High Court grants summary judgment for mortgage lender as defendant failed to prove Code of Conduct breach.

[2018] IEHC 824

THE HIGH COURT

Record No. 2015/1409S

BETWEEN

BANK OF IRELAND MORTGAGE BANK

PLAINTIFF

AND

STEPHEN PEARCE

DEFENDANT

JUDGMENT of Mr. Justice Hunt delivered on the 23rd of March, 2018

1. In this case, the plaintiff brought a motion seeking liberty to enter finial judgment in the sum of €849,037.30 against the defendant.

This claim is based upon a mortgage loan advanced by the plaintiff to the defendant on 10th August, 2005 in the sum of €801,715,

drawn down by the defendant on 28th October, 2005. The defendant fell into arrears on 20th June, 2012. At the outset, it must be

emphasised that the plaintiff does not assert a claim for possession of the mortgaged property in these proceedings.

2. The principles applicable to an application of this type have been set out many times and I do not propose to repeat them in detail

in this case. It is sufficient to refer to the formulation adopted by the late Hardiman J. in Aer Rianta CPT v. Ryanair Limited (No. 1)

[2001] 4 I.R. 607 where he held, at page 623, that the test to be applied on an application for summary judgment involved the court

asking itself the answer to one simple question which he framed in the following terms:

“Is it very clear that the defendant has no case? Is there either no issue to be tried or only issues which are simple and

easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”

3. The observations of the Court of Appeal in Close Invoice Finance Limited v. Matthews [2015] IECA 132 are also relevant. The

Court of Appeal emphasised that the mere assertion in an affidavit of a given situation which is to form the basis of an intended

defence does not of itself constitute a ground for granting leave to defend. Whether or not there is a fair and reasonable probability

of the defendant having a real or bona fide defence has to be ascertained by looking at the situation as a whole, and assertions must

be supported by some meaningful evidence such that a court could conclude that there is a fair or reasonable probability that the

defendant has a bona fide defence based upon such assertions.

Possible defence

4. It seems to me that the sole possible defence of substance advanced by Mr. Murphy on behalf of the defendant is the assertion in

the grounding affidavit that the defendant’s account is not in arrears because the plaintiff’s demand for repayment is unlawful, owing

to non-compliance with the provisions of the Code of Conduct on Mortgage Arrears (“the Code”) on the part of the defendant in

relation to this mortgage account.

5. In this regard, Mr. Murphy relied squarely upon the provisions of section 44 of the Central Bank (Supervision and Enforcement) Act,

2013, which provides as follows:-

“A failure by a regulated financial service provider to comply with any obligation under financial services legislation is

actionable by any customer of the regulated financial service provider who suffers loss or damage as a result of such

failure.”

Mr. Murphy pointed in particular to step 4 of the Mortgage Arrears Resolution Process (MARP) contained within the Central Bank’s

current Code of Conduct on mortgage arrears. This provides that in order to determine which options for alternative repayment

arrangements are viable for each particular case, a lender must explore all of the options for alternative repayment arrangements

offered by that lender. The argument put forward is that compliance with this provision by the plaintiff is an essential pre-requisite to

a valid demand for repayment.

6. Paragraph 39 of the Code contains an extensive list of such possible arrangements. However, it must be observed that most if not

all of these alternatives appear to presuppose some possibility of positive contribution by the borrower to the appropriate

arrangement. If it is the position that a person simply has nothing to offer in the context of any of the listed suggestions, I do no see

how it could be said that any such arrangement could be said to be viable.

7. Insofar as the precise effect of the provisions of section 44 of the 2013 Act are concerned, I do not believe that they bring about

any substantial change to the legal position identified by the Supreme Court in Irish Life and Permanent v. Dunne [2016] 1 IR 92. In

that case, the Supreme Court considered the effect of the previous Code on applications for possession of mortgaged premises. It is

clear from the judgment in Dunne that the only provision to be considered by a court hearing an application for possession is that

relating to the observation of a moratorium on the initiation of proceedings as set out in the Code. In that circumstance, a court

would be obliged to decline to make such an order where there was a failure to abide by this requirement. Failure by a lender to abide

to comply with other provisions of the Code did not affect entitlement to obtain an order for possession as a matter of law.

8. In the first instance this case differs from Dunne in that it is not a claim for possession of the mortgaged premises, but rather an

application for liberty to enter judgment for the monetary amount due by the borrower. I do not interpret the reference to “legal

proceedings” the current Code as having any reference or application to a simple claim for repayment of a mortgage debt. This does

not appear to me to be a state of affairs to which the Code of Conduct is directed. This is clear from the section 56 of the Code,

entitled “Repossessions”. This provides that “proceedings for repossession of a borrower’s primary residence” may only commence

where the moratorium period applicable under either Provision 45 or Provision 47 has expired. This is consistent with the apparent

purpose of the Code, which is to encourage engagement between the parties to mortgage arrears cases, and to inhibit the use of

repossession proceedings until all other possible avenues of resolution have been explored. Therefore, the wording of Paragraph 56

does not prevent the plaintiff from demanding repayment, as was suggested by Mr. Murphy. This clause has no application to a

demand for payment, does not prevent a bank making such a demand, and does not gives rise to any cause of action which could be

used by way of defence to a monetary arrears claim.

