Lenders and loan purchasers may find themselves faced with an allegation by a defendant in repossession and/or enforcement proceedings that they are not entitled to the reliefs sought, in circumstances where the defendant’s signature on the underlying loan and/or related security documentation was the subject of a fraud on the part of the lender and/or a co-defendant to the proceedings. This purported defence can arise in particular in a scenario involving an estranged husband and wife, where most commonly the wife would allege that she did not sign the relevant loan documentation, that her signature was forged and/or the related security documentation which is sought to be enforced was executed without her knowledge or consent. While an allegation of fraud is evidently very serious, it rarely succeeds as a defence. The recent High Court decision of Bank of Ireland Mortgage Bank -v- Heather and Peter Cody  provides food for thought for lenders and loan purchasers as to the strategies they should consider when met with such allegations.
The case involved an appeal by the First Named Defendant, Ms. Cody to the High Court of an Order for Possession made in favour of Bank of Ireland Mortgage Bank (“BOIMB”) in the Circuit Court in respect of her family home which she jointly owned with the Second Named Defendant, Mr. Cody, but from whom she is now estranged. BOIMB asserted that there were monies due to it pursuant to two loan agreements entered into by the Defendants in October 2005 and that the repayment of same was secured against the family home by a Deed of Mortgage and Charge executed by the Defendants in January 2007, which was subsequently registered on the property in June 2007. However, Ms. Cody alleged that the mortgage was undertaken “as part of a systemic fraudulent practice which took place between the years 1990 until 2018”, that during those years there was collusion between Mr. Cody and BOIMB whereby loans and mortgages were created in Ms. Cody’s name without her knowledge and consent, that BOIMB personnel (and staff within the firm of solicitors in which Mr. Cody was then a partner, James Cody & Son) witnessed her signature when she was not present and that there was a “systemic practice” to send all bank statements and documents to the offices of James Cody & Son in order to hide evidence of these loans and mortgages from Ms. Cody. Ms. Cody had instituted separate plenary proceedings before the High Court against Mr. Cody, James Cody & Son and BOIMB. The Court noted that it was curious that the two loan agreements were addressed to “Mr. Peter Cody and Mr. Heather McMillan (sic)” at an address which appeared to be the business address of James Cody & Son, as opposed to what was then their family home. Further, the loan agreements appeared to bear a signature commencing with the name “Heather”, however the surname was illegible.
At the appeal hearing, Counsel for BOIMB made submissions regarding the intended purpose of the loan offers. In particular, it was submitted that because it was expressly stated that €200,000 of the first advance was to be paid over to Ms. Cody in respect of a separation settlement, then it was clear that Ms. Cody had benefited personally from the drawdown. However, the Court noted that there was nothing put on affidavit by BOIMB to confirm whether this condition was complied with and/or whether the monies were ever received by Ms. Cody. Counsel also sought to rely upon certain correspondence which had been exhibited in affidavit material in support of an argument that not only had Ms. Cody been aware of the two loan agreements, but that she had in fact received independent legal advice in respect of same. However, the Court noted that BOIMB did not engage in detail on affidavit with the allegations made by Ms. Cody and instead relied upon the fact that Ms. Cody did not contest in her affidavit, inter alia, the loan agreement and advances made to her and Mr. Cody and/or the fact that she personally received most of the loan funds in respect of the first loan agreement. The Court noted that there was no explanation provided by BOIMB as to why the loan agreements were made out to Ms. Cody in her maiden name or why the correspondence was addressed to Mr. Cody’s business address. Finally, it was noted by the Court that BOIMB did not put forward any affidavit material by a witness who could confirm that Ms. Cody signed either of the loan agreements.
In allowing Ms. Cody’s appeal, the Court held that BOIMB could not discharge the onus of proof as plaintiff by simply exhibiting copies of the loan agreements. In particular, the Court cited the Supreme Court decision in the case of RAS Medical Ltd. v the Royal College of Surgeons in Ireland  whereby it was emphasised that “the mere fact that a document is exhibited in an affidavit does not, in and of itself, turn that document into admissible evidence”, especially in circumstances where the document is not contemporaneous. More fundamentally, the Court found that BOIMB should have, at the very least, applied in the Circuit Court to cross-examine Ms. Cody in respect of her allegations. In the circumstances, the Court found that it was not in a position to make a “definitive finding” that Ms. Cody was indebted to BOIMB pursuant to the loan agreements.
