, if at all, only against a person other than NAMA or a NAMA group entity, and
(iii) is not enforceable, and cannot be relied on, by NAMA or the NAMA group entity against the debtor.
(2) A claim based on a representation, consent, undertaking or obligation referred to in subsection (1) gives rise only to a remedy in damages or other relief that does not in any way affect the bank asset, its acquisition, or the interest of NAMA or the NAMA group entity or (for the avoidance of doubt) any property the subject of any security that is part of such a bank asset.
(3) The Court shall not make an order under section 182 in relation to a claim to enforce a representation, undertaking or obligation referred to in subsection (1).
139. Mr. Morrissey stated on affidavit that at a succession of meetings in 2009 and 2010, it was agreed between him, Mr. Hyland of Baker Tilly and INBS that “a reduced amount would be payable in respect of the family home”. He then repeatedly made legal submissions on the basis of this alleged agreement, stating that there had been an agreement that they would pay a reduced sum of €4,000 per month, and subsequently €3,200 per month. However, the paucity of evidence for the alleged agreement may be noted. There was no suggestion that it was ever recorded in writing; the INBS employee or officer with whom the agreement was allegedly made was never identified; and no further details of the circumstances of the agreement were put forward. No witness from INBS was ever called to substantiate the existence of any such agreement. It may be noted that any such agreement would represent a rather radical departure from the written terms of the loan facility, which envisaged repayment of approximately €12,000 per month. In my view, the plaintiff has failed to establish to the requisite standard of proof in civil proceedings that there was an agreement between the plaintiffs and INBS involving the essential features of an enforceable contract such as precise terms and the presence of consideration. However, I should state for completeness, that even if s.101 does apply because of the absence of written evidence of an agreement, I would reject the constitutional challenge and followed the opinion – albeit obiter – of the Court of Appeal in National Asset Loan Management DAC v. Breslin [2017] IECA 283 where Whelan J. had observed the following (at paras 79-80):
“The 2009 Act enjoys a presumption of constitutionality. The exigencies that brought forth the NAMA Act included a serious threat confronting the state’s economy, the risks surrounding stability of credit institutions in the State generally and the need for maintenance and stabilisation of the financial system in the state […]
While the NAMA Act is exceptional, from an historical perspective it is not unique. The Landed Estates Court (Ireland) act 1858, the Settled Land Acts, 1882-1890 and the Land Purchase Acts 1870-1903 and indeed the Succession Act 1965 each in their turn devised mechanisms, on grounds of public policy, which altered long established rights and overreached long assumed expectations in a manner considered necessary and expedient to address concerns affecting national stability.”
Whelan J. further observed at para 84:-
“84. Insofar as it is relevant, I am satisfied that the provisions of sections 101 (1) (i), 105(1) and 108 (2) (b) are proportionate and fall well within the threshold of restriction permissible on the exercise of protected rights under the Constitution and are no more than a proportionate restraint on the exercise of protected rights having due regard to the exigencies of the common good sought to be protected by the provisions of the NAMA Act as set forth in section 10 of that Act.”
Factual Question No. 3: Did NAMA refuse to allow Mrs. Morrissey to purchase the family home because she was the wife of the debtor?
140. A central part of the plaintiffs’ claim concerning the family home concerned an allegation that NAMA had prohibited Mrs. Morrissey from purchasing the family home. Taking this factual assertion as a foundation, the plaintiffs sought to build upon it a legal claim incorporating all manner of alleged breach of constitutional rights. A fatal flaw in this part of the plaintiffs’ case was the fragility of its factual foundation. Did NAMA actually prohibit Mrs. Morrissey from purchasing family home? In my view, the evidence does not establish this fact.
141. The factual basis purporting to underpin the plaintiffs’ submissions on this issue appears to be entirely based upon Mr. Morrissey’s version of the meeting on the 2nd October, 2013 (referred to in the chronology set out above at paragraph 74). He said that that he was told that his wife would not be allowed to purchase the family home “should such an event arise”. Mr. O’Donoghue, as seen above, gave a long description of what was said at the meeting and utterly disputes that this was ever said; in essence, his version is that he indicated that the family home would have to be sold and that the price of €830,000.00 was a substantial undervalue of the home. He said that Mr. Morrissey refused to allow the open marketing and viewing of the property, and this would preclude NAMA from determining the actual market value of the property, and in those particular circumstances, his wife (nor any other party) would not be allowed to purchase the property. He denied having said that Mrs. Morrissey would never be allowed to purchase the house; rather he informed Mr. Morrissey that his wife would not be permitted to purchase the property at the figure of €830,000.00 and/or without the property being openly marketed. He agreed that if price had not been the issue, nothing would have precluded Mrs. Morrissey from purchasing the property.
142. The Court is mindful of the warnings given by the Supreme Court in RAS Medical Ltd v. RCSI [2019] IESC 4 not to resolve conflicts of fact on affidavit in circumstances where there has been no cross-examination of the deponents. In my view, I cannot reach a conclusion on what was said to Mr. Morrissey about the hypothetical situation of Mrs. Morrissey purchasing the family home in circumstances where neither Mr. Morrissey nor Mr. O’Donoghue were cross-examined on this issue. I would comment that if this was in fact said by Mr. O’Donoghue at the meeting, it is surprising that it was not immediately raised by Mr. Morrissey in his correspondence the next day, because he was not reticent about expressing his complaints in general. Yet on the day after the meeting, Mr. Morrissey wrote a letter in which he made no mention at all of this alleged comment. More importantly, however, I do not think it is essential to my decision in any event to resolve this narrow issue of fact, i.e., whether a comment was made that she would never be allowed to purchase the house. What is clearly established by the evidence is that what was being discussed at that meeting was the Bagnall proposal which was an offer from a third party, not Mrs. Morrissey. It will be recalled that Mr. Morrissey was, at all times, at pains to point out to NAMA that he was at arm’s length from the investor behind the Bagnall proposal. Accordingly, there was in fact no offer to purchase the family home from Mrs. Morrissey on the table at the time of the meeting at which the disputed comment was allegedly made. Consequently, the question of whether NAMA acted ultra vires and unlawfully by refusing her offer does not arise; at best, it was a hypothetical scenario which may have been discussed in the course of the meeting, but there was no actual offer made by her nor was any decision made by NAMA to refuse her offer. Indeed, Mr. Morrissey in his own affidavit used the phrase “should such an event arise”; clearly, this shows that, even on his version of the meeting, what was said was in relation to a hypothetical scenario.
143. In that sense, the case made by the plaintiffs in respect of an actual or threatened breach of various constitutional rights is not anchored in any factual situation which arises properly before the Court. As matters stand, the evidence before me is that NAMA refused the Bagnall proposal (which included as part of the package an offer of €830,000 in respect of the family home) and that NAMA refused that offer on the basis of advice it received from Lisney that this significantly undervalued the property. The question of how NAMA would respond if Mrs. Morrissey made an offer to purchase the property at an objectively reasonable market value did not arise, has not yet arisen and may never arise.
144. The Court should not proceed to decide constitutional issues in the absence of a concrete factual situation in which a consideration of the constitutional issues is necessary and appropriate. This is a well-established proposition of constitutional law. As a general rule, a plaintiff who seeks to impugn the constitutionality of legislation must demonstrate that he or she has suffered, or is about to suffer, a distinct loss, and the Court should not decide hypothetical questions of constitutional law. In the leading case of Cahill v. Sutton [1980] IR 269, O’Higgins C.J. stated (at pages 276-277):-
“Where the person who questions the validity of a law can point to no right of his which has by reason of the alleged invalidity, been broken endangered or threatened, then, if nothing more can be advanced, the Courts should not entertain a question so raised. To do so would be to make of the Courts the happy hunting ground of the busy- body and the crank. Worse still, it would result in a jurisdiction which ought to be prized as the citizens shield and protection, becoming debased and devalued.”
At pp 282-283, Henchy J said:
“On the contrary, the widely accepted practice of courts in other jurisdictions invested with comparable powers of reviewing legislation in the light of constitutional provisions, is to require the person challenging a particular legislative provision to show either that he has been personally affected injuriously by it or that he is in imminent danger of becoming the victim of it. This general rule means that the challenger must adduce circumstances showing that the impugned provision is operating, or is poised to operate, in such a way as to deprive him personally of the benefit of a particular constitutional right. In that way each challenge is judicially assessed in the light of the application of the impugned provision to the challenger’s own circumstances. This general, but not absolute, rule of judicial self-restraint has much to commend it. It ensures that normally the controversy will rest on facts which are referable primarily and specifically to the challenger, thus giving concreteness and first-hand reality to what might otherwise be an abstract or hypothetical legal argument. The resulting decision of the court will be either the allowance or the rejection of the challenge in so far as it is based on the facts adduced.”
