Settlement Acknowledgment Estoppel defeats Statute‑of‑Limitations defences in mortgage possession; s.26 Building Societies Act 1989 confined to sales under power of sale

Introduction

This commentary analyses the High Court judgment in Mars Capital Finance Ireland DAC v Walsh [2024] IEHC 648 (Barr J, 15 November 2024), an appeal from a Circuit Court order for possession. The defendant borrower drew down an EBS mortgage loan in 2003 secured over Ballyvadden House, Co. Wexford, ceased regular repayments in 2007, and the loan and security were assigned by EBS to Mars Capital in 2021. After proceedings for possession began in 2022, the defendant executed a settlement agreement in March 2023 acknowledging indebtedness and agreeing the lender’s entitlement to seek possession on default. Default ensued; the Circuit Court granted possession in June 2024 and the defendant appealed.

Three defences were advanced on appeal:

Non-compliance with Circuit Court Practice Direction 17 (PD17) on service of possession proceedings on adult occupants (alleged non-service on the defendant’s mother).
Invalidity of the 2021 assignment from EBS to Mars because of alleged non-compliance with s.26 of the Building Societies Act 1989 (best price obligation).
That the action and security were statute‑barred and extinguished under the Statute of Limitations 1957, given no payments since 2007 prior to issue (with limited payments in 2023).

The judgment is significant for three clarifications: (1) PD17’s purpose and effect on appeals; (2) the scope of s.26 of the 1989 Act, which the Court confines to sales by a mortgagee of the mortgaged land under a power of sale and not to sales/assignments of loan books; and (3) the deployment of estoppel by settlement acknowledgment to preclude a borrower from relying on Statute of Limitations defences in mortgage possession proceedings.

Summary of the Judgment

Barr J dismissed the appeal and affirmed the order for possession with a three‑month stay on execution and costs to the plaintiff. The Court held:

PD17 non-compliance was not a valid ground to stop the Circuit Court hearing or to upset its order on appeal. Although formal service on the defendant’s mother had not been proved, the evidence showed she knew of and engaged with the proceedings (wrote to the court and her daughter sought an adjournment). PD17 is for the protection of occupants, not a tool for the borrower to derail proceedings; in any event, breach of a practice direction is not, of itself, a ground of appeal.
Section 26 of the Building Societies Act 1989 imposes a “best price reasonably obtainable” duty when a building society sells mortgaged land in exercise of a power of sale. It does not regulate or invalidate the sale/assignment of loans and mortgage securities from a building society to a third party. The borrower’s indebtedness is unaffected by the price the lender obtains for the assignment. The assignment by EBS was valid under the mortgage conditions.
While the mortgage limitation provisions (ss. 13(2)(a), 32(2)(a), 33 and 38 of the 1957 Act) can, in principle, extinguish a mortgagee’s title and the secured debt after 12 years from accrual, the borrower’s March 2023 settlement agreement—executed with legal advice—contained a written acknowledgment of indebtedness and an agreement that the lender could pursue possession on default. Relying on persuasive English Court of Appeal authorities (Colchester Borough Council v Smith; St Pancras & Humanist Housing Association v Leonard; Binder v Alachouzos), the Court held the defendant was estopped by the settlement agreement from disputing the debt or invoking the Statute of Limitations against the debt or the mortgage.

Analysis

Precedents Cited

The Court anchored its estoppel analysis in three English Court of Appeal decisions:

Colchester Borough Council v Smith [1992] Ch 421: A party who, with legal advice, enters a bona fide compromise acknowledging the other party’s title is estopped from reviving antecedent limitation-based arguments (there, adverse possession). Dillon LJ stressed the binding nature of such compromises; Butler‑Sloss LJ emphasised the public policy in upholding settlements freely concluded with legal assistance.
St Pancras & Humanist Housing Association Ltd v Leonard [2008] EWCA Civ 1442: The defendant was estopped, based on his representations and conduct, from relying on limitation defences to defeat the claimant’s title.
Binder v Alachouzos [1972] 2 QB 151: The Court enforced a settlement compromise despite an underlying statutory unenforceability argument (under moneylending legislation), holding that a genuine, lawyer‑advised compromise of a dispute is binding and enforceable; otherwise, the administration of justice would be undermined.

Although not binding in Ireland, Barr J found these decisions persuasive and consonant with the policy of upholding negotiated settlements that compromise litigation and include acknowledgments of liability or title. The judgment also references s.52 of the Statute of Limitations 1957 (fresh accrual via acknowledgment in mortgage cases), but grounds the result in estoppel rather than needing to rely on a statutory fresh accrual.

Legal Reasoning

1) Practice Direction 17 and service on adult occupants

PD17 requires, among other proofs for possession applications, evidence of service on borrowers and “all persons in occupation over 18 years” and precise particulars of occupancy. The defendant argued that the absence of formal service on his mother (alleged long‑time occupant) barred the Circuit Court hearing.

