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Judgment Title: Michael McAteer & Anor v Frank Sheehan Neutral Citation: [2013] IEHC 417 High Court Record Number: 2012 4744 P, 12130 P, 724 SP Date of Delivery: 13/09/2013 Court: High Court Composition of Court: Judgment by: O'Malley Iseult J. Status of Judgment: Approved |
Neutral Citation Number: [2013] IEHC 417 THE HIGH COURT 2012 No. 4744P Between/ MICHAEL MCATEER AND (By order of Laffoy J of 15th November, 2012) BANK OF IRELAND MORTGAGE BANK Plaintiffs -and-
FRANK SHEAHAN (OTHERWISE FRANKIE SHEAHAN) Defendant THE HIGH COURT Between/ 2012 No. 12130P FRANK SHEAHAN, JOSEPH SHEAHAN AND MyMORTGAGES LIMITED Plaintiffs -and-
THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND, BANK OF IRELAND MORTGAGE BANK AND MICHAEL MCATEER Defendants THE HIGH COURT 2012 No. 724Sp Between/ BANK OF IRELAND MORTGAGE BANK Plaintiff -and-
FRANK SHEAHAN Defendant Judgment of Ms. Justice Iseult O'Malley delivered the 13th September, 2013. Introduction 2. The questions of law arise from the lacuna identified in the judgment of Dunne J in Start Mortgages v. Gunn (hereafter "Gunn "), relating to the powers of mortgagees or chargeholders after the coming into force of the Land and Conveyancing Law Reform Act, 2009 on the 1st December, 2009. Section 8 of that Act had the effect of repealing, inter alia, s.62 (7) of the Registration of Title Act, 1964 (hereafter "s.62(7)"). The provision was re-enacted in the Act but the new provision applies only to mortgages created after the commencement of the 2009 Act. There is no express transitional provision. 3. In brief, Gunn decided that by virtue of the repeal provisions in that Act, a lender who had not acquired a right to apply to court for an order of possession pursuant to s.62 (7) before the 1st December, 2009 could not apply thereafter. It was further held that the right to apply was only acquired where the principal monies had become due by reason of default or certain other events and demand for repayment had been made. 4. In significant part, this case concerns a submission that Gunn was wrongly decided because certain arguments were not put before Dunne J. and that this court should therefore, by way of exception to the Worldport principle, decline to follow it. Primarily, these arguments concern, firstly, a particular clause in the deed, deeming the principal monies to have become due one month after the date of its execution and secondly, the effect of the "double construction" rule of statutory interpretation. Separate but, for the most part, related issues arise in relation to the appointment of a receiver. The special case 6. The parties have identified questions of law relating, firstly, to the proper construction of certain statutory provisions and secondly, the validity of the repeal provisions of the Act of 2009 having regard to the provisions of the constitution. By agreement, the special case was divided into two modules, with the constitutional issue to be determined only if necessary. This judgment deals with Module 1. 7. The facts grounding the special case (and for these purposes assumed to have been proved) can be summarised as follows. 8. Each of the cases concerns deeds of mortgage and charge executed in respect of specified registered properties. Each of the deeds contains provisions in identical terms providing for the appointment of a receiver by the bank and/or other rights and powers of the bank (including the statutory power of sale) in the event that the mortgage falls into arrears. 9. In the Receiver proceedings, it is to be assumed that before the 1st December, 2009 the borrower executed mortgages in favour of the bank over certain properties, and that after that date he defaulted on his obligation to make repayments on the loans secured by the mortgages. The receiver was appointed by the bank after the repayments had gone into arrears. In these proceedings he claims reliefs including an order restraining the borrower from interfering with him in the exercise of his functions. 10. The borrowers challenge the appointment of the receiver and the extent, if any, of his powers for the same reasons as in the Sheahan Plaintiff proceedings -that is, they contend that (i) at the date of the appointment of the Receiver the bank had no valid extant power to make such appointments and (ii) that if the receiver was validly appointed he nonetheless had no power to take possession. 11. The Possession proceedings relate to an indenture of mortgage and charge dated the 7th January, 2007 by which the borrower charged to the bank, as security for all sums then due or to become due by him to the bank on foot of any secured loan a particular property in Co. Cork. The loans advanced were assigned to two loan accounts. The charge was registered on the relevant folio on the 28th August, 2008. 12. On dates after the 1st December, 2009 the borrower defaulted in making the payments required of him under the terms of the loan contracts. The whole of the monies due on each of the accounts was demanded in the course of November, 2011. Neither of the sums was repaid and on the 6th November, 2012 the bank demanded possession. The property has not been given up and the bank now seeks an order for possession. 13. The questions of law relating to Module 1 as set out in the special case are:
II. Whether, when properly construed, the terms of the said mortgages created in the bank contractual powers to appoint receivers in respect of the debts thereby secured. III. (a) Whether, by virtue of the various appointments of the receiver as such, the receiver is entitled to take possession of the properties as distinct from merely being entitled to the rents and profits thereof. (b) If the answer to (a) is "No", whether the appointments of the receiver are valid. IV. Whether, by virtue of s. 27 of the Interpretation Act, 2005, the statutory power of the bank as registered chargeant of the property the subject of the possession proceedings to apply for possession of the said property under s. 62(7) of the Registration of Title Act, 1964 remained extant after 1st December, 2009 notwithstanding the provisions of s.8(3) and Schedule 2 of the Act of 2009. V. Whether s.62(6) of the Act of 1964, as amended by the Act of 2009, confers on a registered chargeant pursuant to a charge executed and registered before the 1st December, 2009 the right to seek possession pursuant to Chapter 10, Part 3 of the Act of 2009. The relevant provisions of the mortgage 16. The term "Conveyancing Acts" is defined as meaning the Conveyancing Acts, 1881 to 1911 and the registration of Title Act, 1964. 17. Clause 1.01 contains the covenant by the mortgagor to pay to the mortgagee on demand the secured monies. 18. Clause 1.02 provides that
(a) on the happening of any event of default other than an event specified in paragraph (i) of sub-clause 7.01 ... and the Mortgagor hereby further covenants with the Mortgagee to pay to the Mortgagee forthwith the sum so demanded together with further interest thereon ..."
