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Cite as: [2020] IEHC 28

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THE HIGH COURT

[2020] IEHC 28

[2019/2685 P.]

BETWEEN

JIMMY MURPHY

PLAINTIFF

AND

ANN (OTHERWISE ANNA) DORAN AND CHRISTOPHER MURPHY

DEFENDANTS

JUDGMENT of Ms. Justice Reynolds delivered on the 17th day of January, 2020

Introduction

1. In this application the plaintiff (‘the receiver’) seeks interlocutory injunctive relief to

restrain the defendants from continuing their trespass at a property situate at 9

Walkinstown Road, Walkinstown, Dublin (‘the property’).

2. The plaintiff was appointed as receiver by an Instrument of Appointment dated 8th

January 2016 by Promontoria (Finn) Limited in its capacity as mortgagee of unregistered

land under a Deed of Mortgage dated 23rd November, 2007 (‘the mortgage’), executed

by the first named defendant (‘the borrower’) and First Active plc. The business of First

Active plc was subsequently transferred to Ulster Bank Ireland Limited (‘Ulster Bank’) and

thereafter, the facility and mortgage were assigned to Promotoria (Finn) Limited.

3. The defendants are resisting the application primarily on the basis that the subject

property is their principal private residence and/or family home in which circumstances

the borrower asserts an entitlement to the protections of the Code of Conduct on

Mortgage Arrears.

Factual Background

4. The borrower entered into a mortgage with First Active plc in November, 2007 on foot of

a loan by First Active plc to her for the sum of €420,000 which sum was secured on the

property.

5. Pursuant to the terms of the mortgage, First Active plc had an express power to transfer

or assign inter alia the mortgage and the security created by the mortgage together with

all associated powers and rights to any persons with or without notice to the borrower.

6. The terms of the mortgage agreement provided that the borrower could not grant any

tenancy or other rights of possession of the property to any third party which would bind

or usurp the mortgagee’s title. The mortgage agreement expressly excluded the

mortgagor’s statutory power to grant lettings as conferred by Section 18 of the

Conveyancing Act 1881. Clause 6 (e) and (h) of the mortgage specifically provided as

follows:

“(e) Not to exercise the powers of leasing or agreeing to lease and of accepting

surrenders of leases conferred on a mortgagor in possession by the Conveyancing

Acts, 1881 to 1911 and not to create any lease or tenancy or part with or share the

occupation or possession of the mortgaged property.

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(h) Not without consent of the lender to make any disposition of the mortgaged

property subject to the mortgage or create or purport to create any rent charge

affecting it and not to create or permit to exist any mortgage or charge on the

mortgaged property or the endowment policy or any additional or collateral security

which will rank after the mortgage.”

7. In February, 2010 the banking business of First Active plc was transferred to Ulster Bank

Ireland Limited (“Ulster Bank”) pursuant to statutory instrument. As a consequence, the

loan and mortgage were transferred to Ulster Bank as of then.

8. The borrower fell into arrears with the repayments due under the loan. By letter dated

18th February, 2013, Ulster Bank made demand of the borrower to repay the sum of

€439,224.71 which was the sum then due and owing, in default of which proceedings

would be issued.

9. By Global Deed of Transfer dated 29th September, 2015 Ulster Bank transferred its

interest in the loan agreement to Promontoria (Finn) Limited.

10. By letter dated 5th November, 2015, the borrower was informed that the loan facility and

security had been assigned from Ulster Bank to Promontoria (Finn) Limited.

Issue to be determined

11. The net issue between the parties concerns the defendants’ contention that the property

constitutes their principal private residence and/or family home in circumstances where

the borrower asserts an entitlement to the protection of the Code of Conduct on Mortgage

Arrears.

The Code of Conduct on Mortgage Arrears

12. The Code of Conduct issued by the Central Bank sets out the manner in which banks must

deal with borrowers who are either in arrears with the mortgage on their family home, or

are faced with the prospect of entering mortgage arrears. The Code sets out a framework

allowing mortgage lenders and borrowers in mortgage difficulties to engage with one

another in a structured way.

