Judgment
Title: | Promontoria (Oyster) Designated Activity Company -v- Hannon |
Neutral Citation: | [2019] IESC 49 |
Supreme Court Record Number: | 167/2017 |
Court of Appeal Record Number: | 319/2015 |
High Court Record Number: | N/A |
Date of Delivery: | 06/04/2019 |
Court: | Supreme Court |
Composition of Court: | Clarke C.J., Birmingham P. MacMenamin J., O'Donnell Donal J., Dunne J., Charleton J. |
Judgment by: | Dunne J. |
Status: | Approved |
Result: | Appeal allowed |
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| Judgments by | Link to Judgment | Concurring | Clarke C.J. | | Birmingham P. MacMenamin J., Dunne J., Charleton J. | Dunne J. | | Clarke C.J., Birmingham P.MacMenamin J., Dunne J., Charleton J. | |
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THE SUPREME COURT[Appeal No. S:AP:IE:2017:000167]
Clarke C.J.
Birmingham P.
MacMenamin J.
Dunne J.
Charleton J.
BETWEEN
PROMONTORIA (OYSTER)
DESIGNATED ACTIVITY COMPANY
PLAINTIFF/RESPONDENT
DEFENDANT/APPELLANT
Judgment of Ms. Justice Dunne delivered the 4th June, 2019
1. I have had the opportunity of reading in draft the judgment delivered by Clarke C. J. in this matter. I agree with it but wish to add a few observations of my own.
2. The critical question to be considered in this case is whether s. 73 of the Registration of Deeds and Title Act 2006 has abolished the creation of equitable mortgages by deposit of land certificates or other title deeds. In order to consider that question, it is helpful to look back at the origins of the system of registration of title and the creation of equitable mortgages by deposit of title deeds.
3. It is necessary to consider the statutory changes that have occurred in relation to titles to registered land. It is impossible to do this without considering in the first place how the creation of an equitable mortgage by deposit of title deeds occurred in the case of registered land. The system of land registration was designed to provide simplicity and clarity in relation to the title to land, with a view to making the process of transferring a title easier and creating a register which would provide a clear record of the title to land and any transactions affecting the same.
4. In Wylie Irish Land Law (5th Ed.) the author discusses the creation of equitable mortgages by way of deposit of a title deed in relation to registered land commencing at paragraph 12.29. He states:
"One of the guiding principles of a registration of title system is that the registers should 'mirror' the current title to the land and that all transactions relating to the land should be presented for registration to the Land Registry, for the appropriate consequent amendments to the registers to be made there. However, it was recognised from the very beginning of the introduction of a registration system in Ireland that, for convenience and administrative reasons, amongst others, the system could not and, perhaps, should not seek to conform with this principle absolutely, and the modern legislation still allows several types of transactions to be effective without registration in the Land Registry and to create interests in the registered land which are not noted on the registers. One of these transactions used to be the method of informal creation of mortgages which, we pointed out above, was so common in Ireland. It had been considered that the advantages of such a method of creation of mortgages justified a breach of the 'mirror' principle of registration.
12.30. The 1964 Act provided that the deposit of a land certificate or certificate of charge had the same effect as a deposit of the title deeds of unregistered land. As Kenny J. put the matter: 'The right created by the deposit is not limited to keeping the deeds until the money has been paid but gives an equitable estate in the lands'. In other words, such a deposit created an equitable mortgage on the registered land which did not need to be registered in the Land Registry as a burden on the land in order to secure priority as against subsequent transactions relating to it. The mortgage was protected because subsequent transactions relating to the registered land generally could not be completed by registration in the Land Registry without production of the land or charge certificate, which the mortgagee held. However, if the mortgagee wished, he could lodge a caution with the registrar against subsequent registered dealings, all this, however, has ceased to be possible because s. 73 of the Registration of Deeds and Title Act 2006 abolished the issue of land and charge certificates, with the consequence that neither a registered owner nor registered chargee has any longer a document to deposit, so as to create such an equitable mortgage. Existing mortgages by deposit were saved, but the mortgagees holding certificates by deposit were required to register a lien in the Land Registry by 31 December 2009, in order to protect the equitable mortgage. After that date land and charge certificates ceased to have any force or effect."
5. In this context it would be useful to look at the provisions of s. 81 of the Local Registration of Title (Ireland) Act 1891 (hereinafter referred to as the Act of 1891). It provided:
"81(1) Subject to general rules, the land certificate or certificate of charge granted on the registration of an owner of land, or of a charge on land, shall be produced to the registering authority on any subsequent transaction in relation to the land or charge requiring registration, as the case may be, and shall be either cancelled or so altered as to be brought into conformity with the register."
Section 81(4) provided that:
"A land certificate or certificate of charge shall be prima facie evidence of the several matters therein contained."
