High Court: Notice of assignment of loans does not need to be sent in advance of demand for payment

About this case:

• Citation:
  [2022] IEHC 99
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Garrett Simons

Further, the court held that the notice of assignment did not require the plaintiff to expressly state the associated security that had been assigned to the plaintiff. The court held that this submission was not in keeping with the fundamental principle that the register maintained under the Registration of Title Act 1964 was conclusive.

Background

The plaintiff, Promontoria (Oyster) DAC, purchased loans from Ulster Bank Ireland Limited. The loan sale included three loan agreements entered into between the defendant and the bank. Each of the loans were said to be secured by liens which were registered as burdens on the defendant’s lands in Westmeath.

The liens were entered as burdens onto the relevant folios in December 2009 and Promontoria’s interest was noted on the folio in March 2017.

The relevant loans and security were assigned to the plaintiff by the bank by way of global deed of transfer. Under section 28(6) of the 1877 Act, an assignment of loans was only valid where notice of the assignment was given to the debtor of a debt or legal chose in action.

The plaintiff relied on several letters to show that notice had been given to the defendant. In particular, the plaintiff relied on a letter from November 2017 which identified the debts by reference to the principal amounts and the dates of the loan offers. The letter stated that the global deed of transfer was executed on 19 December 2016 and that the plaintiff acquired all rights and interest in the defendant’s loans and security. Further, the letter made formal demand for the repayment of the total amount owing by the defendant.

The plaintiff also relied on a solicitor’s letter from September 2018 which referred to the previous correspondence and made a repeated demand for payment. In March 2019, the plaintiff issued a special summons seeking a declaration that the monies were well-charged against the defendant’s lands and seeking an order for sale.

In reply, the defendant took issue with the notice of assignment. First, it was argued that the assignment was not valid because the plaintiff was required to give notice of the assignment separately and in advance of making a demand for repayment. Second, it was argued that, in addition to specifying that a debt has been assigned, a notice of assignment must also specify that the relevant security had been assigned as well.

High Court

Delivering judgment in the case, Mr Justice Garrett Simons began by outlining the provisions of section 28(6) of the 1877 Act. The court went on to consider AIB Mortgage Bank v. Thompson [2017] IEHC 515, which summarised the principles of proper notice of assignment.

The court noted that, under Thompson, a demand for payment will not ordinarily constitute a valid notice under section 28(6) without more information. However, this did not mean that a notice could not be provided as part of a demand letter, the court said.

The court held that the demand letters from November 2017 (and sent again in identical terms in September 2018) contained a greater level of detail than in Thompson. The court held that there was no authority for the proposition that notice of assignment must be sent separately and in advance of a demand letter.

There was nothing in the case law to suggest that this was necessary and there was no rationale for imposing such a condition precedent. The court stated that “there is no logical reason that a single document may not serve the twofold objective of giving notice of the assignment of the debt and making demand for payment. The debtor would not be in any way prejudiced by such an approach.”

If a debtor had any doubts about an assignment, they would be entitled to satisfy themselves of the assignment before making any payment to the assignee. The court identified that, using the defendant’s logic, it would be valid for a notice to be given and a demand issued the next day. There was no logical reason for a “sliver of time” to exist between notice of assignment and demand, the court said.

The court noted that the plaintiff’s letters contained sufficient information to constitute a valid notice. If the defendant had any issues, he failed to interrogate them at the time.

On the second issue, the court accepted the plaintiff’s submission that the security was readily identifiable from the information in the demand letter and the original letters of offer from the bank. The court held that it was reasonable to impute knowledge of the loans on the defendant, who was “an informed reader” and not a stranger to events.

Further, the court noted the fundamental principle that the register constituted conclusive proof of inter alia burdens on land. As such, Promontoria was entitled to rely on the register as establishing its interest in the lands irrespective of any inadequacy as to notice of assignment. The defendant could not rely on an alleged non-notification of assignment of security to circumvent the conclusiveness of the register.

Conclusion

The court held that valid notice of assignment had been provided to the defendant in the case. However, the court noted the decision in Promontoria (Oyster) DAC v. Fox [2022] IEHC 97, which stated that a plaintiff could not rely on a registered lien as security for further loan agreements made after 31 December 2009. The loans therefore did not appear to be secured on the lands. The court would hear further submissions from the parties on the issue.