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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Halston Street Credit Union Ltd -v- Costello [2014] IEHC 619 (16 December 2014) URL: http://www.bailii.org/ie/cases/IEHC/2014/H619.html Cite as: [2014] IEHC 619 |
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Neutral Citation: [2014] IEHC 619 THE HIGH COURT Record No. 2012/99 SP Between/ HALSTON STREET CREDIT UNION LIMITED Plaintiff AND
RAYMOND COSTELLO Defendant AND In the matter of an application brought by Emberton Finance Limited pursuant to O.55, r.36 of the Rules of the Superior Courts Judgment of Mr. Justice Max Barrett delivered on 16th December, 2014. 1. Emberton Finance Limited is seeking an order pursuant to O.55, r.36 of the Rules of the Superior Courts, 1986, as amended, giving it leave to submit a late claim to the Examiner’s Office. Its claim derives ultimately from a judgment for just under €30,000 that was entered against a Mr. Costello on 26th July, 2010, and registered at the Land Registry as a judgment mortgage on 2nd December, 2010. The court considers the relevant facts in some detail below. However it turns first to a more fundamental issue, viz. the standing of Emberton to bring the within application. Standing of Emberton Finance Limited. 3. On 26th July, 2010, Friends First Finance Limited obtained judgment against a Mr. Costello for a sum of just under €30,000. This judgment was subsequently entered as a judgment mortgage against property owned by Mr. Costello in County Wexford. On 19th December, 2013, Friends First entered into a loan sale agreement with Emberton whereby Friends First agreed to assign various loan assets to Emberton. The court has not had sight of this loan sale agreement but it has seen a copy of a subsequent ‘Deed of Transfer of Loan Assets’ dated 3rd March, 2014, whereby Friends First transferred its rights under certain loan agreements and security documentation to Emberton. The Deed of Transfer is drafted in quite generic terms. Thus it transfers a portfolio of loans and related agreements without specific mention of Mr. Costello’s debt. Emberton has not furnished to the court the suite of documentation evidencing that it is the ‘successor in title’ to Friends First in respect of Mr. Costello’s debt. Instead it has referred the court to an order made by the High Court (Peart J.) on 24th March, 2014, whereby Emberton was substituted as a party in various proceedings that had been commenced at that time. However, the present proceedings are not among the proceedings to which that order refers. Thus the court cannot but conclude that Emberton, through its failure to produce the necessary contractual documentation and its reliance on an order that does not have the effect that Emberton purports it to have, has not established that it has the necessary standing to bring the within application. 4. A consequence of the foregoing conclusion is that the court cannot grant Emberton the remedy that it seeks at this time. There the court could end its judgment. However, that would be unsatisfactory for a number of reasons:
- second, if the court makes a finding as to standing only and Emberton thereafter appeals the court’s decision and standing is established to the satisfaction of the appeal court, the application may well then be remitted to this Court for consideration of the substantive issues arising. That would lead to an unnecessary protraction of proceedings and increase in legal costs when matters can quickly be resolved by means of an order such as that just mentioned above. If either of the parties is dissatisfied with the court’s preferred means of proceeding and/or the court’s adjudication on the substantive issues arising, it is free to appeal the court’s judgment, but at least that judgment will have traversed the substantive issues arising and a comprehensive and meaningful appeal can then be commenced and concluded. - third, the within proceedings arise in the debt recovery context. The court recalls in this regard the observation of Mr. Curran in his learned text, “Debt Recovery” (Round Hall, 2009), at vi, that:
Facts. 7. As its full name suggests, Halston Street is a credit union. It trades from offices just down the road from the courtroom in which this judgment is pronounced, serving people who live and/or work in the vicinity of its shop-front premises on Capel Street. On 15th November, 2011, Halston Street obtained judgment against Mr. Costello in the amount of just over €75,000. This was registered as a judgment mortgage against Mr. Costello’s Wexford property on 20th December, 2011. Halston Street was clearly determined to recover the monies owing to it, as was its right. On 23rd February, 2012, it issued what are commonly known as ‘well-charging proceedings’ against Mr. Costello. In essence, these are a type of proceeding in which a party seeks a declaration that a debt has been well-charged against another party’s interest in property, and a direction that the affected property be sold. The precise elements of the court order that issues pursuant to a ‘well-charging’ application tend to vary from case to case. Typically, however, the court will order, amongst other matters, that the Examiner of the High Court take an account of all incumbrances affecting the relevant property and make an enquiry into their respective priorities. 8. On 30th July, 2012, the High Court (Dunne J.) issued a well-charging order to Halston Street, subject to what might be described as the ‘usual terms’. Subsequent to the making of this order, and pursuant to direction from the Examiner, the solicitors for Halston Street caused advertisements to be placed in the Irish Independent on 19th August, 2013, and the Wexford People on 20th August, 2013, effectively stating what was to come next in the debt recovery process. So, for example, the advertisement in the Irish Independent read as shown overleaf.
