The Court of Appeal has dismissed an appeal by Laurence and James O’Toole, upholding a High Court determination that AIB Mortgage Bank could rely on mortgages linked to an earlier loan to secure liabilities under a later loan.
The appeal concerned six properties in Carlow purchased with the first loan. The brothers later borrowed additional money with their brother Donal O’Toole to acquire properties at Tanner Hall. The judgment records that the brothers had not defaulted on the first loan, while the borrowers were in default on the second. AIB demanded repayment of the second loan in December 2014.
In 2015, James O’Toole sold No. 15, The Glen. AIB’s redemption correspondence stated the amount required to release the charge over that property and did not refer to cross-security. A bank manager later said the letters were erroneous and should have included the liabilities under both loans. After the sale proceeds were paid, AIB obtained ex parte orders restraining the disposal of the remaining secured properties.
The High Court determined a preliminary issue: whether AIB could rely on the first-loan agreements and security documents in respect of amounts due under the second loan. It ruled that the documents gave the bank express contractual rights to demand repayment of the first loan following default on another loan. The brothers appealed, arguing that AIB could not enforce cross-security without satisfying the rules governing the equitable doctrine of consolidation.
The Court of Appeal held that cross-security and equitable consolidation are distinct. It found that the mortgages contained clear “all sums due” provisions covering present and future liabilities, including amounts owed jointly with others. The court said the bank had not invoked consolidation and that a borrower could not compel a mortgagee to do so.
The court concluded that the properties covered by the first loan remained security for the outstanding amounts due under the second loan. It upheld the High Court’s determination and dismissed the appeal on all grounds. The decision addressed the preliminary issue; the judgment does not determine the final amount due or make a final order for sale of the properties.