145. In State (Lynch) v. Cooney [1982] IR 337, Walsh J. pointed out that the question of standing cannot be detached from the facts of the case (at page 369):
“The question of whether a person has sufficient interest or not must depend upon the circumstances of every particular case. In each such case the question of sufficient interest is a mixed question of fact and law which must be decided upon legal principles but, it should be added, there is greater importance is to be attached to the facts because it is only by an examination of the facts that the Court can come to a decision as to whether there is a sufficient interest in the matter to which the application relates . In so far as it may be thought that such a matter can be deemed to be a question of practice rather than of substantive law it is sufficient to point out that the Rules of the Superior Courts make no reference whatever to this subject. However, such rules as do exist, or appear to exist, regarding what is “sufficient interest” for the purpose of applying for certiorari or a declaratory order are judge-made rules and as such can be changed and altered by judges. More importantly they must be flexible so as to be individually applicable to the particular facts of any given case. Such a question cannot be regarded as a preliminary point unless there is an admission of all the facts necessary to determine the issue. In the absence of any admission in any such case where the point is raised it is necessary for the Court to enter into a sufficient examination of the facts and having heard them to decide whether or not a sufficient interest has been established. In so far as assistance can be got from the decided cases it will be seen that in all of the cases the circumstances of each case decided the question.” (emphasis added)
146. In A v. Governor of Arbour Hill Prison [2006] 4 IR 88, Hardiman J. said that an applicant “cannot seek to attack the Section on a general or hypothetical basis … he is confined to the actual facts of his case and cannot make up others which would suit him better.” He added:
“The jus tertii rule is a very necessary regulation of locus standi – standing to sue. It prevents the proliferation of litigation and the expense and uncertainty it causes by requiring that each litigant must show that on the facts of his situation he is personally affected by the law he challenges. It prevents necessary and important laws from being struck down on a purely hypothetical supposition which may never arise in real life and avoids the tax payer having to fund the holding of pointless moots. Once a declaration of inconsistency or invalidity is made, however, its effect appears to me to be, necessarily, universal.” (emphasis added)
147. I therefore refuse all the reliefs sought in respect of the family home at 36 Palmerston Road, Dublin 6 on the basis that the legal arguments are premised upon a factual situation which has not arisen; there was no offer by Mrs. Morrissey to purchase the family home and there was no refusal to allow her to purchase it because she was the wife of a debtor whose loans had been taken over by NAMA. What was refused by NAMA was a package offer from a third party investor (Bagnall) which had valued the family home well below what NAMA had been advised by Lisney it was worth. If the alleged comment was made, it can only, in those circumstances, have amounted to a single comment in the course of a meeting in respect of a hypothetical situation which had not yet arisen.
3. Miscellaneous Issues
148. In Part XII of the lengthy statement of claim, it was pleaded that INBS (or certain of its senior managers, servants or agents) had, during the currency of the loans, conducted its business in an unlawful manner, and intentionally, recklessly and negligently conducted its business in such a manner as to foreseeably damage the financial security of the plaintiff and of the family home. This, it was pleaded, was a fundamental breach which entitled the second named plaintiff to repudiate any contract which forms part of the bank assets acquired by NAMA and meant that the acquisition was a void or nullity. This type of argument became a common one on behalf of debtors during the years following the banking collapse in 2008 but it has never been accepted by the courts. No authority was cited in favour of the propositions pleaded on behalf of the plaintiffs in this regard, which is hardly surprising. In the first place, there is no tort of reckless lending (see Charleton J. in ICS Building Society v. Grant [2010] IEHC 17). Secondly, the circumstances in which the illegal behaviour of one party to a contract results in the contract being rendered null and void are tightly circumscribed (see Quinn v. IBRC (in special liquidation) [2016] 1 IR 1). The plaintiffs have not attempted in any serious way to demonstrate that the evidential threshold in that regard has been reached.
149. In the circumstances, it is hardly necessary for the defendants to rely on s. 105 of the Act of 2009. I note that in a different set of proceedings brought by the second plaintiff in respect of loans from Anglo Irish Bank, similar arguments were made by him in respect of the conduct of officers of the Bank (see Morrissey v. IBRC & ors [2017] IECA 162). In that case, Kelly J. (as he then was) said to Mr. Morrissey that “trawling through the newspapers and picking up pieces of information about Mr. Fitzpatrick and his alleged activities and the Maple Ten and what other people in Anglo might have been up to can hardly provide any basis for defence when you have a contractual obligation with the bank…” This comment applies with even greater force in the present case insofar as Mr. Morrissey was seeking to rely on wrongdoing at Anglo Irish Bank to resist a debt originally incurred with an entirely separate institution, INBS . This absurdity reached a low-point in the proceedings before me when Mr. Morrissey sought to introduce newspaper articles and other materials concerning the conspiracy to defraud committed at Anglo Irish Bank on the 30th September, 2008. It is worth pausing to contemplate that Mr. Morrissey was seeking to rely on this event in late September 2008 to resist enforcement action in respect of a loan he had entered into with INBS (not Anglo) between 2004 and 2006 and in respect of which he was starting to default as early as 2006 . The submission made up in audacity for what it lacked in legal substance.
150. I also have no hesitation in rejecting the claim that there was ministerial interference with NAMA in the carrying out of its statutory functions. I cannot discern anything improper from the evidence before me as to the manner in which the Minister, his Advisory Committee or NAMA carried out their respective functions, either at a general level, or in respect of NAMA’s conduct towards the second-named plaintiff specifically. The plaintiff set out a lengthy narrative at Part IX of his Statement of Claim, alleging that there was unauthorised ministerial commitment on behalf of NAMA, unauthorised interference with NAMA in respect of the disposal of properties in the purported interest of the Irish property market and unauthorised ministerial direction regarding the operation of a NAMA advisory group. Most of this concerned political events rather than matters properly within the parameters of a legal proceeding. Insofar as there is a role for the Court to ensure that a public body such as NAMA confines itself to its statutory functions without outside interference, I cannot see on the evidence before me that NAMA’s decision to enforce in January 2014 was causally related to any improper conduct on the part of the Minister. In my view, its decision was directly related to its interactions with Mr. Morrissey over the previous three years and the content of his business plans and alternative proposals, with which it did not ultimately agree.
4. Constitutional challenges to certain provisions of the 2009 Act
151. Given the decisions I have reached in relation to various factual and legal issues as described above, the constitutional issues pleaded by the plaintiffs do not arise for consideration in these proceedings. As noted earlier, the authorities make it clear that the Court should not address constitutional issues unless it is necessary to do so and, in my view, it is not necessary to do so in this case for the reasons set out above.
Conclusion
152. I accordingly propose to refuse all reliefs sought by the plaintiffs in their plenary action, and to grant the reliefs sought by the first and second named defendants in their counterclaim.
Bank of Ireland Mortgage Bank v George Raymond, Ruth Raymond
2019 No. 143 CA
High Court [Approved]
29 October 2021
unreported
[2021] IEHC 665
Mr. Justice Garrett Simons
October 29, 2021
JUDGMENT
INTRODUCTION
1. This matter comes before the High Court by way of an appeal against an order for possession granted by the Circuit Court. The order had been made pursuant to section 62(7) of the Registration of Title Act 1964.
2. The application for possession is grounded on two separate loan agreements said to have been entered into between the plaintiff bank and the defendants. The unusual feature of the case is that the defendants accept that the principal sum under the first loan agreement is payable. It is only the enforceability of the second loan agreement that is challenged. It is said that the second loan agreement had been entered into under duress, and that it is unenforceable as against the second named defendant.
3. One of the issues which arises for determination in these proceedings is whether an order for possession should be granted, on a summary basis, by reference to the first loan alone, notwithstanding that the bank’s entitlement to rely on the second loan is something which might only be determined by plenary hearing.
FACTUAL BACKGROUND
4. The first and second named defendants are married, but have been legally separated since 23 February 2013. For ease of exposition, the defendants will be referred to in this judgment as “the husband” and “the wife”, respectively.
5. The husband and wife are the registered owners of property at Delgany, Co. Wicklow. This property had been occupied by the couple as their family home. It is now occupied by the wife alone.
6. Insofar as relevant to these proceedings, the husband and wife are said to have entered into two loan agreements with Bank of Ireland Mortgage Bank (“the bank”). The two loan agreements are said to be secured by way of a legal charge on the family home (“the mortgaged property”). The legal charge is dated 18 November 2005, and had been registered against the title of the mortgaged property on 24 February 2006 as a charge for “ present and future ” advances repayable with interest. The legal charge had been entered into prior to the second loan agreement.
