BAILII is celebrating 24 years of free online access to the law! Would you consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it will have a significant impact on BAILII's ability to continue providing free access to the law.
Thank you very much for your support!
 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
Irish Law Reform Commission Papers and Reports |
||
|
You are here: BAILII >> Databases >> Irish Law Reform Commission Papers and Reports >> Judgment Mortgages, Consultation Paper on (LRC CP 30-2004) [2004] IELRC CP30(2) (March 2004) URL: http://www.bailii.org/ie/other/IELRC/2004/CP30(2).html Cite as: [2004] IELRC CP30(2) |
||
[New search] [Help]
START OF PAGE 7
CHAPTER 2 THE CURRENT LAW
A The Statutory Framework
provide a mechanism whereby a plaintiff who obtains judgment can
register the judgment as a mortgage against the defendant's land in
respect of the debt due on foot of the judgment.[1] In summary, the
procedure to be followed is as follows. When judgment is entered,[2]
the judgment creditor swears an affidavit setting out, inter alia, the
terms of the judgment and reciting that the judgment debtor is the
owner of particular lands. Once the affidavit is sworn the judgment is
converted into a mortgage by filing the affidavit in both the office of
the particular court where judgment was obtained, and the Land
Registry or Registry of Deeds (as appropriate). The Registrar of
Deeds, or the Registrar of Title in the Land Registry, will thereupon
send both parties a note confirming registration of the judgment
mortgage.
1850 Act. When judgment is validly registered as a judgment
mortgage, registration has the effect of mortgage by deed over the
judgment debtor's beneficial interest at the time of registration of
lands set out in the affidavit. Accordingly such a judgment creditor
has special powers in relation to the property by virtue of section 19
START OF PAGE 8
of the Conveyancing Act 1881.[3] These include a power to appoint a
receiver, and a power of sale. It is doubtful if the judgment creditor
can sell out of court.[4] The judgment mortgagee may well encounter
difficulties in finding a third party buyer prepared to purchase in the
absence of a well charging order issued by the court. The judgment
creditor's usual remedy, accordingly, is to seek a well charging order
by institution of a mortgage suit.
conveyance made with fraudulent intent after judgment is void as
against the judgment creditor.
mortgage is not effective if bankruptcy occurs within three months
following registration of the judgment mortgage. As regards
companies, pursuant to section 284(2) of the Companies Act 1963 a
judgment mortgage is not effective if winding up occurs within three
months of registration.
commentators that section 4 of the 1850 Act requires that a judgment
mortgage must be 'renewed' every 5 years otherwise it becomes
unenforceable against third parties. This is not so. Section 4 provides
that a purchaser of property is only affected by notice of any
judgment affecting the land within 5 years of the date of judgment
unless the judgment is renewed. The drafting of section 4 is opaque
but in the view of the Commission it does not go so far as to require
renewal of judgment mortgages every 5 years.[5] In any event, the
Commission does not recommend that judgment mortgages be subject
to a requirement that they be renewed and would propose that any
new legislation should clarify this point.
lodgement by the judgment debtor of a document signed by the
judgment creditor showing that the debt has been paid (a satisfaction
piece).[6] This is lodged in the appropriate court office. As regards
START OF PAGE 9
unregistered land a satisfaction piece lodged with the Registrar of
Deeds operates as a reconveyance of the land and the legal or
equitable estate vests in the person in whom it would have vested had
no registration of a judgment mortgage been effected. The
cancellation of a judgment mortgage as a burden on registered land is
effected by producing to the Land Registry a certificate of satisfaction
of the judgment or a requisition by the judgment creditor for its
discharge.[7]
automatic immediate effect until the judgment creditor decides either
(a) to force a sale as mortgagee pursuant to a mortgage suit, or (b) to
claim entitlement to proceeds upon a sale by the judgment debtor. To
this extent the judgment creditor is, broadly speaking, in the same
position as an equitable mortgagee by way of deposit of title deeds to
the extent that the judgment creditor has an estate in land which
entitles him or her to payment through a court enforced sale.[8] The
jurisdiction in which to seek a well charging order is either in the
High Court or the Circuit Court as appropriate. The District Court
has no jurisdiction to hear such applications: it would appear that a
well charging order with regard to a judgment mortgage relating to a
District Court decree should be sought in the Circuit Court.
B The Requirements of the Acts in Detail
is entered up in the High Court, the Circuit Court,[9] or the District
Court[10]:
"… and the [judgment creditor] shall know or believe that
the [judgment debtor] … is seised or possessed at Law or in
Equity of any Lands, Tenements, or Hereditaments, of any
Nature or Tenure, or has any disposing power over any such
START OF PAGE 10
Lands, Tenements, or Hereditaments which he may without
the Assent of any other person exercise for his own benefit
… it shall be lawful for the [judgment creditor] … to make
and file in [the relevant court] an Affidavit stating the Name
or Title of the Cause or Matter, and the Court in which
[judgment] has been entered up, obtained, or made and the
Date of such [judgment] and the usual or last known Place
of Abode and the Title, Trade or Profession of the Plaintiff
… and of the Defendant or person whose estate is intended
to be affected by the Registration … of such Affidavit, and
the Amount of the Debt, Damages, Costs or Monies
recovered or ordered to be paid by such [judgment] and
stating that, to the best of the Knowledge and Belief of the
Deponent, the [judgment creditor] … is at the Time of the
swearing of such Affidavit so seised or possessed, or has
such a disposing Power as aforesaid, of or over such Lands,
Tenements, or Hereditaments, and such Affidavit shall
specify the County and Lands to which the Affidavit relates
are situate, and where such Lands lie in Two or more
Counties or Baronies, or Parishes or Streets, or partly in
One Barony, Parish or Street and partly in another, the same
shall be distinctly stated in such Affidavit; and it shall be
lawful for the [judgment creditor] making such Affidavit to
register same in the Office for registering Deeds,
Conveyances and Wills in Ireland, by depositing in such
Office an Office Copy of such Affidavit …."
