Court of Appeal Clears the Way for Well Charging Proceedings
In a trio of noteworthy judgments1 the Court of Appeal has overturned recent High Court judgments relating to liens and well charging proceedings.
The common issue in all three appeals was the extent to which a registered lien holder is required to prove the date on which the equitable mortgage (giving rise to the lien) was created. The Court of Appeal considered issues concerning the interpretation and effect of section 73 of the Registration of Deeds and Title Act 2006 (the “2006 Act”).
The Nature of the Proceedings
The form of action at the centre of the three appeals were well charging proceedings. Actions of this type are taken by the holders of judgment or equitable mortgages with the aim of recovering a debt by forcing the sale of a property. If successful, the Court will:
• declare that the debt owed stands “well charged” on the property;
• direct that the property be sold; and
• direct the Examiner’s Office to take an account of all other charges, mortgages, liens or other debt that may be secured on the property.
The Security Relied On
The security for the loans in each case was the deposit of a land certificate in respect of registered property. This was a relatively common form of security prior to the enactment of the 2006 Act. It was a convenient and inexpensive way to provide security for a loan.
The deposit of a land certificate in respect of registered property had the same effect as the deposit of title deeds of unregistered property and gave the holder an equitable interest in the property. A land certificate had to be produced for any transaction in relation to the property and without the land certificate the owner of registered property would have been unable to dispose of the property.
The High Court Judgments
In two similar High Court judgments delivered over the course of 20202, the High Court dismissed applications for well charging orders and orders for sale where the lien holder did not put forward evidence as to the creation of the equitable mortgage.
The position adopted in the High Court decisions was that the lien holder must lead evidence in respect of the deposit of the land certificate. It was held that this was the event relied on as creating the equitable mortgage and that evidence as to the date of creation was required as this date is crucial in determining priority between any competing mortgages.
The Relevant Section of the Registration of Deeds and Title Act 2006
Land certificates were abolished by section 73 of the 2006 Act such that the creation of security by way of deposit of those land certificates was no longer possible. Pursuant to section 73 (2) of the 2006 Act, lien holders were afforded a three-year period up to 31 December 2009, within which to register their security as a lien to protect their position.
In the two High Court cases the existing liens created by the deposit of the land certificates were registered as liens on the subject Folios within the applicable time period. However, the High Court judgments stated that proof of the registration of a lien on its own is not sufficient.
The Court of Appeal Judgments
Across the three Court of Appeal judgments, Mr Justice Collins (with whom Ms Justice Costello and Mr Justice Binchy concurred), considered in some detail the status and legal effect of a lien registered as a burden on a Folio pursuant to section 73(3) of the 2006 Act. This section sets out the registration mechanism for the conversion of a lien by deposit of a land certificate into a registered lien.
Mr Justice Collins considered the registration process provided for in section 73 (3) in detail in the Greene judgment. He noted that the application for registration of the lien in the Property Registration Authority of Ireland was on notice to the registered owner and that the registered owner had an opportunity at that time to object to the registration. He noted that section 73 (3) had been considered by the Supreme Court in Promontoria (Oyster) DAC v Hannon3 and that on the conclusion of the registration process the lien holder’s security is the lien registered on the Folio.
It was noted that registration of the lien constitutes “conclusive evidence” that the title of the registered owner is subject to such lien. He held that the lien holder was entitled to rely on the register to establish conclusively that it was the holder of a section 73 lien registered as a burden on the Folio.
Mr Justice Collins stated that it is on the registered lien itself that the lien holder must rely on as the equitable mortgage no longer exists. He concluded that the lien holder was not required to lead evidence in respect of the deposit of the land certificate (including the date of deposit or the circumstances in which the deposit occurred). It was pointed out that in applications for well charging orders that the High Court is not normally concerned with any issue of priority between competing mortgages and that this is a matter for the Examiner (with the assistance of the High Court if appropriate).
Mr Justice Collins confirmed in each of the appeals that the lien holder was entitled to well charging orders and orders for sale of the subject properties.
Comment
In the High Court judgment in McKenna it was noted that the ruling would have potential implications for a number of other pending well charging cases before the Courts. The depositing of a land certificate was often done in an informal way and precise information on the exact date or the circumstances of the deposit is not easily obtainable in all cases. The Court of Appeal judgments on this evidential requirement have provided clarity and will allow lien holders to progress well charging cases in reliance on the registered lien and without requiring them to establish the date of deposit of the land certificate.
OSM Partners, Gary Hayes BL and Andrew Fitzpatrick SC acted for the lien holders in Promontoria (Oyster) DAC v Sean McHale and Promontoria (Oyster) DAC v Kieran McKenna.
In a trio of noteworthy judgments1 the Court of Appeal has overturned recent High Court judgments relating to liens and well charging proceedings.
