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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Ulster Bank Ireland Ltd -v- Hannon [2014] IEHC 670 (18 December 2014)
URL: http://www.bailii.org/ie/cases/IEHC/2014/H670.html
Cite as: [2014] IEHC 670
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Judgment
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Neutral Citation: [2014] IEHC 670 THE HIGH COURT [2009 No. 1143 S.P.] BETWEEN ULSTER BANK IRELAND LIMITED PLAINTIFF AND
GERARD HANNON DEFENDANT JUDGMENT of Mr. Justice Michael White delivered on the 18th December, 2014 1. This matter comes before the court by way of full plenary hearing where the Plaintiff is seeking a well charging order on agricultural lands in Co. Sligo comprised in Folios 2289, 2288, 2286, 2285 and 10734 of the Register Co. Sligo. The Defendant contests the right of the Plaintiff to seek a well charging order. There are some disputed issues of fact and also distinct submissions on the law applicable. 2. Apart from the affidavits filed, Notice to Cross Examine was served on a number of witnesses. John Lane the former Commercial Manager in the Ulster Bank branch in Ballymote, Co. Sligo was cross examined on his affidavit of 28th November 2012. 3. Damien Devlin an official from the Head Office of Ulster Bank Limited in Belfast was cross examined on his affidavits of the 22nd January 2010 and 26th October 2012. 4. The Defendant Gerard Hannon was cross examined on his affidavit of the 11th March, 2011. 5. In the course of the proceedings on Thursday, 23rd October, 2014 the court gave an interim ruling on the status of Mr. Devlin’s evidence. The Defendant had made submissions that his evidence was incapable of being considered by the court because he was not an official of the Plaintiff and was not entitled to give evidence in accordance with statutory enactments of the Oireachtas. The court ruled that Mr. Devlin’s evidence was not required by the court as the primary dispute between the parties was the status of an alleged equitable deposit of the Land Certificates of the relevant folios with the Ulster Bank branch in Ballymote, and the relevant evidence was the evidence of John Lane, the Commercial Manager and the Defendant Gerard Hannon. 6. The conflict of fact between the Plaintiff and Defendant related to the status of the deposit of the Land Certificates in the Ulster Bank branch in Ballymote. The plaintiff contends that there was an equitable deposit of the Land Certificates in accordance with facility letters issued to the Defendant and signed by him. The Defendant contended that the Land Certificates were lodged in the branch for safe keeping only, and at no stage was an equitable deposit of the Land Certificates ever contemplated by the Defendant or agreed by him. 7. A separate booklet of papers was prepared for the benefit of the court which contained a number of facility letters and correspondence between the Plaintiff and the Defendant and an undertaking submitted to the bank by Rochford, Gallagher & Co., Solicitors who acted in the perfection of title for the Defendant. 8. The first facility letter of 12th February, 2004 was directed to the Defendant at his address at Lissananny, Ballymote, Co. Sligo. It approved three separate types of finance facility (a) overdraft €15,000, (b) term loan €130,000, (c) bridging loan €30,000. 9. Under the heading ‘Security’ the facility letter states:-
(i) Equitable deposit of Title Deeds comprised in Land Certificate Folio 2286 Co. Sligo undertaking of Rochford Gallagher, Solicitors dated 21st March, 2002 held. (ii) Equitable deposit of Land Certificates covering Folios 2285 and 10734 Co. Sligo. (iii) All monies assignment of life policy to provide full cover for the amount of facility (b) on your death. That facility letter was signed by the Defendant on the 18th February, 2004. ”
(i) All monies mortgage over lands comprised in Folios 2286, 2285, 10734, 2283, 2289 and 2288 all Co. Sligo totalling 125 acres approximately at Lissananny, Co. Sligo. (ii) All monies assignment of Life Policy to provide full cover on death of Gerard Hannon. This facility letter was signed by Mr. Hannon on the 17th July, 2005.
