The High Court has struck out proceedings brought by three borrowers against Bank of Scotland plc and receiver Michael Cotter, finding the claims frivolous and vexatious under Order 19, rule 28.
Mr Justice Gerard Hogan delivered the judgment on 2 July 2014. The plaintiffs had borrowed €2.2 million in August 2006 to buy two commercial properties in Enniscorthy, Co Wexford. They defaulted, the loans were called in during April 2012, and Mr Cotter was appointed receiver on 1 May 2012.
The plaintiffs began proceedings in October 2012, seeking damages over alleged theft of goods and property and making claims including fraud, misrepresentation and breach of contract. Their challenge to the receiver’s appointment depended on their claims against the bank, the judgment said.
A central argument advanced by the plaintiffs was that the bank had not lent them money, but had illegally created currency by monetising their signed promissory notes. They argued this made the loan contracts invalid. They also questioned whether the bank could produce original signed loan documents and mortgage deeds. The bank offered to bring the original mortgages to court and did so.
Justice Hogan said the plaintiffs had misunderstood a Bank of England article about money creation. Banks may expand the money supply through lending, he said, but that does not make a loan contract invalid. The law did not require loan funds to be handed over as notes or coins. The plaintiffs had drawn down and benefited from the funds, leaving them obliged to repay, the judge said. He found that no evidence supported their fraud claim.
The judgment also addressed claims that the bank was insolvent when it made the loans and that it had securitised the mortgages. The judge said alleged bank insolvency would not affect the loans’ validity. Citing evidence from the bank’s head of credit sanctioning, he said the commercial mortgages had not been securitised.
The court concluded that the proceedings should be struck out as frivolous and vexatious under Order 19, rule 28. The judgment does not record an award of damages or a separate order concerning costs.