Debt Problems | Bankruptcy Property Law

Lay litigant succeeds in having Circuit Court order for repossession quashed by the High Court

A Wexford woman succeeded in the High Court with an application to set aside a Circuit Court order for possession of the family home.

In February 2019 the Circuit Court in Wexford was satisfied that the papers and proofs were in order and granted the order for possession to the lender. Ms Cody claimed that the original mortgage had been entered in her name without her knowledge or consent.

She also claimed her husband had witnessed her signature in her absence and colluded with the lender bank. As a consequence of these allegations she claimed that the mortgage was invalid and any order flowing from that mortgage, for example for possession, was also invalid.

The High Court agreed with her and quashed the Circuit Court order.

The lender bank made a number of mistakes which led to this High Court decision. The first was the bank’s failure, by way of its affidavits, to deal with the issues raised by Ms Cody. Secondly, it failed to explain the issues raised and failed to reply to Ms Cody’s allegations. Finally, it did not cross examine Ms Cody in the Circuit Court with the purpose of establishing her indebtedness. It followed from this that this matter could not be rectified in the High Court at the appeal stage and the finding of indebtedness of Ms Cody could not be established to the High Court’s satisfaction.

High Court decision

The High Court held that the bank had failed to establish her indebtedness and had failed to prove she had executed the mortgage. For this reason it quashed the Circuit Court order.

What the bank needed to do to succeed was to

  1. Prove due execution of the mortgage by Ms Cody
  2. Cross examine Ms Cody in the Circuit Court to establish indebtedness

It did neither of these things.

The bank sought to have the High Court remit the case back to the Circuit Court to be reheard by plenary hearing. The High Court saw this as an audacious application to have a case which was already decided reheard. It said such an action would be “an affront to the proper administration of justice”,

With respect, this refined position simply serves to expose the audacity of the bank’s application. The bank, having failed in its proceedings for an order for possession because it came up short in the requisite proofs, now wishes to rewind the clock to the
very start of the proceedings. It wishes to rerun its application before the Circuit Court, on the basis of new evidence, with a right of appeal thereafter to the High Court. In effect, the proceedings before the Circuit Court and the High Court to date would be set at naught, and Ms Cody would be dragged through the courts a second time. Such a
result would be an affront to the proper administration of justice

High Court, February 2020

To rub salt into the wounds of the bank Ms Cody the High Court made an order allowing Ms Cody, a litigant in person, to recover her expenses of the proceedings in the Cirucit Cout and the High Court as against the bank.

Read the full decision in Bank of Ireland Mortgage Bank v Peter Cody and Heather Cody [2020] IEHC 99

Debt Problems | Bankruptcy

Frivolous and Vexatious High Court Proceedings Struck Out in Debt Case

Stock photo of Supreme Court

Arthur O’Neill entered into loan agreements totalling almost €2,000,000 with First Active plc in 2007. The loans were subsequently sold to securitisation companies after 2015.

Mr O’Neill brought High Court proceedings claiming that he had originally been offered 25 year interest only loans by First Active plc and in the process of the loans being sold to the securitisation companies they were altered to 5 years interest only loans.

He claims damages for breach of contract, negligence, negligent misrepresentation, fraud, deceit, concealment, and negligent misstatement. He also claimed these proceedings were necessary to allow him obtain documentation to defend separate proceedings against him seeking to appoint a receiver over his assets.

High Court decision

Mr Justice Barr held that Mr O’Neill had made vague assertions and allegations against various parties.

However, no stateable cause of action could be identified against either of the defendants and the court held that it was insufficient for a plaintiff to rely on making bare allegations in a statement of claim-there must be some evidential basis to show a stateable cause of action.

Mr Justice Barr also decided it was not permissible to bring proceedings in order to seek documents that were needed for separate proceedings.

For these reasons Mr O’Neill’s case was held to be frivolous and vexatious and dismissed the action, notwithstanding the Court’s recognition that the power of the court to strike out proceedings should used sparingly and with caution. However, if a court is convinced that a claim will fail such pleadings will be struck out. (Aer Rianta c.p.t. v. Ryanair Limited [2004] 1 IR 506, Denham J. )

Read the full case here: Arthur O’Neill v Celtic Residential Irish Securitisation PLC and Ors [2020] IEHC 334

Debt Problems | Bankruptcy

The Summary Summons Procedure in Debt Collection-All Parts of the Debt Must Be Set Out in Full

bank of ireland v o'malley

This Supreme Court case has put the cat amongst the pigeons, to a certain extent, when the summary summons procedure is being used to collect debts.

