Pepper Finance Corporation (Ireland) DAC v Jenkins

• Jurisdiction: Ireland
• Judge: Mr. Justice Binchy
• Judgment Date: 23 July 2018
• Neutral Citation: [2018] IEHC 485
• Docket Number: [Record No. 2018 No. 14 C.A.]
• Court: High Court
• Date: 23 July 2018

BETWEEN

PEPPER FINANCE CORPORATION (IRELAND) DESIGNATED ACTIVITY COMPANY

PLAINTIFF

AND

BYRON JENKINS

AND

ADRIENNE JENKINS

DEFENDANTS

[2018] IEHC 485

Binchy J.

[Record No. 2018 No. 14 C.A.]

THE HIGH COURT

Order for possession – Lands and premises – Trustee – Plaintiff seeking order for possession – Whether the plaintiff was obliged to declare its status as trustee

Facts: The plaintiff, Pepper Finance Corporation (Ireland) DAC, sought an order for possession of the lands and premises comprised in Folio 28449F of the Register of County Kildare, which lands and premises comprised the family home of the defendants, Mr and Ms Jenkins. The proceedings come before the High Court by way of appeal from the Circuit Court which dismissed the plaintiff's claim.

Held by Binchy J that the plaintiff was not obliged either to join Windmill Funding Ltd to the proceedings or to declare its status as trustee of Windmill in the proceedings. Binchy J held that the plaintiff was therefore entitled to succeed.

Binchy J held that the appeal should be allowed.

Appeal allowed.

JUDGMENT of Mr. Justice Binchy delivered on the 23rd day of July, 2018.

1 In these proceedings the plaintiff seeks an order for possession of the lands and premises comprised in Folio 28449F of the Register of County Kildare, which lands and premises comprise the family home of the defendants. The proceedings come before this Court by way of appeal from the Circuit Court which dismissed the plaintiff's claim.

2 In any case the matter came on for hearing before this Court, after a number of adjournments on 10th July, 2018. Up to this point in time, the defendants had been representing themselves. However, the proceedings having been adjourned upon their application to enable them to retain legal representation, they were represented at the hearing of this appeal by solicitors and counsel, which was of considerable assistance.

3 Even before they had secured representation however, the defendants had not put in dispute the key facts giving rise to these proceedings. Those are that in June, 2008 they accepted a loan from GE Capital Woodchester Home Loans Ltd ('GE'). The loan was in the sum of €350,000.00 and was drawn down on 16th July, 2008. They completed a mortgage and charge in favour of GE on 18th July, 2008, which was registered in the Land Registry on 29th July, 2008. They started to fall into arrears with repayment of their loan very soon afterwards. The first default of repayment occurred in or around 16th November, 2008. As of 29th June, 2017, there were arrears of mortgage repayments due by the defendants in the sum €326,749.22, and the total sum outstanding in respect of their loan was €599,698.37.

4 The parties exchanged no less than eight substantive affidavits to which there were quite voluminous exhibits. In these affidavits, the defendants did not dispute any of the material facts, but raised a number of legal grounds in opposition to the plaintiff's claim. At the hearing of this appeal however, all bar one of these grounds were abandoned and this decision is concerned with one net point of law which I will set out presently. First however, it is helpful to elaborate a little bit on the factual background.

5 GE was sold to Pepper Netherlands Holding Cooperatie U.A. ('Pepper Netherlands') with effect from 28th September, 2012. On 11th October, 2012, GE changed its name to Pepper Finance Corporation (Ireland) Ltd., and this name change was notified to the defendants by letter dated 25th October, 2012. Accordingly, these proceedings were issued in the name of Pepper Finance Corporation (Ireland) Ltd. as plaintiff, rather than in the name of GE. A certificate of incorporation on change of name issued from the Companies Registration Office on 11th October, 2012. Subsequently, the plaintiff was designated as a designated activity company pursuant to the Companies Act 2014 and the plaintiff is now Pepper Finance Corporation (Ireland) DAC.