registration of a judgment mortgage in respect of registered land is
made in the Land Registry. In addition, the county and folio number
should be described. Registered land is sufficiently described "by
reference to the number of the folio of the register and the county in
which the land is situate".
requires modernisation. The drafting of the Act is obviously
archaic.[11] For example, the requirement that the judgment mortgage
identify the judgment debtor's interest in unregistered land by
reference to its 'parish' or 'barony' is one that is often difficult to
apply. Any descriptive error can be fatal to registration. In Re
START OF PAGE 11
Murphy and McCormack[12] failure to mention the 'barony' invalidated
the registration.
appears to merit a realignment of legislative policy. This is in respect
of the overall treatment of the judgment creditor. In many different
respects, the judgment creditor is not treated in the same manner as a
'normal' mortgagee – eg a financial institution lending funds to a
borrower who has secured his or her obligations by way of a
mortgage or charge. The precise reason for this special treatment of
the judgment mortgagee is that the judgment mortgage is not created
by the voluntary act of the judgment debtor; quite the opposite, in
fact; it is created by the judgment creditor.
recognised by section 68(3) of the Registration of Title Act 1964 and
by the decision of Carroll J in Containercare (Ireland) Ltd v
Wycherly.[13] Of course, in most if not all cases, registration of the
judgment mortgage is the act of the judgment creditor and does not
involve active participation by (still less the consent of) the judgment
debtor. However, the Commission doubts whether it is a fair
assessment of the commercial reality of the situation to say that the
judgment creditor gives no 'value'. A judgment debtor who has
permitted affairs to progress to judgment may well have deprived the
judgment creditor of use of the funds constituted in the award during
the period between the date of judgment and ultimate satisfaction of
the judgment in full (should that ever occur). Furthermore, in debt
recovery cases the judgment may well have deprived the judgment
creditor of the use of funds prior to the date of the award. There is,
therefore, an obvious, substantial and prolonged prejudice suffered by
the judgment creditor. To say, therefore, that the judgment creditor
gives no value, accordingly, does not convey the full picture. To that
end, therefore, the Commission recommends that (save in two
respects)[14] the law be amended so that a judgment mortgage be
START OF PAGE 12
deemed to have been given for value. Notwithstanding, the
Commission having considered this point has concluded that the
priority status of a judgment mortgage should remain unchanged ie
(inter alia) a judgment mortgage remains subject to prior equities
affecting the property.
C Effect of Failure to Comply with Section 6
(1) Description of Parties
6 of the [1850 Act] has always been the great salvation of judgment
debtors".[15] One of the remarkable aspects of the Acts in operation is
that a judgment mortgage affidavit which breached any requirement
of section 6 of the 1850 Act was void[16] notwithstanding that the 1850
Act did not spell out the consequences of breach, and notwithstanding
that in many if not most of the cases no prejudice whatsoever was
caused by the breach concerned.
widow and at the time that the said judgment was obtained and
entered up was a married woman" failed to comply with the Act
because at the time judgment was obtained the defendant was a
farmer.[17] In the same vein, the erroneous description of a farmer as a
mechanic invalidated an affidavit.[18]
(2) Description of Lands
Act 1964 provides that it is sufficient to identify the lands by
reference to the county and folio number. However, considerable
difficulties have arisen where the title to the land is unregistered.
START OF PAGE 13
parish will invalidate the affidavit and registration;[19] so also will
reference to the wrong parish.[20] Similarly, a failure to state the
barony,[21] or stating the wrong barony[22] invalidates the affidavit and
registration.
for the purposes of the Act has given rise to 'some difficulty'.[23] This
can be a significant issue because if the lands are not situated in a
'town', it has been held that it is sufficient to state the county and
barony.[24]
under Irish Law. In Thorp v Browne[25] it was held by the House of
Lords that a purposive approach should be adopted in interpreting
section 6. The purpose of the Act is identification of the parties (in
particular the debtor) and the land sought to be encumbered, so that
proper searches can be effected in association with conveyancing
transactions. Such an approach has received a definite,[26] if
inconsistent, endorsement in the Irish courts. Accordingly a failure to
describe accurately the judgment debtor's place of abode would not
be fatal. A significant relaxation of the unduly strict approach
evidenced in the earlier cases emerged from the judgment of Costello
J (as he then was), and the Supreme Court, in Irish Bank of
Commerce v O'Hara.[27]
START OF PAGE 14
lands (in Dún Laoghaire) were situate. Notwithstanding this failure,
the lands affected by the judgment mortgage were identified beyond
doubt. Costello J adopted a purposive interpretation of section 6 of
the Act. The section was designed so as to identify the lands in
question. Costello J held that any lack of compliance with section 6
which did not result in a failure to identify the lands in question
should not automatically invalidate the judgment mortgage. The
Supreme Court agreed.
sense approach to the construction of section 6. He said as follows:
"In construing a statute and in particular the effect, if any, of
non-compliance with express wording, there are a number
of accepted canons of construction. An unstated one is that
common sense should not be abandoned.
