Galligan Johnston acts in landmark case clarifying priority of charges

Dublin firm Galligan Johnston Solicitors recently acted for the successful party in a case providing clarity on the priority of charges.

The firm represented Cascade Estates Limited, the notice party in Larianov Foundation v Leo Prendergast and Sons (Engineering) IEHC 192.

The matter before the court was initially the plaintiff’s application for a well-charging order in the amount of €438,876 as against the defendant, but the case centred on a dispute between the plaintiff and Cascade Estates in respect of both the validity and priority of these parties’ respective charges over property in Kildare.

The matters for determination were in fact whether a charge on the lands concerned that were executed in favour of the notice party in 2004 but not registered on the folio until 30 August 2012 was in fact valid, and if so did it take priority over the plaintiff’s judgment mortgage registered on the folio on the 9 January 2012.

Judge Keane rejected the plaintiff’s arguments that the notice party’s mortgage deed was invalid, thereby bringing the court’s attention to the central point of whether the charge took validity over the plaintiff’s judgment mortgage. Although registered prior to the notice party’s charge, the notice party’s charge existed first in time.

The relevant piece of legislation being was section 117(3) of the Land and Conveyancing Law Reform Act 2009, which has the effect that any judgment mortgage takes subject to any prior right or encumbrance whether or not they have been registered and crucially, whether or not the judgment mortgagee has notice of such security.

The plaintiff sought to rely on section 74 of the Registration of Title Act 1964, which provides that in respect of registered burdens over property, if such burdens would rank in priority according to date of creation (if not registered), they shall rank according to entry onto the register and not according to the order of creation.

Judge Keane noted this has been described in previous cases as a “possible inherent contradiction”, but also that section 71 (4) of the 1964 Act (largely re-enacted in the 2009 Act) provides for judgment mortgages taking subject to all pre-existing unregistered rights.

Judge Keane went further in his judgment and proposed that any contradiction could be overcome by applying “generalia specialibus non derogant” – the general does not prevail over the specific.

For all of these reasons, the notice party’s charge was found to have priority over the Larianov Foundation’s judgment mortgage.

Sam Saarsteiner, partner and head of litigation at Galligan Johnston Solicitors, told Irish Legal News: “We at Galligan Johnston Solicitors were delighted to achieve this result for our client.

“Our client came to us in the unfortunate position of having to proactively defend its rights as a secured lender.

“We are happy that both validity and priority were established in our client’s favour and it is a welcome removal of any doubt on the applicability of the 2009 Act for secured lenders in these situations.”