9. For some reason, the advertisements placed by Halston Street’s solicitors appear to have gone unnoticed by Friends First. This was misfortunate. However, one potentially enters Lady Bracknell territory with what happened next. On 22nd August, 2013, again pursuant to direction from the Examiner, a letter issued from the solicitors for Halston Street to Friends First, the main text of which reads as follows:
Dear Sir, We confirm that we act on behalf of Halston Street Credit Union Limited in respect of the above entitled proceedings. Friends First Finance Limited obtained Judgment against Raymond Costello in Dublin Circuit Court on the 26th of July 2010 in the sum of €28,805.12 together with costs of €644.00 which is registered as a Judgment Mortgage on Folio WX39665F. We confirm our attendance at the Examiner’s Office on the 14th of August 2013 last in respect of this property and now enclose herewith the following: 1. True copy advertisement placed in the Irish Independent on the 19th of August 2013. 2. True copy advertisement placed in the Wexford People on the 20th of August 2013. You will note that all claims must be made to the Examiner by the 20th of September 2013 next and the next Examiner’s meeting is due to take place on the 27th of September 2013 next at 12.00p.m. We trust that you will note the position accordingly. Yours faithfully ______________________________ M.D. O’Loughlin & Company” 11. Following the placing of the advertisements, the issuance of the above-quoted letter and the adjudication of claims by the Examiner, the solicitors for Halston Street, together with the Examiner and court conveyancing counsel attended to the prerequisites for the sale of the Wexford property such that it was ready to be auctioned in or around July 2014. On 23rd July, 2014, the solicitors for Halston Street wrote another letter to Friends First. By this time, the purported transfer of Mr. Costello’s loan to Emberton had occurred. However, Halston Street and its lawyers had no reason to know this, nor, the court finds, did they know. The main text of this letter reads as follows:
Dear Sir, We write further to our letter to your offices dated the 22nd of August 2013, a copy of which we enclose herewith. We note that no claim was entered by Friends First Finance Limited on foot of the advertisement for incumbrancers placed in two newspapers in August 2013 despite the fact that your Judgment against Raymond Costello obtained in Dublin Circuit Court on the 26th of July 2010 in the sum of €28,805.12 together with costs of €644.00 is registered as a Judgment Mortgage on Folio WX39665F. We confirm that the property contained in Folio WX39665F is now moving to auction. In the event that you have a claim against the property, an application must be made by way of Motion grounded on Affidavit to Court seeking consent to the late submission of a claim. In the event that the aforesaid application is not made, your Judgment Mortgage will be cleared from the title. We trust that you will note the position accordingly. Yours faithfully, ______________________________ M.D. O’Loughlin & Company” 13. In the hearing of the application on 1st December, Halston Street contended, inter alia, that Emberton has no standing to bring the within application and that it has in any event been guilty of inordinate and inexcusable delay in bringing it. Halston Street also made application under O.31, r.18 of the Rules of the Superior Courts for an order for inspection of certain documentation. 14. The issue of standing has already been considered above. The contention regarding inordinate and inexcusable delay and the separate application made under O.31, r.18 are considered further below. However, the court turns at this point to consider the application brought by Emberton. Application under O.55, r.36 of the Rules of the Superior Courts
17. (a) Purpose of ‘well charging’ orders and the succeeding process. As touched upon above, in the context of judgment mortgages a ‘well charging’ order involves what is in effect a declaration by the court that a person’s judgment mortgage stands ‘well charged’ over the interest of another in certain lands or premises. The issuance of a ‘well charging’ order is a condition precedent to the court’s ordering a subsequent sale of those lands or premises. As part of the post-order process, newspaper advertisements are typically placed advising incumbrancers of the need to enter and prove their claims in the prescribed form before the Examiner of the High Court. Such advertisements are not placed because of some bizarre desire on the part of the State to enrich newspaper proprietors. They are placed so as to put the world on notice that a significant event is about to transpire that could seriously prejudice the interests of, for example, certain creditors or mortgagees. To the extent that particular persons are identified whose interests may be prejudiced by that