Self Administered
Revenue Pensions Manual SSAPs
Introduction
This chapter explains the special requirements that small, self-administered pension schemes (abbreviated as SSAP or SSAPS) must comply with to achieve and maintain exempt approved status. These special requirements are additional to the normal approval requirements. Their purpose is to ensure that the scheme is in fact “bona fide established for the sole purpose of providing relevant benefits” under section 772 (2)(a) Taxes Consolidation Act 1997 (TCA) and not a scheme designed for tax avoidance.
Usually, the sole members of “small” schemes are “20% directors”. Revenue defines a 20% director as someone who directly or indirectly at any time in the last three years owned or controlled more than 20% of the voting rights in the employer company, or in the parent company of the employer company.1 Revenue concerns relate to the potential for conflicts of interest, as the individuals involved are at the same time the owners of the business, scheme trustees and scheme members.
1. Definition of “small” scheme
A scheme with fewer than 12 members will generally be regarded as “small”.2 Some schemes with more than 12 members may be regarded as a small scheme – for example, a scheme designed primarily for a few family directors, to whom are added some relatively low paid employees with entitlement to only insignificant benefits, included to bring membership to 12 or more, and a scheme with more than 12 members where most or all of the members are or are connected to 20% directors.
Conversely, it might not be necessary to regard a scheme with fewer than 12 members as small if all the members are at arm’s length from each other, from the employer and the trustees. A small insured scheme which becomes self-administered after approval must, from the changeover date, comply with the special requirements.
Irrespective of the number of members involved, a scheme will be regarded as small at any time when 65% or more of the value of the investments of the scheme relate to the provision of benefits for 20% directors of the sponsoring employer(s) and their spouses, civil partners and dependants.
2. Pensioneer trustee
The trustees must include a Revenue approved “pensioneer trustee”.3 Onerous obligations are placed on the pensioneer trustee, in addition to the normal obligations that apply under trust law.
The duties of the pensioneer trustee are set out in the following undertaking that the trustee must sign:
“I undertake that in relation to any pension scheme, approved under the Taxes Consolidation Act 1997, of which I am a Trustee that I will:
a) Not consent to any action which is contrary to any Revenue regulations. I will report immediately to Revenue full particulars of any action to which I am requested to consent which I consider may be contrary to Revenue regulations.
b) Supply annual accounts, periodic actuarial reports, or any other information required by Revenue.
c) Not agree to the termination of any scheme of which I am Pensioneer Trustee otherwise than in accordance with the terms of the approved winding up provisions.
Nor will I delegate powers to any other Trustee of such a scheme or to any outside person or body on behalf of any other Trustees so as to circumvent the foregoing undertaking.
I further undertake to advise Revenue immediately should I cease to be a Trustee of any such approved Scheme.”
It is a precondition of Revenue approval under section 774 TCA that at all times the “small” scheme must have a Revenue approved pensioneer trustee. The Trust Deed must provide that the pensioneer trustee cannot be removed without prior Revenue approval and that the pensioneer trustee must be a co-signatory on all financial transactions.
Prior to a resignation by a pensioneer trustee, it is the responsibility of the other trustees to arrange for the appointment of a replacement. In cases where this does not occur within 30 days of a resignation, Revenue will withdraw approval from the scheme.
If the trust instrument establishing a scheme provides for the trustees to act on majority rather than unanimous decisions, this provision must be qualified so that it does not apply where the question for decision relates to the termination of the scheme.
3 Section 2(1) Pensions Act 1990 states that a “pensioneer trustee” means a person who is for the time being approved by the Revenue Commissioners to act as such in accordance with requirements imposed under Part 30 of the Taxes Consolidation Act 1997.
To qualify for pensioneer trustee status, an applicant must be closely involved with occupational pension schemes and their approval. They must have experience in processing approval of schemes, administration of small self-administered schemes and a good working knowledge of Revenue practice. Pensioneer trustees should be able to provide a complete range of services: actuarial, legal, investment and administration.
Where a corporate body wishes to act as a pensioneer trustee, it is essential that the directors, or a majority of them, should be acceptable as pensioneer trustees in their own right. The directors regarded as acceptable should have the power to determine how the corporate body will vote in any proceedings of the pension scheme trustees.
Applications for approval to act as a pensioneer trustee should be submitted via the secure ‘MyEnquiries’ service available on ROS, selecting the “Retirement Benefits” category and “General Query” sub-category.
