Foster & Ors v The Governor and Company of Bank of Ireland (Approved)

Factual and Procedural Background

The plaintiffs entered into a mortgage loan agreement with the defendant bank in 2004 to purchase a residential property as an investment. The plaintiffs allege that the bank applied an incorrect interest rate during much of the loan period, resulting in overcharging them by approximately €35,000. This overcharging allegedly made it unsustainable for the plaintiffs to service the loan, forcing them to sell the mortgaged property. The plaintiffs seek damages for lost rental profits and the diminished capital value of the property.

The proceedings include an application by the plaintiffs for discovery of documents relevant to their claims. The defendant bank contests the identity of the correct defendant, asserting that the mortgage loan was transferred to another entity shortly after the loan was entered into, and therefore the plaintiffs have sued the wrong party. However, the plaintiffs wish to proceed with the discovery application against the defendant bank.

Legal Issues Presented

1. Whether the defendant bank is the correct party to the proceedings or if the mortgage loan was transferred to another entity, thereby requiring substitution of the defendant.
2. Whether the plaintiffs are entitled to discovery of documents relating to the decisions to change the interest rates on the mortgage loan in 2011 and 2013.
3. Whether the defendant bank acted unilaterally or with good faith in changing the interest rates applicable to the plaintiffs’ mortgage loan.
4. The relevance of the bank’s knowledge of the plaintiffs’ use of the mortgaged property as an investment property.
5. The classification of the plaintiffs as consumers for the purposes of the loan agreement.

Arguments of the Parties

Defendant's Arguments

• The defendant contends that the mortgage loan was transferred to Bank of Ireland Mortgage Bank in July 2004, making the defendant the wrong party to the proceedings.
• The defendant states it holds no relevant documents for discovery and that any discovery order against it would be futile unless the correct entity is substituted.
• In its defence, the bank denies that changes in interest rates breached the contract but acknowledges that Bank of Ireland Mortgage deemed the plaintiffs to have been charged an incorrect interest rate, without prejudice to the initial denial.
• The bank denies that the plaintiffs are consumers within the meaning relevant to the case.
• The bank submits that the disputed category of documents relating to the 2013 interest rate change is too broad and disputes the characterization of the change as unilateral.
• The bank argues that its knowledge of the plaintiffs’ use of the property as an investment is not dispositive of whether the interest rate changes compelled the sale of the property.
• Regarding the plaintiffs’ consumer status, the bank treats this as a legal issue but agrees to a more narrowly defined category of documents evidencing their categorisation.

Plaintiffs' Arguments

• The plaintiffs seek discovery of documents related to the bank’s decisions to change interest rates in 2011 and 2013 and communications regarding interest rates during 2011-2013.
• They allege the 2013 interest rate increase was deliberate and unilateral and that the bank failed to act in good faith.
• The plaintiffs maintain that the bank’s knowledge of the property’s use as an investment is central to their claim for damages.
• The plaintiffs wish to pursue discovery against the defendant bank despite the bank’s contention regarding the correct defendant, arguing that the bank should procure documents held by the transferred entity if necessary.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court acknowledged the defendant bank’s contention that the mortgage loan was transferred to another entity and that the plaintiffs had sued the wrong party. However, the issue of correct defendant was not formally before the court in the discovery application and was noted for future consideration.

The court considered the pleadings and found that there was a genuine dispute as to whether the interest rate changes were unilateral and whether overcharging occurred. This made discovery of relevant documents necessary and appropriate.

Regarding the disputed categories of documents, the court accepted the plaintiffs’ entitlement to discovery subject to certain limitations, such as time restrictions on categories relating to the 2013 interest rate change.

The court found that the bank’s knowledge of the plaintiffs’ use of the property as an investment was potentially probative and relevant to the issue of good faith, warranting discovery of related documents.

On the issue of consumer status, the court approved a more precise definition of the category of documents to be discovered, reflecting the legal controversy.

Finally, the court ordered the defendant to make discovery of documents in five specified categories and allowed an extended period for compliance due to practical difficulties caused by COVID-19 restrictions.

Holding and Implications

The court GRANTED the plaintiffs’ application for discovery and ordered the defendant to produce documents within its possession, power, or procurement in specified categories related to interest rate decisions, the plaintiffs’ knowledge and involvement, usage of the property, consumer categorisation, and communications regarding interest rates.

The order includes a time limitation on certain categories and allows twelve weeks for compliance, acknowledging practical difficulties due to the COVID-19 pandemic.

Costs of the discovery application are provisionally awarded to the plaintiffs, but the adjudication and execution of costs are stayed pending the ultimate outcome of the proceedings, with provision for submissions on costs by both parties.

No new legal precedent was established by this decision; its direct effect is to facilitate the plaintiffs’ access to relevant documents for trial preparation.