Introduction
As practitioners will be aware, it is relatively simple for a plaintiff to register a lis pendens on the register maintained in the High Court. Upon lodging a short form, which must be accompanied by the relevant High Court Summons or Circuit Court Civil Bill, the “Certificate of Registration of a Lis Pendens” signed by a Court Registrar will normally issue within a few days. This registration gives notice of the existence of legal proceedings involving named parties. In the manner explained in this article, the claim, or lis registered, should relate to an estate or interest in land. Relevant searches will reveal the existence of the registration and the effect on property transactions can be dramatic. Because a purchaser on notice of such a lis pendens could find that their property is subject to rights established at a future point in favour of the plaintiff who registered the lis pendens, such registrations can have very significant effects in both legal and commercial terms. Practitioners may well have witnessed an increase in recent years in the numbers of lis pendens being registered by plaintiffs, and an application seeking to vacate a lis
pendens is an increasingly common one in the Irish Courts. It is in the foregoing context that this article proposes to look at the requirements for the registration of a valid lis pendens in light of relevant statutory provisions and the jurisprudence from the Superior Courts focusing, in particular, on challenges brought in relation to such registrations.
Purpose and Effect
The purpose of the registration of a lis pendens was put succinctly by Clarke J., who was then in the High Court, in his 2008 decision in the case of Dan Morrissey (Irl) Ltd v Morrissey:
“The lis pendens is designed to bring to the attention of third parties who may be interested in acquiring the property, or a charge over it, the fact that there are proceedings in being in relation to the property which might affect their interests.”
The most significant effect of the registration of a lis pendens is that a purchaser, mortgagee or lessee may find that they have acquired their interest in the relevant property subject to rights asserted by a plaintiff in the particular claim the subject of the lis pendens which appears on the relevant register. This register is maintained in the Central Office of the High Court, as specifically provided for in s.121 of the Land and Conveyancing Law Reform Act 2009 (the 2009 Act). This register is arranged in alphabetical order, according to the surname of the person whose interest in land is intended to be affected by the relevant proceedings. The application form for the registration of a lis pendens will contain basic information including the name and address of the applicant, the court in which the proceedings have been commenced, and the title and record number of the proceedings as well as the name, place of residence and description of the person whose estate is intended to be affected by the registration. Searches will reveal the name of the party against whom a lis pendens has been registered. However, the application does not have to detail the nature of the claim. Thus, it can and does happen that a lis pendens appears on the Central Office register even though the proceedings underpinning the registration may ultimately be found not to constitute a claim to an estate in land. This can arise because registration of a lis pendens is essentially an administrative
process. As the High Court observed in Morrissey:
“A lis pendens can be registered without reference to the court. Such registration clearly does not, therefore, involve the exercise by the court of any consideration or discretion as to whether the lis pendens should be registered.”
Section 52 of the 2009 Act provides that subject to exceptions, which do not include lis pendens, ”… the entire beneficial interest passes to the purchaser on the making of an enforceable contract for the sale or other disposition in land”.
Hence, after December 1, 2009, a purchaser under an enforceable contract acquires the full beneficial interest in the property and this takes priority over any lis pendens registered after the date of the contract in question. Section 125 of the 2009 Act provides that a lis pendens does not bind a purchaser of unregistered land without actual knowledge of it unless it has been registered in the Central Office of the High Court within five years before the making of the conveyance to the purchaser. The Central Office register of lis pendens affecting land does not specify whether title to the land in question is registered or unregistered. However, the effect of the registration of a lis pendens may be significantly different, depending on whether *59 the property in question comprises registered land and whether the lis pendens has also been registered as a burden on the relevant folio.
A Registered “burden” In so far as registered land is concerned, a lis pendens can be registered as a burden on the
relevant folio. Section 69(1) of the Registration of Title Act 1964 (the 1964 Act) makes it clear that:
There may be registered as affecting registered land any of the following burdens, namely…
(i) any judgment mortgage, recognizance, State bond, inquisition or lis pendens, whether existing before or after the first registration of the land;
If it appears from the application that only part of a folio is affected by the legal proceedings on which the lis pendens is based, the relevant part of the folio affected can be identified. By virtue of s.52(1) of the 1964 Act, a transfer of land by the full owner to a purchaser for valuable consideration will be subject to those burdens registered as affecting the land, ie pursuant to s.69 of that Act. Such a transfer will also be subject to burdens affecting the land, without registration, by virtue of s.72 of the 1964 Act, but these do not include a lis pendens. Unlike the position applying to the High Court Central Office register, registration in the Land Registry every five years is unnecessary and for so long as the lis pendens remains undischarged, it will remain on the register and bind a purchaser. Authoritative commentators have suggested that a purchaser for value of registered land where a lis pendens has not been registered as a burden on the folio, will take the land entirely free of a plaintiff's rights as claimed, even where a lis pendens appears on the register in the Central Office. However, where searches reveal the registration of a lis pendens on the Central Office register, the commercial reality will invariably be a reluctance if not a refusal on the part of a purchaser to complete the transaction.
