Mortgagee Possession

Cases

Bank of Ireland v. Feeney

Irish Permanent Building Society v. Ryan.

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Horsham Properties Group Ltd v Clark & Anor

Bank of Ireland v. Smyth 

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Ropaigealach v Barclays Bank Plc

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Silven Properties Ltd & Anor v Royal Bank of Scotland & Ors 

McEnery -v- Sheahan

[2012] IEHC 331

Feeney J.

2.1 The plaintiff seeks an order compelling the defendant to deliver up possession of the Property together with declaratory relief. The defendant claims that the Bank had no power to appoint a receiver and that the plaintiff has no right to enter on to his properties and that not having such a right the plaintiff should not have been granted either an interim or an interlocutory order. In his defence and counterclaim the defendant contends that the charge upon which the plaintiff seeks to rely has not been registered and does not affect the Property as described by the plaintiff in his claim. The defendant pleads, at paragraph 22 of the defence and counterclaim, that it is denied that pursuant to s. 19(1)(ii) of the Conveyancing and Law of Property Act 1881, that Ulster Bank became entitled to appoint a receiver to the property of the defendant as alleged or at all. It was further pleaded that the plaintiff at no material time had a right to enter the defendant’s premises since the Bank’s power of sale was not exercisable as the mortgage document had not been registered. The defendant counterclaims seeking damages for trespass, breach of contract or alternatively on foot of the undertaking by the plaintiff as to damages. In the reply and defence to counterclaim the plaintiff admits that the charge upon which the plaintiff seeks to rely had not been registered, as of the date of the Reply and Counterclaim, and that the plaintiff denies that the said charge does not affect the Property in circumstances where an application to register has been lodged since the 15th June, 2009 and registration remains pending since that date. The plaintiff seeks a declaration that pursuant to the provisions of the Interpretation Act 2005 and, in particular, s. 27(1)(c) thereof that the right of Ulster Bank Ireland Limited to appoint a receiver to the premises pursuant to the provisions of the Conveyancing and Law of Property Act 1881 has not been affected by the enactment of the Land and Conveyancing Law Reform Act 2009.

2.2 There is a legal issue between the parties as to the effect that the enactment of the Land and Conveyancing Law Reform Act 2009 (the Act of 2009) has, if any, on the right of the Bank to appoint a receiver to the premises pursuant to the Conveyancing and Law of Property Act 1881 (the Act of 1881).

2.3 A separate issue which is in issue between the parties relates to the defendant’s plea in paragraph 21 of his defence where it is pleaded that the letter of demand was an immediate demand for payment which was unreasonable and inequitable in all the circumstances and in breach of an implied term of the contract between the parties. The plaintiff denies that its immediate demand for repayment was unreasonable or inequitable or in breach of the alleged or any implied term of contract between the defendant and the Bank.

3.1 The first issue which the Court has to consider is the validity of the appointment of the receiver. The defendant claims that the Bank had no power to appoint a receiver.

3.2 All parties agree that the defendant and the Bank entered into a mortgage agreement in respect of the property by a deed executed on the 26th October, 2007. That mortgage was executed on foot of advances made by the Bank to the defendant.

3.3 The relevant statutory provision which was in force at the time of the execution of the mortgage deed on the 26th October, 2007 was the Act of 1881.

4.1 Section 19(1) of the Act of 1881 provides:

“19(1) A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely)- …

(iii) A power, when the mortgage money has become due, to appoint a receiver of the income of the mortgaged property, or of any part thereof;.”

Section 8(3) of the Act of 2009 and Schedule II thereof repealed the provisions of the Conveyancing Acts 1881/1911 in respect of mortgages. The Act of 2009 was commenced by Statutory Instrument No. 356/2009 on the 1st December, 2009. The power of appointment of a receiver by a mortgagee is dealt with by s. 108 of the Act of 2009 which provides for the appointment of a receiver following specified events of default and provides, inter alia, that a mortgagee may appoint, by writing, a receiver over the income or the property. Chapter III of the Act of 2009 deals with the obligations, powers and rights of a mortgagee and s. 96 identifies the powers and rights generally and the following section, s. 97, deals with the taking of possession. The mortgage the subject matter of these proceedings predates the Act of 2009 and it follows that s. 109 of that Act has no application.

4.2 It is claimed by the defendant that the repeal of the Act of 1881 and, in particular, ss. 19 and 24 of that Act results in a situation where the mortgagee in this case no longer has a statutory power to appoint a receiver to the Property. It is further contended that as a result of that situation that a lacuna exists following the coming into effect of the Act of 2009 whereby the implicit statutory terms implied into every mortgage created from the commencement of the Act of 1881 up until the commencement of the Act of 2009 no longer apply with the consequence that a mortgagee’s power of appointment of a receiver for all such mortgages has been lost.

4.3 In response to the defendant’s claim that the mortgagee has no power to appoint a receiver, the plaintiff relies firstly on the provisions of the Interpretation Act 2005 (the Act of 2005) and, in particular, s. 27(1)(c). Secondly, based upon such reliance the plaintiff contends that the rights acquired by the mortgagee under the Act of 1881 continue to apply based upon a claim that the provisions of s. 19 of the Act of 1881 were incorporated as a term of mortgage at the date of the creation of the mortgage, that is, on the 26th October, 2007, and cannot be removed thereafter by operation of a subsequent statute.

4.4 A key issue in contention between the parties in this case concerns the Bank’s power to appoint the plaintiff as its receiver. An examination of the terms of the mortgage establishes that there is no express power to so appoint in the mortgage instrument and in those circumstances the plaintiff relies on a claim that the rights acquired by the mortgagee under the Act of 1881 apply and continue to apply. The Bank and the plaintiff seek to rely on a claimed statutory power under s. 19 of the Act of 1881 and the defendant contends that that section has been repealed by s. 8(3) of the Act of 2009 as and from the 1st December, 2009. The area of dispute between the parties therefore centres on the plaintiffs contention that the Bank’s power to appoint a receiver was unaffected by the repeal contained in the Act of 2009 because it had an acquired or accrued right to make the appointment. The plaintiff submitted that the rights that a mortgagee possessed under the Act of 1881 at the time of the creation of the mortgage were in fact accrued, or, perhaps more particularly, acquired rights and that those rights were implied into the deed of mortgage at the time of its creation. Section 19(1) of the Act of 1881 providing:

“A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed.”

The plaintiff argues that the rights so identified are different in type and order from the mere hope or expectation that rights might be conferred at some later stage and they were incorporated at the time that the mortgage was completed as if they were terms of the deed itself. Whilst the plaintiff accepts that the powers implied by the Act of 1881 do not become exercisable until default by the mortgagor, that power arises automatically once there has been default by the mortgagor and the mortgagee does not require to take any further steps to prove his entitlement.

5.1 This Court has delivered two recent judgments concerning the law in relation to repossession and the appointment of a receiver. The first of those cases was Start Mortgages v. Gunn and Ors. [2011] IEHC 275 and the later case was Kavanagh and Anor. v. Lynch and Anor. (Unreported judgment of Ms. Justice Laffoy delivered on the 31st August, 2011).

5.2 The Start Mortgages decision dealt with a common issue which had arisen in a number of related cases concerning the consequences of the repeal of s. 62(7) of the Registration of Title Act 1964 (the Act of 1964) by s. 8 of the Act of 2009. The judgment delivered by Dunne J. in the Start Mortgage case covered not only that case but also the related cases.

5.3 Section 62 of the Act of 1964 deals with the creation and effect of charge on registered land and provides at s. 62(7):

“When repayment of the principal money secured by the instrument of charge has become due, the registered owner of the charge or his personal representative may apply to the court in a summary manner for possession of the land or any part of the land, and on the application the court may, if it so thinks proper, order possession of the land or the said part thereof to be delivered to the applicant, and the applicant, upon obtaining possession of the land or the said part thereof, shall be deemed to be a mortgagee in possession.”

Section 27 of the Act 2005 provides at subss. (1)(c) and (e):

“(1) Where an enactment is repealed, the repeal does not …

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment, …

(e) prejudice or affect any legal proceedings (civil or criminal) pending at the time of the repeal in respect of any such right, privilege, obligation, liability, offence or contravention.”

Section 27(2) of the Act of2005 provides that:

“(2) Where an enactment is repealed, any legal proceedings (civil or criminal) in respect of a right, privilege, obligation or liability acquired, accrued or incurred under, or an offence against or contravention of, the enactment may be instituted, continued or enforced, and any penalty, forfeiture or punishment in respect of such offence or contravention may be imposed and carried out, as if the enactment had not been repealed.”

5.4 In all of the cases under consideration in the Start Mortgages decision, the facts were in each instance similar in that the plaintiffs held security in the form of mortgages over properties owned by the defendants. The mortgages in issue provided for the agreement of the borrowers to make payment and that in the event that monies were unpaid, that unpaid monies were due and payable on demand in the event of default. The cases under consideration covered mortgages which had been created between the years 2006 and 2008. The mortgages provided that the lenders could enter into possession of the property and that they had the statutory powers conferred on lenders by the Conveyancing Acts. The mortgagee’s powers could not be exercised until a default had occurred. In those cases it was accepted by the parties to the litigation that until a charge was registered, a lender posses no interest in the property nor was there any dispute that if it transpired that the various plaintiffs could not rely on s. 62(7) of the Act of 1964, that there was in those circumstances no basis for an order for possession. The matter in issue before the Court centred on whether any reliance could be placed on s. 62(7) by the plaintiffs in the various actions.

5.5 In the Start Mortgage decision, in addressing the issue as to whether the Court could place any reliance on s. 62(7) of the 1964 Act, Dunne J. considered the meaning of the word “right” and the issue of the right to apply for possession together with the meanings of “accrued” and “acquired”. In the case before Dunne J., the plaintiffs contended that when considering the provisions of s. 27(1)(c) and (e), the word “right” was to be interpreted on the basis that it was the right to apply for possession pursuant to s. 62(7) of the Act of 1964. On page 16 of her judgment, Dunne J. stated:

“I was referred in the course of the submissions to a number of judgments which refer to the exercise of the court’s power to make orders under s. 62(7) or its equivalent. The first of the cases referred to was the decision in Birmingham Citizens Permanent Building Society v. Caunt [1962] 1 Ch. 883. Russell J. in that case considered at p. 912 the nature of the court’s jurisdiction to decline to make an order for possession in the following terms:-

‘Accordingly, in my judgment where (as here) the legal mortgagee under an instalment mortgage under which by reason of default the whole money has become payable, is entitled to possession, the court has no jurisdiction to decline the order or to adjourn the hearing whether on terms of keeping up payments or paying arrears, if the mortgagee cannot be persuaded to agree to this course. To this the sole exception is that the application may be adjourned for a short time to afford to the mortgagor a chance of paying off the mortgagee in full or otherwise satisfying him; but this should not be done if there is no reasonable prospect of this occurring. When I say the sole exception, I do not, of course, intend to exclude adjournments which in the ordinary course of procedure may be desirable in circumstances such as temporary inability of a party to attend and so forth’.”

5.6 Bank of Ireland v. Smyth [1993] 2 I.R. 102, was also considered by Dunne J. in the Start Mortgages decision at p. 18, and in the Bank of Ireland case, Geoghegan J. dealt with the suggestion that s. 62(7) gives the Court discretion to refuse an application for possession and stated (at p. 111) of his judgment:

“The words ‘may, if it so thinks proper’ ins. 62(7) mean no more, in my view than, that the court is to apply equitable principles in considering the application for possession.”

