Introduction

The case of Mars Capital Finance Ireland DAC v Farrell & Anor ([2024] IEHC 277) presents a significant examination of the Central Bank of Ireland's 2013 Code of Conduct on Mortgage Arrears ("CCMA") and its application in the context of loan transfers. The dispute involves Mars Capital Finance Ireland DAC ("Plaintiff") appealing a Circuit Court decision that dismissed part of the Defendants' motion regarding alleged non-compliance with the CCMA's moratorium period. The Defendants, Sean Farrell and Veronica Farrell, sought to strike out the Plaintiff’s pleadings on the grounds that required pre-warning notifications were not properly issued.

Summary of the Judgment

Mr. Justice Conleth Bradley, delivering the judgment on April 26, 2024, upheld the Circuit Court's decision. He affirmed that Mars Capital Finance Ireland DAC complied with the CCMA provisions through the correspondence issued by its predecessor, IBRC. The High Court found that the Plaintiff rightfully relied on these communications to initiate repossession proceedings, even after the loan was transferred. Consequently, the Defendants' motion to strike out the pleadings was refused, and the Plaintiff’s orders were maintained.

Analysis

Precedents Cited

The judgment references several key cases to contextualize the application of the CCMA:

• Irish Life and Permanent PLC v Dunne [2015] IESC 46; [2016] 1 I.R. 92: This Supreme Court case dealt with a breach of the CCMA where the lender failed to adhere to the moratorium period, but it did not address the implications of loan transfers.
• AIB plc v Buckley [2019] IEHC 97: Here, the High Court found that inadvertent non-compliance with the CCMA did not invalidate repossession proceedings. Similar to the current case, it did not involve a loan transfer scenario.
• Bank of Ireland v Reilly [2023] IECA 196: This Court of Appeal decision closely parallels the present case, addressing the transfer of a mortgage loan and reaffirming that once the CCMA provisions are complied with by the original lender, the transferee can rely on those actions without needing to repeat the process.

These precedents collectively support the principle that compliance with the CCMA by an original lender extends to subsequent transferees of the loan, provided the initial requirements are met.

Legal Reasoning

Justice Bradley's reasoning is anchored in the interpretation of Provision 29 of the CCMA, which outlines the consequences of a borrower being classified as "not co-operating." The Court determined that:

• The designation of "not co-operating" is specific to the borrower, not the lender.
• The transfer of the loan from IBRC to Mars Capital Finance Ireland DAC did not necessitate a reset of the CCMA protections.
• No provision within the CCMA mandates repeating compliance steps upon a change in loan ownership.

By examining the correspondence dated October 21, 2014, and December 9, 2014, the Court found that IBRC fulfilled its obligations under the CCMA. Mars Capital Finance Ireland DAC, as the new lender, inherited these compliant actions, thereby rightfully proceeding with repossession without further notification.

Impact

This judgment solidifies the precedent that compliance with the CCMA by an original mortgage lender remains effective even after the loan is transferred to another lender. Future cases involving loan transfers will likely reference this decision to affirm that transferees can rely on prior compliance without the need for reissuing pre-warning notifications. Additionally, it clarifies that the CCMA's protections are borrower-centric, ensuring that borrowers cannot circumvent compliance issues through loan transfers.

Complex Concepts Simplified

Central Bank of Ireland's Code of Conduct on Mortgage Arrears (CCMA)

The CCMA provides guidelines for how lenders should interact with borrowers facing mortgage arrears. It aims to ensure that borrowers receive fair treatment and have opportunities to resolve their arrears before lenders can take legal actions such as repossession.

Moratorium Period

A moratorium period is a set timeframe during which certain actions, like issuing repossession proceedings, are paused to allow the borrower time to address their financial difficulties.

Not Co-operating

This status is assigned to borrowers who do not engage with the lender to resolve mortgage arrears. Once classified as such, the borrower loses the protections of the Mortgage Arrears Resolution Process (MARP), allowing the lender to proceed with repossession.

Mortgage Arrears Resolution Process (MARP)

MARP is a structured process outlined in the CCMA that lenders must follow to help borrowers manage their arrears, aiming to find mutually agreeable solutions to prevent repossession.

Conclusion

The High Court's decision in Mars Capital Finance Ireland DAC v Farrell & Anor reaffirms the robustness of the CCMA framework in safeguarding both lenders' rights and borrowers' protections. By upholding the notion that compliance with the CCMA persists through loan transfers, the judgment ensures consistency and clarity in mortgage arrears proceedings. This case underscores the importance of adhering to regulatory codes and provides a clear pathway for lenders in similar future scenarios, while also reinforcing borrowers' understanding of their rights within the mortgage repayment structure.