6.02 The Mortgagee shall have the statutory powers conferred on mortgagees by the Conveyancing Acts as varied and extended by this Mortgage including the right to appoint a receiver and in particular subject to the following variations and extensions that is to say: (a) the secured monies shall be deemed to have become due within the meaning of and for all purposes of the Conveyancing Acts on the execution of this Mortgage; (b) the power of sale shall be exercisable by the mortgagee or on its behalf by a receiver or any other party appointed by it without the restrictions imposed by section 20 of the Act of 1881; (c) omitted (d) any receiver appointed by the Mortgagee under the power to appoint a receiver shall be deemed to be the agent of the Mortgagor ... 6.04 After entering into possession of the Mortgaged Property or appointing a receiver of the rents and profits thereof the Mortgagee may at any time relinquish possession or determine the appointment of the receiver and subsequently without giving notice or making any demand for payment again enter into possession of the mortgaged Property or appoint a receiver of the rents and profits thereof and any receiver appointed may let and manage the Mortgaged Property at the risk of the Mortgagor. 6.05 The powers conferred on the Mortgagee by this Mortgage are in addition to all the powers and remedies conferred on or vested in the Mortgagee by statute, common law or otherwise. "
(a) default is made in payment of any monthly or other periodic payment or in payment of any other of the secured moneys hereunder ... " 22. The relevant parts of section 62 of the Registration of Title Act, 1964 are as follows.
(2) There shall be executed on the creation of a charge, otherwise than by will, an instrument of charge in the prescribed form ...but, until the owner of the charge is registered as such, the instrument shall not confer on the owner of the charge any interest in the land. … (6) [Prior to amendment] 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 by deed, including the power to sell the estate or interest which is subject to the charge. (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.
25. Section 27 of the Interpretation Act, 2005 provides in full:-
a) revive anything not in force or not existing immediately before the repeal b) affect the previous operation of the enactment or anything duly done or suffered under the enactment c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment d) affect any penalty, forfeiture or punishment incurred in respect of any offence against or contravention of the enactment which was committed before the repeal, or 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. (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 in 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. 26. As already noted, the court is in this case being asked to decline to follow the decision of Dunne J. in Gunn. I therefore propose to consider that judgment in detail, along with the cases that have arisen on the point since. Before doing so it is convenient to refer to Worldport Ireland Limited (In Liquidation) [2005] IEHC 189, which sets out what is now the established test for the exercise by judges of the High Court of their power to disagree with a previous judgment of a judge of that court. 27. In Worldport, Clarke J. had been invited to disagree with a judgment of Kearns J. (as he then was). In a passage subsequently approved by the Supreme Court he made these observations:-
Start Mortgages v. Gunn 30. It appears from the judgment that the mortgages were similar in their terms. Each contained a covenant for payment by the borrower. Each provided that the monies secured by the mortgage should immediately become due and payable on demand for payment by the lender on the occurrence of default by the borrower. Each provided that the mortgagee's powers were not to be exercised unless certain events occurred, including default in payment of any monthly or other secured payment or in payment of any of the secured monies. Provision was made for a power to enter into possession of the property by the mortgagee, who was to have the statutory powers conferred on lenders by the Conveyancing Acts. 31. The submissions made in each case can be summarised as follows. Start Mortgages Limited v. Gunn 32. Counsel for the plaintiff in this case submitted that the creation of the mortgage, the registration of the charge, the default, the demand and the issuance of the proceedings all pre-dated the 1st December, 2009 and that the right to possession was not only acquired but accrued by that date. He relied upon the provisions of s. 62(6) as it stood before amendment in 2009, which stipulated that the registered owner of a charge was to 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. " On that basis he submitted that once there was a default, the plaintiff was entitled to make a demand, and once he had done that he was entitled to issue proceedings without any further procedural step. 33. Counsel for the defendants (Mr. Maguire SC) submitted that since s.62(7) had been repealed it could not be relied upon by the plaintiff, despite the fact that proceedings had been issued before the repeal. He further submitted that the court had had a discretion under s.62(7), to be found in the words "may, if it so thinks proper", not to make an order for possession and that therefore the plaintiff never had more than "a hope or expectation" of obtaining an order. In those circumstances there could not be either an acquired or an accrued right of possession. 34. In reply to that argument, counsel for the plaintiff submitted that any discretion vested in the court did not mean that its rights had not been acquired or accrued by the relevant date. Secured Property Loans Limited v. Clair 35. This case concerned a twelve-month loan where the whole amount became due and owing on a date in October, 2009. Default arose from the 14th July, 2009. The demand was not made and proceedings were not issued until after the 1st December, 2009. The charge had been registered before that date. Counsel for the plaintiff relied upon the arguments that he had made in Gunn. He submitted that the plaintiff had acquired a right within the meaning of s.27(1)(c) by virtue of the following:
