This update reviews four recent decisions of the courts which are of considerable significance for parties seeking to enforce loan agreements.
1. High Court Holds Transferred Charge Must Be Registered Before Enforcement
The High Court, in Harrington & anor v Gulland Property Finance Ltd & anor  IEHC 447, High Court, Baker J, 29 July 2016, held that the plaintiffs had made out an arguable case that, in the absence of registration of a charge, or some other means by which the interest in the charge had been transferred, the contractual interest in the charge had not transferred and therefore the first named defendant could not appoint a receiver.
The plaintiffs sought an interlocutory injunction restraining the second named defendant, a receiver, appointed by the first named defendant (Gulland), from acting as receiver of certain units, of which the plaintiffs were registered owners and which were subject to a charge in favour of Anglo Irish Bank Corporation plc. (Anglo). In February 2015, the special liquidators of IBRC (the successor in title of Anglo) transferred to Gulland the benefit of the loan facilities to the plaintiffs and the security.
The primary argument raised by the plaintiffs was that the instrument by which the charge was transferred from IBRC to Gulland, had not been registered in the Land Registry, and in those circumstances, no interest in the charge had become vested in Gulland. As a consequence, Gulland did not, at the date of the appointment of the receiver, have a power, whether contractual or statutory, to effect that appointment.
The Court noted that the provisions of Section 64(2) of the Registration of Title Act 1964 are unambiguous and, while it is not necessary that the interest of the mortgagee be transferred by means of a transfer in the prescribed form, the instrument of assignment does not confer on the transferee any interest in the charge until the transferee is registered as owner of the charge.
Accordingly, the Court held that the plaintiffs had made out an arguable case that in the absence of registration, or some other means by which the interest in the charge had been transmitted or was deemed by statute not to require registration, the contractual interest in the charge had not become transferred and therefore Gulland could not, in pursuance of the contractual power contained in that mortgage or charge appoint a receiver.
The Court further considered that, in the circumstances, damages would not be an adequate remedy and while there had been some non-disclosure by the plaintiffs in the obtaining of the ex parte injunction it was not sufficiently egregious to weigh the balance against the plaintiffs.
Accordingly, the Court made an interlocutory injunction restraining the second defendant from acting as receiver of the units.
While this is an interlocutory judgment, and the full case has yet to be heard, transferees or assignees of loans or loan portfolios should register charges (other than those deemed by statute not to require registration) before proceeding to enforcement.
2. Circuit Court Has No Jurisdiction In Possession Proceedings Where There Is No Rateable Valuation
The Court of Appeal in its judgment in Permanent TSB plc v Langan  IECA 229, delivered on 28 July 2016, held that the Circuit Court had no jurisdiction to grant orders for possession of residential investment properties as they were "not rateable" under Section 15 of the Valuation Act 2001 (the 2001 Act) and were not covered by the Land and Conveyancing Law Reform Acts, 2009 and 2013.
The judgment has provided some much needed clarity following conflicting High Court decisions on the issue. In May 2015, Murphy J in Bank of Ireland Mortgage Bank v Finnegan and Ward  IEHC 30 held that as the property in that case was not rated nor rateable, the Circuit Court lacked the necessary jurisdiction to hear the bank's claim. However, Noonan J in Bank of Ireland v Hanley and Giblin  IEHC 738 held that establishing the rateable valuation of a property did not constitute an essential proof in order for a bank to succeed in its claim for possession. Given these two conflicting decisions, Baker J stated a case to the Court of Appeal for clarification.
Court of Appeal
The first question stated by Baker J to the Court of Appeal was:
"If a property is not rateable by virtue of the Valuation Act 2001 is the jurisdiction of the Circuit Court in respect of proceedings for possession of a dwelling brought by a mortgage lender thereby excluded?"
The Court reviewed the legislation establishing the Circuit Court and concluded that the current jurisdiction of the Circuit Court to deal with matters relating to land is confined to those cases where the property is "rateable" and the rateable valuation does not exceed €253.95. If the property is not rateable the Circuit Court has no jurisdiction to hear the proceedings.
