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Recent developments in enforcing security
Two recent High Court decisions, outlined below, have once again demonstrated that financial institutions must exercise extreme caution when enforcing security against defaulting borrowers.
The High Court judgment of Mr Justice Cregan on 31 July 2015 in McPhillips v ACC Loan Management Limited & Others (Unreported, 31 July 2015), declared the appointment of a receiver invalid as the Court was not satisfied that the terms of the security document had been rigidly complied with by the mortgagee. The security document provided that ACC Loan Management Limited ("ACC") could appoint a receiver “by writing under its hand”. The deed of appointment, however, was executed under seal and the borrower challenged the receiver’s appointment on the basis of non-compliance with the security document. The High Court interpreted the phrase “by writing under its hand” to mean execution by a duly authorised officer. While counsel for the receiver argued that the appointment of a receiver under seal also constitutes the appointment of a receiver “by writing under its hand” and relied on English authority in support of this argument, the High Court would appear to have been influenced by the fact that ACC’s internal execution policy distinguished between executing under seal and under hand. The High Court concluded that the person who executed the deed of appointment on behalf of ACC had not been authorised to do so and therefore the appointment of the receiver was invalid. This judgment not only demonstrates the importance of strict compliance with the terms of the security document when appointing a receiver but also the importance of ensuring that where a mortgagee has adopted procedures in relation to the execution of documents, that such procedures are strictly adhered to.
In Declan McDonald v Thomas Hill  IEHC 629, a receiver was refused an order for possession of secured property as the borrower successfully argued that he had not received the letter of demand sent by the appointing bank. While a senior business manager of the bank confirmed on affidavit that he had printed, signed and placed the letter of demand in the bank’s internal post, the High Court was not satisfied that there was sufficient evidence before it to prove as a matter of certainty that the letter of demand had been sent by the bank (for example a certificate of posting from the postal authorities or an affidavit from the person who actually posted the letter) and as a result refused to grant the relief sought. The decision was made at the interlocutory (ie interim) stage and while the issue will be conclusively determined at the full hearing, it is advisable that a lender sending any notice (including letters of demands or reservation of rights letters) ensures that it obtains a certificate of postage or an affidavit from the person who actually posted the letter to mitigate the risk of such an argument being successfully made by a borrower.