13. The next facility letter is dated the 12th January, 2007 and it relates to overdraft facilities of €150,000 and the security is set out in the facility letter and it states:-
(i) Land Certificate Folio 2286 Co. Sligo. (ii) Land Certificate Folio 10734 Co. Sligo. (iii) Land Certificate Folio 2285 Co. Sligo. (iv) Land Certificate Folio 2288 Co. Sligo. (v) Land Certificate Folio 2289 Co. Sligo. (vi) Policy on the life of Gerard Hannon for €750,000. (vii) Policy on the life of Gerard Hannon for €120.000. ” 15. The final facility letter is dated the 24th October, 2007. It relates to an overdraft facility of €127,000, under the heading of security the facility letter states:-
18. In addition to the facility letters there were a number of different items of correspondence and an undertaking of the 21st March, 2002 opened to the court and put to the Defendant on cross examination. 19. A Solicitor’s undertaking dated the 21st day of March, 2002 demonstrated that the Defendant gave instructions to his then Solicitors Rochford Gallagher & Co. of Ballymote, to furnish by way of deposit the Land Certificate of Folio 2286 Co. Sligo which was being transferred to him voluntarily by his father Patrick J. Hannon. 20. The form of undertaking which was signed by the Defendant Mr. Hannon on the 21st March 2002, anticipated that the deposit of the Land Certificate was for monies advanced by the bank. The wording of the last page of the client’s authority and retainer states:-
22. This is borne out by the subsequent letter of the 12th February, 2004 from the Plaintiff to the Defendant:-
24. A further letter was sent to the Defendant on the 7th June, 2005 which stated:-
26. This was normal banking procedure at the time, as it would not have been appropriate to have the Defendant sign the memorandum as it would acquire the status of an agreement for mortgage to which the Statute of Frauds Act applied requiring a lien or burden to be registered in the Land Registry. There was nothing unusual about this, as it was common banking practice at the time prior to the enactment of the Registration of Deeds and Title Act 2006. 27. The Land Certificates were not held by the Plaintiff for safe keeping. The Court is satisfied from the facility letters, other letters furnished and evidence that the Defendant had no doubt that the Certificates lodged with Ulster Bank Limited were there for the purposes of security on very substantial borrowings advanced to the Defendant. 28. I accept the evidence of the Defendant that from September 2009 his relationship with his father had deteriorated and that he had moved to an apartment in October 2009 and then moved to Derry to study for three years. The Defendant has advanced the opinion that his father must have refused a registered letter. He stated that he did not become aware of the registration of the lien until 2011 and that he never actually received the letter of the 29th March, 2010 enclosing the Notice. The Legal Principles
The deposit, as security, of documents of title to land which is not registered gives the person with whom it is made an equitable estate in the lands until the money secured by it is repaid: the remedy for securing payment is to apply to the court for a declaration that the deposit has given a charge on the lands. The right created by the deposit is not limited to keeping the deeds until the money has been paid but gives an equitable estate in the lands.”
