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Receivership and Mortgages Case

The High Court judgment of Mr. Justice Feeney in McEnery v Sheahan (in which the firm acted for the receiver, Brian McEnery of BDO) is the most recent in a series of cases dealing with the impact of the repeal of certain legislative provisions by the Land and Conveyancing Law Reform Act 2009 (the “2009 Act”).  The court held in this case that in relation to a mortgage created prior to 1st December 2009, the right or power of a mortgagee to appoint a receiver under the provisions of the Conveyancing Act 1881 (the “1881 Act”) survived the repeal of the 1881 Act by the 2009 Act. 

In this case, the defendant mortgagor entered into a mortgage with a bank on the 26th of October 2007 as a continuing security for all of his present or future indebtedness to the bank. The bank issued a demand to the defendant on the 11th of April 2012 seeking immediate repayment of loans extended to him. No payment was received and the following day, on the 12th of April 2012, the bank appointed a receiver to the mortgaged property. The mortgage did not contain any express power to appoint a receiver. However, at the time the mortgage was entered into, the power to appoint a receiver was implied into the mortgage by virtue of Section 19 of the 1881 Act.

The defendant refused to deliver up possession of the mortgaged property, arguing, inter alia, that the statutory power of the bank to appoint a receiver ceased to exist once the 1881 Act was repealed with the enactment of the 2009 Act on 1st December 2009. The court therefore had to consider the effect, if any, of the enactment of the 2009 Act on the right of a mortgagee to appoint a receiver pursuant to the implied powers in the 1881 Act.

The court held that the mortgagee’s implied right to appoint a receiver was acquired immediately upon the creation of the mortgage while the 1881 Act was still in force, even though that right did not accrue or become capable of being exercised until an act of default on the part of the mortgagor occurred. The right to appoint a receiver was present as and from the date when the mortgage was completed and was not dependent upon any further action being taken or any future agreement. That right, therefore, (by virtue of the provisions of Section 27(1)(c) of the Interpretation Act 2005) survived the repeal of the mortgage provisions of the 1881 Act by the 2009 Act. The case is currently under appeal.

The court distinguished this case from the Start Mortgages case. Start Mortgages concerned the repeal of Section 62(7) of the Registration of Title Act, 1964 which entitled a lender to apply to court for an order for possession of property on a summary basis. The court held in that case that this entitlement had not been acquired by or accrued in favour of the lender at the time of repeal because the monies had not become due and demand had not been made prior to the repeal of the relevant section. Consequently in Start Mortgages, the right under Section 62(7) was lost with the repeal of the relevant statutory provision. 

The court in the instant case went on to say that the right under Section 62(7) of the Registration of Title Act, 1964 was a procedural right and was different in order and nature to the substantive right of a mortgagee to appoint a receiver.

For further information please contact our Insolvency and Corporate Recovery Unit.

Summary

In respect of mortgages created prior to the coming into force of the Land and Conveyancing Law Reform Act 2009, if the mortgage does not include express powers of appointment, the mortgagee acquired an implied right to appoint a receiver by virtue of the provisions of the Conveyancing Act 1881 immediately upon the creation of the mortgage.

The right to appoint a receiver pursuant to such a mortgage survived the repeal of the 1881 Act by the 2009 Act, even where the act of default occurred subsequent to the repeal of the 1881 Act.
 

2018-11-13T10:48:43+00:00December 1st, 2012|Publications|
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