Having considered the authorities, Dunne J. held (at p. 19):

“It is clear from the authorities referred to above that s. 62(7) conferred on a registered owner of a charge the right to obtain an order for possession for the purposes of a sale out of court. It can clearly be seen from the decision in the Smyth case, the decisions in the Birmingham Citizens Permanent Building Society v. Caunt and Anglo Irish Bank v. Fanning that the scope of the discretion conferred on the court is very limited. In practical terms if the principal sum due on foot of the charge has become payable the registered owner of the charge is entitled to an order for possession. That is not to say that the borrower is not entitled to an adjournment of proceedings to pay off the mortgage in full or alternatively to come to an arrangement with the lender as to the repayment of the mortgage. However, if the proofs of a plaintiff are in order and there is no other bar to an order being made, then it seems, the court has no discretion but to make the order.”

It was on that basis that counsel for the plaintiff in Start Mortgages argued that there was a right to apply for an order for possession when repayment of the principal monies secured by the instrument of charge had become due. The defendant’s counsel contended that s. 62(7) did not provide a right per se because the granting of such an order was merely discretionary. Dunne J. went on to consider the findings in Director of Public Works v. Ho Po Sang [1961] AC 901 and in Chief Adjudication Officer v. Maguire [1999] 1 WLR 1778 and the statement in Bennion on Statutory Interpretations (5th Ed.) at page 309 and held (at p. 22):

“It seems to me to be clear from the authorities referred to above that if the right at issue has, to use the words referred to in Bennion, become vested by the date of repeal, then the right is one that can be enforced not withstanding the repeal of the particular statutory provision. That being so, it is necessary to look again at the wording of section 62(7) ….”

Dunne J. held that accordingly the right to apply for an order for possession of the lands is saved by s. 27 notwithstanding the repeal of s. 62(7), as it is a right which confers an entitlement and not merely an exception. Having so held, the Judge then addressed the question as to whether the right was acquired or accrued. On that issue, in the case of Director of Public Works v. Ho Po Sang, it was held by Simon Brown L.J. (at p. 1788]:

“… that whether or not there is an acquired right depends upon whether at the date of the repeal the claimant had an entitlement (at least contingent) to money or other certain benefit receivable by him provided only that he takes all appropriate steps by way of notices and/or claims thereafter.”

Dunne J. also considered the case of O’Sullivan v. Superintendent in Charge of Togher Garda Station [2008] 4 IR 212 in relation to the issue as to when rights are acquired. That case concerned the amendment of s. 29 of the Road Traffic Act 1961 by s. 7 of the Road Traffic Act 2006. Section 7 of the Act of 2006 changed the basis upon which a person in respect of whom a consequential disqualification order of not less than two years had been made on conviction for a road traffic offence was entitled to apply for its removal. Under the old provisions of the Act of 1961, an application to restore the driving licence could be made after nine months. Following the repeal, it was not possible in the case of a person disqualified for a period of more than two years to apply for the restoration of the licence before the completion of one half of the period specified, i.e. twelve months. In the O’Sullivan case the Court considered the words “acquired” and “accrued” and identified that at pages 222 and 223 of the O’Sullivan case the judgment had stated:

“I am of the view that the applicants acquired the right or came into possession of the right to apply for the restoration of their driving licences on their conviction and consequential disqualification. The legislature in enacting s. 27(1)(c) and also s. 27(2), clearly saw a distinction between a right acquired and a right accrued. I accept the argument of the applicants that the right to apply arose following conviction and that the right then accrued after the lapse of nine months.”

The plaintiffs in the Start Mortgages case argued that the right was accrued and acquired at the date of registration of the charges and Dunne J. opined that that issue lay in the future. She identified the issue as to whether the lender had a right to apply for possession on the date of repeal and Dunne J. agreed that the right to apply for an order accrued only when the monies were due and until such time as demand for repayment was made. She concluded (at p. 26):

“… having regard to the provisions of s. 62(7) that repayment of the principal monies secured did not become due until such time as demand for repayment of same was made. I agree with her submissions.”

It followed that Dunne J. held that where monies secured by charge became due and demand had been made prior to the 1st December, 2009, the proceedings were not barred, notwithstanding the repeal of s. 62(7). In those circumstances the rights of the lender to apply for an order of possession were saved and proceedings could be continued or instituted, provided that the monies had become due and demand had been made before the date of repeal. If demand was made after the 1st December, 2009, the lender could not have acquired or accrued a right to apply for an order of possession.

5.7 The effect of the Start Mortgages decision is that there is a lacuna in the law following the repeal of s. 62(7). The consequences of the repeal, as identified in the Start Mortgages decision, was that those lenders who did not have an entitlement to apply for an order pursuant to s. 62(7) by the 1st December, 2009 could not after the repeal apply for an order pursuant to s. 62(7). It was also the case that the provisions in the 2009 Act which replaced s. 62(7) applied only to mortgages registered as and from the 1st December, 2009. That situation gave rise to a situation which Dunne J. described (at p. 30) in her judgment in the following terms:

“It (the repeal of s. 62(7)) only applies therefore to mortgages created by deed after the 1st December, 2009. It appears that there is a lacuna created by the repeal of s. 62(7) in that, as I have found, those lenders who did not have an entitlement to apply for an order pursuant to s. 62(7) by the 1st December, 2009, are not in a position of avail of the provisions of the 2009 Act to apply for an order of possession as their right to apply for such an order is not saved by the provisions of the 2005 Act. It is not for the court to supply that which is not contained in the 2009 Act.”

5.8 The judgment in the Start Mortgages case was expressly limited to the particular facts of that case. As Dunne J. (at p. 30) of her judgment:

“I reiterate the fact that this judgment is not intended to deal with any issue other than the right of the lender to apply for an order pursuant to s. 62(7) of the 1964 Act notwithstanding its repeal by s. 8 of the 2009 Act. Any other issues that may arise by way of defence can be dealt with in due course.”

5.9 The implications of the Start Mortgages decision were considered by Laffoy J. in Kavanagh & Anor. v. Jeremiah Lynch & Anor. (Unreported, judgment of Ms. Justice Laffoy of 31st August, 2011). In that case the Court held that where a mortgagee’s statutory rights, powers and remedies, such as the right to appoint a receiver, pursuant to the Act of 1881 had been contractually incorporated into a mortgage granted prior to the 1st December, 2009, then such rights, powers and remedies are enforceable by the mortgagee notwithstanding the repeal of the relevant sections of the Act of 1881 by the Act of 2009. In the Kavanagh case it was argued by the defendants that by extension of the ruling in the Start Mortgages case any appointment of a receiver which was reliant in any way upon the terms of the Act of 1881 was ineffective. Having considered the authorities, including the Start Mortgages case, the Court held that receivers were validly appointed in the cases before the Court in that the relevant mortgages contained express provisions to the effect that the mortgagees had the relevant rights, even though those rights were incorporated by reference to the Act of 1881. Laffoy J. held (at p. 10 and p. 11) as follows:

“3.5 On the basis of the provisions of the 2007 Mortgage and the Mortgage Conditions to which I have referred and the contents and provisions of the documents exhibited by Mr. Lowe, I am satisfied that on the 13th May, 2010 the power of Permanent to appoint a receiver was exercisable and, further, that it was properly exercised by the deed of appointment of that date. By the combined operation of the 2007 Mortgage and the Mortgage Conditions, certain rights, remedies and powers were given to Permanent, in some instances by reference to the Act of 1881. At the time the 2007 Mortgage and those rights, remedies and powers were created, the Act of 1881 was in force. In properly construing the extent of the mortgagee’s rights, remedies and powers, one must read into the 2007 Mortgage and the Mortgage Conditions, where appropriate, the relevant provisions of the Act of 1881 where they have been incorporated therein, subject to any variations which are expressly provided for. The fact that since the commencement of the Act of 2009, on the 1st December, 2009, ss. 15 to 24 of the Act of 1881 have been repealed cannot vary the proper construction of the 2007 Mortgage or impact on the contractual relationship of the mortgagors and Permanent, as mortgagee, thereby created. The rights, remedies and powers conferred on Permanent ab initio in the 2007 Mortgage still apply.

3.6 Accordingly, in my view, the considerations which arose in Start Mortgages Limited v. Gunn and Others [2011] IEHC 275 in consequence of the repeal of s. 62(7) of the Registration of Title Act 1964 (the Act of 1964) by s. 8 of the Act of 2009 do not arise in relation to the power of Permanent to appoint Mr. Lowe as receiver or the nature of the powers conferred on Mr. Lowe as such receiver, insofar as they are conferred by reference to the provisions of the Act of 1881.”

The Court read into the mortgages being considered in the Kavanagh case the relevant provisions of the Act of 1881 subject to any variations expressly provided for. The Court also held that the repeal of the relevant statutory provisions did not alter that construction of the mortgages or the contractual entitlements thereby created as they existed at the time of the repeal. Laffoy J. concluded (at p. 20 and p. 21) in her judgment as follows:

“7.4 On this application, the defendants have raised issues about the title of the plaintiffs as receivers and their powers, which I have addressed earlier, by reference to the provisions of the 2005 Mortgage and the 2007 Mortgage, and they have done so in reliance on the fact that the provisions of the Act of 1881, by reference to which powers were conferred on the mortgagees and receivers appointed by them, have been repealed. On this point, it seems to me that there is a clear distinction between the impact of the repeal of s. 62(7) of the Act of 1964, which provided a statutory remedy to the owner of registered land to apply to court in a summary matter for possession of the land when repayment of the money secured by the charge had become due, as found by Dunne J. in Start Mortgages Limited & Ors v. Gunn & Ors, and the impact, if any, of the repeal of the Act of 1881 on the drafting device universally availed of by draftsmen of security documents of conferring powers on mortgagees by incorporating statutory provisions in force at the time of creation of the security, with or without variation. As I have found, in the latter situation, the ascertainment of the rights and liabilities of the parties to the security document is a matter of construction of the document and the repeal of the statutory provisions does not have the impact advocated by counsel for the defendants. Nonetheless, the issue may be the subject of further debate at the trial of the action. However, at this juncture, on the basis that all of the immovable property the subject of this application was mortgaged by the 2005 Mortgage or the 2007 Mortgage and that both Mr. Kavanagh and Mr. Lowe have been validly appointed as receivers with power to take possession of the respective parts of that property over which each has been appointed a receiver, I am satisfied that the title of each of the plaintiffs to possession cannot be in issue.”

This Court will follow the approach identified by Laffoy J. and, on the facts of this case, is satisfied that there is also a clear distinction between the impact of the repeal of s. 62(7) of the Act of 1964, which was being considered by Dunne J. in Start Mortgages, namely, the entitlement to apply for summary relief and this case where the entitlement to appoint a receiver had been in place by reference to the Act of 1881 at the date of the repeal.

6.1 The decision in the Start Mortgages case dealt only with the issue of the entitlement to apply to court for an order for possession on a summary basis. In this case what is in issue is the right to appoint a receiver. The Court is satisfied that the right to appoint a receiver is of a different nature or order to the right to apply to the Court for an order for possession on a summary basis. The right to appoint a receiver is different in character. A consideration of what is involved leads to the conclusion that a lender who loses the right to apply for possession of mortgaged property on a summary basis still retains the right to apply on a plenary basis. Therefore, what is in issue is the loss of a procedural facility and there is no loss of a substantive right. In contrast, the loss of the right to appoint a receiver would result in the loss of a substantive right. It is also the case that the right to appoint a receiver and in what circumstances was fully in place at the date of repeal. The nature of the distinction between the effect of a change to a right of a procedural nature as opposed to a right of a substantive nature was considered in Wilson v. First County Trust Ltd. (No. 2) [2004] 1 AC 816 at p. 881. Lord Rodger stated in relation to the issue of statutes altering matters of pure procedure as follows:

“199 So far I have been dealing with changes in substantive law. As can be seen from the statement of Wright J in In re Athlumney [1898] 2 QB 547, 552 which I quoted above, changes in matters of pure procedure have been treated differently. Wilde B stated the position most starkly in Wright v Hale (1860) 6 H & N 227, 232: ‘where the enactment deals with procedure only, unless the contrary is expressed, the enactment applies to all actions, whether commenced before or after the passing of the Act’. The justification for treating matters of pure procedure differently was stated by Mellish LJ in Republic of Costa Rica v Erlanger (1876) 3 Ch D 62, 69: ‘No suitor has any vested interest in the course of procedure, nor any right to complain, if during the litigation the procedure is changed, provided, of course, that no injustice is done’.”