7. The first loan agreement is said to have been for a principal sum of €200,000. The loan agreement appears to have been signed on 27 October 2005 (“the first loan”).
8. The second loan agreement is said to have been for a principal sum of €800,000. The loan agreement appears to have been signed on 28 June 2006 (“the second loan”). The purpose of the second loan had been to purchase a development site. The development site did not have the benefit of planning permission. It appears from the email correspondence between the husband and the bank that the original intention had been that the purchase of the development site would be funded by way of a loan secured on the development site itself. The loan application has not been exhibited, but it appears that the initial request for a loan had been made by the husband and his business partner; and that the wife had not been a co-applicant.
9. It further appears that officials within the bank had suggested that the purchase be funded instead by way of an equity release secured on the husband and wife’s family home. (See email of 8 June 2006 exhibited in the wife’s first affidavit).
10. The wife maintains that she only entered into this second loan agreement under duress. The wife has averred that she had no involvement with her husband’s finances and no access to any of his bank accounts. She further avers that she had been named as a joint borrower despite never having applied for the loan and having had no prior contact with the bank in respect of same. The events leading up to her signing the loan agreement are described as follows (at paragraph 15 of the wife’s affidavit of 28 January 2016):
“[…] I say that the First Named Defendant presented the Loan Agreement to me in our family home one evening without any third-party present. I say that the First Named Defendant demanded that I sign it. I say that I refused to do so and told him that I was not prepared to risk losing my family home for any of his deals. I say that the First Named Defendant lost control; he became extremely angry and aggressive towards me. I say that such was the level of the First Named Defendant’s aggression that I feared for my life. I say that I felt as though I have no option but to sign the 2006 Loan Agreement. I say that I executed the document under extreme duress.”
11. The bank has filed an affidavit in reply which exhibits what is said to be a copy of a document headed up “ Disclaimer Form Mortgage Protection Assurance ”. This copy document bears a signature which purports to be that of the wife, which signature appears to have been witnessed by a bank official.
12. The wife, in a further affidavit of 5 May 2017, has averred that she has never seen this document; that none of the handwriting in that document is her own; and that she does not recall ever having attended before the named bank official for the witnessing of the making of signatures.
13. The bank’s deponent also “ notes ” from certain (unspecified) bank files that the defendants informed the bank, when seeking the loan facilities at issue, that the loans were sought to purchase and develop the development site which was to be divided into three subsites whereon it was intended that the defendants and the husband’s business partner would take one site each as their respective family homes, and the third site would be sold for profit.
14. The purchase of the development site was completed in the joint names of the husband and his business partner. The wife did not have any legal interest in the development site. The wife maintains that she did not receive any benefit from the loan agreement, and that the transaction was manifestly to her disadvantage.
15. The husband has also sworn an affidavit in these proceedings. The affidavit is dated 6 February 2018. The affidavit avers that the suggestion that the loan be secured as against the husband’s and his business partner’s family homes came from the bank itself.
16. Insofar as the dealings between the bank and the wife are concerned, it is averred as follows:
“8. I say that my wife was completely unaware of any of these negotiations with the Bank and at no time did the bank contact her or inform her of the risk involved or ascertain her consent to proceed with this high risk transaction, nor was she advised to obtain or receive any independent legal advice.
9. I say that when I approached my wife with the mortgage papers in our home to sign she refused to do so expressing her extreme concern at the suggestion as she did not want to risk the Family home in any business deal and thought I had already overstretched myself financially and was adamant that she would not sign.
10. I say that as I had already purchased the site at Auction and saw no other way of raising the finance to complete the deal I became extremely agitated by her refusal to cooperate. I was outraged that she questioned my judgement but she continued pleading with me not to make her sign, crying and begging me not to risk the family home. I am ashamed to say that I lost control and became extremely aggressive towards her shouting insults and throwing a Kitchen stool, behaving in a menacing fashion and threatening her with physical violence in order to get her (sic) make her sign.
11. I say that at no time did Bank of Ireland establish that my wife fully consented to the family home being used as security in this transaction. The signing took place in the Kitchen of our family home and was not witnessed by any independent third party.
12. I say that once the equity release was completed I collected the cheque from Bank of Ireland and that I lodged it into a joint account to which my wife had no access, nor did she have a cheque book or banking card for it. I say that I then withdrew €700,000 and purchased a draft made payable to Mangan O’Beirne Solicitor’s with the Balance of €100K being lodged into a new account in my name and that of Brendan Whelan that had been set up for payment of costs and interest going forward, I say that my wife was completely unaware of any of these transactions.”
17. The bank has not sought to cross-examine either the husband or wife on the content of their affidavits.
18. The Circuit Court made an order for possession in favour of the bank on 25 March 2019. The Circuit Court placed a stay on that order for two years, and adjourned the question of costs for the same period of time. A transcript of the hearing before the Circuit Court has been exhibited as part of the appeal to the High Court. It is apparent from the transcript that the order for possession was made on the basis of the first loan alone.
19. The most up-to-date affidavit evidence before the High Court indicates that, as of 2 December 2020, the following sums were outstanding in respect of the two loan agreements: €171,053.30 and €925,475.74. Counsel on behalf of the bank indicated at the hearing before me on 8 March 2021 that there had been a slight further reduction in respect of the first loan agreement.
20. The hearing of the appeal had been adjourned to allow the parties to address the following two issues: (i) the (then anticipated) judgment of the Supreme Court in Bank of Ireland Mortgage Bank v. Cody[2021] IESC 26; and (ii) the relevance, if any, of section 7 of the Family Home Protection Act 1976 (as amended). The parties each filed helpful written submissions on these issues. The hearing of the appeal ultimately concluded on 18 October 2021, and judgment was reserved until today’s date.
TEST FOR REMITTAL TO PLENARY HEARING
21. This matter has come before the High Court by way of an appeal from the Circuit Court. The original application had been subject to Order 5B of the Circuit Court Rules. This rule allows for the possibility of an application for possession being remitted to plenary hearing. See Order 5B, rule 8(2) as follows:
“The Judge may, where he considers it appropriate, adjourn a Civil Bill listed before him under this Order for plenary hearing as if the proceedings had been originated otherwise than in accordance with this Order, with such directions as to pleadings or discovery as may be appropriate.”
22. The proper approach to the exercise of this discretion has been authoritatively stated by the Supreme Court in Bank of Ireland Mortgage Bank v. Cody[2021] IESC 26 as follows (at paragraph 101):
“The jurisdiction is one vested by the Rules of the Circuit Court, but may properly be said to be one that exists in any case heard on affidavit. It is perhaps the default position in any case where the affidavit evidence is evenly balanced, where there is a conflict on the affidavits between the parties which cannot be or has not been resolved by way of further affidavit, where the court considers that a matter raised on affidavit, particularly one raised in defence, might have such a bearing on the outcome that its credibility deserves to be fully tested, or where a judge considers that in the light of certain averments which are credible, but not dispositive, it would be either difficult or unfair to resolve the matter without giving both sides the opportunity to further advance that evidence or, where necessary, to test it. The adjudicative function is not a matter of box ticking or a purely logical engagement with a checklist of proofs that must be met by a plaintiff. Certain evidential presumptions or burdens can make the task of adjudication at times appear almost effortless, but the fact remains that a judge met with evidence, whether contested or not, must weigh that evidence, assess its veracity, credibility, and importance for the purposes of proving those matters that are required to be established. In a case where the action is heard on affidavit, courts are vigilant to consider the option to adjourn the matter for plenary hearing. The vigilance derives from the fact that affidavit evidence of its nature is often in terms which have a tone of certainty which is not always found in oral testimony, particularly where that is cross-examined, and because the affidavits are often drafted by lawyers with a view to the legal test.”
23. I turn next to apply this test to the circumstances of the present case.
ALLEGATION OF UNDUE INFLUENCE AND DURESS
24. For the reasons set out below, I have come to the conclusion that the bank’s entitlement to rely on the second loan cannot be determined without a plenary hearing. The wife has put forward sufficient by way of evidence to make out a prima facie case of undue influence. The wife has set out in detail the abusive nature of the relationship with her husband. Insofar as the specific transaction is concerned, she has averred that she felt she had no choice but to enter into the second loan agreement. It is also common case that notwithstanding that the loan was secured against the wife’s family home, she did not obtain any legal interest in the development site. There is also a factual dispute as to whether the wife’s signature had been witnessed by a bank official.
25. The bank, in response, has drawn attention to what it alleges had been the intention underlying the loan, namely that three housing units would be constructed on the development site, and that one of these would be transferred to the husband and wife as a new family home. It is also suggested that notwithstanding that the wife did not obtain any legal interest in the development site, she may have some unspecified beneficial interest. These are all matters which can only be properly teased out by way of oral evidence and cross-examination.
