In a recent Circuit Court decision, Promontoria (Oyster) DAC (“PODAC”) successfully defended its right to retain title deeds deposited as security for an overdraft facility, notwithstanding a bar on enforcing its equitable mortgage.
The case concerned an equitable deposit of a property’s title deeds as security for a loan which was subsequently registered as a lien. PODAC acquired the rights to the loan and the security. High Court proceedings were subsequently initiated against the estate of the deceased borrower to enforce the security. It was argued during the course of the proceedings that the claim was statute barred under section 9 of the Civil Liability Act, 1961 (the “1961 Act”). That allegation concerned a competing interpretation of the repayment terms of the loan.
In a reserved decision, the High Court held that the cause of action had accrued prior to the death of the borrower such that it was statute barred by virtue of the 1961 Act. Accordingly, the High Court proceedings against the estate were dismissed.
The estate then sought the return of the title deeds, asserting that PODAC had no legal basis to retain the deeds. The request was refused on the basis that High Court had made a determination in respect of the Statute of Limitations only and the security had not been declared void. It was asserted that PODAC could continue to exercise a right to possession over the documents of title that were deposited and which would continue to be held as security pending redemption of the sums secured.
The estate then issued Circuit Court proceedings and sought an order compelling the return of the title deeds. The estate alleged that, by virtue of the High Court’s ruling, any potential claim against the property was statute barred, and therefore there was no entitlement to retain the title deeds. The estate submitted that depositing the deeds did not create a separate form of possessory security which could be relied upon independent of the equitable mortgage.
It was submitted on behalf of PODAC that it is settled law1 that:
• title deeds given by way of deposit to secure land (and thereby creating an equitable mortgage) are the property of the mortgagee until the monies secured have been fully repaid; and
• a mortgagor cannot sue for return of title deeds deposited in such way unless by way of redemption suit (i.e. an action by the mortgagor to enforce the right of redemption).
It was also submitted that the loss of the remedy pursuant to Section 9 of the 1961 Act does not defeat the right. In other words, the finding by the High Court that the right to maintain the proceedings was statute barred does not lead to a finding that the underlying right sought to be enforced is extinguished or nullified in some way. The two concepts are entirely different things.
The Circuit Court refused the estate’s claim. It was confirmed that the deeds form part of the realty and that in the absence of legislation the Court could not consider a dramatic change in the law. The fact that the mortgage is effectively unenforceable does not have the effect of voiding the lien. The lien continued to hang over the property and in the absence of legislation to the contrary that is where it stays.
The Court stated that the lien is there as an indirect means for creditors to recoup from a debtor even if that were to take place long after the entitlement to take legal proceedings has become statute barred. The debt and the lien remain extant. In its ruling the Court said that any initiative to the contrary is a matter of public policy.
This decision underscores the enduring nature of equitable mortgages and the rights of mortgagees to retain title deeds until debts are fully repaid, even when enforcement actions are statute barred.
Raymond Lambe and Paul J Brady BL acted for PODAC.
The case concerned an equitable deposit of a property’s title deeds as security for a loan which was subsequently registered as a lien. PODAC acquired the rights to the loan and the security. High Court proceedings were subsequently initiated against the estate of the deceased borrower to enforce the security. It was argued during the course of the proceedings that the claim was statute barred under section 9 of the Civil Liability Act, 1961 (the “1961 Act”). That allegation concerned a competing interpretation of the repayment terms of the loan.
In a reserved decision, the High Court held that the cause of action had accrued prior to the death of the borrower such that it was statute barred by virtue of the 1961 Act. Accordingly, the High Court proceedings against the estate were dismissed.
The estate then sought the return of the title deeds, asserting that PODAC had no legal basis to retain the deeds. The request was refused on the basis that High Court had made a determination in respect of the Statute of Limitations only and the security had not been declared void. It was asserted that PODAC could continue to exercise a right to possession over the documents of title that were deposited and which would continue to be held as security pending redemption of the sums secured.
The estate then issued Circuit Court proceedings and sought an order compelling the return of the title deeds. The estate alleged that, by virtue of the High Court’s ruling, any potential claim against the property was statute barred, and therefore there was no entitlement to retain the title deeds. The estate submitted that depositing the deeds did not create a separate form of possessory security which could be relied upon independent of the equitable mortgage.
It was submitted on behalf of PODAC that it is settled law1 that:
• title deeds given by way of deposit to secure land (and thereby creating an equitable mortgage) are the property of the mortgagee until the monies secured have been fully repaid; and
• a mortgagor cannot sue for return of title deeds deposited in such way unless by way of redemption suit (i.e. an action by the mortgagor to enforce the right of redemption).
It was also submitted that the loss of the remedy pursuant to Section 9 of the 1961 Act does not defeat the right. In other words, the finding by the High Court that the right to maintain the proceedings was statute barred does not lead to a finding that the underlying right sought to be enforced is extinguished or nullified in some way. The two concepts are entirely different things.
The Circuit Court refused the estate’s claim. It was confirmed that the deeds form part of the realty and that in the absence of legislation the Court could not consider a dramatic change in the law. The fact that the mortgage is effectively unenforceable does not have the effect of voiding the lien. The lien continued to hang over the property and in the absence of legislation to the contrary that is where it stays.
The Court stated that the lien is there as an indirect means for creditors to recoup from a debtor even if that were to take place long after the entitlement to take legal proceedings has become statute barred. The debt and the lien remain extant. In its ruling the Court said that any initiative to the contrary is a matter of public policy.
This decision underscores the enduring nature of equitable mortgages and the rights of mortgagees to retain title deeds until debts are fully repaid, even when enforcement actions are statute barred.
Raymond Lambe and Paul J Brady BL acted for PODAC.
1 Gilligan v The National Bank Limited [1901] QB 513 and The Bank of New South Wales v O’Connor 14 A.C. 273.
For further information on this topic, or for any related queries, please contact Raymond Lambe in OSM Partners LLP.
