The High Court ruled that Bank of Scotland could not use money in a joint deposit account to reduce a loan owed solely by the late John O’Meara. It held that Claire O’Meara, as the surviving account holder, was entitled to the money remaining in that account when her husband died.
The judgment, delivered by Miss Justice Laffoy on 28 October 2011, concerned two joint deposit accounts and a €1.6 million loan advanced to Mr O’Meara alone. The bank transferred €1.6 million from the deposit accounts to the loan account in January 2010, after Mr O’Meara’s death.
The first deposit account was opened in November 2008 with the proceeds of a cheque made payable to both spouses. The judge found they were joint beneficial owners of that money. After two withdrawals totalling €600,000 by Mr O’Meara, €934,126.60 remained in the account.
The bank’s loan offer required a set-off right over a deposit account in both spouses’ names. But the set-off document was drafted for a sole account holder, and Mrs O’Meara’s signature appeared as a witness. The court found she had not agreed to give the bank security over the joint account. The account-opening mandate allowing either holder to withdraw funds did not authorise the bank to impose a set-off on the strength of Mr O’Meara’s instructions alone.
The bank had no common-law or equitable set-off right because it owed the deposit funds to both spouses, while Mr O’Meara alone owed the loan. The court also rejected the bank’s request to rectify the set-off document, finding no evidence of a continuing common intention that Mrs O’Meara would be bound by it. Her actions did not amount to a clear promise that the bank could set off the funds.
The second account was different. It was opened by the bank in both names in December 2008 and credited with €665,873.40 drawn from Mr O’Meara’s loan. The judge found Mrs O’Meara had no prior legal or beneficial entitlement to that sum. The money had been placed there to meet the loan’s set-off requirement, and that purpose took priority. The court did not decide who beneficially owned those funds as between Mrs O’Meara and her husband’s estate, whose personal representative was not before it.
The court declared that the money standing in the first account on 28 November 2009 belonged to Mrs O’Meara. The bank was ordered to pay the appropriate sum, to be agreed, with interest at its six-month fixed-deposit rate from that date to judgment and thereafter at the court rate. The court declared that she had no claim to the second account’s funds and dismissed the bank’s counterclaim, including its bid for rectification.