26. Counsel for the bank referred the court to case law which, on his analysis, indicated that the concept of undue influence does not apply with the same force to loans where the spouse alleging undue influence is a co-borrower (rather than merely a surety for the disputed debt). Counsel cites, in particular, the decision of the House of Lords in CIBC Mortgages plc v. Pitt[1994] 1 A.C. 200.
27. Leaving aside the fact that this decision predates the leading case of Royal Bank of Scotland v. Etridge (No. 2)[2002] 2 A.C. 773, it is doubtful whether there is any bright line rule to the effect that a co-borrower falls to be treated differently. For the reasons explained by the Court of Appeal in ACC Bank plc v. Walsh[2017] IECA 166, there is arguably some equivalence between a spouse who is unduly influenced to join in a loan application from which they are to derive no benefit, and a spouse who is unduly influenced to provide a guarantee for a primary loan from which they will derive no benefit. In each instance, the spouse is exposing themselves to liability for the amount owing to the bank in the event of default. On the facts of Walsh, the Court of Appeal held that the spouse had established an arguable defence on the basis of undue influence. The matter was, accordingly, remitted to plenary hearing. Amongst the considerations taken into account by the Court of Appeal was an averment by the spouse that she had never at any stage met any bank official in relation to the disputed loan. An averment to similar effect has been made in the present case.
28. It is apparent from the case law cited on behalf of the bank that it is necessary to consider the circumstances leading up to the making of the relevant loan. Factors to be taken into account include whether the creditor leaves it to a husband to procure his wife’s participation, and whether the creditor is aware that the loan is for the husband’s own purposes (as opposed to for the couple’s joint purposes).
29. The necessity to consider the specific circumstances leading up to the making of a loan in any particular case means that it will rarely be appropriate to rule upon a defence of undue influence on the basis of affidavit evidence alone. Certainly, in a case such as the present, where the spouse asserting undue influence has put forward sufficient evidence to establish credible grounds for such a defence, then the matter should be remitted to plenary hearing.
IS BANK ENTITLED TO RELY EXCLUSIVELY ON FIRST LOAN?
30. For the reasons set out above, I have concluded that insofar as an order for possession is sought by reliance on the second loan, the entitlement to same could only be determined by way of plenary hearing.
31. The fall-back position adopted by the bank in submission had been that it is sufficient, to ground an order for possession, that the principal sum under the first loan has become due. It is said that as no issue is taken by the wife with her liability under the first loan, the bank’s case is “ indisputable ”, and the order of the Circuit Court should be affirmed by reference to the first loan alone.
32. The bank submits that any issue that might arise by way of dispute regarding the second loan is “ moot ” in the context of the within application for possession. The bank has been careful to explain that it has not waived its reliance on the second loan, lest its approach to these proceedings be (mistakenly) interpreted at a later date by the wife to be a waiver of her liability under the second loan.
33. Counsel on behalf of the bank emphasises that the application before the court is for an order for possession simpliciter, and says that it is unnecessary for that purpose to determine the precise amount of debt outstanding. It is sufficient that the bank is in a position to establish that the principal money secured by the instrument of charge has become due. On this submission, it is not necessary to determine whether the monies owing under the second loan are enforceable at the suit of the bank against the wife. It is submitted that this court should not accede to the “ implicit request ” of the wife that the proceedings, in effect, be converted from a possession case into a debt matter.
34. In order to determine whether the submissions on behalf of the bank are well made, it is necessary to consider the precise function which the court exercises on an application for possession. The application for an order for possession is made pursuant to the provisions of section 62(7) of the Registration of Title Act 1964. This section continues to apply because the legal charge in this case had been entered into prior to the commencement of the Land and Conveyancing Law Reform Act 2009 on 1 December 2009. (See Land and Conveyancing Law Reform Act 2013).
35. Section 62(7) of the Registration of Title Act 1964 provides as follows:
“When repayment of the principal money secured by the instrument of charge has become due, the registered owner of the charge or his personal representative may apply to the court in a summary manner for possession of the land or any part of the land, and on the application the court may, if it so thinks proper, order possession of the land or the said part thereof to be delivered to the applicant, and the applicant, upon obtaining possession of the land or the said part thereof, shall be deemed to be a mortgagee in possession.”
36. On an application under the section, the first question for a court to consider is what the contractual arrangements between the parties provide as to the circumstances in which the principal money can be said to have become due. Thereafter, the court will have to consider whether, on the facts, those circumstances can be said to exist (Irish Life and Permanent plc v. Dunne[2015] IESC 46; [2016] 1 I.R. 92).
37. Counsel for the bank has referred me to a number of cases which are said to illustrate the approach to be taken where part only of a debt secured by a charge is in dispute. The judgment most directly in point is that of the High Court (Dunne J.) in Anglo Irish Bank Corporation plc v. Fanning[2009] IEHC 141. On the facts, the defendant had entered into a series of loans secured on a mortgage in respect of unregistered land. The loans had a twofold purpose: (i) to purchase shares in a company, and (ii) to refinance the defendant’s existing home loan. The question before the court had been whether the entire proceedings should be adjourned to plenary hearing to allow the defendant to challenge his liability under the loans. The court held that, on the affidavit evidence, there was no basis for challenging liability.
38. For present purposes, the relevance of the judgment in Fanning lies in the distinction drawn between the two aspects of the loans. The court accepted the submission on behalf of the plaintiff that regardless of any dispute over the part of the loan attributed to the purchase of shares, there was a sum due in respect of the home-loan element of the borrowing. The defendant was in default in respect of this part of the borrowing and had made no proposal to discharge the principal sum. Accordingly, the court made an order for possession. In so doing, the court appears to have implicitly accepted that, in a suit for possession (as opposed to a suit for the debt), a plaintiff was entitled to possession even if there was a dispute as to part of the indebtedness.
39. The judgment in Fanning has recently been applied by the High Court (O’Regan J.) in Bank of Ireland v. Blanc[2020] IEHC 18 (at paragraph 30) as follows:
“The issue of how much money is due and owing and the guide to the granting or withholding of possession was dealt with by Ms. Justice Dunne in the High Court in 2009 in Anglo Irish Bank PLC v. Fanning[2009] IEHC 141, when it was indicated that a default was the issue, not the amount. That is clearly the case in circumstances where possession only is sought and not judgment of a particular sum of money, and possession is the only matter before this Court.”
40. I respectfully adopt these authorities as a correct statement of the law.
41. The general position is that it is sufficient for the purpose of an application for possession under section 62(7) of the Registration of Title Act 1964 that the moving party establish that the “ principal money ” secured on a charge has become due. Here, it is not disputed that the principal money under the first loan has become due. The obligation to pay the principal money had been triggered by a letter of demand dated 24 September 2014, which had been sent following an earlier event of default. (As it happens, the principal money would be payable now, even if the obligation to make an accelerated payment had not been triggered, because the fixed ten-year term of the mortgage has expired).
42. The bank’s entitlement to apply for an order for possession in respect of the first loan is not adversely affected by the existence of a dispute as to the enforceability of the second loan. Provided that the bank can demonstrate that the principal money under the first loan has become due, then it does not require to rely upon the second loan at all. The matter can be tested this way: had the bank only ever entered into one loan, it would undoubtedly be entitled to apply for an order for possession. The principal money under that loan is due. It would be anomalous were the bank’s rights to be diminished by the fact that it subsequently entered into a second loan. I am satisfied, therefore, that the existence of the second loan does not affect the bank’s entitlement to apply for an order for possession grounded on the first loan.
43. This general statement of the position is, potentially at least, subject to one qualification in cases, such as the present, where there is a significant difference between the value of the disputed and undisputed element of the borrowings. This is because the making of an order for possession is discretionary, and one of the factors to be considered is whether the defendants might be in a position to pay off the debt in a reasonable period of time.
44. In the present case, the discretion falls to be exercised in accordance with section 7 of the Family Home Protection Act 1976 (as amended) (“FHP Act 1976”). The section reads as follows:
“7.(1) Where a mortgagee or lessor of the family home brings an action against a spouse in which he claims possession or sale of the home by virtue of the mortgage or lease in relation to the non-payment by that spouse of sums due thereunder, and it appears to the court—
(a) that the other spouse is capable of paying to the mortgagee or lessor the arrears (other than arrears of principal or interest or rent that do not constitute part of the periodical payments due under the mortgage or lease) of money due under the mortgage or lease within a reasonable time, and future periodical payments falling due under the mortgage or lease, and that the other spouse desires to pay such arrears and periodical payments; and
(b) that it would in all the circumstances, having regard to the terms of the mortgage or lease, the interests of the mortgagee or lessor and the respective interests of the spouses, be just and equitable to do so,
the court may adjourn the proceedings for such period and on such terms as appear to the court to be just and equitable.