In 2008, Bank of Ireland Mortgage Bank advanced a mortgage loan of €225,000 to Mr. Joseph O’ Malley. Shortly after the loan was advanced Mr. O’Malley ran into financial difficulties. The loan repayments stopped going to the bank in November 2011 and three years later in 2014 Bank of Ireland sought summary judgement for the outstanding amount, €221,795.53.

As with all judgement proceedings involving large mortgage sums the matter was before the High Court first where Mr O’ Malley argued that Bank of Ireland’s pleadings (court papers) were defective as they lacked detail as required by Order 4 Rule 4 of the Rules of Superior Courts. 

Order 4 Rule 4 states “state specifically and with all necessary particulars the relief claimed and the grounds thereof”, Mr O’Malley argued that in the pleadings before the court, Bank of Ireland had simply given a statement of account as the evidence to support their claim. It was argued by Mr O’Malley that such a process was defective as Bank of Ireland should have been required to outline each component that made up the debt claim. 

Each component would comprise figures such as the principal debt advanced plus interest due on the account plus surcharges and penalties. Mr. O Malley argued that simply putting a statement of the account before the court was insufficient as each component of the debt being sought needed to be evidenced in the court proceedings.

High Court decision 

Judgement was granted against Mr. O’Malley even though Bank of Ireland had simply put a statement of account before the court and did not outline specifically how the figure being sought had been arrived at.

As a result of this Mr O’ Malley appealed the decision to the Supreme Court. 

The question at hand in the Supreme Court judgement was what level of detail financial institutions need to provide in summary summons issued to debtors to be successful in obtaining a judgement.

The Chief Justice, Clarke CJ allowed Mr. O’Malley’s appeal, holding that Bank of Ireland’s claim had lacked the necessary detail required under Order 4 Rule 4 of the Rules of the Superior Courts. 

Clarke CJ further held that financial institutions should give a straightforward account of how the amount they are claiming for has been calculated. Based on this reasoning the appeal was allowed because there was insufficient evidence to justify the High Court order granting a summary judgement against Mr. O’ Malley.

Supreme Court decision

The matter was sent back to the High Court so that Bank of Ireland could provide more detail and further evidence of the debt claimed.

What does it mean for debt collection?

As a consequence of Clarke CJ effectively ‘sending’ the matter back to the High Court, many lenders are now seeking to amend any pleadings they have before the courts to introduce supplementary or extra evidence in order to satisfy the Rules of the Superior Courts.

A recent High Court decision in Havbell DAC v Harris saw a four-part test for parties seeking summary judgement being out by the judge.

  1. The plaintiff’s case must be sufficiently pleaded and particularised (meaning that each part of the debt that makes up the amount being sought needs to be outlined to the court).
  2. The plaintiff must specify evidence that establishes a prima facie or clearly identifiable case to grant the judgement.
  3. The court must enquire whether there is a fair and reasonable probability that the defendant will be able to put forward a real (bond-fide) defence against the plaintiffs claim.
  4. The defendant must show that they have a defence that goes beyond a mere assertion and is supported by evidence.

The decision and new test reached in O’Malley may pose problems for debt acquisition companies who may have incomplete records from the original lender and will be in a weak position to put any pressure on the original ledner to assist with any evidentiary difficulties.

Read the full decisions in Bank of Ireland Mortgage Bank v. Joseph O’ Malley IESC [2019] IESC 84 and

Havbell DAC v Harris [2020] IEHC 147

Debt Problems | Bankruptcy Property Law

Did Lease Granted by Borrower Prevent AIB From Securing Possession of D4 Property?

differential costs order

AIB granted a loan to Richard Finbarr Fitzgerald and the parties entered into a mortgage contract. The 1995 mortgage, registered in the Registry of Deeds, was secured on a flat in Dublin 4 and the bank now sought an order for possession.

However, there was a problem.

Fitzgerald had gone bankrupt in January 2020 but had previously granted a 35 year lease on the flat to Ms Daly in 2002. The question then arose in this case as to whether this lease was void as against the bank and they could go ahead and recover possession, or did this lease snooker the bank and prevent repossession.

The bank were seeking to recover a debt outstanding from a loan granted in 2015.

The bank’s position was that Fitzgerald needed the consent in writing of the lender if he was going to grant a lease on the property, pursuant to the 1995 mortgage which states

“The Mortgagor shall not be entitled without the consent in writing of the Bank to exercise the powers vested in him by section 18 of the said Conveyancing Act of 1881 so long as any moneys shall remain unpaid on this present security.”

It is worth noting that the Land and Conveyancing Law Reform Act 2009 changed the law in this area, specifically section 112 which states:

112.— (1) A mortgagor of land, while in possession, may, as against every other incumbrancer, lease the land with the consent in writing of the mortgagee, which consent shall not be unreasonably withheld.