“Freeze any Further Disposition”
On the June 26, 2014, Cregan J. delivered judgment in Tola Capital Management LLC v Linders (No.2), in which the High Court specifically recognised the very dramatic effects of the registration of a lis pendens. Cregan J. summarised the consequences of the registration of a lis pendens in the following terms:
“… [T]he essential nature of a lis pendens appears to be that if there is a lis which is pending in respect of property, then the party against whom the lis is registered should not sell, assign, mortgage or otherwise dispose of his lands. If he does so and the purchaser is aware of the lis, then the purchaser takes the lands subject to the rights and liabilities in respect of the land which might be subsequently declared by the court in those proceedings. In most
cases that is a sufficient deterrent to ensure that a vendor will not sell and a purchaser will not purchase the land until the lis has been determined. Therefore, the effect of a lis pendens and the registration of a lis pendens is effectively to freeze any further disposition of land until the proceedings are determined.”
The Effect of an Injunction
The practical effect of the registration of a lis pendens may well be that a mortgagee refuses to take the relevant property as security and to advance any funds on foot of same. Equally, a purchaser may be unwilling to complete a purchase of land owned by the party against whom a lis pendens has been registered in the Central Office. Potential purchasers or mortgagees and their legal advisors may well take this approach, regardless of how title to the property in question is held and irrespective of whether the lis pendens, which appears on the Central Office register, also appears as a burden on any relevant folio. Therefore, given the understandable caution with which a potential purchaser will treat a lis pendens, the effect of a registration in the Central Office can be similar to the granting by the court of an injunction preventing a sale. These commercial consequences have been acknowledged recently in explicit terms by the High Court. Cregan J. put it thus in Tola (No.2):
“It can, therefore, have the same effect as an interlocutory injunction restraining the disposition of land pending the hearing of the action without the necessity of the moving party having to establish that there is a serious issue to be tried, that damages are not an adequate remedy and that the balance of convenience is in favour of the application.
Moreover, the moving party does not have to give an undertaking as to damages.”
As will be explored more fully below, would-be *60 vendors have found that the effect of the registration of a lis pendens is equivalent to an injunction preventing a sale from completing. Yet the party registering the lis pendens neither had to apply to court for injunctive relief, nor incur the costs of so doing. They merely had to complete a one-page form to accompany the legal proceedings already issued. On the other hand, where objection is taken to the validity of the lis pendens registered, the party affected will be put to the considerable cost and effort associated
with applying to the court to vacate the lis pendens in question. That being so, a crucial issue to explore is the essential nature of a lis which a plaintiff is entitled to register as a lis pendens. The Meaning of the Term Lis Pendens The 1974 judgment of Megarry J. in Calgary and Edmonton Land Co. Ltd v Dobinson10begins as
follows:
“The main question in this motion is the meaning of the term ‘lis pendens’ or, to put it more accurately and in more modern language, the term ‘a pending land action…’”
The latter expression, in the English Land Charges Act of 1972, was defined as meaning “any action or proceedings pending in court relating to land or any interest in or charge on land”. The defendant in the case claimed to be a creditor of the plaintiff company and had issued proceedings against it claiming that sales of its property by the company's liquidator were at a gross undervalue and should be restrained. It was on foot of these proceedings that the defendant had procured registrations in the relevant register of pending actions. In his judgment, Megarry J. referred to nineteenth century authorities supporting the principle that the essence of a lis pendens is that the claim is to a proprietary right in land. At p.107 of his judgment, Megarry J. put the matter in the following terms:
“In In re Barned's Banking Co. Cairns L.J. said, at p.178, that lis pendens ‘always implied a claim of right, or a claim to charge some specific property’. In Wigram v. Buckley Chitty J. said, at p.486: ‘Now, the doctrine of lis pendens applies not to every suit, but to a suit the object of which is to recover or to assert title to a specific property’”.
“A substantive right adverse to the owner”
Counsel for the defendant had argued that to be capable of registration under the relevant statute the claim need only be in relation to land. However, in light of the earlier authorities, Megarry J. held that those rights or claims capable of registration under the statute and, therefore, protection under the legislation were far more limited. He identified the essential nature of a lis, properly registrable as a lis pendens under the relevant statute, in the following terms:
“The rights made registrable… are in general substantive rights in the land. Those with specified rights or claims to the land or any interest in it must register those rights or claims (and so give warning to purchasers) or else suffer the consequences of failure to register. What is protected is some substantive right adverse to the owner, rather than a mere fetter on the owner's rights of disposition.”
A Claim to an Estate or Interest in Land
Some two decades later in A.S. v G.S.,14the Irish Courts had to consider whether proceedings seeking a property adjustment order in the context of judicial separation proceedings were registrable as a lis pendens. Citing the English Court of Appeal in Perez- Adamson v Perez-Rivaz, 15the High Court held that they were. That a claim to an estate or interest in land is essential for a lis pendens to be registrable is made clear from the 1994 decision by Geoghegan J.:
“Although the Court of Appeal [in Perez- Adamson] partly relied on the wording of the Act of 1972, it seems clear that the English legislation referred to was nothing more than a replacement of the Judgments Act, 1839, which was the English equivalent of the Act of 1844 in Ireland and did not, in any relevant or significant way, alter the nature of a lis pendens, the circumstances in which it could be registered and the effect of registration. Nicholls L.J. raises what is the real problem about regarding an application for a property adjustment order as a registrable lis pendens. At the time of the institution of the proceedings the applicant spouse has no estate or interest in the property sought to be transferred. She or he has merely a claim to it. Is that sufficient? Nicholls L.J. points out that in Whittingham v.
