|Freeman -v- Bank of Scotland PLC & ors|
| IESC 14|
Supreme Court Record Number:
High Court Record Number:
|2012 8705 P|
Date of Delivery:
Composition of Court:
|Dunne J., Charleton J., O'Malley J.|
Link to Judgment
Charleton J., O'Malley J.
THE SUPREME COURT
[Appeal No. 292/2014]
ANTHONY FREEMAN AND MIRIAM FREEMAN
BANK OF SCOTLAND PLC, SIMON DAVIDSON AND LLYOD DALY & ASSOCIATES LIMITED
Judgment of Ms. Justice Dunne delivered the 15th day of March 2016
This is an appeal from a judgment of the High Court (McGovern J.) delivered on 29th May, 2014 ( IEHC 284) wherein the learned High Court judge dismissed the claim brought by the plaintiffs/appellants (“the Appellants”) on the basis that the Appellants had failed to prove their case against the defendants/respondents (“the Respondents”) on any of the issues before the High Court.
Background and procedural history
The background to this matter is described in the judgment of the learned trial judge but it would be of assistance to set out the background here. The Appellants are husband and wife. Between 1996 and 2006 they purchased six investment properties with finance provided by First Active Building Society (“the Society”). By way of security for the finance provided, the Appellants entered into mortgages in favour of the Society.
In 2006 the Appellants refinanced their borrowings with the Society by means of a loan from Bank of Scotland (Ireland) Limited (“BOSI”). The six investment properties were re-mortgaged with BOSI as security for the sum of €1,406,000 approximately provided by BOSI. The borrowings of the Appellants with the Society amounted to approximately €800,000 at that time and that sum was discharged on the refinancing of their borrowings with BOSI. Following the discharge of their borrowings with the Society, a surplus of €600,000 approximately was released to the Appellants.
By deed of mortgage and charge dated the 5th January, 2007 (“the Charge”) the Appellants granted a first legal charge over the property (described in the schedule to the Charge and comprising the six houses at issue in these proceedings) being the land and premises at:
The loans provided by BOSI were for a period of twenty years and the loans were described as interest only.
(1) 52, Huntstown Drive, Blanchardstown, Dublin, 15 (Folio 26512F, County Dublin);
(2) 27, Willowood Lawn, Blanchardstown, Dublin, 15 (Folio 61206F, County Dublin);
(3) 55, Huntstown Wood, Blanchardstown, Dublin, 15 (Folio 3413F, County Dublin);
(4) 15, Ventry Drive, Cabra, Dublin 7 (Folio 53190L, County Dublin);
(5) 23, Dunsink Green, Finglas, Dublin 11 (Folio 13478L, County Dublin); and
(6) 1, Drumcliffe Drive, Cabra, Dublin, 7 (Folio 42656F, County Dublin).
On the 31st December, 2010, BOSI was the subject of a cross-border merger with Bank of Scotland Plc (“the Bank”) by virtue of which all the assets and liabilities of BOSI transferred to the Bank. The Appellants defaulted on the loan facilities granted to them by BOSI and failed to repay the sums due when demanded. On the 17th November, 2011, the second named respondent (“the Receiver”) was appointed by the Bank as receiver over the above mentioned properties of the Appellants. The third named respondent was appointed to sell the assets comprising of the six properties referred to above.
