McCarthy v Moroney & anor; Moroney v Property Registration Authority & ors

Factual and Procedural Background

This judgment concerns multiple applications arising from two related sets of proceedings. The first set was initiated by Plaintiff against Defendants seeking possession of certain lands in Co. Clare, commenced by plenary summons on 8 September 2017. The second set was commenced by Defendant (acting in person) against the Property Registration Authority (PRA), Company A, Bank of Scotland PLC, and Plaintiff, seeking declaratory relief and damages related to the registration of charges over the same lands.

The applications before the court included interlocutory orders by Plaintiff as receiver appointed by Company A to take possession of the lands, Defendant’s application compelling the PRA to remove charges registered in favor of Company A, motions to join additional parties, and motions by Company A and Bank of Scotland seeking to dismiss Defendant’s proceedings as frivolous, vexatious, or bound to fail.

The background involves a series of loan facilities originally granted by Bank of Scotland Ireland Ltd ("BOSI") to Defendant and his spouse, secured by charges over several parcels of land. These loans were transferred through a cross-border merger from BOSI to Bank of Scotland PLC and subsequently assigned to Company A. The loans were in arrears, and Company A appointed Plaintiff as receiver over the lands. Defendant challenges the validity of the registrations and transfers, alleging constitutional and procedural defects, unfair terms, and regulatory failures.

Legal Issues Presented

1. Whether the cross-border merger and subsequent transfers of charges to Bank of Scotland and Company A were valid and complied with applicable law and regulations.
2. Whether Defendant’s constitutional rights, including the right to fair procedures, were infringed by the registration of charges without notice or opportunity to be heard.
3. Whether the registration of charges by the PRA required prior notice to Defendant under established case law.
4. Whether the contractual provisions allowing assignment and transfer of the loan facilities and charges are enforceable or constitute unfair terms under consumer protection regulations.
5. Whether Plaintiff, as receiver, was validly appointed with authority to take possession of the lands under the terms of the mortgage deed.
6. Whether Defendant’s proceedings are frivolous, vexatious, or bound to fail and should be dismissed.
7. Whether interlocutory injunctions sought by Defendant and Plaintiff should be granted based on the strength of their cases and the balance of convenience.

Arguments of the Parties

Defendant's Arguments

• Regulation 19(1)(g) of the 2008 Cross-Border Mergers Regulations is unconstitutional as it disregards borrowers’ rights and denies fair procedures.
• The PRA failed to afford Defendant notice and an opportunity to be heard before registering charges, contrary to principles established in The State (Philpott) v. Registrar of Titles.
• The successor company Bank of Scotland and Company A are unregulated in the State, which prejudices Defendant’s rights.
• The transfer of loans and charges was not effected pursuant to Part III of the Central Bank Act 1971, rendering it invalid.
• There was a failure to disclose that the loans could be "sold out of regulation," violating the Unfair Terms Directive and related Irish regulations.
• Clause 14.2 of the 2008 Loan Conditions constitutes an unfair term, permitting assignment or novation without adequate disclosure or consent.
• The 2008 Regulations failed properly to transpose Article 14(3) of the Directive regarding formalities for transfer of rights.
• Bank of Scotland was unable to comply with formalities due to its unregulated status in the State, breaching the governing law clause of the mortgage deed.
• Defendant seeks rectification of the register under section 31 of the Registration of Title Act 1964 on grounds of fraud or mistake.
• There has been an overcharge of interest on the loan account.

