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Cite as: [2012] IEHC 459

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Judgment Title: GE Capital Woodchester Home Loans Ltd -v- Reade & Anor

Neutral Citation: 2012 IEHC 459

High Court Record Number: 2010 237 SP

Date of Delivery: 12/11/2012

Court: High Court

Composition of Court:

Judgment by: Laffoy J.

Status of Judgment: Approved

Neutral Citation 2012 [IEHC] 459

THE HIGH COURT

[2010 No. 237 SP]

BETWEEN

G E CAPITAL WOODCHESTER HOME LOANS LIMITED

PLAINTIFF

AND

JOHN READE AND DYMPNA READE

DEFENDANTS

Judgment of Ms. Justice Laffoy delivered on 12th day of November, 2012.

1. The purpose of this judgment is to address an issue which has been raised by the plaintiff arising out of the judgment I delivered in this matter on 22nd August, 2012 [2012] IEHC 363 (the Judgment). I have been asked by the plaintiff to revisit the findings made in paragraphs 17 and 18 of the Judgment in relation to letters which were relied on by the plaintiff as letters of demand. The relevant passages from the Judgment are as follows:

“17. . . . As regards the letter of 2nd February, 2010, once again, the defendants were told that they were in arrears on their mortgage and the amount of the arrears was specified. It was then stated that the result of the default was that the entire balance outstanding, the amount of which was specified, as at the date of the letter, had fallen due and owing. However, there was no demand for repayment of the entire balance; there was merely an assumption that it was due and owing. The demand was for vacant possession of the Property within ten days. On the basis of the analysis of those two letters, it must be concluded that the evidence does not establish that repayment of the principal money had become due prior to the initiation of these proceedings, because of the absence of the demand for the entire balance as required by Clause 3.02.

18. As I have stated earlier, the plaintiff’s reliance on the letter of 10th April, 2007 was to avoid the implications of the decision in Start Mortgages Ltd. & Ors. v. Gunn & Ors. However, even if a letter in the form of the precedent was dispatched to the defendants on 10th April, 2007, the letter, like the letters of 21st December, 2009 and 2nd February, 2010, would not have embodied a demand. It would merely have indicated that, if the arrears were not remitted in full within seven days, the plaintiff would have no alternative but to embark on proceedings for possession. In short, even if it had issued, a letter in the form of the precedent would not have constituted a demand for all the monies remaining unpaid by the defendants to the plaintiff as required by Clause 3.02 of the Charge and would not have fulfilled the requirement of s. 62(7) that the principal money secured by the Charge had become due.”

2. The plaintiff’s contention is that similar letters of demand have passed muster before the Judges in the Chancery Special Summons List. The plaintiff also makes the point that, as the second defendant who appeared on the hearing of the special summons did not raise any issue as to the adequacy of those letters as demands, the Court, in making adverse findings in relation to the wording of the demands, has been in breach of fair procedures and the principles of natural justice, insofar as the plaintiff was never given the opportunity to be heard on the issue and deal with the same. While I have considered it appropriate to consider the submissions made on behalf of the plaintiff, as I still have jurisdiction in the matter because no order has been perfected, it is important that it is understood that the onus of proof on an application for possession under s. 62(7) of the Registration of Title Act 1964 is on the plaintiff. As was pointed out in the judgment at paragraph 15:

“Under that provision two requirements had to be complied before the Court could make an order for possession: the principal money had to have become due; and the applicant had to be registered as the owner of the Charge on the relevant folio. If both requirements were fulfilled, the Court was empowered to make an order for possession if it considered it ‘proper’ to do so.”

The second defendant did not object to the Court revisiting the issue and, indeed, her counsel gave full co-operation on the resumed hearing.

3. However, as I pointed out in paragraph 3 of the judgment, the first named defendant has never entered an appearance in the proceedings and did not appear on the hearing. Therefore, it was incumbent on the Court to ensure that the plaintiff was entitled to an order for possession under s. 62(7).

4. Counsel for the second defendant referred the Court to a decision of the Supreme Court delivered by Fennelly J. on 21st January, 2004 in The Wise Finance Co. Ltd. v. John Lanigan, which it was submitted determines the issue. In that case, the deed of charge gave rise to a number of issues. However, I will endeavour to extrapolate what is pertinent to this case from the judgment of Fennelly J.