If the words are imperative, non-compliance is fatal; if the
words are directory, non-compliance is not fatal. In
determining the nature of the provision there is no rule of
general application save to seek to identify the purpose of
the legislation. What is the purpose here? Is it other than to
secure the judgment creditor's position both as to the date
and amount of his charge if the property is clearly and
adequately identified … [I]s the legitimate charge to be
defeated by the omission of a detail which few may know
and with which even fewer may be concerned? I think
not."[28]
Chancery judge, Lynch J, in Re Smith and Ross:[29]
"No case has yet ruled that in construing these affidavits, I
must lay aside all the promptings of common sense."
had not proved that as of 1850 Dún Laoghaire was a 'town', there was
accordingly no requirement to identify the lands by reference to the
'parish' in which they were located.
START OF PAGE 15
there appears still to be areas of uncertainty which, in the view of the
Commission, are unacceptable.
Doyle,[30] the law requires to be changed so that any description of
unregistered land sufficient to identify it with reasonable certainty
may be used in the affidavit. Whether one has an intellectual
preference for the purposive approach or an approach which requires
strict compliance with section 6 of the Act, the learned authors of
Annual Review of Irish Law 1989 commenting on the High Court's
decision in O'Hara are surely correct in saying that "the better answer
may perhaps be to streamline and improve the relevance of statutory
requirements rather than to remove the real advantages which
specificity offers".[31] Either way, the need for legislative change
appears inevitable.
O'Hara indicates a retreat from the unduly technical approach
adopted by the courts in previous decisions.[33] It may, therefore, be
thought that the decision in O'Hara (which concerns section 6 of the
1850 Act) points to the conclusion that no change in the law is
required in this regard.
conclusion. First, the decision of the High Court in AIB v Griffin[34]
which concerned a different aspect of section 6 (namely the
description of the judgment debtor), indicates that there may
nonetheless be a latent culture of absolutely strict compliance which
START OF PAGE 16
has not been entirely displaced by the O'Hara decision. In Griffin an
innocuous misdescription of the occupation of the judgment debtor
invalidated registration of the judgment mortgage. Secondly, O'Hara
is potentially capable of being narrowly interpreted as applying only
to place names and not to the judgment debtor's occupation. Thirdly,
the 1850 Act is evidently drafted in the most archaic language, and
uses concepts (baronies and parishes) which are not necessarily
helpful nowadays in identifying properties.
changed so that any description of unregistered land sufficient to
identify it with reasonable certainty may be used in a judgment
mortgage affidavit.
D Statement of Amount of Decree and Costs
perfected order of the court, there would seem to be little difficulty in
stating the amount of the decree in the judgment mortgage affidavit.
Where judgment has been obtained in the District Court the amount
of costs must not exceed the amount of the decree.[35]
mis-stated, this will invalidate the judgment mortgage. So in Phillips
v Kilkelly[36] an affidavit which incorrectly stated that the costs order
included some £5-13 in witness expenses was held to have
invalidated registration of the judgment mortgage.
wish to register a judgment mortgage quickly. This is so as to
preserve priority over other – later – encumbrances. It is also sensible
to do so because if the judgment debtor becomes bankrupt, or, being a
company is wound up, within three months of registration of the
judgment mortgage, the registration will have no effect in the
judgment debtor's bankruptcy/liquidation. So it is sensible for the
judgment creditor to 'start the clock running' as soon as possible.
may not, as a practical matter, be immediately ascertained. In
practice, (save in the District Court where scale costs apply) costs are
START OF PAGE 17
only ascertainable where there is agreement reached as to the amount
of costs recoverable, or where they are taxed in default of agreement.
Accordingly, where costs are not agreed by the defendant, they must
be taxed – a process which at least in the High Court (and including
appeals from the Taxing Master's decision) can take some
considerable time. In the meantime, it appears unjust to force the
judgment creditor to waive an entitlement to have the claim for costs
secured merely so as to preserve his or her priority with regard to the
actual damages awarded.
to register a second judgment mortgage when the amount of costs is
known.[37] However, there would appear to be some procedural
infirmity associated with this course of action. It has been held that
there cannot be two registrations against the same lands in respect of
the same judgment.[38] Aside from this, the sum secured pursuant to
the later judgment mortgage will of necessity cede priority to any
charges created or registered between the plaintiff's first and second
judgment mortgages. This seems arbitrary.
should be a statutory requirement at all to state the precise amount of
costs. It appears sensible for the application to register a judgment
mortgage merely to indicate whether costs were granted (or the extent
to which this is so) and for proof of the precise amount to be attested
to before such date as the judgment mortgage is to be enforced.
consideration be given as to whether there is a need for a statutory
requirement to state the precise amount of costs awarded on the
judgment mortgage affidavit.