13. The Code derives its legal status from section 117 of the Central Bank Act 1989, wherein

section 117(1) provides: -

“The Bank may, after consultation with the Minister, from time to time draw up,

amend or revoke, in relation to any class or classes of licence holders or other

persons supervised by the Bank under this or any other enactment, one or more

than one code of practice concerning dealings with any class or classes of persons

and every such code shall be observed by the licence holders or other persons so

supervised, to whom they relate”.

14. The Code, at page 2, states as follows:

“This Code applies to the mortgage loan of a borrower which is secured by his/her

primary residence.”

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The plaintiff’s position

15. The receiver denies that the property constitutes the defendants’ principal private

residence and/or family home for the purposes of the Code of Conduct on Mortgage

Arrears.

16. In this regard, the receiver highlights relevant factual issues for consideration by the

court as follows: -

(a) The Letter of Loan offer dated 27th October, 2007 expressly stated that the monies

were advanced for the purpose of purchasing the property for use as a Buy-to-Let

Property and the special conditions attached thereto expressly stipulated that “This

is an Investment Property.”

(b) The borrower maintains that she moved into the property in March 2012 for the

purposes of using it for a family home. This was a period of approximately four and

a half years after the execution of the loan agreement on 22nd October, 2007 and

the mortgage on 23rd November, 2007.

and further, moved the second named defendant into the property in breach of the

negative pledge clause of the mortgage.

(d) The borrower first notified Ulster Bank in January 2014 that she was in occupation

of the property, some twelve months after she had been served with a demand for

payment of the arrears on the account in the sum of €473,758.67.

(e) In April 2016, the borrower first notified the receiver that she had moved into the

property for its use as a family home. The receiver thereafter made repeated

requests for documentary proof that the property comprised her primary residence

which she refused to provide until after the issue of the proceedings herein.

17. Further, it is submitted that the plaintiff acting in his capacity as receiver is neither a

licensed holder nor a person supervised by the Central Bank and accordingly is not bound

by the Code of Conduct. The Code applies to “the mortgage lending activities of

regulated entities”. The plaintiff is not a regulated entity and accordingly it is submitted

that the Code of Conduct has no applicability to the within proceedings.

18. In addition, the Code applies only to the mortgage loan of a borrower “which is secured

by his/her primary residence”. A “primary residence” is defined in the Code as follows:

“(a) The residential property which the borrower occupies as his/her primary residence

in this State, or

(b) a residential property which is the only residential property in this State owned by

the Borrower”.

19. The receiver posits that the loan the subject matter of these proceedings was not secured

by the borrower’s residential property but was secured by way of mortgage on an

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investment property which was explicitly Buy-to-Let. It was some four and a half years

after the conclusion of the loan agreement and mortgage that the defendants moved into

the property to claim it as their primary residence.

20. It is argued that even if the Code did apply, Clause 57 provides that “notwithstanding

Clause 56” the lender may commence legal proceedings in the event of a “breach of

contract by the borrower other than the existence of arrears”. It is argued in the instant

case, that in addition to falling into arrears, the borrower committed a separate breach of

contract by installing the second named defendant in the property without prior consent

of the mortgagee in breach of the mortgage. In the circumstances, it is contended that

the receiver would have been entitled to immediately commence the proceedings

notwithstanding the moratorium provisions of the Code of Conduct.

21. Further, it is contended that even if the Code of Conduct was applicable, the only

provisions that are directly enforceable are the clauses which impose a moratorium on

repossession proceedings. The Code prescribes a procedure to be followed known as the

“Mortgage Arrears Resolution Process” or “MARP”. The combined effect of the relevant

clauses of the Code is that where an alternative repayment arrangement is not agreed,

the lender must notify the borrower in writing that the provisions of MARP no longer

apply, in which circumstances proceedings may commence either (a) three months from

the date of the letter, or (b) eight months from the date the arrears arose, whichever

date is later.

