A Banks enforcement remedies in light of the recent Gunn Judgment

Mark Woodcock, Partner
Head of Insolvency Unit
McDowell Purcell

A Bank’s enforcement remedies in light of the recent Gunn Judgment

Background

This judgment arose out of a number of applications made by way of special summons by banks for orders for possession of charged properties. The Registration of Title Act, 1964 was the legislation upon which a bank relied when seeking an order for possession of registered property. This act provided that when payment of the principal money secured by a charge became due and a lawful demand for repayment was made, a bank could apply to court for possession of the property.

New Legislation

The Land and Conveyancing and Law Reform Act 2009 was drafted to consolidate the multiple and varied legislation governing land law in Ireland. In doing so it repealed hundreds of statutes going back as far as the Statute De Donis Conditionalibus of 1285. One of the acts repealed was the Registration of Title Act. The Land and Conveyancing Act 2009, provides as follows:

“ the powers and rights of a mortgagee apply to any mortgage created by deed after the commencement of this chapter”

The Gunn Judgment interpreted this to mean that the enforcement rights set out in the 2009 Act applied only to mortgages registered after the 2009 Act came into law on the 1^st December 2009.

In relation to mortgages registered before the 1^st December 2009, a bank remains entitled to rely on the provisions of the previous legislation, provided the banks entitlement to a court order for possession existed before the enactment of the 2009 Act. That is to say, provided the bank had issued a demand for repayment prior to the 1^st December 2009.

Gap in the legislation

This interpretation created an obvious gap in the legislation:

Banks holding mortgages registered before the 1^st December 2009 can rely on the previous legislation to apply for a court order for possession provided the bank has made a demand for repayment of the loan before the 1^st December.
Banks holding mortgages registered after the 1^st December can rely on the 2009 Act to apply for a court order for possession.
However, banks holding a mortgage registered before the 1^st December 2009 where a demand for repayment of the loan was not made prior to the 1^st December cannot rely on either act and appear to be in legal limbo as regards their entitlement to rely on the powers and rights set out in the 2009 Act.

Implications

This interpretation will have dramatic consequences for banks and represents a windfall in relief for defaulting borrowers. It means that all proceedings brought for court orders for possession where the mortgage was registered prior to and the demand for repayment was made after the 1^st December 2009 can be struck out.

Although the Gunn judgment dealt specifically with a banks entitlement to a court order for possession, it must be assumed the judgment may have the same negative effect as regards all powers and rights of a mortgagee set out in the 2009 Act insofar as they arise out of repealed legislation. This could include powers and rights such as the appointment of receivers and the sale of property as a mortgagee in possession. However, contractual rights (as opposed to statutory rights) which are specifically set out in a mortgage document should be unaffected by the decision.

It is anticipated that the decision in the Gunn case will be appealed. However, the Dail must step in to fill this gap in the legislation. It may be the case that delivery of the judgment was deliberately delayed to the last week of the legal term, as the Dail now has two months before the new term commences in which to do so.

Mark Woodcock
Partner
3rd August 2011

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