Section 15 of the 2001 Act provides that, subject to minor exceptions, domestic dwellings "shall not be rateable". As the properties in the case before the Court were domestic dwellings, albeit residential investment properties, they were not rateable.
The Court noted that since the enactment of Part 10 of the Land and Conveyancing Law Reform Act 2009 (the 2009 Act) the Circuit Court's jurisdiction in respect of mortgage suits was not dependent on rateable valuation but this only applied where the mortgage was created after 1 December 2009. The Land and Conveyancing Law Reform Act 2013 (the 2013 Act) extended this jurisdiction to mortgages in respect of principle private residences created before 1 December 2009. This remedied some of the issues left by the 2009 Act but a gap remained in that the 2013 Act had no application where a property was not a principle private residence.
Accordingly, the Court held that where the defendant has put the jurisdiction of the Circuit Court at issue, that Court is not entitled to proceed to judgment in respect of a domestic dwelling which has been rendered unrateable by the 2001 Act, unless the case in question comes within either Part 10 of the 2009 Act or Section 3 of the 2013 Act.
The Court did acknowledge the difficulties the judgment would cause in circumstances where proceedings would have to be commenced in the High Court rather than the Circuit Court including the additional costs for litigants and the fact that the parties would be deprived of access to local courts.
The Court also noted that the judgment would have even more serious consequence in that the general jurisdiction of the Circuit Court to deal with property disputes (ie other than those concerning applications for possession) concerning domestic dwellings was now open to question.
Finally, the Court referred to the fact that the Oireachtas had, to some extent, already anticipated these difficulties with the enactment of Section 45 of the Civil Liability and Courts Act 2004. That Section - which has not yet been commenced - provides for a system of jurisdiction for the Circuit Court based on the market value of the property concerned and it may be that the judgment in this case will provide the impetus to the government to commence that particular section.
In the light of this judgment financial institutions should now review any extant Circuit Court proceedings to ensure the Court has jurisdiction to hear the application. If not, it may be necessary to discontinue the proceedings and commence new proceedings in the High Court.
Any new proceedings in respect of properties which come within the ambit of the judgment should be commenced in the High Court.
3. Court of Appeal Outlines The Need For Clear And Correct Calculations In Summary Judgment Applications
In Ulster Bank Ireland Ltd v Grimes, Court of Appeal, Irvine J, Hogan J, Kelly P, 27 July 2015, the Court of Appeal considered an appeal from a High Court order for summary judgment in the sum of €70,007.18.
The debtor argued that Ulster Bank (the Bank) had provided a grounding affidavit, sworn by Mr Duffy, a bank official with its SME recoveries department, which failed to comply with the requirements of the Banker's Books Evidence Act 1879. This argument was rejected by the Court.
The second argument put forward by the debtor was that the Bank, in its verifying affidavit, had failed to prove the amount stated to be due and owing and insofar as it had sought to remedy its errors in a supplemental affidavit, that affidavit was inadmissible as it was sworn by the Bank's solicitor, who was not in a position to swear positively to the facts therein contained.
The Court noted that the fact that a defendant may have no substantive defence to an application for summary judgment did not relieve a plaintiff of its obligations in terms of proof and it went on to set out clearly the requirements that a plaintiff must meet to obtain summary judgment.
- A defendant is entitled to sufficiently clear particulars so that they can be satisfied that the sum claimed is correct and not excessive.
- On an application for summary judgment, a plaintiff must, by verifying affidavit, be in a position to satisfy the court that the sum claimed was validly due as of the date of the issue of the summons.
- Insofar as a plaintiff may seek judgment in a sum different from that contained in the special indorsement of claim, the plaintiff's right to that sum must also be proved by clear and unambiguous evidence and in such a manner as to show that the latter sum is not in conflict with that initially claimed.
- How the amount claimed has been calculated should be readily ascertainable from the affidavit and insofar as a plaintiff may seek to recover further interest on a principal sum, following the date of the issue of the summary summons, the amount so claimed and the period over which that sum has been calculated should be clearly specified in the grounding affidavit.
