I have located what appears to be a copy of the
Freeman v. Bank of Scotland decision on a 'mortgage protest' website:
This appears to be a written decision, so I would hope it will be formally reported. I don't see any indication of a neutral citation or such. The decision is not listed yet on the Irish public access caselaw database, "IRLII", but I'll keep an eye on that to see if it appears later.
A lot of our questions are answered by this written decision. First, the facts are as follows:
- 1. The Freemans in 2006 had six mortgages on properties, the mortgages were with the Bank of Scotland Ireland. In 2010 that Bank merged with the Bank of Scotland PLC.
2. In 2011 the Freemans fell behind in their payments - I believe this is on five of the six properties. Foreclosure occurred on those five properties. The Freemans attempted to halt sale via an injunction, which was rejected.
3. Three properties were sold by receivers, with the proceeds to the Bank. The Bank agreed to not sell the remaining two properties until the trial was resolved.
The Freemans attack this transaction set in a number of ways.
The Central Bank of Ireland Codes of Conduct (described in previous messages) prohibit the transfer and securitization of the mortgage without the Freemans' consent. The Bank replies with the response suggested by grixit - that even if there were glitches with the sale of the mortgages, the underlying debts would remain and thus the Freemans' action is fatally flawed as it will provide no remedy (para. 9).
The Bank also argues that its mortgage contracts included clauses that effectively meant the Freemans' had, in advance, agreed to whatever securitization or transfer steps the Bank might take in the future (paras. 10-11). These clauses 'trump' any legislative restrictions. So that is your argument, AndyK. In any case, the bank also argues the Codes of Conduct are merely suggestions, rather than binding legislation (paras. 12-15).
In response, the Court reviewed Irish cases have evaluated the Codes of Conduct and their effect (paras. 16-19), concluded that the jurisprudence is "not absolutely clear" (para. 20), and that as a consequence the Freemans' action is not certain to fail, and should therefore go to trial.
I have not reviewed the cases identified in paras. 16-19, but it's pretty hard to disagree with the conclusion that a serious evaluation would be appropriate to confirm the status of the Codes of Conduct, particularly as it seems some of the cases are handling the personal homes of mortgagors in a different manner, and that the Codes of Conduct may set a tort standard of care for lender conduct.
The Freemans' second issue is that the 2006 bank merger between the Bank of Scotland Ireland and the Bank of Scotland PLC was fraudulent and improper, in part because the Bank of Scotland Ireland was bankrupt. The Court rejects this proposition as the status of the Bank of Scotland Ireland is irrelevant, and the merger was supervised by both Irish and Scottish courts, bringing in the doctrine of collateral attack (though that is not expressly stated.) The illegal merger claim is struck.
Next, the Freemans challenge appointment of the receivers who sold their properties. The Court agrees with the Bank of Scotland Ireland that the mortgage contracts permitted that transfer, but that this claim should remain in relation to the potential legal effect of the Codes of Conduct (para. 28), and for the same reasons.
Last, we have the crazy-time arguments. The Freemans also advanced the claim that banks create money out of thin air, so there isn't any 'real' money to pay back. Here is the relevant passage (paras. 29-31):
29. At para. 10 of the statement of claim, the plaintiffs allege that the "first named defendants misled and deceived the plaintiffs by offering what the plaintiffs understood to be a 'loan of money', when in fact the first named defendants did not 'lend' the funds, they instead
created the funds with the Plaintiff's signatures on a loan application" [Emphasis in original]. In support of this argument the plaintiffs seek to rely on the affidavit of a Mr. Walker F. Todd which discusses what he calls "a common misconception about the nature of money" and states -
"In a fractional reserve banking system like the United States banking system, most of the funds advanced to borrowers (assets of the banks) are created by the banks themselves and are not merely transferred from one set of depositors to another set of borrowers." [Emphasis in original]
30. This affidavit was sworn in unrelated proceedings in the United States. This Court has no knowledge of those proceedings, the facts and issues of the particular case, and the context in which the affidavit was made and accordingly the Court attaches no weight to it. The Court accepts the submission by counsel for the defendants that this 'creation of currency' argument resembles the so-called 'money for nothing' schemes discussed in
Meads v. Meads 2012 ABQB 571. Such arguments are coming before the Courts in numerous jurisdictions with increasing frequency since the economic and property market collapse. In
Meads, Associate Chief Justice Rooke stated that such arguments are often advanced by a particular type of vexatious litigant which he termed 'Organized Pseudolegal Commercial Argument (OPCA) litigants'. He described these arguments as '
fanciful' and '
completely devoid of merit' and said they are often made by distressed litigants, particularly those who find themselves in financial difficulty, acting under pressure and on the instruction of organized groups or individuals who have a vested interest in disrupting court operations and frustrating the legal rights of governments, corporations and individuals.
31. It is also important to note that the funds in question, regardless of how they were allegedly 'created', were drawn down by the plaintiffs and, as stated in the statement of claim, were spent on the refurbishment and upkeep of the properties or however else the plaintiffs saw fit. The nature of the loan agreement between the parties was clear and unambiguous and was willingly signed for by the plaintiffs who were aware of their obligations and responsibilities. For that reason, I am of the view that the plaintiffs' claim in relation to the 'creation of currency' argument is frivolous, vexatious and bound to fail and is therefore struck out.
The judgment continues to strike claims that the defendants had engaged in theft (para. 32, 34), but continues a defamation allegation against a receiver as a potential breach of a duty of care related to the Codes of Conduct (para. 33).
My guess is that the "Walker F. Todd" mentioned is this chap:
All in all, an interesting result! I anticipate that the
Freeman v. Bank of Scotland case will now provide a clear precedent in Commonwealth jurisdictions to strike actions based on the 'banks create money' concept, as an OPCA 'money for nothing' scheme to evade financial obligation. My understanding is that this argument is very popular in UK Freeman-on-the-Land circles.
Hopefully this case is reported and therefore becomes more broadly accessible to the courts and lawyers.
SMS Möwe
