Judgment Mortgages, Consultation Paper on (LRC CP 30-2004) [2004] IELRC CP30 (March 2004)

CONSULTATION PAPER ON JUDGMENT MORTGAGES

(LRC CP 30 - 2004)

IRELAND

The Law Reform Commission

35-39 Shelbourne Road, Ballsbridge, Dublin 4

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© Copyright The Law Reform Commission 2004

First Published March 2004

ISSN 1393 – 3140

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THE LAW REFORM COMMISSION

Background

The Law Reform Commission is an independent statutory body

whose main aim is to keep the law under review and to make practical

proposals for its reform. It was established on 20 October 1975,

pursuant to section 3 of the Law Reform Commission Act 1975.

The Commission's Second Programme for Law Reform, prepared in

consultation with the Attorney General, was approved by the

Government and copies were laid before both Houses of the

Oireachtas in December 2000. The Commission also works on

matters which are referred to it on occasion by the Attorney General

under the terms of the 1975 Act.

To date, the Commission has published seventy Reports containing

proposals for reform of the law; eleven Working Papers; twenty-nine

Consultation Papers; a number of specialised Papers for limited

circulation; An Examination of the Law of Bail; and twenty-four

Annual Reports in accordance with section 6 of the 1975 Act. A full

list of its publications is contained in the Appendix to this

Consultation Paper.

Membership

The Law Reform Commission consists of a President, one full-time

Commissioner and three part-time Commissioners. The

Commissioners at present are:

President The Hon Mr Justice Declan Budd

High Court

Full-Time Commissioner Patricia T Rickard-Clarke

Solicitor

Part-Time Commissioner Dr Hilary A Delany, Barrister-at-Law

Senior Lecturer In Law, Head of Law

School, Trinity College Dublin

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Part-Time Commissioner Professor Finbarr McAuley

Jean Monnet Professor of European

Criminal Justice

University College Dublin

Part-Time Commissioner Marian Shanley

Solicitor

Secretary John Quirke

Research Staff

Director of Research Raymond Byrne BCL, LLM

Barrister-at-Law

Legal Researchers Deirdre Ahern LLB, LLM (Cantab)

Solicitor

Patricia Brazil LLB, Barrister-at-Law

Ronan Flanagan LLB, LLM (Cantab)

Glen Gibbons BA, LLB (NUI), LLM

(Cantab)

Claire Hamilton LLB (Ling Franc),

MLitt, Barrister-at-Law

Darren Lehane BCL, LLM (NUI)

Trevor Redmond LLB, MPhil, LLM

(Cantab)

Eadaoin Rock LLB, LLM (Cantab)

Jennifer Schweppe BCL (Euro)

Administration Staff

Project Manager Pearse Rayel

Legal Information Manager Marina Greer BA, H Dip LIS

Cataloguer Eithne Boland BA (Hons) H Dip Ed,

H Dip LIS

Executive Officer Denis McKenna

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Private Secretary Liam Dargan

to the President

Clerical Officers Alan Bonny

Debbie Murray

Principal Legal Researcher on this Consultation Paper

Dr John Breslin, BA, LL.M, Ph.D, NI Lon., Barrister-at-Law

Other Legal Researchers involved with this Consultation Paper

Brónagh Maher, BCL, Barrister-at-Law

Mark O'Riordan, BCL, Barrister-at-Law

Trevor Redmond, LLB, MPhil, LLM (Cantab)

Contact Details

Further information can be obtained from:

The Secretary

The Law Reform Commission

35-39 Shelbourne Road

Ballsbridge

Dublin 4

Telephone (01) 637 7600

Fax No (01) 637 7601

Email info@lawreform.ie

Website www.lawreform.ie

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ACKNOWLEDGEMENTS

The Commission would like to thank the following members of its e-

Conveyancing Substantive Law Working Group for the expertise and

experience they brought to this Paper:

Professor JCW Wylie

Commissioner Patricia T Rickard-Clarke (Convenor)