(ii) That charge was registered at a time when the instrument operated as a mortgage by deed within the meaning of the Conveyancing Act, because of the provisions of s. 62(6) prior to its amendment. (iii) The defendant was in default since the 14th July and further in default in having failed to make payment of the full amount in October, 2009. 37. Counsel for the defendants submitted that there was no right acquired or accrued by reason of the default, on the argument that the plaintiff had only an expectation and not a right. G. E. Capital Woodchester Homeloans Limited v. Mulkerrins 38. The defendant in this case had gone into default in May, 2008. Two letters of demand had been sent before the 1st December, 2009. The summons was issued in August, 2010. 39. The defendant was unrepresented in the hearing. Mr. Murphy SC for the plaintiff, having adopted the arguments of counsel for the other plaintiffs, argued that the operative date giving legal effect to a mortgage was the date of registration of the charge. 40. (I think that it should be noted here that in the instant case, after further reflection, Mr. Murphy has changed his view on this issue and now argues that the right for which he contends is acquired on the date of execution, or possibly even earlier where there is an antecedent contract to grant the security on the drawdown of the monies.) 41. He submitted that since the new provisions for the enforcement of charges in the Act of 2009 were not applicable to mortgages created before that Act, it must have been the intention of the Oireachtas that the provisions of the Interpretation Act, 2005 would apply. He relied on ss. 27(1)(c), 27(1)(e) and in particular s.27(2) of that Act and submitted that s.27(1)(c) referred to and preserved substantive rights other than those already asserted at the time of commencement of the 2009 Act, thus allowing for the institution of new proceedings after the commencement of a repealed Act in relation to rights preserved. 42. In this context, Mr. Murphy argued that the right to seek possession in the event of default, though a conditional right, was nonetheless a right acquired by a chargeholder on the date of registration of the charge. In the alternative, if the right to seek possession was held not to accrue until default rendered the principal monies due, the plaintiff was still entitled to succeed because the defendant had been in arrears since prior to the relevant date. 43. Mr. Murphy pointed out that, having regard to the provisions of s.62(2) of the Registration of Title Act, 1964, the instrument creating the charge did not confer any interest in the land until registration. Therefore the right to seek possession, in the event of default, for the purpose of sale to recover the sums secured, represented the whole substance of what the lender obtained on receipt of a charge in its favour. That was the "interest" referred to in s.62(2), which was postponed until registration. Upon registration, the holder of the charge had done all that was necessary to acquire the interest. The right to seek possession might or might not have to be exercised, but it existed "from the date of the charge" and the fact that it could not be exercised until default was of no significance. 44. The plaintiff also relied upon the provisions of s.62(6) of the 1964 Act, as amended by the 2009 Act, which is set out above. It was submitted that the rights under the mortgage, including the right to possession or the right to sell the property, were acquired upon registration of the plaintiffs' charge on the Folio. 45. In an alternative argument, the plaintiff argued that the right to apply for possession was acquired or accrued when the principal monies became due, which came about when default occurred in May 2008. G.E. Capital Woodchester Homeloans Limited v. Grogan 46. The submissions on behalf of the plaintiff were identical to those in Mulkerrins. On behalf of the defendants it was submitted that the registered owner of a charge only acquired the right, or the right accrued to the registered owner, to initiate proceedings when the repayment of the principal monies became due. Having regard to the terms of the instrument in question, that only arose when demand was made on the occurrence of an event of default. Decision of Dunne J. 48. The question then was the extent, if any, to which the provisions of s.62(7) were saved by s.27(1) and (2) of the Interpretation Act, 2005. 49. It is, I think, important to bear in mind that the "right" being contended for in Gunn was the right to apply to court for an order of possession and that the issue, having regard to the provisions of the Interpretation Act, was whether that right had been "acquired" or had "accrued" before the repeal of the section. 50. Having considered the cases of Birmingham Citizens Permanent Building Society v. Caunt [1962] 1 Ch. 883, Anglo Irish Bank Corporation v. Fanning [2009] IEHC 141 and Bank of Ireland v. Smyth [1993] 2 I.R. 102, Dunne J. concluded that it was clear that s.62(7) conferred a right on a registered owner to obtain an order for possession for the purpose of a sale out of court, and that the scope of the discretion conferred on the court in relation to the grant of the order was very limited.