(2) In considering whether to adjourn the proceedings under this section and, if so, for what period and on what terms they should be adjourned, the court shall have regard in particular to whether the spouse of the mortgagor or lessee has been informed (by or on behalf of the mortgagee or lessor or otherwise) of the non-payment of the sums in question or of any of them.”
45. The section affords the court a discretion to adjourn possession proceedings to allow for the making of payments by a spouse. The court must consider the financial capability of the spouse (i) to pay arrears due under the mortgage within a reasonable time, and (ii) to pay future periodical payments falling due under the mortgage. The exercise of this discretion will be informed, to some extent, by the amount of debt outstanding. In cases, such as the present, where a significant part of the debt is disputed the court may form the view that the spouse would be able to make payments in respect of the smaller undisputed debt only. In such a scenario, it might be appropriate for the court to adjourn the application for possession to plenary hearing to determine the full extent of the debt. The court could then exercise its discretion under section 7 of the FHP Act 1976 in an informed manner.
46. In the present case, the principal money outstanding under the first loan is modest relative to that under the second loan. The arrears under the first loan had stood at approximately €171,000 as of the date of the Circuit Court hearing in March 2019. Had the wife been in a position to adduce persuasive evidence before the Circuit Court that she would have been able to pay off the arrears on the first loan, but not the combined sum under the two loans, then it might have been appropriate to adjourn the proceedings to plenary hearing to allow a determination to be reached on her liability, if any, under the second loan. Put shortly, in the particular circumstances of this case, it might have become relevant to know whether or not the second loan was enforceable against the wife.
47. In the event, however, no such evidence was adduced before the Circuit Court, nor before the High Court on appeal. Whereas payments totalling €9,500 had been made during an eighteen month period over the years 2018 and 2019, no payment at all has been made since 27 August 2019. In the absence of any affidavit evidence to the effect that the wife would be able to discharge the arrears under even the first loan, there is no basis for the High Court to exercise its discretion under section 7 of the FHP Act 1976 in her favour. This is so regardless of whether the second loan is enforceable or not.
48. Given the absence of evidence of financial capability, it is not necessary to consider further the proper interpretation of section 7 of the FHP Act 1976. In particular, there is no need to consider whether the section is applicable in cases, such as the present case, where both spouses are parties to the relevant charge. On one view, the section might be read as applying only to a non-disposing spouse.
CONCLUSION AND FORM OF ORDER
49. I have concluded that the principal money borrowed pursuant to the loan agreement of 27 October 2005, and secured upon the registered charge, has become due. Indeed, the second named defendant has not sought to argue otherwise. The “ proofs ” for an application under section 62(7) of the Registration of Title Act 1964 have thus been met.
50. In the absence of any evidence that the second named defendant has the financial capability to discharge the arrears under this loan, there is no basis for this court to exercise its discretion under section 7 of the Family Home Protection Act 1976 (assuming that the section is applicable at all to the circumstances of the case).
51. For the reasons set out at paragraphs 24 to 29 above, I have come to the conclusion that the bank’s entitlement to rely on the second loan agreement dated 28 June 2006 cannot be determined without a plenary hearing. The second named defendant has put forward sufficient by way of evidence to make out a prima facie case of undue influence.
52. However, the bank’s entitlement to apply for an order for possession in respect of the first loan is not adversely affected by the existence of a dispute as to the enforceability of the second loan. The order for possession can be grounded on the first loan alone. There is thus no need to refer the question of the enforceability of the second loan to plenary hearing.
53. I propose, therefore, to grant an order for possession pursuant to section 62(7) of the Registration of Title Act 1964. This order is grounded on the first of the two loan agreements secured on the registered charge. A stay of six months will be placed on this order to allow the second named defendant time to arrange alternative accommodation.
54. It is neither necessary nor appropriate, for the purpose of the present application, for this court to make any finding as to whether the plaintiff is entitled to rely on the second loan agreement as against the second named defendant. For the avoidance of doubt, this judgment does not address the question as to whether the plaintiff would be entitled to apply the proceeds of any sale of the mortgaged property in discharge of the monies due under the second loan agreement. If and insofar as a dispute subsists in this regard following a sale of the mortgaged property, it will have to be resolved in separate proceedings.
55. Insofar as the allocation of legal costs is concerned, my provisional view is that the appropriate order is that each party should bear their own costs. Whereas the plaintiff has obtained an order for possession, it has not been “ entirely successful ” in the proceedings within the meaning of section 169 of the Legal Services Regulation Act 2015. This court has found that the plaintiff’s entitlement to rely on the second loan agreement as against the second named defendant could not be resolved on a summary application based on affidavit evidence alone. This issue took up most of the time in the hearing and most of the written legal submissions, and would have had a material impact on the level of costs. As explained by the Court of Appeal in Chubb European SE v. Health Service Executive[2020] IECA 183, where a party has not been successful on an identifiable issue or issues which have materially increased the costs of the case, that party may obtain his costs but may suffer two deductions: one in respect of his own costs in presenting that issue, and the other requiring him to set off the costs of his opponent in meeting that issue against such costs as are ordered in his favour.
56. The proposed costs order represents my provisional view only, and if either party wishes to contend for a different form of costs order, they should file written legal submissions within four weeks of today’s date.
Appearances
Nevan Powell for the plaintiff instructed by Fieldfisher Solicitors
Clare O’Shea for the second named defendant instructed by Amoss Solicitors
Allied Irish Banks plc v. Finnegan
[1996] I.L.R.M. 401 Blayney J
The defendants in these proceedings are husband and wife. They were married on 3 June 1978 but have been separated since February 1992.
In 1989 the defendants decided to buy a new family home at 4, Casana View, Howth and in order to effect the purchase a sum of £100,000 was borrowed from the plaintiff bank (hereinafter called the bank). The house was conveyed to Mr Finnegan on 5 December 1989 and on 15 December 1992 he executed a mortgage in favour of the bank to secure the amount borrowed. On 1 December 1989 Mrs Finnegan had signed a form of consent for the purposes of the Family Home Protection Act 1976 agreeing to the mortgage to be given by her husband to the bank.
In 1992 Mr Finnegan stopped making the payments due to the bank under the mortgage and on 24 March 1994 the bank commenced the present proceedings by special summons claiming an order for possession of 4, Casana View, Howth, which was then occupied by Mrs Finnegan on her own. At the time the proceedings were issued, the sum of £121,888.49 was due to the bank under the mortgage.
The special summons was issued against Mr Finnegan alone and Mrs Finnegan was joined as a defendant subsequently. Mr Finnegan is not defending the proceedings. Mrs Finnegan has put in two affidavits. I will deal with the contents more fully later, but in summary what she avers is that she did not consent to the mortgage to the bank. She believed that the form of consent that she signed, and which had been prepared by her husband’s solicitor, was a document connected with putting the family home, which was being purchased, into the joint names of herself and her husband.
In the High Court it was submitted on behalf of Mrs Finnegan that there was an issue of fact to be decided in regard to whether her consent to the mortgage was valid and that accordingly there would have to be a hearing on oral evidence. The bank submitted that it did not have to go into the question of the validity of the consent; it was a stranger to what had taken place between Mrs Finnegan and her husband’s solicitor and it was entitled to rely on the fact that it was a bona fide purchaser for value. The bank relied on the exception contained in s. 3(3) of the Family Home Protection Act 1976 to the provision contained in subs. (1) of the same section. Subs. (1) provides as follows:
(1) Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subs. (2) and (3) and s. 4, the purported conveyance shall be void.
Subs. (3) then provides for the following exception:
(3) No conveyance shall be void by reason only of subs. (1)—
(a) if it is made to a purchaser for full value.
Carroll J accepted the bank’s submissions and made an order for possession. The relevant part of her judgment was as follows:
In my opinion the plaintiff was entitled to rely on the documentation signed by Mrs Finnegan and sent to it by Mr Finnegan’s solicitor. The bank had no reason to believe that she was making any adverse claim, either in relation to the property or the documentation she signed. Therefore it is in the position of a bona fide purchaser for value without notice and under s. 3(3)(a) of the Family Home Protection Act 1976 its mortgage is valid. So it is a question of making the order for possession.
Mrs Finnegan now appeals against this order. Ms Clissman SC submitted on her behalf that the case ought to have been sent to plenary hearing as there were two issues to be determined both of which involved deciding disputed issues of fact:
1. Whether the consent given by Mrs Finnegan was valid, and
2. If the consent was not valid, whether the bank was a bona fide purchaser for value without actual or constructive notice of its invalidity.
