Promontoria [Oyster] Designate Activity Company v Kean
| Jurisdiction | Ireland |
| Judge | Mr. Justice Garrett Simons |
| Judgment Date | 30 September 2022 |
| Neutral Citation | [2022] IEHC 526 |
| Court | High Court |
| Docket Number | 2019 No. 247 SP |
[2022] IEHC 526
2019 No. 247 SP
THE HIGH COURT
Contractual promise – Constitutional reading – Double construction rule – Plaintiff seeking to rely on a registered lien as security for additional loans advanced to a borrower – Whether a contractual promise was sufficient to create an equitable mortgage
Facts: The plaintiff, Promontoria (Oyster) DAC, sought to rely on a registered lien as security for additional loans advanced to a borrower after 31 December 2009. The plaintiff sought to distinguish the judgment in Promontoria (Oyster) DAC v Fox [2022] IEHC 97 on two principal grounds. First, it was said that the borrower had expressly agreed to deposit the land certificate as security in respect of present and future loans and that this contractual promise was sufficient on its own to create an equitable mortgage. Secondly, it was said that, prior to the commencement of the Registration of Deeds and Title Act 2006, the lender would have had the potential to avail of a benefit known as “tacking”. It was submitted that the court was obliged, under the double construction rule, to avoid an interpretation of the Act which would result in the loss of this benefit.
Held by the High Court (Simons J) that the factual position – as assumed for the purposes of the modular hearing – differed from that in Fox insofar as the deposit of the land certificate in this case was expressly intended to secure future advances, in addition to the initial borrowings in 2005. Simons J held that this did not alter the legal analysis. He held that the rationale of the judgment in Fox was that the contractual intention of the parties cannot prevail over the amended statutory scheme. He held that the argument urged in this case was simply another version of the argument rejected in Fox. He held that the interpretation given to the legislation in Fox did not result in an unconstitutionality and hence there was no necessity to resort to the double construction rule.
Simons J held that the circumstances of this case were indistinguishable from those considered in Fox. He refused the application for a well charging order.
Application refused.
Eoghan Casey for the plaintiff instructed by O'Brien Lynam
Diarmaid Padraig Murphy for the defendant instructed by Michael Keane & Co.
JUDGMENT of Mr. Justice Garrett Simons delivered on 30 September 2022
The Registration of Deeds and Title Act 2006 brought to an end the practice whereby a debt could be secured on registered land by the expedient of depositing the land certificate with the lender. The Act not only precluded the creation of new equitable mortgages (otherwise, liens) by way of the deposit of a land certificate, it also extinguished all existing liens with effect from 31 December 2009. The holder of an existing lien by deposit was able to protect their interests by converting their lien into a registered lien during a three-year transitional period.
For the reasons explained in my judgment in Promontoria (Oyster) DAC v. Fox [2022] IEHC 97, a registered lien pursuant to Section 73 of the Registration of Deeds and Title Act 2006 cannot be relied upon as security in respect of a further loan agreement entered into after 31 December 2009. An appeal has been taken against that judgment to the Court of Appeal and the appeal is listed for hearing on 16 January 2023.
In the present proceedings, the plaintiff seeks to rely on a registered lien as security for additional loans advanced to a borrower after 31 December 2009. It is sought to distinguish the judgment in Promontoria (Oyster) DAC v. Fox on two principal grounds as follows. First, it is said that the borrower had expressly agreed to deposit the land certificate as security in respect of present and future loans and that this contractual promise is sufficient on its own to create an equitable mortgage. Secondly, it is said that, prior to the commencement of the Registration of Deeds and Title Act 2006, the lender would have had the potential to avail of a benefit known as “ tacking”. It is submitted that the court is obliged, under the double construction rule, to avoid an interpretation of the Act which would result in the loss of this benefit.
The ownership of the land the subject-matter of these proceedings has been registered under the Registration of Title Act 1964. Put colloquially, the land is “ registered land”. The Defendant is registered as full owner of the land under Folio 15424F in County Roscommon (“ the folio”).
