Judiciary 'tone deaf' to new realities in financial markets warns Master of High Court

Central Bank urged to investigate Promontoria fund 'seeking more land than it was entitled'
Judiciary 'tone deaf' to new realities in financial markets warns Master of High Court

High Court reporters

The Master of the High Court wants the Central Bank to inquire into what he described as "a blatant attempt" by a fund to seize more land than it was entitled to in a dispute over the use of land as security for a loan.

Edmund Honohan also said the judiciary seems to be "tone deaf to the 21st century's new realities in financial markets and, in particular to the ability of capital to hedge against losses caused by economic shocks".

He said the response of some major legal firms specialising in debt collection to recent judgments "foreshadows a culture of aggressive lawyers" rather than the traditional role of the lawyer as a client's conscience and wise counsellor.

Mr Honahan is not a judge but performs a quasi-judicial role in a court which makes administrative rulings on cases which may or may not be sent for trial to the High Court.

Sligo agricultural land

He made his comments in a decision relating to an attempt by fund Promontoria (Oyster) DAC to enforce rights over agricultural land in Co Sligo owned by John Gethins in a dispute over a €52,750 loan to him in 2013.

He said Promontoria had engaged in a "blatant attempt to seize much more land" than was originally secured on the loan.

He said Mr Gethins, Woodview, Doonally, Ballygawley, Co Sligo, took out an undisclosed loan sum with Ulster Bank in 2009 which was secured on 25 acres of land he owned at Ardleebeg, near Ballygawley.

He took out another loan with Ulster Bank in 2013 for €52,750 and the lien on the Ardleebeg property, via its property folio number of 3540F, was registered as security for the new loan. It was repayable within six months, but was not repaid. A lien is the right to keep possession of property belonging to another person until a debt owed by that person is repaid.

The loan was subsequently transferred to Promontoria Oyster which then sought an order from Master Honohan that the debt was "well charged" on the property contained in folio number 3540F, which meant the fund could then possess the property and sell it to satisfy the debt.

However, that folio included two other parcels of land owned by Mr Gethins, at Knockageeha and Carricknagat, comprising a total of 31 acres.

In seeking its order, Promontoria Oyster relied on the lien on the 2009 loan and not the 2013 loan which meant the 2013 loan was unsecured, Mr Honohan said.

Promontoria had in its proceedings seeking possession of the property described the land involved as "all of folio 3540F" and not just the 25 acre parcel, he said.

This case "should be thrown out because it is a blatant attempt to seize much more land than was originally secured for the old (2009) Ulster Bank loan," he said. That was in addition to the fact that the 2013 was in fact never secured, he said.

It highlighted what he said was an issue with securitisation by special purpose vehicle (SPV) fund purchasers of non-performing loans.

The speed of securitisation over the past quarter of century means the system here now "is damaged to the point of dysfunctionality - that means it doesn't work as intended".

In view of his findings, and given "our experience with complexities and judicial difference of opinion on the interpretation of legislation, I have decided to refer the papers (in this case) to the Governor of the Central Bank for his urgent attention", he said.

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