E Interest
to have the amount of interest ascertained as at the date of swearing
the affidavit, or else abandon the claim for interest. This too appears
arbitrary.
START OF PAGE 18
required to state the precise amount of interest at the outset. The
decree may attract interest because the creditor has contracted with
the judgment debtor that the debt does not merge with the judgment
and accordingly the contractual rate continues to be applied.
Alternatively, the court may award interest either pursuant to the
Courts Act 1981, or pursuant to its equitable jurisdiction. It will be
impossible for an outsider to calculate with any accuracy the amount
of interest involved where the rate is a private contractual matter
between the judgment creditor and the judgment debtor. This will
also be the case where the court awards interest pursuant to its
equitable jurisdiction, for, unlike the jurisdiction under the Courts
Act, the court is free to set its own rate – which may be a floating rate
(eg x% above the European Interbank Rate). There should, of course,
be certainty with regard to Courts Act interest because it is statutorily
fixed at a certain rate per annum and applied on a simple (not
compound) basis.
creditor to state the amount of its decree and interest thereon is to
inform outsiders of the amount secured by the judgment mortgage,
this purpose is defeated where the debt does not merge with the
judgment or the court, in the exercise of its equitable jurisdiction, sets
a floating rate of interest.
registers the charge pursuant to section 99 of the Companies Act 1963
(as amended), whilst the chargee can, if it wishes, state the precise
amount covered by the charge, there is no requirement to do so. It is
sufficient, for example, to state that the charge secures 'all sums and
interest thereon' or the like. Equally, a mortgage of a ship or a share
in a ship pursuant the Mercantile Marine Act 1955[39] need not
explicitly state the precise amount advanced where the advance is
made on current account.
is arguably not necessarily to inform an outsider of the amount of the
judgment, but rather it is to inform outsiders that the judgment
debtor's property is encumbered. A sensible third party intending to
START OF PAGE 19
purchase the land will not normally proceed until steps have been
taken to remove the encumbrance from the title. The outsider is,
accordingly, not so much concerned with the amount of the
judgment, but rather with its existence. Accordingly an explicit
statutory requirement that the judgment creditor state the amount of
the judgment, and a fortiori interest and costs, appears to be of little
practical benefit given the primary purpose of the procedure.
the primary purpose of registration of a judgment mortgage is not to
inform outsiders of the amount of the judgment but rather to inform
them that the debtor's property is encumbered, there is little practical
benefit in having an explicit statutory requirement that the judgment
creditor state the amount of the judgment and in particular to state
the interest and costs.
F Priority of Judgment Mortgages
mortgages can be summarised as follows.
that the judgment mortgage registered in the Registry of Deeds takes
effect subject to all equities or interests affecting the land at the date
of registration. Accordingly, a prior unregistered deed still has
priority.[40]
regarded as a voluntary transaction, by virtue of section 71(4) of the
Registration of Title Act 1964 it is subject to the following:
(i) all registered burdens on the folio;
(ii) all section 72 burdens (burdens which affect registered
land without registration);
(iii) all unregistered rights affecting the judgment creditor's
interests prior to registration of the affidavit.
40 See Wylie Irish Land Law (3
rd ed Butterworths 1997) paragraph 13.181.
START OF PAGE 20
(1) Tempany v Hynes
addressed by the Supreme Court in Tempany v Hynes.[41] In that case a
majority of the Supreme Court took the view that a judgment
mortgage registered against an owner of registered land who had
entered into a contract to sell the land, attached to the beneficial
interest retained by the judgment debtor for so long as the purchaser
had not paid the full purchase price. When the purchaser paid the
balance on completion, thereby becoming the full owner on
registration of the transfer to him or her, the purchaser took title
subject to the judgment mortgage. Henchy J, however, dissented. He
took the view that the entire beneficial interest passed to the purchaser
by virtue of the contract regardless of whether the purchase price was
paid, so that the judgment mortgage did not affect the purchaser's
interest at any stage. The judgment mortgage attached only to the
vendor's/judgment debtor's interest. As this title disappears on
completion, so did the judgment mortgage. Accordingly, the new
owner took free of the judgment mortgage. The Commission intends
that the general issues will be reviewed as part of a separate project
concerned with land law and conveyancing overall, including pre-
1922 property legislation.
alter the essential rules governing the priority of a judgment
mortgagee. Accordingly, it is proposed that the existing rules should
prevail: a judgment mortgagee over unregistered land should be
subject to all equities affecting the land as at the date of registration
and subject to all prior unregistered deeds. As regards registered
land, the judgment mortgagee will be subject to existing registered
burdens and burdens affecting the judgment debtor's interest without
registration, together with all unregistered rights subject to which the
judgment debtor held the interest at the time of registration of the
affidavit.
