Maher v Dublin City Council

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Garrett Simons
• Judgment Date: 18 July 2023
• Neutral Citation: [2023] IEHC 408
• Docket Number: 2022 No. 195 CA

Between

Michelle Maher

Plaintiff

and

Dublin City Council

Defendant

[2023] IEHC 408

2022 No. 195 CA

THE HIGH COURT

CIRCUIT APPEAL

Sale of land – Statutory interpretation – Derelict Sites Act 1990 – Plaintiff seeking declaratory relief – Whether a charge arising under the Derelict Sites Act 1990 is capable of being overreached pursuant to the Conveyancing Act 1881

Facts: Land in Dublin sold in September 2014 had been conveyed by a mortgagee pursuant to their statutory power of sale under s. 21 of the Conveyancing Act 1881. Proceedings were taken by the plaintiff, Ms Maher (the purchaser), the individual who had been the purchaser of the land under the conveyance. The purchase price had been €176,600. The sale of the land closed on 30 September 2014. The title had been unregistered, but the sale of the land was subject to compulsory first registration. The following year, the local authority wrote to the purchaser on 30 June 2015 demanding payment of the outstanding derelict sites levy. The local authority maintained the position that the overreaching provisions could never apply to a charge under the Derelict Sites Act 1990. The outstanding levy was paid under protest. The payment was in an aggregate amount of €50,153.42, consisting of a levy of €18,575.34 for part of the financial year 2008, together with penalty interest of €31,578.08. Interest was charged at 1.25 per cent per month or part thereof. Thereafter, the proceedings were instituted in the name of the purchaser. The proceedings had been instituted before the High Court but, on consent, were remitted to the Circuit Court, by order dated 14 September 2020, in circumstances where the overall value of the levy and penalty interest fell within the jurisdiction of that court and where the market value of the land was less than three million euro. The Circuit Court (Judge O’Connor) dismissed the proceedings by judgment and order dated 27 July 2022. The purchaser lodged an appeal against that decision to the High Court. The appeal ultimately came on for hearing before Simons J on 11 July 2023. The sole witness was the purchaser’s solicitor. There was no material factual dispute between the parties; the conveyancing history and the correspondence between the purchaser and the local authority was proved by the purchaser’s solicitor in his oral evidence. The defendant, Dublin City Council, accepted the fact of the correspondence but denied that same contained an unequivocal representation on its part such as might ground an estoppel. The dispute between the parties turned on whether a charge arising under the 1990 Act is capable of being overreached pursuant to the 1881 Act; if the overreaching provisions did apply, then the local authority should have sought to recover the outstanding levy from the mortgagee, out of any surplus sale proceeds, and not from the purchaser.

Held by Simons J that a statutory charge arising under s. 24 of the 1990 Act is, in principle, subject to the overreaching provisions under the 1881 Act and its successor, the Land and Conveyancing Law Reform Act 2009. Simons J held that the question of whether a particular estate, interest or right has priority over a statutory charge would require consideration of the timing of the creation and registration of that estate, interest or right relative to the timing of the creation and registration of the statutory charge. Simons J held that, on the facts of the case, the mortgage had priority over the charge in circumstances where both the creation of the mortgage and its subsequent registration in the Registry of Deeds predated the charge arising. Therefore, Simons J held that it followed that the charge was overreached on the sale by the mortgagee and that the purchaser was not liable to pay the outstanding derelict sites levy.

Simons J’s provisional view was that the plaintiff was entitled to a declaration broadly along the lines sought at paragraph (a) of the statement of claim. Simons J found that it should not be necessary to make a formal order directing the repayment of the levy and interest, given that the defendant was a public authority and, as such, was to be expected to give effect to the declaratory judgment.

Declaration granted.

Appearances

Angus Buttanshaw for the plaintiff instructed by Peter Nugent and Company

John Donnelly SC and Paul Coughlan for the defendant instructed by the Law Agent for Dublin City Council

JUDGMENT of Mr. Justice Garrett Simons delivered on 18 July 2023

INTRODUCTION

1 This judgment addresses a short point of statutory interpretation in respect of the Derelict Sites Act 1990. The point is this: is a charge arising under the Act overreached in circumstances where the subject property is sold by a mortgagee pursuant to a statutory power of sale. Put otherwise, does the exercise of a statutory power of sale result in the purchaser taking the property free of the charge. The resolution of this issue requires consideration of the interaction between Section 24 of the Derelict Sites Act 1990 and Section 21 of the Conveyancing Act 1881.