22. The receiver contends that Ulster Bank had notified the borrower that she was at risk of

losing the protections of MARP and afforded her ample opportunity to engage with the

mortgagee.

The defendants’ position

23. In January, 2016, the borrower was informed of the appointment of the receiver.

Thereafter, the borrower sought and was provided with a copy of the relevant Instrument

of Appointment together with an offer to inspect the original documentation at the

plaintiff’s solicitor’s office.

24. In April 2016, the borrower asserted that the property comprised the dwelling in which

her family resided. She also advised that she had engaged Mr. Ben Gilroy to act as her

adviser and to enter into discussions on her behalf. She now accepts in her affidavits that

she should not have followed Mr. Gilroy’s advice and instead that she should have

properly engaged with the receivership.

25. The borrower asserts that she has resided in the property with her husband, the second

named defendant, since in or about March 2012. In support of this assertion the

borrower exhibits her marriage certificate (dated 4th January, 2013), employment and

Revenue records together with sample utility bills for the period 2018 – 2019.

26. The borrower disputes the valid appointment of the receiver to the property in

circumstances where it is maintained that the property is a family home and principal

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private residence and where the charge holder has not completed any process pursuant

to the Code of Conduct on Mortgage Arrears. In this regard, she relies on a letter dated

29th September, 2014 from Ulster Bank advising of arrears on the mortgage and the

protections afforded by the Mortgage Arrears Resolutions Process.

27. The borrower posits that the charge holder has attempted to circumvent this process by

the appointment of the receiver. Further, she maintains that any order for repossession

of the property must be sought by means of a Civil Bill for possession in the Circuit Court.

Relevant legal authorities

28. The principal argument made by the borrower is that the property constitutes a family

home and that she is therefore, entitled to the benefit of mortgage arrears process.

29. In Fennell v. Creedon [2015] IEHC 711, Murphy J. in considering the application of the

Code of Conduct on Mortgage Arrears stated at para. 62, as follows:

“The Court is not at all persuaded that this contract is one which attracts the

protection of the Code of Conduct on Mortgage Arrears. The Code is specified to

apply to the mortgage loan of a borrower which is secured by his/her primary

residence. This particular loan was not secured by the defendant’s primary

residence. It was only four years after the conclusion of the loan agreement and

mortgage that the defendants moved into the property at 131 Tritonville Road and

converted it into their primary residence.”

30. In that case, the receiver had sought an interlocutory injunction to restrain the

mortgagors from trespassing on a property which they claimed comprised their family

home. The mortgagors attempted to rely on the Code of Conduct in order to challenge the

jurisdiction of the court to grant the reliefs claimed.

31. Murphy J. was satisfied that the loan agreement entered into had been commercial in

nature and that the mortgagors had only moved their family into the property four years

after the loan agreement had been entered into. She rejected the mortgagor’s argument

that the Code of Conduct applied notwithstanding the fact that the mortgagee had at one

stage considered that the property was entitled to the benefit of the Code of Conduct and

had sent correspondence in that respect. She rejected the mortgagor’s submission that

the effect of the Code was that the mortgagee could only apply for possession of the

property through formal court proceedings rather than the appointment of a receiver.

32. She further surmised as follows:

“The defendants’ entire case is founded on an incorrect premise that they are the

owners of 131 Tritonville Road when in fact they transferred their ownership of that

property to EBS by mortgage agreement dated 9th August, 2004. It appears to the

Court that a failure to resolve issues relating to the mortgage under the MARP

simply means that the parties revert to their original positions as determined by the

contract which they have entered into.”

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33. The approach adopted by Murphy J. in Fennell was approved by the Court of Appeal in

Tyrrell v. Wright [2018] IECA 295. Whelan J. stated that the High Court had been correct

in attaching weight to the fact that the premises was not acquired as a family home and

that the loans had been extended for a commercial purpose. Whelan J. endorsed Murphy

J.’s finding that “merely because mortgagors move into a secured property several years

after a commercial loan agreement is entered into is not sufficient to usurp the underlying

terms of the mortgage contract.”