(2) Retaining the Current Law
a statutory provision be enacted so as to reverse the effect of the
Supreme Court decision in Tempany v Hynes. On balance the
Commission takes the view that it would not be appropriate to follow
START OF PAGE 21
this course of action. The decision in Tempany v Hynes raises many
general issues of importance in conveyancing law and practice and
the reform of the law relating to judgment mortgages may be too
narrow a basis upon which the full ramifications of the decision
should be addressed. The Commission intends to review all aspects of
Tempany v Hynes in the context of its project for the reform of
conveyancing law which is currently under way.
lands, some of which are registered under the Registration of Title
Acts, and some of which are not, separate affidavits are necessary, one
for the Registry of Deeds and one for the Land Registry.[42] This is
clearly a requirement consequent on the dual system for land
registration and as an operational matter continues to be necessary.
The Commission considers that it is not possible or desirable to
attempt to propose legal change dealing with this precise issue.
relating to judgment mortgages is too narrow a basis upon which to
attempt to address the decision in Tempany v Hynes. All aspects of
Tempany v Hynes will be the subject of general review in the context
of the Commission's project for the reform of conveyancing law
currently under way.
G Limitation Periods
which a judgment creditor must move to enforce its judgment
mortgage, brief reference should be made to section 4 of the 1850
Act. This provides that if a judgment is to affect subsequent
purchasers of the land to which the judgment relates, it must be
renewed every five years. However the Commission takes the view
that this provision does not require the judgment creditor to renew the
judgment mortgage every five years. The Commission sees no
convincing argument for introducing a requirement to renew a
judgment mortgage. A similar requirement exists under the Bills of
Sale legislation[43] to renew registered bills of sale. Such requirements
appear to operate as an unnecessary impediment for creditors.
START OF PAGE 22
should clarify that a judgment creditor need not renew the judgment
mortgage every five years.
period for bringing an action seeking a court sale is 12 years from the
date when the action accrues – subject to possible extension where
there has been acknowledgement or part payment. In the case of a
judgment mortgage this means 12 years from the date judgment is
marked – not the date when the judgment mortgage affidavit was
registered.
the date when an action accrues as referred to in section 32 of the
Statute of Limitations, it should be clarified by legislation that in
relation to judgment mortgages this means from the date judgment is
marked, not the date when the judgment mortgage affidavit was
registered.
can be cancelled from the Land Registry pursuant to rule 111 of the
Land Registry Rules, which deals with the cancellation of burdens
generally, and rule 122, which deals with the cancellation of judgment
mortgages in two specific instances, on lodgment of an affidavit in
Form 71B. The Land Registry will usually serve notice on the
judgment creditor and where no valid objections are made the
judgment mortgage is cancelled.[44] The Commission notes that no
corresponding procedure appears to be available in the Registry of
Deeds and suggests that any amending legislation provide for such a
procedure. Given that affidavits are generally not registrable such
legislation would have to prescribe for the registration of the affidavit
by the judgment debtor. In addition the Registry of Deeds would
have to be given the power to serve notice and adjudicate the claim.
H Judgment Mortgages and Liquor Licences
judgment mortgage is or includes premises in respect of which a
START OF PAGE 23
liquor licence has been issued. It has been held that such a licence is
personalty – notwithstanding that it attaches, in one sense, to the
premises.[45] However the licence is not capable of alienation
separately from the premises.[46] If this is so then it would seem to
follow that the judgment mortgage does not affect the licence. It has
also been held that a judgment mortgage with regard to licensed
premises does not operate to assign the licence, nor to bind the
judgment debtor to endorse or hand over the licence to a purchaser
upon sale by the court.[47] Indeed, the licence is not an interest which
is capable of being affected by the judgment mortgage procedure.[48]
respect of which it is granted is clearly inconsistent with the position
with regard to normal mortgages, where the licence is treated as
inseparable from the licensed premises.[49] It might, however, be
argued in this context that as the licence is issued by an organ of the
State, it is not an item of property in the hands of the licensee which
has an inherent value for the purposes of sale or security.[50] In other
words, while the licensee may have certain procedural rights by way
of legitimate expectation that the licence will only be revoked in
accordance with law, he or she has no proprietary right as such in the
licence. This appears to be at least implicitly recognised in some of
the cases: the licensee cannot transfer the licence to other premises,
START OF PAGE 24
and equally a transfer of the premises does not and cannot constitute a
transfer also of the licence.[51]
quotas with regard to agricultural land.[52]
any need for reform of this particular aspect of the law relating to
judgment mortgages.
I Priority of Judgment Mortgages in Company
Liquidation
liquidation of a corporate judgment debtor if liquidation occurs before
the judgment creditor has completed the execution process. Section
291 of the Companies Act 1963, provides as follows:
"(1) … where a creditor has issued execution against the …
lands of a company … and the company is subsequently
wound up, he shall not be entitled to retain the benefit of the
execution … against the liquidator in the winding up of the
company unless he has completed the execution … before
the commencement of the winding up
(5) For the purposes of this section … an execution against
land shall be deemed to be completed by seizure and, in the
case of an equitable interest, by the appointment of a
receiver."
England and Wales[53] was considered by the Court of Appeal in Re
Overseas Aviation Engineering (GB) Ltd.[54] In that case a majority of
the Court of Appeal[55] held that since the judgment creditor had not
START OF PAGE 25
completed execution by seizing the land and appointing a receiver
over the equitable interest, the judgment creditor had no rights under
its judgment mortgage in the liquidation of the company.[56]
of the Law Commission of England and Wales.[57] For reasons which
are more complex than those which require to be addressed in this
Paper, the Law Commission recommended a change in the law. This
was subsequently effected.[58]
number of undesirable effects.
of a judgment mortgagee when compared to a normal mortgagee.