52. In Director of Public Works v. Ho Po Sang, a lessee had applied to the Director for a re-building certificate and had received notification that the latter intended to grant it. While certain petition procedures triggered by the application were underway and before a decision on the certification had actually been taken the relevant legislation was repealed. The Privy Council held that neither the Director nor the lessee had an accrued right at that stage. According to Lord Morris of Borth-y-Gest, as quoted by Dunne J.,
56. However, she did not accept the proposition that it was acquired or accrued on the date of registration of the charge. 57. The case of 0'Sullivan v. Superintendent of Togher Garda Station was considered and distinguished. That decision concerned the provisions of the Road Traffic Acts conferring a right on a person, disqualified from driving, to apply for restoration of a driving licence after the elapse of a statutorily-prescribed period of time. At the time that the applicant was convicted and disqualified, the statutory period was nine months. Following amendment of the legislation, he would have had to wait for 12 months unless he had, as he contended, a right to apply after nine. Dunne J. considered that he had acquired the right to apply on conviction and that it accrued after the lapse of nine months. No further procedural step was necessary. 58. The position of the holder of a charge was different because it was not entitled to apply for an order for possession unless certain events had occurred - default on the part of the borrower, and demand by the lender for repayment of the principal monies. 59. In coming to this conclusion, Dunne J. again referred to the plaintiffs' submission that the point of a charge was to create the right to recover the sum secured; that this, in effect, was what was comprised to a large extent in the "interest" mentioned in s.62(6) and that the 1964 Act viewed the registered charge holder as having rights from the time of registration. There is no suggestion that she did not accept these general propositions, but clearly she did not consider that it followed that there was a right to apply for possession from the date of registration.
61. In conclusion, Dunne J. set out the following five propositions: -
2 Proceedings could be instituted after that date provided the lender had acquired the right to apply for an order pursuant to s.62(7) by the 1st December, 2009. 3 A lender had not acquired the right to apply for an order pursuant to s. 62(7) if the principal monies had not become due. 4 The principal monies did not become due until default or certain other events had occurred and demand for repayment of the principal monies had been made. 5 In any case in which demand was made for repayment of the principal sums due after the 1st December, 2009, the lender had neither an acquired or accrued right to apply for an order pursuant to s.62(7) and consequently the provisions of s. 27 of the 2005 Act did not avail such a lender.
Kavanagh v. Lynch ([2011] IEHC 348) 63. This case concerned an application brought in the course of plenary proceedings by two receivers, appointed by two banks, for various interlocutory orders. They sought, inter alia, orders restraining the defendants from remaining in occupation of the property in issue and from interfering with them in the exercise of their powers under the terms of their appointments. They also sought an order for possession. 64. The defendants contended, inter alia, that the receivers had not been validly appointed, on the basis of the repeal of ss. 15 to 24 of the Conveyancing Act, 1881. 65. The first mortgage contained a clause providing that at any time after the power of sale had become exercisable, whether or not the bank had entered into possession, the bank could appoint a receiver. This was stated to be in addition to, and not to be to the prejudice of, all statutory and other powers of the bank under the Conveyancing Act, 1881. It was further provided that the receiver so appointed would have all powers conferred by that Act as if appointed under it, and also additional powers not in substitution for the powers contained in the Act. The first power so conferred was to enter into, take immediate possession of, get in and collect the secured assets or any part thereof. 66. The power of sale, which had to be exercisable before a receiver could be appointed, arose upon an "Event of a Default", or immediately upon the bank making demand as and when the payment became due and payable, or immediately upon the obligations becoming otherwise due and payable. The defendants fell into arrears and a formal demand was made in September, 2010. On the evidence, Laffoy J. was satisfied that the power of sale was exercisable on the 18th October, 2010 when the receiver was appointed. 67. The second mortgage authorised the mortgagor to appoint, at any time after the "Total Debt" had become immediately payable, a receiver to collect and receive rents and profits, and further that the statutory provisions respecting the appointment and powers of such receiver should apply except where varied by, and subject to, the provisions of the mortgage. The "Total Debt" became payable to the bank if, inter alia, two monthly payments were missed. Letters of demand were sent in April, 2010. 68. On consideration of the terms of the instruments, Laffoy J. concluded that the powers of the mortgagees to appoint receivers were not dependent on the statutory powers created by the Act of 1881. At the time the mortgages were created they incorporated into their terms the relevant statutory provisions, subject to any variations expressly provided for. The repeal of the provisions could not vary the proper construction of the mortgage, or impact upon the contractual relationship of the mortgagor and mortgagee thereby created, and the contractual rights and remedies still applied. 69. Laffoy J. expressly concluded that the considerations that arose in Gunn in consequence of the repeal did not arise in this case. 70. This case is also relevant to the question of the receiver's right to take possession of the property, considered further below. EBS v. Gillespie ([2012] IEHC 243) 71. This was an application under s.62(7) for an order for possession, in proceedings which were initiated in 2011. Per Laffoy J.:-
In order to establish that its claim/or possession came within s.62(7) prior to 1st December, 2009, the plaintiff has to establish ...that repayment of the principal monies secured by the charge had become due by that date ... "