A lien has been registered as a burden on the land. It appears from the folio that the lien had originally been in favour of Ulster Bank Ireland Ltd (“ Ulster Bank”). The entry of the lien as a burden is dated 31 December 2009. Promontoria (Oyster) DAC (“ Promontoria”) asserts that it has since succeeded to Ulster Bank's interest. Promontoria's interest in the lien is “ noted” on the folio by reference to an instrument dated 9 March 2017.
The lien had been registered pursuant to Section 73(3) of the Registration of Deeds and Title Act 2006. It can be inferred, therefore, that the land certificate had previously been deposited with Ulster Bank as security for an (earlier) loan to the Defendant. This deposit would, by virtue of the now defunct provisions of Section 105(5) of the Registration of Title Act 1964, have created a lien by deposit. It can also be inferred that Ulster Bank subsequently applied to register that lien within the three-year transitional period provided for under Section 73 of the Registration of Deeds and Title Act 2006. There is a separate dispute between the parties as to whether the registration process had to have been completed prior to 31 December 2009.
Had Ulster Bank wished to enforce its security subsequent to this registration, it could have done so by way of an application for a well charging order. It would have been unnecessary for Ulster Bank to adduce evidence in respect of the creation of the lien by deposit. Ulster Bank could, instead, rely on the conclusiveness of the register. It would, however, have been necessary for Ulster Bank to establish that there were sums due and owing to it and that those sums were secured by the registered lien. (See, generally, Promontoria (Oyster) DAC v. Greene [2021] IECA 93). Similarly, once Promontoria had succeeded to Ulster Bank's interest in the registered lien, it could have enforced the original debt in the same way.
On 17 February 2012, Ulster Bank granted three loan facilities to the Defendant as follows: (i) an overdraft facility of €25,000; (ii) a loan facility of €165,000; and (iii) a loan facility of €260,000.
On 19 December 2016, by global deed of transfer and Irish law deed of transfer, Ulster Bank (by then known as Ulster Bank Ireland DAC) transferred to Promontoria all its rights, title, interest, benefit and obligation (past, present and future) in and under the Defendant's facilities, security and burdens in the land.
Promontoria sent demand letters to the Defendant on 18 August 2017 and 24 April 2018 seeking repayment of the amounts then owing under the loan facilities.
By Special Summons dated 13 June 2019, Promontoria seeks a number of reliefs including, inter alia, a declaration that the interest of the Defendant in the subject land stands well charged with the payment of all monies due and owing by the Defendant to Promontoria on foot of the facility letter of 2012 and the registered lien. A further declaration is sought that the sum of €310,512.83 is due and owing on the principal and interest as of 3 September 2018 (together with continuing interest pursuant to contract and/or statute).
The Defendant resists the application, and a number of issues were raised by way of replying affidavit including, inter alia, whether or not the lien had been properly registered by 31 December 2009. Detailed written legal submissions have been filed outlining the substance of the defence.
The Defendant made an application to remit the proceedings to the Circuit Court. I delivered a written judgment on 21 December 2021 refusing that application: Promontoria (Oyster) DAC v. Kean [2021] IEHC 796. A pre-emptive or protective costs order was made in the following terms: if the Defendant is ultimately unsuccessful in the defence of the proceedings, then costs would be confined to the Circuit Court scale. In the event of the Defendant being successful, he may make an application for a differential costs order pursuant to Section 17 of the Courts Act 1981 (as amended).
There is a dispute between the parties as to whether the present proceedings are governed by the judgment in Promontoria (Oyster) DAC v. Fox [2022] IEHC 97 (“ Fox”). The parties agreed that the question of the applicability of that judgment should be addressed by way of a modular hearing. It is only in the event that the judgment in Fox were held to be inapplicable that it would then become necessary to consider the alternative grounds of defence advanced. Written submissions on the issue were furnished by the parties on 18 July and 20 July 2022, respectively, and there was an oral hearing on 26 July 2022. Judgment was reserved until today's date.
Promontoria seeks to distinguish Fox on the basis that the Defendant had expressly agreed to deposit the land certificate as security in respect of present and future loans. It is said that this contractual promise or pledge is sufficient on its own to create an equitable mortgage. More specifically, it is said that an agreement to provide security represents a separate route to the creation of an equitable mortgage which is distinct from the deposit of the land certificate. The gist of the submission is that equity looks to intent, rather than form, and that...
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