Financial Services Update: Redacted Transfer Documentation Sufficient to Show Transfer of Title
18 December 2017
Since the High Court judgment in English v Promontoria (Aran) Limited (English case), the question of what level of redaction might be acceptable to prove transfer of ownership of loan and mortgage documentation has been hotly debated. In that case the borrower had a right to “insist on proof of transfer of ownership of the mortgage before being required to comply with the request of a stranger to vacate the property”.
In Vitgeson Ltd & William Farrelly v Tom O'Brien & Promontoria (Arrow) Limited, Mr Justice Haughton delivered an ex tempore judgment in favour of the respondents. In particular, he agreed with the receiver, Tom O’Brien, and the owner of the loans and security, Promontoria (Arrow) Limited (PARL), that notwithstanding significant redactions the Global Deed of Transfer was sufficient to prove PARL’s acquisition and ownership of loans originally made to the plaintiffs, as well as the security provided for those loans.
A “Global Transfer Deed” is a form of deed of conveyance and assignment used to transfer loan agreements, security documentation and related rights from a seller to a purchaser. It is the main document evidencing transfer of loans and security documentation.
The proceedings were issued by the plaintiffs, Vitgeson Ltd and Mr. William Farrelly on 17 November 2016 against Tom O’Brien. Mr O’Brien was the receiver appointed by PARL over several commercial and residential properties owned by the plaintiffs. The plaintiffs sought:
- A declaration that the receiver was unlawfully appointed
- An injunction to restrain the receiver from dealing with or selling the properties, and
- Damages for trespass, negligence and interference with the plaintiffs’ economic interests
The main thrust of the plaintiffs’ case was that Mr O’Brien had been appointed by PARL as receiver prior to the completion of the registration in the Property Registration Authority (PRA) of PARL’s interest in the security over the properties.
PARL was included in the proceedings as a co-defendant and issued a counterclaim against the plaintiffs seeking judgment. Following an application by the defendants, the case was transferred into the Commercial Division of the High Court.
The plaintiffs delivered a full defence to PARL’s counterclaim and PARL was required to prove (amongst other things) its acquisition of the loans and security at issue.
The Judge made the following orders:
- An order dismissing the plaintiffs’ claim
- An order for judgment in favour of PARL against Vitgeson Ltd
- An order for judgment in favour of PARL against William Farrelly
- An order for costs in favour of PARL and the receiver
Points to note
- The judge agreed that a Global Deed of Transfer (GDT) was sufficient to prove PARL’s acquisition of the loans and security. In addition, evidence from a person who was in the room at the time of signature was deemed sufficient for the purpose of verifying the fact that the signatory had signed the GDT
- The judge was satisfied that a redacted copy of the GDT was sufficient and admissible by the Court, stating “…while the production of the original was physically possible, it was legally impossible in the sense that this would give rise to entirely and admittedly unnecessary publication of the details of third party loans and security in the schedules. It would be an entirely unwarranted incursion into the privacy of persons not involved in these proceedings”.
- On the issue of the receiver’s appointment pre-registration in the PRA, the plaintiffs ultimately agreed in principle that a contractual power, if there was one apparent in the security documents, could be used to appoint a receiver, despite non-registration of that security document (or PARL’s interest in it) in the PRA. Having examined the mortgages at issue in this case, the Judge was satisfied that, as a matter of construction, PARL had the contractual power to appoint the receiver and the appointment was valid and lawful. Accordingly, the court found that it was not necessary to address the issue of registration any further.
This decision means that redacted documentation is not an obstacle to showing the lawful and valid transfer of ownership of loans and security documentation. This is provided it can be demonstrated that the redactions are justifiable on the grounds that they are in place to protect sensitive information and prevent an unwarranted intrusion on the private information of others.