The latter can stand outside the fray of a liquidation or bankruptcy
and rely on his or her security to recover the debt – whether or not the
judgment creditor has completed execution in the sense contemplated
by section 291 of the Companies Act 1963. A judgment creditor is
treated as an unsecured creditor unless he or she has completed
execution within the meaning of the section.
for a judgment mortgage to achieve expeditiously complete execution
as contemplated by the provisions of the Companies Act 1963. A
judgment creditor will seldom, in practice, 'seize' the lands: as noted
above it is the well established practice for the judgment creditor to
seek a well charging order and an order for sale. Neither of these
procedures necessarily involves 'seizure' of the property in the sense
of occupation (adverse to the judgment debtor) without ownership.
Furthermore, appointing a receiver over the equitable interest in the
property will serve no useful purpose where the property does not
generate income. Accordingly, in order to comply with these
provisions, the judgment mortgagee will have to go to the trouble and
expense of appointing a receiver for no purpose other than to comply
START OF PAGE 26
with a seemingly unnecessary strict statutory precondition to the
enjoyment of the status of secured creditor.
the equitable interest represents a trap for the uninitiated that serves
no ascertainable policy objective.
be changed to provide for the repeal (to the extent necessary) of
section 291 of the Companies Act 1963 and replacement with a
provision that a judgment mortgage registered against an interest in
land held by a company should enjoy priority as if it were a
consensually created security.
individuals, it is recommended that section 50 of the Bankruptcy Act
1988 be amended so as to preserve the priority of a judgment
mortgage in bankruptcy. Section 50 provides that where a leasehold
interest in land has been seized pursuant to an execution order, the
sheriff, county registrar or execution creditor must retain the proceeds
for 21 days. If the judgment debtor becomes bankrupt within that
period the money must be paid over to the Official Assignee. In order
to provide for the integrity of judgment mortgages contemplated by
the amending legislation, the Commission recommends that this
provision should not apply to a judgment creditor who has duly
registered his or her judgment as a mortgage.
of the Bankruptcy Act 1988 be amended so as to preserve the priority
of a judgment mortgage in bankruptcy and that this provision should
not apply to a judgment creditor who has duly registered his or her
judgment as a mortgage.
J Judgment Mortgages and 'Risk Periods': Liquidation
and Bankruptcy
section 51 of the Bankruptcy Act 1988, if the judgment debtor is
wound up (being a company), or is adjudicated bankrupt (being an
individual) within three months of the registration of a judgment
mortgage, the judgment mortgagee has no priority in the winding
START OF PAGE 27
up/bankruptcy.[59] No change is recommended to these provisions.
They accord with the general policy in individual and corporate
bankruptcy law that securities created close to the insolvency of the
subject should enjoy no priority at the expense of the general body of
unsecured creditors.
K Judgment Mortgages and Registration Under the
Companies Act 1963
Companies Act 1963 requires the judgment creditor to send two
copies of the affidavit within three weeks to the company. Within
three days of receipt of the affidavit the judgment debtor company
must furnish a copy to the Registrar of Companies. The Companies
Act 1963 does not specify the consequences of failure by the
judgment creditor to comply with section 102.[60]
failure by the judgment creditor to comply with section 102 stands in
stark contrast to the failure to register a charge created by the
company under section 99 of the 1963 Act within the required period.
In such circumstances the charge is void as against a liquidator or
other creditor of the company. Expert opinion differs as to whether or
not the absence of this consequence is justified. Courtney[61] considers
that there is no difficulty in this regard because the judgment
mortgage is not created by the company. In contrast, Keane[62]
contends that the same consequences should ensue for failure to
comply with section 102 as ensue when there is a failure to comply
with section 99.
Courtney's contention, it is considered that on balance it might be
START OF PAGE 28
preferable if a failure to comply with section 102 resulted in the
judgment mortgage being void against a liquidator or creditor of the
judgment debtor company. This is because the purpose of the scheme
for the registration of charges in Part IV of the Companies Act 1963
(containing sections 99 and 102) is to provide a publicly available
register of company charges to enable debtors to gain some (albeit
imperfect) insight into the extent to which a company with which they
are dealing, or about to deal, is indebted to third parties. To the extent
that such a public register does not also include details of judgment
mortgages registered against the company, there would appear to be a
clear deficiency in the effectiveness of that register.
contention should be implemented so that the same consequences
flow from a failure by the judgment creditor to comply with section
102. This would render the judgment mortgage void as against a
liquidator and other creditors of the company.
mortgage should be subject to the same registration requirements as
applied to the other forms of security set out in section 99 of the
Companies Act 1963. Accordingly failure by the judgment creditor to
register particulars of the charge within 21 days of its creation should
render the judgment mortgage void as against a liquidator and other
creditors of the company.
L Judgment Mortgages Over Equitable Interests
beneficial interest of a beneficiary under a trust for sale of land could
not be made the subject of a charging order – the then English
equivalent of a judgment mortgage. The thrust of the decision is that
such an interest is not an interest in land at all, rather it is an interest
in the proceeds of sale of land. We are not aware of this decision
having been considered in Ireland. However, for the avoidance of
doubt the Commission recommends that it be clarified that such an
interest is capable of being made the subject of a judgment mortgage.
