The High Court has ruled that AIB Mortgage Bank was entitled under the terms of mortgage documents to demand repayment of loans secured on properties bought by Laurence and James O’Toole, after the brothers defaulted on a separate loan. The decision resolved a preliminary issue about the bank’s contractual rights; it did not determine the final amount due or direct the sale of the properties.
The first group of loans, advanced in 2003 to buy properties in Carlow, was still being repaid. A later €760,000 loan, made in 2008 to the brothers and another family member for properties at Tanner Hall, fell into default. The bank sought judgment on that second loan and, in December 2015, demanded repayment of the first loans as well, relying on an event-of-default clause in the mortgage documents.
The dispute arose after the bank sent redemption letters stating the sums needed to release charges over individual properties. The letters did not mention other liabilities. James O’Toole later sold one property, No. 15, The Glen, and the bank received the amount quoted for that property’s loan. The brothers agreed to place €74,000 in their solicitors’ account pending the court’s decision. The court had also continued an interim order restraining dealings with the remaining secured properties.
The brothers argued that the bank could not combine loans where the borrowers who gave security were not identical. That argument focused on the equitable doctrine of consolidation. The bank said it was relying instead on the wording of the loan and mortgage documents, which it submitted secured present and future liabilities, including liabilities owed jointly with others.
Justice Binchy found that the documents expressly covered present and future liabilities. He held that, despite the first loans being performing, the bank could demand their repayment following default on another liability covered by the documents. He said the bank could not rely on the doctrine of consolidation, but was entitled to contractual declaratory relief. The precise terms of that relief were left for further submissions.
The judgment addressed the preliminary issue only. It did not decide the ultimate disposition of the €74,000 or the proceeds of any other property sale. The judge also disclosed a personal shareholding in AIB Plc, estimated at about €500. After considering the parties’ positions and the applicable objective test, he concluded that the interest was trivial and that it would have been absurd for him not to hear the case.