The decision in the Start Mortgages cases relates to the loss of a procedural facility and to extend its scope beyond procedural facilities to substantive rights would be to disregard the established rights of mortgagees as recognised in legislation for over one hundred years. The judgment in Start Mortgages was expressly limited to issue before the Court and did not deal with any other issue. The provisions of the Act of 1881 and the implied power of the appointment of a receiver by a mortgagee are well established. The re-enactment of the 1881 provisions in the Act of 2009 in a substantially similar form by way of s. 108 of that Act leads to the conclusion that applying the canons of statutory interpretation and, in particular, the provisions of the Act of 2005, that if the Oireachtas had intended to abolish the statutory power of the appointment of a receiver such abolition would have been expressly provided for in the legislation. Section 27(1)(c) of the Act of 2005 expressly provides that where an enactment is repealed, the repeal does not:

“(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment.”

It is a well established principle consistent with the Act of 2005 that the legislature does not intend to change the law beyond the immediate scope and object of an enactment and that the more radical a change can be said to be, the more weight is given to such presumption. See judgment of Finnegan J. in Meagher v. Luke J. Healy Pharmacy Ltd. [2010] IESC 40 (Unreported, Supreme Court, 16th June, 2010) where Finnegan J. adopted with approval (At p. 19) the statement of the law contained in the textbook Statutory Interpretation- Bennion (2nd Ed.) set forth at s. 269 which stated:

“It is a principle of legal policy that laws should be altered deliberately rather than casually, and that Parliament should not change either common law or statute law by a sidewind, but only by measured and considered provisions. In the case of common law, or Acts embodying common law, the principle is somewhat stronger than in other cases. It is also stronger the more fundamental the change is.”

6.2 In applying the above approach to the facts of this case, the Court is satisfied that the abolition of a substantive right is not comparable with or to be compared with the abolition of a procedural right. The presumption against radical amendments applies with particular force to a purported abolition of a well established substantive right. In those circumstances when the Court comes to ascertain the intention of the Oireachtas it is satisfied that if it had been the intention of the Oireachtas to disapply the provisions of the previously existing law, in particular, the provisions of the Act of 1881 to mortgages created prior to December 2009, the Act of 2009 would have expressly so provided. In applying the provisions of s. 27 of the Act of 2005 to substantive rights as opposed to procedural rights, the Court is satisfied that the facts of this case can be distinguished from Start Mortgages. The provisions of s. 62(7) of the Act of 1964 are unique and provide for an additional procedural right without removing the substantive right. The Court has already indicated that if the Oireachtas had intended to make a radical change to a substantive right it would have expressly and explicitly stated such a change. It was submitted on behalf of the plaintiff in this action that if the intention of the Oireachtas had been to disapply the provisions of the previously existing law, in particular, the provisions of the Act of 1881, to mortgages created prior to 1st December, 2009, the Act of 2009 would have expressly so provided. In this context, it is informative that when s. 111 of the Act of 2009 amends the law in relation to future advances, s.111(4)(a) expressly provides that it applies to mortgages made both before and after the commencement of Chapter 3 of the Act of 2009. It was contended that that demonstrated a clear intention on the part of the Oireachtas to disapply the previous legislation to mortgages created before 1st December, 2009. The Court adopts that argument and is satisfied that if the intention of the Oireachtas had been to disapply other aspects of the pre-existing law to mortgages created by deed prior to the commencement of the Act of 2009, it would have done so by express provision.

7.1 Applying s. 27(1)(c) of the Act of2005 to this case, the Court is satisfied that the mortgagee’s statutory right to appoint a receiver was acquired under the Act of 1881 at the time of the execution of the mortgage and that therefore the operation of the relevant section in the Act of 2005 results in a situation where such acquired or accrued right cannot be abrogated by the operation of a subsequent statute which purports to abolish such a right. Section 19(1) of the Act of 1881 provided:

“A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed ….”

The facts in this case demonstrate that the right to appoint a receiver was conferred immediately upon the creation of the mortgage. Even though as of that date the mortgagee could not exercise that right but could only do so when the mortgage monies became due, the entitlement to do so and the circumstances which would permit the exercise of the entitlement were identified and required no further agreement. The Court is satisfied that a correct analysis of the contractual agreement between the parties and the application of the then relevant legislative provisions as contained in the Act of 1881 to the agreement results in the situation that the power to appoint a receiver was acquired at the time of the creation of the mortgage even though the power did not actually accrue or become capable of exercise until mortgage monies had fallen due. The restriction on the appointment of a receiver until after the mortgage monies had become due can be correctly categorised as a procedural restriction which is placed on the exercise of the power rather than a substantive restriction placed upon the acquisition of the power. Section 24 of the Act of 1881 specifically commences with the words “A mortgagee entitled to appoint a receiver under the power in that behalf conferred by this Act ….” There is no doubt but that the right sought to be relied upon by the plaintiff in this case must have been acquired or accrued, as provided for in the words of s. 27(1)(c) of the Act of2005 and not merely capable of being acquired or accrued to benefit from that provision. The provisions within s. 27 of the Act of 2005 are similar to those contained in the English Interpretation Act 1978. Those provisions have been the subject of review by the English courts in a number of cases which have addressed the issue as to when a right is to be deemed to be acquired or accrued and thus saved by the equivalent English provision to that contained in the Act of 2005.

8.1 In the case of Chief Adjudication Officer & Anor. v. Maguire [1999] 2 All ER 859, the Court of Appeal considered the issue of whether for the purposes of s. 16 of the English Act of 1978, a right could be acquired under enactment before its repeal even though that right was contingent upon an event which occurred only after the repeal. In a paragraph in the judgment headed “Conclusion”, Simon Brown L.J. in giving judgment held (at p. 868):

“I greatly prefer Mr. Howell’s argument. Indeed I think that much of Mr. Drabble’s argument proceeds on a fundamentally false premise. The court is not, in my judgment, engaged on a two stage inquiry, first deciding whether there is a right and then deciding whether it is an ‘acquired’ or ‘accrued’ right. (Incidentally, despite what Lord Hunter said in Moray CC, and perhaps what Atkin LJ hinted at in Hamilton Gell v White, I for my part see no distinction in this context between ‘acquired’ and ‘accrued’. I would note, indeed, that certain of the saving legislation refers to only one of these words- the Ceylon Ordinance in the Free Lanka case to ‘any right acquired’; the relevant provision in Abbott’s case to ‘all rights accrued’.) Rather the court is concerned with a single question: has the claimant established that at the time of repeal he had a right? True, as Lord Evershed observed in the Free Lanka case: ‘The distinction between what is and what is not “a right” must often be one of great fineness.’ But there are now to be found in the authorities helpful touchstones by which to reach the correct answer. A mere hope or expectation of acquiring a right is insufficient. An entitlement, however, even if inchoate or contingent, suffices. The fact that further steps may still be necessary to provide that the entitlement existed before repeal, or to prove its true extent, does not preclude it being regarded as a right.”

This Court adopts the approach identified in the judgment of Simon Brown LJ. It is then necessary to apply that statement of the law to the facts of this case and to consider the single question; has the plaintiff in this case established that at the time of repeal he had a right? In addressing that question, the Court proceeds on the basis that a mere hope or expectation of acquiring a right is insufficient but that an entitlement, however, even if inchoate or contingent suffices. The plaintiff in this case had the rights that a mortgagee possessed under the 1881 Act at the time that the mortgage was created and those rights were acquired rights. Those rights were expressly implied into the deed of mortgage at the time of its creation given that s. 19(1) provided:

“A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed ….”

The rights identified therein are not rights which could be categorised as falling within the hope or expectation category or rights that might be conferred at some future date but were rights which were incorporated as if they were terms of the deed itself. The facts of this case establish that the powers which were incorporated by reference to the Act of 1881 did not become exercisable until default by the defendant. However, the power to exercise such right arises automatically on default and is not a mere hope or expectation and can be correctly identified as a contingent right as of the date upon which the parties entered into the mortgage. The right to appoint a receiver was inchoate as of the date upon which the mortgage was agreed but applying the statement of the law from Simon Brown LJ, set out above, such right was nevertheless a real and acquired right and not a right based upon hope or expectation. The right to appoint was present as and from the date when the mortgage was completed and was not dependent upon any further action being taken or any future agreement.

8.2 Applying the approach identified by Dunne J. in the O’Sullivan v. Superintendent in Charge of Togher Garda Station case, and, in particular, the statement of the law contained at p. 222 of that judgment, to the facts of this case, those facts demonstrate that the mortgagee acquired the right to appoint a receiver upon the creation of the deed of mortgage whilst the Act of 1881 was still in force and even though that right did not accrue until an act of default occurred by the defendant which occurred subsequent to the repeal of the Act of 1881 provisions in the Act of 2009 based upon the ratio of Dunne J. in the O’Sullivan case, leads to the conclusion that the right of the mortgagee to appoint a receiver survived the Act of 2009 by virtue of the provisions of s. 27(1)(c) of the Act of 2005.

9.1 During the course of argument before the Court a distinction was sought to be drawn between the words “acquired” and “accrued”. Various authorities were referred to which indicated disagreement in various decisions of the English courts as to whether or not there was a distinction between the words “acquired” and “accrued”. However, in the light of the determination which this Court has made that the plaintiff had the right to appoint a receiver as of the date of the creation of the mortgage deed even though that right did not accrue until mortgage monies became due, it follows that given the wording of s. 27(1)(c) of the Act of 2005 which provides that a right that is either acquired or accrued is saved by the provisions of that section, this matter does not fall to be considered in this case. The plaintiff had acquired a right as of the date of the creation of the mortgage and that acquired right is saved by the provisions of s. 27(1)(c) of the Act of 2005 and can be relied upon by the plaintiff in this case. The Court is satisfied that the provisions of the Act of 2005 apply and accordingly the rights acquired by the mortgagee under the Act of 1881 continue to apply and that since the provisions of s. 19 of the Act of 1881 were incorporated as a term of the mortgage as of the date of the creation of the mortgage, that term cannot be removed by the operation of a subsequent statute. The plaintiff as mortgagee had a statutory right to appoint a receiver and the receiver had statutory powers under the statutory provision.

10.1 The defendants contended that the bank’s deed of mortgage/charge was not registered and since it was not registered that the charge did not operate as a mortgage by deed and since the charge was not a mortgage by deed, the bank had no power of sale nor had it a power to appoint a receiver. It was therefore claimed that as a result of the non-registration that the bank had no right to summary possession of the premises. The facts are that an application for registration of the charge over the mortgaged property was made on the 15th June, 2009 and that charge was ultimately registered in August 2011. Since the charge is now registered, the issue which the defendant raises in relation to non-registration is moot due to the fact that the registration of the charge, which is now complete, is deemed effective from the date of application which is the 15th June, 2009. The Court must proceed on the basis that the registration was effective from 15th June, 2009, which is prior to the appointment of a receiver.

