A High Court judge has refused an order allowing Irish Life & Permanent repossess a family home in Co Louth on grounds including the bank's failure to comply with the Financial Regulator's code of conduct requiring banks to engage with borrowers over mortgage arrears.
Malcolm and Susan Duff, faced losing their home at The Square, Collon, Co Louth, next month but Mr Justice Gerard Hogan granted their appeal against a Circuit Court order permitting ILP secure possession on February 28th next.
Mr Justice Hogan said his judgment may have implications for "general relationships" between mortgage lenders and borrowers, particularly those with ILP mortgages. He told the sides before the case he had a mortgage with ILP but no objection was raised to his hearing it.
A central issue in the case was the couple's claim ILP failed to comply with the Central Bank Code of Conduct by not engaging with them about their capacity to repay mortgage arrears. The Duffs took out a 25 year mortgage with ILP in 2003 for €258,000 related to registered and unregistered lands. Their home was on registered land and the garden was on unregistered land.
They were required to make monthly repayments of €1,300 and had arrears of €63,000 in February 2012 when the Circuit Court made a repossession order but deferred that to February 2013.
Mr Duff, a self-employed building contractor whose business suffered heavily after 2007, claimed ILP never offered the couple alternative repayment arrangements, a "mortgage holiday", deferred payments, interest only payments or recapitalisation.
The Duffs also objected to being classified by ILP as "non co-operating borrowers".
Mr Justice Hogan found the case was governed by the 2009 Code of which Clause 6 stated a lender must not seek repossession until "every reasonable effort" has been made to agree an alternative repayment schedule. Where a borrower was deliberately not engaging with the lender, or other circumstances so justified, the lender could seek repossession, Clause 6 also stated.
Mr Justice Hogan noted Mr Duff's sworn statement that he had offered ILP interest only repayments in 2009 but was rebuffed. ILP had not complied with Clause 6 prior to seeking repossession as it could not say every reasonable effort was made to agree an alternative repayment schedule in discussions between the Duffs and ILP in 2009, he ruled.
It could not be said the Duffs were non co-operating borrowers in 2009, whatever about subsequently, he found. They seemed to have been "frank and forthcoming" with ILP about facing acute financial difficulties and sought "some way out of the dreadful financial circumstances into which they, like so many others, had been plunged".
The judge also ruled, as a result of the repeal of Section 62.7 of the Registration of Title Act 1964 with effect from December 1st 2009, the court no longer has jurisdiction to make an order for possession of the registered land.
Because ILP had not, by December 1st 2009, either demanded repayment of the entire sum or shown the entire sum had become properly due, the statutory power to allow a bank possession by means of court order was no longer exercisable, the judge ruled.
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[Section 62.7 provided, when repayment of the "principal" money secured by a charge has become due, the registered owner of the charge may apply to the courts for a summary possession order. While Section 62.7 was replaced by Section 97.2 of the Conveyancing Act 2009, the High Court previously found that only applied to mortgages created after December 1st 2009}
The judge also rejected arguments by ILP he could make a possession order on the basis of a contractual agreement between the sides.
While going on to find the court has jurisdiction to grant possession of the unregistered land, and the arrears in this case would normally justify that, he refused such an order due to ILP's failure to comply with the 2009 Code.
Nothing in his judgment prevented ILP taking further steps as it considered appropriate to realise its security, he stressed.
The bank could independently sue for an order deeming it had a valid charge over the house and ask the court to exercise its inherent power of sale, he noted earlier.
The constitutionality of Section 8 of the Conveyancing Act 2009, insofar as it repealed lenders' rights to seek possession orders under Section 62.7, "may well be questioned" but no such constitutional challenge was brought in this case, he also noted.
