Thursday 18 January 2018

Couple who borrowed €1.2m challenge appointment of receiver

Tim Healy

A COUPLE who borrowed around €1.2m to refinance property investments claim their lender had not validly appointed a receiver over their assets when they went into arrears following the economic crisis, the High Court heard.

Former window cleaning business owner,  Anthony Freeman, and his wife Miriam, who live at Willowwood Lawn, Blanchardstown, Dublin, borrowed the money in 2006 from Bank of Scotland Ireland (BoSI) to fund the re-financing and refurbishment of six Dublin houses but following the financial crisis in 2008,  they went into arrears at the bank appointed a receiver over the properties in 2011.

They claim the receiver was not validly appointed because by this time BoSI had been dissolved and its successor,  Bank of Scotland plc (BoS), was  not legally entitled to appoint a receiver.

They also claimed BoS had lost its entitlement to appoint the receiver because it had transferred the mortgages on a number of the properties to a third party as a means of raising capital, a process known as securitisation.

They also claimed BoS had breached a voluntary Central Bank code in relation to the securitisation.

BoS  denies claims.

The court heard that validity of the receiver's appointment was the main outstanding issue between the Freemans and the bank following another High Court ruling last year that a number of other allegations they made could not proceed.

Joseph Hogan SC, for the Freemans, said while the case was now more about a technical argument in relation to the legality of the receiver's appointment, his clients were also seeking damages because of what he called the "brutality" of the bank's treatment of them.

Alternatively, they were seeking restitution of the properties.

Mr Hogan said around half of the €1.1m-€1.2m borrowed was used to re-finance existing loans the Freemans had on the properties with

First Active with the remainder going to refurbish them.   They also

spent some of the money on themselves "for some nice holidays and buying new cars for each of them", Mr Hogan said.

All was going well until the financial collapse when they, like many others, got into trouble with the loans going into arrears in 2009, he said.  The Freemans lost their business and are now on social welfare, he said.

They had at all times accepted they were in trouble but argued there was surplus income from the rents on their properties and an arrangement to deal with arrears could have been made but "when they tried to put this to the bank,  it (BoS) had no ears, it would not listen", counsel said.

Counsel said part of their case was tht there was no power to  appoint a receiver because, under Registration of Title Act 1964, registration of title from BoSI to BoS was never completed.

Paul Gallagher SC, for BoS, said following last year's High Court ruling, the Freemans were not entitled to raise a new issue that the receiver's appointment was invalid under registration of title legislation.

It was however irrelevant because under the contract between the parties, there was an entitlement to appoint a receiver which was entirely separate from any statutory right to do so, he said.

On the securitisation issue, there was nothing unusual about this lawful procedure whereby banks can raise capital by selling mortgages

to a third party, he said.   It did not in any way affect the bank's

title to the properties or control of the mortgages and the right to appoint a receiver in arrears cases.

Mr Gallagher also said there was no breach of the Central Bank's code in relation to securitisation and it was, in any event, a voluntary, not a statutory, code.

The hearing continues before Mr Justice Brian McGovern.

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