Judge rejects claim that loans were private deal

A RETIRED obstetrician and an architect have had summary judgment orders for some €1.23 million entered against them after a High Court judge rejected their claims they were acting as consumers when taking out loans to develop a property into six apartments.

ACC Bank had sought summary judgment for some €1.33 million against cousins Patrick McCarthy, a retired obstetrician, with an address at Tallahassee, Florida, and Anthony McCarthy, an architect, of Kiln House, Hilltown, Carrigaline, Co Cork.

The judgment orders were sought arising from loans advanced in 2007 related to the purchase of a property, Bank House, Passage West, Co Cork, and its development into six apartments to be sold on.

The defendants argued they had taken out the loans as consumers and the loan was unenforceable against them because the bank had failed to adhere to the requirements of the Consumer Credit Act 1995. On that basis, they argued the bank was not entitled to summary judgment and they had a defence which required the matter go to a full plenary hearing.

Rejecting that argument at the Commercial Court yesterday, Mr Justice Peter Kelly said the defendants are professional persons, a doctor and an architect, and, for their argument under the consumer legislation to succeed, he would have to conclude the loans were taken out to service a person’s own needs in terms of private consumption. These loans were to enable the defendants “speculate” on a land development and sell it on at a profit and were not comparable, as their counsel submitted, with selling a private house or car, the judge said.

Unfortunately for these defendants and many others, the market had turned in “a radically dreadful way”. This was an arrangement where two businessmen got involved in property development and they were not entitled to rely on a defence they had acted as consumers, the judge said.

He noted the documentary evidence was against this claim as various loan documents signed by the defendants stated they were not acting as consumers. However, the judge did find the defendants had raised an arguable defence in relation to a maximum €100,000 of the sum claimed.

The defendants had argued ACC had levied a 6 per cent interest surcharge when they had a verbal agreement from the bank not to do so. While the defendants had a possibility of a defence on that point, they faced “an uphill struggle” and it was only a defence for a sum of no more than €100,000, the judge said.