5. The deed of charge in the Wise case contained a covenant by the borrower/chargor to “pay [the appellant] and discharge on demand . . . the general indebtedness and liability”. Fennelly J. records in the judgment that by early 2000 the appellant contended that the sum of £60,898.47 was due and that this sum would have to be paid to redeem the charge. Fennelly J. then went on to say:

“By a letter of 18th February 2000 from its solicitors, the appellant formally wrote to the respondent demanding possession of the lands within seven days. The letter continued: ‘

In the alternative, you may pay the said sum of Stg£60,898.47 to our client within the said period of seven days’

.”

On the question as to whether that was an adequate demand to give the Court jurisdiction under s. 62(7), Fennelly J. stated:

“There remains, however, the point made by the Respondent about the absence of a demand. The appellant accepts that the covenant to pay

‘general indebtedness’

and, hence, the inclusion of such sums within the scope of the charge depends on a demand being made.

The appellant says that a sufficient demand was made in the letter demanding vacant possession of the charged lands. That demand was followed by the sentence quoted earlier indicating that the respondent might as an alternative ‘pay the said sum of Stg£60,898.47 to our client within the said period of seven days’.

That letter, in its own terms purported to rely on a right conferred by the deed of charge to enter into possession of the property ‘in the event of default by you in respect of the repayments due by you.... Insofar as the advance came within the scope of ‘general indebtedness’, the covenant to pay came into effect only on demand being made. The present case concerns a claim for possession, not pursuant to any express terms conferring a right to possession, but upon the exercise by the Court of its power to grant an order for possession ‘where repayment of the money secured by the instrument of charge has become due’. That, in turn, depends on the appellant being able to show that the general indebtedness has become due. I am satisfied that the appellant could not apply to the court for an order pursuant to section 62(7) of the Act on the basis of general indebtedness without proof of prior demand for payment, since the covenant applied only upon demand for payment. A suggestion that the respondent might avoid the demand for possession by making a specified payment does not constitute a demand for payment. On this ground, therefore, I believe that the appellant’s claim must fail. I would dismiss the appeal.”

6. I am satisfied that the conclusions I reached in the judgment are wholly consistent with the decision of the Supreme Court for the reasons set out below.

7. First, as is clear from the outline of the provisions of the Charge given by the defendants to the plaintiff and their effect under pre-1st December, 2009 law contained in paras. 13 and 14 of the Judgment, under the terms of the Charge the entire of the secured monies, including principal, remaining unpaid would only become due by the defendants to the plaintiff on demand following an event of default. A demand would be necessary to render the monies remaining unpaid on the happening of an event of default due and payable to the plaintiff. Accordingly, as was the position in the Wise case, a demand was necessary, in this case, following an event of default.

8. Secondly, as in the Wise case, the core question then was whether there was a demand which rendered repayment of the principal monies secured by the Charge due, as required to give the Court jurisdiction under s. 62(7).

9. Thirdly, as regards the letter which the plaintiff contended was dispatched on 10th April, 2007 in the form of the precedent letter, on which the plaintiff relied so as to avoid the implications of the decision in Start Mortgages Ltd. & Ors. v. Gunn & Ors. [2011] IEHC 275, in the interests of clarity, I will quote hereunder the first two paragraphs of that letter, which are the only paragraphs relevant to the issue, because the remainder of the letter deals with the question of legal expenses. The first two paragraphs were in the following terms:

“We refer to your mortgage account and note from our records that as of XX/XX/XX, your account is €xxxx.xx plus charges of €xx.xx in arrears.

We must advise you that unless you remit this sum in full within 7 days from the date hereof we will have no alternative but to pass this account over to our Solicitors to commence repossession proceedings as arising from your default under your mortgage agreement the entire balance outstanding has now fallen due which as of the xx/xx/xx, amounted to €xxxxxxxx.xx.”

