The High Court has ruled that Permanent TSB could appoint a receiver over property secured by a March 2008 mortgage after repayment defaults, without first demanding payment of the full debt.
Ms Justice Ní Raifeartaigh delivered the judgment on 18 December 2018 in a Special Case concerning a mortgage over Diep Le Shaker Restaurant, Units 5 A, B and C, Pembroke Lane, Dublin 2. The case addressed whether the bank was entitled to appoint a receiver under the mortgage and whether a demand for the secured debt was required.
The borrowers had received two loan facilities from Permanent TSB in December 2007. The judgment concerns only the March 2008 mortgage securing the €1,165,000 facility. The borrowers’ repayment defaults were not disputed. The dispute was about the formal preconditions for appointing a receiver.
The borrowers argued that the bank had to demand the entire debt before the mortgage security became enforceable. They said a December 2010 letter seeking arrears only was insufficient, and that the later appointment of Stephen Tennant was invalid because an earlier appointment of Keith Lowe was invalid.
The bank argued that, under clause 7.1 of the mortgage, a payment default made the security immediately enforceable. Clause 9.1 then allowed the bank to appoint a receiver once the security was enforceable.
The judge found that clause 7.1 set out separate consequences of a listed default. Although certain secured liabilities became payable “on demand”, the clause separately said the security became immediately enforceable. The demand wording did not qualify that separate consequence. The court held that no demand letter was required before the bank could appoint a receiver under this mortgage.
The judgment also considered the bank’s October 2011 demand for the full sum of €3,565,526.64 across both loans. The borrowers argued that it was invalid because it did not separately state the amount due under the March 2008 mortgage. The judge found that the letter gave sufficient information and clearly demanded repayment of the full amount.
The court answered yes to the first question, whether the security became immediately enforceable on a specified default, and yes to the second, whether the bank had a contractual right to appoint a receiver without prior demand. It said the third question was not applicable in light of those answers. The fourth question appeared to depend on negative answers to the first two, and the judge did not see how the borrowers’ estoppel argument was made out; it had not been pursued orally.
The judgment records the answers to the questions raised in the Special Case. It does not purport to determine any broader issue beyond those questions.