Mars Capital Finance Ireland DAC -v Farrell & Anor (Approved)

Factual and Procedural Background

This opinion arises from an appeal against a decision of the Circuit Court dismissing part of the Defendants' motion concerning the Plaintiff's alleged non-compliance with the moratorium period under the Central Bank of Ireland's 2013 Code of Conduct on Mortgage Arrears ("CCMA"). The Defendants sought an order striking out the Plaintiff’s pleadings on the basis that the Plaintiff initiated legal proceedings within the moratorium period without issuing the required pre-warning notifications. The loan in question was transferred from a predecessor lender to the Plaintiff, and the issue centers on whether the Plaintiff can rely on the predecessor’s communications invoking the CCMA moratorium provisions prior to issuing repossession proceedings. The Circuit Court had dismissed the Defendants' motion relating to non-compliance and adjourned the remainder of the motion to the possession hearing, awarding costs in favor of the Plaintiff. The appeal focuses solely on the relief sought in paragraph 3 of the Notice of Motion dated 26 October 2023.

Legal Issues Presented

1. Whether the Plaintiff breached the moratorium period set out in the Central Bank of Ireland's 2013 Code of Conduct on Mortgage Arrears by initiating legal proceedings without issuing the required pre-warning written notifications.
2. Whether the Plaintiff, as the transferee of the loan, can rely on the predecessor lender’s correspondence classifying the Defendants as "not co-operating" and thereby outside the protections of the moratorium period under the CCMA.
3. Whether the protections under the CCMA moratorium provisions "reset" or require repetition upon transfer of the loan from one lender to another.

Arguments of the Parties

Defendants' Arguments

• A borrower who has lost protection under the CCMA by being classified as "not co-operating" can regain such protection if the mortgage is transferred to a new lender before proceedings are initiated by that new lender.
• The Plaintiff cannot rely on two letters sent by the predecessor lender (dated 21 October 2014 and 9 December 2014) which classified the Defendants as "not co-operating" because these communications predate the Plaintiff’s ownership and initiation of proceedings.

Plaintiff's Arguments

• Upon transfer of the debt, the transferee lender steps into the shoes of the transferor, assuming all rights and obligations under the debt agreement, including those under the CCMA.
• The CCMA contains no provision suggesting that its moratorium protections reset upon transfer of the debt; the identity of the lender is irrelevant to the application of the Code.
• There is no obligation for the new lender to repeat the moratorium process if the predecessor lender complied with the CCMA provisions before the transfer.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Irish Life and Permanent PLC v Dunne [2015] IESC 46; [2016] 1 I.R. 92	Addressed breach of CCMA moratorium where lender failed to comply with provisions.	Distinguished as not addressing loan transfers; did not consider reliance on predecessor lender’s compliance.
AIB plc v Buckley [2019] IEHC 97	Case where lender inadvertently failed to comply with the CCMA.	Also distinguished as not involving loan transfers or reliance on predecessor lender’s compliance.
Bank of Ireland v Reilly [2023] IECA 196	Confirmed that a transferee lender can rely on predecessor’s compliance with CCMA where the loan transfers.	Applied analogously; supported the Plaintiff’s position that the moratorium protections do not reset upon transfer and that the transferee steps into the shoes of the transferor.

Court's Reasoning and Analysis

The Court analysed the provisions of the CCMA 2013, emphasizing that the Code sets out a framework for mortgage lenders to treat borrowers in arrears sympathetically and positively, with an objective to assist borrowers in meeting obligations. The Court focused on Provision 29, which requires notification to borrowers once classified as "not co-operating," informing them that legal proceedings may commence immediately and that protections under the Mortgage Arrears Resolution Process (MARP) no longer apply.

The Court examined the correspondence dated 21 October 2014 and 9 December 2014 from the predecessor lender to the Defendants, which complied with these notification requirements. The Court accepted the Plaintiff’s submission that upon transfer of the loan, the new lender inherits the rights and obligations of the predecessor, including the status of the borrower under the CCMA.

The Court rejected the Defendants’ argument that moratorium protections could be "recovered" or reset upon transfer to a new lender. It found no provision in the CCMA that supports such a reset, and reasoned that the designation of "not co-operating" is borrower-specific and not lender-specific. By analogy, the Court noted that if legal proceedings are initiated by one lender and the loan is subsequently transferred, the new lender would not be required to repeat moratorium compliance.

In reliance on the Court of Appeal’s decision in Bank of Ireland v Reilly, the Court held that the Plaintiff was entitled to rely on the predecessor lender's compliance with the CCMA and that issuing proceedings in June 2023 did not undermine that compliance.

Accordingly, the Court refused the relief sought by the Defendants to strike out the pleadings on the basis of alleged breach of the CCMA moratorium.

Holding and Implications

The Court refused the Defendants the relief sought in paragraph 3 of the Notice of Motion dated 26 October 2023.

The direct effect of this ruling is that the Plaintiff, as the transferee lender, may rely on the predecessor lender’s compliance with the CCMA moratorium provisions and proceed with repossession proceedings without repeating the moratorium notifications. No new precedent was established beyond affirming established principles regarding the continuity of lender obligations following loan transfer under the CCMA.