The High Court dismissed Bank of Ireland Mortgage Bank’s claim seeking €250,500 and interest from solicitor Daniel Coleman over a mortgage undertaking, finding that the bank had framed its claim incorrectly and had not shown that completing the undertaking was impossible.
In a judgment delivered on 6 November 2006, Miss Justice Laffoy said Coleman remained in breach because the borrower did not have registered or marketable title to the property and the bank did not have a registered, enforceable first legal mortgage. The title documents had not been delivered to the bank.
The dispute arose from a €250,500 loan offered in August 2003 to John Lane for a property in County Cork, with a stated purchase price of €295,000. Coleman acted for Lane and gave the bank a solicitor’s undertaking in September 2003. It required him to ensure Lane acquired good title, obtain an executed mortgage before negotiating the loan cheque, register the charge and provide the bank with the relevant documents.
Lane defaulted on repayments, and the bank called in the loan in December 2004. By April 2006, it said €258,620.83 was due, including €27,794.65 in arrears. The bank sought compensation on the basis that its loss was the full loan amount. It had not brought proceedings to recover the debt from Lane or to realise security available under the undertaking.
The judgment records that the bank had complained to the Garda Bureau of Fraud Investigation in March 2004 about apparent irregularities in this and other mortgage transactions introduced by the same broker. The investigation was ongoing. Gardaí had taken Coleman’s file in June 2004, and it remained in their possession at the time of the judgment.
The bank argued that Coleman released the loan proceeds without first securing an executed mortgage. Laffoy said it was reasonable to infer he had not complied with that step. But she held that the undertaking had to be read as a whole: its ultimate purpose was to provide the bank with good security for the loan. If Coleman could still complete that obligation, the bank would receive what it was entitled to under the undertaking.
The evidence included a copy of a mortgage deed exhibited by Coleman, though the bank said it was not the form available when the deed should have been obtained. The vendors remained registered owners, and a building society charge was shown on the folio. Coleman said that charge had been discharged and that evidence was available. The judge was not satisfied that performance was impossible, while noting that Coleman could not act on the file while Gardaí retained it.
Laffoy also said repayment of the full loan would not necessarily reflect the bank’s loss. A valuation report put the property’s value at €140,000 in June 2006. If completion proved impossible, she said, the relevant loss would be the value of the security the bank should have obtained but would not obtain. The court made no finding on the bank’s separate agency argument.
The order dismissed the bank’s claim. The judgment did not order Coleman to complete the undertaking or award compensation.