Court of Appeal judgment signals return to business as usual for receiver sales

The decision of the Court of Appeal in Bank of Ireland Mortgage Bank v Hade1 has brought some welcome clarity to legal requirements for the enforcement of security in respect of non-housing loans.  This was a Court of Appeal decision following an appeal of a decision of the High Court earlier in the year.

Although it was accepted that the relevant loans were not strictly housing loans, the High Court had held that the Bank agreed to treat them as such and so the receiver had acted unlawfully in taking possession of the properties without the necessary court orders applying to housing loans.  Exemplary damages of €550,000 were awarded against the receiver for that unlawful action.

Among the issues to be determined by the Court of Appeal were (1) whether the borrowers had acted as consumers when taking out the loan facilities, (2) whether the mortgages could be treated as housing loan mortgages, requiring the receiver to have sought a court order for possession and (3) whether the award of exemplary damages to Mr Hade was correct.

The Court of Appeal held that the High Court was correct in determining that the borrowers had not acted as consumers when entering the loan facilities, because the monies were advanced to refinance and buy properties which were intended to be let for a profit, but it disagreed with the High Court’s finding that the Bank had agreed to treat the mortgages as housing loan mortgages.  Although general conditions incorporated into the mortgages were subject to the statutory provisions governing housing loans, the Court of Appeal held that this did not mean that the Bank had agreed to treat the loans as housing loans.  In addition, the Court of Appeal held that the legislation requiring a court order for possession for housing loan mortgages did not, in fact, refer to receivers.

The appeal of the receiver to the award of exemplary damages against him was allowed.  It was held that he had acted lawfully in possessing the properties without a court order.

The decision of the High Court had suggested some uncertainty in the settled legal requirements for receiver sales of non-housing loan mortgages.  As this would have knock-on requirements for Land Registry registration requirements, the Land Registry had paused any applications for registration of title bought from a receiver pending the outcome of an appeal of the High Court decision.  In response to this, the Law Society of Ireland’s Conveyancing Committee issued a practice note on 12 May 2023 on the decision (here) urging, that “until an appeal is determined, the Conveyancing Committee recommends that practitioners acting in the sale of a property by a receiver should consider carefully before entering into a contract whether Sections 97 and 100 of the 2009 Act have application, and whether necessary court orders should be obtained.”

While the Land Registry has not published any update to its practice since the judgment of the Court of Appeal, we expect the Court’s decision to signal a return to normal business when it comes to receiver sales of non-housing loan mortgages.

  1. [2023] IECA 293, 7 December 2023 (here)

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.