6 On 10th October, 2012 the plaintiff, still then known as GE, wrote to the defendants informing them that the sale of GE to Pepper Netherlands had completed on 28th September, 2012. This followed on from a previous letter of June, 2012 whereby the defendants had been informed that an agreement for sale of GE to Pepper Netherlands had been signed. In the same letter, the defendants were informed that GE was to be renamed Pepper Finance Corporation (Ireland) Ltd., and that they would be informed when the name change had been completed. The letter of 10th October, 2012 also stated that 'completion of the sale means that the lender on your mortgage loan, Home Loans [i.e. the plaintiff], is now owned by Pepper'. On 25th October, 2012, the plaintiff wrote on a letterhead bearing the title 'Pepper' to the defendants informing them of the name change of the plaintiff from GE Capital Woodchester Home Loans Ltd. to Pepper Finance Corporation (Ireland) Ltd. The effect of all of this correspondence was to inform the defendants that the entity which held their home loan had been sold and had subsequently changed its name. Importantly however, this correspondence does not say or suggest that the defendants' loan with the plaintiff had been sold.

7 Also on 28th September, 2012, the plaintiff entered into a document called a mortgage sale deed with three other parties, namely Windmill Funding Ltd. ('Windmill'), Pepper Netherlands and TMF Trustee Ltd. Pursuant to this agreement, the plaintiff agreed, inter alia, to sell the mortgage loans described therein, and including that of the defendants. The mortgage sale deed provides, at Clause 2.3 thereof:-

'The seller [the plaintiff] hereby confirms and acknowledges that on and following Completion and until perfection in accordance with Clause 5 of this deed, it will hold legal title to the Mortgage Loans sold hereunder together with the Related Security and the benefit of the Relevant Insurance Policies as bare Trustee for the Issuer [Pepper Netherlands] (or, following enforcement of security created pursuant to the Deed of Charge, for the Note Trustee [TMF Trustee Ltd.]).'

Clause 5.1 of the mortgage sale deed provides:-

'The sale and purchase of the Mortgage Loans and their Related Security provided for hereunder shall be perfected by the seller as soon as possible following a demand by the Issuer or Note Trustee which may be in any circumstances ...'

8 In an affidavit dated 16th August, 2017, Ms. Caroline Loftus, Senior Operations Manager of the plaintiff, deposes that the loans, (and their associated security) are the subject of a securitisation transaction whereby the plaintiff retains legal title as bare trustee unless and until perfection in accordance with Clause 5.1 of the mortgage sale deed occurs. She avers that as of the date of that affidavit, neither the Issuer nor the Note Trustee had served a demand in accordance with Clause 5.1 and as such the plaintiff retains legal title to the defendants' loan and its related security as bare trustee for the Issuer pursuant to the securitisation transaction provided for in Clause 2.3.

9 So, it is apparent that the defendants' loan was securitised to a third party, Windmill. Consent to such securitisation of their loan and related security was given in advance by the defendants upon acceptance of the letter of loan offer in the first instance, and also subsequently in the deed of mortgage and charge completed by them in favour of the plaintiff. None of this is controversial to the extent that the defendants acknowledge that the plaintiff was entitled to securitise their loan. They acknowledged at a very early stage in these proceedings that securitisation is common banking practice. However, notwithstanding this acknowledgement, the defendants argued that the effect of this transaction was that their loan had been sold to Windmill, and accordingly the plaintiff no longer had any interest in their loan such as to entitle it to issue these proceedings against the defendants to recover the loan or to enforce the security given by the defendants in respect of the loan. While, as I indicated above, the defendants raised a number of points along the way in the defence of these proceedings, this is the sole surviving point. But it is expressed somewhat differently by their counsel, Mr. McEntagart, S.C.. He acknowledges that the mortgage sale deed does not comprise an outright sale of the entire interest of the plaintiff in the defendants' mortgage. He accepts that the plaintiff has retained the legal estate in the defendants' loan and related security, pending perfection of the transaction in accordance with Clause 5.1 of the mortgage sale deed, although the beneficial interest in those assets has been transferred to Windmill. It is Mr. McEntagart's contention however that even though the plaintiff has retained the legal estate in the defendants' loan and related security, it was necessary for the plaintiff either to have Windmill join in the proceedings as co-plaintiff, as the owner of the equitable estate in the defendants' loan and related security, or alternatively to make it clear that the plaintiff was issuing proceedings as bare trustee on behalf of Windmill. It is submitted that this is no mere procedural requirement but is an essential prerequisite to the plaintiff's entitlement to succeed as against the defendants, in order that the defendants are not exposed to the risk of the defendants being required to pay twice in respect of the same debt. The defendants having abandoned all other points made by them (correctly in my view) this is the sole issue now requiring determination in these proceedings and may be posited thus: may the owner of a loan and related security, who has divested itself of the entire beneficial interest in that loan and related security, and whose interest in the same is no more than that of a bare trustee, issue proceedings in its sole...