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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> EBS Ltd -v- Gillespie [2012] IEHC 243 (21 June 2012)
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Cite as: [2012] IEHC 243
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Judgment Title: EBS Limited -v- Gillespie Neutral Citation: 2012 IEHC 243 High Court Record Number: 2011 38SP Date of Delivery: 21/06/2012 Court: High Court Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation Number: [2012] IEHC 243 THE HIGH COURT [2011 No. 38 SP] IN THE MATTER OF THE REGISTRATION OF TITLE ACT, 1964 BETWEEN EBS LIMITED PLAINTIFF AND
EAMONN GILLESPIE DEFENDANT Judgment of Ms. Justice Laffoy delivered on 21st day of June, 2012. The proceedings 2. The relief which the plaintiff now seeks is an order for possession pursuant to the provisions of s. 62(7) of commercial premises consisting of a shop and filling station being the property comprised in Folio 38596 of the Register of Freeholders, County Donegal and part of the property comprised in Folio 36513 of the Register of Freeholders, County Donegal, the identification of which part I will deal with later. The claim for possession is founded on the fact that the property in question was charged by the defendant in favour of the plaintiff under an indenture of charge dated 16th April, 2002, which was made between the defendant of the one part and the plaintiff of the other part (the Charge). 3. There was also a claim for judgment in a sum of money in the special endorsement of claim on the special summons. However, that was not pursued and, obviously, it could not have been pursued in proceedings commenced by special summons. 4. The proceedings were grounded on the affidavit of Caroline Belton, the Commercial Credit Control Manager of the plaintiff, which was sworn on 28th February, 2011. Initially, the defendant's defence to the proceedings, as set out in his first replying affidavit sworn on 18th July, 2011, was that the plaintiff had a duty of care to him and failed in that duty of care in that, inter alia, it was reckless in its lending to him. That line of defence was not pursued at the hearing of the proceedings. Instead, the defendant pursued a challenge to the validity of the process on the basis of which the plaintiff contends it is entitled to possession, the factual basis of which was averred to in affidavits sworn by him on 21st March, 2012, 26th April, 2012 and 18th May, 2012. Accordingly, it is only necessary to outline the facts relevant to the line of defence pursued by the defendant. The relevant facts. 6. In the grounding affidavit, Ms. Belton averred that by letters of loan offer dated 17th December, 2001 and 24th September, 2002 the plaintiff agreed to provide the defendant with "20 year repayment loans in the sum of €393,618.80 and €70,000 respectively", which loans were given account numbers 59164985 and 59393969 respectively. It was further averred that the said loans were subject to a variable interest rate, which at the date of the issue of the loan offers was 5.50%, and that the "said loan was repayable on demand but until demand was made in monthly instalments over the term of 20 years". Neither of the letters of loan offer has been exhibited in the proceedings. Ms. Belton averred that the defendant had defaulted under account 59164985 since February 2003 and in respect of account 59393969 since April 2003 and particularised that averment. 7. The provisions of the Charge, apart from the charging clause (Clause 3.01A(iii)) the effect of which I have already outlined, which are of relevance are the following:
(b) The covenant to pay is contained in Clause 2.01 which provides:
(c) Section 5 deals with enforcement of the security. Clause 5.01 provides, insofar as is relevant for present purposes, as follows:
(a) If the Borrower fails to pay on the due date any money payable or interest due by it from time to time to the [plaintiff] . …”
(e) Counsel for the plaintiff pointed out that the Clause 11.19 provides that in the event that there is any conflict between the terms of the Charge and "the Offer Letter", the terms of the Charge shall prevail.
10. In the grounding affidavit Ms. Belton averred that, as of the date of the grounding affidavit (28th February, 2011), the sum of €386,441.25 was due and owing by the defendant to the plaintiff on the two loan accounts. In his first replying affidavit, the defendant acknowledged that that was the balance due at 28th February, 2011, despite the fact that he had made payments of €274,655.64 to the plaintiff. However, the history of the dealings between the plaintiff and the defendant was not as limited as the plaintiffs grounding affidavit suggests. 11. While these proceedings were not initiated until 18th January, 2011, the plaintiff had issued proceedings, which were not disclosed in the grounding affidavit, by way of special summons on 4th January, 2010 under record No. 2010/1SP (the 2010 Proceedings), of which these proceedings, in their original form, were a replica. Apparently the 2010 Proceedings were never served on the defendant and they were struck out on the second occasion on which they were listed in the Master's Court, that is to say, on 22nd June, 2010. 12. Following on the letter of 28th May, 2009 and before the request for possession dated 4th November, 2009 and after that request but before either the 2010 Proceedings or these proceedings were initiated, there had been direct interaction between the defendant and the plaintiff in relation to the accounts. In his affidavits sworn on 21st March, 2012 and 26th April, 2012, the defendant has set out -
(b) payments totalling €4,807.04 which he made in July 2009 and January, February, May, June, July and September 2010 on loan account 59393969.
