Allied Irish Banks Plc v Richard Finbarr Fitzgerald

JudgeMs. Justice Ní Raifeartaigh
Judgment Date13 December 2022
Neutral Citation[2022] IECA 286
CourtCourt of Appeal (Ireland)
Docket NumberAppeal Record No. 2021 126
Allied Irish Banks Plc
Richard Finbarr Fitzgerald


Eileen Daly
Notice Party/Appellant

[2022] IECA 286

Barniville P.

Faherty J.

Ní Raifeartaigh J.

Appeal Record No. 2021 126




JUDGMENT of Ms. Justice Ní Raifeartaigh delivered on the 13th day of December 2022


This appeal arises in proceedings brought by the Plaintiff (hereinafter “ the Bank”) to recover possession of premises pursuant to a mortgage entered into between it and the defendant in 1995 (and therefore on a date prior to the Conveyancing and Land Law Reform Act 2009 which is a point of significance). The mortgage contained a provision usually referred to as a negative pledge clause. The defendant (variously “ the defendant” orthe Borrower”) did not take part in the High Court proceedings; he had been adjudicated a bankrupt by the time of the hearing and the Official Assignee did not offer opposition to the orders sought. The appeal is brought by the Notice Party (hereinafter “ the appellant”) who had entered into a 35-year lease with the defendant in 2002, and therefore some 7 years after the mortgage. There was no evidence before the High Court that the Bank gave its consent to the lease. Nonetheless the appellant maintains that the Bank must comply with the Residential Tenancies Act 2004 with regard to the notice provisions concerning the termination of her tenancy under the lease and that no order for possession should have been made by the High Court as against her.


I am of the view that the High Court was correct in determining that the 2004 Act does not apply in the circumstances of this case, and that it was correct in following the approach taken by the Court in Kennedy v. O'Kelly [2020] IECA 288, albeit that the latter concerned an interlocutory injunction in plenary proceedings. The following sets out the circumstances of this case and the reasons for this conclusion.


On 1 June 1995, the defendant/Borrower granted a mortgage in respect of certain premises at Pembroke Road in Dublin (“ the premises”) to the Bank. The mortgage was stated to secure all monies for which the defendant may be in any way liable to the Bank, either as principal or surety. The Bank sought to enforce the mortgage in circumstances where there was a debt outstanding to it under the terms of loan facilities accepted by the defendant on 13 September 2015 and issued a summary summons. The defendant was declared a bankrupt on 27 January 2020 and neither he nor the Official Assignee took any part in the proceedings in the High Court.


It appears that the defendant had entered into a lease with the appellant in 2002. A copy of a document entitled “Memorandum of Agreement”, dated 3 April 2002 and agreed between the defendant and the appellant, was exhibited on behalf of the Bank. The second schedule of this agreement indicates that the term of the lease was 35 years, commencing on 3 April 2002. The rent payable was €800 per month, which was to be paid by set-off of a sum of €800,000 said to be due by the defendant to the appellant.


The mortgage contained the following, typically referred to as a negative pledge clause:—

“IT IS HEREBY AGREED AND DECLARED that the provisions of theConveyancing Act 1881, as amended by theConveyancing Act 1911 shall in their application to this security be modified as follows

(1) The power of sale conferred upon mortgagees by theConveyancing Act 1881 shall apply to this present security without the restrictions therein contained as to the giving notice or otherwise and for the purpose of any sale under such power the moneys hereby secured shall be deemed to have become due immediately after the execution of these presents although no demand of payment shall have been made.

(2) The Mortgagor shall not be entitled without the consent in writing of the Bank to exercise the powers vested in him bysection 18 of the said Conveyancing Act of 1881 so long as any moneys shall remain unpaid on this present security.”

(Emphasis added)

The First High Court Judgment

The Bank issued a special summons on 5 June 2019 claiming possession of the premises. An affidavit of a Ms. Orlaith Tierney was sworn on 7 June 2019. The proceedings sought inter alia an order pursuant to O. 54 of the Rules of the Superior Courts 1986 (as amended) for possession of the lands and premises described in the Schedule to the summons, which had been charged by the defendant to the Bank pursuant to an Indenture of Mortgage dated 1 June 1995. Ms. Tierney set out the history as between the Bank and the Borrower and the latter's default. She then referred to the lease agreement dated 3 April 2002 as between the defendant and the appellant. She stated clearly on affidavit that there was no consent from the Bank to the lease, and that the notice party was a trespasser on the premises.