As regards the first of these issues, Mrs Finnegan avers in her affidavit sworn on 31 January 1995 that before the family home at 4, Casana View was purchased, she had a discussion about it with her husband and he agreed that it would be purchased in their joint names. She said she would not have agreed to the purchase if she had been told that the house was going to be conveyed to her husband solely. At paragraph 8 of her affidavit she gave the following account of how she came to sign the form of consent to the mortgage:
I say and believe that in or about 1 December 1989 that I attended with my husband at the said firm of Dockrell Farrell of 51/52 Fitzwilliam Square, Dublin 2. I say and believe that during my visit to the said office that I signed a document. I say and believe that while I was in that office and in particular prior to my signing of that document that I did not receive any legal advice or any advice whatsoever. Further, I say and believe that the document and its effects was not explained to me and that at all material times I truly believed that this document related to the conversation that I had previously with my husband and that it was the essential document required to ensure that the family home we were purchasing would be put into our joint names. I say and believe that nothing was said or represented to me during that said meeting that would have changed my belief as to what I was signing. Further, I say and believe that I was not informed that the documents to which I put my signature related to any mortgage in favour of the plaintiff or that it constituted my consent to my husband creating a mortgage in favour of the plaintiff in respect of my family home. I say that apart from the document which I signed that I did not see or sign any other document and that, in particular, I was not shown any documents relating to the mortgage and the terms of any mortgage in favour of the plaintiff were not explained to me.
This account is disputed by Mr Finnegan’s solicitor, Mr Bernard McEvoy, in an affidavit sworn by him on 23 May 1995. He avers that he told Mrs Finnegan that her consent was necessary to the mortgage as the house was being purchased in her husband’s sole name. There is accordingly a clear dispute of fact as to the circumstances in which Mrs Finnegan signed the form of consent, and the issue as to the validity of her consent will depend on how this dispute is resolved.
But the bank submits, as it did in the High Court, that it is not concerned with this issue. Mr O’Neill SC argued that the bank is a bona fide purchaser for value without notice of any defect in the consent, and accordingly its title could not be affected even if the consent is invalid. But whether the bank is a bona fide purchaser for value without notice is disputed by Mrs Finnegan and this involves issues of fact which have to be established by the bank, the onus of proof being on the bank as s. 3(4) of the Family Home Protection Act 1976 provides that ‘if any question arises in any proceedings as to whether a conveyance is valid by reason of subs. (2) or (3), the burden of proving that validity shall be on the person alleging it.’ Here the bank is alleging the mortgage is valid by reason of subs. (3) and accordingly the burden of proving that validity rests on the bank. The bank has to show that it did not have any actual or constructive notice of the possible invalidity of the consent, and this is not an issue which can be decided on affidavit.
For these reasons I am satisfied that Ms Clissman’s submissions are well- founded and I would allow this appeal and direct that the bank’s claim be remitted to the High Court to be determined at a plenary hearing on oral evidence.
Before concluding I should refer briefly to one matter which was part of the evidence in the High Court. In her second affidavit sworn on 28 June 1995, Mrs Finnegan avers that on 6 March 1995 the Circuit Court, in family law proceedings instituted by Mrs Finnegan against her husband, declared that Mrs Finnegan was beneficially entitled to a half share in the family home. This fact does not in my opinion in any way affect the bank’s claim, if the bank has a valid mortgage. In that event, as the learned trial judge pointed out in her judgment, Mrs Finnegan would be entitled to a half interest in the equity of redemption subsisting in the family home, an interest which would probably have no value. But obviously it would have value if the bank’s mortgage were held to be invalid. However, whether Mrs Finnegan’s half share turns out ultimately to have some value, its existence is not relevant to the issues which had to be determined on this appeal and my only reason for referring to it is to show that it had not been overlooked.
As stated earlier, I would allow this appeal.
H. and L. v S
1979 No. 312 Sp
High Court
10 July 1979
[1979] I.L.R.M. 105
McWILLIAM J
delivered his judgment on 10 July 1979 saying: The plaintiffs purchased from S. (hereinafter called the husband) a dwellinghouse which had originally been held by him as a weekly tenant under an agreement in writing dated 6 June 1968. The husband had been married to the defendant on 25 October 1965. They first resided in England but, after some time, returned to Ireland, and, immediately after the execution of the agreement of 1968, went into occupation of the dwelling and continued to reside there with their two children until May 1973, when the defendant left the dwelling with the children under circumstances which she alleges involved assaults and mental abuse by her husband and general distress caused by his behaviour. In October 1973, she went to America with the children and took up residence with her brother and obtained some not very well remunerated employment as a bookkeeper. The defendant alleges that the husband had a drink problem, working only intermittently and changing his employment frequently. She states that, between 1970 and 1973, he did not work at all whereas she had regular seasonal work. She alleges that she paid most of the rent during this period although in 1970 the husband made a considerable amount of money from a musical composition. The defendant did not give her American address to the husband but he was able to write to her through members of her family and the two carried on a desultory correspondence up to and including May of this year.
The husband continued to reside in the dwelling and appears to have made enquiries about purchasing it from the landlords at the end of 1977. By letter of 1 January 1978, the landlords agreed to sell it to him for the sum of £6,000 but stated that the offer was subject to review at the end of the year. In the autumn of that year the husband obtained an offer of employment in England and, not wishing to reside any longer in the dwelling and not having funds with which to purchase it, entered into negotiations with the plaintiffs who agreed to pay him the sum of £9,000 for the dwelling when he had obtained the landlord’s interest. This having been arranged, the husband entered into an agreement dated 23 October 1978, with the landlords for the purchase of the landlords’ interest for the sum of £6,000 and, on the same day, entered into an agreement with the plaintiffs for the sale to them of the dwelling for the sum of £9,000. The landlords conveyed the dwelling to the husband by indenture of 1 November 1978, and the husband conveyed the dwelling to the plaintiffs on the following day.
The same firm of solicitors acted for the husband and the plaintiffs and they advised the parties that the dwelling was not a family home within the meaning of the Family Home Protection Act, 1976. A statutory declaration prepared by the solicitors and made by the husband contained the following paragraph:
The above premises are not a Family Home within the meaning of the Family Home Protection Act 1976, by virtue of the fact that my wife has not resided with me at the above premises since May 1973 when she left me taking with her our two children and went to America. She has not contacted me since that time. I had held the premises under agreement dated 6 June 1968 from Associated Properties Ltd as a weekly tenant. On or about 20 September 1978, I agreed to purchase the premises from Associated Properties Ltd for the sum of £6,000.
The plaintiffs took possession of the dwelling and did repairs and decorations at a cost of approximately £650 and then entered into a contract to re-sell the dwelling for the sum of £12,000 on 2 March 1979. On this sale the purchaser challenged the validity of the opinion of the solicitors for the purchasers and of the statutory declaration made by the husband.
These proceedings were commenced by the husband who claimed a declaration that the plaintiffs are purchasers for full value within the meaning of s. 3 of the Act of 1976, or, alternatively, an order dispensing with the consent of the defendant to a sale to the plaintiffs.
The husband died suddenly and unexpectedly on 25 May last and, on the application of the plaintiffs, I substituted them as plaintiffs to save the expenses of instituting further proceedings. Owing, apparently, to the unusual circumstances of the death of the husband, no representation can yet be raised to his estate.
I am satisfied that, although the defendant had left Ireland before the passing of the Act of 1976, the dwelling was a family home within the meaning of the Act and that it remained a family home at the time of the transactions with which I am concerned. While not being admitted, this has not been contested and no claim has been made for a declaration that the dwelling is not a family home.
The valuers called to give evidence on both sides have established to my satisfaction that the price of £9,000 was approximately the full value of the dwelling in October 1978, in the condition in which it then was.
S. 3 of the Act of 1976, in so far as is relevant to these proceedings, provides as follows:
(1) Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to sub-ss. (2) and (3) and s. 4, the purported conveyance shall be void.
(3) No conveyance shall be void by reason only of sub-s. (1) — (a) if it is made to a purchaser for full value.
(6) In this section, ‘purchaser’ means a grantee, lessee, assignee, mortgagee, chargeant or other person who in good faith acquires an estate or interest in property.
(7) For the purposes of this section, s. 3 of the Conveyancing Act 1882, shall be read as if the words ‘as such’ wherever they appear in paragraph (ii) of subsection (1) of that section were omitted.
