Below is a case in which issues were raised by the Defendants, who sought to avoid judgment being granted against them, on grounds that the Bank to which they owed money had merged with another Bank and therefore the new Bank could not enforce the security.

A number of Banks have recently been merged and various assets have been transferred.  We have seen situations where the Bank who is being dissolved/merged executes a Deed of Transfer and Assignment in favour of the entity who is now taking control of the loan and who will ultimately be enforcing the security, if the need should arise.  The Deed is then lodged in the Land Registry and/or Registry of Deeds and the new Bank is then noted as the registered owner of the charge over the security.  The lodging of such Deeds could avoid future litigation along the lines of this case and are worth considering.

Kavanagh and Bank of Scotland Plc v McLaughlin [2013] IEHC 453

Judgement delivered by Birmingham J in the High Court on the 30th of September 2013


The First Named Plaintiff sought declaratory relief in relation to the validity of his appointment as Receiver, while the Second Named Plaintiff sought judgment in the sum of €4,022,734.92 on foot of loans advanced to the Defendants.

Whilst there was no dispute by the Defendants that the sum in question was borrowed and had not been repaid the Defendants did raise a series of technical defences.

Defendants’ Argument

1. The Defendants argued that at the time of the appointment of the Receiver the loans were not due and this in circumstances where there had been a merger of Bank of Scotland Ireland Limited (‘BOSI’) and Bank of Scotland Plc, and therefore that even if the loans were due and there was a power to appoint a Receiver, the Receiver has not been validly appointed because the officer of the Bank who appointed him had not been validly delegated with the power to do this.

2.The defendants contend that the security for the loans was secured to BOSI and the mortgages were not transferred by virtue of the merger and did not form part of the assets transferred in the merger.

3. The Defendants further argued that Bank of Scotland Plc is not the registered owner of the charge (the charge having been registered in the name of BOSI) and therefore does not have entitlement to execute powers granted under the charge.

4. The Defendants argued that the Bank did not serve the appropriate 21 day warning letter and that the power to appoint a Receiver arises after a power of sale has arisen and that a power of sale does not arise until there has been a default and there is no default until there has been demand.

The Plaintiffs then referred the Court to a letter sent to the Defendants from a firm of Solicitors who identified their clients as Bank of Scotland Plc and referred to the Facility Letters advanced to the Defendants and also referred to the merger and continued to explain that the loan facility advanced pursuant to the Facility Letters was in default.

The letter advised that the Solicitors had received instructions from Bank of Scotland Plc to issue proceedings for the full amount due but that no steps would be taken in this regard within the period of 21 days.

The Court dismissed the Defendants argument that because the letter was written by the Solicitors rather than Bank of Scotland Plc meant that it lacked effectiveness and was without substance.   The Court held that the Latin maxim “qui facit peralium facit per se” (he who acts through another acts himself) applied in these circumstances.

The next issue which the court considered was the merger.  On 31 December 2010 all the assets and liabilities of BOSI were transferred to Bank of Scotland Plc. The Defendants argument was that the mortgages and charges which Bank of Scotland Plc sought to rely on in these proceedings were not validly transferred to Bank of Scotland Plc by BOSI when these bodies merged.

The Defendant’s argument was based on their assertion that a mortgage does not constitute an asset within the meaning of the EU Directive upon which the merger was based on.  The Court noted that the Defendant’s argument was not that the security was left behind to BOSI because this company had been dissolved but that it had disappeared.

The Court held that there was no rational basis for the Defendants to conclude that while the loans transferred, the security underlying the loans did not.  The view of Justice Birmingham was that there can be no doubt but that the loan and the security which underlie it cannot be divorced.

The Court held that the Defendants argument that, as the charges were not registered in the name of Bank of Scotland Plc, meant that they did not have any entitlement to execute powers under those charges should fail.  The court was satisfied that BOSI has ceased to exist and in the space where BOSI once stood now stands Bank of Scotland Plc.

A further argument made on behalf of the Defendants was that the purported appointment of the Receiver was not valid because the official of Bank of Scotland Plc, who appointed the Receiver, was not entitled to carry out this task, not having been properly authorised to perform this role on behalf of the Bank.    The Defendants also raised the argument that the Receiver was, according to the Bank, appointed on the 06 June 2012 whereas the instruments were executed by the official of the Bank on 28 May 2012.

In considering this argument the Court considered the provisions of the Mortgage Deed in particular the provisions regarding the power of sale and appointment and powers of Receivers. The Mortgage Deed provided that after an event of default or where the monies have otherwise become due and payable the Bank may exercise its statutory power of sale.  The Mortgage Deed further provided that at any time after the power of sale has become exercisable the Bank may appoint a Receiver.

Dealing with the first point in relation to the date the Court held that there was nothing irregular as the documentation was signed by the Bank Official on the 28th May and signed by the Receiver on 06th June 2012. The Court noted that a Receiver cannot be appointed without his knowledge and consent and accordingly the appointment took effect on the 06th June which was the date the Receiver signed the Deed and consented to his appointment.

The Court then turned to the argument that the Bank Official was not a duly authorised officer or employee of the Bank under whose hand, a Receiver might be appointed.

The Bank Official’s evidence was that she was a senior credit risk manager in Bank of Scotland Plc, a position she took up in October 2011. Her evidence was that when she took on that role that she received authority or nomination to sign various documents on behalf of the Bank.

After reviewing the Deed of Appointment of Receiver the Court held that the document created by the Bank Official on the 28th May 2012 and accepted by the Receiver on the 06th June operates as a Deed and there could be no doubt that it was a document sealed under the hand of a person who was a duly authorised employee of the Bank.


Justice Birmingham noted that the proceedings had been defended on technical grounds with great industry and ingenuity, but that in his view none of the points that had been raised either in oral or written argument provided a defence.

The Court concluded the First Named Defendant was entitled to a declaration that he stands validly appointed.

With regards to the Second Named Defendant the Court noted that money was lent and has not been repaid and therefore the Second Named Plaintiff was entitled to Judgement against the Defendants in the amount of € 4,022,734.92.

Breda Sheahan is a trainee solicitor in the Commercial Department of FitzGerald Solicitors.  FitzGerald Solicitors are located at 6 Lapps Quay, Cork.

The above does not constitute legal advice and we would recommend that you contact your Solicitor to receive legal advice tailored to your specific needs.

Leave a reply