In what amounts to a follow up to the Start Mortgages decision, Justice Laffoy has recently ruled that where a mortgage granted prior to 1 December 2009 expressly states that the mortgagee has certain rights under the Conveyancing Act, 1881 then that mortgage grants the mortgagee a contractual entitlement to exercise those rights which is not affected by the subsequent repeal of that legislation.

Judgment

The ruling was given in the case of Kavanagh and Lowe -v- Lynch and St. Angela's Student Residences Limited on an interlocutory application brought by receivers (appointed by Bank of Scotland (Ireland) and permanent tsb respectively) against two parties who it was alleged were preventing the receivers from obtaining possession of the secured property. The defendants argued, inter alia, that the receivers had no such entitlement to the property as their appointments were based in reliance on certain provisions of the Conveyancing Act, 1881 which had been repealed. However the Judge ruled that the receivers were validly appointed because the relevant mortgages contained express provisions to the effect that the mortgagees had the relevant rights, even though those rights were incorporated by reference to the Conveyancing Act, 1881. The Judge commented that this was a "drafting device universally availed of ... by incorporating the statutory provisions in force at the time of creation of the security". Consequently the Court had to read into the mortgages the relevant provisions of the Conveyancing Acts subject to any variations expressly provided for. The Judge further ruled that the repeal of the relevant statutory provisions did not alter that construction of the mortgages or the contractual entitlements thereby created.  

Comment

Given that it was common practice in mortgages granted prior to 1 December 2009 to expressly cross-refer to the right of the mortgagee to exercise relevant powers under the Conveyancing Acts, this decision will provide some welcome comfort to many lenders who have had concerns in the wake of the Start Mortgages decision about whether they still had a power of sale or the ability to appoint a receiver. 

However the Judge did not overrule the Start Mortgages decision. Instead the Judge distinguished that case on the basis that the provisions of the mortgages meant that the considerations which applied in the Start Mortgages case did not arise. Therefore the Start Mortgages decision still has to be considered when reviewing any security granted prior to 1 December 2009 to determine what enforcement remedies may be available. Accordingly, it is likely that there will continue to be a specific issue in relation to the right of a mortgagee to possession of registered land (the security over which invariably relied, without express reference, on the statutory remedy in S.62(7) of the Registration of Title Act, 1964, as was the issue in the Start Mortgages case).

The other point to note is that the exercise of any right expressly incorporated by reference to the Conveyancing Acts comprises the exercise of a contractual right pursuant to the mortgage only. The significance being that the lender in the exercise of the power of sale pursuant to the mortgage may not be able to avail of the right of overreaching other encumbrances which rank subsequent in priority (such as judgement mortgages) because this is a statutory right available where the lender is exercising the power of sale pursuant to the Conveyancing Act, 1881. 

For these reasons the imperative for lenders to have the Start Mortgage decision reversed on appeal or by legislation remains.