Pepper Finance Corporation (Ireland) LTD v Moloney (Approved)

Factual and Procedural Background

By special summons issued in November 2008, the Plaintiff, formerly known as Company A, sought an order for possession based on a charge created by the Defendant over a dwelling house ("the Property"). The charge was registered as a burden on the relevant folio. The Original order for possession was granted by McGovern J. in October 2010. However, possession has not been delivered to date. The Plaintiff now seeks leave under Order 42, rule 24 of the Rules of the Superior Courts to issue execution of the Original order for possession, as well as leave to renew an expired order of possession issued by the Central Office in April 2014 pursuant to Order 42, rule 20.

The Defendant disputes the Plaintiff's entitlement to issue execution, primarily on two grounds: (a) that the Plaintiff sold its entire mortgage portfolio, including the Charge, to another entity ("Company B") in September 2012, and thus lacks enforcement rights; and (b) that the Plaintiff's change of corporate identity and legal status means it cannot enforce the Charge as originally contracted.

The proceedings have a complex procedural history involving multiple applications for renewal of orders of possession, changes in the Plaintiff's corporate status, and attempts to negotiate repayment or sale arrangements involving the Defendant's son. The Defendant has defaulted on repayments, and the Plaintiff has sought to enforce the possession order accordingly.

Legal Issues Presented

1. Whether the Plaintiff is entitled to issue execution of the Original order for possession given the sale of the mortgage portfolio and corporate changes.
2. Whether the court should exercise its discretion to grant leave to issue execution outside the six-year period under Order 42, rule 24.
3. Whether the Plaintiff is entitled to renew the order of possession issued on 2nd April 2014 pursuant to Order 42, rule 20.

Arguments of the Parties

Defendant's Arguments

• The sale of the entire mortgage portfolio, including the Charge, to Company B in 2012 was a "true sale" transferring both legal and beneficial interests, thus terminating the Plaintiff's rights as mortgagee.
• The Plaintiff cannot enforce the Charge because the contract was with Company A (the Plaintiff's former name), not with the Plaintiff's current entity.

Plaintiff's Arguments

• The sale to Company B was a securitisation whereby only the beneficial interest passed; the Plaintiff retained the legal interest in the Charge and the exclusive right to enforce it.
• The Plaintiff's corporate changes do not affect its rights or obligations under the Charge, supported by company registration documents and statutory provisions.
• The Defendant consented to securitisation in the loan documentation, which expressly allowed the Plaintiff to retain legal title.
• The Plaintiff relies on a Determination of the Tax Appeals Commission, which it contends supports the position that only the beneficial interest was sold.
• Prior case law supports that securitisation does not affect the originating bank's entitlement to enforce security.
• The Plaintiff contends that as the registered owner of the Charge on the folio, it is entitled to enforce it.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first considered whether the Plaintiff is entitled to issue execution, focusing on the nature and effect of the sale of the mortgage portfolio to Company B. The Defendant argued that this sale transferred both legal and beneficial interests, terminating the Plaintiff’s enforcement rights. The Plaintiff contended that only the beneficial interest passed, retaining legal title and enforcement rights pursuant to a securitisation arrangement.

The court noted that the Plaintiff failed to exhibit key transaction documents such as the mortgage sale instrument and the portfolio management agreement, which were critical to establishing the nature of the retained interest. The Plaintiff's reliance on a Determination of the Tax Appeals Commission was inconsistent: while it urged the court to accept findings supportive of its position, it also argued that the court was not bound by that Determination. Moreover, the Determination itself indicated that the Plaintiff’s retention of legal title was "heavily qualified and conditional" and for a finite period, subject to renewal, with termination clauses that could extinguish the Plaintiff’s legal interest.

The Defendant’s affidavit raised these points and noted the absence of evidence of renewal or continuation of the portfolio management agreement. The Plaintiff did not provide evidence to counter this. Additionally, the Plaintiff did not produce an up-to-date folio extract confirming its ownership of the Charge, despite this being obtainable for a nominal fee.

The court accepted that the Plaintiff’s corporate changes did not affect its rights under the Charge, relying on company law provisions. However, the crucial issue was the effect of the sale to Company B, which remained unresolved due to insufficient evidence from the Plaintiff.

On the exercise of discretion to grant leave to execute outside the six-year period, the court accepted the Plaintiff’s explanation for delay, including attempts to negotiate repayment and sale arrangements involving the Defendant’s son, and found no prejudice to the Defendant. Thus, the Plaintiff met the test from Smyth v. Tunney.

Regarding the renewal of the 2014 order of possession, the court interpreted Order 42, rule 20 strictly, holding that the first renewal must be sought before the expiry of the one-year validity period. The Plaintiff’s application was made more than seven years after issue, and so was refused as out of time.

Overall, the court concluded that the Plaintiff was not entitled to issue execution due to unresolved issues regarding its legal interest in the Charge. Therefore, the court did not exercise its discretion to grant leave. The renewal application was also refused as moot.

Holding and Implications

The court REFUSED the Plaintiff's application for leave to issue execution of the Original order for possession pursuant to Order 42, rule 24, on the basis that the Plaintiff failed to satisfy the court that it was entitled to enforce the Charge.

The court also REFUSED the Plaintiff's application to renew the order of possession dated 2nd April 2014 pursuant to Order 42, rule 20, as the application was made well beyond the one-year renewal period.

The direct consequence is that the Plaintiff cannot currently enforce possession under the Original order or the 2014 order of possession. The court did not set any new legal precedent but emphasized the necessity for a party seeking enforcement to provide clear evidence of entitlement, especially in complex securitisation contexts. The court also highlighted the importance of timely renewal applications for orders of possession.