It would appear that the interest is so closely connected with the very
interest in property itself that any purported distinction between the
START OF PAGE 29
asset and its proceeds is not a valid basis to defeat the interests of the
judgment creditor.[64]
clarified that the beneficial interest of a beneficiary under a trust for
sale of land is capable of being made the subject of a judgment
mortgage.
M Judgment Mortgages and Proceeds of Sale
registered and sold, the judgment creditor holds the proceeds of sale
for the account of prior encumbrancers. There appears to be no
significant difficulty with the operation of this principle in practice.
However, the Commission considers that the interests of prior
encumbrancers could be protected through the mechanism of a
statutory hearing to consider ordering sale (the equivalent of the wellcharging
application currently applicable) and a provision stating
explicitly that the judgment creditor holds the proceeds of sale to the
account of all encumbrancers with a prior interest in the property as at
the date of sale.
consideration be given to protecting the interests of prior
encumbrancers through the mechanism of a statutory hearing to
consider ordering sale and a provision stating explicitly that the
judgment creditor holds the proceeds of sale to the account of all
encumbrancers with a prior interest in the property as at the date of
sale.
Note 1 See, generally, Wylie Irish Land Law (3rd ed Butterworths 1997)
paragraphs 13.166-13.182; Wylie Conveyancing Law (Butterworths 1999)
at 431 and following. [Back] Note 2 In this regard, the judgment mortgage process can, it would appear, be
availed of notwithstanding that the court imposes a stay on execution:
Barnett v Bardley (1890) 26 LR Ir 209. The better practice currently is to
request that the plaintiff be permitted to register a judgment mortgage
notwithstanding a general stay on execution. In paragraph 4.39 below the
Commission provisionally recommends that it be confirmed in any
legislative reform that a general stay on execution does not prohibit a
judgment creditor registering a judgment mortgage. [Back] Note 3 44 & 45 Vict c 41. [Back] Note 4 Eighteenth Interim Report of the Committee on Court Practice and
Procedure, Execution of Money Judgments, Orders and Decrees (The
Stationery Office 1972) at 7. [Back] Note 5 See paragraphs 2.50 and 4.26 below. [Back] Note 6 See paragraph 4.32 below. [Back] Note 7 Rule 122 of theLand Registry Rules 1972. [Back] Note 8 Doyle “Judgment Mortgages” Bar Council Continuing Legal Education
Programme 17 October 1994 at 1. [Back] Note 9 By virtue of theCircuit Court (Registration of Judgments) Act 1937. [Back] Note 10 Sections 24 and 25 of theCourts Act 1981: although no provision was
made for the enforcement of such judgment mortgages. See Doyle
“Judgment Mortgages” Bar Council Continuing Legal Education
Programme 17 October 1994 at 2. [Back] Note 11 Described by Kenny J as “perplexing” in Re Flannery [1971] IR 10, 12. [Back] Note 14 First, that the law should not be amended so that a judgment mortgage is
deemed to be a transaction whose validity depends on the consent of a nonowning
spouse where the property is a family home for the purposes of the
Family Home Protection Act 1976. See paragraph 4.22 below.
Accordingly, in our respectful opinion the effect of Carroll J’s decision in Containercare v Wycherly requires no legislative intervention. Secondly, the Commission considers that the law with regard to the priority of a judgment mortgage should not be changed. See paragraph 4.23 below.
[Back] Note 15 Doyle “Judgment Mortgages” Bar Council Continuing Legal Education
Programme 17 October 1994 at 13. [Back] Note 16 Re Murphy & McCormack [1930] IR 322. [Back] Note 17 Allied Irish Banks plc v Griffin [1992] 2 IR 70: see commentary by Doyle
“Judgment mortgages – a false dawn” (1993) Law Society Gazette 70. [Back] Note 18 Dardis and Dunnes Seeds Ltd v Hickey High Court (Kenny J) 11 July
1974. [Back] Note 19 Re Ulster Banking Co’s Estate (1986) IR 3 Eq 264. [Back] Note 20 Re Flannery [1971] IR 10. Reference must be to the official parish as listed
in the census and not to unofficial, religious parishes. [Back] Note 21 Re Murphy’s and McCormack’s Contract [1930] IR 322. [Back] Note 22 Re Earl of Limerick’s Estate (1861) 7 Ir Jur (ns) 85. [Back] Note 23 Wylie Irish Land Law (3rd ed Butterworths 1997) paragraph 13.174. [Back] Note 24 Dardis and Dunnes Seeds v Hickey High Court (Kenny J) 11 July 1974. [Back] Note 25 (1867) LR 2 HL 220. [Back] Note 26 Re Smith and Ross (1860) 11 Ir Ch Rep 397; Re FitzGerald’s Estate
(1861) 11 Ir Ch Rep 356; Credit Finance Ltd v Grace High Court (Kenny