The application should include a full “pensions C.V.” together with details of any self- administered schemes established and administered by the applicant.
A list of Revenue approved pensioneer trustees is available on request.
3. Scheme approval and compliance requirements
Practitioners are encouraged to agree a “standard” trust document and announcement letter with Revenue. The covering letter with each approval application should include:
1. Confirmation that the scheme is documented by the standard deed.
2. Confirmation that the announcement letter has issued.
3. An outline of the scheme’s investment policy.
4. The member’s PPSN.
5. Confirmation that the scheme member is an employee of the employer sponsoring the scheme.
The supporting documentation required is:
1. A funding report with full details of retained benefits
2. Copy of the relevant pages of the trust deed showing employer name, trustee details, scheme title and commencement date.
Incomplete submissions will be returned.
As a condition of approval, Revenue will expect actuarial reports to be made at intervals not greater than three years and will examine the assumptions that have been used as a basis for funding the scheme. A further condition of continuing approval is a requirement to submit annual accounts within nine months of the end of the year, in line with the statutory requirements of Schedule 23 TCA.
In view of the significance attaching to the investment policy of the trustees, Revenue will need to know, when the application for approval is first considered, and in conjunction with the examination of annual accounts and later actuarial reports, how the funds are to be or have been invested.
4. Investment of funds in small self-administered schemes
All investments by small self-administered pension schemes must be on an arm’s length basis. The investment powers of trustees of small self-administered pension schemes are circumscribed in a number of areas which are detailed below. The list is intended as a guide and is not exhaustive. A ruling on any specific proposal can be requested from Pensions Branch in Revenue’s Large Cases – High Wealth Individuals Division.
(i) Loans
Loans to members of schemes or to any other individual having a contingent interest in the scheme or to the employer are prohibited.
(ii) Property investments
A proposal to acquire property as an investment can be approved subject to the following conditions:
(a) The vendor is at arm’s length from the scheme and the employer, including its directors and associated companies.
(b) The purpose of the acquisition is not for disposal or letting to the employer, including its directors and associated companies.
(c) Disposal of the property is on an arm’s length basis.
(d) The scheme has sufficient liquid investments to ensure that the requirement to provide benefits, including ill-health and early retirement benefits, can be met. Where the main or only asset is property, the concentration of investments in an asset not readily realisable does not satisfy the overriding need to match investment of the assets with a scheme’s liabilities, in particular the requirement to provide benefits; when the first or subsequent retirements take place, a scheme could be compelled to realise its only or main asset in order to pay benefits.
(e) Purchase of overseas property will only be permitted where there are appropriate arrangements in place to enable the pensioneer trustee to maintain control of the asset to ensure that Revenue rules are complied with.
(f) A transaction which involves the scheme trustees directly in the acquisition and development of property with a view to its disposal will not constitute an investment to which the exemption in section 774 (3) TCA will apply.
(g) Any proposal that involves the diversion of the sponsoring employer’s taxable activity into the scheme is not acceptable.
(iii) Self-investment
The following types of self-investment are not acceptable:
(a) Acquisition of property or other fixed assets from the employer, and
(b) Acquisition of shares, debentures, etc., in the employing company whether by subscription, bonus issue, purchase from existing shareholders or any other means.
(iv) “Pride in possession” articles
Schemes are not permitted to invest in personal chattels such as works of art, jewellery, vintage cars, yachts, etc. Schemes can invest in choses in action (a personal property right to an intangible object) which are not tangible, moveable or visible. Examples are company shares, copyrights, and financial futures.
(v) Private companies
Investments must be limited to 5% of scheme assets and to 10% of the private company’s share capital.
(vi) Transactions deemed to be pensions in payment (section 779A TCA)
Certain transactions made by an Approved Retirement Fund (ARF) as detailed in section 784A(1B) TCA are deemed to be a distribution from the ARF (please see chapter 23 of the Pensions Manual for more information). A similar provision applies to pension schemes. When these transactions occur, the use of scheme assets is treated as a pension payment from the scheme. Any amount treated as a pension payment is no longer regarded as a scheme asset. The transactions are:
• A loan made to the beneficial owner or connected person.
• An acquisition of property from the beneficial owner or connected person.
• A sale of ARF asset to the beneficial owner or connected person.