On the 28th August, 2012, the Appellants commenced High Court proceedings in which they sought, inter alia, to invalidate the appointment of the Receiver. The Respondents brought an application to dismiss the Appellants’ claim as frivolous, vexatious and bound to fail. The High Court (Gilligan J.) in a judgment delivered on 31st May, 2013 ( IEHC 371) dismissed the Appellants’ claim save for two issues, namely “the issues raised by the [Appellants] in relation to securitisation and alleged non-compliance with Central Bank codes”. Other heads of claim were struck out and the Appellants were directed to deliver an amended statement of claim. There were various amended statements of claim but for the purposes of these proceedings the relevant statement of claim is that amended pursuant to the order of Gilligan J. referred to above and dated the 21st January, 2014. At that stage the position was that three issues were permitted to go forward by Gilligan J. Those were the issues of securitisation and alleged non-compliance with Central Bank codes as provided for in the judgment of Gilligan J. of the 31st May, 2013. In addition, by his order made on the 21st January, 2014, the Appellants were granted liberty to amend their pleadings to include a pleading that were it not for an error in interest applied to the account – which error was corrected by the Bank and the amount overcharged refunded with interest – the Appellants would not have defaulted on their loans. Thus, at that time, there were three issues to be determined in the trial. Subsequently, in submissions delivered to the Respondents shortly before the commencement of the trial, the Appellants raised a further issue in relation to the effect of s. 64 and s. 90 of the Registration of Title Act 1964 (“the Act of 1964”). Initially, the Respondents objected to this issue being raised given that it was not permitted to be raised by Gilligan J. and because it had not been pleaded. However, when the matter came on for trial before McGovern J., the Respondents withdrew their objection and the matter was considered and dealt with by McGovern J. Accordingly, there were four issues before McGovern J. to be considered, namely:
Judgment of the High Court
It was contended by the Appellants that the Bank was not entitled to enforce loans that were securitised and in particular to enforce the Charge granted by the Appellants as security for such loans. Five of the Appellants’ loans were securitised. Two were removed from the pool of securitised loans on the 16th November, 2011 prior to the appointment of the Receiver and the remaining loans were purchased from the special purpose vehicle used for the securitisation of loans on the 5th November, 2013. The Appellants did not dispute that the loans were in default and the learned trial judge was satisfied that more than one “event of default” as defined in the terms and conditions applicable to the loans had taken place. He was also satisfied that the evidence established that the Appellants in accepting the loans signed documents in which they agreed to BOSI securitising the loans. McGovern J. concluded that the securitisation of the loans was properly effected and did not in any way alter the obligations of the Appellants so far as the repayment of the loans was concerned. He further concluded that following the cross-border merger the Bank stood in the position of BOSI. He concluded that as the legal title in the Charge of the properties is held by the Bank, the Bank was the proper body to appoint a receiver and could rely on the contractual power to do so which was formerly vested in BOSI. Accordingly he rejected the Appellants’ claim that the Bank was not entitled to appoint a receiver either by reason of the cross-border merger issue or the securitisation issue.
(1) the issue of securitisation;
(2) the alleged breach of the Central Bank Codes of Practice;
(3) the effect of s. 64 and s. 90 of the Act of 1964; and
(4) whether the error in interest calculation and consequent overcharging caused or contributed to the default of the Appellants on their loans.
As no issue was raised by the Appellants in their appeal in relation to the alleged breach of the Central Bank Codes of Practice and the error in interest calculation and consequent overcharging, it is not necessary to consider those issues further.
The final issue raised before the High Court concerned the interpretation of the Act of 1964. Two issues were raised by the Appellants in respect of the Act of 1964. It was contended by the Appellants that the Receiver was not appointed by the registered owner of the Charge, BOSI. BOSI was still registered as the owner of the Charge at the time of the appointment of the Receiver although the cross-border merger had taken place at that time resulting in the dissolution of BOSI. The argument was made that there had been no registration of the transfer of the rights and powers of BOSI to the Bank and that consequently the appointment of the Receiver was invalid. The Bank contended that the transfer was effected by operation of law in accordance with the Cross-Border Merger Directive (05/56/EC) which was given effect in this jurisdiction by the European Communities (Cross-Border) Mergers Regulations 2008 (S.I. 157 of 2008). The learned trial judge concluded that there was no requirement to execute an instrument of transfer in this case as the transfer occurred by operation of the law. He concluded (at para. 26):
The second issue raised concerned the approach of the Property Registration Authority which had issued an Office Notice 1/2011 stating that discharges by Bank of Scotland (the Bank) of BOSI charges will be acted upon as if the charge was registered by the Bank. The learned trial judge rejected the arguments of the Appellants that it was not permissible for the Bank to act on foot of the Charge as though it, the Bank, was the registered owner of the Charge. (Emphasis added)
“Section 90 of the Registration of Title Act 1964 is limited to circumstances where ‘by reason of an instrument of transfer’ a transfer is made. As there is no such instrument of transfer, s. 90 has no application.”
Accordingly the learned trial judge dismissed the claim brought by the Appellants on the issues before him.
Kavanagh and Bank of Scotland Plc v. McLaughlin & Anor.
