Recent consideration of borrower protections in possession proceedings

The case of Grant & Anor. V. The County Registrar from the County of Laois & Anor. [2019] IEHC 185, concerned an application brought by borrowers, by way of judicial review, to quash an order for possession of a family home granted with the consent of the borrowers by the Laois County Registrar.

The High Court found that the County Registrar did not at the time of granting the Order for Possession consider the fairness or otherwise of the terms of the contract between the borrower and the lender. The Court found that County Registrars should, of their own initiative, conduct an unfair terms assessment.

The High Court considered Irish law in the context of EU law together with the requirements of fairness. The Court held that the mechanisms available in this jurisdiction, including the Code of Conduct on Mortgage Arrears (the CCMA) prior to the issuance of proceedings and the ability of borrowers to canvass their case before the Court, provided sufficient protection to borrowers in compliance with the overall requirement of fairness between the parties. 

Facts

The Applicants were defaulting borrowers in respect of a loan facility secured by a mortgage over their family home. The mortgage provided that the borrowers' family home was at risk if they did not keep up repayment and that the lender may seek possession of the property in the event of a default. As required, under the CCMA, the lender explored the possibility of an alternative payment mechanism and subsequently issued proceedings seeking an Order for Possession of the borrowers' property.

The borrowers consented to an Order for Possession in respect of their family home. During the course of the proceedings both borrowers were declared bankrupt. The Official Assignee in Bankruptcy confirmed they had no objection to the application for a Possession Order. At the hearing, no basis upon which to send the matter to the Judge's list was presented. The Order was granted with a stay for a period of nine months.

After the Order was granted the Applicants sought brought judicial review proceedings against the manner in which the County Registrar granted the Order for Possession. A central argument to the application was that the County Registrar did not at the time of the making of the Order assess the fairness of the terms of the mortgage contract between the parties as was required by EU Law.

Decision

The High Court concluded the County Registrar had not reviewed whether the terms of the loan agreement or mortgage deed were unfair. Notwithstanding that conclusion, and considering the borrowers did not raise any defence, the Court refused to quash the Order for Possession.

The Court considered various arguments advanced in opposition to the application. The Court determined that there was a material non-disclosure on the application for leave to apply for judicial review, although it did not rely on that determination to refuse the application given that the issue in the proceedings concerned obligations imposed by EU law. The Court was further of the view that whether terms of a contract fall within the scope of EU law depend on the particular facts of the agreement. It did not find clauses in relation to interest, the creation of a charge and the right to seek possession of the charged property to be unfair in the context of the requirements of EU law.

Commentary

The decision in Grant does not represent a novel departure from the position already adopted by the Courts in this jurisdiction. The relatively weak position of the borrower as compared to that of the lender is a factor considered by the Court when determining Orders for Possession. The Grant decision analyses that position and the protections available to borrowers and concludes that there is sufficient protection for the borrower.

The decision also serves as a reminder that the Court will, notwithstanding the fact that it may not be raised as a defence, consider the relative fairness of the terms of the contract in dispute in addition to considerations of whether the CCMA has been complied with.