In a recent High Court judgement, a large investment company, Promontoria (Aran) Limited (PAL), was criticised for seeking to appoint a receiver over a borrower’s property as it had failed to demonstrate its legal right to do so. The High Court held that the borrower had a right to “insist on proof of transfer of ownership of the mortgage before being required to comply with the request of a stranger to vacate the property”. As key documentation evidencing the transfer of the borrower’s loan from Ulster Bank Ireland Limited (UBIL) to PAL had not been given to the borrower and those which had been furnished were heavily redacted, the Court was not satisfied that PAL had established its right to appoint a receiver.
Time – Line of events
- 8 November 2007 – the borrower, Mr English, entered into a mortgage agreement with Ulster Bank Ireland Limited in respect of unregistered lands in County Tipperary.
- August 2008 – March 2011 – Mr English entered into a series of facility agreements with UBIL.
- 16 December 2014 – UBIL entered into a mortgage sale deed in respect of Mr English’s lands with Promontoria Holding 128 BV (PH). This deed was apparently the subject of a deed of novation on 12 February 2015.
- 12 February 2015 – UBIL and three related entities executed a global deed of transfer and a deed of conveyance and assignment transferring to PAL all rights, title, interest and benefits in the facility letters and mortgage relating to Mr English.
- 22 September 2015 and 16 October 2015 – PAL issued letters of demand to Mr English.
- 6 November 2015 – PAL appointed a receiver over Mr English’s lands.
- 10 November 2015 – Mr English issued a plenary summons claiming that PAL was not legally entitled to hold itself out as being entitled to UBIL’s interest in the facility letters or the underlying security.
- 16 November 2015 – PAL provided Mr English with a redacted copy of the global deed of transfer and a redacted copy of the conveyance and assignment. Copies of the mortgage sale deed and deed of novation were not provided.
- 30 November 2015 – the transfer of mortgage from UBIL to PAL was registered in the Registry of Deeds.
Mr English argued that documents which were furnished to him were not sufficient to establish PAL’s right to appoint a receiver over his property. He claimed that he was entitled to sight of the entire “suite” of documents. In addition, due to the level of redaction of the documents which had been furnished it was not possible to tell who had executed them. Mr English sought an injunction requiring PAL to disclose all documents which PAL relied on as entitling it to appoint a receiver. Alternatively, he suggested that the documents could be submitted to the Court for review.
PAL argued that it had furnished all of the relevant information to Mr. English and there was sufficient proof of its entitlement to appoint a receiver. It claimed that it was necessary to redact the information due to its commercially sensitive nature. In response to Mr English’s objections to the redaction on the execution pages of the documents, PAL produced evidence of registration of the transfer of the mortgage from UBIL to PAL in the Registry of Deeds.
Decision of the Court
The Court agreed with Mr. English and found that he had a right to see proof of the transfer of the mortgage to PAL before surrendering control of the property. It noted that registration of the transfer document in the Registry of Deeds was not an assurance that PAL had good title.
The Court looked at the factual position of the alleged transfer and found it unclear. According to the evidence produced to the Court, UBIL sold all of its rights, title and interest in the mortgage to PH in December 2015 by way of a mortgage sale deed. Two months later, on 12 February 2015, UBIL and three related entities sought to sell the same mortgage to PAL. The Court found that without sight of the mortgage sale deed and deed of novation, it was not possible to determine the validity of the transfer from UBIL to PAL. The Court was of the view that, if PAL sought to rely on the deed of novation and mortgage sale deed, these documents should be disclosed. The Court also noted that the details of the transfer of the mortgage contained in the recitals of deed of appointment of the receiver did not correspond with the details registered in the Registry of Deeds. The Court noted that while there might be a good reason for these anomalies, PAL would need to provide an explanation.
The Court was sympathetic towards PAL’s position that it was necessary to redact commercially sensitive information. It acknowledged that a borrower is not entitled to know certain information such as the consideration paid for the transfer or details of other mortgages transferred under the same deed. However, the Court found that Mr. English was entitled to know the identity of the parties who signed on behalf of UBIL and the parties who had witnessed the signatures. The Court also noted that if the fact of the alleged transfer is not clear without sight of certain sections of the document, then the lender would need to present this information to Mr. English if they wished to appoint the receiver.
The Court granted a stay on the appointment of the receiver until such time that PAL could establish its rights to appoint a receiver. The Court highlighted that the decision to disclose the redacted information was a matter for PAL but that if they chose not to disclose the information the ability to appoint a receiver may be in jeopardy. The Court rejected the proposal that the documents could be submitted to the Court for inspection and emphasised that it was not the role of the Court to assure Mr English that the mortgage was properly transferred.
This case highlights the difficulty that lenders may face in enforcing security where the documentation evidencing their interest contains commercially sensitive information. Lenders will need to balance the necessity to protect commercially sensitive information and confidentiality obligations against the requirement to demonstrate their legal entitlement. Each document should be analysed carefully before furnishing to the borrower or redacting information and if in doubt, legal advice should be sought.
English v Promontoria (Aran) Limited  11 JIC 1603