It should be said at the outset that the issue of the cross-border merger raised in this appeal is identical to that considered by this Court (Clarke J., Laffoy J. and Dunne J.) in the case of Kavanagh and Bank of Scotland Plc v. McLaughlin & Anor. ( IESC 27) (Kavanagh v. McLaughlin) concerning, as it does, the same cross border merger. An argument had been made in that case about the treatment of security for the purpose of considering the effect of a cross-border merger. Clarke J. said in the course of his judgment at para. 6.20:
Clarke J. continued at para. 6.24 as follows:
“As previously indicated, a result of the proper interpretation of the Directive and the Irish Regulations which led to the conclusion that an extremely important part of the practical business of a lending institution (and, indeed other companies) was not to be transferred in the context of a cross-border merger would be highly surprising. Such an interpretation could only be reached if there was clear wording in the body of the relevant measures which could lead only to an interpretation which had that effect. On the contrary, an analysis of the meaning of the term ‘asset’ leads to the conclusion that it clearly includes security backing up loans, which loans themselves are part of the assets of the relevant lending institution. The security has the potential to have a significant effect on the value of those loans. It is, in that context, clearly an asset. The company is better off with the security than it would be if it had not security in place. For those reasons I am satisfied that it is absolutely clear that, amongst the assets which passed from BOSI to BOS on the cross-border merger coming into effect, was whatever security BOSI held in respect of loans which were transferred at that time.”
The decision of this Court in Kavanagh v. McLaughlin makes it clear that the cross-border merger had the effect of transferring the Charge held by BOSI to the Bank together with the underlying loan contracts. Thus, the cross-border merger issue cannot give rise to any basis for invalidating the appointment of the receiver in this case.
“While, for the reasons already analysed, there is no specific mention of security as a separate line in the balance sheet contained in the common draft terms, nonetheless the availability of security has an effect on that balance sheet by virtue of reducing the extent to which it is necessary to make provision against non-performing loans. The fact that the relevant loans are secured has, therefore, an effect on that valuation by potentially reducing the provision which needs to be made in respect of non-performing loans. Even if, therefore, it were necessary to interpret the term ‘assets’ by reference to the common draft terms, that would not exclude securities from being properly considered to be assets, for security affects the valuation of non-performing secured loans. In making that point, I should not be taken to accept, in any event, that it is necessarily appropriate to interpret the term ‘assets’ by reference to the common draft terms. The purpose of the inclusion of an assessment of the assets of a company in those terms is to provide a valuation rather than to list the assets themselves. There is nothing, therefore, in my view, to suggest that the common draft terms could alter the clear statutory language contained in the Directive which is to the effect that ‘all assets’ are to be transferred.”
A judgment was also delivered by Laffoy J. in Kavanagh v. McLaughlin dealing principally with issues arising in relation to the validity of the appointment of a receiver in circumstances where the Bank was not registered as owner of the relevant charge in that case following the transfer of assets from BOSI to the Bank effected by the cross-border merger which took place on the 31st December, 2010. The judgment of Laffoy J. in Kavanagh v. McLaughlin was relied on by the Appellants to argue that the non-registration of the Bank as owner of the Charge meant that the second named respondent’s appointment as Receiver was not valid and that the subsequent actions of the Receiver do not have the effect of depriving the Appellants of their ownership of the six properties.
Office Notice 1/2011 issued by the Property Registration Authority was considered in Kavanagh v McLaughlin. In the course of the hearing before the High Court in that case, evidence had been given by Mr. Murphy from the Property Registration Authority as to the Authority’s understanding of the consequences of the cross-border merger. He confirmed that the interim Chief Executive of the Property Registration Authority had written to the solicitors on record for the Receiver and the Bank in the following terms as set out at para. 13 of the judgment of Laffoy J:
It is confirmed that BOS is in the same position as a transferee in s. 64(4) of the Registration of Title Act in relation to BOSI mortgages and purchasers and receivers appointed by BOS pursuant to BOSI charges will be registered without any requirement for re-registration of BOS.”
“I confirm that as a consequence of the merger of [BOSI] with [BOS] and in accordance with Regulation 19(1)(g) and (h) all mortgages registered with PRA to which BOSI is a party should be construed as if BOS had been a party thereto and all references to BOSI should be construed as references to BOS.