Whittingham [1979] Fam.9, the English Court of Appeal decided that it is sufficient. With some hesitation I have also come to the *61 conclusion that an application for a property adjustment order relating to specific property is a registrable lis.”
The 1884 Act The Judgments (Ireland) Act 1844 (the 1844 Act) referred to by Geoghegan J. in A.S. v G.S. introduced the system of lis pendens registration. This was at a time when all title to land in Ireland was unregistered. Section 10 of the 1884 Act provided that:
No lis pendens shall bind or affect a purchaser or mortgagee without express notice thereof, unless and until a memorandum or minute containing the name and the usual or last known place of abode, and the title, trade or profession, of the person whose estate shall be intended to be affected thereby, and the court of equity, and the title of the cause or information, and the day when the bill or information was filed, shall be left with such officer
so to be appointed as aforesaid, who shall forthwith enter the same particulars in a book as aforesaid, in alphabetical order, by the name of the person whose estate is intended to the affected by such lis pendens, and which book is to be entitled ‘The Index to Lis Pendens’.
Prior to the passing of the 1844 Act, it appears that if a person acquired an interest in land from a vendor, without any notice of proceedings against the vendor relating to that land, the purchaser nevertheless acquired it subject to the rights in the land asserted by the plaintiff in those proceedings. The public policy basis for the pre-1844 Act position can be understood from Lord Cranworth's comments in Bellamy v Sabine.18In his Lordship's view, the central issue was not whether or not a purchaser had notice of a lis pendens but the need for certainty in relation to a court's determination of claims concerning land, regardless of the effect on purchasers of such land, who acquired their interest prior to the outcome of the litigation in question. He put it as follows:
“It is scarcely correct to speak of lis pendens as affecting a purchaser through the doctrine of notice, though undoubtedly the language of the courts often so describe its operation. It affects him not because it amounts to notice, but because the law does not allow litigant parties to give to others, pending the litigation, rights to the property in dispute so as to prejudice the opposite parties. Where a litigation is pending between a plaintiff and a
defendant as to the right to a particular estate, the necessities of mankind require that the decision of the court in the suit shall be binding, not only on the litigant parties, but also on those who derive title under them by alienations made pending the suit, whether such alienees had or had not notice of the pending proceedings. If this were not so, there could be no certainty that the litigation would ever come to an end. A mortgage or sale made before
final decree to a person who had no notice of the pending proceedings would always render a new suit necessary, and so interminable litigation might be the consequence.”
Legislative intervention, in the form of the 1844 Act, altered significantly the common law position which had pertained previously. It is not difficult to imagine the harsh effect on individual purchasers who, despite having no notice whatsoever of litigation against the vendor from whom they were purchasing property, subsequently found that their interest in land was subordinate to the rights subsequently established by a plaintiff in proceedings of which they were utterly unaware.
A System of Registration
The purpose and effect of the 1844 Act was summarised clearly by Geoghegan J. in A.S. v G.S. as follows:
“… [T]he purpose of the Act of 1844 was to provide a system of registration but not to alter the nature of a lis pendens. From and after the passing of the Act of 1844 purchasers and mortgagees deriving title from a defendant did not take subject to rights declared in the litigation if they had no actual notice of the litigation and the proceeding was not registered as a lis pendens under the Act.”
The 2009 Act
Section 10 of 1844 Act is essentially re-enacted in s.121 of the Land and Conveyancing Law Reform Act 2009 (the 2009 Act). Given their importance, it is worthwhile setting out, verbatim, certain provisions in the 2009 Act which relate to the registration and vacation of a lis pendens. Section 121(1) of the 2009 Act states that “A register of lis pendens affecting lands shall be maintained in *62 the prescribed manner in the Central Office of the High Court” whereas s.121(3) provides that “Such particulars as may be prescribed shall be entered in the register”. Section 121(2) states that:
The following may be registered as a lis pendens:
(a) any action in the Circuit Court or the High Court in which a claim is made to an estate or interest in land (including such an estate or interest which a person receives, whether in whole or in part, by an order made in the action) whether by way of claim or counter-claim in the action; and
(b) any proceedings to have a conveyance of an estate or interest in land declared void.
Section 123 of the same Act provides that, “Subject to section 124, a court may make an order to vacate a lis pendens”, and goes on to provide that the application to the court may be made by the person who registered the lis pendens or any person affected by it. An application by the latter must be on notice to the party who registered the lis pendens. The court is empowered, under s.123(b)(ii), to vacate a lis pendens:
(i) where the action to which it relates has been discontinued or determined, or
(ii) where the court is satisfied that there has been an unreasonable delay in prosecuting the
action or the action is not being prosecuted bona fide.
Vacating a Lis Pendens
In Moorview Developments Limited & Ors v First Active Plc and & Ors,21Clarke J., who was then in the High Court, considered an application brought by the second-named defendant, Mr Ray Jackson, who was the receiver appointed by the first-named defendant to a number of companies which registered a lis pendens against him. The basis for the receiver's application was his argument that he did not have any interest in the relevant lands and that the proceedings, insofar as they concerned him, did not involve a claim against him relating to any interest in the lands concerned. He argued that the lis pendens was improperly registered in those circumstances and should be vacated. The companies opposed his application.