9. Secondly, even in the context of an application for possession there is no general jurisdiction in the courts under the law as it set

out in the Dunne judgment to consider whether the actions of a lender might be considered to be fair or reasonable, and the Supreme

Court noted that clear legislation would be required to confer such a role. I do not accept that the very general terms of the

statutory provision relied upon by Mr. Murphy confer such a role upon the Court in cases such as this. Therefore, the sole remaining

question is whether the defendant has raised any reasonable possibility that the plaintiff has breached an obligation owed to the

defendant under financial services legislation resulting in loss and damage to him, which might then be set up by way of defence or

counter-claim to that of the plaintiff.

Actionable breach of obligation

10. I am not persuaded on the evidence available that there is a fair or reasonable probability that the defendant has passed the low

threshold required to send this case to plenary hearing. The affidavit evidence concerning a possible actionable breach of the Code by

the plaintiff is somewhat sparse. As far as I can ascertain, the mortgaged property is also the subject of repossession proceedings

between the same parties in the local Circuit Court. Although not apparent from the affidavits, I was informed that no payments

whatsoever have been made by the defendant since 2012, although he has continued in occupation of the property during that time.

His affidavits supply no reasons for the complete absence of any repayments during that that period of time.

11. His affidavit states that he requested a two year moratorium on payments in 2012, and although this was not formally granted by

the defendant, he has had an effective moratorium on payments of almost six years at this stage. Payments have not resumed in any

shape or form during this time. In retrospect therefore, it does not appear that the suggested moratorium would have led to a viable

resolution of whatever difficulty the defendant had in meeting his repayments.

12. He then complains that although he filled in a standard prescribed financial statement in April 2013, he was classified as “non-co-

operating” by the plaintiff within the meaning of the Code of Conduct on mortgage arrears, on the basis that “he had no money”, and

was informed by the plaintiff in April 2014 that the protections of MARP no longer applied to him. The financial statement prepared by

the defendant under the Code in 2013 was not exhibited, so I do not know whether the stated reaction of the plaintiff to that that

statement was inaccurate, unjustified or unreasonable. The fact that there has been a complete and unexplained absence of

payments for almost six years may indicate that this was an accurate summary of the defendant’s position. I do not see that this

evidence reasonably establishes a cause of action of the type referred to in section 44 of the 203 Act. These complaints about the

plaintiff amount only to assertion, in the absence of any supporting evidence.

13. The defendant also states that he recently engaged in a Personal Insolvency Practitioner, and as part of a restructuring

arrangement, a proposal was put to the plaintiff by way of an upfront payment of €50,000, to be funded by way of a loan from family

members and a split mortgage secured on his family home. It appears that this solution was rejected by the plaintiff. It is very difficult

to identify from this evidence whether there is any reality to the defendant’s desire to engage with the Code of Conduct and the

MARP. His affidavit does not identify which of the possible solutions in the Code might reasonably apply to him, or how such a solution

might be sustained in his case. Although the sum recently offered by the defendant to the plaintiff would cover the arrears that have

built up since 2012, it is not clear how the plaintiff proposes to address future repayments during the remaining term of the mortgage.

Conclusion

14. The Dunne judgment is clearly limited to the effect of certain provisions of the Code on a court hearing an application for an order

for possession. The only provision of the Code where non-compliance might debar a plaintiff from obtaining such an order is the

provision conferring a moratorium on the initiation of such proceedings as set out in the Code. Paragraph 56 of the Code specifically

applies to the commencement of proceedings for repossession of a primary residence. The Circuit Court proceedings between the

parties undoubtedly fall into this category, and some provisions of the Code may be relevant to the determination of that claim. I

have no doubt that that, as in the vast majority of these cases, an order for possession will not be granted in that Court unless as a

matter of last resort.

15. The claim in this case does not engage the provisions of the Code, and the defendant has not demonstrated any fair or

reasonable probability that there has been an actionable breach of the Code, or any specified ensuing losses which could operate by

way of a defence to a bare claim for repayment of a monetary sum, even assuming that such a claim could arise under the legislation

invoked by the defendant in this case. The contractual right to demand repayment under the terms of the loan accepted by the

defendant is entirely unaffected by the Code or the provisions of the 2013 Act. Taking an overall view of the affidavit evidence, the

defendant has not established by evidence a fair or reasonable possibility that the plaintiff has failed “to comply with any obligation

under financial services legislation”.

16. In the circumstances, as the plaintiff was entitled under General Condition 4 of the loan offer to demand early repayment of the

full amount due on 16 July 2014, on the basis that the loan had then been in default since 2012, I propose to grant the plaintiff the

relief it seeks in the notice of motion. This does not confer any immediate additional right to the plaintiff to obtain possession of the

defendant’s residence. It is simply a finding that the defendant is indebted to the plaintiff in the sum claimed by it. I express no view

as to how the Code might apply to any further steps which the plaintiff might take to enforce this monetary judgment. The Code will

continue to apply to the possession claim in the Circuit Court in line with the Dunne judgment, and complaints that the defendant has

relating to the Code may be ventilated in that Court, in so far as they are legally relevant. It also does not preclude the defendant

from suggesting a solution other than continuing to occupy the property at no immediate cost to himself, which is understandably not

acceptable to the plaintiff.