34. In Tyrrell, Whelan J. held that the mortgagor committed a separate breach of the

mortgage other than falling into arrears, namely he had breached the negative pledge

clause therein by representing to his partner that she would have an interest in the

secured properties. She determined that under Clause 57 of the Code the mortgagor had

committed a further breach of contract and as such MARP did not apply. The receiver

therefore was entitled to commence legal proceedings for vacant possession, whether or

not it was Mr. Wright’s principal private residence and there was no onus on the receiver

to comply with the provisions of Clause 56 of the Code”.

Conclusion

35. In applying the principles enunciated in Fennell v. Creedon and approved by the Court of

Appeal in Tyrrell, I am satisfied that the borrower is not entitled to have the Code applied

in this case in circumstances where she drew down a commercial mortgage for the

purposes of purchasing a residential investment property. The fact that some years later

she decided to use the property as her private residence, without any notice to or consent

from the mortgagee, does not entitle her to have the Code applied.

36. Pursuant to the mortgage, the mortgagee became the full owner of the property, subject

only to the borrower’s equity of redemption which constitutes her sole proprietary interest

in the property. Unless the mortgagee had consented, the borrower could not grant any

tenancy or other rights of possession to any third party, be it her husband or otherwise,

which would bind or usurp the mortgagee’s title.

37. In any event, the Code specifically states that it applies to “the mortgage loan of a

borrower which is secured by his/her primary residence”. This Court is satisfied that

these terms must be read together and that the mortgage loan and the primary residence

are determined at the same time. It is clear that when the loan was entered into in 2007

the borrower’s primary residence was at 10 Derby Lodge, The Curragh, County Kildare. It

is simply not open to the borrower to change the character of the property in Walkinstown

by her unilateral act of moving into the property some years after the mortgage had been

entered into so as to vary or increase the rights conferred upon her.

38. Even if the borrower was entitled to have the Code applied, she was in fact advised of the

protections available under MARP by Ulster Bank in September, 2014 and choose not to

engage with the process at that stage. The Court of Appeal in Tyrrell determined that

even if the Code of Conduct did apply, the mortgagor had committed a breach of contract

other than the accumulation of arrears and as such MARP did not apply. In the instant

case, it is clear that the mortgagor has breached Clause 6 of the contract and it follows

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therefore that the receiver was entitled to commence the within proceedings whether or

not it was the borrower’s principal private residence.

Application for injunctive relief

39. Based on the evidence before this Court, I am satisfied that the receiver has made out a

strong case that he is likely to obtain an order for possession of the property at the

substantive trial. At no stage has the borrower denied that the monies are due and

owing, it is the manner in which the receiver has proceeded that she has taken issue with.

Further, I am satisfied that damages would not be an adequate remedy for the receiver in

circumstances where the borrower is unable to pay the very significant debt now due and

owing on the property, which exceeds the amount on the original loan. It is clear

therefore that she will be unable to meet any award for damages in due course.

40. By contrast, the receiver has provided an undertaking as to damages and it is clear that

the balance of convenience must favour the granting of the injunction sought.

41. In so determining, I am mindful that the character of the relief sought has a mandatory

character but a mandatory character which is in itself the very purpose of the mortgage,

namely to allow an enforcement in the event of a default. Whilst noting the Supreme

Court decision in Scriven and the caution that must be exercised by the court in

determining such issues as to minimise the risk of injustice, this has to be viewed in light

of the circumstances of the instant case where the borrower has made no effort to meet

her obligations and has now produced a situation of arrears of a magnitude which she

clearly cannot address.

42. In all the circumstances, I will grant the reliefs sought in paras. 1-6 of the plaintiff’s

notice of motion herein.

Result: Reliefs sought granted in paras. 1-6 of the plaintiff's notice of motion herein.