High Court Confirms No Tort of “Reckless Lending”: Healy v Stepstone Mortgage Funding Ltd


Author: Richard Willis and Eimear McNamara

The financial crisis has resulted in an unprecedented increase in proceedings between financial institutions and defaulting borrowers coming before the Irish courts. An argument which has been raised by borrowers in a number of such cases is that the loan agreement is invalid as the financial institution in question engaged in reckless lending practices and should never have loaned the monies to the borrower. However, the Irish courts have made it clear on a number of occasions, most recently in a judgment delivered on 19 March 2014, that there is no tort of reckless lending known to Irish law.

This most recent confirmation came in a judgment delivered by Mr Justice Hogan in Healy v Stepstone Mortgage Funding Ltd [2014] IEHC 134. In that case, the plaintiff, Mr Thomas Healy, who was in arrears on his mortgage repayments, issued proceedings against Stepstone Mortgage Funding Ltd. Mr Healy claimed that Stepstone broke “serious liquidity laws which… caused the financial collapse” and that by reason of this conduct the mortgage contract was “seriously flawed”. He also claimed damages for “reckless lending procedures” by Stepstone. Separately, Stepstone had commenced proceedings against Mr Healy in respect of his arrears.

Stepstone successfully applied to have Mr Healy’s proceedings struck out on the basis that they disclosed no reasonable cause of action. In delivering his judgment, Mr Justice Hogan stated that it was “absolutely clear that there is no such common law tort of reckless lending” and that the proceedings were completely unsustainable in law and doomed to fail.

Mr Justice Hogan referred to two recent decisions of the High Court as authority in this regard. In 2010, in ICS Building Society v Grant [2010] IEHC 17, Mr Justice Charleton stated that “the argued for tort of reckless lending does not exist in law as a civil wrong“. He added that while the Oireachtas (Irish Parliament) could pass a law prohibiting reckless lending, it was “not within the competence of the court to invent such a tort.” This view was followed in 2012 by Mr Justice Kelly in McConnon v President of Ireland [2012] IR 449.

Judgment on Reckless Lending

The judgment in Healy v Stepstone Mortgage Funding Ltd is further confirmation that a tort of reckless lending does not exist under Irish law and that the courts will, in the ordinary course, enforce the terms of a loan agreement between a borrower and a lender, notwithstanding any allegations of reckless lending practices.

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