On 16 September 2019, the proceedings were served upon the defendant. There were various attempts at serving papers upon the occupants. It is not necessary for present purposes to detail the attempts that were made as detailed in the affidavits of service for reasons that will become apparent.

The first judgment of the High Court

The High Court (Simons J.) delivered two judgments in the proceedings. The first arose out of a hearing conducted on 9 March 2020 and was delivered on the 27 April 2020, [2020] IEHC 197. As already noted, the defendant did not take part and the Official Assignee did not oppose the application. The appellant was not involved in this first hearing.


In this judgment, the High Court held that it was satisfied that the Bank was entitled to an order for possession. The uncontested evidence before the Court indicated that the principal monies secured on the mortgage were due for payment, and that the loans were repayable on demand, with an alternative timeline for repayment being set out without prejudice to the requirement of repayment upon demand. Both dates had passed without repayment being made. In reaching this conclusion, Simons J. relied upon ACC Bank plc v. Kelly [2011] IEHC 7 and Allied Irish Banks plc v. McKeown [2019] IECA 296. He pointed out that the mortgage provided that the Bank may exercise the statutory power of sale under theConveyancing Act 1881 without the restrictions therein contained, and that the power of sale would be ineffective without vacant possession of the premises.


Simons J. went on to consider the 2002 lease. He noted that Section 18(1) of the Conveyancing Act 1881 had provided that a mortgagor of land, while in possession, shall have power to make, from time to time, any such lease of the mortgaged land, but that the parties to a mortgage were allowed to contract out of this provision. Seesection 18(13) provides:

“This section applies only if and as far as a contrary intention is not expressed by the mortgagor and mortgagee in the mortgage deed, or otherwise in writing, and shall have effect subject to the terms of the mortgage deed or of any such writing and to the provisions therein contained.”


He noted also that section 18 of the Conveyancing Act 1881 has since been repealed by theLand and Conveyancing Law Reform Act 2009, section 112 of which now provides that a mortgagor of land, while in possession, may lease the land with the consent in writing of the mortgagee, which consent shall not be unreasonably withheld. He observed that this repeal did not affect the interpretation of the mortgage of 1 June 1995 because it did not contain a retrospective provision. He noted that this conclusion, as to the implications of the repeal of the 1881 Act for an existing mortgage, had been reached by the High Court (Laffoy J.) in Kavanagh v. Lynch and St Angela's Student Residences Ltd [2011] IEHC 348, albeit in the context of the statutory power of a mortgagor to appoint a receiver.


In considering whether the lease as between the appellant and the Borrower was void as against the Bank, he referred to the judgment of the High Court in Fennell v. N17 Electrics Ltd [2012] IEHC 228; [2012] 4 I.R. 634 (“ N17 Electrics Ltd”), where Dunne J., having conducted a careful review of the authorities, summarised the consequences of section 18 of the Conveyancing Act 1881, as follows (at paragraph 30 of her judgment):

“A number of useful observations can be made from the authorities referred to above. I think, first of all, that it is clear that a mortgagor and mortgagee can expressly agree to exclude the power conferred by s. 18 of the Act of 1881. If the power is excluded, it may be done in a way that permits the mortgagor to grant a lease subject to the prior consent of the mortgagee. If such prior written consent is not obtained by the mortgagor and the mortgagor proceeds to enter into a lease with a tenant, the lease will be binding on the mortgagor as lessor, but as against the mortgagee, the lease will not be binding. It is also clear that in certain circumstances, the lease may be binding on the mortgagee in circumstances such as those described in the authorities referred, where, for example, the mortgagee ‘serves a notice on the tenant to pay the rent to him’. It is also clear from the authorities referred to above, that the mere fact that the mortgagee is aware of the existence of a tenancy and that a tenant is paying rent to the mortgagor which is being used to pay the obligations of the mortgagor to the mortgagee, is not, of itself, sufficient to create a relationship between the mortgagor's tenant and the mortgagee.”


Simons J. noted that towards the end of her judgment (at paragraph 47), Dunne J. referenced the rationale underlying the requirement for the consent of the mortgagee, namely that any potential impediment to the realisation of the security must be approved of by the lender:

“There might be an argument to be made that...

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