Section 62(7) of the Registration of Title Act 1964 historically afforded charge holders of registered land the right to apply to court in a summary manner for possession of such charged land when repayment of the principal monies secured by the instrument of charge became due.

That subsection was repealed by the Land and Conveyancing Law Reform Act 2009 (“the 2009 Act”), and although similar provisions were re-enacted these only apply to mortgages created by deed after 1 December 2009.

Start Mortgages Ltd & Ors v Gunn & Ors IECH 275

On 25 July 2011 in Start Mortgages & Ors v Gunn & Ors Ms Justice Dunne was tasked with addressing the issue of the rights of lenders to apply for possession orders pursuant to section 62(7) of the 1964 Act, notwithstanding its repeal by the 2009 Act.

Ms Justice Dunne noted that it was clear from the decision in Northern Banking Company Limited v Devlin 1 IR 90 that charge holders do not by virtue of the charge have an estate or interest in land sufficient to enable them to recover possession and that the right to recover possession of registered land arose only from the statutory entitlement conferred by section 62(7). As a consequence of its repeal, this right no longer existed.

In order to determine whether mortgage lenders could continue to rely on section 62(7), despite its repeal, the judge considered section 27 of the Interpretation Act 2005.

Section 27 provides that the repeal of an enactment does not affect “any right, privilege, obligation, or liability acquired, accrued, or incurred under the enactment”. It further provides that “any legal proceedings (civil or criminal) in respect of a right… acquired, accrued or incurred under… 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punishment in respect of such offence or contravention may be imposed and carried out, as if the enactment had not been repealed”.

Ms Justice Dunne decided that the right to make an application under section 62(7) was not acquired or accrued on the date of registration of the charge, but was only acquired or accrued when the right to seek possession of the property became exercisable. This only occurs when (i) there is a default in repayments; and (ii) a formal demand for repayment of the principal sum due has been made.

On the issue of the specific nature of the discretion afforded to the Court to grant possession orders pursuant to section 62(7), the decisions in Bank of Ireland v Smyth 2 IR 102; Birmingham Citizen’s Permanent Building Society v Caunt 1 Ch 883; and Anglo Irish Bank v Fanning IEHC 141 were referenced. Ms Justice Dunne considered these cases to be authority for the very limited discretion of the court to grant possession orders. This was not to find that a borrower was not entitled to an adjournment to discharge the mortgage in full or alternatively to seek to come to some arrangement with the lender, but where “the proofs of the plaintiff are in order and there is no other bar to an order being made, then… the Court has no discretion but to make the order”.

Ms Justice Dunne decided that:

• Possession proceedings commenced prior to 1 December 2009 can be continued
• Possession proceedings can be initiated after 1 December 2009 only in circumstances where the lender had acquired the right to apply for an order pursuant to section 62(7) before 1 December 2009 (i.e. the mortgage in respect of which there has been a default was in place prior to 1 December 2009 and a demand was made for the principal sum prior to 1 December 2009)
• Lenders do not have the right to apply for a possession order pursuant to section 62(7) if the principal monies secured by the mortgage have not become due. Principal monies do not become due until default or certain other events have occurred and demand has been made for repayment
• If demand is made for payment of the principal sum after 1 December 2009, the lender has neither an acquired nor accrued right to apply for a possession order (and cannot therefore be “saved” by the 2005 Act) 

Ms Justice Dunne indicated that the “unintended consequence” of the 2009 Act is that lenders who did not have an entitlement to apply for a possession order prior to 1 December 2009 cannot rely on the 2009 Act to apply for an order for possession as their right to do so is not saved by the 2005 Act. 

A broader interpretation of the ruling followed in a judgment of Ms Justice Laffoy in Kavanagh & Anor v Lynch & Ors IEHC 348. This case concerned the application of the statutory power afforded to lenders pursuant to section 19 of the Conveyancing Act 1881 to appoint a receiver over mortgaged property (also repealed by the 2009 Act). In the case before the Court, the defendant sought to rely on the Start Mortgages decision to challenge the receiver’s appointment and further argued that the rights, powers and entitlement implied in the bank’s security pursuant to the 1881 Act had been repealed and could not therefore be relied upon.

In this instance Ms Justice Laffoy decided that due to the fact that the lender’s statutory entitlements pursuant to the 1881 Act had been expressly incorporated in the mortgage, as a matter of contract, the power to appoint a receiver arose not under the 1881 Act but under the specific terms of the mortgage, with the result that the relevant rights and powers remained enforceable, notwithstanding the repeal of section 19 by the 2009 Act.

While the decision of Ms Justice Laffoy provides welcome clarification for lenders in respect of their ability to appoint a receiver under pre-2009 mortgages and debentures, it does not address other concerns arising as a consequence of the Start Mortgages decision for possession proceedings (or other remedies) in relation to registered land under securities created before 1 December 2009.

The decision in Start Mortgages is currently under appeal to the Supreme Court.

Contributed by Delia McMahon.