It was contended by the McLaughlins in that case that the enforcement of the 2006 charge against the McLaughlins was not possible in the absence of the registration of BOS as the owner of the charge. In that context Laffoy J. considered a number of the provisions of the Act of 1964. Thus at para. 23 et seq. of the judgment she stated:
The Act of 2009 amended that provision and substituted –
The important point to be noted in relation to subs. (6) is that the power to enforce a charge is conferred on ‘the registered owner of the charge’. The consequences of a sale of registered land the subject of a charge by the registered owner of the charge are set out in subsequent provisions of s. 62 (subs. (9) and (10), in particular). Such consequences are dependent on the land being sold and transferred by the registered owner of the charge.
“23. The provisions of the Act of 1964 which govern charges are principally contained in ss. 62 to 67 inclusive. Some of those provisions have been amended by the Land and Conveyancing Law Reform Act 2009 (the Act of 2009), which was in force when the cross-border merger took place just before midnight on 31st December, 2010.
24. Section 62 deals with the creation and effect of a charge on registered land. Sub-section (1) provides that a registered owner may, subject to the provisions of the Act of 1964, charge the land with payment of money and it further provides that ‘the owner of the charge shall be registered as such’. Sub-section (2), which has been amended by the Act of 2009, deals with the form of the charge and also provides that ‘until the owner of the charge is registered as such, the instrument shall not confer on the owner of the charge any interest in land’. Sub-section (6) is the provision which is of most significance for present purposes. In its original form it provided:
‘On registration of the owner of a charge on land for the repayment of any principal sum of money …, the instrument of charge shall operate as a mortgage by deed within the meaning of the Conveyancing Acts, and the registered owner of the charge shall, for the purpose of enforcing his charge, have all the rights and powers of a mortgagee under a mortgage by deed, including the power to sell the estate or interest which is subject to the charge.’
Laffoy J. then went on to consider the validity of the receiver in that case and said at para. 27:
25. Section 64 deals with the transfer of a charge. Sub-section (1) empowers the registered owner of a charge to transfer the charge to another person as the owner thereof, and provides that the transferee shall be registered as the owner of the charge. Sub-section (2), which has been amended by the Act of 2009, stipulates the form of the transfer but also, consistent with s. 62(2), it provides that ‘until the transferee is registered as owner of the charge, that instrument shall not confer on the transferee any interest in the charge’.”
Laffoy J. referred in the course of that passage to Clause 9.1 of the 2006 Charge and earlier in the judgment she described the terms of Clause 9.1. Clause 9.1 is similar in its terms to Clause 8 of the Home Loan Mortgage Conditions attached to the Charge in this appeal. There is no difference in substance between Clause 9.1 referred to in the judgment of Laffoy J. in the case of Kavaghan v. McLaughlin and Clause 8 of the Charge, the subject of this appeal, as was conceded by Counsel for the Appellants, Mr. Hogan, S.C.
“27. Bearing in mind that the only issue which was determined in the High Court and, consequently, the only issue which arises on the appeal, in relation to enforcement of the securities given by the McLaughlins to BOSI which are now vested in BOS is whether BOS was entitled to appoint the Receiver, it is appropriate to consider that issue first by reference to the narrow argument advanced on behalf of BOS and the Receiver, namely, that BOS had a contractual entitlement to appoint a receiver independently of the provisions of the Act of 1964. Having regard to the terms of Clause 9.1 of the 2006 Charge, which has been quoted earlier, as a matter of contract between BOS, a successor in title of BOSI, and the McLaughlins, BOS unquestionably had power to appoint a receiver independently of the powers conferred by the Act of 1964. There is nothing in the Act of 1964 which limits or restricts the contractual power to appoint a receiver once it is exercisable. Accordingly, I am satisfied that the fact that BOS is not registered on the relevant folio as the owner of the 2006 Charge did not prevent it appointing the Receiver as Receiver over the registered property secured by that charge. To the extent that the fact that BOS was not registered as owner of the 2006 Charge forms the basis of the argument that the Receiver was not validly appointed, the McLaughlins fail in their appeal against the finding of the trial judge that their arguments in relation to non-registration of the charges failed to establish that the Receiver was not validly appointed. However, that conclusion goes no further than affirmation that the Receiver was validly appointed. It does not address how the Receiver might make title to the registered property the subject of the 2006 Charge, if he decided to sell that property, nor does it address whether BOS could effectively exercise its power of sale and give good title to a purchaser without being registered as owner of the charge.”