Allied Irish Banks PLC -v- Patrick and Mary Stack
In contrast, the 2018 decision of the Court of Appeal in Allied Irish Banks PLC –v- Patrick and Mary Stack  provides a good illustration of when an allegation of forgery is likely to fail, albeit in the context of an application for summary judgment on foot of a guarantee.
In summary, the case involved an appeal by the Defendants of an order granted in favour of AIB in the High Court on foot of guarantees signed by the Defendants on 13 July 2010 in support of a loan facility advanced to a company, Carrignagour Limited (“the Company”). The Defendants put forward a number of grounds of proposed defence, but of note was Mrs. Stack’s assertion that her signature on the guarantee containing her name was a forgery and that she did not recall signing the document or having been requested to sign one. However, in a supplemental affidavit, AIB exhibited a complete copy of the underlying loan facility letter and also a copy of a resolution signed by the Company (specifically, by Mr. and Mrs. Stack as chairman and secretary, respectively) accepting the facility. AIB also exhibited a letter addressed to the Defendants dated 7 July 2010 enclosing copies of the proposed guarantees and advising them that they had been nominated by the Company to provide such guarantees.
Ms. Justice Irvine found that the evidence put forward by Mrs. Stack concerning her execution of the guarantee was inconsistent. In particular, Mrs. Stack alleged that AIB forged her signature on the guarantee while at the same time averring that she did not recall signing the document or having been requested to do so, which the Court found were entirely different propositions. Citing the decision of Banque de Paris v de Naray , the Court held that in circumstances where Mrs. Stack made a bald averment that her signature was forged, in considering whether she had a bona fide and credible defence to a claim based on the validity of that signature, it was necessary to look at “the whole situation to see whether the defendant had satisfied the court that there was a fair or reasonable probability” of them having a real or bona fide defence. In this case, the Court found that it was insufficient for Mrs. Stack to make a bald assertion that her signature was a forgery, in circumstances where she did not deny the execution of the resolution of the Company which accepted the terms of the facility (including the provision of a guarantee), she did not explain why the signature on the guarantee might be a forgery and she did not make any effort, in light of the exhibits produced by AIB, to adduce evidence to support her assertion. Further, Mrs. Stack did not seek to establish why AIB would have forged her signature in circumstances where she had previously signed a guarantee in 2009.
Similarly, AIB Mortgage Bank v McBrien  was a 2017 High Court decision involving an application for summary judgment by AIB Mortgage Bank (“AIBMB”) against the Defendants. In her affidavit in response to the motion for judgment, Ann McBrien simply stated that she did not sign the letter of offer of the mortgage loan the subject of the proceedings, on the basis that the signature was not her signature. She also alleged that she did not sign any mortgage deed nor did she obtain any legal advice or give consent to the said mortgage. However, in response to those allegations, an employee of AIBMB swore an affidavit that having regard to the books and records of AIBMB, Mrs. McBrien’s averments were not credible in circumstances where, inter alia, Mrs. McBrien’s signature on the loan facility and the mortgage was witnessed by her own solicitor, both Defendants completed and returned an application form to AIBMB in relation to the mortgage loan and despite numerous statements and correspondence issuing to Mrs. McBrien in relation to the mortgage loan, at no time prior to the filing of her affidavit did she ever allege that she was a stranger to the loan and to the mortgage or that her signature had been forged. Ultimately, Eager J. found in favour of AIBMB and granted summary judgment against both Defendants, finding that Mrs. McBrien had not addressed any of the above mentioned issues (and others) raised by AIBMB in response to her assertions.
While the Court was critical of BOIMB’s approach in the Cody case, it can be distinguished on its own peculiar facts in that there was an allegation by Ms. Cody of systemic fraud, over a significant number of years, which appeared to implicate BOIMB. In contrast, the Stack and McBrien decisions provide a useful illustration of the hurdles a litigant seeking to rely upon a purported defence of fraud or forgery would have to overcome in the context of summary proceedings. Overall, it appears that in dealing with allegations of fraud or forgery, lenders and loan purchasers should carefully examine the whole of the circumstances of the case made by a defendant and the evidence available.
  IEHC 34
  IESC 4;  2 I.L.R.M 273
 Order 5B of the Circuit Court Rules (as amended) allows a party to possession proceedings to file a notice in writing requiring the production of a deponent for cross-examination
  IECA 128
  1 Lloyd's Rep. 21