Fay v Promontoria (Oyster) Designated Activity Company

• Jurisdiction: Ireland
• Judge: Ms. Justice Butler
• Judgment Date: 29 July 2022
• Neutral Citation: [2022] IEHC 483
• Court: High Court
• Docket Number: [Record No. 2018/4987 P]

Between

Carol Fay and Anthony Fay

Plaintiffs

and

Promontoria (Oyster) Designated Activity Company and Tom O'Brien

Defendants

[2022] IEHC 483

[Record No. 2018/4987 P]

THE HIGH COURT

Lis pendens – Registration – Delay – Second defendant seeking to vacate a lis pendens registered by the plaintiffs – Whether the lis pendens was improperly registered by the plaintiffs

Facts: The second defendant, Mr O’Brien, applied to the High Court under s. 123 of the Land and Conveyancing Law Reform Act 2009 to vacate a lis pendens registered by the plaintiffs, Ms and Mr Fay, under s. 121 of the 2009 Act in respect of proceedings issued by them against the defendants. The underlying proceedings challenged the validity of the appointment by the first defendant, Promontoria (Oyster) DAC, of the second defendant as receiver over certain property that was mortgaged by the plaintiffs as security for loans made to them by Ulster Bank in 2007 and 2011. In moving the application, the second defendant relied on two main grounds. The first was that the underlying proceedings did not make a claim to an estate or interest in land and, therefore, the lis pendens was improperly registered by the plaintiffs under s. 121. The second was that the plaintiffs had been guilty of an unreasonable delay in prosecuting the underlying action. In that regard, the defendants pointed to the fact that at the time the motion was issued in September 2021, the proceedings had been in existence for a period of nearly three and a half years.

Held by Butler J that, in circumstances where the stated intention of the receiver was to sell the property in order to realise the first defendant’s security and, indeed, the object of the motion was to facilitate such sale, the plaintiffs’ proceedings which challenged the validity of the receiver’s appointment and sought damages for trespass by the receiver having taken possession of the property with a view to selling it must be characterised as an action making a claim to an estate or interest in land. Butler J held that the object of the proceedings was to ensure that the plaintiffs maintained their estate or interest in the mortgaged property and to prevent its alienation by a person whom they claimed had no legal right to sell their property; the fact that a receiver validly appointed under the mortgage deed would act on behalf of the plaintiffs as their agent was irrelevant to this scenario as the thrust of the plaintiffs’ claim was that the receiver was not validly appointed. For those reasons, Butler J was satisfied that the lis pendens registered by the plaintiffs was validly registered pursuant to s. 121(2)(a) of the 2009 Act. On balance, Butler J concluded that the delay on the part of the plaintiffs in bringing a motion against the defendants to compel the defendants to file a defence was not unreasonable in all of the circumstances. Butler J held that, procedurally speaking, not only did the obligation lie on the defendants to take the next step in the proceedings, but by taking that step the defendants could have ensured that the plaintiffs would then be required to act and to act expeditiously. Butler J noted that the period of delay was lengthy and would certainly warrant the vacation of the lis pendens were it a period of active delay on the plaintiffs’ part. Nonetheless, in all of the circumstances, Butler J held that it was not so lengthy as to make it unreasonable for the plaintiffs to assume that the defendants were not going to comply with the obligation on them to file a defence without positive intervention on the part of the plaintiffs.

Butler J refused the application.

Application refused.

JUDGMENT of Ms. Justice Butler delivered on the 29 ^th day of July 2022

Introduction

1 . This judgment deals with the second defendant's application under s. 123 of the Land and Conveyancing Law Reform Act 2009 to vacate a lis pendens registered by the plaintiffs under s. 121 of the 2009 Act in respect of proceedings issued by them against the defendants. The underlying proceedings challenge the validity of the appointment by the first defendant of the second defendant as receiver over certain property that was mortgaged by the plaintiffs as security for loans made to them by Ulster Bank in 2007 and 2011. The properties are investment properties, one located in County Leitrim and the other in Dublin. Ostensibly, it is not in issue that the plaintiffs' loans and related security were transferred by Ulster Bank to the first defendant in 2016, although this is a matter to which I will briefly return. Nor is it disputed that the loans in respect of which the security was offered are currently in arrears. Although the plaintiffs are not, and have not, resided in either of the properties, their son was apparently living in the County Leitrim property at the time of the second defendant's appointment as receiver.