14. In the affidavit sworn on 26th April, 2012 the defendant has also recorded that two ejectment actions which were instituted against him by the defendant in the Circuit Court, County Donegal in 2004 and 2008. He has averred that the 2004 proceedings were discontinued in October 2007, when he discharged the arrears then due. In relation to the 2008 proceedings, he reached an agreement with the plaintiff in September 2008 and the proceedings were settled and not continued, although a formal notice of discontinuance was never served on his solicitors or filed in the Circuit Court office. As I have stated, the 2010 proceedings were commenced on 4th January, 2010. The defendant has disposed that the same firm of solicitors acted for the plaintiff in both ejectment proceedings in the Circuit Court and in the 2010 Proceedings as are representing the plaintiff in these proceedings. By letter dated 28th April, 2010 to the defendant, the plaintiff informed the defendant that his account had been debited with a sum set out in a fee note furnished by the plaintiff’s solicitors in accordance with the terms of the Charge. The relevant fee note was enclosed. The total amount due on the fee note was €2,707.38. This obviously related to the 2010 Proceedings because it refers to the professional charges for acting in connection with the plaintiff against the defendant "in relation to High Court proceedings". The defendant has suggested in his affidavit that the discontinuance of the 2010 Proceedings demonstrates that the plaintiff did not intend to pursue him in the Courts, but that it changed its mind later. 15. The final step in the process adverted to by the defendant is a letter dated 30th November, 2010 from the plaintiffs solicitors to the defendant, which was a verbatim replica of the letter of 28th May, 2009 referred to at para. 8 earlier, save that the arrears on account No. 59164985 were then €27,353.04 and the total debt was €322,433.07 and the arrears on account No. 59393969 amounted to €5,278.66 and the total debt amounted to €59,136.81. 16. None of the matters averred to by the defendant which are outlined in the preceding paragraphs have been disputed by the plaintiff, although a supplemental affidavit was sworn on 17th April, 2012 by an in-house solicitor of the plaintiff setting out the arrears and the balance due on each loan account as at that date. The balance on account 59164985 was €271,261.90 and the arrears outstanding amounted to €76,229.07, whereas the balance due on account 59393969 was €49,815.08 and the arrears outstanding amounted to €14,147.15. It is difficult to reconcile those figures with the figure in the letter of the 30th November, 2010, but that is not an issue the Court has to resolve on this application. Submissions 18. First, it was submitted by counsel for the defendant that the letter of 28th May, 2009 did not constitute a valid demand so as to give the plaintiff the entitlement to realise the security created by the Charge. In this connection, counsel relied on the commentary in Paget 's Law of Banking, 13th Ed. at para. 13.3, where it is stated that both the High Court and the Court of Appeal in England and Wales has adopted as a fair working definition of a valid demand the following passage from the judgment of Walker J. in the Australian case of Re Colonial Finance, Mortgage, Investment and Guarantee Corpn. Ltd. (1905) 6 SRNSW 6 at p. 9:
20. Thirdly, if the plaintiff is constrained to fall back on the later demand of 30th November, 2010, which on the evidence it would appear was not followed by a fresh request for possession, it was submitted by counsel for the defendant that on the authority of the decision of the High Court (Dunne J.) in Start Mortgages v. Gunn [2011] IEHC 275, given that the demand post-dated the coming into operation of the Act of 2009, which repealed s. 62(7) of the Act of 1964, the Court does not have jurisdiction to make an order for possession pursuant to s. 62(7). Indeed, it is reasonable to infer that the application on foot of the plaintiffs notice of motion dated 20th January, 2012 to amend the special summons was a reaction to an affidavit sworn by the defendant's solicitor, Sean Boner, on 25th November, 2011, in which it was pointed out that the provisions of Chapter 3 of Part 10, including s. 97(2), of the Act of2009 only apply to mortgages created after the commencement of Chapter 3 of Part 10, which commenced on 15th December, 2009. 21. The position adopted by counsel for the plaintiff was that the plaintiff was relying on the provisions of the Charge, in particular, clause 5.01(a). It was also relying on the demand in the letter dated 28th May, 2009, which was a valid demand. The defendant had defaulted prior to the coming into operation of the Act of 2009 and subsequent events, including the arrangements entered into by the plaintiff with the defendant, did not alter or revoke the validity of the demand. It was emphasised that in his affidavits, the defendant has accepted that the arrears are due and owing on foot of the Charge. Conclusion
