The Court of Appeal has set aside a €1.37 million default judgment obtained by the Governor and Company of Bank of Ireland against Patrick O’Brien, ruling that the bank’s conduct led him reasonably to believe the proceedings would not continue while he negotiated with it.
In a judgment delivered on 19 February 2020, Ms Justice Máire Whelan said the circumstances in which the judgment was obtained were closer to the irregular end of the spectrum. The court allowed Mr O’Brien’s appeal and set aside the judgment, which had been entered in the High Court Central Office in June 2013 after he failed to enter an appearance.
The case arose from six loans advanced by ICS Building Society, whose assets and liabilities were transferred to Bank of Ireland in 2014. After the loans fell into arrears, the bank sought €1,373,676.11. Mr O’Brien acknowledged receipt of the summons by email and said he planned to consult a solicitor. He did not enter an appearance, and judgment was entered on 10 June 2013.
The Court of Appeal considered the bank’s dealings with him before and after the summons. An internal email from a bank official to the bank’s solicitor, sent in March 2013, recorded that the bank would proceed with litigation unless it received proposals acceptable to it. The court found the evidence showed that Mr O’Brien was led to understand that if he provided requested documents and engaged in negotiations, the proceedings would be stayed. There was no evidence that the bank told him he had failed to meet its requirements.
Negotiations continued after judgment was entered. On 5 July 2013, the parties agreed revised repayment terms involving two loans and the sale of a Dublin property securing three mortgages. The court found that the agreement affected five of the six mortgages. Mr O’Brien complied with its terms through its five-year duration. The bank did not disclose the judgment to him until July 2017, more than four years after it was entered.
The bank opposed the appeal, arguing that the repayment agreement came after judgment and did not provide a defence to the original claim. The Court of Appeal held that the trial judge had erred by concluding that the judgment was regularly obtained, because the bank’s representations and subsequent conduct had induced Mr O’Brien’s reasonable understanding that the litigation would not proceed if he cooperated. It said the irregularity arose from estoppel based on that conduct, rather than non-compliance with court rules.
The court said it was therefore unnecessary to consider the separate rule concerning special circumstances for setting aside a default judgment. It allowed the appeal and set aside the High Court order. The judgment addresses the default judgment and appeal; it does not determine the underlying loan dispute on its merits.