The Estate of Arthur Blennerhassett

• Jurisdiction: Ireland
• Judgment Date: 17 January 1912
• Date: 17 January 1912
• Court: Court of Appeal (Ireland)

In the Matter of the Estate of Arthur Blennerhassett (1).

Appeal.

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND,

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1911.

Land Purchase Acts — Sale of incumbered lands — Mortgage — Arrears of interest — Statute of Limitations (3 & 4 Wm. 4, c. 27, s. 42).

Where lands are sold under the provisions of the Irish Land Act, 1903, the owner of an incumbrance or charge upon such lands, portion of the arrears of interest due upon which has become statute-barred, is only entitled to be paid out of the purchase-money the arrears of interest which accrued during the six years prior to the payment of the purchase-money into the Bank of Ireland, and the order attaching claims thereto, under sect. 24, sub-s. 1, of the Irish Land Act, 1903, together with all further interest accrued since that date.

Appeal from an order of Ross, J., made in this matter on the 6th day of July, 1910.

By an indenture, dated the 15th day of July, 1880, Arthur Blennerhassett, the above-named vendor, mortgaged the lands sold in the matter, together with other lands, to the appellants, the Scottish Widows Fund Life Assurance Society, to secure the repayment to the Society of the sum of £10,000, with interest thereon at 5¹/₂ per cent. The said lands having been sold by the vendor under the provisions of the Irish Land Act, 1903, the Society appeared before Ross, J., on the ruling of the final schedule of incumbrances affecting the lands (on which schedule they ranked ninth in the list of claimants), and contended that they were entitled to be paid out of the purchase-money of the lands the capital sum of £10,000 secured by the said mortgage, together with £8138 8s. 1d., representing fifteen years' arrears of interest on the said mortgage due to the Society. The learned Judge held that he was bound by the decision of Meredith, J., in Howlin's Estate (2), and declared accordingly that the claimants

were only entitled to be paid out of the purchase-money the arrears of interest which had accrued due during the six years prior to the payment of the purchase-money into the Bank of Ireland, and the order attaching claims thereto, together with all further interest accrued since that date. From this order the Society now appealed.

S. L. Brown, K.C., Garrett Walker, K.C., and R. J. Herbert Shaw, for the appellants:—

We contend that the mortgagees are entitled to be paid the full arrears of interest on their mortgage. No doubt Howlin's Estate (1) is against our contention, but that case is not binding on this Court, and should not now be followed. Sect. 42 of 3 & 4 Wm. 4, c. 27, has no application; there was here no “distress, action, or suit” by the mortgagees to recover the arrears of interest. Sales under the Land Purchase Acts are originated by the vendors without consulting, and often against the will of, incumbrancers, who are thereby deprived of their right of lying by, in the hope of being repaid in full, or of themselves exercising their statutory power of sale, in which latter case, admittedly, they could retain for themselves the full arrears due out of the purchase-money. That such sales take place in invitum as regards incumbrancers is shown by sub-section 1 of section 16, and sub-sections 1, 6, and 7 of section 24 of the Act of 1903. The “claims,” which by sub-section 1 of section 16 cease as against the lands, and attach to the purchase-money, must be, not merely ascertained rights, but all existing rights which are merely transferred from the lands to the money, and there is no provision in the Act to deprive a mortgagee of his right to be paid the full arrears of interest due on his mortgage, or to put a vendor who sells under the Act in a better position as regards such arrears than one selling outside the provisions of the Act. It is submitted that this is a proceeding, originated solely by the mortgagor, which is in the nature of a redemption suit, and that according to the rule in redemption suits the full arrears of interest should be paid. In In re Owen Lewis's Estate (2) the incumbrancer,

who was disallowed more than six years' interest, availed himself of the proceedings in an incumbrancer's petition matter; it was because the mortgagee was in the same position as the petitioner who had invoked the aid of the Court that he was held disentitled to more. Here the mortgagees have done nothing. Nixon's Estate (1), Bateson's Estate (2), and Smithwick's Estate (3) leave this question an open one. The present case is ruled by Lloyd v. Lloyd There the judgment of Stirling, L.J., who delivered the judgment of the Court in favour of the mortgagees, was based on the fact that the latter were not proceeding to recover arrears of interest by “distress, action, or suit.” Edmunds v. Waugh (5) shows that a petition of trustees of a mortgagee's estate for payment out of Court of the proceeds of sale of mortgaged premises sold under the power of sale in a mortgage, and paid into Court in a suit for the administration of the mortgagee's estate, was not a “suit” to recover arrears of interest within the 42nd section of 3 & 4 Wm. 4, c. 27: In re Marshfield (6); In re Stead's Mortgaged Estate (7); In re Slater's Trusts (8).