“A sufficient piece of litigation”
Clarke J. made it clear in his judgment that the relevant test to determine whether the lis pendens should be vacated or not does not depend on the effect of the registration. Rather, the test was whether the litigation against the individual was sufficient to justify the continuance of the lis pendens. Clarke J. analysed the matter on a first principles basis as follows:
“Either the lis pendens is properly registered, in which case it must remain in place, or it is not properly registered, in which case it should be vacated. Mr. Jackson is entitled to have the lis pendens vacated if it is not properly registered irrespective of whether its registration has any effect on him. The test is not similar to the consideration which a court may have to give in the case of an interlocutory injunction, where the court needs to balance the interests of the parties concerned. There either is or is not a sufficient piece of litigation in place as
against Mr. Jackson to warrant the continuance of a lis pendens. If there is not, then Mr. Jackson is, in my view, entitled to a vacation of that lis pendens as of right.”
Lacking Urgency
Suggestions that the matter lacked urgency and that the receiver's application could conveniently be left over until all the other issues in the proceedings had been determined were also rejected emphatically by Clarke J. as irrelevant to the analysis which the Court had to carry out:
“If Mr. Jackson is properly entitled to have the lis pendens vacated, then he is entitled to have that done now rather than to have to wait until other unconnected issues are determined.”
Interest in Land—A Receiver's Position
Clarke J. held that the underlying rationale behind the registration of a lis pendens is as noted by Geoghegan J. in A.S. v G.S.24He made it clear that the issue between the parties must relate to the ownership of some interest in land. Furthermore, in order for a lis pendens to be validly registered in respect of a particular defendant, the issues being bona fide pursued by the plaintiff against that particular defendant must relate to the ownership of some interest in land. That being so, the High Court granted the receiver's application to vacate the lis pendens against him, holding that:
“A receiver does not own any interest in lands *63 which are properly described as being owned by the company to which the receiver has been appointed. The lands remain owned by the company (in receivership). The fact that the receiver may well be entitled, provided that all necessary formalities are complied with, to execute a deed of transfer of a relevant interest in property in the name of the company does not alter that fact. It is the company which transfers the property. The receiver is simply entitled, by virtue of the debenture in favour of the relevant lender, and his appointment, to cause the company to effect the transfer… In those circumstances, it does not seem to me that a receiver has a sufficient interest in any land purportedly owned by the company to which the receiver has been appointed so as to warrant the registration of a lis pendens against the receiver arising out of proceedings relating to those lands. In an appropriate case there is no reason why a lis pendens cannot be registered against a company in receivership.”
A Future Interest in Land
The authorities make clear that to be registrable as a lis pendens, the claim must relate to an interest in land, although the interest need not be in existence on the date when the proceedings are instituted. In Cunnane v Shannon Foynes Port Co.,26Murphy J. delivered judgment on behalf of a three-judge Supreme Court also comprising Murray J. and Geoghegan J. His lordship made it clear that to be registrable, a claimant need not have an interest in land at the time of registration of a lis pendens:
“… [W]here a plaintiff does not at the commencement of proceedings have a proprietary interest in the premises in respect of which a claim is made does not… mean that the litigation is not registrable.”
No Proprietary Interest or Claim
The court held that where the claim, if successful, would not result in an existing interest in or right against the premises, there was no basis upon which the lis pendens could validly be registered. In that case, the plaintiff appealed against an order of the High Court vacating a lis pendens which he had registered under the 1844 Act. The plaintiff had brought his action seeking to prevent an intended sale of property on the basis that it was allegedly being sold for less than open market value contrary to provisions in the Harbours Act 1996. The plaintiff also sought a declaration that he was entitled to bid for the premises and have that bid taken into account in determining the open market value of the property. Crucially, however, the Supreme Court found that the plaintiff neither had a proprietary interest when instituting the proceedings, nor would he acquire such an interest, even in the event of being fully successful at trial. This proved fatal to the appeal brought by the defendant/respondent. This lis was not properly registrable as a lis pendens. The position was set out as follows by Mr Justice Murphy:
“Mr. Cunnane does not claim to have an option to purchase the premises or a right of first refusal thereon. Assuming, for the present purposes only, that sale of the premises at “its open market value” requires that they placed [sic] on the market so that members of the public may bid for it, his only role in the matter in such an event would be as potential and probable bidder. He claims no right in the property but asserts that Shannon have a duty to ascertain and obtain the market value of the premises and that this would involve affording an opportunity to Mr. Cunnane and other interested parties—including the other tenants of the premises—to bid for the premises. Mr. Cunnane's only possible claim against the premises is that in the event of their being offered for sale by public auction or tender he might be the highest bidder therefore and so obtain ownership. As matters stand he has no
proprietary interest in the premises but, more than that, he has no claim to or against the premises. If he succeeded fully in the proceedings he might have the possibility of becoming the owner but the successful outcome of the action would not of itself give him any estate whatever in the premises.”
Tougher (No.2)
On May 15, 2014, Cregan J. delivered his judgment in Tougher v Tougher's Oil Distributors (No.2).29Among the issues which the High Court had to consider was an application pursuant to s.123 of the 2009 Act to vacate the lis pendens registered on the plaintiff's application against lands comprised in 12 different folios. The court described the plaintiff's proceedings underpinning the lis pendens in the following terms: *64
“… The plaintiff has a stateable case against the defendants for damages for breach of contract, negligence and breach of duty which he has set out in his plenary summons. The claim is both stateable and sustainable and not bound to fail.”