(a) if the borrower fails to pay on the due date any money payable or interest due by it from time to time ... " Moran v. AIB Mortgage Bank & ors. ([2012] IEHC 322) 74. In this case the plaintiffs challenged the appointment of a receiver by the defendants in respect of 24 separate but identical mortgages. In each case demand had been made and the receivers appointed after 2009. The mortgages included an interpretation clause providing that
(a)The secured monies (whether demanded or not) shall be deemed to become due within the meaning and for all purposes of the Conveyancing Acts on the execution of these presents. (b)The power of sale shall be exercisable without the restrictions on its exercise imposed by section 20 of the Act of 1881 ... " 77. Having regard to the terms of the mortgages McGovern J. held that the secured monies were deemed to have become due and, therefore, the right to appoint a receiver accrued, as soon as the deed was executed and the contract entered into. Since the 2009 notice provisions applied only to mortgages created by deed after the commencement of that Act, they could not affect a mortgage that pre-dated it. In this regard he adopted the analysis of Laffoy J. in Kavanagh. 78. There is no reference in the judgment to Gunn. 79. In any event, McGovern J. considered that the contractual term incorporating amending legislation could only be read as referring to amending legislation in force at the time that the contract was entered into. This was because it had to be presumed that the parties, in entering into the contract, intended that the rights they were acquiring and the obligations they were assuming would be certain. It could not be assumed that they intended to be bound by future changes in the law of which they had no knowledge. McEnery v. Sheahan ([20127 IEHC 331) 80. This case concerned the mortgage of a commercial premises to cover all present and future indebtedness of the defendant. Registration of the charge was applied for in June, 2009 but not completed until August, 2011. The demand for repayment and the appointment of a receiver (the plaintiff) occurred in April, 2011. The defendant refused to permit the plaintiff to take possession. On the 15th April, 2011 the plaintiff issued a plenary summons seeking an order compelling the defendant to deliver up possession together with declaratory relief. The defendant pleaded that the plaintiff had no power to appoint a receiver because of the repeal of s.19 of the Act of 1881. 81. Section 19(1) of that Act provided that
(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; ... "
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. "
87. Counsel for the borrower says that the decision is not reconcilable with Gunn and that the latter is preferable. Irish Life and Permanent plc v. Duff [2013] IEHC 43 88. This was an appeal from the Circuit Court to the High Court against an order for possession in favour of the plaintiff. The property comprised both registered and unregistered lands and the references to the judgment here relate to the part concerned with registered land. The proceedings, were issued in April, 2009 but then withdrawn to facilitate discussions between the parties. They were subsequently re-entered. Judgment was delivered on the 31st January, 2013. 89. Having considered the judgments of Laffoy J. in Gillespie and Dunne J. in Gunn, Hogan J. held that the question was whether the monies had become due prior to the 1st December, 2009. The letter of demand in the case, dated the 11th December, 2008, had referred to the arrears and to the right of the plaintiff to recover possession. However, it then went on to say: -
91. Hogan J. went on to consider whether the bank had a contractual right to seek possession without reference to s.62(7). On this point he said: -
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/or 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. "
94. It should be noted that this in this judgment Hogan J. expressed the view that a registered mortgage holder had an estate in land by virtue of s.62(6) of the Act of 1964. Ulster Bank Ireland v. Carroll [2013] IEHC 347 95. This was an undefended case in which this court gave an ex tempore ruling, subsequently given in writing at the request of the plaintiff. The judgment points out the fact that it was an unargued case and therefore of limited value. The mortgage in question contained a clause providing that the total sum would become due in the event of default in a monthly payment. It was therefore held that no demand was necessary and that the case was governed by Gillespie rather than Gunn. G.E. Capital Woodchester Home Loans Limited v. Reade ([2012] IEHC 363) 96. This was an application for an order of possession of registered land pursuant to s.62 of the Act of 1964. The mortgage provided that all monies unpaid by the defendants to the plaintiff should "immediately become due and payable on demand" on the happening of any of the events of default. 97. Clause 8.01 of the charge provided that at any time after the execution of the charge the plaintiff might without any further consent from or notice to the defendants enter into possession of the property. Clause 8.02 provided that the plaintiff should have the statutory powers conferred on lenders by the Conveyancing Acts and the Act of 1964, as varied and extended by the terms of the charge itself. It also provided that
(ii) the power of sale should be exercisable by the plaintiff without the restrictions on its exercise imposed by s. 20 of the Conveyancing Act, 1881. " 99. Laffoy J. noted that the effect of these provisions meant that the monies did not become due and payable until demand was made on foot of an event of default. The power to enter into possession and the power of sale arose on execution of the charge. The power of sale was exercisable on the occurrence of default. 100. On the evidence before her, Laffoy J. concluded that the letters of demand exhibited by the plaintiff were insufficient to render the monies due and payable, since they did not demand the entire balance. The first letter relied upon (and the only one pre-dating the repeal) called only for the arrears. The second did not even mention the entire outstanding balance and the third assumed that the entire balance was due without having demanded it. 101. Laffoy J. noted in her judgment that the plaintiff had "inherently adopted" the position that if it could not show that it had made demand before the 1st December, 2009 it would be precluded from relying on s.62(7) and she therefore approached the case on that basis. ACC Bank plc v. Ruddy ([2013] IEHC 138) 102. In this case the net issue arose from the fact that the letters of demand, written on the 9th November, 2009, had been sent to the wrong address. The plaintiff was unable to dispute the defendant's assertion that he had not received them and fell back upon the argument that the letters constituted "unequivocal external acts vouching an intent to call in all facilities, albeit not received by the defendant". In presenting the case against an unrepresented defendant, counsel for the plaintiff drew the court's attention to the issue arising from the repeal of the section and to the judgments relating thereto. Referring to Gunn, Moriarty J. said