J) 29 May 1972; Supreme Court 9 June 1972. [Back] Note 27 High Court 10 May 1989. See the excellent discussion by Doyle “Merits
versus technicalities: The Judgment Mortgage (Ireland) Acts” (1993) Irish
Law Times 52 [Back] Note 28 Irish Bank of Commerce v O’Hara Supreme Court 7 April 1992 per
McCarthy J at 2 [Back] Note 29 (1860) 11 Ir Ch Rep 397 at 400. [Back] Note 30 (1993) Irish Law Times at 56. [Back] Note 31 Byrne and Binchy Annual Review of Irish Law 1989 (Round Hall 1990) at
312. See also Byrne and Binchy Annual Review of Irish Law 1992 (Round
Hall 1992) at 410-12. [Back] Note 32 Doyle “Judgment Mortgages” Bar Council Continuing Legal Education
Programme 17 October 1994 at 14. [Back] Note 33 But see his article “Judgment Mortgages – a false dawn” (1993) Law
Society Gazette 297, where such optimism is tempered in the light of the
decision of the High Court in Allied Irish Banks plc v Griffin [1992] 2 IR
70. Doyle does not go so far as to advocate that the O’Hara decision
means that legislative change is unnecessary. [Back] Note 34 [1992] 2 IR 70. [Back] Note 35 Sections 24 and 25 of the Courts Act 1981. [Back] Note 36 High Court (Budd J) 11 July 1966. [Back] Note 37 Eighteenth Interim Report of the Committee on Court Practice and
Procedure, Execution of Money Judgments, Orders and Decrees (The
Stationery Office 1972) at 8. [Back] Note 38 Re Field’s Estate (1877) IR 11 Eq 456. [Back] Note 39 Breslin Banking Law in the Republic of Ireland (Gill & Macmillan 1998) Chapter 37, Part 2. [Back] Note 40 See Wylie Irish Land Law (3rd ed Butterworths 1997) paragraph 13.181. [Back] Note 42 Fitzgerald Land Registry Practice (2nd ed Round Hall Press 1995) at 125. [Back] Note 43 Bills of Sale (Ireland) Act 1879 (42 & 43 Vict c 50) as amended by Bills of Sale (Ireland) Act Amendment Act 1883 (46 & 47 Vict c 60). The requirement to renew a bill of sale is contained in section 11 of the 1879
Act.
[Back] Note 44 See Fitzgerald, Land Registry Practice (2nd ed Round Hall 1995) at 133-4. [Back] Note 45 Brennan v Dorney (1887) LR (Ir) 353. [Back] Note 46 O’Connor Irish Justice of the Peace Vol 2 (2nd ed Ponsonby 1925) at 688.
However, as Cassidy remarks, and as often happens in practice, “[w]here
the holder of a licence wishes to dispose of it for consideration, he may
consent to the extinguishment of that licence upon the grant of another
licence after a successful application under the licensing code. As a matter
of law, his licence will become extinguished, but only upon the grant of the
new licence.” Cassidy The Licensing Acts (Round Hall 2001) paragraph 2-
10. [Back] Note 47 The Irish Industrial Benefit Building Society v O’Brien [1941] IR 1. [Back] Note 48 Ibid at 11 per Meredith J. [Back] Note 49 Re Sherry-Brennan [1979] ILRM 113, per Hamilton J at 117: see also Cassidy The Licensing Acts (Round Hall 2001) paragraph 2-15. [Back] Note 50 Hempenstall v Minister for the Environment [1994] 2 IR 20. [Back] Note 51 Ibid. See Cassidy The Licensing Acts (Round Hall 2001) paragraphs 2-9 and 2-10. [Back] Note 52 Lawlor v Minister for Agriculture [1988] ILRM 400; O’Brien v Ireland [1991] 2 IR; Swift v Dairywise Farms Ltd [2003] 2 All ER 304. [Back] Note 53 Section 325 of theCompanies Act 1948, as amended by 36(4) of theAdministration of Justice Act 1956. [Back] Note 54 [1963] 1 Ch 24. [Back] Note 55 Denning MR and Harman LJ; Russell LJ dissenting. [Back] Note 56 The court unanimously confirmed that registration of a judgment mortgage
by a judgment creditor did not require to be registered under the then
equivalent of section 99 of theCompanies Act 1963. [Back] Note 57 The Law Commission for England and Wales Charging Orders (No 74)
Cmnd 6412. [Back] Note 58 Charging Orders Act 1979. [Back] Note 59 In the context of companies, see Re Shannonside Holdings Ltd High Court
(Costello J) 10 May 1993. [Back] Note 60 Compare with section 99 of the Companies Act 1963 which provide that
failure to register a charge or mortgage created by a company within the
prescribed period renders the charge void against a liquidator and creditors
of the company. [Back] Note 61 Courtney The Law of Private Companies (2nd ed Butterworths 2002) paragraph 21.071. [Back] Note 62 Keane Company Law (3rd ed Butterworths 2000) paragraph 21.38. [Back] Note 64 This raises issues similar to those considered by the Privy Council in Agnew v Commissioner of Inland Revenue [2001] 2 AC 710, now followed by the English High Court in National Westminister Bank plc v Spectrum Plus Ltd [2004] EWHC 9 (Ch), in relation to the nature of a fixed charge over book debts of a company. In that case Lord Millett considered that in the circumstances of that case the asset was effectively indivisible from its proceeds. [Back]