Company Lands—A Shareholder's Lis
However, the plaintiff also asserted an alleged agreement with the second-named defendant, pursuant to which the plaintiff claimed to be entitled to a shareholding in the first-named defendant. It was also claimed that, by virtue of the alleged shareholding, the plaintiff had a proprietary interest in the company's assets, in particular, different portions of land. Cregan J. rejected this proposition in the clearest of terms:
“… [P]art of Mr. Tougher's claim is a claim to be legally or beneficially entitled to the assets of the company. In my view, this part of his claim is clearly bound to fail for the following reasons:-
- It is a fundamental principle of company law that shareholders have a right to a share in the company but they do not have a direct right to have a share in any of the company's assets.” Cregan J. cited with approval the decision of Finlay Geoghegan J., delivered on December 20, 2013, in Ciara Quinn v Irish Bank Resolution Corporation Ltd (in special liquidation), in particular. At para.21 of her judgment, Finlay Geoghegan J. stated the following:
“It is the most basic principle of company law that a shareholder does not by reason of his shareholding have any proprietary interest in the company's assets. In Kerry Co-operative Creamery Ltd. -v- An Bord Bainne Co-op Ltd. [1980] ILRM 664, Costello J. cited with approval the following statement in Keane ‘Company Law in the Republic of Ireland’ repeated at para.17.01 of the 4thEdition:
‘Where a company has a share capital, each of the members own at least one share of that capital and is consequently a shareholder in the company. This does not mean that he is the owner of any part of the company's assets or that he owns them jointly with his fellow shareholders.’”
In the circumstances, those portions of Mr Tougher's claim to the effect that he was legally or beneficially entitled to an interest in the company's lands, and any specific performance claim regarding such lands, were struck out. The High Court held that the striking out of those portions of the claim amounted to the action having been “determined” within the meaning of s.123(b) of the 2009 Act. That being so, the court also made an order vacating the lis pendens which had been registered on the lands comprised in the relevant folios.
Notice to Complete a Sale
In Roche v Leacy,the High Court had to consider a claim for specific performance which arose in the following circumstances. The plaintiffs had contracted to sell a portion of registered land to the defendant. Prior to the completion, a lis pendens was registered in the Central Office, relating to family law proceedings in the Circuit Court between the first-named plaintiff's wife, as applicant, and the first-named plaintiff, as respondent. The steps taken by the plaintiffs' solicitors to deal with the lis pendens with a view to completing the sale were detailed at length in the judgment given by Laffoy J. on February 29, 2012. The defendant served a Notice to Complete, pursuant to Condition 40 of the General Conditions of Sale, on January 28, 2009, giving a 28 day period expiring on March 2, 2009. Meanwhile, the first-named plaintiff and his wife agreed that an ex parte application to the relevant county
registrar would be made to vacate the lis pendens. The plaintiffs' solicitors wrote to the defendant's solicitors on February 24, 2009 confirming that the county registrar had ordered, on February 23, 2009, that the lis pendens be vacated. Notwithstanding the foregoing, the defendant's solicitors took the view that the plaintiffs had not furnished clear unencumbered title to the property in sale, prior to the expiry of the completion notice period, and purported to
rescind the contract. As of the March 2, 2009, no formal order vacating the lis pendens had yet been perfected, although this became available from March 6, 2009. The relevant form to procure a memorandum of vacate was signed on behalf of the county registrar on March 16, 2009 and received by the Central Office of the High Court on March 25, 2009. The defendant's solicitors persisted in their refusal to complete the purchase, having obtained a judgment search carried out on March 23, 2009 showing the existence of the lis pendens in the Central Office against the first named plaintiff.
When is a Lis Vacated?
Precisely when a lis pendens has been vacated may well be crucial to parties who are anxious to complete a property transaction which the registration of a lis pendens has interfered with. Of relevance in the present case was whether the lis pendens had been vacated prior to the expiry of the notice to complete the sale. Clarity on the point was also provided by Laffoy J., who emphasised the immediate effect of an order vacating the lis pendens in question stating:
“The order of the country registrar was effective from the moment it was pronounced in court. Mr. Cullen who conveyed the information that the order had been made, as a solicitor, is an officer of the court. Irrespective of the fact that the vacation of the lis pendens had not been noted on the index in the central office, in my view, the defendant was no longer on notice that there was a lis pendens affecting the property, because he had been informed that it had been vacated. If he had completed the purchase on March 1, 2009, in my view, he
would have obtained good marketable title to the lands, the subject of the contract free from any rights of Mrs. Roche.”
“Title free from all claims”
Laffoy J.'s decision, granting an order for specific performance against the defendants, is also of particular note, given that it concerned registered land and a situation where the lis pendens, although appearing on the High Court Central Office Register, was not registered as a burden on the relevant folio. The court's findings were in the clearest terms:
“Having regard to the nature of the title to the land the subject of the contract, it is possible to state with absolute confidence that, if the defendant had completed the purchase of the lands, the subject of the contract on the 1stor 2ndMarch 2009, the defendant would have acquired title to the lands free from all claims by Mrs. Roche as the applicant in the proceedings in the circuit court the subject of the lis pendens which had been registered by her. The crucial factors were that the property the subject of the contract was registered land and, notwithstanding what was pleaded in the defence, the lis pendens was not registered as a burden on the relevant folio.”