Irish Life and Permanent plc v. Dunphy ([2013] IEHC 235) 104. This was another Circuit appeal against an order for possession granted on foot of ejectment proceedings. As described by Hogan J., two of the principal questions before him were:-
(ii) even if the answer to that question is in the negative, whether this Court can grant possession pursuant to a contractual agreement which is independent of statute? " 106. Hogan J., having examined the judgment of Andrews L.J. in Devlin, reconsidered the nature of the mortgagee's interest and decided that he had taken an incorrect approach in Duff, albeit he considered that he had reached the correct result. He had been wrong to say in that case that a registered mortgagee had an estate in land, but rather should have said that the registered holder of such a charge had an interest in land enforceable by sale. The estate remained vested in the mortgagor. That was why s.62(7) was so important- without an estate in the land the mortgagee could have no right of entry without the power conferred by the section. 107. Having regard to the significant repercussions and difficult legal issues given rise to by the repeal, Hogan J. decided to state a case for the determination of the Supreme Court, notwithstanding certain doubts about his jurisdiction so to do. The questions stated asked whether the plaintiff in the case had a vested right to possession prior to 1st December, 2009 and, as a separate issue, whether the court could grant possession to a mortgagee of registered land pursuant to a contractual agreement. G.E. Capital cases (unrep., Dunne J, 16th May, 2013) 108. The main issue with which this judgment is concerned is the adequacy of certain standard form letters of demand, there apparently having been a divergence between the views expressed in ex tempore judgments given by, amongst others, Dunne J. herself and the considered decision of Laffoy J. in Reade (referred to above). That issue is not of itself of concern in the instant case but it is worth noting that Dunne J. mentioned the distinction between Gunn and Gillespie. The wording of the mortgage in Gunn required a valid demand for payment of the full amount to render the principal money due, and therefore to ground an application for an order, while that in Gillespie did not. 109. Dunne J. then went on to refer to the passage from the judgment of Clarke J. in Worldport quoted above. She stated that the "value of certainty", or, in Clarke J.'s phrase, the "virtue of consistency" was central to our system of jurisprudence. She also referred to Brady v. Director of Public Prosecutions [2010] IEHC 231, where Kearns P., having cited Worldport with approval cited Parke J. in Irish Trust Bank v. The Central Bank of Ireland [1976-7] I.L.R.M. 50 as follows: -
Freeman v. Bank of Scotland (Ireland) Limited & ors. (unrep.,Gilligan J, 31st May, 2013) 111. A variety of arguments were raised by the plaintiffs in this case. On the issue relevant to the instant case, Gilligan J. followed Kavanagh v. Lynch in holding that the entitlement of the bank to appoint a receiver was a contractual matter conferred on it by the deed of mortgage and was unaltered by the repeal of the legislation. ACC Bank v. Fagan ([2013] IEHC 346) 112. In this case arrears had arisen in the course of 2009 but there had been no demand until 2010. However, the plaintiff relied on Clause 6 of the deed, which provided inter alia that
115. The plaintiff further relied on a clause providing a power to sell the premises in the same manner as if the statutory power of sale under s.19(1) of the Act of 1881 had arisen, but since that too depended on the monies having become due it was held not to be available. Submissions on Gunn 117. I propose to deal with the double construction rule first. The double construction rule 119. The "double construction" rule of statutory interpretation is a constitutional principle identified in the decision of the Supreme Court in McDonald v. Bard na gCon [1965] I.R. 217. The rule stipulates that if, in respect of any statutory provision, two or more constructions are reasonably open, one of which is constitutional and the other or others are unconstitutional, it must be presumed that the Oireachtas intended only the constitutional construction. 120. The bank and receiver submit that on its proper construction, s. 27 of the Interpretation Act operates so that, in relation to a charge on secured land, s.62(7) of the Act of 1964 and ss. 19 and 24 of the Act of 1881 survive their repeal. It is argued that the interpretation adopted in Gunn has the effect of rendering the Act of 2009 unconstitutional, as arbitrarily removing from lenders the right to apply for possession in the case of charges created before the 1st December, 2009 where the borrower did not default until after that date. It is submitted that the legislature could not have intended to bring about this situation, especially given that it re enacted the equivalent enforcement provisions. Reference is made to the doubts expressed by Hogan J. in Irish Life & Permanent v. Duff, summarised above. 121. It is submitted that the issue is whether the rights of the lender comprehended by the statutory provisions should be regarded as acquired, on the basis that the concept of contingent rights should be read broadly enough to comprehend such interests. 122. The section to be interpreted is s.27 but the argument is that if that section cannot be interpreted so as to save the lender's rights, then the repeal provisions would be unconstitutional as not having provided for any saver. 123. On behalf of the borrower, it is submitted that the bank should not be permitted to "re-open" Gunn on the basis of the double construction rule because to do so would be
125. Counsel for the Attorney General submits that s.27 (1)(c) is designed precisely to protect rights that would be seen as having constitutional protection.