Section 81(5) provided:
"Subject to any registered rights the deposit of a land certificate or certificate of charge shall, for the purpose of creating a lien on the land or charge to which the certificate relates, have the same effect as a deposit of the title deeds of land or of a charge thereon has heretofore had."
6. There are two points to note in relation to those provisions. First of all in order to carry out any transaction in relation to registered land it was necessary for the land certificate to be produced to the registering authority. Secondly the importance of a land certificate (or a certificate of charge) was made clear by the provisions of s. 81(4). Finally, it was expressly provided that the deposit of a land certificate had the same effect as a deposit of the title deeds of land. In other words the Act of 1891 recognised the importance of the creation of equitable mortgages by the deposit of title deeds and made similar provision for the creation of equitable mortgages by deposit of the land certificate.
7. The provisions of s. 81 were replicated in s. 105 of the Registration of Title Act 1964 (hereinafter referred to as the Act of 1964). Thus s. 105(5) provides:
"Subject to any registered rights, the deposit of a land certificate or certificate of charge shall, for the purpose of creating a lien on the land or charge to which the certificate relates, have the same effect as a deposit of the title deeds of unregistered land or of a charge thereon."
8. It is evident from the provisions of the statutes referred to above that the fact that land was registered land did not deprive the owner of that land of the opportunity to create an equitable mortgage. The owner could do so by depositing the land certificate, being the document showing title, in the same way as the owner of unregistered lands could create an equitable mortgage by deposit of the title deeds. In the course of submissions the Court was referred to Coote's Treatise on the Law of Mortgages (8th Ed., Vol. 1, page 68) where it was stated:
"A deposit of title deeds by the owner of freeholds or leaseholds with his creditor for the purpose of securing either a debt antecedently due, or a sum of money advanced at the time of the deposit, operates as an equitable mortgage or charge, by virtue of which the depositee acquires, not merely the right of holding the deeds until the debt is paid, but also an equitable interest in the land itself. A mere delivery of the deeds will have this operation without any express agreement, whether in writing or oral, as to the conditions or purpose of the delivery, as the court would infer the intent and agreement to create a security from the relation of debtor and creditor subsisting between the parties, unless the contrary were shown; and the delivery would be sufficient part-performance of such agreement to take the case out of the statute."
(The reference to the statute is a reference to the Statute of Frauds (Ireland) Act 1695).
9. There may be an issue as to the characterisation of such transactions as being an element of part-performance of a contract or agreement to create a security but leaving aside that issue there is no doubt whatsoever that the creation of an equitable mortgage by means of a deposit of title deeds is of long-standing. Thus it was perhaps not surprising that when the system of registration of title was introduced, the practice in relation to the creation of equitable mortgages by means of a deposit of the title deeds was replicated by reference to a deposit of the land certificate or, as may be appropriate, the certificate of charge.
10. That is an explanation of the historical background to land certificates, the creation of equitable mortgages by deposit of land certificates and the continued existence of such equitable mortgages notwithstanding the overall aims and intentions of the registration of title legislation.
11. It may be helpful to refer to one or two other provisions of the legislation referred to previously. First of all it is to be noted that s. 31 of the Act of 1891 provided as follows:
"On registration of a person as owner of land, the registering authority shall deliver to him a certificate in the prescribed form (in this Act referred to as a 'land certificate') of his title to the land."
12. Section 34 of the Act went on to provide that the register "shall be conclusive evidence of the title of the owner to the land as appearing thereon". Similarly s. 28 of the Act of 1964 provided:
"On registration of a person as owner of land, the Registrar shall deliver to him a certificate in the prescribed form (in this Act referred to as a 'land certificate') of his title to the land."
13. It can be seen therefore that the land certificate was an important document establishing an individual's title to land.
14. The Act of 2006 has in s. 73 provided that the Property Registration Authority "shall cease to issue land certificates and certificates of charge under the Act of 1964" and thus has repealed amongst other provisions s. 28 of the Act of 1964. The remainder of s. 73 deals with inter alia the position in relation to the deposit of a land certificate and is in the following terms:
"(1) The Authority shall cease to issue land certificates and certificates of charge under the Act of 1964, and accordingly -
(2) Subject to subsection (3), land certificates and certificates of charge issued before the commencement of subsection (1) and not already cancelled cease to have any force or effect on the expiration of the period of 3 years after the commencement of this subsection."
15. Section 73(3) then provides for steps to be taken during the three year period referred to. In effect it would appear that as a result of the passage of s. 73 of the Act of 2006 a deposit of a land certificate or certificate of charge (which was deemed under s. 105 to have the same effect as a deposit of title deeds of unregistered land) ceases to have effect three years after the commencement of subs. (2) of the Act of 2006.
16. The provisions of s. 73 provide a saving in relation to such deposits by means of the registration of a lien during the period of three years following the commencement of subs. (2).