Abuse of Process
Even where proceedings exist which claim an interest in land, the High Court will not be slow to strike down the lis pendens if the underlying proceedings constitute an abuse of process. The 2012 decision by Ryan J. in Kelly v Irish Bank Resolution Corporation Ltd illustrates the point. The plaintiffs' mortgagee issued ejectment proceedings against them in the Circuit Court which culminated in a consent order for possession of the relevant property, dated June 30, 2010. There was a stay on the execution of the order for a period of six months, which stay was extended by agreement between the parties from time to time but, ultimately, the Order was sent to the Sheriff for execution. In response, the plaintiffs issued High Court proceedings claiming damages for slander of title and trespass to the mortgaged property and also sought a declaration that the order obtained by the defendant for possession of the property was in breach of contract, void and invalid. The plaintiffs registered a lis pendens against the property on the same day as issuing the plenary summons but did not serve the summons, nor did they notify the bank of the registration of the lis pendens. In his September 26, 2012 judgment, Ryan J. recognised practical realities and stated, inter alia, that:
“If the lis pendens is not vacated, it will impede and may prevent the completion of the sale.”
It is clear from Ryan J.'s decision that, where the court is satisfied that legal proceedings constitute an abuse of process, it follows that it will involve an absence of bona fides for the purposes of s.123 of the 2009 Act. Citing earlier authority in relation to instances of abuse of process, Ryan J. had the following to say:
“In the case of O'Malley v Irish Nationwide Building Society and Others (unreported, 21st January 1994) Costello J. held that what was in effect an attempt in those proceedings to appeal against an Order of the Circuit Court in a manner that was not permitted constituted an abuse of process. Giving the judgment of the supreme court in McCauley a minor -v- McDermott and McCauley [1997] 2 I.L.R.M. 486, Keane J. (as he then was) cited with
approval a comment by Lord Halsbury L.C. in Reichel -v- McGrath as follows:
‘I think it would a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same *66 case again.’
In this case, it seems to me that everything goes back to the consent order for possession of the property that was made by the Circuit Court. I think the bank is correct in suggesting that the plaintiffs are endeavoring to re-visit and appeal, in effect, that order. The proceedings, insofar as they assert and interest in land such that would justify the registration of a lis pendens, constitute an abuse of process. The fact that the plaintiffs are unable, even when faced with this motion, to suggest any detail or even any basis for advancing a claim as to an interest in land, is very
telling, and in my view, is quite fatal to their claim and confirms the absence of bona fides in doing so. It seems to me to be quite obvious that the claim at paragraph (b) of the endorsement on the summons was introduced for the sole purpose of providing a colourable justification for registering a lis pendens in the hope of frustrating a sale of the property.”
Delay in Registering a Lis Pendens
We can see from Ryan J.'s decision in the Kelly case that the High Court will not be slow to vacate a lis pendens where the underlying claim is brought purely to try and justify the registration of a lis pendens. What of a situation where a plaintiff waits years to register a lis pendens? In Dan Morrissey (IRL) Ltd v Morrissey,40the High Court had to deal with an application to vacate a lis pendens registered in the Central Office some six years after the litigation
commenced. The plaintiff claimed ownership of certain lands of which the defendant was the registered owner. The ownership claim in the proceedings, which also involved a claim to a right of way, involved only a portion of the defendants' folio. The plaintiff had not registered the lis pendens as a burden under the Land Registry Rules. It appears that, as a result of a conversation relating to the lands, the defendants intimated that a charge had been granted in favour of their bank as part of a reorganisation of finance, and that this prompted the plaintiff to register a lis pendens to put the bank on notice of the existence of the proceedings.
A Lis Pendens Belatedly Registered Without Notice
In their application seeking to vacate the lis pendens, the defendants pointed to the delay in registering the lis pendens which was filed without any advance notice or warning to them. The defendants also complained that it was open to the plaintiff to register a lis pendens as a burden on any relevant folio but, not having done so, a person conducting a search in relation to the defendants could not get clarity from the public record as to the extent of the plaintiffs' claims. In his judgment, Clarke J., then in the High Court, rejected the defendants' application, holding that:
“The whole point of registering a lis pendens is to protect the plaintiff's interests. The plaintiff is entitled to protect those interests in all circumstances subject only to having a bona fide claim to protect. For all those reasons, it does not seem to me that the fact that a lis pendens was not registered at an early stage, or that it was somewhat belatedly registered without notice to the defendant, is of any materiality to the entitlement, as of right, of a plaintiff to put the public on notice of the existence of the proceedings concerned.”
Registration at any Time a Plaintiff Chooses
The fact that time is not of the essence with regard to the registration of a lis pendens, so long as the underlined proceedings concern a bona fide claim, was set out in the clearest terms by Clarke J.:
“Subject only to the overriding requirement that the lis which is said to be pending must be bona fide, it seems to me that a plaintiff is entitled to register the lis pendens as of right and at any time that he chooses.”