Mr. Hogan, S.C., on behalf of the Appellants, made it clear that the sole issue in the case so far as he was concerned related to the validity of the appointment of the Receiver. He relied heavily on the judgment of Laffoy J. in Kavanagh v. McLaughlin.
Insofar as the issue of securitisation was concerned it seems to me that Mr. Hogan on the appeal appeared to make a somewhat different point than had been made in the High Court. In the High Court, as recited in the judgment of McGovern J., (see para. 7) the Appellants had argued that the Bank was not entitled to enforce loans that were securitised, and in particular to enforce any mortgage or charge granted by the Appellants as security for such loans. McGovern J. explained the process by which the loans were securitised. On the 30th November, 2008, BOSI sold its legal and beneficial interest in a series of loans and their related security comprising the portfolio to a special purpose vehicle (SPV) pursuant to the terms of a mortgage sale agreement. It was found by McGovern J. that the sale by BOSI to the Issuer of the loans by way of securitisation was effected by way of equitable assignment. The completion of the transfer or conveyance of the loans and related security (and where appropriate, their registration) to the Issuer was deferred. Accordingly, it was found that the legal title to the loans and related security remained with BOSI until the completion of the transfers to the issuer and notification of the transfers being given to the borrower. McGovern J. observed that such transfers would only be completed and notifications given in the circumstances provided for in the mortgage sale agreement between BOSI and the special purpose Issuer. No such event had occurred and the assignment of each of the Appellants’ loans and related security was effected in equity only. It was noted that the security transaction was completed on the 5th November, 2013 when the Bank repurchased the special purpose vehicle’s interest in the securitised loans and relevant securities. Accordingly, McGovern J. concluded that the securitisation of the loans did not affect the entitlement of the Bank to appoint a Receiver.
Before this court, Counsel on behalf of the Appellants stated that insofar as the issue of securitisation was concerned the point being made was that for the Bank to be entitled to appoint a receiver, the transfers effected by the securitisation agreement should have been registered in accordance with the provisions of the Act of 1964 and even though the assignment of each of the Appellants’ loans and related security was effected in equity only, as equitable rights cannot be effected without registration in accordance with s. 68 of the Act of 1964, any rights in relation to those loans which had been securitised could not be effected without registration.
It should be borne in mind that the Appellants agreed by the terms of the Mortgage to the securitisation of the loans by BOSI, such securitisation having been described by McGovern J. at p. 7 of his judgment, quoting from Wellstead v Judge Michael White  IEHC 438, :
As is clear from the decision in Kavanagh v. McLaughlin, the non registration of the Bank as the owner of the charge following the cross border merger did not affect the contractual entitlement to appoint a receiver. I cannot see any reason to disagree with the approach taken by McGovern J. in the High Court or any basis upon which the non registration of the transfers effected by the securitisation agreement could have affected the contractual entitlement to appoint a receiver by reason of s.68 of the Act of 1964 or otherwise.
“It is typical of such securitisation schemes that the original lender will retain under the scheme, by agreement with the transferee, the obligation to enforce the security and account to the transferee in due course upon recovery from the mortgagors.”
As pointed out earlier, the Appellants have throughout these proceedings maintained that the appointment of the Receiver was invalid by reason of the cross-border merger, the securitisation of the loans and the non-registration of the Bank as the owner of the Charge in accordance with the provisions of the Act of 1964. As is clear from the judgments in Kavanagh v. McLaughlin, those arguments cannot succeed. The Bank, following the cross border merger was the entity entitled to appoint a receiver and that entitlement was not affected by the securitisation of the loans or the non-registration of the Bank as the owner of the Charge.
That has led to a somewhat different argument being put forward by Mr. Hogan in reliance on the judgment of Laffoy J. in Kavanagh v. McLaughlin. He pointed out that the six properties at issue have been sold by the Receiver, unlike the situation in Kavanagh v. McLaughlin, where no sale had taken place. Four of the properties were sold by August 2012 and the purchasers of those properties have been registered as owners in accordance with the practice of the Property Registration Authority outlined in the testimony of Mr. Murphy referred to in the judgment of Laffoy J. in Kavanagh v. McLaughlin. The purchasers of the last two properties are awaiting registration, pending further consideration of the judgment of Laffoy J.