Ronan, K.C., H. D. Conner, K.C., and Macrory, for the respondent:—

Not only was the decision appealed against right in principle, but to reverse it would upset the established practice which has been uniformly followed in the Incumbered Estates Court, the Land Judge's Court, and in the Court of the Irish Land Commission.

The cases relied on by the appellants' counsel, where more than six years' interest were allowed to a mortgagee, depend either upon the principle adopted in redemption suits, where the Court will only lend its assistance to the mortgagor upon such terms as it thinks just, including the payment of all arrears of interest, or upon the right of retention of a mortgagee, where the purchase-money of the mortgaged lands is either actually or constructively in his hands.

The decision in In re Lloyd (1) was thus explained by Farwell, L.J., in Hazeldine's Trusts (2):—“In In re Lloyd there was a subsisting mortgage, and the only question was how much interest on that mortgage should be charged against the mortgagor as a term of allowing him to redeem..… Where there is a mortgage or charge which the mortgagor desires to redeem, the Court gives him its assistance by interfering with the legal right of the creditor only on such terms as are equitable; such terms are the price of its interference.” Neither that principle, nor the principle which allows a mortgagee to retain the full amount of his debt out of moneys in his hands, has any application to sales in the Land Judge's Court or under the Land Purchase Acts. The object of the latter Acts, namely, to place occupying tenants in possession as owners of their lands, free from incumbrances, would be defeated, if, on their taking advantage of the Acts, vendors could be compelled to pay arrears of interest that had become statute-barred. It is clear that the person who originates the proceedings, and whom, under section 17 of the Irish Land Act, 1903, the Land Commission may deal with as owner, may or may not be the real owner out of whose pocket the arrears of interest are to come; it is otherwise in a redemption suit, and as to the purchase-money the incumbrancer never has or could have it in his possession, constructively or otherwise. Such a proceeding as this, if one inter partes at any stage, ceases to be so once the vesting order or fiat is made: see judgment of Walker, L.J., in Bateson's Estate (3). The purchase-money is entrusted to a judicial tribunal for distribution amongst the parties entitled, and each claimant has to come forward and establish his claim. That is a proceeding in Court which comes within the words of the 42nd section of 3 & 4 Wm. 4, c. 27. The claims which are transferred under the Act from the lands to the purchase-money must be claims which could be legally enforced. If the appellants' contention be correct, not only could arrears of interest, but also a capital sum charged on the lands, which had become statute-barred, be recoverable out of the purchase-money. This case is ruled by

Howlin's Estate (1) and In re Owen Lewis's Estate (2). In Archdall v. Anderson (3), which was a suit by an equitable mortgagee to raise the amount due on his mortgage, lands were sold under the judgment in the action, and realized more than was sufficient to pay the plaintiff's demand and costs; it was there held that claims brought in by legatees on foot of legacies charged on the lands sold were proceedings in the nature of a suit within section 42, and that the legatees were only entitled to interest on the legacies for six years prior to the action: Hughes v. Williams (4); Henry v. Smith (5); Hughes v. Kelly (6).

Brown, K.C., in reply.

S. L. Brown, K.C., Garrett Walker, K.C., and R. J. Herbert Shaw, for the appellants:—

Ronan, K.C., H. D. Conner, K.C., and Macrory, for the respondent:—

The Lord Chancellor:—

This case raises an important question, viz., whether the 42nd section of the 3 & 4 Wm. 4, c. 27, limiting the amount of arrears of interest which can be recovered by distress, action, or suit, is applicable to sales of land originated by the owner under the Land Act of 1903, after the purchase-money has been paid into Court under the provisions of the 24th section of that Act, and mortgagees or other incumbrancers make claims against that fund and are paid out of it. The facts are that Arthur Blennerhassett, the owner, applied to the Land Commission to have his lands sold to tenants. The Land Commission sold, and vested the lands in the purchasers, including the demesne resold to the owner, and then paid the purchase-money into the Bank of Ireland, and made an order attaching claims to that purchase-money. Claims were advertised for...