10.2 A further issue raised by the defendant was that it was claimed that the bank acted in a precipitous manner in sending in a receiver in that it did not give the defendant sufficient time or an adequate opportunity to make a proposal or to deal with the bank and had acted in an unreasonable manner. The evidence which was before the Court both on affidavit, which was admitted in evidence, and on oral evidence, makes it clear that a receiver was only appointed by the bank after there had been extensive discussions, negotiations and meetings between the defendant and his representatives and the bank and their employees and that notwithstanding those events, no agreement could be reached between the parties. The demand on the 11th April, 2011 was not a precipitous demand as it followed upon the extensive negotiations and contacts between the parties and the fact that that demand was made immediately prior to the appointment of the receiver in no way disentitles the bank to appoint the plaintiff as a receiver. As of the date that the plaintiff was appointed receiver there was a sum of over €1,800,000 due by the defendant to the bank and this Court is satisfied that pursuant to s. 19(1)(iii) of the Act of 1881 and pursuant to the provisions of the deed of mortgage, the Ulster Bank became and was entitled to appoint a receiver to the premises following an act of default by the defendant, namely, his failure to pay the monies due and owing to the bank upon demand and when such demand had been made.

11.1 In the light of the above findings, this Court is satisfied that the plaintiff is entitled to the declarations sought at paragraph (1) of the statement of claim, that is a declaration pursuant to the provisions of the Act of 2005 and, in particular, s. 27(1)(c) thereof that the right of Ulster Bank Ireland Ltd. to appoint a receiver to the premises pursuant to the provisions of the Act of 1881 has not been affected by the enactment of the Act of 2009 and that in the light of that declaration and based upon the findings made by this Court, it follows that the plaintiff is entitled to an order compelling the defendant to deliver up possession of the property. It also follows that the defendant’s counterclaim and his claim for damages for trespass, breach of contract and for damages on foot of the undertaking given by the plaintiff to this Court, should be dismissed. The Court is satisfied that there was no trespass and that there was no breach of contract and that the bank as mortgagee had a right to appoint a receiver and that the receiver was appointed after demand had been made and at a time when the defendant was in default. It is also the case that following the plaintiff’s demand to the defendant that the defendant refused to deliver up possession of his premises until ordered by the Court. The Court, therefore, will grant the plaintiff the relief sought as indicated in this paragraph and will dismiss the claims made by the defendant as contained in his counterclaim.

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Stepstone Mortgage Funding Ltd -v- Fitzell & Anor

 [2012] IEHC 142

Judgment by: Mary Laffoy J.

2.            The issue and the relevant facts

2.1 The core issue which the Court has to determine is whether the conclusion of the Master that the plaintiff was incorrect in informing the defendants in the letter of 29th November 2011 that they had no right of appeal was wrong in fact and in law. The determination of that issue turns on the proper application of the “Code of Conduct on Mortgage Arrears” issued by the Central Bank of Ireland in December 2010 to mortgage lenders pursuant to s. 117 of the Central Bank Act, 1989 (the Act of 1989). That code, to which I will refer as the “the Current Code”, replaced two earlier codes (the Code of Conduct on Mortgage Arrears issued by the Financial Regulator in February 2009, and the Code of Conduct on Mortgage Arrears issued by the Financial Regulator on 17th February 2010).

2.2 While the Compliance Affidavit is very comprehensive and covers transactions on the defendants’ mortgage account from November 2007, onwards, for present purposes I consider that it is only necessary to address the factual situation since the Current Code came into effect on 1st January 2011. However, in order to give some perspective on the monthly instalment for which the defendants were liable in 2010 and 2011, I note that it is averred in the Compliance Affidavit that, in February 2010, the plaintiff asked if the defendants could pay €150 per week “as this would cover the monthly instalment and mean that arrears were not increasing”. Accordingly, I assume that the monthly instalment at that stage was in the region of €663. During the eleven months from January 2011 to November 2011, the defendants made no payments for four months, they paid €300 for one month, €400 for five months and €600 for one month. In other words, they only paid €2,900 over eleven months.

2.3 By letter dated 1st July 2011, the plaintiff informed the defendants about the Current Code, that it became effective on 1st January 2011 and that it contained certain requirements which the plaintiff was obliged to adhere to when dealing with borrowers who find themselves in arrears on their mortgage account. There was enclosed with the letter a booklet which explained the plaintiff’s “Mortgage Arrears Resolution Process (MARP)” and what borrowers could expect during the process. The letter would appear to be a standard letter which, I infer in all probability, went to all of the plaintiff’s borrowers.

2.4 A document referred to a “Standard Financial Statement (SFS)” was completed by the defendants, presumably at the request of the plaintiffs, and was received by the plaintiffs on 30th September 2011. However, it was considered by the plaintiff that SFS was incorrectly completed and by letter dated 3rd October 2011 the plaintiff requested the defendants to complete the incomplete sections and return it. Once again, I would surmise that this letter was a standard letter issued to borrowers who had not completed the SFS correctly. For instance, there was a caveat in the letter that failure to provide the plaintiff with a fully completed SFS might cause the defendants to be classed “as borrower who is not co-operating”, so as to allow the plaintiff to commence legal proceedings for possession of the mortgage property. Further, the letter stated that the plaintiff reserved the right to commence such proceedings “if the fully completed SFS was not provided within twenty business days”. That caveat was of no relevance to the defendants because these proceedings were already in being. In any event, the defendants completed the SFS, signed it, dated it 10th October 2011, and returned it to the plaintiff. In the Compliance Affidavit it is averred that the plaintiff assessed the SFS as completed and came to the conclusion that the SFS did not show sufficient disposable income to meet an appropriate level of payment to mortgage account. That led to the letter dated 29th November 2011, which prompted the Master’s decision not to accede to the plaintiffs request to transfer the matter to the Chancery special summons list.

2.5 The letter of 29th November 2011 sets out the total arrears due on the mortgage account at that stage at €17,106.78. The letter stated that, following the assessment of the defendants’ personal and financial circumstances, the plaintiff was not prepared to offer the defendants a repayment arrangement; they did not have sufficient disposable income to enable them to maintain an appropriate level of payments and there was no evidence that there would be any material change in their circumstances. The letter then went on to say:-

“Therefore we intend to proceed with the litigation process for possession of your property which commenced previously. Given that this process has already commenced, you do not have the benefit of the MARP process referred in the 2010 Code of Conduct on Mortgage Arrears [i.e. the Current Code] and, consequently, amongst other things, you do not have the right to appeal this decision”.

It was the plaintiff’s contention in that paragraph that the defendants did not have the right to appeal the decision of the plaintiff that the Master determined was incorrect and it was to rectify what he believed was a mistake on the part of the plaintiff that the Master directed the plaintiff to inform the defendants that they did in fact have a right of appeal. In order to determine what is the correct position it is necessary to consider the provisions of the Current Code.

3.            The Current Code

3.1 In Chapter 1, entitled “Scope” of the Current Code, existing arrears cases are addressed in the following paragraph:

“From 1 January 2011, this Code applies to all existing Arrears cases falling within this Code. While lenders’ attention is specifically brought to provisions 21, 35, 47 and to steps 3 and 4 of the Mortgage Arrears Resolution Process, lenders must ensure that they comply with all provisions of this Code from 1 January 2011.”

It is unquestionably the case that the defendants’ mortgage account was an existing arrears case on 1st January 2011.

3.2 Counsel for the plaintiff emphasised the extent to which matters had advanced as between the plaintiff and the defendants by 1st January 2011. At that stage, these proceedings for possession had been in being for over a year. That being the case, it was submitted by counsel for the plaintiff that the relevant provision of the Current Code as regards what action the plaintiff could take after 1st January, 2011 is provision 50, which provides:-

“In cases where legal action to obtain an Order for Possession has commenced, a lender must endeavour to maintain contact with the borrower or his/her nominated representative. If an alternative repayment arrangement is agreed between the parties before an Order for Possession is granted, the lender must put the legal proceedings on hold, for the period during which the borrower adheres to the terms of the alternative repayment arrangement.”

Taking an overview of the terms of the Current Code, in my view, provision 50 applies in every case in which legal action is commenced, whether before or after 1st January 2011.

3.3 As stipulated in the provision quoted at para 3.1 above, all of the provisions of the Current Code applied to the defendants’ case from 1st January 2011, irrespective of the fact that these proceedings had commenced a year earlier. In the standard letter from the Central Bank to mortgage lenders notifying them of the introduction of the Current Code, under the heading “Transitional Arrangements”, that provision was reiterated and the attention of lenders was specifically brought to the provisions which were set out in that provision, for instance, the limits on unsolicited contact as imposed by provision 21. As regards steps 3 and 4, it was stated:-

“Where no formal arrangement is in place, a lender must review each borrower’s case in accordance with steps 3 and 4 of the MARP”.

The letter then went on to deal with the situation where there was an alternative repayment arrangement in place and stated as follows:-

“Where an alternative repayment arrangement (which was already in place before the introduction of this Code) breaks down, the lender’s ASU must review the borrower’s case immediately, in accordance with provision 41.”

Provision 41 provides:-

“Where a borrower ceases to adhere to the terms of an alternative repayment arrangement, the lender’s ASU must formally review the borrower’s case, including the standard financial statement, immediately.”

The ASU is the centralised dedicated Arrears Support Unit, which each mortgage lender which is subject to the Current Code must establish.

3.4 While not directly relevant to the issue with which the Court is concerned, I think it is worth noting that the standard letter draws attention to “some overlap of requirements between the existing Consumer Protection Code” and the Current Code and to the fact that certain provisions of the Consumer Protection Code have been “disapplied for mortgage lenders when dealing with mortgage arrears and pre-arrears cases”. As I understand the position, the disapplication has been preserved in the Consumer Protection Code 2012.

3.5 In this case, there was an alternative repayment arrangement in place on 1st January 2011. In reality, there had been a series of arrangements and a series of breakdowns. The last arrangement put in place before 1st January 2011 was that the defendants would make a double payment in January 2011 and would pay €600 by 7th January 2011. The defendants only paid €300 in January 2011, so that the defendants had once again failed to adhere to the arrangement with the plaintiff. Therefore, in my view, provision 41 came into play and there was an obligation on the plaintiff to formally review the defendants’ case, that is to say, to go through step 3 and 4 of the MARP. In fact, that is what the plaintiff set out to do in obtaining the completed SFS from the defendants and in conducting the assessment referred to in the letter of 29th November 2011. In my view, the submission made on behalf of the plaintiff that after July 2011 the plaintiff had gone further in engaging with the defendants than it was obliged to do under the Current Code is not correct. It follows that the statement in the letter of 29th November 2011, which I have quoted at para. 2.5 above, to the effect that the defendants did not have the benefit of the MARP process, and, consequently, did not have a right of appeal against the decision of the plaintiff, is not correct.