It was argued on behalf of the Appellants that the sale of the properties could potentially create a liability on the part of the Appellants to the purchasers of the properties, given that the Receiver is the agent of the mortgagors in accordance with the terms of the Charge, in the event of any claim being made by the purchasers because of any deficiency in the title of the purchasers by virtue of the non-registration of the Bank as the owner of the charge. On that basis, it is contended that as such a potential liability was never contemplated by the parties to the Charge, the Charge is void or non est factum and consequently, the appointment of the Receiver is invalid.
The provisions of the Act of 1964 are central to the arguments of the Appellants. For that reason, it would be helpful to set out the relevant provisions of s. 62 of the Act of 1964 as originally enacted:
As Laffoy J. observed in para. 27 of her judgment in Kavanagh v. McLaughlin, the non-registration of the charges did not establish that the receiver was not validly appointed but that conclusion did not address how the receiver could make title to property if he decided to sell that property nor did it address whether the Bank in that case could effectively exercise its power of sale and give good title to a purchaser without being registered as owner of the charge. She then expressly addressed the issue as to whether or not the approach of the Property Registration Authority described by Mr. Murphy in his evidence in that case was correct. At para. 29 of her judgment she said:
“(6) On registration of the owner of a charge on land for the repayment of any principal sum of money with or without interest, the instrument of charge shall operate as a mortgage by deed within the meaning of the Conveyancing Acts, and the registered owner of the charge shall, for the purpose of enforcing his charge, have all the rights and powers of a mortgagee under a mortgage by deed, including the power to sell the estate or interest which is subject to the charge.
(9) If the registered owner of a charge on land sells the land in pursuance of the powers referred to in subsection (6), his transferee shall be registered as owner of the land, and thereupon the registration shall have the same effect as registration on a transfer for valuable consideration by a registered owner.
(10) When a transferee from the registered owner of the charge is registered, under subsection (9), as owner of the land, the charge and all estates, interests, burdens and entries puisne to the charge shall be discharged.
(11) When it is expressed in the instrument of charge that any person covenants for repayment of the principal sum charged, there shall be implied a covenant by that person with the registered owner for the time being of the charge to pay the sum charged and interest (if any) thereon at the time and rate specified in the instrument of charge, and also a covenant, if the sum or any part thereof is unpaid at the time so specified, to pay interest half-yearly at the specified rate on so much of the principal sum as for the time being remains unpaid.”
Laffoy J. continued at para. 30:
“The relevant provisions of s. 62 and s. 64 of the Act of 1964 which apply to the enforcement of a charge over registered land are mandatory. In s. 62(2), it is expressly provided that an instrument such as the 2006 Charge ‘shall not confer’ on the owner of the charge any interest in the land until the owner is registered as such. Similarly, in the case of the transfer of a charge, subs. (2) of s. 64 provides that the instrument of transfer ‘shall not confer’ on the transferee any interest in the charge until the transferee is registered as owner of the charge. While that provision is not of relevance in this case because the transfer took effect by operation of law, it is consistent with the crucial requirement for enforcement of a charge on registered land imposed by an Act of the Oireachtas. That requirement is contained in subs. (6) of s. 62 and it is that the owner of the charge be registered as such and, when registered, subs. (6) provides that the owner ‘shall, for the purpose of enforcing his charge, have all the rights and powers of a mortgagee’. Insofar as BOS has not applied to be substituted for BOSI on the relevant folios in accordance with para. (4) of Legal Office Notice No. 1/2011, it is BOSI which is registered on the relevant folios as the owner of the charges on registered land transferred to BOS with effect from just before midnight on 31st December, 2010. BOS is not registered as owner of the said charges and, accordingly, in my view, BOS does not meet the requirement of s. 62(6) and cannot exercise the powers conferred by that sub-section or avail of the protections afforded by subs. (9) and (10) of s. 62.”
“Further, in my view, neither the invocation of sub-paragraphs (g) and (h) of Regulation 19(1) of the Irish Regulations, nor the corresponding provisions of the U.K. Regulations nor any provision of the Directive, obviates the mandatory statutory requirement of registration as owner of the charge before the powers and protections afforded by s. 62 can be availed of.”
She contrasted the position with other legislation which related to transfers effected by operation of law such as those to be found in, for example, the National Asset Management Agency Act 2009 which provides in s. 107(1):
“However, the special formalities required by the law of this jurisdiction to enforce the security must be complied with in accordance with paragraph (2).”