[12.30] “The 1964 Act provided that the deposit of a land certificate or certificate of charge had the same effect as a deposit of the title deeds of unregistered land. As Kenny J. put the matter: ‘The right created by the deposit is not limited to keeping the deeds until the money had been paid but gives an equitable estate in the lands’. In other words, such a deposit created an equitable mortgage on the registered land which did not need to be registered in the Land Registry as a burden on the land in order to secure priority as against subsequent transactions relating to it. The mortgage was protected because subsequent transactions relating to the registered land generally could not be completed by registration in the Land Registry without production of the land or charge certificate, which the mortgagee held. However, if the mortgagee wished, he could lodge a caution with the Registrar against subsequent registered dealings. All this, however, has ceased to be possible because s 73 of the Registration of Deeds and Title Act 2006 abolished the issue of land and charge certificates, with the consequence that neither a registered owner nor registered chargee has any longer a document to deposit, so as to create such an equitable mortgage. Existing mortgages by deposit were saved, but the mortgagees holding certificates by deposit were required to register a lien in the Land Registry by 31 December 2009, in order to protect the equitable mortgage. After that date land and charge certificates ceased to have any force or effect.” The text at para [12.46] deals with the deposit of title deeds and states, [12.46] “It appears that a mere deposit of the title deeds will be regarded as prima facie evidence of an equitable mortgage, unless a deposit is otherwise accounted for, e.g., deposit with a bank for safe keeping. On the other hand, a mere agreement to deposit is not enough if the deeds are not actually deposited, though that agreement may create another kind of equitable mortgage. It is not necessary to deposit all of the title deeds relating to the land, provided those in fact deposited are material evidence of title and sufficient to indicate the parties’ intention. It has also been held in Ireland that a deposit of title deeds with a creditor’s solicitor, for the purpose of preparation of a mortgage to secure ancedent debt and further advances, in itself creates and equitable mortgage without any further agreement. Furthermore, a verbal agreement, supported by parol evidence, to make future advances on a deposit of title deeds as security for a present loan may be sufficient to create an equitable mortgage as security for any subsequent advances.” 32. In addition, Section 105 of the Registration of Title Act 1964, and legal precedent gave the benefit to the holder of the equitable mortgage the priority of that mortgage over and above any other burden registered other than existing equities. 33. The effect of an equitable deposit of Land Certificates for the purpose of security, had the effect of granting to the financial institution who had advanced the monies an equitable interest in the land rather than a lien over the Title Deeds. 34. The difficulty for any financial institution holding an equitable mortgage subsequent to the 1st January, 2007 was that if a lien or burden was not registered on the Folio within a three year period from the 1st January 2007, the financial institution, lost the benefit of priority of their equitable mortgage. 35. Section 73(3)(b) of the Registration of Deeds and Title Act 2006 states:-
38. The holder of an equitable mortgage who seeks to register the equitable mortgage as a lien or a burden on registered land is bound by the equitable maximum of “he who seeks equity must do equity”. 39. If a situation arose where the Court considered apart from technical issues that a holder of an equitable mortgage was not entitled to register same as a lien or a burden, the Court then would have a duty to intervene as the responsibility placed on the financial institution would be to treat the registered owner against whom the lien or burden is registered in a manner which is equitable. 40. In this case the Defendant was treated equitably. He was advanced very substantial monies by the Plaintiff. The facility letters on numerous occasions outlined to him that the purpose of the deposit of the Land Certificates was for security purposes. On the 7th June, 2006, Mr. John Lane, the Commercial Manager of the Ulster Bank Limited formally received from the Defendant an acknowledgement that five Land Certificates had been received by the bank by way of equitable deposit to secure the individual liabilities of the Defendant. The Defendant in respect of any service of notice could not have been prejudiced in any way by the registration of the lien or burden. The only prejudice that could have arisen was to the Plaintiff, as from an inspection of the relevant up to date Folios, the Defendant had incurred substantial debts to suppliers where proceedings were issued, judgment marked and judgment mortgages filed in the Land Registry office. 41. It is unclear to the Court the status of the proceedings Record Number 2012/58P an action commenced by the Defendant against the Property Registration Authority and the Plaintiff challenging the registration of the lien as a burden on the relevant Folios in accordance with Section 73(3)(c) of the Registration of Deeds and Title Act 2006. There may be outstanding issues in relation to that matter upon which the Court may have to receive submissions from all three parties to that litigation. 42. Apart from that issue the Court is satisfied that the Plaintiff is entitled to a declaration that by virtue of the deposit by the Defendant with the Plaintiff on the 7th June, 2006 of the Land Certificates of Folios 2289, 2288, 2286, 2285 and 10734 of the Register Co. Sligo by way of equitable deposit that the sum specified in the Second Schedule to the Special Summons with interest thereon stands well charged on the Defendant’s interest in the said lands. |