This is particularly relevant for lenders who have acquired loans from another bank. The practice of furnishing redacted documentation to the borrower’s solicitor to evidence the transfer of the loans to the lender was recently called into question.
Background of the case
In November 2016, the High Court granted a stay on the appointment of a receiver by Promontoria (Aran Limited) Limited (PAL). The borrower’s loan had been transferred to PAL by Ulster Bank Ireland Limited (UBIL). As crucial documentation evidencing the transfer of the borrower’s loan to PAL had either not been furnished to the borrower or were heavily redacted, the Court was not satisfied that PAL had established its right to appoint the receiver.
PAL had argued that it was necessary to withhold the redacted information from the borrower as it was commercially sensitive. While the Court agreed that the borrower was not entitled to know certain commercially sensitive information, it was not satisfied that PAL had established the chain of title to demonstrate its entitlement to security over the borrower’s lands. The Court granted a stay on the appointment of the receiver until such time as PAL established its legal right to do so. See our article on the earlier High Court decision.
Further documentation furnished to the borrower
Following the High Court decision, in December 2016, PAL furnished additional documentation to the borrower including the mortgage sale deed, the deed of novation and various powers of attorney. However, while new information was provided to the borrower, parts of the documents were still heavily redacted. When no response was received from the borrower, PAL applied to the Court in January 2017 to vacate the stay on the appointment of the Receiver.
Commercially sensitive information
The borrower again raised a number of concerns regarding redaction of the documents and the validity of their execution.
PAL argued that the information which was redacted was commercially sensitive relating to the terms on which PAL were willing to transact with UBIL, including the consideration paid by PAL, which was not relevant to the borrower. PAL also claimed that they were under a contractual duty of confidentiality to third parties. PAL submitted that the information provided to the borrower clearly demonstrated PAL’s ownership of the borrower’s mortgage and was sufficient.
Decision of the Court
The High Court issued its judgment on 17 May 2017. The Court looked at the documents furnished by PAL and noted that while parts had been redacted, the relevant sections of the documents which had been provided clearly demonstrated the chain of title evidencing PAL’s rights to the mortgage.
The Court noted that due to the redaction of large portions of the documents, the borrower had concerns regarding the wider context of the transfer of the loans from PAL to UBIL. However, the borrower was not a party to the deeds and any potential problems with the arrangements between PAL and UBIL were not a matter for his concern. PAL’s only obligation to the borrower was to demonstrate the chain of title to show that the acquisition of the loan from UBIL was valid. While this had not been initially satisfied, the furnishing of the additional documentation in December 2016 fulfilled this obligation by PAL despite redaction of certain portions.
On the face of the deeds provided, the Court noted that they appeared to be valid and that the identity of the signatories had been disclosed. The Court lifted the stay on the appointment of the receiver.
English v Promontoria (Aran) Ltd (No.2) [2017] 5 JIC 1702
