Originally published July 2011

Decision of Ms. Justice Dunne of 25th July, 2011 on the interaction of the Registration of Title Act, 1964, and the Land of Conveyancing Law Reform Act, 2009

The decision of Justice Dunne has huge ramifications for lenders. The following is a synopsis of that decision and its practical effect.

The judgment pertains to 4 separate cases involving three separate lenders.

The decision deals with entitlement of the holder of a charge over registered land to obtain possession on foot of that charge. The position regarding holders of mortgages over unregistered land is entirely unaffected by the decision.

Background to the Decision

 Section 62(7) of the Registration of Title Act, 1964, provided that the owner of a registered charge could apply to the Court for an Order for possession when repayment of the principal money secured by the charge had become due. This provision was repealed by Section 8 of the Land and Conveyancing Law Reform Act, 2009, which came into operation (save for Section 132 of the 2009 Act) on 1st December, 2009.

For its part, the 2009 Act provides in Section 97(2) that a mortgagee may apply to Court for an order for possession of the mortgaged property. On such application the Court may, if it thinks fit, order that possession be granted to the applicant on such terms and conditions, if any, as it thinks fit. However, Section 96 of the 2009 Act makes clear that the power under Section 97(2) applies only in respect of a mortgage created by deed after 1st December, 2009.

Arguments

 In brief, the Defendants argued that, as Section 62(7) of the 1964 Act had been repealed by the 2009 Act, it could not now be relied upon by the Plaintiffs to ground an application for possession. Furthermore, Section 97(2) of the 2009 Act only applied in respect of mortgages created by deed after 1st December, 2009. The combined effect of the foregoing, it was argued, was that the holder of a charge other than a mortgage created by deed after 1st December, 2009, had no statutory basis on which it could recover possession of the charged land.

While accepting that Section 62(7) of the 1964 Act had been repealed, the Plaintiffs argued that its provisions had been saved by Section 27(1) and (2) of the Interpretation Act, 2005.

In essence, the Plaintiffs argued that they had a "right" to apply for possession which had either "accrued" or been "acquired" prior to the coming into force of the 2009 Act on 1st December, 2009, which allowed them to continue to rely on the provisions of Section 62(7) of the 1964 Act to obtain possession.

While differing submissions were made as to when exactly that right "accrued" or was "acquired" depending on the factual circumstances of each of the 4 cases, at least one of the Plaintiffs contended that the "right" existed from the date the charge was registered in the Land Registry.

Judgment

Ms Justice Dunne considered that the "right" to apply for possession of the lands was a right within the meaning of Section 27 of the 2005 Act. The question then as arose as to when that right "accrued" or was "acquired".

Ms Justice Dunne disagreed with the argument that the right accrued or was acquired on the date of registration. Rather, in light of the wording of Section 62(7) of the 1964 Act, the right accrued to the registered charge-holder when the repayment of the principal monies became "due." Furthermore, Ms Justice Dunne considered that, in light of the wording in the relevant mortgages, the principal monies only became due on demand.

Accordingly, it followed that a lender did not acquire a right to apply for an Order for Possession pursuant to Section 62(7) of the 1964 Act unless and until the principal monies had become due and that only occurred once demand has been made. If the principal monies had become due on foot of a demand for repayment by 1st December, 2009, then there was no bar to the lender bringing proceedings to recover possession of the lands secured by the charge, notwithstanding that Section 62(7) had been repealed. However, if the principal monies had not become due by 1st December, 2009, a lender could not rely on Section 62(7) of the 1964 Act to obtain possession of the charged land

Effect of Judgment

In summary, the effect of this judgment would appear to be as follows:

  • Proceedings commenced prior to 1st December, 2009, are unaffected by this judgment;
  • Proceedings on foot of a mortgage created by deed after 1st December, 2009, are unaffected by this judgment;
  • Proceedings commenced subsequent to 1st December, 2009, on foot of a charge registered prior to 1st December, 2009, and where the principal monies secured by the charge have become due prior to 1st December, 2009, are unaffected by this judgment;
  • with regard to when the principal monies secured by the charge have become "due", it is clear that in the factual scenarios addressed in her judgment, Ms Justice Dunne found that the monies became due only when demand for repayment was made. It is perhaps possible that, depending on the factual circumstances (e.g. bridging finance) and, more particularly, the wording of the charge/mortgage in a particular case, that the principal monies have become due without the need for a demand for repayment.
  • Proceedings commenced subsequent to 1st December, 2009, on foot of a charge registered prior to 1st December, 2009, and where the principal monies secured by the charge have become due subsequent to 1st December, 2009, cannot not be continued and any Orders for possession already granted in such a scenario must now be considered compromised.

Conclusion

Given the passage of time since 1st December, 2009, it must be considered unlikely that, in respect of any charge registered prior to 1st December, 2009, the principal monies secured by the charge have become due prior to 1st December, 2009, enabling a lender to now issue proceedings and obtain possession of the property secured by that charge. This clearly has huge ramifications for lenders. While, as a fall-back position, it would be possible for a lender to seek well-charging orders and orders for sale on foot of such charges, such a course is much less desirable for lenders as it is a very considerably more cumbersome and lengthy process.

There have already been some indications of possible appeals of Ms Justice Dunne's decision. However, such an appeal will not occur quickly and, in any event, the decision may very well be upheld – leaving aside its dramatic consequences, prima facie, it appears well reasoned.

Accordingly, it would appear that a legislative remedy may offer the best resolution of the position.

Disclaimer

This information is for guidance purposes only. It does not constitute legal or professional advice. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. No liability is accepted by Eversheds O'Donnell Sweeney for any action taken in reliance on the information contained herein. Any and all information is subject to change. Eversheds O'Donnell Sweeney is not responsible for the contents of any other website or third party material which can be accessed through this website.

Eversheds O'Donnell Sweeney is an Irish partnership and a member firm of the Eversheds International network of firms affiliated with Eversheds International Limited, an English company limited by guarantee. Member firms of Eversheds International are independent firms and members of Eversheds International Limited, but have no authority to obligate or bind Eversheds International Limited or one another vis-à-vis third parties. Neither Eversheds International Limited nor any of its member firms have any liability for each other's acts or omissions.