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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the bank in question where the 1881 Act had been repealed by the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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