Vivienne Bradley, Solicitor

Dr John Breslin, Barrister-at-Law

Mr Justice Declan Budd, President of the Law Reform Commission

Seamus Carroll, Department of Justice, Equality and Law Reform

Patrick Fagan, Solicitor

Chris Hogan, Land Registry

Caroline Kelly, Barrister-at-Law

Deirdre Morris, Solicitor

Marjorie Murphy, Solicitor

Commissioner Marian Shanley

Doreen Shivnen, Barrister-at-Law

The Commission would also like to thank the following for their

assistance:

George Brady SC

John F Buckley, Solicitor (former judge of the Circuit Court)

Ernest Farrell, Solicitor

Brian Gallagher, Solicitor

Mary Geraldine Miller, Barrister-at-Law

Professor David Gwynn Morgan

Deborah Wheeler, Barrister-at-Law

Brónagh Maher was Secretary and Legal Researcher to the Group

until September 2002, when she was replaced by Mark O'Riordan.

Trevor Redmond became Secretary and Legal Researcher to the

Group in June 2003.

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TABLE OF CONTENTS

INTRODUCTION	1
CHAPTER 1 THE JUDGMENT MORTGAGE PROCEDURE	3
CHAPTER 2 THE CURRENT LAW	7
A The Statutory Framework	7
B The Requirements of the Acts in Detail	9
C Effect of Failure to Comply with Section 6	12
(1) Description of Parties	12
(2) Description of Lands	12
D Statement of Amount of Decree and Costs	16
E Interest	17
F Priority of Judgment Mortgages	19
(1) Tempany v Hynes	20
(2) Retaining the Current Law	20
G Limitation Periods	21
H Judgment Mortgages and Liquor Licences	22
I Priority of Judgment Mortgages in Company Liquidation	24
J Judgment Mortgages and 'Risk Periods': Liquidation and Bankruptcy	26
K Judgment Mortgages and Registration Under the Companies Act 1963	27
L Judgment Mortgages Over Equitable Interests	28
M Judgment Mortgages and Proceeds of Sale	29
CHAPTER 3 THE LEGAL POSITION IN SELECTED JURISDICTIONS	31
A England and Wales	31
B Northern Ireland	32
C Canada – British Columbia	33
D New Zealand	36
CHAPTER 4 PROPOSALS FOR GENERAL REFORM	39
A Introduction and Terminology	39
B Procedure	39
(1) Type of Record	39
(2) Procedure for Applying for Judgment Mortgage	40
(3) Issues as to Identification	41
(4) Availability of Pre-judgment Relief	42
(5) Modernisation of Mode of Application	42
C Effect of Registration	43
D Renewal of Judgment Mortgage	44
E Enforcement	44
F Discharge and Satisfaction	45
G Miscellaneous	46
CHAPTER 5 JUDGMENT MORTGAGES OVER THE FAMILY HOME	49
A Current Law	49
(1) Judgment Mortgages and the Family Home Protection Act 1976	49
(2) Judgment Mortgages and Prior Equities in the Family Home	50
B Proposals for Reform	52
(1) General	52
(2) Order for Sale Pursuant to a Judgment Mortgage	53
CHAPTER 6 SEVERANCE OF JOINT TENANCIES AND PARTITION	57
A Introduction	57
B Severance	58
(1) Subsequent Acquisition of Another Interest	58
(2) Alienation by One Joint Tenant to a Third Party	58
(3) Unilateral Dealing	59
(4) Act of a Third Party Under Statutory Powers	59
C Judgment Mortgages and Joint Tenancies	60
D Partition	62
CHAPTER 7 SUMMARY OF PROVISIONAL RECOMMENDATIONS	63
APPENDIX LIST OF LAW REFORM COMMISSION PUBLICATIONS	69

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INTRODUCTION

In examining the law in relation to judgment mortgages this

Consultation Paper is a further step in the Commission's commitment

made in the Second Programme for Law Reform to "continue its

general review of land and conveyancing law with the assistance of

its standing specialist working group".