• An acquisition of residential or holiday property for use by the beneficial owner or connected person.
• An acquisition of property which is to be used in connection with any business of the beneficial owner, or of a connected person. The distribution arises on the date such use commences. The distribution is the amount of the value of the ARF assets used in connection with the acquisition and any expenditure on improvement or repair of the property.
• An acquisition of shares in a close company in which the beneficial owner or connected person is a participator.
A “close company” means a company under the control of five or fewer participators, or of participators who are directors. Please refer to section 430 TCA for a complete definition.
A “participator”, in relation to any company, means a person having a share or interest in the capital or income of a company. Please refer to section 433 TCA for a complete definition.
Definitions of “connected persons” and “relative” are contained in section 10 TCA.
5. .Benefits
A final funding review must take place before any benefits are paid. The scheme rules should provide that benefits be secured by either the purchase of an annuity from a life office or in accordance with section 772 (3)(a) TCA.
6. Death-in-service benefit
All death-in-service benefits should be insured from the outset insofar as they exceed the value year to year of the member’s interest in the fund, based on their accrued pension and other retirement benefits.
7. Full commutation of pension in cases of serious ill-health
Where the rules of the pension scheme include a provision for the full commutation of pension where the member is “in exceptional circumstances of serious ill-health” it has always been the practice to leave the application of the rule in particular cases to the trustees. In large schemes, the arm’s length relationship, and in insured schemes, the interest of the life office, each provide a reasonable assurance that the facility will not be abused. Neither factor is present in small self-administered schemes and the rules of such schemes should, therefore, provide for full commutation on serious ill-health grounds to be subject to the agreement of Revenue. In such cases Revenue would seek to establish that proper medical evidence has been obtained and that its terms appeared to warrant a conclusion that the member’s expectation of life was very short.
8. General enquiries
Enquiries must disclose the title of the scheme to which they relate and all other relevant facts and figures. Each case is dependent on its facts and it is not possible to deal with purely hypothetical situations.
5.1. General
The tax advantages of exempt approved schemes are controlled by imposing limits on benefits. The other important control is to prevent excessive funding of the scheme. The basic requirement is that scheme assets should not amount to more than what is required to provide the benefits which the scheme has a commitment to pay.
5.2. Actuarial reports
It is the duty of scheme trustees and administrators to monitor the scheme’s funding. In the case of self-administered schemes, appropriate actuarial advice should be obtained at commencement and at regular intervals thereafter. Actuarial reports are not required for insured schemes where contributions are invested exclusively in a policy or policies that provide benefits according to a predetermined scale of premium rates. Particular attention should be paid to employee’s additional voluntary contributions (AVCs).
5.3. Surpluses
There is no objection to a scheme holding a reasonable reserve. In any case where a valuation discloses a surplus in excess of 10% of the value of the fund assets, the matter should be brought to the attention of Pensions Branch, Large Cases – High Wealth Individuals Division. Cases will be reviewed on an individual basis. It is important to prohibit the build-up of monies in a tax-exempt fund that could not be used for the purposes of providing relevant benefits.
Normally, a scheme surplus should be disposed of by augmenting benefits within approvable limits or by reducing or suspending contributions to the scheme. In exceptional cases, part of the surplus might have to be refunded to the employer and taxed as a trading receipt.
5.4. Investments
Revenue’s interest in scheme investments is to ensure that schemes are “bona fide established for the sole purpose of providing relevant benefits” (section 772(2)(a) Taxes Consolidation Act 1997 [TCA]). Certain investments may prevent approval or prejudice ongoing Revenue approval. These could include investments used for tax avoidance purposes and assets not used to provide “relevant benefits”.
Specific investment rules for small self-administered schemes are detailed in Chapter 19.
Transactions deemed to be pensions in payment
Where scheme assets are used in connection with a transaction which would, if the assets in question were those of an approved retirement fund (ARF), be regarded as giving rise to a distribution under ARF legislation (see Chapter 23.8) then the use of those assets is treated as a pension paid under the scheme and is subject to tax. The amount to be regarded as a pension payment is calculated in accordance with ARF provisions. Any amount treated as a
pension payment is no longer regarded as a scheme asset. The transactions detailed in
Chapter 23.8 include the following:
• Loan made to the beneficial owner or connected person.
• Acquisition of property from the beneficial owner or connected person.
• Sale of ARF asset to the beneficial owner or connected person.
