The Supreme Court of Ireland recently delivered judgment in two separate, but related, appeals by John Fox [Promontoria (Oyster) DAC v John Fox S:AP:IE:2024:00058] and Michael Kean [Promontoria (Oyster) DAC v Michael Kean S:AP:IE:2024:00083] against the decisions of the Court of Appeal. The decisions overturned the High Court's refusal to grant well-charging orders to Promontoria (Oyster) DAC (PODAC), finding that pre-existing registered liens could not secure subsequent lending.
The Supreme Court reaffirmed the decision of the Court of Appeal and found there was no clear legislative intent within Section 73 of the Registration of Deeds and Title Act 2006 (the 2006 Act) to extinguish the ability for future lending to be secured by pre-existing registered liens.
Background
Section 73 of the 2006 Act abolished the use of land certificates for the creation of liens. It also required existing liens created through the deposit of land certificates to be registered by 31 December 2009 (the Transitional Period), to remain effective. In both sets of proceedings, PODAC sought well-charging orders over lands owned by Mr. Fox and Mr. Kean. These claims were based on liens registered under section 73 of the 2006 Act, claiming security for loans advanced after the Transitional Period ended.
Facts of the case against Mr. Fox
Mr. Fox was the owner of lands in Co. Westmeath. He drew down funds from Ulster Bank in 2010, after the expiration of the Transitional Period. A lien in favour of Ulster Bank which had been registered as a burden on the folio before the expiration of the Transitional Period was relied on as security for subsequent lending in 2010. PODAC acquired the Ulster Bank's interest in the lien in 2017. Mr Fox defaulted on the loans which were advanced post the Transitional Period and PODAC sought a well-charging order in the High Court, relying on the registered lien. Mr. Fox argued that a lien registered under the 2006 Act could not secure loans advanced after the expiration of the Transitional Period (the Fox Point).
Facts of the case against Mr. Kean
Mr. Kean was the owner of lands in Co. Roscommon. He deposited a land certificate with Ulster Bank in 2005 as security for loans. A lien was registered on the folio prior to the expiration of the Transitional Period. Additional loans were subsequently advanced to Mr. Kean in 2012, and Ulster Bank relied on the lien registered prior to the expiration of the Transitional Period as security for these additional loans. PODAC acquired Ulster Bank's interest in the lien in 2017 and sought a well-charging order in the High Court, relying on the registered lien. Mr. Kean made numerous arguments resisting the well-charging application, one being that where a contractual promise to provide security was incapable of being performed it is ineffective and cannot be relied on to obtain a well charging order (the Kean Point).
High Court Decisions
The High Court refused PODAC's applications for well charging relief in both proceedings. In Mr. Fox's case, the High Court held that liens registered under Section 73 of the 2006 Act could not secure loans advanced after the expiration of the Transitional Period. This became known as the Fox Point.
Mr. Kean was subsequently successful in defending PODAC's application for well charging relief based on the Fox Point alone. As such the Kean Point was not fully considered or determined by the High Court.
Court of Appeal Decisions
On appeal by PODAC, the Court of Appeal reversed the High Court's decisions on the Fox Point, holding that liens registered under Section 73 of the 2006 Act could secure post-2009 lending if agreed by the parties.
Supreme Court Decisions
Mr. Fox and Mr. Kean both appealed the decisions of the Court of Appeal to the Supreme Court.
On the Fox Point, the Supreme Court upheld the Court of Appeal's decision. It found no clear legislative intent in the legislation to prevent securing future lending.
In considering the Kean Point, the Supreme Court remitted the issue to the High Court for full consideration, emphasising the need to address the implications of registered land and the policy of moving towards a system of universal land registration.
The Supreme Court dismissed both appeals, upholding the Court of Appeal's interpretation of Section 73, and remitted both cases to the High Court for further determination.
Consequences of the Supreme Court Judgment
The Supreme Court's decision on the Fox Point paves the way for lenders to seek well-charging orders. It confirms that pre-existing registered liens can be used as security for future lending. This applies where the parties have agreed that the subsequent lending would be secured by the pre-existing lien.
The Kean Point will require full consideration and determination by the High Court.
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