127. I do not propose to embark upon a discussion of the authorities on the double construction rule because it appears to me that it cannot avail the bank parties in this case. 128. I should make it clear that this is not because I do not consider it open to the bank parties to raise new arguments in unrelated proceedings. Where a point arises that was not previously decided, the court is not prevented from considering it because it could have been argued by a different party, or even by the same party, in an earlier case. The issue that arises here is, in my view that, in applying the Worldport principles, I have to consider whether the new argument is one that leads to a materially different outcome in the sense that it demonstrates that the determination in the earlier case was wrong. 129. The double construction rule of statutory interpretation is one that applies only where two or more interpretations are reasonably open. Where the literal meaning of a statute is clear, unambiguous and not absurd, there is no necessity and indeed it would be wrong to use other canons of construction to interpret it - see the judgment of Denham J. in Board of Management of St. Malaga's NS v. Secretary of the Department of Education [2010] IESC 57. 130. The issues in this case do not in my view give rise to competing interpretations of the statutory provisions. 131. Section 8 of the 2009 Act repealed s. 62(7) and there is no ambiguity about that. Section 27 of the Interpretation Act protects rights that, under the repealed legislation, were acquired or accrued at the date of repeal. The only question then is whether the right identified in this case -the right under s.62(7) to apply for an order of possession when "repayment of the principal money secured by the instrument has become due" -had been acquired or accrued by the 1st December, 2009. Dunne J. held that it had not, not because she did not consider the right to be a substantive one capable of being preserved despite the repeal but because she held that the principal money had not "become due". That was a finding by reference to the facts of the case and the terms of the instrument. Whether the finding was correct or not, and whether she was correct or not in considering that the right was not "acquired" in the same way as in O'Sullivan v. Superintendent of Togher Garda Station does not depend on any issue of disputed statutory interpretation capable of attracting the double construction rule. Clause 6 of the deed 133. Mr. Murphy argues that the effect of the clause is that, from the date of execution, the money has become due for the purposes of s.62(7). The mortgagee then has a right to apply under s.62(7) for possession, subject only to its covenant not to exercise that right in the absence of default. This, it is submitted, is comparable to the characteristic feature of a mortgage that the mortgagee has an immediate, present right to possession which is made subject to a covenant not to exercise the right until default. 134. On behalf of the borrower, Mr. Maguire agrees that this provision is probably contained in almost mortgages. He argues that it was not relied upon in Gunn because it does not have the effect now contended for. The issue in Gunn was whether or not there was a right to apply, and manifestly, clause 6.02(a) would not have given a right to apply where the borrower was repaying the loan in accordance with the contract. The mortgage in the instant case, he says, requires default and demand before an application could be made. 135. Mr. Maguire also relies upon the decision of the House of Lords in West Bromwich Building Society v Wilkinson [2005] 1 WLR 2303. In that case the plaintiff had repossessed and sold the mortgaged property. As the full amount of the debt had not been realised by the sale, it now sued for the balance. One of the issues raised by the defendants was a limitation argument. Relying on a clause similar to that under consideration in this case, it was submitted that time in respect of the debt ran from the expiration of one month from the date of execution of the charge. 136. Rejecting that argument, and holding that time ran from the date of default, Lord Scott of Foscote said: -
138. This is indeed a new argument, and one which could be described as significant. However, on balance I think that it must fail. It is not simply that it might be thought odd that a clause having such an important effect should have escaped the notice of so many experienced practitioners and judges for so long, for such things can happen - in this context Mr. Murphy points to the lapse in time between the passage of the 1881 Act and the judgment in Devlin in 1924. Rather, it seems to me that the "deeming" provision, described in West Bromwich Building Society as "commonplace" and as being designed to protect the position of a third party buying the property from the mortgagee, cannot be interpreted as overriding the legal relationship between the parties to the agreement in all other respects. 139. Mr. Murphy expressly disavows any suggestion that the clause could ground an application, because of the lender's covenant. However, if a borrower was making payments as they fell due under the terms of the contract and the lender nonetheless made demand for the entirety of the principal, I am not convinced that the only reason a court would refuse an order for possession would be the lender's covenant. The money would not be "due" within the meaning of clause 1.02 set out above, because none of the events described therein had occurred and the borrower was in compliance with the covenant to pay. 140. I consider that I do not have to determine whether there is a conflict between the two clauses, or whether the "deeming" provision is only directed towards third party rights. The issue, in my view, ultimately comes back to the question whether, as of the relevant date, the bank had an acquired right to apply for the statutory remedy. The bank, in essence, says that it had an acquired but as-yet unexercisable right. Dunne J. considered that the right in question could not be described as acquired unless the conditions for its exercise had arisen. 