The judgment mortgage is one of a number of different

procedures available to a judgment creditor seeking to enforce a

judgment against a judgment debtor who fails or refuses to pay, the

legislative basis for which is provided by the Judgment Mortgage

(Ireland) Act 1850 and the Judgment Mortgage (Ireland) Act 1858.

The purposes of this Paper are (a) to set out briefly the current law

with relation to judgment mortgages, with particular reference to the

deficiencies in current law and procedures, (b) to consider equivalent

legislative schemes in other common law jurisdictions, and (c) to

review the principal issues associated with a reformulation of the law

and to suggest bases upon which the law could be reformed and

modernised. As part of a separate project, the existing legislation (the

Judgment Mortgage Act 1850 and 1858) will be reviewed, along with

other pre-1922 property legislation.

The Commission considers that reform of the law in this

area should be guided by two over-arching principles. First, the rights

and interests attendant upon a judgment mortgage should be the same

irrespective of whether the judgment mortgage is in respect of

registered land or unregistered land. Secondly, the law should equate

the judgment mortgage with a conventional mortgage – ie a mortgage

consensually granted for value by a mortgagor in favour of a

mortgagee – insofar as this is consistent with sensible policy aims.

Chapter 1 provides an introduction to the judgment

mortgage procedure and its current use. In Chapter 2 the existing

statutory framework is examined in detail. The operation of judgment

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mortgages in respect of licensed premises and companies is also

discussed. A comparative analysis of the law in England and Wales,

Northern Ireland, British Columbia and New Zealand is undertaken in

Chapter 3, while Chapter 4 offers provisional proposals for general

reform. The particular issues which arise in the context of the family

home are addressed in Chapter 5. Chapter 6 discusses the effect of a

judgment mortgage on joint tenancies. Finally a comprehensive

summary of recommendations is provided in Chapter 7.

The Commission usually publishes in two stages: first, the

Consultation Paper and then the Report. The Paper is intended to

form the basis for discussion and accordingly the recommendations,

conclusions and suggestions contained herein are provisional. The

Commission will make its conclusive recommendations on this topic

following further consideration of the issues and consultation,

including a colloquium attended we hope by a number of interested

and expert people (details of the venue and date of which will be

announced later). Submissions on the provisional recommendations

included in this Consultation Paper are also welcome. Secondly, the

Report also gives us an opportunity not only for further thought on

areas covered in the Paper, but also to treat topics not yet covered. In

order that the Commission's final Report may be made available as

soon as possible, those who wish to make their submissions are

requested to do so in writing to the Commission by 31 August 2004.

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CHAPTER 1 THE JUDGMENT MORTGAGE

PROCEDURE

01 The judgment mortgage procedure is a valuable method of

enforcing judgments available to a plaintiff (hereinafter the 'judgment

creditor') who has obtained judgment against a defendant (hereinafter

the 'judgment debtor') who is the owner of an interest in real

property. In broad terms, it enables the judgment creditor to secure an

unsatisfied claim pursuant to the judgment by way of a mortgage or

charge over the judgment debtor's real property.

02 Statistical evidence indicates that it is a widely used

procedure. Figures provided by the Land Registry^[1] indicate that the

following number of judgment mortgages were registered in the

Registry of Deeds over recent years:

(a) 1992 – 927

(b) 1993 – 1088

(c) 1994 – 1017

(d) 1995 – 857

(e) 1996 – 623

(f) 1997 – 456

(g) 1998 – 423

(h) 1999 – 294

(i) 2000 – 240

(j) 2001 – 267

(k) 2002 – 202

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(l) 2003 – 239

03 Records of judgment mortgages in the Land Registry for the

last five years are as follows:

