The High Court has dismissed Timothy Lynch’s statutory appeal against a Financial Services Ombudsman decision concerning KBC Bank Ireland’s use of surplus proceeds from the sale of two London properties.
Mr Justice Baker delivered judgment on 26 March 2015. The appeal challenged the Ombudsman’s October 2013 finding that Mr Lynch’s complaint was unsubstantiated. He argued that KBC had no right to apply funds held after the London sales to a loan secured on property in Co Sligo, which he held jointly with his then wife.
The London properties had been bought in 2007 with KBC loans secured against each property. After the loans fell into arrears, KBC sold the properties in November 2008 and June 2009. More than £205,000 remained after the loans and sale costs were paid. KBC held the money in an account from July 2009. It told Mr Lynch in July 2009 that it intended to use the funds against the Sligo loan, but the set-off was not made until August 2012, according to the judgment. The court later referred to the actual set-off as occurring on 19 April 2012.
The Ombudsman had concluded that the London charge allowed KBC to apply a credit balance towards the borrower’s “secured liabilities”, including liabilities on the Sligo loan. Mr Lynch argued that the charge had ended when the London properties were sold, that the Sligo loan was a separate joint debt, and that the sale proceeds were held on trust for him under English law. He also disputed the effect of the charges’ set-off clauses and argued that KBC had waived its right to demand payment.
Justice Baker found that the London properties were sold free of the charge, but that this did not prevent the charge continuing as security for other liabilities. He agreed that the surplus was held on trust under section 105 of the English Law of Property Act 1925. However, he found that the charge secured the Sligo loan as well, so there was no surplus trust balance that prevented the funds from being applied to that debt.
The judge found no error in the Ombudsman’s interpretation of the set-off provisions. He did not remit the waiver issue for reconsideration, noting the no-waiver provisions in both relevant loan documents and that the issue had been ventilated in correspondence. On proportionality, he considered the arrears at the time the set-off was made; they were then about €50,000, rather than the much smaller arrears when KBC first proposed using the funds.
The court held that the Ombudsman made no error of law and that the adjudicative process as a whole was satisfactory. The appeal was dismissed.