Court of Appeal: Plaintiff entitled to argue that debtor created equitable charge over property in well-charging proceedings
The Court of Appeal has held that a fund was entitled to argue in the course of well-charging proceedings that the debtor created an equitable charge over the property. The High Court had determined that the plaintiff could not raise this argument because the plaintiff was not able to rely on a lien as security over the property.
About this case:
- Citation: IECA 181
- Court:Court of Appeal
- Judge:Ms Justice Teresa Pilkington
Delivering judgment in the case, Ms Justice Teresa Pilkington held that the proceedings mirrored the issue contained in Promontoria (Oyster) DAC v. Fox  IECA 76. Accordingly, the court determined that a lien registered pursuant to s.73 of the Registration of Deeds and Title Act 2006 could secure lending after 31 December 2009.
As such, the court determined that the plaintiff was entitled to advance an argument that an action may lie in the enforcement of an equitable charge. The defendant had argued that the loan facilities were not entirely secured by the terms of the facility letters. In response, the plaintiff argued that equity would treat a contractual promise by the debtor as effective.
The defendant had previously entered into a mortgage agreement with Ulster Bank in respect of registered land in Roscommon. In March 2005, the defendant deposited his land certificate to Ulster Bank as security over the folio.
Three additional loans were advanced to the defendant in February 2012. As the defendant failed to keep up repayments on the loans, the plaintiff (now Promontoria) sought to rely on the lien created by the land certificate deposit to ground well-charging proceedings.
In the High Court, Mr Justice Garrett Simons outlined that after 31 December 2009, land certificates held as security ceased to have effect (pursuant to section 73 of the 2006 Act). There was a three-year grace period to register existing liens on the folio but no new liens could be created.
As such, the trial judge determined that the effect of section 73 was that a lien could not secure monies advanced after 31 December 2009, when liens could no longer be created. It was held that only a charge could be used to create security after this date.
Additionally, the plaintiff sought to argue that, if the property was not properly secured by the terms of the loan facilities (as argued by the defendant), then an equitable charge should exist. It was contended that the defendant had agreed to pledge his lands as security for the borrowings and this was sufficient to create an equitable charge over the property.
The trial judge rejected any suggestion that an equitable remedy could exist independently of the equitable mortgage was “extinguished” after 31 December 2009. Any “standalone agreement” to create security outlined of an equitable mortgage was said to be artificial.
The plaintiff appealed to the Court of Appeal. First, it was said that the trial judge was incorrect in his assessment that a lien registered pursuant to section 73 could not secure lending after 31 December 2009. Second, it was submitted that the plaintiff should be entitled to argue that an action lay in the enforcement of an equitable charge.
Court of Appeal
The court began by observing that the first issue had been conclusively determined in Promontoria (Oyster) DAC v. Fox, where it was held that the High Court’s assessment of section 73 was incorrect. It was held that further advances could be secured by way of an existing lien and that the holder of a registered lien pursuant to s.73 was entitled to exercise the rights formerly available under the old regime.
As such, the holder of a registered lien as a burden on a folio was entitled to enforce their security. The present case was indistinguishable from the Fox decision and the court therefore upheld the plaintiff’s appeal on the first ground.
In respect of the issue of equitable relief, the court emphasised that it was not asked to determine whether a contractual promise gave rise to an equitable charge. Instead, it was concerned with whether such an argument could be raised.
The court outlined some quotations from eminent scholars on the issue of the creation of equitable charges (see also Bank of Ireland Finance v. Daly Limited  IR 79). The court held that there was no basis for precluding the plaintiff from advancing an argument based on the criteria of an equitable charge to ground well-charging relief.
Finally, the court noted the comments in Promontoria (Oyster) DAC v. Hannon  1 IR 364 that the 2006 Act was designed to move towards a universal system of land registration. The court outlined that the Act did not attain this goal with the enactment of section 73, as the concept of a lien had “a long history and even more ancient antecedents”.
This long history “has given rise to a series of interest in land which, in my view, can only be unravelled with care”, the court said. As such, a universal system of land registered had to be achieved in an incremental manner. While section 73 was a step in this incremental change, it did not mean that registered interests were no longer enforceable. The court stated that section 73 was “light touch” regulation.
The court stated that the doctrine of equitable charge was beyond doubt and there was nothing in the 2006 Act which impugned it. As such, the court allowed the appeal and held that the plaintiff was entitled to argue that an equitable charge existed.
Promontoria (Oyster) DAC v. Kean  IECA 181