The High Court has dismissed an appeal against a Circuit Court decision granting IBRC an order for possession of a defaulting borrower’s property.

Background

The borrowers’ mortgage entered into in 2005 provided that if any instalment, or other monies, fell into arrears for one month the whole of the future principal sum amount became immediately repayable. The borrowers defaulted on their mortgage repayments in March 2009. An order for possession was subsequently granted against the borrowers by the Circuit Court in favour of IBRC on 20 September 2012.

The Law

In the high-profile Start Mortgages case, the judge ruled that arising from the repeal of certain historical legislation under the Land & Conveyancing Law Reform Act 2009 (which came into effect from 1 December 2009) a bank could not apply for an order possession of land by summary judgment over which it had a registered charge unless the principal amount secured under the mortgage had fallen due for repayment. If the principal monies had not become due prior to 1 December 2009 the judge held that the bank’s entitlement to obtain possession had not been “vested in” or “accrued to” the bank. The judge ruled that a bank could only therefore apply for an order of possession by summary judgment where repayment of the principal sum had became due and payable before 1 December 2009 and where a demand for repayment of the principal outstanding sum had been made before that date.

The uncertainty created by the Start Mortgages decision was subsequently alleviated in a series of further decisions including EBS-v-Gillespie, in which the High Court decided it was not necessary for a demand to have been issued prior to 1 December 2009. The clause of the mortgage in this instance expressly obliged the borrowers to pay “on demand or on the happening of any of the [default] events” as specified in the terms of the mortgage.  These mortgage terms differed from the terms of the Start Mortgages decision and the Court decided that the lender’s entitlement to apply for possession by summary judgment had been preserved without having to issue a demand before 1 December 2009.

Appeal Arguments

In appealing the order for possession granted to IBRC, the borrowers in this case argued that the Start Mortgage decision applied and that a letter of demand issued by IBRC dated 17 November 2010 did not properly fulfil the requirements of that decision and that IBRC were consequently not entitled to obtain possession.

IBRC counter argued that both the terms of the mortgage and the rules in EBS-v-Gillespie more appropriately applied and that, upon establishing that the event of default gave rise to the entire sum becoming due and owing, the bank was entitled to an order for possession without having to issue a demand.

Appeal Decision

The judge applied the principles laid down in EBS-v-Gillespie in deciding that the principal sum under the mortgage had fallen due and owing as soon as the borrowers had defaulted in making one monthly periodic payment without the necessity for a demand. Since the default had occurred before 1 December 2009, IBRC’s entitlement to seek an order for possession under the repealed legislation was deemed to have been preserved, without the need for any demand. The appeal was therefore dismissed.