A legal challenge to the entitlement of Start Mortgages Ltd to issue mortgages here has major implications for its €1 billion housing loans in Ireland and for the legal position of other lenders, the Central Bank has told the Commercial Court.
Hundreds of actions by Start Mortgages Ltd for repossession orders are also affected by the challenge brought by Robert Gunn, Mr Justice Peter Kelly noted today when granting the Central Bank’s application to fast-track the challenge to Start’s entitlement to issue loans.
The judge noted Start has 242 actions for repossession before the Master of the High Court with another 71 cases sent to the High Court list while Start CEO David Ingram had also said 115 orders for possession have been granted in other cases and a further 89 possession orders have been executed.
Another borrower with Start has also taken an action similar to that of Mr Gunn, the judge said.
The Central Bank’s application to fast-track Mr Gunn’s action was supported by lawyers for the State and for Start while Ross Maguire SC, for Mr Gunn, an unemployed construction worker, adopted a neutral position.
The judge directed the Gunn action will be heard in March next. Prior to that, the judge will on January 24th next hear an application by Start to discharge a stay on proceedings against him by Start.
Mr Gunn, who is represented by the New Beginnings group of lawyers and business people, last month initiated his challenge aimed at stopping Start repossessing his home at Lyre, Lisselton, Co Kerry.
He had in 2007 obtained a mortgage of €210,000 from Start, secured against his family home, but after losing his job in 2008, fell into arrears on mortgage repayments.
Start later brought proceedings seeking possession of Mr Gunn’s home with a view to selling it on. Mr Gunn, a separated father of one, claims he has nowhere else to go.
In his judicial review proceedings against the Central Bank and the State, with Start as a notice party, Mr Gunn claims Start was not legally authorised to make the loan to him because, he claims, it was not regulated by the State as required.
Mr Gunn claims only the Central Bank has the power to prescribe any entity as a “Credit Institution” and the purported delegation of that power to the Consumer Director of the Irish Financial Services Regulatory Authority is unconstitutional.
He claims the then Consumer Director of IFSRA unlawfully and unconstitutionally prescribed Start as a “Credit Institution” within the State in 2004.
He claims provisions of the 1942 Central Bank Act did not vest, delegate or transfer the power to prescribe a Credit Institution to the office of the Consumer Director.
Jim Breslin, for the Central Bank, said it is vigorously defending Mr Gunn’s case as the proceedings had implications not just for Start but all other institutions prescribed by the Consumer Director as a “credit institution”, including many subsidiaries of banks.
Mr Gunn’s case was fundamentally misconceived but, if he was correct and the Statutory Instrument under which the Consumer Director acted was made without authority or was unconstitutional, that would have significant implications for institutions designated by the director, counsel said.
While the Central Bank, due to confidentiality requirements could not provide details about the loan books of the various institutions to support its arguments as to the urgency of the case and its commercial significance, Start Mortgages had provided an affidavit setting out the specific extent of its loan book which was some €1 billion, counsel said.
Denis McDonald SC, for Start, said it has a significant commercial business here and the reliefs being sought by Mr Gunn would have a significant impact on that business if he was correct.
Counsel also referred to the hundreds of legal actions brought by Start and said these proceedings could have a lot of impact on those cases.
Mr McDonald said it was Start’s case it is properly designated a credit institution here. He was further arguing Start is a mortgage lender and, in those circumstances, did not have to be designated a “credit institution”.
Start is entitled to grant housing loans and there should be no stay on its proceedings against Mr Gunn, counsel argued.
