Jim Stafford
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The Court of Appeal delivered judgment on 13th July 2016 in respect of two judgment mortgages that Muintir Skibbereen Credit Union (“the Credit Union”) had obtained.
The issue before the court was whether it would be appropriate to grant an order directing the sale of jointly owned family homes to enable the discharge of a judgment debt obtained by the credit union against one of the spouses. In a judgment delivered in the High Court on 23rd January 2015, White J. refused to grant the Credit Union the orders in these two cases which it had sought pursuant to s. 31 of the Land Law and Conveyancing Act. The Credit Union appealed against that decision.
The appeal represented the first occasion in which the principles governing the possible partition and sale of a family home have fallen to be considered by either the Court of Appeal or the Supreme Court following the enactment of s.31 of the 2009 Act and its coming into force on 1st December 2009.
Background
The decision of the High Court concerned two separate special summonses issued by the Credit Union against the defendants. In both cases the Credit Union sought a well charging order and the sale of two separate properties which in both instances comprised family homes. In the first appeal, the first defendant, Mr. Cornelius Crowley, jointly owns the family home with his wife, Ms. Breda Crowley. In the second appeal, the first defendant, Mr. Brendan Hamilton, jointly owns the family home with his wife, Ms. Breda Hamilton.
Both Mr. Crowley and Mr. Hamilton engaged in relatively small scale property development in the general West Cork region. Both defendants obtained loans from the Credit Union for this purpose, but following the property collapse in 2008 ultimately they proved unable to repay these loans.
In the case of Mr. Crowley, judgment was obtained by the Credit Union on the 5th October, 2011 for the sum of €562,500, and a judgment mortgage was registered on his interest in the family home.
Ms. Crowley never signed any documentation providing the family home as any security for the commercial loan and nor was she involved in any way in respect of her husband’s application for a loan.
In the case of Mr. Hamilton, judgment was obtained by the Credit Union for the sum of €562,500. Just as with the case of Ms. Crowley, Ms. Hamilton never signed any documentation providing the family home as security and nor was she involved in any way in respect of her husband’s application for a loan.
All other property assets which Mr. Crowley and Mr. Hamilton previously owned have subsequently been sold, so that the only properties which remain available to satisfy the judgment debts are the respective family homes.
The judgment of the High Court
The High Court White J. refused to make the orders sought, saying:
“It is within the Court’s discretion to decide if it is appropriate to grant the well charging order, and to order partition and sale. The Court in its discretion refuses the application of the plaintiff in respect of both defendants, for the following reasons:
"(1) Both the properties are the family homes of the respective defendants.
(2) Breda Crowley and Breda Hamilton, the spouses of the respective defendants, were never consulted about the commercial loan drawn down by the defendants from the plaintiff.
(3) The spouses, Breda Crowley and Breda Hamilton, never signed any documentation providing the family home as security.
(4) The personal circumstances of Breda Crowley with responsibility for three dependant children of ages 13, 8 and 6 and those of Mrs. Hamilton who is suffering from ill health are taken into account by the Court.
(5) Both defendants are in serious debt, and 50% of the net proceeds of any sale of the family homes due to the spouses, would not provide either family with sufficient resources to purchase another family home.
(6) The orders sought by the plaintiff are refused.”
The jurisdiction of the High Court to order partition or sale under s.31 of the 2009 Act
The jurisdiction of the High Court to order partition or sale is now set out in s. 31 of the 2009 Act.
It has been stated that s. 31 gives the court “a free hand in deciding what the appropriate order is” and that the use of the permissive “may” in s. 31(3) “reiterates the court’s discretion”.
The court held that the starting point is that the discretion conferred by s. 31 of the 2009 Act must be exercised in a constitutional fashion. This means that, where appropriate, the Court must endeavour to balance and respect competing constitutional rights, including the property rights of the judgment mortgagees and those of the spouses.
The second factor is that the lending by the Credit Union in both instances was unsecured and personal to each judgment debtor. This had the consequence that neither Ms. Crowley nor Ms. Hamilton were consulted regarding the taking out of these loans by their respective spouses and neither were they required to sign or execute any documentation.
