Credit Union fails in appeal to order the sale of family homes in West Cork
The Court of Appeal has found that making an order directing the sale of jointly owned family homes, to enable the discharge of a judgment debt obtained by a credit union against one of the spouses, would be to direct the sale of the family home over the wishes of an innocent spouse not a party to a commercial loan transaction and who had never formally consented to the same.
In the High Court, Justice White refused to grant Muintir Skibbereen Credit Union the orders in these two cases which it had sought pursuant to section 31 of the Land Law and Conveyancing Act 2009 which sets out the jurisdiction of the High Court to order partition or sale of property.
The decision concerned two separate special summonses issued by the Credit Union against the defendants; in both cases the Credit Union sought a well charging order and the sale of two separate properties which in both instances comprised family homes.
In the first appeal, defendant Mr Crowley jointly owns the property with his wife; while similarly in the second appeal, defendant Mr Hamilton jointly owns the property with his wife.
Both Mr Crowley and Mr Hamilton engaged in relatively small-scale property development in the general West Cork region; obtaining loans from the Credit Union for this purpose, but following the property collapse in 2008 ultimately they proved unable to repay these loans.
In the case of Mr Crowley, judgment was obtained by the Credit Union for the sum of €562,500 and costs of €355.98. Mr and Ms Crowley were married in 1993 and have three children aged 14, 9 and 7. Ms Crowley never signed any documentation providing the family home as any security for the commercial loan and nor was she involved in any way in respect of her husband’s application for a loan.
In the case of Mr Hamilton, judgment was obtained by the Credit Union for the sum of €562,500 and €345.98 for costs. Mr and Ms Hamilton were married in 1978 and have three children who are no longer dependant, however both Mr and Ms Hamilton suffer from ill health. Just as with the case of Ms Crowley, Ms Hamilton never signed any documentation providing the family home as security and nor was she involved in any way in respect of her husband’s application for a loan.
The only properties which remain available to satisfy the judgment debts are the respective family homes, as all other property assets which Mr Crowley and Mr Hamilton previously owned have been sold.
This appeal raised issues of some considerable practical importance, representing the first occasion in which the principles governing the possible partition and sale of a family home have fallen to be considered by either the Court of Appeal or the Supreme Court following the enactment of section 31 of the Land Law and Conveyancing Act 2009 and its coming into force on 1st December 2009.
Carefully considering the ruling in Containercare Ltd. v. Wycherley IR 143, Justice Hogan indicated that “strictly speaking” the Family Home Protection Act 1976 would have no application to the present case, because the decision in Containercare ruled that the consent of the non-borrowing spouse is not required under section 3 of that Act in the case of the registration of a judgment mortgage.
However, Justice Hogan emphasised the discretion provided to the court in the Law and Conveyancing Act 2009, and also reiterated the express statement within section 31(5) that nothing in that section “affects the jurisdiction of the court” under the Family Home Protection Act 1976.
Justice Hogan considered this to be a clear signal from the Oireachtas that the section 31 jurisdiction should be exercised in a manner which was consistent with the objectives of the 1976 Act.
The 1976 Act reflected a fundamental policy choice which sought to prevent the sale or disposal of the family home by the unilateral act of one spouse at the expense of the other – an objective that would be compromised if a family home which the couple co-owned could be effectively sold by court order over the heads of the wives that had no involvement in the business affairs of their respective husbands and critically, where they had never been given a prior opportunity to consent to such loan transactions.
Justice Hogan noted that situation would have been very different had the wives in question been parties to such transactions or if they had otherwise consented to the loan agreements which had given rise to the judgment mortgages in the first place.
Counsel for the Credit Union drew attention to case-law where the Court examined the possibility of a sale of a family home in circumstances where the net equity remaining from the proceeds of sale would be sufficient to enable the innocent spouse to purchase another property, including Dublin v. Kenny IEHC 20.
In Kenny the family home in question was a valuable one, where the debtor and his wife were both in their late 70s and their children were no longer living at home. The evidence was that the sale of the property would leave Ms Kenny with sufficient resources to purchase another property.
Justice Hogan affirmed that the situation in Kenny simply did not arise in either of the two cases under appeal, agreeing with the statement by Justice White in the High Court that 50% of the net proceeds any sale of the family home due to the spouses would not provide either family with sufficient resources to purchase another family home.
Dismissing the appeal, Justice Hogan found that the court should not make an order for sale of either family home pursuant to section 31(2)(c) of the 2009 Act.