If you were given an interest in the property of someone else – for example you loan someone money in exchange for a charge over their land – you must make sure your interest is registered over their property as soon as possible. If you don’t, you risk being left without any security or recourse against the borrower.
This was demonstrated recently in the case of Larianov Foundation -v- Leo Prendergast and Sons (Engineering) Limited [2017] IEHC 192 (High Court, Ireland – High Court, Keane J (David), 24 March 2017).
This case concerned a number of loans advanced to the defendant company, by both the plaintiff and also by a notice party, Cascade Estates Limited.
In 2002, the plaintiff agreed to provide a sum of money to the defendant with a charge over the defendant’s property to be provided as collateral. Ultimately, this charge was never registered against the defendant’s property.
Following the defendant’s failure to repay the loan, the plaintiff sought and obtained a judgment mortgage against the defendant which was registered in the Property Registration Authority against the defendant’s lands on 9 January 2012.
It transpired that in March 2004 the defendant mortgaged the same lands to Cascade. The mortgage in favour of Cascade was registered with the PRA in 30 August 2012, after a delay of eight years.
The plaintiff sought to enforce its judgment and sell the defendant’s land on foot of well charging order. The Court identified the primary issues being:
Whether a charge executed in favour of Cascade on 24 March 2004 but not registered on the folios concerned until 30 August 2012 was valid; and
1. Whether a judgment mortgage against Prendergast in favour of Larianov registered with the PRA on 9 January 2012 took priority over Cascade’s mortgage deed registered on 30 August 2012.
2. On the first issue, the Court considered the errors on the face of the mortgage deed and found these issues to be non-determinative, upholding the validity of the mortgage deed.
Having found the mortgage to be valid, the Court considered the issue of priority. It was ultimately held that the mortgage between the defendant and Cascade dated 24 March 2004 and registered 30 August 2012 took priority over the plaintiff’s judgment mortgage registered on 9 January 2012.
A crucial consequence of this determination was that the plaintiff was unable to enforce the judgment mortgage in their favour without the notice party, Cascade, first recovering what they were due by the defendant. [Were the plaintiff able to enforce their judgment and sell the well-charged property of the defendant the plaintiff, priority of payment will lie with Cascade and only the residual sale proceeds, after payment of the Cascade debt, will be payable to the plaintiff to satisfy the defendant’s debt.]
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