event, the Examiner will typically require that there be direct correspondence with same, such as the letter of 22nd August, 2013, that the Examiner directed was to issue from Halston Street to Friends First. The ‘significant event’ arising is that, following the Examiner’s adjudication on such claims as are entered, the Examiner will issue a certificate identifying persons entitled to the proceeds of sale from the property to which the ‘well charging’ order relates. A creditor or mortgagee or person who otherwise purports to be entitled to monies and who/that is not identified in the certificate at this stage of the process likely will not get paid at the end of the process. O.55, r.36 is entirely clear in this regard. It provides that “No claim shall be received after the time fixed by the advertisement except by special leave of the court.” So the standard situation is that no claim gets in after the prescribed time; the exceptional situation is that such a claim may be entered with the special leave of the court. The court considers hereafter the principles that might usefully inform, and the special circumstances that it considers ought to pertain before any exercise of, the court’s discretion to grant special leave. Suffice it at this point to note by way of general remark that it appears to the court that there is good reason why r.36 has been drafted as it has and why “special leave” ought not to become the routine. The reason is this: a too-liberal exercise of the discretion afforded to the court under r.36 would displace the efficacy of debt recovery proceedings and that would not be in the interests of business or, even more importantly, in the interests of consumers who would quickly find that general price increases are the inexorable consequence of effectively irrecoverable debt. The court will and must in any one application made under r.36 have regard to the requirements of justice as well as any special circumstances arising in the context of that particular application. However, it is not the intention of r.36 that a lackadaisical creditor, or a sophisticated financial entity that acquires some or all of that creditor’s debt portfolio in a transaction which is subject to the precept of caveat emptor (on which see further below), must be granted every indulgence as against the rest of the world. Nor is it generally correct to suggest that the answer to any potential unfairness that may arise as a result of the court acceding to an application for special leave is to require that all the costs of the creditor who was successful in the ‘well charging’ application be borne by the beneficiary of the special leave granted. That balm will not cover the wasted time of the disappointed creditor; systemically applied it would be but a Band-Aid which concealed the wound being inflicted on that general efficacy of the debt recovery process in which there is a very real public interest. 18. (b) Applicable principles. It seems to the court that the principles which apply when a party seeks to have a judgment that was obtained in default of defence set aside for surprise can usefully be applied by way of analogy to an application made under O.55, r.36. The court recently considered those principles in Monaghan v. United Drug Public Limited Company [2014] IEHC 183. That was a case in which United Drug applied but failed to have a judgment that was obtained in default of defence set aside in circumstances where every rule of procedure had been observed by its opponent while United Drug repeatedly dallied in the proceedings and ultimately lost papers that were served on it. In the course of its judgment, the court identified the principles applicable to that application in the following terms:
“[U]nless and until the court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure.” …5. In Fox v. Taher (Unreported, High Court, January 24th, 1996), Costello P. was confronted with a case in which there had been mistake on the part of the defendants, rather than surprise. Costello P. noted that:- “I do not think it matters very much whether I come to the view that the judgment was obtained by mistake or by surprise because the court has to do justice in this situation.” The need to do justice to the parties on the particular facts of each case was also emphasised by Murray J in the decision of the Supreme Court in McGuinn v. The Commissioner of An Garda Siochana [2011] IESC 33 at 10, albeit coupled with the statement that the courts in the interests of justice generally lean in favour of a determination of litigation on the merits of the issues… 7. In Allied Irish Banks plc v. Lyons [2004] IEHC 129…a case concerning a mistake by a solicitor rather than surprise, Peart J. concluded that the interests of justice required that a summary judgment against the solicitor's client ought to be set aside, rather than leaving the client to a possible remedy against her solicitor in negligence.”
