The High Court has ruled that a mortgage over a property owned by Diamond Rock Developments Limited was void against the company’s liquidator because it was never registered with the Companies Registration Office (CRO).
In a judgment delivered on 13 February 2023, Ms Justice Eileen Roberts held that the lender could not continue to rely on the mortgage to enforce his security after the company entered liquidation. The court did not decide whether he had lawfully taken possession of the property before the liquidation.
Gerard Murphy, the company’s liquidator, brought the proceedings against Joseph Leddin. Leddin had advanced €400,000 to the company in June 2018 for working capital, secured against registered property in Belgooly, County Cork. The mortgage was registered as a burden on the property’s Land Registry folio in July 2019, but the required CRO registration was never completed.
The company was wound up by special resolution on 14 February 2022. Its property was its only significant remaining asset. At a creditors’ meeting, the company’s debts were put at about €1.4 million and the property’s approximate value at €340,000.
Murphy argued that section 409 of the Companies Act 2014 made the unregistered charge void against the liquidator. Leddin maintained that a loan default had triggered enforcement rights and that he had taken possession before the liquidation. He argued that the court should not grant relief without a full hearing with oral evidence.
The judge found that section 409’s registration requirement was mandatory and did not exempt a mortgage already being enforced. Even if Leddin had validly taken possession before the liquidation, the mortgage remained the basis on which he would have to rely to sell the property. Because it was void against the liquidator, the court held that it could no longer be used to enforce the security.
The court dealt with the application on the basis of the originating notice of motion, finding that a full hearing would not improve Leddin’s position. It granted declaratory and interlocutory relief restraining him from dealing with or selling the property, including marketing or advertising it, and preventing interference with the liquidator’s access and control. The property was to fall into the company’s assets for distribution among creditors, including Leddin, on an equal-ranking basis.
The court did not determine the disputed question of possession or make a finding that Leddin had lawfully taken possession. It also deferred the form of the order and costs. The case was listed for mention on 28 February 2023 for those matters.