Rights of residence and the Family Home Protection Act 1976 considered by High Court in Bank of Ireland v O’Donnell [2015] IEHC 640

Certain defences raised by Brian and Mary Patricia O'Donnell in the latest High Court action taken against them by Bank of Ireland in connection with Gorse Hill in Killiney have caused the High Court to consider both the nature of rights of residence and also certain provisions of the Family Home Protection Act, 1976.

Background
This is the latest in a line of High Court and Supreme Court decisions arising from the ongoing litigation between Bank of Ireland and the O'Donnells in connection with the property at Gorse Hill, Killiney.  By way of common background to the cases generally, a company known as Vico Limited (Vico) mortgaged and charged Gorse Hill to the Bank by way of two separate deeds of mortgage and charge, which were given as security for guarantees which Vico had provided to the Bank in respect of borrowings of the O'Donnells.  Judgment in excess of €70m was given against the O'Donnells in favour of the Bank in December 2011 and, when that judgment remained unsatisfied, the Bank called in Vico's guarantee and the supporting security in May 2012.  The O'Donnells were each adjudicated bankrupt in September 2013.

This decision arises from the Bank's application for injunctive relief restraining the O'Donnells from trespassing at Gorse Hill, an order directing them to vacate the property and damages for trespass and breach of contract. 

In defence to this most recent application, the O'Donnells claimed inter alia that they had a right of residence in Gorse Hill which was subsisting and had not been terminated.  They further argued that the nature of this right was such that it was not a property right which vested in their official assignee following their adjudication as bankrupts. This argument was based predominantly on section 81 of the Registration of Title Act, 1964 which provides that: -

"[A] right of residence in or on registered land, whether a general right of residence on the land or an exclusive right of residence in or on part of the land, shall be deemed to be personal to the person beneficially entitled thereto and to be a right in the nature of lien for money's worth in or over the land and shall not operate to create any equitable estate in the land".

The O'Donnells also challenged the validity of the security entered into by Vico on the basis that they did not consent to the granting of the deeds of mortgage and charge and that the deeds did not therefore comply with the provisions of the Family Home Protection Act, 1976. In the alternative they pleaded that, while Mary Patricia O'Donnell was represented in the transaction by her husband's firm of solicitors, she did not have the benefit of independent legal advice. 

In the course of the Bank's application, the O'Donnells' official assignee in bankruptcy brought a motion before the Court seeking an order restraining the O'Donnells from litigating the proceedings on the grounds that the subject matter of the proceedings formed part of the O'Donnells' estate and are therefore vested in the official assignee as provided for by section 44 of the Bankruptcy Act, 1988.

Decision
In granting the office assignee's motion to restrain the O'Donnells from litigating the proceedings, Costello J. held that:

• The law in Ireland is such that it is for the official assignee in bankruptcy to decide whether or not to defend proceedings brought against a bankrupt, save those which are of a personal nature.
   
• The O'Donnells' submission that their right of residence at the property was not a property right which vests in the official assignee following their adjudication as bankrupts was based on an incorrect interpretation of section 81 of the Registration of Title Act, 1964.  Costello J. held that a right of residence had long been recognised as constituting an interest in land and therefore a right to litigate in respect of the claimed right of residence is one which vests in the official assignee as it is not personal to the bankrupt.
   
• As Vico, the owner of the Gorse Hill property, is a corporate entity, the provisions of the Family Home Protection Act, 1976 can have no application to the security which it entered into in favour of the Bank.  The Court further held that while it was both possible and indeed probable that a married couple occupying a dwellinghouse owned by a limited company might have an interest in that dwelling to which the provisions of the Act could apply, it did not arise in this case as the O'Donnells had asserted that their interest in Gorse Hill was a joint right of residence and there is no requirement to obtain a spouse's prior consent in writing to the conveyance of an interest (of whatever nature) in a family home where the interest is held jointly – consent is needed only from a non-owning spouse.  Costello J. also rejected the argument that the 1976 Act applied because the husband had arranged the mortgage on behalf of Vico – in her view, such an arrangement could not be said to amount to a conveyance of an interest in a family home within the meaning of the Act.

For further information please contact Aoife Smyth at asmyth@algoodbody.com.

Date published: 17 November 2015