(a) 1999 – 1420

(b) 2000 – 1356

(c) 2001 – 1180

(d) 2002 – 1206

(e) 2003 – 1540

04 The legislative basis for the judgment mortgage procedure

is the Judgment Mortgage (Ireland) Act 1850 ('the 1850 Act')^[2] and

Judgment Mortgage (Ireland) Act 1858 ('the 1858 Act').^[3] This

legislation urgently requires to be updated. It relies on antiquated

concepts and terminology and serves neither creditors nor debtors

well. Furthermore, by reason of a number of decisions with regard to

the formalities with which the judgment creditor must comply, the

procedures for enforcing judgment mortgages have become unduly

cumbersome. In this regard, there is a long line of cases where minor

breaches of the requirements of section 6 of the 1850 Act, which have

caused no prejudice whatsoever to the judgment debtor, have

nonetheless invalidated the judgment mortgage.

05 A consideration of the law relating to judgment mortgages

was included in the 1972 Report of the Committee on Court Practice

and Procedure.^[4] At paragraph 16 of the report the members

concluded:

"The judgment mortgage procedure is cumbersome and

over-technical and should be replaced by a simpler more

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expeditious system which would allow a judgment creditor

to stake an immediate claim to the extent of his judgment

over the immovable assets of his judgment debtor."

The authors recommended either the immediate repeal of the Acts, or

pending this, immediate modifications to the judgment mortgage

procedure.

06 Some 30 years later, neither of these recommendations has

been implemented.

07 The judgment mortgage is one of a number of different

procedures available to a judgment creditor seeking to enforce a

judgment against a judgment debtor who fails or refuses to pay.^[5]

Other procedures include orders for fieri facias, sequestration and

attachment, seizure of goods, distringas of shares, and procedures

under the Debtors Act (Ireland) 1872.^[6] The legal source of many of

these procedures is to be found in the Rules of the Superior Courts

1986 (as amended). There appears to be some merit in considering a

modernisation of these procedures also – along with judgment

mortgages – so that all of the mechanisms available to a judgment

creditor are contained within the same instrument – preferably an Act

of the Oireachtas.^[7] However, whether such a comprehensive review

is merited, and if so, what its scope should be, are issues which are

beyond the remit of this Paper.

08 The purposes of this Paper are (a) to set out briefly the

current law with relation to judgment mortgages, with particular

reference to the deficiencies in current law and procedures, (b) to

consider equivalent legislative schemes in other common law

jurisdictions, and (c) to review the principal issues associated with a

reformulation of the law and to suggest bases upon which the law

could be reformed and modernised.

09 The Law Reform Commission considers that reform of the

law in this area should be guided by two over-arching principles.

First, the rights and interests attendant upon a judgment mortgage

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should be the same irrespective of whether the judgment mortgage is

in respect of registered land or unregistered land.^[8] Currently there are

significant aspects in which the legal treatment of a judgment

mortgage differs depending on whether title is registered or

unregistered. Secondly, the law should equate the judgment mortgage

with a conventional mortgage – ie a mortgage consensually granted

for value by a mortgagor in favour of a mortgagee – insofar as this is

consistent with sensible policy aims.^[9]

Note 1   We are most grateful to Mr Chris Hogan, Deputy Registrar of the Land Registry, for the production of this data and to Mr P J Fitzpatrick, Chief Executive Officer of the Courts Service, for his assistance generally.    [Back]

Note 2   13 & 14 Vict c 29.    [Back]

Note 3   21 & 22 Vict c 105.    [Back]

Note 4   Eighteenth Interim Report of the Committee on Court Practice and Procedure Execution of Money Judgments, Orders and Decrees (The Stationery Office 1972).    [Back]

Note 5   Order 42 of the Rules of the Superior Courts 1986 (as amended).    [Back]

Note 6   35 & 36 Vict c 57.    [Back]

Note 7   As has been done in Northern Ireland and British Columbia: see Chapter 3 below. See, generally, the Enforcement of Court Orders Acts 1926 and 1940.    [Back]

Note 8   See Chapter 4.    [Back]

Note 9   This is the approach commended by the British Columbia Law Reform Commission and represents, in general, the position in Great Britain, Northern Ireland and New Zealand. See Chapter 3.     [Back]