3.6 The interpretation of the Current Code which, in my view, is the correct interpretation, as set out in the previous paragraph, is consistent with a document which was helpfully put before the court by the plaintiff’s legal advisors- a document which I believe has been produced by the Central Bank and is headed “Mortgage Arrears- Frequently Asked Questions”. The pertinent question is: “I went into mortgage arrears in 2009. Am I covered by the [Current Code]?” The answer given to the question is as follows:

“Yes, you are. Anyone who was in arrears on their mortgage on their home before 1st January 2011… is covered by the [Current Code]. Your lender must apply the protections of the [Current Code] to your case after 1st January, but how they do this will depend on what stage of the Mortgage Arrears Resolution Process (MARP) you are at when the [Current Code] carne into place. For example, if you entered an arrangement with your lender last year and this breaks down after 1st January 2011, your lender must formally review your case immediately. As part of this review, your lender will ask you to complete a Standard Financial Statement (SFS), which you may not have had to do before. Your case will then go through all stages of the MARP process. This means that your case will be assessed by your lender’s Arrears Support Unit, which will consider what form of alternative repayment arrangement is suitable for your current circumstances. If you are not happy with the arrangement you are offered, you can make an appeal to your lender’s Appeals Board…”

3.7 Step 5 of the MARP deals with appeals. Provision 42 provides that a lender must establish an Appeals Board to consider any appeals submitted by borrowers and to independently review, inter alia, the decision of the lender’s ASU. I assume that the assessment referred in the letter of the 29th November 2011 was carried out by the plaintiff’s ASU in accordance with step 3 (provisions 30 to 32 inclusive of the Current Code). Provision 45 provides as follows:-

“A lender must allow the borrower a reasonable period of time to consider submitting an appeal to the Appeals Board, which must be at least 20 business days from the date he/she received notification of the decision of the lender’s ASU.”

In this case, the defendants were not given the opportunity to consider appealing the decision recorded in the letter of 29th November, 2011, as they should have been.

3.8 It was also part of the plaintiff’s case that the defendants, through their consistent and repeated default and non-compliance with the alternative arrangements entered into between the parties, are non-co-operating borrowers. The defendants undoubtedly have reneged on agreements entered into with the plaintiff. However, I think it would be premature to form a view as to whether the defendants are non-co­ operating borrowers at this juncture, given that they have not been afforded the benefit of the Current Code as they should have been. In any event, the evidence before the Court, in the form of the completed SFS, raises the question as to whether the defendants are unable, as distinct from being unwilling, to meet repayment obligations they have taken on.

4.            Submissions

4.1 The Court has been furnished with comprehensive written legal submissions on behalf of the plaintiff to which I have had regard. The submissions have been veryhelpful, particularly, given the non-appearance of the defendants or anybody on their behalf.

4.2 A number of issues were raised in the affidavit of Mr. Kelly in relation to the manner in which the Master dealt with the matter on 6th December 2011. It was contended that he acted outside his jurisdiction in adjourning the matter. As the plaintiff’s papers were in order, it is the plaintiff’s case that the Master’s only role was to transfer the matter to the Chancery Special Summons list. Further, while the position adopted on behalf of the plaintiff at the hearing of this application was that there had not been non-compliance by the plaintiff with the Current Code, it was suggested that compliance with the Current Code is not a necessary proof in an application for possession made by way of special summons.

4.3 On the status of the Current Code in the context of these legal proceedings, the court was referred to the decision of the High Court (Birmingham J.) in Zurich Bank v. McConnon [2011] IEHC 75 where, in the context of an application for summary judgment on foot of a summary summons, there was a discussion of the entitlement of the defendant to raise, by way of defence, his reliance on the Financial Regulator’s Consumer Protection Code. The observations Birmingham J. made were against the background of his finding that the defendant was “emphatically” not a consumer who came within that code, and that his loan agreement predated the coming into force of the relevant code. Having said that, the obiter observations of Birmingham J. are in line with the statement on the status of Central Bank Codes of Practice quoted at para. 5.12 below.

5. Conclusions

5.1 Given that the Court has not had the benefit of evidence or submissions from the defendants and has not had the benefit of any view on the application of the Current Code, either generally or to the circumstances of this case, other than that of the plaintiff, I consider that it is necessary to exercise caution in expressing a viewon the application of the Current Code, particularly in the current economic climate.

5.2 The following passage from Breslin on Banking Law (2nd Ed.) at 3 – 56, which sets out to explain the contractual setting of Central Bank Codes of Practice is helpful in considering the status of the Current Code. It is stated:

“The Central Bank has promulgated Codes of Practice for credit institutions pursuant to its powers under s. 117 of the Central Bank Act 1989. Breach of the code is not a criminal offence and the Act does not spell out any particular consequences in civil law arising from a breach. Breach of a direction by the Central Bank to comply with particular provisions of the Code is a criminal offence. A key question is whether or not these provisions are merely ‘soft law’, i.e. devoid of legal effect such that a breach of a provision in the Code of Practice will not sound in a remedy in civil law for damages. In the unlikely event that the Codes of Practice have been incorporated into the bank­ customer bargain then they apply. Whether a particular requirement is deemed to be an implied term in that contract depends on the particular term sought to be implied, and the circumstances of the case – but the test is not an easy one to meet. It is submitted that the Codes of Practice appear more likely primarily to arise in the context of the analysis of the bank’s duty of care and whether the bank has in a particular case met reasonable standards.”

For present purposes, I accept that passage as an accurate statement of the jurisprudence of the Superior Courts on the status of the Current Code as of now. However, in the light of the observations of the author in Donnelly on The Law of Credit and Security at paras. 9-79 and 20-47, some development of the jurisprudence in this area in the future may be anticipated.

5.3 The legislative basis of the Current Code as set out therein is also consistent with the passage quoted above and is in the following terms:

“This Code is issued under Section 117 of the Central Bank Act 1989.

The Central Bank has power to administer sanctions for a contravention of this Code, under Part IIIC of the Central Bank Act 1942.

Lenders are reminded that they are required to comply with this Code as a matter of law.”

Further, in the standard letter, it is stated that contraventions of the Current Code “may be subject to imposition of administrative sanctions”.

5.4 In summary, the methods of enforcement of the Current Code provided by law are:

(a) the administrative sanctions provided for in Part IIIC of the Act of 1942 (as inserted by s. 10(1) of the Central Bank and Financial Services Authority of Ireland Act 2004 (the Act of 2004); and

(b) criminal prosecution for breach of offences created by subs. (4) of s. 117 of the Act of 1989 (as substituted by Schedule 3 of the Act of 2004).

5.5 Notwithstanding what is stated in the preceding paragraphs, I find it impossible to agree with the proposition that, in proceedings for possession of a primary residence by way of enforcement of a mortgage or charge to which the Current Code applies, which comes before the court for hearing after the Current Code came into force, the plaintiff does not have to demonstrate to the Court compliance with the Current Code. To take what is perhaps the best known provision of the Current Code, the imposition of a moratorium on the initiation of proceedings, which is now contained in provision 47 of the Current Code (and which was also to be found in the earlier codes, although the moratorium period in the case of the earliest code was six months, rather than twelve months), surely a court which is being asked to make an order which will, in all probability, result in a person being evicted from his or her home, is entitled to know that the requirement in provision 47, which has been imposed pursuant to statutory authority, is complied with. Moreover, it is likely that it would render the enforcement of provision 47 nugatory, if a lender did not have to adduce evidence to demonstrate that the moratorium period had expired.

5.6          On the facts of this case, for the reasons set out in paragraph 3.7 above- that the defendants were not given the opportunity to consider appealing the decision of the plaintiff recorded in the letter of 29th November, 2011- I consider that the Current Code was not complied with.

5.7          Under O.38, r. 6 of the Rules of the Superior Courts, 1986, it is provided:

“In all cases in which he shall not have jurisdiction… the Master shall transfer the summons, when in order for hearing, to the Court list for hearing on the first opportunity”.

In this case, the position of the plaintiff on 6th December, 2011 was that the case was ready for hearing. Aside from the application on behalf of the defendants for an adjournment by counsel in circumstances where an appearance had not been entered, which, as I understand from Mr. Kelly’s affidavit, the Master was not inclined to accede to, it seems to me that the function of the Master was to transfer the proceedings to the Chancery Special Summons list. In the light of the view I have taken of the application of the Current Code to the defendants’ case, however, that would not have availed the plaintiff because, on the basis of the evidence before the court now, in my view, they are not entitled to an order for possession, not having complied with the Current Code.

6.            Form of order

6.1          I propose hearing further submissions from the plaintiff as to the form of order which the court should make in the light of the conclusions set above, the objective being to minimise the use of court time and to minimise the legal costs in relation to the matter.

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Irish Life & Permament Plc -v- Duff & Anor

 [2013] IEHC 43 (

Hogan J.

20.          Section 62(7) of the 1964 Act provided that:-

“When repayment of the principal money secured by the instrument of charge has become due, the registered owner of the charge … may apply to the court in a summary manner for possession of the land …, and on the application the court may, if it so thinks proper, order possession of the land … to be delivered to the applicant, and the applicant, upon obtaining possession of the land …, shall be deemed to be a mortgagee in possession.”

21.          This sub-section must be read in context with its companion sub-section, s. 62(6) of the 1964 Act:-

“On registration of the owner of a charge on land for the repayment of any principal sum of money with or without interest, the instrument of charge shall operate as a mortgage by deed within the meaning of the Conveyancing Acts, and the registered owner of the charge shall, for the purpose of enforcing his charge, have all the rights and powers of a mortgagee under a mortgage by deed, including the power to sell the estate or interest which is subject to the charge.”

22.          Section 62(7) was, however, repealed with effect from 1st December, 2009, by s. 8(3) and Schedule 2, Part 5 of the Land and Conveyancing Law Reform Act 2009 (“the 2009 Act”). But as Laffoy J. herself pointed out in EBS Ltd. v. Gillespie [2012] IEHC 243 (as had indeed Dunne J. in her judgment in Start Mortgages Ltd. v. Gunn [2011] IEHC 275), s. 27(1) of the Interpretation Act 2005 (“the 2005 Act”) provides that the repeal of any enactment does not “…affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment.” Section 27(2) of the 2005 Act provides that where an enactment is repealed, any legal proceedings (including civil proceedings) may be “instituted, continued or enforced…as if the enactment had not been repealed” in respect of the right or obligation in question.

23.          Laffoy J. then continued thus in Gillespie:-

“In order to determine whether, notwithstanding the repeal of s. 62(7), the jurisdiction of the Court to make an order for possession under that provision is alive as regards the plaintiff’s claim against the defendant in these proceedings, the crucial question is whether it has been established that the plaintiff had acquired as against the defendant a right to seek the statutory remedy in the form of an order for possession of the property secured by the charge prior to 1st December, 2009. The answer to that question turns on the application of the requirements of s. 62(7) in the context of the agreement between the plaintiff and the defendant embodied in the charge to the facts. In performing that exercise, because it is the easiest course to adopt, I propose looking at the matter from the historic perspective and considering whether the plaintiff has established that it had a right to seek an order for possession prior to 1st December, 2009. However, it is not to be inferred that I consider that such approach is the only approach to answering the crucial question.

In order to establish that its claim for possession came within s. 62(7) prior to 1st December, 2009, the plaintiff has to establish compliance with the two requirements expressly set out in the sub-section, namely:-

(a) that repayment of the principal monies secured by the charge had become due by that date; and

(b) that the plaintiff was the registered owner of the charge.

Requirement (b) was clearly complied with. As regards requirement (a), it is necessary to consider what was agreed between the plaintiff and the defendant in relation to repayment of the principal money secured by the charge. Apart from those two requirements, the Court must be satisfied that it would have been proper to afford the plaintiff the statutory remedy of an order for possession against the defendant to enforce the right acquired. Having regard to the observations of Geoghegan J. in Bank of Ireland v. Smyth [1993] 2 IR 102…., I consider the Court would have to be satisfied not only that the application was made bona fide with a view to realising the plaintiffs security, but also that the power of sale had arisen and was exercisable by virtue of the terms of the agreement between the plaintiff and the defendant contained in the Charge.”

24.          It is plain here that ILP are the registered owner of the charge. The real question is whether the monies in question had become due prior to 1st December, 2009. In the letter of demand dated 11th December, 2008, ILP referred to the arrears of almost €7,500 and then said:-

“As a result of the arrears stated above and the terms of your mortgage, the Bank is now entitled to recover possession of the mortgaged premises.