141. I have also considered whether I should prefer the analysis of Feeney J. in McEnery v. Sheahan, relating to the difference between procedural and substantive rights, to that of Dunne J. in Gunn. It will be recalled that Feeney J. held that the right to appoint a receiver, although inchoate, subsisted from the execution of the deed and that it was therefore an acquired right at the date of repeal. He distinguished Gunn on the basis of an apparent misapprehension as to the unique function of the s.62(7) procedure. Mr. Murphy has submitted that if he had been aware of Devlin, he would have realised that both the right to apply for an order and the right to appoint a receiver were of a similar nature. 142. That of course may be correct. However, it is not for me to say what direction the learned judge's judgment would then have taken. He could have decided to disagree with Dunne J. on Worldport criteria, or he might have decided that he should apply the general principle in Worldport and adopt the reasoning in Gunn. 143. In any event, it seems to me that maintenance of the values sought to be protected by the Worldport principle are best served in this instance by accepting the Gunn determination on the issue. It is apparent from the cases post-dating it, summarised in this judgment, that it has been followed or distinguished several times by a number of different judges but never disagreed with. To disagree with it now, especially in a case where, to adopt Clarke J.'s phrase, the issues are evenly balanced, would cause a highly undesirable state of uncertainty in an area of economic activity where certainty as to one's rights and obligations is desirable. 144. I therefore conclude that, on this issue, the bank parties have not discharged the burden of persuading the court that it should depart from the decision in Gunn. By way of observation, however, I note that the concluding propositions in that case were probably drafted more broadly than was necessary. By this I mean the reference to a requirement that a demand should have been made before the 1st December, 2009 -this clearly was a condition of the deeds with which Dunne J. was concerned but, as Gillespie demonstrates, it does not necessarily apply in every case. The appointment of the receiver
148. The bank submits that its right to appoint a receiver derives from the contract and not from statute. It therefore relies on Kavanagh v. Lynch and Moran v. AIB, both summarised above. There is no dispute about the fact that the borrower was in default at the time of appointment. 149. Mr. Maguire has not made any submission, either oral or written, in respect of these authorities other than to say that he does not concede the point. 150. In my view they are apposite and I therefore adopt the principles set out by Laffoy J. as to the survival of the contractual power to make the appointment. I further agree that, in the absence of any indication to the contrary, it is not likely that the parties to a commercial contract intended to leave themselves subject to any change in the law that might occur, of which they had no knowledge at the time. I agree with the analysis of McGovern J. on this issue and hold that the reference to the legislation set out in paragraph 145 above is to the existing corpus of laws at the time of the agreement. 151. Mr. Maguire makes a separate argument as to the validity of the appointment, based on the actual terms of that appointment as compared with the powers set out in the deed. He submits that the powers conferred by the deed are limited to that set out in s.19(1)(iii) of the Conveyancing Act,1881, which refers only to receipt of the income of the property or part thereof. The deed of appointment purports to confer a power to enter into possession. He submits that it follows that the appointment itself is invalid. 152. This argument commences with the terms of s.19(1), which provides that
(i) A power, when the mortgage money has become due, to sell ...the mortgaged property ... (ii) omitted (iii) A power, when the mortgage money has become due, to appoint a receiver of the income of the mortgaged property, or any part thereof .. "
(3) This section applies only if and as far as a contrary intention is not expressed in the mortgage deed, and shall have effect subject to the terms of the mortgage deed and to the provisions therein contained. " 155. Reliance is placed upon the decision of Gilligan J. in The Merrow v. Bank of Scotland [2013] IEHC 130, where a particular debenture required the appointment of a receiver to be done under seal. Gilligan J. held that non-compliance with that requirement invalidated the appointment. 156. Mr. Murphy submits that the terms of the deed make it clear that the powers conferred by it are additional to those conferred by statute. He points to clause 6.04, set out above, which provides that the receiver may "let and manage" the mortgaged property. 157. Mr. Murphy relies on s.2 of the Act of 1881, which provides that
and argues that, as a matter of logic, it follows that income is a type of possession. This is, he says, a proposition that is intrinsic to property law and to the nature of property transactions. He refers by way of example to the situation where a tenant of the mortgagor, whose tenancy is binding on the mortgagee, is in possession. In that case the mortgagee "takes possession" by giving notice to the tenant to pay the rent to himself. If the tenant refused, the receiver must be entitled to assert possession in the form of insisting that the rent is paid to him.
160. It seems clear that in the instant case clause 6.04 envisages two separate situations - the entry into possession by a mortgagor on foot of an order for possession, which I have held to be unavailable in this case, and the appointment of a receiver, which I have held is lawful by virtue of the contractual entitlement of the bank. Where a receiver of rents and profits, with a power to let and manage, is properly appointed with due regard to any formal requirements, it seems to me that, as in Kavanagh v. Lynch, it is implicit that he has a power to take possession in order to carry out his functions. Question 5 of the special case Conclusions 163. That this was done accidentally seems overwhelmingly likely, given that the remedy in question was re-enacted. However, as Dunne J. said in Gunn, it is not for the court to supply the omission of the Oireachtas. 164. I will answer the Questions in this Module as follows: -
II. Yes. III. (a) Yes. (b) Does not arise. IV. No. V. This question was not argued. I therefore record the fact that the parties to the substantive litigation are agreed that the answer is "No" and that the Attorney General has reserved her position. |