- second, as regards the decision in Fox, in that case Costello P. was satisfied that at all times the defendants had wished to contest the jurisdiction of the Irish courts in the matter arising; he was therefore of the view that the defendants should be allowed to make their case. In this case, by contrast, it is not apparent that Friends First ever took any steps following the issuance of the well-charging order on 30th July, 2012, to protect its own interests. The only sign of movement that one can detect on the part of Friends First in all that occurred is that it must have communicated its receipt of the letter of 23rd July, 2014, to Emberton. The court notes further that although the only inaction that can be detected in all that transpired is the apparent inaction of Friends First, it does not follow that a supposedly ‘blameless’ Emberton should in justice receive the special leave that it now seeks. The court does not know if Emberton conducted a ‘due diligence’ exercise before it acquired the portfolio of debt from Friends First. Whether it did or not, its dealings with Friends First as regards the acquisition of the latter’s loan assets were dealings between two sophisticated commercial traders in which only commercial interests arose, and hence were clearly dealings to which the precept of caveat emptor (‘let the buyer beware’) applied. The principle of caveat emptor has the effect that one party is not bound to disclose to the other all the material facts or circumstances which might affect a bargain and which are known only to the non-disclosing party. Even if the non-disclosing party knows that the other is contracting under a misapprehension about the applicable facts, the general rule in transactions between sophisticated commercial entities is that the non-disclosing party has no duty to disillusion the other. Of course the law may require disclosure, even in commercial transactions between commercial traders, as for example in instances where a duty of utmost good faith arises or there is a fiduciary or significantly unequal relationship between them. Active concealment too may constitute misrepresentation. Save in these instances, however, each party to dealings between sophisticated commercial traders must protect itself from the consequences of its own mistakes. There is, of course, a distinction to be drawn between a mistake about the terms of a contract and a mistake about the facts or circumstances surrounding the formation of a contract. The consideration of that distinction is, however, for another judgment. In the present context what is of particular interest is the policy that informs the principle of caveat emptor. Clearly this policy is that in entering into a contract with each other, sophisticated commercial traders must generally use their own judgment and/or take care to ensure that the terms of the applicable contract secure to them what they want. If, as appears to be the case, Emberton now finds that an element of the portfolio of debt that it acquired from Friends First is tainted to some extent by deficiency, it may be that the liability for such deficiency can be litigated between Emberton and Friends First. However, it does not appear to the court that justice requires that a failure by Emberton, in the course of a transaction governed by the precept of caveat emptor, to discover the deficiency arising in respect of Mr. Costello’s debt, must now be visited on Halston Street. That would allow Emberton to benefit despite its own failings, as against a party that has done everything right, and that smacks of injustice. Save as is otherwise provided in the loan sale agreement, it appears to the court that Emberton must take the loan portfolio it acquired subject to whatever deficiencies arise in same. Here the deficiency is that the non-presentation by Friends First of its secured debt to the Examiner in September 2013 has the result that Emberton cannot now lay claim to same. - third, having regard to the decision in Lyons, the court has considered whether the interests of justice demand that Emberton should not suffer for the actions of Friends First. However, for the reasons already stated above, it seems to the court that if there is to be a victim of any inaction by Friends First, or a victim of any deficiency arising in the portfolio of loans that Emberton acquired subject to the precept of caveat emptor, it ought, as between Emberton and Halston Street, to be the former, Halston Street being the innocent party in all that has transpired. Emberton must look to Friends First for relief, if relief is there to be had. Inordinate and inexcusable delay. Application for inspection of certain documentation. Conclusion. 1.O.55, r.26 provides that “Advertisements for creditors and other claimants shall fix a time within which each claimant, not being a creditor, is to come in and prove his claim, and within which each creditor is to send to the executor or administrator of the deceased, or to such other party as may be directed or to his solicitor, to be named and described in the advertisement, the name and address of such creditor and the full particulars of his claim, and the statement of his account and the nature of the security (if any) held by him…. At the time of directing such advertisement a time shall be fixed for adjudicating on his claims…”.
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