The court found that the 1976 Act itself reflected a fundamental policy choice made by the Oireachtas which – reflecting constitutional values embraced in both Article 40.5 (inviolability of the dwelling) and Article 41 (protection of family life) - sought to prevent the sale or disposal of the family home by the unilateral act of one spouse at the expense of the other. It felt that objective would be seriously compromised if a family home which the couple co-owned could be effectively sold by court order over the heads of the wives in the present cases given that they had no involvement in the business affairs of their respective husbands and, critically, where they had never been given a prior opportunity to consent to such loan transactions.
The Court said it was true that the rights of the judgment mortgagee are liable to be defeated if the two family homes in question are not sold. But it said that the Credit Union’s entitlements cannot prevail as against the rights of the two innocent parties, namely, Ms. Crowley and Ms. Hamilton, who had nothing to do with these transactions and who did not give formal consent to them.
Counsel for the Credit Union drew attention to a line of case-law where the High Court examined the possibility of a sale of a family home in circumstances where the net equity remaining from the proceeds of sale would be sufficient to enable the innocent spouse to purchase another property.
But the Court held that whatever might possibly be the situation where the sale of a particular family home would leave the innocent spouse with a net equity sufficient to purchase another property this possibility simply does not arise in either of the two cases under appeal.
Judgment
The Court did not make an order for sale of the family homes in question pursuant to s. 31(2)(c) of the 2009 Act, principally because the effect of any such order would be to direct the sale of the family home over the wishes of the innocent spouse who was not a party to the loan transaction which gave rise to the judgment mortgage in the first instance and who had never formally consented to same.
The Court did not express any concluded view as to whether that, in a future case, the innocent spouse might be in a financial position to purchase another family home were the existing family home to be sold at the behest of the judgment creditor.
Conclusion
Personally, I have never seen a judgment mortgage creditor force the sale of a family home as a result of a JM registered against just one spouse, as judges always "found a reason" not to allow the sale of the family home. the Court of Appeal decision helps to confirm the position.
Combined with the the facts that a JM falls away on the death of the debtor (if the property is owned in a Joint Tenancy) and also falls away after 12 years, their use as a means of collecting a debt is limited.
Jim Stafford
The issue before the court was whether it would be appropriate to grant an order directing the sale of jointly owned family homes to enable the discharge of a judgment debt obtained by the credit union against one of the spouses. In a judgment delivered in the High Court on 23rd January 2015, White J. refused to grant the Credit Union the orders in these two cases which it had sought pursuant to s. 31 of the Land Law and Conveyancing Act. The Credit Union appealed against that decision.
The appeal represented the first occasion in which the principles governing the possible partition and sale of a family home have fallen to be considered by either the Court of Appeal or the Supreme Court following the enactment of s.31 of the 2009 Act and its coming into force on 1st December 2009.
Background
The decision of the High Court concerned two separate special summonses issued by the Credit Union against the defendants. In both cases the Credit Union sought a well charging order and the sale of two separate properties which in both instances comprised family homes. In the first appeal, the first defendant, Mr. Cornelius Crowley, jointly owns the family home with his wife, Ms. Breda Crowley. In the second appeal, the first defendant, Mr. Brendan Hamilton, jointly owns the family home with his wife, Ms. Breda Hamilton.
Both Mr. Crowley and Mr. Hamilton engaged in relatively small scale property development in the general West Cork region. Both defendants obtained loans from the Credit Union for this purpose, but following the property collapse in 2008 ultimately they proved unable to repay these loans.
In the case of Mr. Crowley, judgment was obtained by the Credit Union on the 5th October, 2011 for the sum of €562,500, and a judgment mortgage was registered on his interest in the family home.
Ms. Crowley never signed any documentation providing the family home as any security for the commercial loan and nor was she involved in any way in respect of her husband’s application for a loan.
In the case of Mr. Hamilton, judgment was obtained by the Credit Union for the sum of €562,500. Just as with the case of Ms. Crowley, Ms. Hamilton never signed any documentation providing the family home as security and nor was she involved in any way in respect of her husband’s application for a loan.
All other property assets which Mr. Crowley and Mr. Hamilton previously owned have subsequently been sold, so that the only properties which remain available to satisfy the judgment debts are the respective family homes.