- Insofar as credits may be due to a defendant in respect of dealings between the parties post-dating the issue of proceedings, the grounding affidavit should identify how and the extent to which the sum initially claimed has been reduced.
In the present proceedings, the Summary Summons claimed a total sum of €71,871.86 on foot of a Loan Account and a Current Account. While the total claimed as due and owing in respect of both accounts as of the 13 October 2013, was correct, there was an error in the particulars on the face of the summons. The total sum in respect of principal and interest due on foot of the Loan Account was €69,715.35, as opposed to the sum of €68,715.35, claimed. Because of this error an application was made to amend the summons which was granted, with a dispensation for the need for re-service.
The Bank then proceeded to issue a motion for liberty to enter final judgement. In doing so, it sought to enter judgment in the sum of €70,007.18, an incorrect sum. The sum claimed ought to have been €71,007.18 as per the summons, that being the total sum due on both accounts as of the 13th October, 2013. The grounding affidavit carried through the same error. That affidavit attempted to bring the customer's liability up to date but the affidavit did not identify the date to which this further interest had been calculated although the exhibits did.
Because of the difficulties with the grounding affidavit, the Bank filed a supplemental affidavit, sworn by a solicitor for the Bank. The Court was somewhat critical of the clarity of this affidavit but, regardless of whether or not it was admissible, the Court was not satisfied that the Bank had proved its entitlement to obtain summary judgement in the amount of €70,007.18.
The Court held that the sum, while claimed in the notice of motion, was not the customer's liability as advised in the special indorsement of claim. Neither was it the sum outstanding as per the books and records of the Bank. Further, the grounding and supplemental affidavits offered a range of different figures as the customer's outstanding liability.
The Court noted that the rules governing summary summons proceedings were not met by affidavits and submissions which urged the court to grant judgment for the lowest of the figures claimed on the basis that it was clear that the customer's liability was in excess of that figure and they have not advanced any potential defence to the claim. The Court held that the customer is entitled to a straightforward, clear and unambiguous statement on affidavit demonstrating how the sum claimed in the notice of motion is lawfully due and owing.
Accordingly the Court allowed the appeal set aside the summary judgment.
4. Circuit Court Refusal Of Omnibus Substitution Application Upheld By High Court
In Irish Bank Resolution Corporation Ltd v Kennedy & anor  IEHC 395, High Court, McDermott J, 6 July 2016, the High Court upheld a decision of the Circuit Court, refusing an omnibus application for orders for substitution in over 500 Circuit Court cases in circumstances where the loans to which the proceedings related had been sold.
Following the acquisition of a loan portfolio from Irish Bank Resolution Corporation Limited (IBRC), Mars Capital Ireland Limited (Mars) sought an order substituting it as plaintiff in lieu of IBRC, in the proceedings against the defendants.
As there were over 500 sets of Circuit Court proceedings, Mars made an omnibus application for an order substituting it as plaintiff in each of the Circuit Court proceedings.
The Court was satisfied that Mars had adduced prima face evidence that IBRC had assigned to the applicant all its rights, title, interests and benefits in the facilities to the defendants in these proceedings and the defendants in the other pleadings and therefore the Court would have been entitled to make the orders sought. The Court then considered that a question arose as to whether the substitution was in the interests of justice "not only from the point of view of the costs that might be saved by the applicant but also the impact of such an order on the administration of justice in the Circuit Court".
Noting that there had been a number of errors in the schedule of cases originally submitted and that an updated schedule had been furnished, McDermott J concluded that when one tries to consolidate this large number of cases throughout the State for this purpose, mistakes occur. In looking at the administrative burden that might be imposed on Circuit Court offices McDermott J stated that:
"It is important that steps should not be taken (even if superficially attractive) which have the potential to confuse or disrupt the orderly local administration of each case whether in court or in the court office and that each of the 576 cases should be seen to be dealt with individually in its proper local jurisdiction."