Bank of Ireland Mortgage Bank U.C. v Hade [2023] IECA 293

The background to this case stems from a High Court judgment in 2022, where exemplary damages were awarded against a receiver in the sum of €550,000. The damages were awarded after a receiver had taken possession of and sold certain properties without first obtaining a court order under the Land and Conveyancing Law Reform Act 2009 (the “2009 Act”). The judgment was appealed by the receiver in 2023 (the “2023 Appeal”) and the appeal deals primarily with Sections 97 and 100 of the 2009 Act, which manages the enforcement of any mortgage relating to a housing loan entered into after 1 December 2009.

Three distinct issues arose in the 2023 Appeal.

  1. The first questioned whether the receiver had unlawfully taken possession of the properties secured in favour of Bank of Ireland Mortgage Bank (the “Bank”), without having obtained a Circuit Court Order in advance of taking possession. It is worth mentioning that none of the properties were the principal private residence of the defendants at the time the receiver took possession.
  2. The second issue on appeal centred on whether the High Court decision to grant exemplary damages against the receiver was correct.
  3.  Thirdly, the question of whether the Bank was entitled to its costs in respect of the High Court judgement, which costs had previously been refused.

Unlawful Possession by the Receiver

It was noted in the 2023 Appeal that Section 97 of the 2009 Act only applies to mortgagees in relation to taking possession of properties. Neither this section, nor any other section within the 2009 Act requires a receiver to obtain a court order in advance of taking possession of a secured property over which the receiver has been appointed. For this reason, the Court found that the receiver was not a trespasser and there was no obligation on a receiver to obtain a Circuit Court Order of Possession prior to taking possession.

Exemplary Damages Against the Receiver

The Court of Appeal overruled the High Court’s decision to hold the receiver as a trespasser and deemed the taking of possession to be lawful. Consequently, the Court held that this could not attract an award of exemplary damages.

It was also held by the Court of Appeal that the High Court failed to grant the receiver fair procedure as there was no notice of any claim for exemplary damages. For this reason, there was no possibility for the receiver to produce any pertinent evidence or advance any submissions on his own behalf to address the height of any exemplary damages that might be awarded by the High Court. The Court also noted that the borrowers were at no loss, as the properties had not been sold at an undervalue. The Court of Appeal allowed the appeal and overturned the award of exemplary damages.

The Bank and Costs

The Court of Appeal acknowledged that the Bank was entirely successful in the summary proceedings and that the defendants had not given any reason as to why the Bank should not recover its costs. The Bank’s costs were therefore awarded in respect of both the summary and plenary proceedings.

In conclusion, this case brought some clarity to the effect of the restrictions imposed by the 2009 Act on the exercise of receivers’ powers in taking possession of assets. There are however still questions around whether or not a receiver is required to obtain a court order prior to a sale of property and the position to be taken by Tailte Éireann on registration. Prior to the Hade High Court judgement, Tailte Éireann’s position  was that where a receiver is acting as a sale agent or attorney of a borrower, there would be no consent or court order required, but where the power of sale was assigned from a mortgagee to a receiver, then borrower consent or a court order should be sought. Although this case has shone some light on receivers’ powers when taking possession of assets, it appears to be time to update the 2009 Act to provide full clarity on the topic.

For further information please contact Conor Rock (Solicitor) or your usual AMOSS contact.