S. 3 of the Conveyancing Act 1882, in so far as is relevant to these proceedings provides as follows:
(1) A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing unless—
(i) It is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or
(ii) In the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor, or other agent, as such, or would have come to the knowledge of his solicitor, or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent.
The words ‘as such’ having been deleted from clause (ii) by s. 3 of the Act of 1976, it is immaterial in which capacity the solicitor who acted for both parties obtained or failed to obtain notice of the true position.
I have been referred to the judgments in Somers v W [1979] IR 94. On the first aspect of this case I quote the following passages from the judgment of Henchy J with reference to the obligation of a purchaser of a family home. He said:
He must ascertain if the property, because of its present or past use, is a family home within the meaning of the Act of 1976. If it is, he must find out if it is a sale by a spouse, and, if so, whether the conveyance should be preceded by the consent in writing of the other spouse, so as to prevent its being rendered void under s. 3. If that other spouse omits or refuses to consent, the purchaser should require the vendor to apply to the court for an order under s. 4 of the Act of 1976 dispensing with the consent. If the purchaser takes a conveyance without compliance with the requirement as to consent, he carries the onus of proving that the conveyance comes under one of the exceptions in sub-s. (2) and (3). If, as in the present instance, the purchaser’s case is that the wife’s prior consent did not arise because he was a purchaser for full value without notice, he must show that the consideration amounted or approximated to the full value of the property and also that he, or his agent, made such inquiries or inspections as ought reasonably to have been made. If such inquiries or inspections have not been made, but would, if made, have disclosed that the vendor should have obtained either his wife’s prior consent in writing or a court order dispensing with that consent, the conveyance will be no less void than if the purchaser had actual knowledge that the wife’s prior consent in writing required to be sought and he had taken the conveyance in disregard of that requirement.
In the present case the statutory declaration of the husband showed that the dwelling had been a family home in May 1973, and no inquiries were made to locate the defendant although, notwithstanding the inaccurate statement in the declaration, it is clear that there was little difficulty in getting in touch with her, a fact which was clearly established at the time of the third sale even though there was then a postal strike in operation. The suggestion of desertion made in the declaration would not avoid the necessity for obtaining the consent required by s. 3 even if the suggestion were well founded unless an order of the court were first obtained under s. 4. Indeed, in this connection, no inquiries appear to have been made with regard to the circumstances under which the defendant left the family home.
This being so, I am satisfied that the inquiries which ought reasonably to have been made were not made and that, if they had ben made, the defendant would have been located and her consent either given or refused. Accordingly, although I have considerable sympathy for the plaintiffs, I must refuse to make the declaration that they are purchasers for full value within the meaning of the section.
It is clear from the judgments in Somers v W. that an application for an order dispensing with the consent of the defendant to the sale to the plaintiffs should have been made before the execution of the conveyance to the plaintiffs. This is accepted on behalf of the plaintiffs but it is argued that, if an order is made dispensing with the consent of the defendant, the agreement for sale can then be enforced by the plaintiffs against the personal representatives of the husband. But, as was pointed out by Griffin J in Somers v W. this is not correct because, under s. 1(1) of the 1976 Act, the word ‘conveyance’ includes an enforceable agreement to make a conveyance and the word ‘convey’ is to be construed accordingly. Therefore the contract is also void and there is not, at the moment, any person who is in a position to enter into a new contract or execute a new conveyance to the plaintiffs. In any event, on the facts before me at present, I am of opinion that the defendant had a proprietary interest in the dwelling and that this, combined with her needs and resources and the needs of her children, impels me to the conclusion that it is not unreasonable for the defendant to withhold her consent and would not have been unreasonable for her to do so if she had been asked for it at the proper time.
I must, therefore, also refuse to make an order dispensing with the consent of the defendant to a sale to the purchasers.
National Irish Bank Ltd. v. Graham
[1995] 2 IR 248
Finlay C.J.
Finlay C.J.
4th May 1994
This is an appeal brought by the defendants against an order made by Costello J. in the High Court on the 8th November, 1993, ordering that the defendants and each of them should forthwith deliver up to the plaintiff or its agents possession of certain lands and hereditaments all of which are situated in the county of Donegal. The claim of the plaintiff pursuant to which the order was made was as mortgagee and the lands involved constituted a very large estate held under different titles some registered and some not registered land.
Upon the hearing of the appeal before this Court two issues only were raised on behalf of the defendants.
The first issue was that it was asserted that the plaintiff in the affidavits filed on its behalf to support the special summons made inconsistent averments concerning the date on which two of the defendants who are husband and wife, namely Eric Samuel Graham and Charis Graham, first occupied a house on one portion of the lands and also made inconsistent statements concerning as to whether in respect of the deed of mortgage upon which the plaintiffs claim was based Charis Graham had given her prior consent to the execution of that mortgage. It was submitted that by reason of these inconsistencies a general view should have been taken by the court that this could not constitute an appropriate case for summary judgment for possession and that accordingly the matter should have been remitted to plenary hearing.
The second issue which arose was a submission that upon the true interpretation of s. 2 of the Family Home Protection Act, 1976, the dwelling which was situate on the land forming part of the mortgaged property in which eventually Eric Samuel Graham and Charis Graham resided constituted a family home in which they as a married couple ordinarily resided at the time at which the mortgage of the property was executed on the 9th August, 1989, even though they had not at that time yet occupied the premises.
Having regard to affidavits sworn by both Eric Samuel Graham and Charis Graham in these proceedings, counsel on behalf of the defendants conceded that the sequence of events with which the Court is concerned and which occurred on the 9th August, 1989, was in this chronological order: an execution of a conveyance by the vendors of the lands forming the estate in Donegal to the defendants; the execution by the defendants of a mortgage over those lands conveying them to the plaintiff and thirdly, the taking of possession of the lands pursuant to the conveyance by Eric Samuel Graham as far as the house situate on portion of the lands was concerned into which he and his wife on the evening of the same day went into residence.
The first issue
With regard to the first issue it was contended on behalf of the defendants that once there was in a sense an inconsistency in the affidavits filed on behalf of the plaintiff that that fact in itself made this an inappropriate case for a summary judgment even though the inconsistency might eventually on affidavit have been resolved.
That is what occurred in this case. In the first affidavit filed on behalf of the plaintiff sworn by Mr. Ryan, he stated that Eric Samuel Graham and Charis Graham had for some time before the 9th August, 1989, been residing in the premises on the lands and he stated in the same affidavit that Charis Graham had given her prior consent to the mortgage of the property consisting of the house on the lands in which they resided. Upon further investigation of the matter and by subsequent affidavits Mr. Ryan corrected both of these statements as being inaccurate and pointed out that they had not occupied the lands prior to the conveyance to them and their obtaining possession on the 9th August, 1989, and that Charis Graham was not requested to nor did she give any prior consent to the execution of the mortgage. This latter corrected version coincides with the sworn testimony of both these two defendants and in those circumstances I am quite satisfied that there can be no general principle nor any requirement of justice which would make necessary a plenary hearing and the refusal of a summary judgment. The purpose of a plenary hearing instead of a summary judgment in a case of this description is for the purpose of resolving a dispute of fact which remains between the parties and the determination or resolution of which is necessary for the decision in the case. In this case, such disputes do apparently or did apparently exist concerning transactions by way of further mortgages executed by the defendants later than the month of August, 1989, but the plaintiff’s claim is based exclusively on the deed of mortgage of August, 1989, and in respect of the facts material to that there is not any longer any dispute nor any lack of certainty for the Court to act upon. For these reasons this submission must in my view fail.
The second issue
The major submission made on behalf of the defendants with regard to this matter was twofold. Firstly, it was suggested that on the authority of a number of decisions but particularly on the authority of the decision of this Court in Bank of Ireland v. Purcell [1989] I.R. 327 the purpose of the Family Home Protection Act, 1976, clearly was a remedial or protective Act intended to protect a spouse in his or her residence in the family home and in a right to reside in it by preventing or avoiding the other spouse who was the sole owner of the family home by any transaction purporting to convey any interest in the family home to any person other than the spouse concerned.
It was submitted that unless the provisions of the Act defining a family home were given what was described as a liberal interpretation or a subsidiary or alternative interpretation other than the actual words contained in s. 2, the Act would fail in one of its main objectives and purposes and that accordingly the Court was entitled to add to the express definitions of a family home contained in the statute a further definition involving a home which the parties intended to occupy and reside in as a married couple. Secondly, it was submitted that the words “ordinarily reside” contained in s. 2 could on the authority of definitions of residing and residence contained in other statutory provisions include a situation in which they did not actually occupy it but intended or were about to take up abode in it.
I have carefully considered these submissions and I am satisfied that they are not sound and that if the Court were to give to the words the extended definition which is contended for in this case it would manifestly not be interpreting the section but would be legislating: something which is impermissible.
