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Originally published in the Commercial Litigation and Dispute Resolution Newsletter Winter 2011.
The potential ramifications of the recent decisions in the cases of Start Mortgages v Gunn(1) and Kavanagh & Anor v Lynch & Ors(2), have been a cause of concern for lenders regarding the enforcement of their security. Both of these cases deal with the repeal of legislative provisions by the Land & Conveyancing Law Reform Act 2009 (the "2009 Act").
In the case of Start Mortgages v Gunn, Ms Justice Dunne held that following the repeal of certain provisions of the Registration of Title Act 1964 (the "1964 Act") chargeholders were precluded from seeking to recover possession of registered property in a summary (short/simplified) manner, unless the principal monies secured by the charge were due and demanded on or before 1 December 2009 (being the date of repeal of certain provisions of the 1964 Act). If, however, the principal monies became due and owing after 1 December 2009, then the holder of such security would be precluded from relying on the provisions of the 1964 Act to get possession in a summary manner. Given the 2009 Act only applies to charges created after 1 December 2009, chargeholders may now find themselves in a difficult position regarding the enforcement of security (in respect of registered land) which was granted before the coming into force of the relevant provisions of the 2009 Act unless the principal monies had become due prior to 1 December 2009.
The full extent of the consequences of the decision are, as yet, still unclear. However, in the (more recent) Kavanagh & Anor v Lynch & Ors case, this issue came up for consideration again in the context of an application by a receiver for an interlocutory order restraining the defendant from interfering with the receiver's right to possession. The defendant, who was refusing to deliver up possession of the secured property to the receiver, challenged the appointment of the receiver on the basis that the rights, powers and entitlements implied into the bank's security pursuant to the terms of the Conveyancing Acts 1881 (the "1881 Act"), in particular the section specifying when the powers (including the power to appoint a receiver) become exercisable, could not be relied on by the bank in question where the 1881 Act had been repealed by the 2009 Act and the said rights had not accrued prior to 1 December 2009. The defendant sought to rely on the decision in the Start Mortgages case.
In the Kavanagh v Lynch case, Ms Justice Laffoy confirmed that, as a matter of contract, the receiver had been validly appointed and was entitled to possession of the secured property. She concluded that where a mortgagee's statutory rights, powers and remedies (such as the right to appoint a receiver or sell as mortgagee in possession) pursuant to the 1881 Act have been contractually incorporated into a mortgage/charge, such rights, powers and remedies are enforceable as a matter of contract, notwithstanding the repeal of the relevant sections of the 1881 Act by the 2009 Act.
While the Lynch case represents a welcome clarification of the potential impact of the Start Mortgages case, it does not deal with all of the concerns arising as a consequence of the Start Mortgages case. The decision in the Start Mortgages case is currently under appeal to the Supreme Court.
Footnote
1. [2011] IEHC 275
2. [2011] IEHC 348
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