Accordingly, unless the above mentioned arrears are discharged within 21 days of today’s date, or, alternatively, vacant possession is given to the Bank within 21 days; we will issue proceedings without further notice against you for a Court Order for the recovery of possession of the premises so that the property may be sold….”

25.          It is clear, however, that the letter refers simply to the arrears and not to the principal sum. Put another way, had the arrears been discharged as of that date, then it is plain that ILP would not have proceeded further. While counsel for ILP, Mr. Seligman, accepted that no formal demand for repayment of the entirety of the mortgage monies was made by letter, he insisted that this was not necessary having regard to the relevant terms and conditions of the mortgage itself, namely, condition 6(2)(a), condition 6(4)(a) and condition 7(1) which may now be conveniently considered.

26.          So far as condition 6(2)(a) is concerned, it merely says that formal notice requiring payment of the mortgage debt shall not be required. But this in itself does not tell determine whether the debt had become payable. Condition 6(4) is likewise not dispositive, since it simply purports to give ILP the right to enter into possession of the property without notice to the mortgagor “at any time after the total debt has become immediately payable”. This condition does not, however, determine whether the total debt has become payable.

27.          Clause 7.1 provides, however, that:-

“The total debt shall become immediately payable to permanent tsb:-

1. If the mortgagor defaults in the making of two monthly repayment or for two months in the payment of any other moneys payable under the mortgage…”

28.          It is, of course, true that there had been such default on the part of the mortgagor such as rendered the debt payable immediately given that more than two monthly payments had been missed. But this contractual clause in the mortgage deed had itself been almost instantly overtaken by the letter of 11th December, 2008, which, in effect, promised the mortgagor that the mortgage debt would not become due if the arrears were discharged. Could it be suggested that if the Duffs had, in fact, paid the arrears at that time that ILP could validly have called in the mortgage, the provisions of Condition 7.1 notwithstanding?

29.          To my mind, it is clear that ILP could not so have demanded the repayment or otherwise contended that the entirety of the mortgage monies had become due, since by writing the letter in question, the bank were effectively waiving or superseding the strict entitlements of the mortgage deed. In essence, the letter amounted to a representation that the entire sum was not due. All of this is further underscored by the fact that in response to the letter of December 2008, Mr. and Ms. Duff offered to make two payments of €1,500 on 6th February, 2009, and 13th February, 2009. The Bank wrote in response on 28th January, 2009 agreeing to this, although stressing the importance of making these payments on or before that date. While, of course, the Duffs found it impossible to keep up with the repayments schedule, this sequence correspondence further illustrates that the Bank had not actually called upon the Duffs to repay the entire mortgage at this point or that it had ever in reality required them to do so.

30.          In these circumstances, I am driven to the conclusion that as ILP had not unequivocally demanded repayment of the entirety of the mortgage debt prior to 1st December, 2009, the bank had not, in the words of Dunne J. in Start Mortgages, “acquired the right to apply for an order pursuant to s. 62(7) [as] the principal monies secured by the mortgage have not become due”. It follows, therefore, that this Court has no jurisdiction to grant the plaintiff bank possession pursuant to s. 62(7), as the latter’s right to apply for possession under that sub-section had not by 1st December, 2009, sufficiently crystallised for the purposes of s. 27(5) of the 2005 Act.

Does the Court have jurisdiction to grant the Bank possession of registered land pursuant to a contractual agreement?

31.          Counsel for the Bank, Mr. Seligman, argued forcefully that even if it could not avail of the right to possession under s. 62(7) of the 1964 Act, it was nonetheless entitled to possession as a matter of contractual entitlement. I think that the short answer to that is that the Oireachtas had originally designated s. 62(7) as the sole mechanism whereby this Court could grant possession in this fashion to the holder of a mortgage over registered land (i.e., the well-charging procedure coupled with an order for sale described in the next paragraph excepted). Section 62(7) – following its earlier predecessor, s. 13 of the 1942 Act – thus rectified the yawning gap in the powers of such a mortgagee which Andrews L.J. had identified in Devlin by expressly granting such a power, such as already had been done for the first time in 1942. Given that the Oireachtas has removed that power – save in those cases of demand having been made or the entirety of the mortgaged sum fell due prior to 1st December, 2009 – in the case of pre-2009 Act mortgages of registered land, this Court cannot supply a power to recover possession where none existed in the first place independently of statute.

32.          Of course, this does not at all mean, for example, that the Bank cannot sue independently to obtain a well-charging order and to ask the Court to exercise its “inherent” power of sale in that fashion: see Bank of Ireland v. Waldron [1944] IR 303 and Wylie, Irish Land Law (4th Ed., 2010) at 801. Rather, all that has been decided by me is that as the Bank neither demanded repayment of the entire sum nor that the entire sum had properly become due prior to 1st December 2009 (the terms of the mortgage deed notwithstanding), the statutory power to allow a mortgagee possession by means of court order in respect of registered land is no longer exercisable. Absent the applicability of that (now repealed) statutory power and given that the successor to s. 62(7) provided for in s. 97(2) of the 2009 Act only applies to mortgages created after 1st December, 2009, this Court cannot, as it were, create or invent a new power to grant the mortgagee possession.

33.          I cannot, however, pass from this point without observing that ILP did not raise – and, of course, could not validly raise in the Circuit Court – the constitutionality of s. 8(3) of the 2009 Act insofar as it repealed a mortgagee’s right to seek an order for possession under s. 62(7) of the 1964 Act. Naturally, in view of the express language of Article 34.3.2 of the Constitution, the constitutionality of any enactment can only be challenged in original proceedings commenced in the High Court.

34.          From the standpoint of ILP, however, the constitutionality of such a measure might well be questioned. After all, the mortgagee might well ask why, as a result of what it might fairly consider a piece of legislative legerdemain, an essential ingredient of its security interest (namely, the right through court order to recover possession of the mortgaged property) was now made contingent on the essentially fortuitous issue as to whether a full demand for repayment had been made or the mortgage sum had otherwise become due prior to 1st December, 2009, even though the significance of this date was only to become apparent some time later in July, 2011 following the decision of Dunne J. in Start Mortgages.

35.          In these circumstances, a lender might well question whether the legislation was based on rational considerations, i.e., the very first limb of the Heaney proportionality test (Heaney v. Ireland [1994] 3 I.R. 593). This concern might well be re-inforced when one considers that more or less the same power was simultaneously re-introduced for mortgages created after 1st December, 2009, by s. 97(2) of the 2009 Act. One might also query whether by significantly curtailing (or, at least, circumscribing) a lender’s right to possession in this fashion, the Oireachtas unfairly struck at the substance of the lender’s property rights in a disproportionate fashion, which in this instance is the right to recover the security given in exchange for the loan where the borrower has defaulted.

36.          These, however, are issues which will be doubtless ventilated in other proceedings and it would be inappropriate at this juncture to do any more other than to raise these issues and to draw attention to them.

Does the Court have jurisdiction to grant possession in respect of the unregistered land?

37.          Prior to the enactment of the 2009 Act, the legal status of mortgages over unregistered land was underwritten by a great deal of legal fiction which, although hallowed by unquestioned usage over the centuries, had long ceased to have any real or practical reality. In theory, the mortgagee generally took a conveyance of the lands by fee simple, subject to the mortgagor’s equity of redemption. For so long, therefore, as the mortgagor honoured the terms of the mortgage, he or she was entitled to possession. This is all faithfully reflected in the indenture of mortgage created in the present case so far as the unregistered portion of the land is concerned.

38.          One of the great achievements of the 2009 Act has been to liberate the law from these unnecessary and cumbersome fictions. Accordingly, therefore, the creation of mortgages over unregistered land after 1st December, 2009, has been largely assimilated to that regarding registered land, so that the mortgage now operates as a charge on the title of the mortgagor: see s. 89 of the 2009 Act.

39.          The present case concerns a pre-2009 Act mortgage, so that the mortgagee is entitled under the mortgage to possession by virtue of the fact that – reflecting the then prevailing legal fiction of which we have just spoken – Mr. and Ms. Duff had conveyed unto ILP their entire beneficial estate subject to the equity of redemption. That in turn meant that they were entitled to possession of the property by virtue of that equity of redemption, subject only to compliance with their repayment of obligations under the mortgage.

40.          There is fundamentally no dispute but that the present mortgage is significantly in arrears. Nor could it be realistically argued that ILP are not otherwise entitled in principle to possession in respect of the unregistered portion of the lands (subject to the question of a stay). But here again it is necessary to re-visit the legal fiction underpinning a mortgage of this kind in respect of unregistered land

41.          In theory, the mortgagee is entitled to take possession peaceably without even the need for a court order. As Mr. Seligman fairly stressed, this in practice never arises. What happens, however, is that even in the case of unregistered land, the practice had de facto assimilated itself to that of registered land, so that the lender here too would first ask the Court for order for possession and forebore to exercise the right to possession which the mortgage deed clearly gave him, even where the mortgagor had forfeited his equity of redemption by defaulting on the mortgage repayments

42.          It is, of course, true that there is modern authority for the proposition that a mortgagee is entitled to take peaceable possession of the dwelling of a defaulting mortgagor without the need for a court order: see First National Building Society v. Gale [1985] IR 609, 612, per Costello J. Yet the decision in Gale must now be re-examined in the light of Article 40.5 of the Constitution and the contemporary jurisprudence concerning the interpretation of this constitutional provision insofar as the pre-2009 Act law permits the peaceable recovery of dwellings situate on unregistered land by the mortgagor without the necessity for court order.

43.          It is true that Gale rests on the idea of a contractual licence (i.e., the right of the mortgagee to take possession pursuant to the deed once the defaulting mortgagor has lost the equity of redemption) and one might, of course, say that any homeowner is free to come an agreement that he or she will allow a third party to take possession in defined circumstances. But this would be to allow the triumph of ancient legal fictions over the requirements of justice in a modern society.

44.          The key points, however, in this context are surely the requirements of notice, foreseeability and independent determination of the objective necessity for yielding up of possession which is inherent in the judicial process. All of these are key values comprised in the very essence of the protection of the “inviolability” of the dwelling guaranteed by Article 40.5. This was issue which did not feature at all in Gale, but which now requires to be evaluated in this context in the light of the contemporary case-law.

45.          In the aftermath of the Supreme Court’s decision in Damache v. Director of Public Prosecutions [2012] IESC 11, [2012] 2 ILRM 153 (where legislation permitting the grant of non-judicial warrants in respect of a family home was found unconstitutional), the Court of Criminal Appeal has taken the opportunity in a series of cases to emphasise what Hardiman J. described in The People (Director of Public Prosecutions) v. Cunningham [2012] IECCA 64, [2012] 2 ILRM 406 as the “intrinsic importance” of Article 40.5 to a free and democratic society.

46.          In another post-Damache decision, The People (Director of Public Prosecutions) v. O’Brien [2012] IECCA 68, Hardiman J. also observed that:-

“Article 40.5 by guaranteeing the ‘inviolability’ of the dwelling reflects long standing constitutional traditions in both common law and civil law jurisdictions, features of which were stressed in both Damache and Cunningham respectively. This constitutional guarantee presupposes that in a free society the dwelling is set apart as a place of repose from the cares of the world. In so doing, Article 40.5 complements and re-inforces other constitutional guarantees and values, such as assuring the dignity of the individual (as per the Preamble to the Constitution), the protection of the person (Article 40.3.2), the protection of family life (Article 41) and the education and protection of children (Article 42). Article 40.5 thereby assures the citizen that his or her privacy, person and security will be protected against all comers, save in the exceptional circumstances presupposed by the saver to this guarantee.”