No Obligation to Register Elsewhere
In relation to whether a plaintiff who had registered a lis pendens on the Central Office Register was obliged to register the lis pendens as a burden on the relevant Land Registry folio, Clarke J. was clear that no such obligation exists:
“Provided that there is bona fide claim, then a plaintiff is entitled to register a lis pendens and is under no obligation to engage in any other form of registration. The fact that a plaintiff may choose to also register the lis pendens as a burden on relevant folios does not take away from the entitlement to register the original lis pendens in the central office.”*67
Tola (No.2)
On June 26, 2014, Cregan J. gave judgment in the High Court in Tola Capital Management LLC v Linders (No.2).44The plaintiff in that case was a limited liability company incorporated under the law of Delaware in the United States of America, with a principal place of business in New York. The defendants were company directors, and in the proceedings, the plaintiff sought specific performance of a certain agreement which, on the defendants' case, had previously been terminated. The plaintiff claimed that the agreement subsisted and entitled it to acquire certain properties owned by companies controlled by the defendants. The relevant provisions in the agreement, relied on by the plaintiff, set out the mechanism for the purchase. It involved the establishment of a “newco” to be wholly owned and controlled by the plaintiff, which newco would initially purchase certain loans secured on the properties and would subsequently take a transfer of the properties themselves from companies which were not parties to the agreement but which owned the properties in question. The plaintiff sought injunctions from the High Court, including an Order restraining the defendants from selling, disposing of, charging or otherwise dealing with
named properties. The plaintiff also registered a lis pendens against each of the two individual defendants. In a judgment delivered on June 5, 2014, Cregan J. rejected the plaintiff's application for injunctive relief. The defendants brought an application to the High Court seeking to vacate each lis pendens. Cregan J.'s 47-page judgment delivered on June 26, 2014, contains a very comprehensive analysis of the authorities here and in the UK, following which his lordship focused on ss.121 and 123 of the 2009 Act.
Definitions and the 2009 Act
Mr Justice Cregan noted the following in relation to certain key phrases which had, and had not, been defined in the 2009 Act:
“Section 3 is the interpretation section and sets out the legal definitions of certain terms. The term ‘lis pendens’ is, however, not defined in the Act. The phrase ‘estate or interest in land’ is not specifically defined in the Act. However, the phrase ‘legal estate’ is defined in the interpretation section as having the meaning given to it by s.11(1). Likewise, the phrase, ‘legal interest’, is defined in the interpretation section as having the meaning given to it by
s.11(4) of the Act. Section 10 (1) of the Act provides that:-
‘ The concept of an estate in land is retained and, subject to this Act, continues with the interests specified in this part to denote the nature and extent of land ownership’.
Section 11 (1) of the Act provides that:
‘the only estates in land which may be created or disposed of are the freehold and leasehold estates specified by this section’
Section 11 (4) of the Act sets out the only legal interests in land which may be created or disposed of and this includes ‘an incumberance’. The term ‘incumberance’ is defined in s.3 as including, inter alia, an annuity charge, lien and mortgage.”
“Whether the lis pendens was properly registered at all”
As Cregan J.'s judgment makes clear, the plaintiff submitted that, once a lis pendens appeared on the Central Office register, the only issue which the court could consider was whether the lis pendens should be vacated by the court if it came within s.123(b)(ii), i.e. if the court was satisfied that the action was not being prosecuted bona fide. Cregan J. rejected that view in the clearest of terms. He put the matters as follows:
“Section 121 (2) of the Land and Conveyancing Law Reform Act, 2009, provides that only certain matters may be registered as a lis pendens, i.e. those matters that fall within the precise terms of s.121(2)(a) and (b). If a lis which has been registered as a lis pendens does not fall within the statutorily permissible type of action which can be registered as a lis pendens, then it follows that the lis should not have been registered as a lis pendens in the first place. Thus, the court may consider whether the lis pendens was properly registered at all. It is only if the court is satisfied that the lis pendens was properly registered that the court goes on to consider whether to vacate the lis pendens on the grounds set out in s.123 of the act.”
The Conditions for a Valid Lis
Cregan J.'s decision clarifies in very explicit terms the conditions which a lis must satisfy in order to *68 constitute a valid lis, properly registered in accordance with the provisions in the 2009 Act. The inter relationship between the explicit statutory provisions and guidance from the jurisprudence to date was set out as follows:
“… in order to come within the relevant statutory section, a person seeking to register a lis pendens must show:-
(a) That there is an action in the High Court (or the Circuit Court)
(b) In which a claim is made to an estate or interest in land.
(c) By way of claim in the action.
However, in light of the authorities which I have set out above, in order to come within the statutory definition set out in s.121(2)(a) a party seeking to register a lis pendens has to establish:-
(a )That the plaintiff is claiming a proprietary estate or interest in land.
(b) That the defendant has an estate or interest in the land in which the plaintiff is claiming an estate or interest.
(c) That the proceedings themselves make a claim to a proprietary estate or interest in the saidlands.”
Cregan J. then applied the foregoing tests to the facts in the case. In relation to whether the plaintiff was truly claiming an estate or interest in lands, he found, having regard to the wording of the relevant agreement, that
”… what was agreed between the parties was that the plaintiff company itself would never acquire the properties in question”.