In the case of cross-border merger regulations there is no similar provision. Accordingly Laffoy J. concluded at para. 35:
“Where a bank asset has been acquired by NAMA or a NAMA group entity –
(a) notwithstanding anything in any Act listed in subsection (2) or any other Act that provides for the registration of assets, security or details of them, NAMA or the NAMA group entity is not required to become registered as owner of any security that is part of the bank asset,
(b) notwithstanding sections 62 and 64 of the Registration of Title Act 1964, NAMA or the NAMA group entity has, in relation to any such charge, the powers of a mortgagee under a mortgage by deed, even though NAMA or the NAMA group entity is not registered as owner of any such charge,
(c) NAMA or the NAMA group entity has the powers and rights conferred on the registered owner of a charge by the Registration of Title Act 1964.”
What then are the consequences of the non-registration of the Bank as the owner of the charge for the exercise of the power of sale? As pointed out above, four of the properties have been sold and the transferees of those properties have been registered as owners. Further, the proceeds of sale have been returned to the Bank by the Receiver. Despite the fact that those transferees have been registered as owners of the properties, can it be said that the charge has been discharged given that the transferee is not a transferee from the registered owner in accordance with s.62(10)?
“Having regard to the foregoing, I am satisfied that, absent any specific statutory provision relieving BOS from the mandatory obligation of becoming registered as owner of a charge in respect of which it wishes to exercise any of the powers conferred, or to avail of any of the protections afforded, by s. 62 of the Act of 1964, it must become registered as the owner of the relevant charge on the relevant folio, if it wishes to exercise the statutory powers conferred by the Act of 1964.”
Both sides in the course of their submissions made reference to the decision in the case of In re Strong  I.R. 382 (In re Strong) in which the Supreme Court considered s. 35(2) of the Local Registration of Title (Ireland) Act, 1891 (‘the Act of 1891’) which corresponds with s. 62(2) of the Act of 1964. In that case a purchaser for value paid over the entire purchase money and the transfer was delivered. Subsequently, a judgment mortgage was registered against the vendor’s interest before registration of the transfer for value. O’Byrne J. delivered the judgment on behalf of the majority in that case stating (at p. 407):
Reliance was placed in the course of the judgment in that case on the decision in Devoy v. Hanlon  I.R. 246 in which Murnaghan J., at page 262 of his judgment, observed in relation to s. 44, subs. (2) of the Act of 1891 as follows:
“It was contended by Mr. Roe and Mr. Newett that the effect of s. 35 is to keep the entire estate and interest in the lands in the transferor until the registration of the transfer. Sub-sect. 2 of that section provides that: ‘Until the transferee is registered as owner of the land transferred that instrument [i.e., the transfer] shall not confer on the transferee any estate in the lands.’
In my opinion the foregoing provision deals only with the effect of the transfer and operates so as to prevent any estate or interest being conveyed by the transfer until registration. It would, in my opinion, be going beyond the provisions of the section and would be inconsistent with s. 44, sub-s. 2, to hold that no unregistered right can be created in the registered land. It is not the transfer which is relied upon by the appellant but the contract for purchase, coupled with the payment of the purchase money.”
He went on to observe at page 263:
“This section, therefore, makes it clear that the registered owner can by an unregistered disposition create an estate in registered land which will be valid as against the owner of the land.”
Mr. Hogan in his arguments had relied on the minority judgment of Meredith J. in In re Strong and the statement made by him at page 400 that:
“The Act therefore provides for the recognition of rights, including estates, which do not appear on the register. Such rights are valid against the registered owner creating them, against a voluntary transferee from the registered owner, and against everyone claiming through a voluntary transferee where the person so claiming has not given valuable consideration.”
Thus Mr. Hogan contended that the Bank was in the same position as the purchaser in In re Strong. The comment of Meredith J. was made in the course of a minority judgment in that case and as such I fail to see how it can avail the Appellants, having regard to the contents of the majority judgments in that case. It is clear from those authorities that the non-registration of the Bank as owner of the Charge does not prevent a subsequent purchaser of property from the Receiver appointed by the Bank from obtaining an estate or interest which will be valid against the owner of the Charge. Obviously, there would be a problem in having their transfer registered by virtue of the fact that the owner of the charge was not registered, as identified by Laffoy J.
“The neglect or failure of the purchaser to do what, under the statute, was necessary to effect a transfer of the legal estate did not preserve any equity in him.”