47.          If I might also venture to repeat what I said in Sullivan v. Boylan [2012] IEHC 385 in this context:-

“The Irish language text of Article 40.5 (“Is slán do gach saoránach a ionad cónaithe….”) captures and expresses the essence of the English language word (“inviolability”) by stressing the concepts of safety and security of the dwelling.”

48.          This assurance of security and protection inherent in the guarantee of “inviolability” would be fundamentally compromised if peaceable possession of a dwelling could be taken by a lender at almost any time other than by means of a court order without express notice to the borrower in the manner envisaged by Costello J. in Gale merely because the borrower was in default, even if this were to be contractually agreed by reason of the pre-2009 Act fictions in respect of unregistered land we have just examined. Nor could this be assured if the determination as to whether the borrower was in actually in default was to be left to the say-so of the lender or whether there was an objective justification for the mortgagee taking possession of the dwelling without any independent determination of these questions by the judicial branch.

49.          This conclusion, in any event, merely reflects the new statutory prohibition which (subject to minor exceptions) precludes a mortgagee taking possession of mortgaged property without a court order and which is now provided for in the 2009 Act: see s. 97(1) of the 2009 Act.

50.          None of this is to suggest that a defaulting borrower can invoke Article 40.5 to avoid having to yield up possession where a court so orders, no more than Article 40.5 can be invoked to justify the unlawful construction of a dwelling on another’s land or the construction of a dwelling without planning permission: see, e.g., Wicklow County Council v. Fortune [2012] IEHC 406. It is, however, to say that those elements of formal notice, foreseeability and an independent determination of the objective necessity for possession of the dwelling are presupposed by the guarantee of inviolability and these protections cannot be assured outside the judicial process or, at least, something akin to the judicial process.

51.          All of this means that even in the case of unregistered land, the homeowner cannot be required to give up possession save by court order. But unlike the position with regard to registered land (which was governed by statute), in the case of unregistered land the courts have always assumed a jurisdiction to grant possession and, in fairness, mortgagees have always (or, at least, almost always) submitted to the necessity for court adjudication and an actual order before taking possession ever before the enactment of s. 97(1) of the 2009 Act.

52.          All of this is to say that the court retains a jurisdiction to determine whether to make an order for possession in the case of unregistered land and this general jurisdiction to grant possession is not affected by the operation of the 2009 Act in the same manner as has occurred in the case of registered land. The real question, therefore, is whether this Court should exercise that jurisdiction in this particular case. It is contended, however, that by failing to engage with Mr. and Ms. Duff with regard to the issue of mortgage arrears and their capacity to repay, ILP have not complied with the Financial Regulators’ Code of Conduct and that, as a result, no order for possession should now be made.

53.          It is, therefore, to this final issue to which we can now turn.

The Code of Conduct

54.          As we just seen, the claim that ILP have not complied with the Financial Regulator’s Code of Conduct on Mortgage Arrears is central to the defendants’ defence of these proceedings. It is thus necessary to consider the somewhat troublesome issue of the precise legal status of the Code of Conduct. At the outset, it is, however, necessary to state how the defendants maintain that ILP have not complied with the Code.

55.          First, according to the latest affidavit sworn by Mr. Duff on the 13th November, 2012, he was never offered “any alternative repayment arrangement” or a “mortgage holiday, deferred payments, interest only or recapitalisation”. He also says without contradiction that he made an oral offer of interest only repayments, but that this was rejected and that he was not informed of his right to appeal.

56.          Second, Mr. Duff also objects to the way in which he and his wife were classified as “non co-operating borrowers” by the Bank. He acknowledges that his wife sold a small portion of land which, after expenses, came to €6,200. These funds were used to discharge basic household essentials (such as food and to pay arrears due in respect of electricity bills). He says that the Bank were fully aware of this proposal – something which the Bank denies – and that they was never an agreement that the proceeds of the sale would be paid to the Bank.

57.          The Code itself is promulgated under s. 117 of the Central Bank Act 1989 (“the 1989 Act”). Section 117(1) provides that:-

“(1) The Bank may, after consultation with the Minister [for Finance], from time to time draw up, amend or revoke, in relation to any class or classes of licence holders or other persons supervised by the Bank under this or any other enactment, one or more than one code of practice concerning dealings with any class or classes of persons and every such code shall be observed by the licence holders, or other persons so supervised, to whom they relate.”

58.          There is no doubt but that the Central Bank, as regulatory authority, has power to invoke the administrative sanctions procedure contained in Part IIIC of the Central Bank Act 1942 (as amended by s. 10(1) of the Central Bank and Financial Services Authority of Ireland Act 2004)(“the 2004 Act”). Breach of the code is designated as a criminal offence: see s. 117(4) of the 1989 Act (as substituted by Schedule 3 of the Act of 2004).

59.          It is, of course, important to recall that the Oireachtas could not by means of enacting s. 117 effectively give the Central Bank the power to change the substantive law by making codes made pursuant to this provision. As this Court recently pointed out in the (admittedly different) context of guidelines governing prosecutorial discretion, an administrative officer cannot effectively change or alter the law through this mechanism, since the power to enact legislation is constitutionally reserved to the Oireachtas by Article 15.2.1 of the Constitution: see Fleming v. Ireland [2013] IEHC 1. Likewise, in Crawford v. Centime Ltd. [2005] IEHC 325, [2006] 1 ILRM 543, Clarke J. held that the Revenue Commissioners enjoyed no general discretion to waive, alter or otherwise dispense with the law by means of published guidelines, even if those guidelines had the merit of enabling taxpayers better to understand their legal rights and obligations. By the same token the Supreme Court held in Curley v. Governor of Arbour Hill Prison [2005] IESC 49, [2005] 3 IR 308 that secondary legislation could not be read as having been superseded by an industrial relations agreement, even if the secondary legislation in question had itself been the product of industrial relations negotiations.

60.          The question of the status of the Code has been examined in a number of recent cases. In Zurich Bank v. McConnon [2011] IEHC 75 Birmingham J. rejected the suggestion that the Code created any justiciable rights at the hands of a consumer:-

“Entirely lacking is any suggestion that a breach of the Code renders the contract null and void or otherwise exempts a borrower from the liability to repay. The questions of sanctions is referred to in s. 33AQ of the Central Bank Act 1942, as amended by s. 10(1) of the Central Bank and Financial Services Authority of Ireland Act 2004. This contains provisions for matters such as caution or reprimand, the payment of a monetary penalty to the financial regulatory authority, disqualification provisions and the like, but again there is no suggestion that a lender is prohibited from seeking repayment from its borrower. The contrast between the approach taken in the Code and the approach of the Consumer Credit Act 1995, is striking. Section 30 of the Act contains mandatory provisions concerning a credit agreement or contract of guarantee entered into by a consumer. Matters such as a requirement for the agreement to be in writing and for a cooling off period are dealt with. Section 38 of the Act deals with the consequences of failing to comply with the requirements of the section and provides that a creditor will not be entitled to enforce a credit agreement or contract of guarantee and that any security given shall not be enforceable. There are no comparable provisions whatever in the Code.”

61.          One might add that s. 117 of the 1989 Act contains no mandatory sanction of voidness such as has been adopted in other cases where the consumers have either pledged the credit of or were otherwise engaged in selling their family home, of which s. 3(1) of the Family Home Protection Act 1976 is perhaps only the most notable example. Birmingham J. then went on to reject the implied terms argument:-

“The defendant has argued that the Code forms an implied term of the contract. There are a number of fundamental difficulties with this argument. First of all the question arises by what method is it suggested that a term has been implied. It is not the case that any terms have been implied by statute. There is also the question of what term would be implied if a mechanism for doing so was found. The only implied term that would assist the defendant would be a term that the Bank was obliged to comply in all respects with the Code and that the consequence of non compliance was that the borrower was exempted from the liability to repay the loan. If one introduces the traditional officious bystander into the equation then it would be seen that such a suggestion has little reality. The notion that a bystander asking whether such a term formed part of the agreement would be hushed by the parties jointly and impatiently snapping “of course” seems more than improbable. In summary I can see no basis for suggesting that any alleged breach of the Code exempts the borrower from repaying his loan.”

62.          Of course, it must be acknowledged that while Birmingham J. found against the defendant on this ground, this was against a background where the judge had also found that he was not a “consumer” within the meaning of the Code and, furthermore, that the loan in question had been executed some two weeks before the first such Code had been promulgated. These comments were, accordingly, in all strictness merely obiter dicta.

63.          A somewhat different approach is, perhaps, evident in the judgment of Laffoy J. in Stepstone Mortgage Funding Ltd. v. Fitzell [2012] IEHC 142. This was an undefended mortgage suit wherein the plaintiffs sought possession. While she acknowledged that it was necessary “to exercise caution in expressing a view on the application of the Current Code, particularly in the current economic climate”, Laffoy J. also acknowledged that “some development of the jurisprudence in this area in the future may be anticipated”.

64.          In that case Laffoy J. held that the Code was applicable to the facts of that case and concluded that because the defendants in question had not been given any adequate opportunity of appealing a particular decision of the lender to an Appeals Board in the manner required by the Code, the plaintiff lender was thus in default.

65.          Laffoy J. then proceeded to hold that:-

“Notwithstanding what is stated in the preceding paragraphs, I find it impossible to agree with the proposition that, in proceedings for possession of a primary residence by way of enforcement of a mortgage or charge to which the Current Code applies, which comes before the court for hearing after the Current Code came into force, the plaintiff does not have to demonstrate to the Court compliance with the Current Code. To take what is perhaps the best known provision of the Current Code, the imposition of a moratorium on the initiation of proceedings, which is now contained in provision 47 of the Current Code (and which was also to be found in the earlier codes, although the moratorium period in the case of the earliest code was six months, rather than twelve months), surely a court which is being asked to make an order which will, in all probability, result in a person being evicted from his or her home, is entitled to know that the requirement in provision 47, which has been imposed pursuant to statutory authority, is complied with. Moreover, it is likely that it would render the enforcement of provision 47 nugatory, if a lender did not have to adduce evidence to demonstrate that the moratorium period had expired.”

66.          Laffoy J. then concluded that the plaintiff lender was not entitled to possession because it could not show it had complied with the provisions of the Code. This was because she concluded that the borrowers had not been advised of their right to appeal in the manner required by the Code.

67.          The present case is governed by the 2009 Code of Conduct which was the one applicable at the time of the commencement of the proceedings. Clause 6 of the Code provides that:-

“the lenders must not seek repossession of the property until every reasonable effort has been made to agree an alternative repayment schedule with the borrower or his/her nominated representative. However where it is clear that the borrower is deliberately not engaging with the lender or where other circumstances reasonably justify [it] the lender may seek repossession in the absence of any engagement with the borrower.”

68.          The question, for example, of what constitutes a “reasonable effort” on the part of the lender does not easily lend itself to judicial analysis by readily cognisable legal criteria. How, for example, are “reasonable efforts” to be measured and ascertained? If, moreover, non-compliance with the Code resulted in the courts declining to make orders for possession to which (as here) the lenders were otherwise apparently justified in seeking and obtaining, there would be a risk that by promulgating the Code and giving it a status that it did not otherwise legally merit, the courts would, in effect, be permitting the Central Bank unconstitutionally to change the law in this fashion. Likewise, the argument advanced by Birmingham J .in McConnon regarding the absence of any statutory indication that failure to comply with the Code would affect the ability of the lender to secure relief may be thought to be a forceful one.