[CA 1881, s. 18][CA 1911, s. 3]

(2) A lease made without such consent is voidable by a mortgagee who establishes that—

(a) the lessee had actual knowledge of the mortgage at the time of the granting of the lease, and

(b) the granting had prejudiced the mortgagee.

(3) A mortgagee of land while in possession or, after the mortgagee has appointed a receiver and so long as the receiver acts, the receiver, may, as against all prior incumbrancers, if any, and the mortgagor, lease the land provided—

(a) it is for the purpose of—

(i) preserving the value of the land, or

(ii) protection of the mortgagee’s security, or

(iii) raising income to pay interest due under the mortgage or otherwise reduce the debt,


(b) it is otherwise an appropriate use of the land pending its sale, or

(c) the mortgagor consents in writing, or

(d) the court in any action relating to the mortgaged land makes an order permitting such lease.

(4) In this section “ mortgagor” does not include an incumbrancer deriving title from or under the original mortgagor.

(5) The power of leasing conferred by this section applies only to mortgages created after the commencement of this Part.

However, the contractual position between Fitzgerald and the bank, as a consequence of the mortgage entered into between the parties, could not be retrospectively amended by the 2009 act as this act was not applied retrospectively to existing contracts and mortgages.

The High Court held that the 1995 mortgage was not affected by the 2009 act and held that all the authorities led one to the conclusion

“If such prior written consent is not obtained by the mortgagor and the mortgagor proceeds to enter into a lease with a tenant, the lease will be binding on the mortgagor as lessor, but as against the mortgagee, the lease will not be binding.”

The bottom line is that any potential impediment to the realisation of the security must be approved of by the lender. The principles in N17 Electrics Limited have been applied consistently and the onus on proving that a mortgagee had consent to a lease lies with the party seeking to rely upon the terms of the lease.

This lease, therefore, was void as against AIB and an order for possession was granted, with a stay for 6 months to allow obtain new accommodation having regard for the fact that she had lived there for two decades.

Read the full decision in Allied Irish Banks PLC and Richard Finbarr Fitzgerald [2020] IEHC 197.

Business and Company Law Debt Problems | Bankruptcy

Promontoria Denied Judgment of €27 Million Because of Hearsay Evidence Rule

The Court of Appeal have held that the High Court was correct in refusing to grant summary judgment against the borrowers, Mr and Mrs Burns. It held that the evidence was not adequate and was inadmissible because it was hearsay evidence, and the usual way around the difficulty was not open to the applicant because it was not a bank.

Promontoria had bought the debt from the lender, Ulster Bank Ireland Limited. The case is Promontoria (Aran) Ltd -v- Burns [2020] IECA 87


Gerry and Anne Burns were pursued by Ulster Bank Ireland Limited in 2013 on foot of guarantees they had given the bank for borrowings for their limited companies.

In 2015 Ulster Bank Ireland Limited sold the loan to Promontoria by way of a Deed of Transfer and Promontoria then sought summary judgment in the sum of 27,000,000 euros in the High Court. The application for judgment was based on an affidavit by an employee of the asset manager (formerly Capita Assets Services (Ireland) Limited) who provides debt collection services to Promontoria.

Mr Burns challenged this affidavit evidence on the basis that the employee was not employed by the lender, Ulster Bank, and could not swear on behalf of Promontoria as he had no first hand knowledge of the borrowing or debt alleged. This was hearsay evidence and inadmissible, accoring to Burns.

The High Court agreed with this argument and refused the application for judgment on the basis that his evidence was hearsay evidence.

Bankers’ Books Evidence Act 1879

The Bankers’ Books Evidence Act 1879 provides an exception to the hearsay evidence rule and allows banks to establish the proof of a debt by reference to the books and records of the bank and a course of dealing between the parties.

Promontoria was seeking to rely on the course of conduct between Ulster Bank Ireland Limited and Burns and Promontoria’s books and records. However, the Court of Appeal held that this relief was not open to Promontoria because neither it nor its debt collection service provider were banks and, thus, their evidence did not come within the Bankers’ Books Evidence Act 1879.

Ms Justice Baker said that letters of demand or facility letters do not prove their contents: “What is required to be proved by Promontoria is that monies were advanced on foot of certain agreements for repayment and subject to certain conditions, including a condition providing for the payment of interest, and that the monies fall due for payment.”

And “Further, the letters of demand, at best, taken alone do not prove more than the making of a demand. They do not prove the debt”.

In conclusion, Promontoria is not a bank and cannot avail of Bankers’ Books Evidence Act 1879 and could not swear to relevant matters in their affidavit seeking summary judgment.

Read the full decision here. (J. Baker)

Read the concurring judgment here. (J. Collins)