The Supreme Court has dismissed a man’s bid to overturn an €11.4 million judgment against him as it found he failed to show persuasive and comprehensive evidence of alleged illegality on the part of his creditor.
Writing for the five-judge court on Tuesday, Mr Justice Gerard Hogan said John Kelly failed to raise arguments about alleged credit servicing by Cave Projects Limited in a timely or effective fashion before the High Court, which entered the judgment against him.
Cave Projects is controlled by Supermacs Ireland Limited, according to its most recent accounts, which is headed by Supermacs boss Pat McDonagh and his wife Una.
The issue cannot be raised on appeal without “exceptional circumstances”, which do not arise here, the judge held.
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Mr Kelly, an auctioneer and estate agent who practised in Athenry, Co Galway, had sought to submit to the Court of Appeal a Central Bank press release that warned Cave Projects was not authorised by it to provide financial services.
The September 2023 statement, which was published 10 months after the High Court’s judgment, said the Central Bank believes Cave Projects is engaged in the provision of credit servicing in the State without holding Central Bank authorisation as a credit servicing firm.
It is a criminal offence for an unauthorised firm to provide financial services in Ireland that would require an authorisation, the Central Bank release continues.
The Court of Appeal concluded in October 2023 that the issue of authorisation of Cave Projects, with a registered office in Nenagh, Co Tipperary, had not been argued in the High Court and no evidence was produced. The court said Cave Projects objected to the raising of the issue, submitting it is “purely a regulatory matter which has no relevance to the claim in the proceedings”.
The court case arises out of a €12 million loan advanced by Bank of Ireland in 2007 to five members of a partnership, including Mr Kelly, for development lands in Limerick, Clare and Galway. The facility was secured by charges over various properties held by all five partners.
In 2011 the bank made a demand for payments and then issued proceedings against the five.
Later that year, the National Asset Management Agency (Nama) issued an acquisition notice under section 90 of the Nama Act to acquire the debt and security. In 2013 a loan asset sale deed was executed by a Nama entity with Cave Projects.
Meanwhile, the other four borrowers settled the court proceedings against them. Cave Projects was substituted in as plaintiff instead of the bank and it secured an €11.4 million judgment in the High Court against Mr Kelly, who was by then the only remaining defendant.
The Supreme Court decided to hear a further appeal from Mr Kelly on the sole question of how a court should address an assertion, based on credible material, that recovery of a loan is unauthorised and may constitute an offence.
Mr Kelly alleged the Court of Appeal erred by refusing to admit the Central Bank statement. He claimed the statement rendered enforcement of the debt contract substantively illegal as it said Cave Projects was not authorised by the regulator.
Cave Projects does not accept it was carrying on the business of credit servicing but argued that even if it was, this would not vitiate the €11.4 million judgment or its entitlement to sue over it.
On Tuesday, Mr Justice Gerard Hogan said it is important to state that the Central Bank’s notice “did not change the legal position, but simply recorded the opinion of the regulator”.
The judge said it is unclear whether the definition of credit servicing, as set out in the Central Bank Act of 1997, extends to the prosecution of actions for recovering debt, “still less that it applies to proceedings of this nature” which were already in being by the time key amendments occurred in 2015, 2018 and 2022.
He said it is also “far from clear” that even if Cave Projects was non-compliant and in breach of the requirements of the 1997 Act that this in itself could justify terminating this case.
The Supreme Court, which as an appellate court is “bereft of possibly key evidence”, cannot be satisfied Mr Kelly discharged the burden of demonstrating persuasive and comprehensive illegality, he said.
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