In a judgment delivered on 15 May 2015, the Supreme Court has brought some clarity to the interaction between the Code of Conduct on Mortgage Arrears ("the Code") and the entitlement of a regulated financial institution to possession of mortgaged property. The judgment of the Supreme Court (with which all of his fellow judges concurred) was given by Mr Justice Clarke in the cases of Irish Life and Permanent plc v. Dunne and Dunne and Irish Life and Permanent v. Dunphy,  IESC 46.
Dunne – The Code of Conduct on Mortgage Arrears
The main issue in the Dunne case was whether non-compliance with the Code affected the lender's entitlement to an order for possession.
The Code at issue in this case was the version which came into force on 1 January 2011, which provides for a moratorium during which the lender must not commence possession proceedings. The Supreme Court stated that similar considerations would apply to similar provisions in the current or any future versions of the Code.
The Supreme Court decided that where – in breach of the Code – the lender fails to abide by the moratorium referred to in the Code, but in no other circumstances, non-compliance with the Code affects the lender's entitlement to obtain an order for possession, and that a Court should decline to make an order for possession. The rationale for the Supreme Court's conclusion on this issue was that a Court could not act in aid of the actions of a lender which were clearly unlawful (in the sense that they were in breach of the Code), in circumstances where the very act of the lender was contrary to the purpose behind the Code.
The Supreme Court also stated that it was for the lender to establish to the Court's satisfaction that the moratorium provisions of the Code had actually been complied with, for example by way of an averment to that effect in an affidavit sworn on behalf of the lender.
As regards other provisions of the Code, the Supreme Court stated that different considerations would apply. In particular, Mr Justice Clarke commented that the Courts do not have a role in determining the reasonableness of a lender's mortgage arrears policies and the application of those policies to an individual case. Clear legislation would be needed for that.
Judgments previously given by the High Court on this issue were difficult to reconcile, and the clarification provided by the Supreme Court's judgment is therefore welcome.
Dunphy – When did the debt become due?
In the Dunphy case, the Supreme Court decided that under the terms of the mortgage which was before the Court, the total debt became due automatically when the borrower defaulted in making two monthly repayments. A demand was not required. He found that the debt became due before 1 December 2009, so Irish Life and Permanent plc's entitlement to possession was not affected by the repeal of section 62(7) of the Registration of Title Act 1964.
Contractual documents vary from case to case, so this decision cannot be interpreted as meaning that the debt will become due in every case without a demand.
This aspect of the Supreme Court's judgment will be of most relevance to cases commenced before 31 July 2013 involving mortgages created before 1 December 2009.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.