• Acquisition of residential or holiday property for use by the beneficial owner or connected person.
• Acquisition of property which is to be used in connection with any business of the beneficial owner, or of a connected person.1
• Acquisition of shares in a close company in which the beneficial owner, or connected person, is a participator.
A close company means a company under the control of five or fewer participators, or of participators who are directors. Please refer to section 430 TCA for a complete definition.
A participator in relation to any company, means a person having a share or interest in the capital or income of a company. Please refer to section 433 TCA for a complete definition.
“Connected persons” and “relative” are defined in section 10 TCA.
5.5. Borrowing
Section 772 (3E) TCA provides that:
A retirement benefits scheme shall neither cease to be an approved scheme nor shall the Revenue Commissioners be prevented from approving a retirement benefits scheme for the purposes of this Chapter because of any provision in the rules of the scheme which makes provision for borrowing by the scheme.
The following rules apply to scheme borrowing:
1. Only assets purchased by the borrowing may be used to provide security to the lender.
2. Assignment of rental income to the lender is not permitted.
3. Life cover on the amount of the debt may only be provided outside the scheme.
1 Where property is acquired for residential or holiday purposes, or for use in connection with any business, the distribution arises on the date such use commences. The amount of the distribution is the aggregate of the value of the ARF assets used in connection with the acquisition and any expenditure on improvement or repair of the property.
4. Cross-collaterisation is not permitted (that is, an asset being used as security for a loan cannot also be used as collateral for another loan).
5. Interest only loans and loans for a period of more than 15 years are not permissible. The loan should be repaid in full prior to normal retirement age.
6. Use of other scheme assets to clear residual debt is not permissible.
5.6. Geared property investment vehicles
In relation to investments made via geared investment funds and unit trusts, it is possible to link a scheme investment to a particular property, within a collective investment fund, provided that all acquisitions, disposals and lettings are on an arms’ length basis.
5.7. Calculation of maximum contributions
To standardise benefit and funding calculations, the following methodology and capitalisation factors shown in Table 1 should be used. Current annuity rates form the basis for the calculation.
The methodology to obtain the maximum ordinary annual contribution to be paid by or on behalf of an individual employee (combined employer and employee) is as follows:
Contribution = B X CF – (value of assets plus retained benefits)
Term in years to normal retirement date, minimum 1 year
Or = N/60ths pension X CF- value of assets
Term in years to normal retirement date, minimum 1 year whichever is the greater.
B is the revenue maximum pension based on current remuneration but with service to normal retirement date.
CF is the maximum benefit capitalisation factor as detailed in the table below.
N/60ths pension is the pension that can always be provided from a scheme regardless of retained benefits.
This maximum ordinary annual contribution includes administration costs but not the cost of death-in-service benefits. The cost of death-in-service benefits may be added to the amount calculated using the above formula.
The maximum ordinary annual contribution for a group scheme would be the sum of the individual maximum allowed contributions
Tax relief in respect of contributions in any one tax year is subject to the limits for employee contributions, as detailed in Chapter 3. Relief for employer contributions under section 774 TCA is discussed in Chapter 4. The limits on tax relieved pension funds also apply, as discussed in Chapter 25. Care must be taken to ensure that overfunding does not occur, as surplus funds may have to be refunded to the employer and taxed as a trading receipt.
Details of maximum retirement benefits are contained in Chapter 6.
Additional voluntary contributions (AVCs) can be made if the total of employer contributions and employee normal contributions do not exceed the above limits and the total employee contribution limits as outlined in Chapter 3.
In the case of defined benefit plans where the value of pension assets are not readily available or earmarked at an individual level the following formula applies:
Contribution = B X CF – (SchB X SchCF plus retained benefits)
Term in years to normal retirement date, minimum 1 year
SchB is the scheme pension based on current remuneration but with service to normal retirement.
SchCF is the Scheme benefit capitalisation factor.
Example 1
A male employee with a dependant spouse has a salary of €100,000 and has 15 years until his intended retirement at age 60. He has accumulated assets of €1,000,000 in his pension plan. The maximum normal annual contribution the employer and employee can pay in total is
2/3 X €100,000 X 32.4*-(€1,000,000) = €1,160,000 = €77,333 or 77.3% of salary.
15 15
*This factor is taken from Table 1, line 1.
