The High Court has determined that there is no inconsistency in loan terms which provide for the end of the agreement on a particular date and the accrual of interest thereafter.
Delivering judgment for the High Court, Mr Justice Rory Mulcahy determined: “In circumstances where the terms of the loan make clear that the loan is only repayable after a demand made following the death of the borrower, I do not think that the terms could reasonably have been interpreted to the effect that interest would cease to accrue upon the borrower’s death. Put otherwise, it was clear that interest would continue to accrue after the borrower’s death until the loan, with interest, was repaid in full. In fact, the nature of the loan, a reverse mortgage, meant that it was inevitable that this would occur.”
Background
The plaintiff sought possession of unregistered residential property in Sligo on foot of a deed of mortgage and charge dated 22 March 2007.
There was no dispute that there were sums owing on foot of loan given to the late borrower, that the reverse mortgage was given as security for that loan and that the plaintiff was the lawful assignee of the loan and the security.
Two issues were raised during the course of the hearing — the manner in which interest had been calculated on the loan, and the demands by the plaintiff for repayment of €133,909.78 which was in excess of the amount actually due and owing.
The High Court
Having considered the general conditions of the loan offer, Mr Justice Mulcahy expressed concern regarding the fairness of the contractual terms “prompted by what seemed to me to be a possible tension between the provisions regarding interest, which suggest that interest will continue to accrue until the loan is repaid in full, and the provision regarding the period of the loan agreement which is described as being the date of death of the borrower”.
Interest and unfairness
Noting the court’s obligation to consider the fairness of loan contract terms of its own motion by reference to Pepper Finance Corporation (Ireland) DAC v Cannon [2020] IESC 2, the court agreed that the terms relating to the amount repayable did not fall to be assessed under Directive 93/13/EEC on unfair terms in consumer contracts or the implementing regulations, the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995, SI 27/1995 as long as same were set out in “plain intelligible language” in line with Case C-26/13, Kasler v Jelsalogbank Zrt.
Finding the interest rate to have been stated in clear terms, Mr Justice Mulcahy observed: “In circumstances where the interest provisions are clear, it is not appropriate for the court to try and read in ambiguity where, in truth, none exists.”
The court continued that “there is not necessarily any inconsistency in providing that the period of the agreement ends at a particular date, and interest continuing to accrue after that date. As is clear from the terms of the loan, had the borrower died prior to the loan being advanced, the agreement would have come to an end. In circumstances where the terms of the loan make clear that the loan is only repayable after a demand made following the death of the borrower, I do not think that the terms could reasonably have been interpreted to the effect that interest would cease to accrue upon the borrower’s death.”
The court also determined that the plaintiff could not be criticised for the delay of six years from the date of the borrower’s death to the finalisation of the proceedings and the resultant additional interest of €40,000 accrued, in light of the Covid-19 pandemic and the requirement to appoint an administrator ad litem for the purpose of substantiating the proceedings.
Letters of demand
The court considered the affidavit evidence of the plaintiff’s solicitor that the sums included in the letters of demand for repayment were “inadvertently carried over” from a precedent document in unrelated proceedings.
The court observed that by reference to, inter alia, Flynn v National Asset Loan Management Ltd [2014] IEHC 408, a letter of demand that overstates the amount due is still a valid demand, but highlighted the judgment of Ms Justice Marie Baker in Vivier Mortgages Limited v Lehane [2017] IEHC 605, which warned that the amount of the demand need not be exact “provided that it is clear what is to be done by the borrower”.
In this regard, Mr Justice Mulcahy determined that “it was clear from the letters of demand what was required, payment of the sums due on the loan. Indeed, having regard to the nature of this loan agreement, which didn’t require any payments to be made during the Deceased’s lifetime, the demand made was necessarily for the entirety of the money advanced together with interest thereon from the date of drawdown”.
The judge was satisfied that the error did not render the letters of demand ineffective, finding that there was no prejudice caused to the estate in circumstances where in any event, the plaintiff would have had ample time to issue a fresh demand for the sum now due and to issue fresh proceedings to recover possession within the applicable limitation period.
Conclusion
Accordingly, the High Court found that the plaintiff had established its proofs for the purpose of an order for possession.
Seniors Money Mortgages (Ireland) DAC v Fingleton [2024] IEHC 423
