Regulating Mortgages

Question 1

McConnon and Healy cases

Answer 1

Courts hold that there is no such tort as ‘reckless lending’—pure economic loss is not recoverable in negligence law.

Question 2

ICS Building Society

Answer 2

First case to deal with the ‘tort of reckless lending’.

Question 3

Unfair Contract Terms Directive

Answer 3

EU Directive which, as the ECJ clarified in Aziz, allows courts to assess, “of their own motion”, the terms of a contract and to compensate parties for imbalances if the necessary legal and factual elements are present.

Question 4

Cases on the Unfair Contract Terms Directive

Answer 4

COUNIHAN AND COSGRAVE–
AIB v Counihan; AIB v Cosgrave.

Some hope in the former, but such arguments are rarely successful.

In the latter, the court clarified that the core terms of the mortgage bargain are not open to review under the Directive.

Question 5

Central Bank Act, 1989 s.117

Answer 5

The Bank may, after consultation with the Minister, draw up codes of practice.

Breaching a code of practice can lead to a revocation of a license or individual consequences for the managers of the banks. Serious sanctions and a powerful regulation.

In 2012, the Minister announced a code of conduct on mortgage arrears under s.117. Established a Mortgage Arrears Review Process.

Question 6

Mortgage Arrears Review Process.

Answer 6

Code of practice under s.117 of the Central Bank Act 1989.

Distinguishes between a co-operating and non-cooperating borrower.

Question 7

Co-operating borrowers

Answer 7

The borrower must enter into a process of discussion on what the problem is and what income is available, to restructure the loan in some way. Extending the term, parking some of the mortgage for a while, etc.

Are then afforded six months after all remedies are exhausted before legal proceedings can be initiated.

Question 8

Zurich Bank v McConnon

Answer 8

McConnon argued that there was an implied term in his mortgage agreement with Zurich that they would abide by the MARP; sued them for breach of contract.
Held: MARP was created after the mortgage agreement, clearly a fictitious implied term.

Question 9

Fitzell case

Answer 9

Laffoy J held that a financial institution seeking an equitable remedy of possession in circumstances where it has ignored the code of conduct in mortgage arrears is not a claimant with clean hands and so the court is under no obligation to assist them.

Question 10

Irish Life v Duff

Answer 10

Hogan J expresses in dicta strong doubts about Fitzell: the nature of the code of conduct cannot be law, and only law can prevent the bank from realising its constitutional right to reclaim the property.

Question 11

Irish Life v Dunne

Answer 11

IESC holds:
- Hogan J was quite right to say that the MARP is not law.

• The requirement to cooperate is not binding as agreements to agree are legally ineffective (Walford v Miles).
• The moratorium is clear enough to allow a court to refuse the bank relief if they have not given a cooperating borrower 6 months.

Schrodinger’s Cat: Sometimes it’s law (when one breaches the moratorium) and sometimes it’s not (if all they’ve done is refused to have a pointless conversation).