by Jeremy Erwin July-29-2015 in Banking & Financial Services, Family Law
Following the downturn in the economy, this question has been tested before the courts over the last number of years, as borrowers have sought to defend judgment or repossession proceedings. Jeremy Erwin reviews some key cases.
The background to this question arises from various codes issued by the Central Bank under s117 Central Bank Act 1989 (as amended). These codes are not Acts of the Oireachtas or statutory instruments, but are issued by the Central Bank under s117, and are binding on financial institutions regulated by the Central Bank.
Possession of the family home
The courts have drawn a distinction between the repossession of a family home and the repossession of other premises (e.g. investment properties). Where the family home has been provided as security for borrowings, and the financial institution wants to enforce its security over the family home where there has been a default under the mortgage, the financial institution is required to comply with the Code of Conduct on Mortgage Arrears (CCMA).
Under the CCMA, there is a moratorium period during which a financial institution is precluded from taking steps to repossess a family home. In cases where there has been a breach of this moratorium, the High Court has refused to grant orders for possession to the bank. This position was confirmed by the Supreme Court last month. In its judgment, the Supreme Court stated: “…in the limited cases of a breach of the moratorium, but in no other cases unless and until appropriate legislation is passed, a court should decline to make an order for possession.”
However, where the borrowings are not secured on the family home, the High Court has clearly stated that non-compliance with the Central Bank codes (e.g. the SME code and the Consumer Protection Code) does not set aside the obligations of a borrower to repay the loan.
In Ryan v Danske Bank (2014), Ms Justice Baker stated: “The requirements of compliance are ones which the courts will have regard in the exercise of its discretionary power… Non-compliance with a relevant code may at best offer a defence to a borrower in an individual case.”
Mr Justice McGovern in Freeman v Bank of Scotland (2014) stated: “It is clear, therefore, that non-compliance with a statutory code does not relieve a borrower from his obligations under a loan to repay the lender, nor does it deprive the lender of its rights and powers under the loan agreement.”
Conclusion
As can be seen from the above, the courts will refuse possession of a family home if there has been non-compliance with the moratorium period in the CCMA. Where the financial institution is seeking possession of other property, the court will exercise its discretion in any application.
Back to Full NewsShare this article:
About the Author
Jeremy Erwin
Jeremy specialises in insolvency, commercial litigation and dispute resolution, acting for a variety of companies and financial institutions in contract law cases, enforcement and recovery actions and in high value complex Commercial Court proceedings. Jeremy also specialises in intellectual property matters, including advising on registration and protection of trade marks and related rights and on trade mark disputes.