The Court of Appeal has provided clarity for lenders who want to pursue well-charging proceedings as a means of enforcing security.
What Are Well-Charging Proceedings
The proceedings are the first in a series of steps open to a mortgagee in order to allow it rely on and enforce its rights as against the mortgaged property.
If successful in the application, a well-charging order and order for sale will be granted and will contain a declaration that the debt is “well charged” on the borrower’s interest in the property. The Court will direct that the property be sold. The sales process is administered by the Examiner’s office and the Court’s directions, following the well-charging application, will typically include a direction that the Examiner take an account of all encumbrances (including mortgages) affecting the property and inquire into their respective priorities.
Prior to their abolition in 2006, the creation of an equitable mortgage over a property was often done by depositing a land certificate with a lender as security for the relevant debt. In the cases in question, the deposit of the land certificates was registered as a lien on the relevant Land Registry folios, thereby demonstrating the mortgagee’s interest, as lien holder, in relation to the lands.
The question that arose in the Court of Appeal proceedings was whether it is necessary for the mortgagee to go further, and to provide evidence as to the date of creation of the equitable mortgage.
The High Court Refusal for Well-Charging Orders
In 2018 Promontoria issued well-charging proceedings in respect of default of payment on loans in two separate actions1. The security for the loan was by way of an equitable mortgage, namely the deposit of a land certificate.
In considering if the well-charging orders should be granted to Promontoria, Mr Justice Simons stated that it is essential that the date of creation of an equitable mortgage be established in evidence – that is the date of the deposit of the land certificate. The Judge said the date was significant as this date affects the priority of any competing mortgages or charges. Promontoria was not able to put forward this evidence and the Judge dismissed the mortgagee’s application.
The Court of Appeal’s Clarification
The Court of Appeal reversed the High Court decisions to refuse the well-charging orders. The Court clarified what a mortgagee must prove to establish an entitlement to a well-charging order and subsequent order for sale. It was concluded that the necessary proofs are:
- that the monies were due and owing; and
- that the monies were secured by the registered lien.
The existence of the security – the registered lien – was established by the folio and did not require further proof. The Court noted that the owner of the land had an opportunity to object to the registration of the lien at the time of its creation.
The forced sale of lands, on foot of a well-charging order, is a useful tool for mortgagees. The Court of Appeal cases discussed above have brought some welcome clarity to the question of whether reliance can be placed upon equitable mortgages, created by way of deposit of a land certificate, in applying for well-charging relief.
For further information on any of the issues raised above, please contact Matthew Austin firstname.lastname@example.org, Gill Cotter email@example.com or any member of the Commercial and Business team at Hayes.
1 (Promontoria (Oyster) DAC v Desmond Greene  IEHC 85 and Promontoria (Oyster) DAC v Kieran McKenna  IEHC 337).Back to Full News
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About the Authors
Matthew is a partner in the Commercial & Business team at Hayes solicitors. Matthew advises clients in relation to all forms of commercial dispute resolution and provides general commercial advice. Matthew also advises clients on general commercial matters including contract law, intellectual property/copyright, media law and general commercial agreements.
Gill is an Associate in the Commercial & Business team. Gill acts for a variety of private companies and financial institutions in the High Court and Commercial Court. Gill advises commercial clients on a broad range of topics including contract disputes, insolvency, enforcement and recovery actions.