Example 2
A male employee has 20 years until retirement at age 65. His gross salary is €60,000, his pensionable salary is €50,000 and he has an AVC fund of €120,000. His scheme provides a 50% spouse’s pension and fixed increases of 3% per annum.
Revenue maximum benefits
Scheme benefits
Current AVC fund plus value of retained benefits
Maximum benefit to be funded by AVCs
Maximum AVC rate as
% of salary
60,000
* This factor is taken from Table 1, line 6.
** This factor is taken from the Table 5, allowing for a 50% spouse’s pension and 3% pension increases.
Example 3
A married male civil servant has 20 years until retirement with 40 years’ service at age 60. He has accumulated AVCs worth €100,000. The public sector scheme provides a spouse’s pension of 50% and parity increases.
Revenue maximum benefits
Scheme benefits Gratuity
Current AVC fund plus retained benefits
Maximum benefit to be funded by AVCs
Maximum AVC rate as
% of salary
*The factor 32.4 is from Table 1, line 1.
**The factor 28.3 is from Table 5 for a scheme providing 50% spouse’s or civil partner’s pension and the earnings indexed figures are used as the public sector scheme provides parity increases.
Table 1: Capitalisation Factors
The capitalisation factors to be used are as follows:
NRA Female
no spouse or civil partner Female
with spouse or civil partner Male
no Spouse or civil partner Male
with spouse or civil partner
60 27.5 30.0 24.4 32.4
61 26.8 29.2 23.6 31.6
62 26.0 28.4 22.8 30.8
63 25.3 27.5 22.0 30.0
64 24.6 26.7 21.2 29.2
65 23.8 25.9 20.4 28.4
66 23.1 25.1 19.6 27.6
67 22.4 24.3 18.9 26.8
68 21.6 23.5 18.1 26.0
69 20.9 22.6 17.4 25.2
70 20.2 21.8 16.7 24.4
71 19.5 21.0 16.0 23.6
72 18.9 20.2 15.4 22.8
73 18.2 19.4 14.8 22.0
74 17.5 18.6 14.2 21.2
75 16.9 17.8 13.7 20.5
Table 2: Sample Maximum Contribution Rates
Applying the above factors produces the following table for maximum annual contribution rates, assuming no pre-existing retirement benefits and an NRA of 60.
Current
age Female
no spouse or civil partner Female
with spouse or civil partner Male
no spouse or civil partner Male
with spouse or civil partner
30 61% 67% 54% 72%
35 73% 80% 65% 86%
40 92% 100% 81% 108%
45 122% 133% 108% 144%
50 183% 200% 163% 216%
Table 3: Pension Increases linked to Consumer Price Index (CPI) and/or subject to a cap
The formulae in the tables above are easy to apply when there is a fixed rate of pension increase. If increases are in line with an earnings index the figures can also be taken from the table. In other cases, increases are related to the CPI but with such increases being capped at a fixed amount or uncapped. The table below shows the fixed increase to be used where the scheme provides increases linked to CPI.
Increases
CPI subject to annual cap of Fixed increase
Under 1.5% The actual cap
2% 1.50%
3% 1.50%
4% 1.75%
5% or over 2.00%
Table 4: Scheme Factors for females
Intermediate factors can be derived by interpolation:
Female – 0% spouse or civil partner
NRA 0% 1% 2% 3% Earnings index
60 17.0 19.3 22.1 25.5 27.5
61 16.8 19.0 21.6 24.9 26.8
62 16.5 18.6 21.1 24.2 26.0
63 16.2 18.2 20.6 23.6 25.3
64 15.9 17.9 20.2 23.0 24.6
65 15.7 17.5 19.7 22.3 23.8
Female – 50% spouse or civil partner
NRA 0% 1% 2% 3% Earnings index
60 17.5 19.9 22.9 26.5 28.7
61 17.2 19.5 22.4 25.8 27.9
62 17.0 19.2 21.9 25.2 27.1
63 16.7 18.8 21.4 24.5 26.3
64 16.4 18.4 20.8 23.8 25.5
65 16.1 18.0 20.3 23.1 24.8
Female – 100% spouse or civil partner
NRA 0% 1% 2% 3% Earnings index
60 18.1 20.6 23.8 27.7 30.0
61 17.8 20.3 23.3 27.0 29.2
62 17.5 19.9 22.8 26.3 28.4
63 17.3 19.5 22.2 25.6 27.5
64 17.0 19.1 21.7 24.9 26.7
65 16.7 18.7 21.2 24.2 25.9
Table 5: Scheme Factors for males Male – 0% spouse or civil partner
Male – 50% spouse or civil partner
NRA 0% 1% 2% 3% Earnings index
60 17.3 19.6 22.5 26.1 28.3
61 17.0 19.2 22.0 25.4 27.5
62 16.7 18.8 21.5 24.7 26.7
63 16.4 18.4 21.0 24.0 25.8
64 16.1 18.0 20.4 23.3 25.0
65 15.7 17.6 19.9 22.6 24.2
Male – 100% spouse or civil partner
NRA 0% 1% 2% 3% Earnings index
60 18.8 21.7 25.2 29.7 32.4
61 18.6 21.3 24.7 29.0 31.6
62 18.4 21.0 24.3 28.4 30.8
63 18.1 20.7 23.8 27.7 30.0
64 17.9 20.3 23.3 27.0 29.2
65 17.6 20.0 22.8 26.4 28.4
Cases