The precise terms of s. 2, sub-s. 1 which is the relevant statutory provision of the Family Home Protection Act, 1976, are as follows:”
“In this Act ‘family home’ means, primarily, a dwelling in which a married couple ordinarily reside. The expression comprises, in addition, a dwelling in which a spouse whose protection is in issue ordinarily resides or, if that spouse has left the other spouse, ordinarily resided before so leaving.”
Firstly, I am quite satisfied that the word “primarily” contained in the first sentence in this section means, in its ordinary construction and in the construction which must be given to it in this section, that the definition of a family home as a dwelling in which a married couple ordinarily reside is in the first place the appropriate definition within the Act. The necessity for that word becomes clear when one considers the second sentence contained in the sub-section namely “the expression comprises, in addition, a dwelling in which a spouse whose protection is in issue ordinarily resides” etc. You have clearly therefore in this section a primary definition and you have an additional or subsidiary definition; both are expressed in complete terms and leave no room for the addition of any other subsidiary definition by judicial interpretation.
I am satisfied that having reached that conclusion which appears to me to be inescapable on what is an unambiguous statutory provision that the Court in a sense is not concerned with whether on the facts of this case there is a major failure of the statute to protect the interest of a spouse.
Having regard however to the submissions which are made in this context, it seems necessary that I should point out my view that in reality on the transaction as it is agreed it occurred in this particular case there are reasons of common sense why the particular provisions of the Act of 1976 should not apply to the mortgage which was executed by amongst others Eric Samuel Graham on the 9th August, 1989. On that occasion, a joint conveyancing transaction took place, one a conveyance of the entire of the lands of this large estate to the members of the Graham family who were the purchasers and secondly, in order to achieve that purchase, an immediate mortgage of the same lands to the plaintiff who provided a substantial portion of the purchase money necessary to secure the conveyance to the Graham family. What Eric Samuel Graham and the other members of the family were acquiring on that day by that double conveyancing transaction clearly was an equity of redemption in all these lands. It was therefore the acquisition of an equity of redemption in all these lands which Eric Samuel Graham was effecting in order to provide a house into which he and his wife might enter as a married couple and ordinarily reside.
In these circumstances, it would be inconsistent with both the purposes and provisions of the Act if the consent of the wife to the mortgage which was part of the transaction of purchase was required. If, of course, lands were acquired by a conveyance and even within a short time were then subsequently mortgaged so as to provide possibly the purchase price which up to that had been covered by a bridging loan different considerations under the Act of 1976 would arise.
There is however no warrant in my view for applying the provisions of that Act on the facts of this case to the house which formed part of the lands that were purchased.
I would therefore disallow the appeal and affirm the order made in the High Court.
Egan J.
I agree.
Blayney J.
I agree.
Bank of Ireland v. Slevin
[1995] 2 IR 455
Johnson J.
Johnson J.
16th February, 1989
This is an appeal from a decision by Judge Carroll of last July. It comes by way of a claim and a counterclaim. The claim is by the plaintiff, the Bank of Ireland, for a sum of £266,335.25 against the defendant and the defendant has a counterclaim for a million and a quarter pounds being for damages arising from the conduct of the bank and indicating that the monies claimed by the bank are not due and owing to him. The parties by agreement indicated that at the initial and opening stage of the case, the first thing to be decided was as to whether or not the case proved by the bank was substantiated and if that was not substantiated, the case would be adjourned to a subsequent date for the purposes of assessing the damages in respect of the defendant’s counterclaim. In reality the case has been about the defendant’s counterclaim because there has been no serious contest as to the figures proved by the bank. There was no cross examination on them and the bank has proved them and therefore to date the bank has proved that the figures namely, the sum of £266,335.25, is due and owing to it if everything it says was correctly done, in other words if the money was lent to the defendant at his request and if he has failed to return it. That is what the case is about because the defendant’s counterclaim and his defence both combine to allege that the bank has acted wrongly, dishonestly, negligently and in breach of fiduciary trust to him in the course of the period from early 1978 until late 1980 when to all intents and purposes he ceased to trade with the bank. In order properly to ascertain what the case is about it is not necessary to deal with each and every individual document of the multiplicity which were referred to nor indeed to go into the many highways and byeways which the case developed on at many times. The defendant represented himself and let me say this that I have rarely seen an exhibition of such tenacity, a capacity to parse and analyse documents, a capacity to deal with detail which is practically unprecedented in my experience of a lay litigant. He is quite clearly an extremely capable and hard-working man who has obviously in the past worked and most probably in the future will work extremely hard at a business and possibly at a number of businesses between turf, farming, land reclamation, and agricultural contracting. The essence of the defendant’s case with regard to the claim made by the bank comes down to a conflict on two or three points and the two or three points can be very clearly stated.
[His Lordship reviewed the evidence and continued.]
I find that those things taken into consideration the balance of probabilities lies in favour of the plaintiff. I will therefore hold that the plaintiff has proved its case and the defendant has failed to prove his counterclaim. The Statute of Frauds under those circumstances does not arise. With regard to the fiduciary relationship, I consider myself that this is a relationship which can or cannot develop given different sets of circumstances. Having regard to the circumstances in this particular case and having regard to the quite clear singlemindedness of the defendant, his own ability and the manner in which he considered himself to be and most probably is a better farmer and land reclaimer than anyone else and possibly a better judge of the cattle market and the prices of cattle than anyone else, the relationship between himself and Mr. Meaney was not that of a fiduciary nature but that of a banker and client. Possibly the real difficulty in this case came about because the relationship between the A.C.C. and its clients is somewhat different to that of a commercial bank in the ordinary public sense.
The next question that falls to be decided is as to whether or not the deposit of the land certificate is void by reason of the Family Home Protection Act. The Family Home Protection Act introduced a completely new concept into the laws of this country. It was produced for the purposes of protecting the family home and to prevent families being evicted when a spouse through either stupidity or greed or whatever else or bad business or bad luck lost the family home and it was for the purposes of protecting the families and the children and the spouses that that law was introduced but it introduced a completely new concept of the limitation of the capacity of people to deal with property which was apparently their own which introduced a very new concept into the land market, the commercial market and other aspects of life in Ireland, particularly commercial life and for this reason the Act quite clearly limits very very carefully and with great precision the respect in which any dealing will be made void and it limits the dealing to the family home and it limits that to the dwelling. It means any building or part thereof occupied as a spearate dwelling and includes any garden or portion of ground attached to and usually occupied with the dwelling or otherwise acquired for the amenity or convenience of the dwelling. This is quite clearly designed for the purposes of separating the dwelling-house from other enterprise and this includes fanning. If this was a factory or a pub or a shop or anything other than fanning the question would not arise but there is an illusory sacrosanctity attached to the farming status in this country which has not been copperfastened by this Act. The concept that it would not attach to a deposit of a 20,000 acre holding does not bear thinking about let alone that of a pub or a factory and under those circumstances I hold that there is a severance capacity in the deposit and it is void only insofar as it relates to the dwelling and the garden or portion of ground attached to and usually occupied with the dwelling or otherwise acquired for the amenity or convenience of the dwelling. However, I am totally unsatisfied with the map which has been produced. I will indicate that I will give a charge on the balance of the land and I will deal with the submission regarding the equity attached to or any equitable interest which may attach to Mrs. Slevin. This is a matter which can be debated at a later date. It is not to be decided in this particular case in this particular court and obviously if Mrs. Slevin does have an interest in that portion of the lands then the charge can only relate to that portion in respect of which she does not have an interest or at least that is what I understand to be the law, alternatively Mr. Slevin may very well be liable in any event because he failed to draw the attention of the bank to the security which he gave and in this regard I have no hesitation. I am taking it slightly in reverse in stating that the equitable deposit of the 29th September, 1977, was an equitable deposit as stated in the document proved before me by way of equitable mortgage and to secure the liabilities past and present and this is such a normal and natural part of the business of the country that I was astonished that Mr. Slevin did not readily acknowledge and literally had to be forced to acknowledge that he was familiar with this aspect of life in lodging documents in the bank. Under these circumstances I indicate that I will grant a charge on the lands such portion thereof as do not comprise of the family home, but I require a proper map to be produced setting out clearly the family home, the offices attached thereto, the land which constitutes the amenity and convenience thereof including the avenue which Mr. Slevin has indicated is not contained in the map. The map itself I find quite inadequate and in the event of it being difficult to make a map then it should have been done by way of aeriel photography. The resources of the plaintiff are quite sufficient to run to that. Under those circumstances that is my decision. I will give a decree for £266,335.25. I will give a charge on the lands when a satisfactory map has been produced.