The Court rejected this on four bases:

Factually, there were detailed affidavits of attempted service; the property was gated and not readily accessible; a process server had engaged with a person on site; there was no obvious way to ascertain all occupants. Against that backdrop, it was not reasonable to fault the plaintiff for not knowing of the mother’s occupation.
Even if formal service was lacking, the mother was plainly aware of and involved in the proceedings—she wrote to the court seeking an adjournment, and her daughter appeared on her behalf to renew that request. The objective of PD17 (ensuring occupants know of proceedings) was achieved in substance.
PD17 protects occupants; it is not a right personal to the borrower. The defendant lacked standing to complain on his mother’s behalf, particularly as he had not alerted the plaintiff to her occupancy.
A breach of a practice direction is not, without more, a ground of appeal. The Circuit Court judge was entitled to proceed where the purpose of the direction had been met and no occupant appeared to assert prejudice.

This is a pragmatic, purposive approach to PD17: directory rather than strictly mandatory, aimed at substantive notice to occupants and not a technical veto for borrowers.

2) Section 26 of the Building Societies Act 1989: confined to sales under a power of sale

The defendant contended that the 2021 sale of the loan and mortgage from EBS to Mars was invalid because s.26(1) imposes a duty on building societies “where any estate or interest in land mortgaged to a building society is sold by the society in exercise of a power of sale” to obtain the best price reasonably obtainable, and s.26(4) renders void agreements relieving that duty.

Barr J held the argument misconceived. Properly construed:

Section 26 mirrors the long‑established duty on a mortgagee (or its receiver) when selling the mortgaged land under a power of sale to take reasonable steps to obtain the best price reasonably obtainable for the property being sold.
It protects the borrower’s equity when the collateral (the land) is sold, because a suboptimal sale price directly harms the borrower by reducing the equity/credit for sale proceeds.
It does not regulate the lender’s separate commercial decision to sell or assign a loan and its related security to a third party. The price the lender achieves on such an assignment is immaterial to the borrower; it neither increases nor decreases the borrower’s contractual liability or security terms.

The mortgage conditions here expressly permitted assignment (Clause 9), a “hello letter” was issued, and the assignee’s charge was registered. The assignment was valid and s.26 was inapplicable.

3) Statute of Limitations and estoppel by settlement acknowledgment

The borrower’s limitation defence rested on ss. 13(2)(a) and 32(2)(a) of the 1957 Act (12‑year period to bring actions to recover land or for sale), together with ss.33 and 38 which, notably in the mortgage context, provide for extinguishment of the mortgagee’s title and of the principal and interest secured once the limitation period expires. The defendant said that given no payments since 2007 (before proceedings), the mortgage and debt were extinguished by about 2020/21.

The Court accepted that mortgage limitation provisions are unusually strong—going beyond merely barring a remedy to extinguishing rights and title. If nothing else existed, the limitation plea might have succeeded. However, the 2023 settlement agreement, signed with legal advice, changed the analysis. Its key features:

An express acknowledgment and confirmation that the defendant was indebted for the full amount of the “Secured Obligations,” together with an undertaking not to dispute the amount stated by the lender to be owing.
A term that, upon non‑adherence, the lender could enter judgment for the outstanding Secured Obligations and seek an order for possession over any secured assets.
A release/waiver clause whereby the defendant confirmed that, in consideration of the settlement, he had no actual or pending claims or grounds for claim against the lender or its predecessor insofar as such claims arose from the facilities.

Two practical reinforcements followed: the defendant made two payments under the settlement (April and May 2023), and the lender gave formal default notices under the settlement upon non‑compliance.

While s.52 of the 1957 Act addresses fresh accrual of a mortgagee’s right following acknowledgment, Barr J accepted that a mere acknowledgment cannot revive a right which statute has already extinguished. The decisive move in the Court’s reasoning is estoppel: a borrower who, to compromise litigation and with legal advice, acknowledges the debt and expressly agrees the lender’s entitlement to proceed for possession on default is estopped—by agreement, convention, and conduct—from invoking the Statute of Limitations to defeat those agreed consequences. The Court applied and endorsed the English authorities’ insistence on giving effect to genuine, lawyer‑advised compromises that would otherwise be undermined by opportunistic invocation of limitation technicalities.

Finally, addressing a technical point, the Court noted that claims are ordinarily subsumed into a settlement agreement, with any future action proceeding on the settlement rather than the original cause. But where, as here, the settlement expressly preserves the lender’s right to continue the original possession claim on default, the lender may do so. The plaintiff was therefore entitled to continue and obtain possession.

Impact

The decision has important practical and doctrinal consequences across three domains.