Kelly v Governor and Company of the Bank of Ireland & Boucher
[2018] IECA 288
JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 13TH DAY OF AUGUST 2018
1. In each of the above proceedings the defendants brought a motion in the High Court seeking an order pursuant to Ord. 19, r. 28 of the Rules of the Superior Courts and/or the inherent jurisdiction of the High Court striking out the entirety of the plaintiff’s claim on the basis that it failed to disclose a reasonable cause of action and/or is bound to fail and/or is frivolous and/or is vexatious and/or is an abuse of process. In each case an order (as subsequently amended under the ‘slip rule’) was made to strike out the proceedings pursuant to Ord.19, r.28 of the Rules, and the inherent jurisdiction of the Court.
2. The appellant represented himself both in the High Court and in this Court on appeal. While the appellant contends that the trial judge erred ordering that each proceeding be struck out, I am satisfied that that such an order was correctly made in each case, and that these appeals must fail for reasons which I shall explain.
3. Each set of proceedings has a common factual background. I should add that in the first proceeding the second named defendant is the Chief Executive of the bank at all relevant times. In the second proceeding the second named defendant is the receiver appointed by the bank over certain property later referred to.
4. The plaintiff had operated his professional practice through a limited liability company named Vincent Kelly Limited until that company went into liquidation.
5. The plaintiff established a pension scheme through Vincent Kelly Limited, by way of trust deed dated the 1st April 2007, and in respect of which he is named as the sole beneficiary. This is a self-administered pension scheme. There were two trustees appointed to act, namely the plaintiff himself, and Private Company trustees (Ireland) Limited as Pensioner Trustee (“Private Company”).
6. There is no dispute that the plaintiff and Private Company “as trustees” of the Scheme applied for and accepted a loan from Bank of Ireland in the sum of €800,000 whose purpose was to assist with the purchase of an investment property to be owned by the Retirement Scheme. Repayments were to be €9,718.54 payable monthly. In addition to this borrowing the purchase was funded by an amount of €350,000 provided by Vincent Kelly Limited. Again, that is not disputed by the plaintiff. The property was purchased in due course in the name of the Retirement Scheme as evidenced by deed of purchase dated the 1st October 2007. By deed of mortgage the property was mortgaged to the bank as security for the loan. Repayments were made over the course of some four years following this purchase but ceased in January 2012 resulting in en event of default under the terms of the mortgage. The bank appointed a receiver over the property in these circumstances as it was entitled to do under the terms of the mortgage. The property was occupied by tenants at this time, but following the service by the receiver of notices to quit upon the tenants, the received obtained vacant possession of the property in October 2013.
7. That is an uncontroversial background to the two proceedings commenced by the plaintiff.
8. While the plaintiff pleaded in his statements of claim that he entered into the loan agreement with the bank in August 2007, he has accepted that it was in his capacity as trustee of the Retirement Scheme. That much cannot be gainsaid given that it specifically so stated in the facility letter that issued and that he signed “as trustee”. It was not signed in his personal capacity.
9. However, the plaintiff nevertheless maintains strongly that he personally was advised by the bank and specifically by one of the bank’s senior business managers, Peter Walley (his brother in law), who was also his relationship manager in the bank, in relation to setting up this retirement pension scheme, the purchase of the particular property for the purposes of the scheme, and also the financing of the transaction. He says that he was specifically advised by Mr Walley that he should use his pension fund to finance the purchase, and that it was a sound investment.