The judgment of the High Court
The High Court White J. refused to make the orders sought, saying:
“It is within the Court’s discretion to decide if it is appropriate to grant the well charging order, and to order partition and sale. The Court in its discretion refuses the application of the plaintiff in respect of both defendants, for the following reasons:
"(1) Both the properties are the family homes of the respective defendants.
(2) Breda Crowley and Breda Hamilton, the spouses of the respective defendants, were never consulted about the commercial loan drawn down by the defendants from the plaintiff.
(3) The spouses, Breda Crowley and Breda Hamilton, never signed any documentation providing the family home as security.
(4) The personal circumstances of Breda Crowley with responsibility for three dependant children of ages 13, 8 and 6 and those of Mrs. Hamilton who is suffering from ill health are taken into account by the Court.
(5) Both defendants are in serious debt, and 50% of the net proceeds of any sale of the family homes due to the spouses, would not provide either family with sufficient resources to purchase another family home.
(6) The orders sought by the plaintiff are refused.”
The jurisdiction of the High Court to order partition or sale under s.31 of the 2009 Act
The jurisdiction of the High Court to order partition or sale is now set out in s. 31 of the 2009 Act.
It has been stated that s. 31 gives the court “a free hand in deciding what the appropriate order is” and that the use of the permissive “may” in s. 31(3) “reiterates the court’s discretion”.
The court held that the starting point is that the discretion conferred by s. 31 of the 2009 Act must be exercised in a constitutional fashion. This means that, where appropriate, the Court must endeavour to balance and respect competing constitutional rights, including the property rights of the judgment mortgagees and those of the spouses.
The second factor is that the lending by the Credit Union in both instances was unsecured and personal to each judgment debtor. This had the consequence that neither Ms. Crowley nor Ms. Hamilton were consulted regarding the taking out of these loans by their respective spouses and neither were they required to sign or execute any documentation.
The court found that the 1976 Act itself reflected a fundamental policy choice made by the Oireachtas which – reflecting constitutional values embraced in both Article 40.5 (inviolability of the dwelling) and Article 41 (protection of family life) - sought to prevent the sale or disposal of the family home by the unilateral act of one spouse at the expense of the other. It felt that objective would be seriously compromised if a family home which the couple co-owned could be effectively sold by court order over the heads of the wives in the present cases given that they had no involvement in the business affairs of their respective husbands and, critically, where they had never been given a prior opportunity to consent to such loan transactions.
The Court said it was true that the rights of the judgment mortgagee are liable to be defeated if the two family homes in question are not sold. But it said that the Credit Union’s entitlements cannot prevail as against the rights of the two innocent parties, namely, Ms. Crowley and Ms. Hamilton, who had nothing to do with these transactions and who did not give formal consent to them.
Counsel for the Credit Union drew attention to a line of case-law where the High Court examined the possibility of a sale of a family home in circumstances where the net equity remaining from the proceeds of sale would be sufficient to enable the innocent spouse to purchase another property.
But the Court held that whatever might possibly be the situation where the sale of a particular family home would leave the innocent spouse with a net equity sufficient to purchase another property this possibility simply does not arise in either of the two cases under appeal.
Judgment
The Court did not make an order for sale of the family homes in question pursuant to s. 31(2)(c) of the 2009 Act, principally because the effect of any such order would be to direct the sale of the family home over the wishes of the innocent spouse who was not a party to the loan transaction which gave rise to the judgment mortgage in the first instance and who had never formally consented to same.
The Court did not express any concluded view as to whether that, in a future case, the innocent spouse might be in a financial position to purchase another family home were the existing family home to be sold at the behest of the judgment creditor.
Conclusion
Personally, I have never seen a judgment mortgage creditor force the sale of a family home as a result of a JM registered against just one spouse, as judges always "found a reason" not to allow the sale of the family home. the Court of Appeal decision helps to confirm the position.
Combined with the the facts that a JM falls away on the death of the debtor (if the property is owned in a Joint Tenancy) and also falls away after 12 years, their use as a means of collecting a debt is limited.
Jim Stafford