2 . In moving this application, the second defendant relied on two main grounds. The first is that the underlying proceedings do not make a claim to an estate or interest in land and, therefore, the lis pendens was improperly registered by the plaintiffs under s. 121. The second is to contend that the plaintiffs have been guilty of an unreasonable delay in prosecuting the underlying action. In this regard, the defendants point to the fact that at the time the motion was issued in September 2021, the proceedings had been in existence for a period of nearly three and a half years. Although the motion papers also raised an issue concerning the bona fides of the plaintiffs in prosecuting the underlying action, counsel, correctly in my view, did not pursue this line of argument at the hearing.

3 . I will deal with each of these issues in turn but, before doing so, I propose to outline briefly the history of the interactions between the parties including as regards the underlying proceedings. I will also look at the statutory provisions under which this application is brought and the way in which the courts have approached the sometimes complex issues involved.

History of Interactions between the Parties

4 . The underlying proceedings concern two mortgages entered into in 2007 and 2011, respectively, to support loans made by the Ulster Bank to the plaintiffs. The first of these mortgages is dated 30 ^th May 2007 and relates to a property in County Leitrim. The second is dated 18 ^th November 2011 and relates to a property – or perhaps a number of adjoining properties – in Dublin. Both mortgages are in similar terms. Notably, under clause 8 of the mortgage deed, the provisions of ss. 17 and 20 of the Conveyancing Act 1881 are disapplied and, instead, it is provided that “…the statutory power of sale and other powers shall be exercisable at any time after demand”. Further, clause 11 provides that, at any time after the power of sale has become exercisable, “the bank or any receiver appointed hereunder may enter and manage the mortgaged property”. Under clause 12, any receiver appointed by the bank is deemed to be the agent of the mortgagors (i.e. the plaintiffs) and the plaintiffs are made solely responsible for the acts and defaults of any receiver and for his renumeration. Subsequent to the creation of these mortgages, the Ulster Bank registered them as charges on the respective folios.

5 . On 19 ^th December 2016, the Ulster Bank transferred a significant portion of its loan book, together with the related security, to the first defendant by way of a global deed of transfer. Consequently, the first defendant acquired the rights of the Ulster Bank in relation to the security documents executed by the plaintiffs. On affidavit the plaintiffs argued that the defendants had not proved that the first defendant was the owner of the original borrowings and asserted that they, i.e. the plaintiffs, were denying this fact. However, as was pointed out by the second defendant in reply, the plaintiffs' proceedings expressly plead that the loans and securities connected with the properties were transferred by Ulster Bank to the first defendant. A fact pleaded by the plaintiffs against the defendants, and which is accepted by them is not one that requires to be proved for the purposes of this application, much less proved by the defendants against whom it has been pleaded. Counsel for the plaintiffs, correctly in my view, did not pursue this matter in oral argument.

6 . Although the papers before the court do not identify either the sums borrowed by the plaintiffs nor the circumstances in which, or indeed when, the loans went into arrears, the exhibits suggest that, as of the end of 2020 (i.e. post-dating the appointment of the receiver), a significant six-figure sum remained owing by the plaintiffs on foot of these loans. On 14 ^th December 2017, the first defendant purported to appoint the second defendant as receiver in respect of both properties. The deeds of appointment in each case state that the second defendant is to be appointed receiver over the assets charged by the security document and “to enter upon and take possession of same” and that he was entitled “to exercise the powers conferred on him by the security document and by law”. The plaintiffs take issue with the validity of the second defendant's appointment because the counterpart to those instruments of appointment, confirmations of acceptance signed on the same date, were not signed by the second defendant but instead are signed by a Mr. Simon Coyle. In the context of this motion, the second defendant has sworn an affidavit in which he exhibits a general power of attorney, dated 12 ^th December 2017, made by the second defendant under the Powers of Attorney Act 1996, under which he appointed Mr. Coyle as his attorney for a four-day period from 13 ^th to 16 ^th December 2017. Consequently, the second defendant asserts that Mr. Coyle was authorised to sign the instruments of appointment on...