17. Reference is also made in Fitzgerald on Land Registry Practice to the nature of the lien created by the deposit of a land certificate. At page 146 he states:
"The lien created by deposit of a land certificate is an unregistered right but different to other unregistered rights already referred to. The right of the depositee is provided for by s. 105(5) of the Registration of Title Act 1964. The deposit creates a lien on the lands which cannot be defeated under a disposition for value so long as the depositee holds and refuses to produce the land certificate. Registration cannot be made without it, and the depositee cannot be compelled to produce it for the purpose of converting, by registration, an equity inferior to his own into a legal interest that would have priority to it."
Fitzgerald also commented at page 315 as follows:
Finally he observed at page 262:
"A deposit of a land certificate or certificate of charge by way of equitable mortgage creates a lien on the lands or charge and not on the document. (Section 105(5) of the Act)."
18. The subject of land certificates is also dealt with at length in Registration of Title in Ireland by McAllister. He refers for example at page 252 as follows:
"The reissue of the land certificate to the registered owner of the land would entitle him to do what the Registration of Title Acts intended him to do; that is, where necessary, to have the power to deposit the land certificate by way of equitable deposit as security for a loan. Such deposit, by reason of the express provisions of the Act, would be puisne to any registered charge: s. 105(5) of the Act."
19. McAllister goes on to point out that a certificate of charge issued to the registered owner of a charge enables him to deposit that certificate as a security for a loan, if he so desires. Reliance is also placed on the same section and sub-section of the Act.
At page 254 he comments:
"The effect of the deposit is to create an equitable charge on the land or charge; and is unaffected by the question as to whether or not it is accompanied by a memorandum in writing of the contract. Such a memorandum cannot be registered as a burden on the register of the property affected by the equitable charge; but, of course, it is good evidence of the contract between the parties.
It is clear that at the date of the passing of the Registration of Title Act 1891 mortgages created by equitable deposit of the title deeds were well known to conveyances. It is equally clear that that Act did not set out to change the general law in this respect. As evidence of this, s. 81(5) of that Act states that the deposit of the land certificate or certificate of charge shall have the same effect as a deposit of title deed of land or of a charge thereon has had heretofore."
Thereafter comment is made to the effect that (page 256):
"Therefore the depositee of the land certificate or certificate of charge is entitled to prevent any person, who has acquired a subsequent right for value over the registered land or charge, as the case may be, becoming registered and by so doing to defeat the unregistered right of the depositee."
20. He also noted that the effect of the deposit of a certificate is stated by the Act to have the same effect as a deposit of title deeds of unregistered land or of a charge on such land; the certificate must be produced for dealings by the registered owner with the land or charge as the case may be; it must be produced only for such registrations as can be made without the consent of the depositee: s. 105(1), (2) and (5) of the Act.
21. I find it very difficult in these circumstances to come to any other view than that the effect of the changes brought about by s. 73 in respect of s. 105 of the Act of 1964 are that three years after the commencement of the provisions concerned s. 105 ceased to have effect. The fact that s. 105 ceased to have effect in my view means that an equitable deposit of a land certificate could no longer be enforced as an equitable mortgage after the date concerned. I cannot see any other interpretation being open. That being so, it seems to me that that is the end of the matter. The whole point of effectiveness of the deposit of a land certificate was that without the land certificate no further transactions could be carried out in relation to the land. Thus the creditor of the land owner was in a position to stop the land owner from carrying out any transactions that would affect the creditor’s security. With the abolition of a land certificate the creditor no longer has a means of stopping such transactions. The provisions of s. 73 enabled the holder of an equitable deposit to register a lien over the land in the three year period concerned and in that way to preserve their security. Thus even if it is no longer possible to rely on the land certificate and the lien effectively provided for by the deposit on the land, the creditor had the option during the three year period immediately following the commencement of s. 73 to register the equitable mortgage created by the deposit of the land certificate as a lien on the register. A lien thus registered will appear as a burden affecting the land.
22. It is interesting to reflect briefly on Wylie's comments referred to above in paragraph 12.29 of the passage quoted previously. As he said one of these transactions used to be the method of the informal creation of mortgages. He pointed out that this has now ceased to be possible because the 2006 Act abolished the issue of land and charge certificates with the consequence that neither a registered owner nor a registered chargee has any longer a document to deposit so as to create such an equitable mortgage. His conclusions in relation to the effect of those provisions are in my view correct.
23. This does not, of course, mean that an equitable deposit of title deeds in respect of unregistered land cannot occur but in time as more and more unregistered land becomes registered, the number of such equitable mortgages will decrease.
24. Finally, it goes without saying that this change in the law has no bearing on any other method of creating an equitable mortgage in a manner previously known to the law.
25. It is for the reasons outlined above that I agree with the judgment of the Chief Justice herein and the order proposed.