The court found that what the plaintiff and the two defendants had agreed was that the properties would be transferred to a “newco”. However, as Cregan J. held, this was”… a company which is not yet in existence. It has no legal personality. Therefore, as at the date of the registration of the lis pendens the person who was claiming a title or interest over lands was in fact a legal entity which did not exist.” In so far as newco would be 100 per cent owned and controlled by the plaintiff, the court held that, as properties would be owned by the plaintiff's subsidiary, they would not be held by the parent plaintiff. Hence, the plaintiff lacked the essential claim to an estate or interest in property necessary to underpin a valid lis pendens. Cregan J. also found, on the facts, that the defendants
did not, personally, have the requisite estate or interest in the properties, the subject of the proceedings. All properties were owned by companies in which the defendants had a shareholding. That being so, no lis pendens should have been registered against either of the defendants. The court acknowledged that the claim in the proceedings was one relating to land but, echoing earlier jurisprudence, Cregan J. explained why this is not sufficient to support the valid registration of a lis pendens. He put thus:
“The plaintiff's case could be regarded in a broad sense as a claim relating to land in that the plaintiff is alleging that a yet to be formed company has a legal right to have transferred into its name certain lands. However, for reasons set out above, that is not sufficient on its own to make the proceedings the type of proceedings which can be registered as a lis pendens.”
Bona Fide Prosecution of an Action
Having decided that the plaintiff's action did not relate to claim by it to an interest in land, and having decided that the lis was not properly registered and should be vacated, Cregan J. went on to look, specifically, at the meaning of s.123(b)(ii) of the 2009 Act.52That section confers explicit power on a court to vacate a lis pendens when that court is satisfied that the action is not being prosecuted bona fide. Cregan J.'s decision provides very useful clarity in relation to the wording as employed in the section:
“The subsection does not refer to a situation where a claim is not being brought bona fide, but rather “where the action is not being prosecuted bona fide”. In those circumstances, one must consider what is meant by the phrase ‘the action is not being prosecuted bona fide’.
In my view this phrase can be interpreted as meaning:
A) That the action as a whole is not being prosecuted in a bona fide manner, or
B) That specific steps in the action are not being prosecuted in bona fide manner.
In my view, both interpretations are valid and the meaning of the section is that a court may make an order vacating a lis pendens if it is *69 satisfied that the action as a whole is not being prosecuted in a bona fide manner or if particular steps in the prosecution of the action are not being taken in a bona fide manner.”
Cregan J. went on to find that, on the particular facts of this case, the action was not being prosecuted in a bona fide manner. This included a finding by the court that, as soon as the plaintiff learned that the properties in question were not owned, personally, by the defendants in the proceedings against whom each lis pendens had been registered, it was no longer appropriate to maintain a lis pendens against the two defendants.
A Lis Pendens “as a tactic”
Mindful of the commercial effect of the registration of a lis pendens on a party's ability to complete contracts with others, the court was forthright in its views about the inappropriateness of the plaintiff opposing the defendants' application to vacate each lis pendens. Cregan J.'s decision makes it clear that the High Court is alive to the potential for a lis pendens to be registered as part of a tactic in a wider commercial dispute between parties:
“… [D]espite the knowledge which the plaintiff gleaned from the replying affidavits of the defendants, and despite the specific pleadings in the plaintiff's statement of claim, the plaintiff persisted in maintaining the lites pendentes against the two individual defendants. It also insisted on contesting in full the defendants' application to vacate the lites pendentes. This is not explicable in the normal course of events and, therefore, gives substance to the defendants' contention that the registration and maintenance of the lis pendens by the plaintiff is a cynical and opportunistic attempt to destroy the defendants' refinancing agreement… with a third party financier and to extract the maximum commercial advantage using the registration of a lis pendens as a tactic.”
Inherent Jurisdiction of the Court
Cregan J.'s decision in Tola (No.2) is also significant in that, quite apart from the interpretation of the nature and extent of the statutory power to vacate a lis pendens, the High Court has also made it clear that there exists a parallel power to vacate a lis pendens, which is based on the inherent jurisdiction of the court to do so in appropriate circumstances. Cregan J. explained this power as follows:
“In light of the authorities set out above, it is also clear that the courts have an inherent jurisdiction to strike out a lis pendens either where it is of the view that the lis pendens was not properly registerable or that the action was not being prosecuted bona fide. On the facts of this case, I would also have struck out the lites pendentes on both of the above grounds pursuant to the inherent jurisdiction of the court.”
Conclusion
The legal effect of the registration of a lis pendens on a potential purchaser may be very significant. The commercial effects of the registration of a lis pendens on a would-be vendor can be profound. Recent decisions demonstrate that the High Court is alive to both the legal and practical consequences of such a registration. The essential nature of a valid lis pendens, namely that the lis must relate to an estate or interest in land has not been altered by the coming into force of the 2009 Act and the jurisprudence which considered registrations under the 1844 Act is
still highly relevant. As Clarke J.'s decision in Moorview and Cregan J.'s very recent decisions in Tougher (No.2) and Tola (No.2) demonstrate, the High Court is willing to take a first principles approach to an application to vacate a lis pendens. Even though the explicit statutory power, under s.123 of the 2009 Act, is to vacate a lis pendens on certain specified grounds, including where the court is satisfied that the action is not being prosecuted bona fide, that will not prevent the court from striking down a lis pendens which the court finds was not properly registered in the first place. Given that to procure the registration of a lis pendens involves no judicial oversight, one can expect that lis pendens will continue to be registered, some of which will not satisfy the tests as explained with such clarity in the recent decision of Cregan J. in Tola (No.2). Given that the effect of the registration of a lis pendens can be similar to the granting of an injunction, but without involving any of the risk or cost associated with a plaintiff's application for same, one can also expect that applications to vacate lis pendens will continue to be a feature in the Irish Courts for some time to come.