The problem with that precedent is that it “put the cart before the horse”. Under the terms of the Charge all monies remaining unpaid by the defendants to the plaintiff secured by the Charge would have become immediately due and payable “on demand” to the plaintiff on the happening of any of the events of default specified, for example, default “in payment of any monthly or other periodic payment or in payment of any of the secured monies hereunder”. So for repayment of the principal monies to be due, as required by s. 62(7), the essential sequence was –

(a) the happening of an event of default such as non-payment of an instalment, followed by

(b) a demand for repayment of all of the monies remaining unpaid.

The entire monies secured by the Charge did not automatically become repayable on the happening of an event of default, as assumed in the precedent letter. The precedent letter demanded the arrears due at the date thereof and threatened the commencement of possession proceedings in the event of the defendants failing to pay up. It did not demand the entire balance outstanding on the Charge. On the authority of the Wise case, the Court has no jurisdiction under s. 62(7), because the principal monies secured by the Charge had not become repayable, no demand having been made in accordance with Clause 3 of the Charge.

10. Fourthly, the letter of 2nd February, 2012 from the plaintiff’s solicitors suffers from the same frailty. In the interests of clarity I will quote the first two paragraphs of that letter and part of the third paragraph. The remainder of the letter deals with the issue of legal costs and expenses. The letter stated:

“We act on behalf of [the plaintiff] who instruct us that you are in arrears on your mortgage account in the sum of €53,317.78 as at the 2nd February, 2010.

The purpose of this letter is to advise you that as a result of your above default in your mortgage the entire balance outstanding on your mortgage account in the amount of €270,915.45 as at the 2nd February, 2010 has now fallen due and owing. We are instructed to demand within ten days from the date hereof vacant possession of our security the premises known as 66 Riveroaks, Claregalway, Co. Galway for the purpose of sale as our client’s power of sale has now arisen under the terms of your mortgage. However, if the arrears outstanding to our clients are discharged within ten days from the date hereof proceedings for repossession of our client’s security will not be issued.

You should note that if you do not furnish vacant possession or discharge the arrears outstanding within ten day’s, we have strict and firm instructions to issue proceedings for recovery or possession of our client’s security immediately.”

In that letter, it was assumed that the entire balance outstanding on the Charge had fallen due and owing as a result of the defendants’ default. In accordance with the terms of the contract between the plaintiff and the defendants embodied in the Charge that was not the case. A demand was necessary to call in the entire principal and interest outstanding. The letter of 2nd February, 2010, like the letter relied on in the Wise case, was not a demand which rendered the principal money repayable, so as to confer jurisdiction under s. 62(7) on the Court.

11. This Court is bound by the decision of the Supreme Court in the Wise case. Therefore, counsel for the second defendant was correct in submitting that that decision determines the issue.

12. Accordingly, I consider it unnecessary to address the other arguments made on behalf of the plaintiff, save to address the plaintiff’s reliance on the decision in Start Mortgages & Ors. v. Gunn & Ors. on the basis of the plaintiff’s involvement in that case. Two claims for possession brought by the plaintiff under s. 62(7) were considered in that case:

(a) the plaintiff v. Mulkerrins; and

(b) the plaintiff v. Grogan and Anor.

Apropos of those cases, Dunne J. stated:

“The position in the Mulkerrins case is that all necessary events had occurred before the 1st December 2009 and accordingly, those proceedings may be continued, subject to any defence that may arise. The actual demand for repayment of the principal monies due in the Grogan case was made on the 19th January 2010. There was a letter headed ‘Formal Demand’ of the 5th October 2009 but that letter did not call for repayment of the principal monies due and therefore, the Plaintiff in that case cannot seek an order pursuant to s. 62 (7).”

13. I do not interpret that statement as representing a clear divergence from the conclusions I have reiterated in this judgment. As regards the Mulkerrins case, what was decided was that the proceedings could continue, subject to any defence that might arise, so that it was not decided that the plaintiff was entitled to an order for possession under section 62(7). Even if, as the plaintiff contended, the demand letter in the Mulkerrins case was identical to the letters under consideration here, there is no evidence that the decision of the Supreme Court in the Wise case was brought to the attention of Dunne J. As regards the Grogan case, it was decided that the plaintiff could not seek an order for possession under s. 62(7) in the absence of a demand which called for repayment of the principal monies.

14. Finally, I confirm that there will be an order dismissing the plaintiff’s claim for possession against both the defendants.

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