69.          While I am acutely conscious of these concerns, given these cross-currents of judicial opinion, I feel that I must nonetheless follow the most recent pronouncement of this Court in Fitzell, given that this is the most recent and authoritative analysis of this question where the judicial comments formed part of the ratio of the decision: cf. by analogy my own judgment in AG v. Residential Institutions Redress Board [2012] IEHC 492 and the comments of Clarke J. for the Supreme Court in Kadri v. Governor of Cloverhill Prison [2012] IESC 27 regarding the importance (where possible) of maintaining stare decisis at High Court level in respect of earlier High Court decisions. This is especially so where the decision is recent and all issues have been fully considered. It is essentially for that reason that I feel that I must follow Fitzell while departing from the earlier decision in Gale, the latter decision having been overtaken in any event by constitutional and statutory developments.

70.          Proceeding from that standpoint, therefore, in the present case I feel I cannot ignore the averment made by Mr. Duff that he offered the Bank interest only repayments in 2009, but that this was rebuffed. In these circumstances, I find myself coerced to the conclusion that the Bank did not comply (or, at least, comply fully) with the requirements of Clause 6 of the 2009 Code prior to the effective commencement of the proceedings in that it cannot be said that “every reasonable effort” had been made to agree an alternative repayment schedule in the discussions which ensued in 2009, even if some of these discussions formally post-dated the commencement of the present proceedings by some weeks or even months.

71.          Nor can it be said that at that stage – whatever possibly may have been the case subsequently – that the Duffs were non-cooperating borrowers. On the contrary, they seem to have been as frank and forthcoming with the Bank – whether personally or through their solicitors in correspondence – to the effect that they were facing acute financial difficulties and sought some way out of the dreadful circumstances into which they – like so many others – had been plunged.

Conclusion

72.          In these circumstances, I must therefore conclude:-

A. The Court no longer has jurisdiction to make an order for possession of the registered land in view of the repeal of s. 62(7) of the 1964 Act. Nor had the rights of the Bank accrued prior to 1st December 2009, since the entirety of the mortgage monies had neither been demanded nor were they actually due prior to that date.

B. The Court has a jurisdiction to grant possession in respect of the unregistered land. While the level of arrears is such that an application for possession would normally be justified, in the present case, following the decision of Laffoy J. in Fitzell, I must ask whether the Bank have complied with the Code of Conduct.

C. As I have concluded that the Bank did not so comply with the requirements of Clause 6 of the Code in the manner that I have indicated, in line with the reasoning in Fitzell, it would not be appropriate for me to exercise a judicial discretion in favour of granting an order for possession.

D. It is in these special circumstances that I propose to allow the appeal and I would therefore decline to grant the Bank an order for possession. None of this should be taken as precluding the Bank taking such further steps to realise the security as it may now consider appropriate in the light of this judgment.

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Bank of Ireland v. Waldron

[1944] IR 303

Overend J.         

 This matter comes before me on a motion by the purchaser, Patrick Martin, that £892 19s. 6d. may be paid to him out of his purchase money, which is still in Court, as compensation for delay in completing the sale to him of the defendant’s farm at Carrowbaun, Masmore, directed to be sold in this matter, and also, in respect of damage to the crops, fences and premises, after the date of sale and before the purchaser was put into possession.

 The defendant held the said lands in fee simple, and by indenture of mortgage, dated 7th February, 1923, had conveyed the same to the plaintiffs, by way of mortgage. On 20th November, 1940, the plaintiffs issued a summary summons to realise the amount due to them. The defendant did not appear, and on the 21st day of January, 1941, the Court made an order declaring the mortgage well charged, and ascertained the principal sum due at £5,786 19s. 11d. with interest thereon (unless the defendant disputed that amount within one month), and, in default of payment within three months from the service of the order, directed the premises to be sold. The plaintiffs obtained carriage of the sale.

 This order was duly served on the defendant on the 20th February, 1941, but the plaintiffs were not paid. The particulars and conditions of sale were settled on the 4th February, 1942. The particulars stated that “vacant possession will be given to the purchaser,” and the conditions were in the prescribed form. The auction was to be held on 24th February, 1942, and the 18th of March was the date fixed for payment into Court of the balance of the  purchase money, on payment of which the purchaser was to be entitled to possession, i.e., to be given vacant possession as stated in the particulars.

 The reserve price had previously been fixed at £2,500 which was the figure recommended by Mr. W. G. Lougheed, the auctioneer appointed by the Court, whom I asume made a careful inspection of the premises before making his valuation.

 The auction proved abortive, but subsequently the purchaser, after some negotiation through his solicitor, Mr. Gerald Maguire, offered £2,650 and this proposal, which incorporated the conditions already settled, was brought before the Court for acceptance, and by order of the 8th day of June, 1942, was accepted and £662 10s. 0d. paid as deposit. The order was perfected on the 12th June, and it shows that the date for payment of the balance of the purchase money was to be the 8th July, 1942.

 On an open contract a purchaser is entitled to possession on paying his purchase money:  Engel v. Fitch (1);  Royal Bristol Permanent Building Society v. Bomash (2); Williams, Vendor and Purchaser, 4th Edn., Vol. 1, p. 37. A fortnight later, on the 23rd June, Mr. Maguire wrote to the plaintiffs’ solicitor complaining of trespass on the lands, and asking whether the purchaser could then be given possession if he paid the balance of his purchase money. On the 30th June, Mr. Maguire wrote again that he had now received the balance of the purchase money from his client and requesting a privity to enable him to lodge it, and complaining of serious trespass by a large number of cattle and sheep and some horses, stating that the purchaser must claim compensation. He also asked that the necessary steps be taken to give possession to the purchaser at the earliest possible moment. It is unnecessary to refer to the correspondence in detail, suffice it to say that an order for possession was not obtained till the end of July, and was not sent to the County Registrar for execution till 14th August, although the purchaser’s solicitor had the money and was ready to lodge it in advance on the 30th June if his client could be given possession. In fact, in the end he lodged it, but “without prejudice to his client’s claim,” on the 14th July, though there was then no prospect of getting possession. So far as the purchaser is concerned, the cause of delay was not material, provided it was not due to any defect of title, and there was here no question of title, and he is entitled to compensation for the period he was kept out of possession in breach (if contract: Engel v. Fitch (1);  Royal Bristol Permanent Building Society v.Bomash (2). Further, a vendor is bound, until possession is given to the purchaser, to manage and preserve the property with the same care as a trustee would exercise in regard to the property subject to his trust:  Phillips v. Silvester (3);  Royal Bristol Permanent Building Society v. Bomash (2);  Clarke v. Ramuz (4);Williams, Vendor and Purchaser, 4th Edn., Vol. 1, p. 59; Connolly v. Keating (No. 2). (5) In this case the plaintiffs did not, before the date for completion, take up possession, nor did they get a receiver appointed, and, when warned of trespass, no effective steps were taken to prevent further damage. The purchaser is therefore entitled to compensation sufficient to make good the damage which accrued between the date of purchase and the date of giving him possession.

 It was suggested that the plaintiffs were not the vendors, and were in no way responsible, because the Court was the vendor and the sale was by the Court. There is a statement to the effect that the Court is vendor in Prideaux, Forms and Precedents in Conveyancing, 22nd Edn., Vol. 1, p. 382, note (f), which I think quite erroneous. In my opinion the plaintiffs are the vendors, they sought a sale under order of the Court; they obtained carriage of that sale. Condition 6 provides “The vendors are . . . to deliver . . . an abstract of the title.” Condition 7 provides that the outgoings down to the date for completion are to be paid by the vendors. Condition 15 provides that “if the purchaser should make any objection or requisition which the vendors shall be unable or unwilling to remove or comply with, the vendors shall be at liberty with the sanction of the Court . . . to rescind.” Rescind what? Surely the contract between the vendors and the purchaser. The Conditions of Sale are in the form proscribed by the rules of Court (Or. LI, & App. L., form 16) and are the same as in the corresponding English Rules.

 This view of the legal position is supported by high authority in  In re Banister, Broad v. Munton (6). Jessel M.R., Brett and Cotton, L.JJ., all took the view that Court conveyancing counsel, in settling conditions for a sale under order of the Court, must be regarded as agent for the vendor (in that case a defendant who was devisee of the property on trust for sale), who must accept responsibility for a statement which the Court held to be misleading, and that the purchaser was entitled to be relieved from the condition.

 The same view was taken in  Union Bank v. Munster (1).These decisions do not appear ever to have been questioned.

 It was suggested in argument that no purchaser at a sale under an order of the Court expects the sale to be completed in accordance with the contract. If there were the slightest foundation for such a statement it would indicate a lamentable state of affairs and would go far to explain why reserve prices are not reached and why sales prove abortive. The judgment in the Court of Appeal in England which I have just referred to, show that the Court expects exemplary conduct on the part of vendors selling under its order and will see that purchasers are fairly dealt with in every respect. The same view was expressed by the Master of the Rolls in  Connolly v. Keating (No. 2). (2)

 In my view it is the duty of the vendor having carriage to be in a position to give clear possession on the date fixed for completion, and, in any case of doubt, application can be made to the Court in good time for an order for possession with a view to sale. I recollect frequent applications for such orders, and I think this was the normal procedure in the past unless in cases in which it was clearly unnecessary. I am at a loss to understand why this practice was discontinued; for it seems to me that the certainty that a purchase would be promptly and punctiliously carried out, or adequate compensation awarded in case of default, should be an incentive to purchasers to give better prices, which would benefit both mortgagees and mortgagors.

 The purchaser is not, in my opinion, entitled to succeed in his claim for £330 for increase in the price of stock. I have no evidence that a rise in price always, or even frequently, occurs between July and September, and should therefore have been in contemplation of the parties, and apart from any question of remoteness, I have no evidence that beasts bought in September are not a better article.

 There is a conflict of testimony as to the area of meadow, but, even if I were to accept Mr. Lougheed’s figures as to area, I should allow for delay in giving possession of 196 acres at the rate of £2 per annum, bearing in mind that these are summer months. Mr. Lougheed placed no value on the garden because it was neglected, but he does not suggest that the fruit trees bore no fruit. Mr. Lougheed had inspected the house before sale and says it was in had repair, but he does not contradict the purchaser’s statement that he stated he first saw the destruction on the 8th of July, nor does he traverse a single item of destruction or removal of doors, windows gates, fences, etc., claimed, except the five gates allowed for by Mr. Biggins. I have perused and compared the estimates of damage prepared by Mr. Kennedy and Mr. Walsh. I find agreement in price in very many instances, in others, Mr. Walsh allows only a reduced figure, because he thinks the fitting or fixture removed was in bad condition, a matter irrelevant for present purposes, for which the proper figure is the cost of replacement. As to certain items which he disallowed, he did so because in his opinion there was evidence that the removal was not very recent from the appearance of the particular site.

 Giving the matter the best consideration I can, I have arrived at a figure of £468 5s. 0d. as the reasonable amount of compensation to which the purchaser is entitled. When it is proved to the satisfaction of the Court that the property sold has been damaged between the date of sale and the time when the purchaser gets possession, the onus is shifted to the vendor, whose duty it was to preserve the property, and it is for him to establish, if he can, what portion of the damage pre-existed the sale and what portion could not have been prevented by the exercise of due care and forethought on his part.

 It is only fair to the solicitor having carriage to say that he appears to have followed a practice which in recent years seems to have become prevalent, but which I now have held to be erroneous.

 The purchaser is entitled to his costs to be paid out of the funds in Court, and, as the defendant is primarily responsible for the delay in getting possession, and there are no puisne incumbrancers who would be prejudicially affected, I shall declare the plaintiffs entitled to their costs with their demand.