Given that the Receiver is stated in the Charge to be the agent of the mortgagors, it was argued on behalf of the Appellants that the inability of the transferees to register their transfers could give rise to a potential liability on the part of the Appellants in relation to the title given. This was the basis on which it was contended that the Charge was “non est factum” as such a potential liability was never contemplated by the parties. The basis of a plea of non est factum is described by McDermott, Contract Law, (Dublin, 2001), at paragraph 12.153 as follows:
Of course, the fundamental point is that the person relying on a defence of non est factum must be in a position to show that the document they signed is fundamentally different in substance or in kind to that which they thought they were signing. That clearly is not the case here. The fact that there is the possibility of a potential liability on the part of the Appellants, however remote that may be, does not in any way give rise to the contention that the Charge is non est factum in circumstances where the Appellants quite clearly must have known and understood the nature of the document that they were signing. It was never suggested otherwise when the matter was heard in the High Court. In any event, such a defence simply does not arise in the circumstances of this case.
“In Tedcastle McCormack & Company Ltd. v. McCrystal Morris J. held that a person seeking to raise the defence of ‘non est factum’ must prove:
(i) that there was a radical or fundamental difference between what he signed and what he thought he was signing;
(ii) that the mistake was as to the general character of the document as opposed to the legal effect; and
(iii) that there was a lack of negligence, i.e. that he took all reasonable precautions in the circumstances to find out what the document was.”
During the course of argument, Mr. Gallagher, S.C., on behalf of the Bank, conceded that there was, as he put it, “a blot” on the title of the transferees of the properties sold by the Receiver. Nonetheless he contended that this was of no benefit to the Appellants. I agree. If transferees of the four properties already registered have a problem with their title, and they may or may not, their recourse will be to the Receiver and the Bank. Nevertheless, given that they have been registered as owners of the properties concerned and bearing in mind the conclusiveness of the Register, (See s.31 of the Act of 1964), it is difficult to imagine that the transferees could have any problem with their title. Consequently, there should be no problem for the Appellants in this regard.
It is also important to bear in mind that it is still possible at this stage for the Bank to be registered as owner of the Charge in order to ensure that the two remaining transferees of the properties can have their transfers registered enabling them to be registered as owners. As a matter of practicality I do not see how those transferees can be registered as owners having regard to the judgment of Laffoy J. unless and until the Bank is registered as owner of the Charge. This should be done forthwith. I would expect that in the event that any of the four transferees who have already been registered as owners with the Property Registration Authority have any difficulties with their title, however unlikely that may be, the Bank would take the necessary steps to perfect the transferees’ title.
I find it impossible to see how the possible potential difficulty in conferring good title on the transferees can in any way invalidate the appointment of the Receiver or the validity of the Charge. Quite simply the problem that has now arisen by virtue of the non-registration of the Charge is one that affects the Bank and potential transferees but not the Appellants. Looking back once more at the provisions of s. 62(9) of the Act of 1964 it provides:
The Bank is not the registered owner of the Charge on the land. Even though the Bank can sell its interest in the property and any such sale will be binding as between the Bank and the purchaser, it is not possible for a transferee of the property to be registered as owner of the property until such time as the Bank is registered as owner of the Charge. The provisions of s. 62(10) provide that once the transferee is registered, the Charge shall be discharged and clearly that cannot occur until such time as the owner of the Charge selling the land is registered as owner of the Charge, thereby enabling the transferee to be registered but the non registration of the Bank does not vitiate or invalidate the appointment of the Receiver. It simply creates a problem for the transferees of the properties concerned in perfecting their title. In the event that any transferee sought a remedy directly against the Appellants arising out of the problem caused by the non-registration of the Bank, it is inconceivable that the Appellants would not have a remedy against the Bank for any potential liability that they could have. To suggest that the remote possibility of a transferee claiming that the Appellants have any liability for the “blot” on their title such that the charge is rendered void or “non est factum” is simply not credible. The remote possibility that such liability could be asserted does not in my view have any bearing whatsoever on the validity of the appointment of the Receiver.
“If the registered owner of a charge on land sells the land in pursuance of the powers referred to in subssection (6), his transferee shall be registered as owner of the land and thereupon the registration shall have the same effect as registration on a transfer for valuable consideration by a registered owner.”
In all the circumstances of this case, I would dismiss the appeal.