The High Court has recently upheld a challenge to the appointment of a receiver on the basis that Danske Bank could not prove that it had as a matter of certainty sent the pre appointment demand to the borrower. Mark Woodcock and Susie Higgins look at this decision and the very serious consequences it has for banks engaged in multiple receiver appointments.
Normal method of service of demandsIn this case, the bank had sent a pre appointment demand to the borrower by ordinary pre-paid post which was in accordance with the provisions of the facility letter and the mortgage in place between the bank and the borrower. A standard notice provision for the service of demands in a mortgage might read as follows: “A demand may be effectually made by notice in writing either left at or sent by post to either of the mortgagor’s usual or last know place of abode or business, or left for the mortgagor on any part of the mortgaged property and that every such demand sent by post shall be deemed to have been made on the day the demand was posted.” The service of demands by banks is in contrast to the service of legal documents such as a Summons which must be by hand. It is the accepted practice that demands for payment, in accordance with the majority of facility letters and mortgaged deeds, may be sent by ordinary pre-paid post and delivery is assumed to be effected that day or the following day.
The facts of the Danske CaseIn order to maintain the case that the pre appointment demand had been sent, the bank procured a number of affidavits from a number of officers and employees of the bank to support the contention that the letter was indeed sent. However, despite the various affidavits and exhibited internal emails and instructions suggesting that the pre appointment demand letter had been sent, there was no actual evidence available to the court to prove as a matter of certainty that it had been. The court suggested that acceptable evidence could be in the form of a certificate of posting from the postal authorities or in the form of a certificate or affidavit from the person who actually posted the demand.
Conclusion and AdviceThere is a considerable volume of jurisprudence on the requirement for a deed of appointment of a receiver to be undertaken in strict compliance with the terms of the security documentation. This has developed because of the very serious implications of a receiver’s appointment over a borrower’s assets. Unfortunately, there does not appear to be any authority dealing specifically with the standard of proof required to demonstrate that a pre appointment demand was actually sent. The recent judgment concluded that it is not necessary for a bank to send a pre appointment demand by registered post, or for a bank to prove that the demand has been received by the borrower. However, the court did conclude that the bank must be in a position to prove as a matter of certainty that the pre appointment demand was sent. Therefore the most prudent course of action is for a bank to ensure that any pre appointment demands are sent by certified post and that the postage certificate is retained on the file so that it can be exhibited in any affidavit of service required if a borrower should challenge the appointment. If you have any queries in relation to this e alert please do not hesitate to contact:
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