The common issue in all three appeals was the extent to which a registered lien holder is required to prove the date on which the equitable mortgage (giving rise to the lien) was created. The Court of Appeal considered issues concerning the interpretation and effect of section 73 of the Registration of Deeds and Title Act 2006 (the “2006 Act”).
The Nature of the Proceedings
The form of action at the centre of the three appeals were well charging proceedings. Actions of this type are taken by the holders of judgment or equitable mortgages with the aim of recovering a debt by forcing the sale of a property. If successful, the Court will:
• declare that the debt owed stands “well charged” on the property;
• direct that the property be sold; and
• direct the Examiner’s Office to take an account of all other charges, mortgages, liens or other debt that may be secured on the property.
The Security Relied On
The security for the loans in each case was the deposit of a land certificate in respect of registered property. This was a relatively common form of security prior to the enactment of the 2006 Act. It was a convenient and inexpensive way to provide security for a loan.
The deposit of a land certificate in respect of registered property had the same effect as the deposit of title deeds of unregistered property and gave the holder an equitable interest in the property. A land certificate had to be produced for any transaction in relation to the property and without the land certificate the owner of registered property would have been unable to dispose of the property.
The High Court Judgments
In two similar High Court judgments delivered over the course of 20202, the High Court dismissed applications for well charging orders and orders for sale where the lien holder did not put forward evidence as to the creation of the equitable mortgage.
The position adopted in the High Court decisions was that the lien holder must lead evidence in respect of the deposit of the land certificate. It was held that this was the event relied on as creating the equitable mortgage and that evidence as to the date of creation was required as this date is crucial in determining priority between any competing mortgages.
The Relevant Section of the Registration of Deeds and Title Act 2006
Land certificates were abolished by section 73 of the 2006 Act such that the creation of security by way of deposit of those land certificates was no longer possible. Pursuant to section 73 (2) of the 2006 Act, lien holders were afforded a three-year period up to 31 December 2009, within which to register their security as a lien to protect their position.
In the two High Court cases the existing liens created by the deposit of the land certificates were registered as liens on the subject Folios within the applicable time period. However, the High Court judgments stated that proof of the registration of a lien on its own is not sufficient.
The Court of Appeal Judgments
Across the three Court of Appeal judgments, Mr Justice Collins (with whom Ms Justice Costello and Mr Justice Binchy concurred), considered in some detail the status and legal effect of a lien registered as a burden on a Folio pursuant to section 73(3) of the 2006 Act. This section sets out the registration mechanism for the conversion of a lien by deposit of a land certificate into a registered lien.
Mr Justice Collins considered the registration process provided for in section 73 (3) in detail in the Greene judgment. He noted that the application for registration of the lien in the Property Registration Authority of Ireland was on notice to the registered owner and that the registered owner had an opportunity at that time to object to the registration. He noted that section 73 (3) had been considered by the Supreme Court in Promontoria (Oyster) DAC v Hannon3 and that on the conclusion of the registration process the lien holder’s security is the lien registered on the Folio.
It was noted that registration of the lien constitutes “conclusive evidence” that the title of the registered owner is subject to such lien. He held that the lien holder was entitled to rely on the register to establish conclusively that it was the holder of a section 73 lien registered as a burden on the Folio.
Mr Justice Collins stated that it is on the registered lien itself that the lien holder must rely on as the equitable mortgage no longer exists. He concluded that the lien holder was not required to lead evidence in respect of the deposit of the land certificate (including the date of deposit or the circumstances in which the deposit occurred). It was pointed out that in applications for well charging orders that the High Court is not normally concerned with any issue of priority between competing mortgages and that this is a matter for the Examiner (with the assistance of the High Court if appropriate).
Mr Justice Collins confirmed in each of the appeals that the lien holder was entitled to well charging orders and orders for sale of the subject properties.
Comment
In the High Court judgment in McKenna it was noted that the ruling would have potential implications for a number of other pending well charging cases before the Courts. The depositing of a land certificate was often done in an informal way and precise information on the exact date or the circumstances of the deposit is not easily obtainable in all cases. The Court of Appeal judgments on this evidential requirement have provided clarity and will allow lien holders to progress well charging cases in reliance on the registered lien and without requiring them to establish the date of deposit of the land certificate.
OSM Partners, Gary Hayes BL and Andrew Fitzpatrick SC acted for the lien holders in Promontoria (Oyster) DAC v Sean McHale and Promontoria (Oyster) DAC v Kieran McKenna.
1 Promontoria (Oyster) DAC v Desmond Greene [2021] IECA 93, Promontoria (Oyster) DAC v Kieran McKenna [2021] IECA 94 and Promontoria (Oyster) DAC v Sean McHale [2021] IECA 95
2 Promontoria (Oyster) DAC v Kieran McKenna [2020] IEHC 337 and Promontoria (Oyster) DAC v Desmond Greene [2020] IEHC 853 [2019] IESC 49