A. Settlements and limitation defences in mortgage litigation

Borrowers: Executing a settlement that acknowledges indebtedness and expressly allows the lender to proceed to possession on default can estop a borrower from later asserting even a potentially strong limitation defence. Borrowers must weigh the long‑term legal consequences of such acknowledgments and waivers; legal advice is critical.
Lenders: The judgment validates settlement strategies that include clear acknowledgments, waiver/estoppel language, and express preservation of the original remedies. Such settlements can provide a robust answer to later limitation arguments, even where the underlying mortgage rights might otherwise face extinguishment issues.
Courts: The policy of upholding bona fide compromises is reinforced. Estoppel by agreement/convention is affirmed as a flexible tool to prevent abuse of limitation statutes where parties have, with advice, resolved disputes and structured consequences for default.

B. Assignments of loan books by building societies

The scope of s.26 of the 1989 Act is clarified: it regulates the sale of the mortgaged property under a power of sale, not the sale or assignment of loans and securities. Attempts to impeach loan book transfers by invoking s.26’s “best price” duty are unlikely to succeed.
This promotes certainty in Ireland’s secondary mortgage market: lawful assignments under the mortgage conditions will not be derailed by borrower challenges premised on s.26.

C. Practice Direction 17 and service on occupants

PD17 is purposive and directory: its objective is to ensure adult occupants are actually alerted to possession proceedings. Substantial compliance may suffice, particularly where occupants demonstrably know of and engage with the process.
Standing and fairness: Borrowers cannot generally rely on PD17 non‑compliance to advance their own case where the alleged defect concerns the rights of other occupants, especially if they did not disclose those occupants to the lender. On appeal, mere breach of a practice direction, absent prejudice, will not suffice to overturn a possession order.

D. Evidential and procedural practice points

Assignments: “Hello letters,” registration of the assignee’s charge, and proof that the defendant’s loans are scheduled in a global transfer deed remain sufficient to demonstrate title to sue. Redactions in portfolio‑level sale documents may be acceptable where the borrower‑specific pathway of title is evidenced.
Fresh evidence on appeal: While the defendant sought to adduce limitation‑related evidence only on appeal, the Court’s outcome shows the limited utility of such attempts where a later settlement supersedes or estops earlier defences.
Stays and proportionality: The Court granted a three‑month stay on execution, reflecting a balancing of interests once entitlement is established.

Complex Concepts Simplified

Extinguishment vs bar: Many limitation rules merely bar the remedy (you cannot sue, but the right notionally survives). Mortgage limitations under ss.33 and 38 are stronger: on expiry, the mortgagee’s title and the secured principal and interest are extinguished. That distinction matters for whether “acknowledgment” can revive rights (generally not once extinguished).
Estoppel by agreement/convention: If parties, to settle a dispute, with legal advice, reach an agreement that assumes certain facts or rights (e.g., a valid debt, entitlement to possession on default), neither party can later contradict that agreed position where it would be unconscionable to do so. This prevents opportunistic reliance on limitations to undo the settlement’s agreed consequences.
Assignment vs power of sale: Assignment transfers the loan and the benefit of the mortgage from one creditor to another. A power of sale allows a mortgagee to sell the borrower’s property. Section 26 governs the latter, not the former.
Practice direction vs statute/rules: A practice direction guides procedure and proof but is not a statute. Courts may treat it as directory, focusing on whether its purpose (e.g., notice to occupants) was met. Non‑compliance, without prejudice, is rarely a standalone ground to overturn orders.
“Hello letter”: Informal term for the notice a borrower receives informing them their loan has been transferred to a new creditor. It evidences assignment but does not alter the borrower’s obligations.

Conclusion

Mars Capital v Walsh establishes three practical propositions of general importance in Irish mortgage litigation:

A borrower who, with legal advice, signs a settlement acknowledging indebtedness and conceding the lender’s right to pursue possession on default can be estopped from later deploying Statute of Limitations defences against the debt and the mortgage, even where those defences might otherwise have been formidable.
Section 26 of the Building Societies Act 1989 is confined to sales of mortgaged land under a power of sale; it does not apply to portfolio loan sales or assignments of mortgages, and such assignments do not alter the borrower’s obligations.
PD17 is intended to protect occupants through actual notice and participation; technical non‑compliance, absent prejudice and especially where occupants are aware and engage, will not vitiate possession orders on appeal, and borrowers lack standing to complain on behalf of non‑served occupants.

The judgment underscores the Irish courts’ commitment to upholding bona fide litigation compromises and to pragmatic, purpose‑driven procedural oversight. It offers lenders and borrowers alike clearer guidance on the legal effects of mortgage assignments, the limits of PD17 objections, and the significant legal consequences of settlement acknowledgments in the mortgage arrears context.