A recent High Court decision on the proofs needed for the enforcement of an equitable mortgage demonstrates that evidence as to the creation of an equitable mortgage must be provided.
The case in the High Court arose from a loan agreement entered into by the defendant (Kieran McKenna) with Ulster Bank in 2005. The security for the loan was the equitable deposit of the original land certificate for the defendant's property in Monaghan. A lien was registered as a burden in favour of Ulster Bank in respect of this property in 2009. It was subsequently updated to reflect the interest of the plaintiff (Promontoria (Oyster) DAC) who acquired the interest in the lien from Ulster Bank.
The plaintiff was seeking to enforce the equitable mortgage on the basis that the principal monies under the loan were due and owing. They brought an application to the High Court looking for a well charging order and order for sale in respect of the property.
High Court Decision
The High Court (Simon J) set out the context in which the lien was created. The Registration of Deeds and Title Act 2006 set out that land certificates are no longer issued and therefore abolished the possibility of the creation of a lien by way of the deposit of a land certificate. The Land and Conveyancing Law Reform Act 2009 also set out that it is no longer possible to create an equitable mortgage or lien in registered land by the deposit of a land certificate. Section 73 of the 2006 Act however set out a three-year transitional period in which the holders of existing security by way of deposit of a land certificate could register the security as a lien. Ulster Bank registered their security in the defendant's property in this transitional period.
The High Court set out that necessary proofs for an application to enforce a lien registered on a property are that the plaintiff must establish the creation of the equitable mortgage by the deposit of a land certificate, that the lien has been registered as a burden and that the principal monies under the lien are due and owing. It was not sufficient for the plaintiff to provide evidence in respect of the registration of the lien over the property. The High Court referred to the registration of the lien as merely an administrative function. The Property Registration Authority does not decide if monies have been well charged against the property. That is a matter for the courts.
The registered lien acts as a statutory registration of an earlier event, the creation of the equitable mortgage by the deposit of the land certificate. To enforce the equitable mortgage, information of the date upon which the equitable mortgage was first created has to be provided. This is important as it determines the priority of the mortgage against any and all other competing mortgages.
The plaintiff had not provided any evidence regarding the date of creation of the equitable mortgage and so the High Court refused to grant them any of the applications they were seeking.
The lesson from this case for companies seeking to enforce equitable mortgages is that evidence as to the date of the creation of the equitable mortgage must be gathered and presented in court alongside the other proofs necessary for enforcement.