Bank of Scotland (Ireland) (“BOSI”) provided a loan to the Defendant in March 2006. That loan was to be secured against the Defendant’s family home and accordingly the Bank’s mortgage was registered on 20 March 2006 (the “2006 Mortgage”).
The assets and liabilities of BOSI were transferred to the Bank of Scotland Plc (“BOS”) on 31 December 2010 pursuant to the European Communities (Cross- Border Mergers) Regulations 2008 (Ireland) and the Companies (Cross-Border Mergers) Regulations 2007 (UK). This transfer included ownership of the 2006 Mortgage. BOS never however registered its ownership of the charge with the Property Registration Authority.
BOS subsequently disposed of a portfolio of securities to Tanager Designated Activity Company (the “Plaintiff”). This portfolio included the 2006 Mortgage. The Plaintiff, unlike BOS, did register itself as the new owner of the 2006 Mortgage with the Property Registration Authority on 25 April 2014.
As the Defendant had fallen into mortgage arrears, the Plaintiff demanded repayment of the Loan. The Defendant failed to repay the loan and accordingly, on 15 January 2015, the Plaintiff issued proceedings in the Circuit Court seeking possession of the property.
When the matter came before the Circuit Court, the Defendant argued that BOS had no entitlement to transfer the 2006 Mortgage to the Plaintiff as it never registered its ownership with the Property Registration Authority. It was in turn argued that the Property Registration Authority erred in registering the Plaintiff’s ownership of the 2006 Mortgage with the consequence that the Plaintiff had no entitlement to enforce it against him.
The Plaintiff submitted that the registration by the Property Registration Authority was conclusive evidence of the ownership of the 2006 Mortgage. The Circuit Court nonetheless, refused to grant an order for possession and so the Plaintiff appealed the matter to the High Court.
The core point for the High Court to consider was whether BOS, as the unregistered owner, was entitled to transfer the 2006 Mortgage to the Plaintiff without itself first being registered. BOS purported to have transferred the 2006 Mortgage to the Plaintiff by virtue of a Land Registry form which dealt with a transfer by either a registered owner or an unregistered owner under Section 90 of the Registration of Title Act 1964 (the “1964 Act”). The Court referred to the case of Kavanagh v McLaughlin  3 IR 555 for some guidance on the point.
In the McLaughlin case BOSI had granted a mortgage loan to the defendant and the registered charge had been transferred to BOS by virtue of the operation of law through a cross-border merger. BOS appointed a receiver over certain properties the subject of the mortgage loan which included registered land. The validity of the appointment of the receiver, however, was challenged on the basis that BOS had not registered its ownership of the charge. The Supreme Court in that case held that, because BOS had not registered its ownership of the charge, it was not entitled to rely on any of its statutory rights under the Registration of Title Act 1964. These rights included the statutory right to appoint a receiver. As the charge had been validly transferred to BOS by virtue of the cross-border merger, BOS was entitled to exercise its contractual rights under the charge which included its right to appoint a receiver.
In a similar manner therefore, in the given case, the Court concluded that BOS was not entitled to rely on its statutory powers under the Registration of Title Act 1964 to transfer a charge over which it had not registered its ownership.
The Court considered the argument that, under Section 31 of the 1964 Act, the registration of the Plaintiff as owner of the 2006 Mortgage was conclusive evidence of its ownership and that that would not be challenged by the Defendant.
The Court noted that while Section 31 does provide that the Register in relation to the ownership of land, now maintained by the Property Registration Authority, (the “Register”), is conclusive, it preserves the jurisdiction of the court to rectify the Register [see above] where there is evidence of actual fraud or mistake. The Court concluded that the point of whether the Property Registration Authority had erred in registering the Plaintiff’s ownership of the 2006 Mortgage on foot of a mistake was worthy of argument.
However, it held that it was not within the scope of the Court to deal with that point as the proceedings had been brought in a summary manner and in the absence of the Property Registration Authority, who were not a party to the proceedings.
The Court noted that hundreds of other cases would be directly affected by the outcome of the case and so the matter was of considerable public importance. The Court adjourned the matter for a month and invited the parties to apply to the Court to refer the matter to the Court of Appeal. In doing so that Court also suggested the following queries:-
- In considering the plaintiff’s claim, is this court entitled to have regard to the circumstances in which the plaintiff became the registered owner of the charge on the defendant’s folio?
- Is it open to the defendant to argue that those circumstances amounted to a mistake within the meaning of Section 31 of the Registration of Title Act 1964?
- If the answer to the foregoing two questions is in the affirmative, is it open to the court to join the Property Registration Authority as a notice party for the purpose of hearing further argument from it on this issue?
- If the answer to all the foregoing questions is in the affirmative, what consequences would flow from a determination by the Court that the Property Registration Authority was not entitled to register the plaintiff as owner of the registered charge on the defendant’s folio?
This decision will have a limited impact and in particular only affects the purchasers of loan portfolios secured against property where the vendor of that portfolio was not the registered owner of the security.