STATUTORY POWER OF SALE AND OVERREACHING

2 It may assist the reader in better understanding the dispute which has arisen between the parties to pause here, and to explain what is meant by the term “ overreaching”. The term describes the legal mechanism whereby, in certain circumstances, land may be conveyed to a purchaser free from incumbrances such as mortgages or charges. The incumbrances are, in effect, transferred from the land to the sale proceeds. The practical result is that the purchaser obtains a “ clean” title to the land and the incumbrancers must seek payment out of the sale proceeds rather than from the purchaser.

3 The form of overreaching at issue in the present case is that arising on the exercise by a mortgagee of their statutory power of sale. The practical effect of overreaching can be illustrated by the following example. Suppose that a landowner is indebted to a number of different financial institutions. In each instance, the debt is secured by a mortgage over the land. Further suppose that the landowner then defaults on his debt. The holder of the first mortgage in time would be empowered to convey the land to a purchaser free from the subsequent mortgages. The holders of the subsequent mortgages would no longer have any interest in the land but would, instead, be entitled to their share of any surplus sale proceeds remaining after the debt secured by the first mortgage has been discharged.

4 The modern version of the power of sale is to be found at Section 104 of the Land and Conveyancing Law Reform Act 2009. On the facts of the present case, the subject property had been conveyed pursuant to the statutory precursor to this provision, i.e. Section 21 of the Conveyancing Act 1881. That section has been repealed but with a saver for mortgages, such as that in the present proceedings, which had been created prior to 1 December 2009. This saver is provided for under the Land and Conveyancing Law Reform Act 2013.

5 Section 21(1) of the Conveyancing Act 1881 provides, relevantly, as follows:

“A mortgagee exercising the power of sale conferred by this Act shall have power, by deed, to convey the property sold, for such estate and interest therein as is the subject of the mortgage, freed from all estates, interests, and rights to which the mortgage has priority, but subject to all estates, interests, and rights which have priority to the mortgage; […].”

6 As appears, the property is conveyed free from “ all estates, interests, and rights” to which the mortgage has priority. The position of the subsequent incumbrancers is addressed as follows under Section 21(3) of the Conveyancing Act 1881:

“The money which is received by the mortgagee, arising from the sale, after discharge of prior incumbrances to which the sale is not made subject, if any, or after payment into Court under this Act of a sum to meet any prior incumbrance, shall be held by him in trust to be applied by him, first, in payment of all costs, charges, and expenses, properly incurred by him, as incident to the sale or any attempted sale, or otherwise; and secondly, in discharge of the mortgage money, interest, and costs, and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorised to give receipts for the proceeds of the sale thereof.”

7 As appears, this section provides that the mortgagee is to hold the purchase monies in trust, and directs the order in which those monies are to be applied. In the event that there is a residue remaining after the mortgage has been discharged, the mortgagee is required to pay the surplus sale proceeds to the person next entitled to the mortgaged property. If there are subsequent incumbrancers, then the surplus sale proceeds are to be paid to the incumbrancer next entitled and so on, with any residue remaining thereafter being paid to the mortgagor. See, generally, Walsh v. Governor and Company of Bank of Ireland [2018] IEHC 828.

8 The term “ overreaching” is often used as a shorthand to describe this process whereby the interests of the subsequent incumbrancers are, in effect, transferred to the sale proceeds. The term does not, however, actually appear in the legislation.

9 The dispute in the present case centres on whether a charge arising under the Derelict Sites Act 1990 is capable of being overreached in this way.

DERELICT SITES ACT 1990

10 The Derelict Sites Act 1990 provides, inter alia, for the imposition of a levy on sites, situated in an “ urban area”, which have been entered on the relevant local authority's register of derelict sites. The levy is referred to under the Act as “ the derelict sites levy”. Relevantly, the Act provides that the derelict sites levy is to be paid by the “ owner” of the land. The...