Couple lose appeal over €4m property loan debts

A couple have lost their Supreme Court appeal against a decision Bank of Scotland plc was entitled to recover €4m from them arising from unpaid loans made for property development purposes and to appoint a receiver over certain properties.

Patrick and Roseann McLaughlin, Foxrock, Dublin, in their appeal, argued the 2010 cross-border merger between Bank of Scotland (BOS) and Bank of Scotland Ireland (BOSI) did not involve the transfer of any securities held by BOSI to BOS.

Their appeal was given a priority hearing by the Supreme Court because, if that argument was upheld, it would have what Mr Justice Frank Clarke described as a “profound” effect on the position of BOS and also potentially impact other cross-border mergers.

In unanimous judgments yesterday, the court dismissed their argument and ruled the security held by BOSI over the McLaughlins’ properties was an “asset” of BOSI within the meaning of the relevant 2005 EC directive on cross-border mergers which had passed to BOS on the coming into effect of the relevant merger.

The three-judge court also refused as unnecessary the couple’s application to have issues, including the meaning of the word “assets” in the 2005 directive, referred to the ECJ for determination.

The Supreme Court upheld a High Court decision BOS was entitled to recover some €4.06m from the couple arising from the 2008 loans and had validly appointed Tom Kavanagh receiver over certain properties on which various loan facilities were secured.

In their appeal, the couple also claimed they had had an arrangement with BOSI that it would not call in the relevant loans until their residence, Latona, Torquay Road, Foxrock, had been sold. They intended to move to smaller accommodation and took out a bridging loan to buy another property at Kerrymount Rise, Foxrock.

Mr Justice Clarke said

there was no evidence to establish a legal obligation on the part of the bank to refrain from calling in the loan until Latona was sold.

Another potentially significance issue was whether the failure to specifically register BOS as the new registered owner of charges originally executed in favour of BOSI meant, at least where registered lands were affected, neither BOS nor the receiver could enforce the charge. Ms Justice Laffoty said she was satisfied, as a matter of contract, BOS had power, independently of provisions of the 1964 Registration of Title Act, to appoint the receiver under the terms of a 2006 charge between the couple and BOSI.