Start Mortgages Limited (“Start”) & Others v Gunn & Others  IECH 275 dealt with the right of lenders to apply for possession orders pursuant to Section 62 (7) (“Section 62(7)”) of the Registration of Title Act, 1964 (the “1964 Act”) which was repealed by the Land & Conveyancing Law Reform Act, 2009 (the “2009 Act”). The 2009 Act came into force on 1st December 2009. The decision highlighted a number of gaps in the law caused by the repeal of certain sections of the 1964 Act and the Conveyancing Act, 1881 (the “1881 Act”).
Section 62(7) conferred a power on the holder of a charge over registered land to apply to the Court in a summary, being a short or simplified, manner for an order for possession provided that the principal monies secured by the charge had become due (i.e. the principal monies had been formerly demanded).
The Defendants were in default under their loans and Start was attempting to recover possession of the secured properties. The Defendants argued that because section 62 (7) had been repealed by the 2009 Act it could no longer be relied on by a holder of a charge over registered land. Start argued that the right was preserved by virtue of Section 27 of the Interpretation Act 2005 (the “2005 Act”). That provides that a right which had been acquired or accrued prior to the repeal of a legislative provision cannot be affected by the repeal. Start also argued that the right to make an application to recover possession of the property under section 62 (7) had accrued on the date of the registration charge.
The Court held that the right to make an application to recover possession of the property under section 62 (7) was not acquired on the date of registration of a charge, but only acquired when the right to seek possession of the property became exercisable. That only occurs when (i) there is a default in repayments, and (ii) a formal demand repayment of the principal monies due has been made.
The Court went on to hold that the right to apply in a summary manner for possession of registered land under section 62(7) was a right which would be preserved by Section 27 of the 2005 Act, provided that it had accrued or had been acquired prior to the repeal of the 1964 Act, i.e prior to 1 December 2009 when the 2009 Act came into force.
On that basis the court concluded that if the principal monies due had been demanded before 1 December 2009 the charge holder could proceed with an application for possession in the notwithstanding the repeal of section 62(7). However, if the monies had only become due and owing after 1 December 2009 then the charge holder is precluded from applying under section 62 (7).
This created a lacuna, or a gap in the law, and the Court indicated that the “unintended” consequence of the 2009 Act was that lenders who did not have an entitlement to apply for possession prior to 1 December 2009 cannot rely on the 2009 act to apply for an order for possession because the right to do so was not preserved by the 2005 Act.
This case was followed relatively soon by Kavanagh & Anor vs. Lynch & Ors  IEHC 348. The Kavanagh case concerned the application of the statutory powers afforded to lenders pursuant to Section 19 of the 1881 Act (“Section 19”), relating to the appointment of receivers over mortgaged property. Section 19 had also been repealed by the 2009 Act. In this case the Defendant tried to rely on the Start Mortgages decision to challenge the appointment of a receiver. They argued that the power applied by the bank pursuant to the 1881 Act had been repealed therefore the lender could not rely on it.
In that case the Court decided that because the lender’s statutory entitlements under the 1881 Act had been expressly incorporated in the mortgage as a matter of contract the power to appoint the receiver arose, not under the 1881 Act, but under the specific contractual terms of the mortgage. This meant that the lender’s rights and powers including the right to appoint a receiver remained enforceable despite the repeal of the relevant sections of the 1881 Act.
The decision in Start Mortgages has had broader effects than it may have first appeared, and because of the repeals in the 2009 Act, has led to concerns in relation to, among other things, a lender’s power to appoint a receiver, take possession and sell and sell free from subsequent charges (in the case of unregistered land) in relation to mortgages executed prior to 1 December 2009.
Following the decision in Kavanagh there should be no problem where the mortgage was created on or after 1 December 2009, where a receiver was validly appointed prior to 1 December 2009, where the monies secured by the mortgage became due prior to 1 December 2009 (i.e. a demand for repayment had issued), or where a pre-1 December 2009 mortgage contains the appropriate contractual powers to appoint a receiver, take possession and sell.
The decision in their mortgage is under appeal to the Supreme Court.