End of the lien: Supreme Court rules that the Registration of Deeds and Title Act 2006 has brought a complete end to the system of relying on the deposit of a land certificate for liens in respect of registered land

The Supreme Court ruled earlier this month that Promontoria (Oyster) DAC (“Promontoria”), cannot rely on the deposit by a land owner of land certificates with a bank to give it a lien, or claim, over registered land in county Sligo. The five judge Supreme Court made the unanimous ruling in the case of Promontoria (Oyster) DAC v Gerard Hannon[1] on 4 June last. The appellant, Mr Hannon, appealed an earlier Court of Appeal decision which found that Promontoria had the ben... The Supreme Court ruled earlier this month that Promontoria (Oyster) DAC (“Promontoria”), cannot rely on the deposit by a land owner of land certificates with a bank to give it a lien, or claim, over registered land in county Sligo. The five judge Supreme Court made the unanimous ruling in the case of Promontoria (Oyster) DAC v Gerard Hannon[1] on 4 June last. The appellant, Mr Hannon, appealed an earlier Court of Appeal decision which found that Promontoria had the benefit of a lien by deposit of land certificates by Mr Hannon in respect of his land. Background Mr Hannon deposited land certificates for five folios of land in county Sligo with Ulster Bank in 2006 as security for present and future indebtedness. In 2010, Ulster Bank informed Mr Hannon that it intended to register a lien on each of the folios pursuant to s. 73(3)[2] of the Registration of Deeds and Title Act 2006 (the “2006 Act”). Ulster Bank subsequently registered the liens in the Property Registration Authority (“PRA”). Ulster Bank then brought proceedings by way of special summons in the High Court to enforce its lien over the lands. Mr Hannon sought to set aside the PRA’s decision to register the liens in the first place. Mr Hannon argued that under the 2006 Act land certificates would cease to have any force or effect on the expiration of three years after the commencement of the relevant section on 1 January 2007. Ulster Bank contended that the legislation does not affect the validity of any security held by a bank pursuant to an equitable deposit but merely has a potential effect on the priority between a bank holding an equitable mortgage and other persons who may have charges registered over the land. The High Court ruled in favour of Ulster Bank, as did the Court of Appeal and granted Orders recognising the bank’s position as the beneficiary of the lien over the lands. In December 2016, Ulster Bank sold the loan as part of a loan sale agreement to Promontoria and thereafter Promontoria was substituted as the plaintiff/respondent in the proceedings. Mr Hannon was granted leave to appeal to the Supreme Court on foot of a question of law which arose in the following terms:- Has s.73 of the 2006 Act abolished equitable mortgages by deposit of land certificates or other title deeds with a view to securing borrowings and what is the effect of that legislation in terms of the ranking of priorities where several charges are created over land including by the deposit of land certificates or title deeds? Supreme Court Ruling In the introductory paragraphs of his judgment, Chief Justice Frank Clarke set out that s. 81(5) of the Local Registration of Title (Ireland) Act 1891 recognised that a lien could be created on registered land by the deposit of a land certificate. He also explained that a similar provision was contained in s. 105(5) of the Registration of Title Act 1964 (the “1964 Act”), and commented that the “concept of the creation of a lien over registered land has a long history and even more ancient antecedents.” He went on to say that s.73 of the 2006 Act abolished land certificates and certificates of charge and provided that the PRA would cease to issue such certificates under the 1964 Act.  The Chief Justice further stated that although s. 73 of the 2006 Act, by abolishing land certificates, had the effect of removing the rationale for the lien by deposit of land certificate regime, there was no suggestion that any provisions of the 2006 Act had any effect on the creation or continuance of equitable mortgages by deposit of title deeds in relation to unregistered land. In giving judgment, Mr Justice Clarke noted that the legislative intent of the provisions of the 2006 Act was to terminate the system of lien by deposit of a land certificate in respect of registered land at the expiry of the three year transition period however mortgagees, having the benefit of such liens, had the same period within which to register their interest as a lien on the land. On that basis, he was satisfied that Mr Hannon’s appeal must be allowed and that it must be determined that Promontoria did not have the benefit of a lien by deposit over the lands. In making his judgment, Mr Justice Clarke emphasised that nothing in his judgment should be taken as expressing any view as to whether there may or may not be any other means open to Promontoria to pursue a claim against Mr. Hannon based on having security over the relevant lands, and that this was a matter to be determined in future proceedings which Promontoria may be advised it could bring. Ms Justice Elizabeth Dunne delivered a concurring judgment in which she also allowed the appeal. She said that s. 73 of the 2006 Act abolished the creation of an equitable mortgage by the deposit of a land certificate or other title deeds. She further said that this did not mean that “an equitable deposit of title deeds in respect of unregistered land cannot occur but in time as more and more unregistered land becomes registered, the number of such equitable mortgages will decrease.” The three other members of the Supreme Court who heard the case unanimously agreed that Promontoria did not retain the benefit of a lien by deposit because of changes to the law effected by s. 73 of the 2006 Act. Prior to the enactment of the 2006 Act, holders of liens by deposit had a potentially valuable property right which could operate as security for any monies owing and might, subject to the value of the land, the amount of the debt and the potential presence of other charges over the land which had priority, result in a person being able to recover a debt which would have been, in practice, irrecoverable in the absence of the lien concerned. This case raises an issue of general public importance given the number of equitable mortgages created by the deposit of deeds and the requirement by the 2006 Act that lenders register any lien created in that manner. Please click here for the full text of the judgment of Mr Justice Clarke, Chief Justice. [1] [2019] IESC 49 [2] This section came into effect on 1 January 2007 and provided for a three year transition period up to 31 December 2009.