Couple lose court action against lender

A couple who borrowed €1.4m to refinance property investments have lost their High Court action alleging their lender had not validly appointed a receiver over their assets when they went into arrears.

Anthony Freeman, who owned a window cleaning business, and his wife, Miriam, Willow Wood Lawn, Blanchardstown, Dublin, borrowed €1.4m in 2006 from Bank of Scotland Ireland (BoSI) to fund re-financing and refurbishment of six Dublin houses.

Of that sum, €800,000 was used to re-finance existing loans on the properties held with First Active with the remainder released to the Freemans. Following the financial crisis in 2008, they went into arrears in 2009 and a receiver was appointed over the properties in 2011. They claimed the receiver was invalidly appointed because BoSI had been dissolved.

They argued, its successor, Bank of Scotland plc (BoS), was not legally entitled to appoint a receiver because it had transferred the mortgages on some properties to a third party as a means of raising capital, a process known as securitisation.

In proceedings against BoS and the receiver, they also claimed BoS breached a voluntary Central Bank code in relation to the securitisation. They further claimed it was not entitled to appoint a receiver because, under the Registration of Title Act 1964, registration of title from BoSI to BoS was never completed.

They also alleged the admitted overcharging of €20,700 in interest by BoS contributed to them defaulting on their loans.

The claims were denied.

In his judgment yesterday, Mr Justice Brian McGovern ruled the couple had failed to prove their case on any of the issues raised.

The Freemans’ argument that overcharging contributed to them defaulting “did not stand scrutiny“, he said. They were overcharged some €20,000 but that must be set against the surplus of approximately €600,000 available to them after they acquired the loans.

The couple could have used that money to reduce the principal or re-invest in their business “but chose to do neither” and went on a “spending spree” where substantial money was spent over 16 months on expensive vehicles and at least one holiday to the US, he said.

There was compelling evidence they gave BoSI misleading information when they applied for the loans, including grossly inflated figures about the net profit of Mr Freeman’s window cleaning business, he said.

He ruled the securitisation of the loans was properly effected by BoS and rejected the claims BoS’ title to the loans was affected by the cross-border merger of Bank of Scotland Ireland Ltd and Bank of Scotland Plc. After the merger took place BoS “stood in the shoes” of BoSI and was the proper body to appoint a receiver over the properties.

The Freemans also failed to establish BoS breached a voluntary Central Bank code in regards to securitisation. Non-compliance with the statutory code would not relieve a borrower from their obligation under a loan to repay the lender or deprive the lender of its rights and powers under the loan agreement, he added.