Judgment mortgage holder fails in application to force sale of family home due to lack of spousal consent
Overview
The Court of Appeal has upheld two High Court decisions which refused the Plaintiff an order directing the Defendants to sell their family homes which were co-owned with the Defendant's spouses.
Background
The High Court decisions related to two separate summonses for the sale of two separate family homes. Both Mr Crowley and Mr Hamilton had borrowed money from the Plaintiff for the purposes of small scale property development. The only remaining assets of Mr Crowley and Mr Hamilton that were available to satisfy their outstanding debts to the Plaintiff were each of their family homes. It was noted that neither Mrs Crowley nor Mrs Hamilton had ever been consulted in relation to the loans and had never signed any loan documentation or consented to the grant of security over their family homes against which judgment mortgages were registered.
Section 31 of Land and Conveyancing Law Reform Act 2009 (the 2009 Act)
In reviewing this joint appeal, the Judge considered the provisions of Section 31 of the 2009 Act which provides that a court may order a partition of land or a sale of land which is co-owned. The Judge noted that Section 31(3) of the 2009 Act provides the court with a discretion in its application and stated that before exercising that discretion in this case, due regard must be given to balancing the constitutional rights (including property rights) of the judgment mortgagee and of the defendants' spouses and the fact that the loans in question were personal to each judgment debtor and not to their spouse.
The Judge also acknowledged that while the Family Home Protection Act 1976 (the 1976 Act) had no application to the present case (as the consent of a non-borrowing spouse is not required in the case of the registration of a judgment mortgage), regard must also be given to Section 31(5) of the 2009 Act which provides that nothing in Section 31 "affects the jurisdiction of the court" under the 1976 Act. Therefore, the Judge stated that the exercise by the court of the discretion as set out in Section 31 should be "consistent with the objectives of the 1976 Act".
The Judge noted that although the rights of the judgment mortgagee would be defeated if the family homes were not sold, those rights could not prevail against the rights of innocent persons who were not party to the transactions and did not give any formal consent.
The Judge referred to the decision of Laffoy, J in Trinity College Dublin V Kenny [2010] IEHC 20 in which an order for the sale of a family home was granted but in that case, Mrs Kenny had sufficient resources following the sale of her family home to fund alternative accommodation.
In the cases before the Court, the Judge noted that if the family homes were sold, due to the high level of debt owed by the Defendants, there would be insufficient equity to enable the spouses to purchase a new property. The Judge did not consider it necessary to consider the extent to which the potential availability of sufficient equity after the sale of a family home should be considered as this possibility did not arise in the present cases.
The Judge concluded that the order under S31(2)(c) of the 2009 Act (an order for sale of land and distribution of proceeds) should not be made as to do so would leave an innocent spouse, who was not party to the loan or the security documents, without a family home.
Judgment Mortgages and Joint Tenancy
This judgment also highlights the fact that a judgment mortgage in respect of registered loan does not sever a joint tenancy and is extinguished on the death of the judgment debtor. This was also confirmed by the Supreme Court in Mahon v Lawlor [2011] 1 IR 311.
For more information please contact Louise McNabola.
Date published: 26 July 2016