Company A and Bank of Scotland's Arguments

• The cross-border merger regime and Regulation 19 do not involve discretionary decisions engaging Dellway principles; the PRA merely registers transfers as mandated by statute.
• The Supreme Court decision in Kavanagh v. McLaughlin confirms the validity of the transfer of charges and loans under the merger.
• There is no obligation on the PRA to notify borrowers of registration of charges under section 64 of the 1964 Act.
• Bank of Scotland is regulated in the United Kingdom and entitled to provide services in the State under EU passporting rules; Company A, though unregulated, operates through a regulated credit servicing firm, Pepper Finance DAC.
• The contractual documents expressly permit assignment and transfer of rights and obligations, including under Clause 27 of the Deed of Mortgage and Clause 14 of the Loan Conditions.
• Defendant is not a consumer under the Unfair Terms Regulations as the loans were for business purposes; thus, claims under consumer protection law fail.
• The formalities for the cross-border merger and registration were properly complied with.
• The letter of demand and declaration of default were valid notwithstanding Defendant’s claim of overcharge; overstating amounts does not invalidate the demand.
• Plaintiff was validly appointed as receiver with authority to take possession of the lands.
• Defendant’s proceedings are frivolous, vexatious, and bound to fail and should be dismissed.
• The interlocutory injunction sought by Defendant is inappropriate given delay and balance of convenience; Plaintiff’s interlocutory injunction should be granted.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first analysed Defendant’s claims challenging the validity of the cross-border merger and subsequent transfers. It found that Regulation 19 of the 2008 Regulations and the Supreme Court’s decision in Kavanagh v. McLaughlin established that the transfer of loans and security interests from BOSI to Bank of Scotland was lawful and a necessary consequence of the merger. Defendant’s reliance on Dellway was misplaced, as the PRA’s registration function under s. 64 of the 1964 Act is administrative and non-discretionary, not a discretionary decision requiring fair procedures.

The court held that the PRA had no obligation to notify Defendant before registering transfers of charges, distinguishing The State (Philpott) case on its facts. It further found that Bank of Scotland was regulated in the UK and entitled to operate in the State under EU passporting rules. Company A, while unregulated, was obliged by domestic law to act through a regulated credit servicing firm, providing Defendant with protections equivalent to regulated entities.

The contractual provisions, including Clause 27 of the mortgage deed and Clause 14 of the loan conditions, clearly permitted assignment and transfer of rights and obligations without Defendant’s consent. Defendant’s loans were for business purposes and thus consumer protection regulations did not apply, negating claims of unfair terms and non-disclosure under the 1995 Regulations.

The court rejected Defendant’s arguments about improper transposition of Article 14(3) of the Directive, finding that Regulation 19(2) would be interpreted consistently with the Directive’s requirements and that all necessary formalities had been complied with.

Regarding Plaintiff’s appointment as receiver, the court examined the mortgage deed’s Clause 9, which contemplates appointment of a "receiver and manager." Plaintiff was appointed only as "receiver," omitting the "manager" designation. Applying binding precedents requiring strict compliance with appointment formalities, the court found Plaintiff’s appointment likely invalid. This defect was fatal to Plaintiff’s interlocutory injunction application seeking possession.

The court considered the evidence of default and the letter of demand, concluding there was a strong case that an event of default had occurred, entitling the mortgagee to appoint a receiver. However, due to the defect in appointment, Plaintiff failed to establish a strong case for interlocutory relief.

On Defendant’s interlocutory injunction application to compel removal of charges, the court found no strong case on the merits and held the balance of convenience against granting such relief, particularly given delay and risk to Company A’s priority.

Finally, the court concluded Defendant’s proceedings were bound to fail and should be dismissed as frivolous or vexatious, applying the principles from Lopes v. Minister for Justice.

Holding and Implications

The court’s final decision was as follows:

• Dismissal of Defendant’s proceedings challenging the registration and transfers of charges on the basis that they disclose no reasonable cause of action and are bound to fail.
• Dismissal of Plaintiff’s application for interlocutory injunction against Defendant due to failure to establish a strong case, principally because of the invalidity of Plaintiff’s appointment as receiver.
• Refusal to grant Defendant’s interlocutory injunction against the PRA and others to remove charges, due to absence of strong case and adverse balance of convenience.
• Adjournment of Plaintiff’s interlocutory injunction application against Defendant’s spouse with directions to fix a new hearing date and ensure proper notice, given lack of evidence of notification.
• Striking out of Defendant’s remaining motions as no useful purpose would be served given dismissal of main claims.

The direct effect is that Company A’s ownership of the charges and Plaintiff’s receivership appointment remain validly recognized subject to the caveat that Plaintiff’s appointment as receiver is defective and may be challenged at trial. No new precedent was established beyond the application of existing principles to the facts.