10. In his statements of claim the plaintiff pleads that while advising him positively in relation to this investment for his pension fund, Mr Walley at the same time, and unknown to him, was disposing of his own shareholding in Bank of Ireland, and that given the knowledge held by the bank in relation to the state of the property market, and its own stability, the bank breached its duty of care to the plaintiff by promoting the setting up of this pension scheme and the purchase of the property. The plaintiff maintains that the bank was aware that he would be relying on the advice given, and that he was in fact one of many people who was actually targeted by the bank at the time in order to build up the bank’s loan book to the benefit of the bank.
11. The plaintiff maintains that the advice given to him in relation to these matters was negligent advice, and deceitful, being knowingly made without belief as to its truth or reckless as to whether it was true or not. This last claim is the basis for a submission that the bank was guilty of fraud and deception for the purposes of the Criminal Justice (Theft and Fraud Offences) Act, 2001.
12. The plaintiff claims that it was on foot of this negligent and reckless advice received, upon which he was entitled to rely, and did rely to the knowledge of the bank, that he invested the said sum of €350,000 in the pension scheme, and borrowed the balance of €800,000 in order to complete the said property purchase.
13. These allegations of negligence and breach of duty are set out at greater length in the statements of claim. In addition he particularises claims ofmala fidesand improper purposes against the bank, and particularises his losses.
14. In addition to making those claims, the plaintiff seeks many other reliefs including the recovery of damages, the removal of the receiver, an injunction to restrain the sale of the property by the receiver, the setting aside/rescission of the loan agreement and the mortgage.
15. In hisex temporejudgment delivered on the 7th October 2016 the trial judge first of all set out a brief factual background. Thereafter, he stated that there was no basis for the plaintiff to allege that Mr Boucher, as Chief Executive of the bank, had a duty to the plaintiff either “in contract or in law”, and neither was there a basis for alleging that the plaintiff in his own right was owed some duty by the receiver who was appointed by the bank over property belonging to the Scheme. I am in full agreement with those conclusions by the trial judge, and need say no more about them.
16. The trial judge went on to conclude that the plaintiff had no authority or status to mount these proceedings in his personal capacity. He noted that he had not obtained the consent of the other trustee, Private Company, and described the plaintiff as going “on a frolic of his own” in relation to claims for losses or other rights of action which might be open to the Scheme itself as opposed to the plaintiff personally.
17. The trial judge then proceeded to state that even if he had overlooked some relevant matter concerning the plaintiff’s status to pursue these claims, there were other “fatal flaws which the plaintiff cannot overcome”. In that regard he stated:
“1. There is no causal link at law between what might be described as the macro economic knowledge of the bank to the lending and purchase of the Property. Cases before the Court and appeals from the Court have given rise to many judgements which have rejected what has been termed “reckless lending” or advice based claims to avoid the repayments of loans. Some applications by the Bank against the plaintiff may have been sent by consent or otherwise to plenary hearing based on a defence or counterclaim which includedinter aliaadvice based arguments sought to be maintained by the plaintiff. Exercising the inherent jurisdiction of the Court and having regard to the undisputed evidence of the loan agreement, mortgage and deed of appointment of the receiver adduced by way of affidavit evidence, the Court find that there is no prospect of the plaintiff establishing the necessary causal link of his alleged loss to any cause of action against the bank. In other words, maintaining these sets of proceedings would be futile.
2. Birmingham J’s judgment inKearney v. KBC Bank (Ireland) Ltd[2014] IEHC 260 [which] mentions the “fanciful” argument (which he described as a mild term) that one can borrow money and take no responsibility because of the source of the funds, is so apt to the claim sought to be advanced by the plaintiff on behalf of the Scheme if he had the standing to pursue that.”
18. Thereafter the trial judge addressed the claim by the plaintiff based on negligent advice to establish the Scheme. He stated:
“20. In returning to the claim by the plaintiff that he received negligent advice which allows him a remedy for establishing the Scheme in the first place, the Court finds he could not establish at this late stage any loss arising from that decision. The plaintiff in his quest and effort to take on the Bank alleges in the 2013 statement of claim that were it not for the Bank’s advice he would not have sought and secured for the Scheme the Property with the loan repayments obligation. Unfortunately for the plaintiff, he overlooked the fact, as highlighted by counsel for the defendants, that the arrangements and facility to purchase were those of the trustees to take responsibility for solely. If they got advice and such advice was negligent, the Scheme is the proper claimant.