23. It is also instructive to refer to the observations of Geoghegan J. in Bank of Ireland v. Smyth [1993] 2 I.R. 102, which were obiter, as to the nature of the discretion conferred on the Court by s. 62, subs. (7). He said (at p. 111):
25. 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:
(b) that the plaintiff was the registered owner of the Charge. 26. The Charge in this case was an "all sums" charge. In my view, where a lending institution is seeking relief on foot of an "all sums" mortgage or charge and, as in this case, the terms of the loan offer and its acceptance are not spelt out in the deed of mortgage or charge, the loan offer and acceptance should be exhibited. As I have already indicated, that was not done in this case. At the hearing, counsel for the plaintiff offered to file an affidavit exhibiting the two offer letters. However, in this case, it is possible to identify whether repayment of the principal money secured by the Charge had become due before 1st December, 2009 and whether the plaintiff was entitled to enforce its security by obtaining possession and exercising its power of sale before that date by reference to the terms of the Charge on its own. By virtue of the terms of the Charge as agreed between the plaintiff and the defendant, the position immediately prior to 1st December, 2009 was as follows:
(b) The plaintiff's power in accordance with clause 9.01 to enter upon and take possession of the secured property was exercisable because the security had become enforceable. (c) The plaintiff's power of sale had arisen because it was expressly agreed that, for the purposes of any sale, the legal date for redemption occurred immediately after the execution of the Charge. (d) The plaintiff's power of sale as mortgagee was exercisable. The statutory power of sale conferred on a mortgagee by s. 19 of the Act of 1881, prior to its repeal by the Act of 2009, could be varied or extended by the mortgage deed and the section applied only if and as far as a contrary intention was not expressed in the mortgage deed. As the statutory power of sale applied "when the mortgage money has become due", in this case, by virtue of the terms of the Charge (clause 9.01), the power of sale was exercisable after the security had become enforceable, which I am satisfied had happened before 15th December, 2009. Moreover, it was expressly provided in the Charge (clause 9.07) that the power of sale was exercisable without the restrictions contained in s. 20 of the Act of 1881 as to giving notice or otherwise. 27. In relation to the specific arguments advanced on behalf of the defendant, I would make the following observations. First, neither the right of the plaintiff to enforce the security by entering into possession with a view to a sale nor the exercise of the power of sale required the issue of a prior demand or notice to the defendant, having regard to the provisions of the Charge which I have outlined earlier, so that the question of the validity of the demand contained in the letter dated 28th May, 2009 is not an issue which can determine the entitlement of the plaintiff to the remedy it seeks. Nonetheless, I would observe that, notwithstanding the misstatement of the total amount owing to the plaintiff on foot of account 59164985, due to what is an obvious typographical error, I am satisfied that the letter constituted a valid demand, in that it is clear that what was being demanded was repayment of the entire monies due on foot of the two loan accounts. Secondly, even though the forbearance given by the plaintiff to the defendant in the letter of 6th January, 2010 effectively postponed the enforcement by the plaintiff of its right to possession, I do not consider that the actions of the plaintiff are properly construed as a waiver of its rights under the Charge which arose from the default of the defendant. The letter itself made it clear that the position would be reviewed by the plaintiff at the expiry of the six month period. Thirdly, having regard to the terms agreed between the plaintiff and the defendant in this case as set out in the Charge, on the basis outlined earlier, I am satisfied that the plaintiff had acquired a right to seek an order for possession before the repeal of s. 62(7). Order
(b) There is a very odd averment in the grounding affidavit of Ms. Belton at para. 34 to the effect that the defendant's wife "is habitually resident in the property", which I assume is totally incorrect. On the basis of that assumption, a corrective affidavit must be filed. (c) Lest anything turns on it later, the two relevant Offer Letters should be exhibited in a supplemental affidavit, which should be filed. (d) In the light of my observations at para. 16 above, the balance due by the defendant to the plaintiff on each of the loan accounts should be reviewed. 30. Finally, I will hear further submissions from the parties in relation to the costs of these proceedings and the question of a stay. In relation to costs, I would point out that there is no reference to costs in the order dated 27th February, 2012, which gave liberty to amend the special summons, and, in particular, it is not clear whether the costs were reserved.
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