21. The Court has some sympathy for the plaintiff as he may not have had the benefit of studying the law of tort and contract. Put simply, the concept and policy of duty of care, the standard of care, causation, remoteness and quantum are all topics which law students and legal practitioners have to grapple with regularly. The plaintiff has not put forward the necessary degree of relationship for establishing his own personal loss. He is in effect, a step or two removed by reason of the structures which he established and probably with advice which he now seeks to impugn.
22. I take this as an example: if “Joe Murphy” [a name I picked at random] incorporates a company, invest money in that company, that company then borrows money to invest further and the investments go under, Joe Murphy has no prospect of suing successfully in his own right for the loss of the investment as the loss has been suffered by the company.”
19. The trial judge went on to state that:
“No matter what way the Court looks at matters, there is no realistic prospect that the plaintiff could recast the 2013 proceedings in a way which would allow him to recover damages. The 2015 proceedings rehash the plaintiff’s claim, but add the receiver appointed by the Bank. The property was owned by the Scheme, mortgage to the Bank and the Receiver was appointed by the Bank.”
20. The trial judge also stated that “there was no prospect of rescission of the loan or for any other reliefs sought either”.
21. I am satisfied that the overall conclusions of the trial judge are correct. Both sets of proceedings have no prospect of succeeding even if the plaintiff’s claim is taken at its height. At its height the plaintiff contends that he personally received advice from his brother-in-law who was a senior manager at the bank and his relationship manager, that he should set up this type of pension scheme, that he should invest funds into it himself and borrow further funds in the amount of €800,000 so that the Scheme could purchase the particular property which was duly purchased. He contends that the bank was negligent in providing that advice given what it already knew about the state of the property market, and the economy of the country and the state of the bank itself, and that it gave that advice putting its own selfish interests ahead of the plaintiff’s. He says also that the bank knew that he would be relying on the advice given by it, and that he was entitled to rely on the advice, and did so. He contends that because that advice has turned out to be wrong, and because it was reckless, deceitful and even fraudulent at the time it was given, he personally has suffered a loss because the repayments due on foot of the loan could not be made after January 2012, and the bank took possession of the property having appointed a receiver. He maintains that this is a loss to him as the sole intended beneficiary of the Scheme, and that in such circumstances the trial judge was wrong to strike out the claims on the basis that it was the company and not he who is at a loss.
22. He says that the relationship between him and the bank was a fiduciary one, given his long-standing relationship with the bank, and that a heightened duty of care was therefore owed to him.
23. In my view the fatal flaw in the plaintiff’s arguments that must lead inexorably to the striking out of these two proceedings as sought by the defendants is that it was the company, Vincent Kelly Limited which invested the amount of €350,000 in the Scheme, to top up the other funds in the scheme which comprised the loan drawn down by the trustees of the Scheme so as to buy the investment property. There is no doubt that the Scheme itself suffered a loss due to the inability to meet the repayments on the loan. Those repayments were being funded by Vincent Kelly Limited. While the amount of €350,000 was undoubtedly put into the Scheme to facilitate the purchase of the property, that sum was contributed not by the plaintiff himself, but by Vincent Kelly Limited.
24. It must follow that any losses that have been incurred have been suffered firstly by the Scheme because it has lost its only asset, and secondly by Vincent Kelly Limited in so far as it contributed the sum of €350,000 and that is also lost.
25. Therefore even if the plaintiff’s case is taken at its height, and the advice that he claims was given was in fact given to him, and even if he relied upon that advice and would not have proceeded with setting up the scheme, and purchasing the property qua one of the trustees of the scheme without that positive advice from the bank, he has suffered no loss personally. He cannot claim as a disappointed beneficiary of the scheme. It is the scheme that has suffered the loss, and could potentially have made a claim against the bank, but in fact the Private Company trustee refused to consent to do so, as it was entitled to do. It cannot be added as a party to the proceedings in such circumstances in order to possibly save them.
26. These proceedings are bound to fail for the reasons I have stated. I am satisfied that the trial judge did not err in making the orders under appeal, and I would dismiss these appeals.