Download Report

1 | arthur cox
Group Briefing
May 2013
key contacts
For further advice on
litigation and enforcement,
please contact:-
Eve Mulconry
Partner
+353 1 618 0455
[email protected]
Anna Morgan
Senior Associate
+353 1 618 0412
[email protected]
This document contains a general
summary of developments and is not
a complete or definitive statement of
the law. Specific legal advice should
be obtained where appropriate.
litigation & dispute resolution
Lis Pendens:
When can a Lis Pendens be
registered?
The term lis pendens is the Latin for
“litigation pending” and refers to a legal
burden registrable against land which is
the subject of litigation in the Circuit or
High Court. That litigation must involve
a claim made or disputed by one of the
parties to an interest or estate in the land
in question.
Registering a lis pendens will seriously
restrict the manner in which the land
concerned can be dealt with. As the
procedural threshold for registering a
lis pendens1 is much lower than that for
vacating it, there is also considerable
scope for abuse of this mechanism.
However a recent Supreme Court
decision demonstrates that a plaintiff
will not be permitted to manufacture
a claim to an interest in land solely to
satisfy the criteria necessary to register a
lis pendens.
and incurs minimal costs, the
consequences for the affected party can
be serious.
The purpose of a lis pendens is to put
third parties on notice that there is ongoing litigation over a property which
could ultimately diminish its value or
affect the interest of the party currently
holding or controlling it. Potential
purchasers will generally be reluctant to
proceed with a sale where they discover
that a lis pendens is registered. A lis
pendens therefore prevents the person
holding the property from dealing with
it in the usual course, effectively freezing
their rights of disposal. These adverse
consequences are exacerbated by the
necessity to make a Court application
(unless the registrant consents) to vacate
the lis pendens.
Potential for Abuse
Registration and Effect
The registration of a lis pendens can be
easily achieved, without any sanction
from the Court, through the lodgement
of an application form and the issued
summons or civil bill (which does
not need to have been served) in the
Central Office of the High Court. While
registration is generally uncomplicated
The imbalance between the
administrative process for registering
a lis pendens and the Court application
required to vacate it means that this
device can be abused. In an application
to vacate a lis pendens the Court will
adjudicate on whether the registration
criteria stipulated in the 2009 Act2
is satisfied. Notably no such judicial
1 Set out in the Land and Conveyancing Law Reform
Act 2009 (the “2009 Act”)
2 Section 121(2) sets out the types of action which
may be registered as lis pendens
2 | arthur cox
litigation & dispute resolution
lis pendens: when can a lis pendens
be registered?
examination is required prior to the lis
pendens being registered.
lis pendens was preventing the sale from
proceeding, IBRC brought an application
to the High Court under the 2009 Act to
vacate the lis pendens. Section 123(b)(ii)
of the 2009 Act provides for the Court to
vacate a lis pendens on the application of a
person affected by it where it is satisfied
that the action is not being prosecuted
bona fides.
contention in its ex tempore judgment.
It confirmed that the party affected by
the registration of a lis pendens may apply
to vacate it when he becomes aware of
it and there is no obligation to await the
delivery of the Plenary Summons and
Statement of Claim before doing so.
However, the recent case of Kelly &
O’Kelly v. IBRC Limited3, demonstrates
that there must be a genuine claim to an
interest in a property in order to register
a lis pendens against it. The High Court
and Supreme Court judgments confirm
that where a claim has been articulated
solely to enable the registration of a lis
pendens, such registration will have been
effected in an absence of good faith and
will be vacated by the Court.
Kelly & O’Kelly v. IBRC
The Kelly & O’Kelly case concerned
a residential property in Killiney,
County Dublin (the “Property”) which
was mortgaged to Irish Nationwide
Building Society (“INBS”) and thereafter,
to its successor, Irish Bank Resolution
Corporation Limited (“IBRC”). An Order
for possession of the Property was
obtained by INBS with the consent of the
Plaintiffs in June 2010. IBRC executed the
Order and recovered possession of the
Property from the Plaintiffs in April 2012.
In July 2012 the Plaintiffs issued
proceedings against IBRC for a number
of reliefs including damages for slander
of title to goods and property and
trespass to land in respect of the Property.
A declaration was also sought that the
Order for possession was in breach of
contract, void or invalid. On the same
date that those proceedings were issued,
a lis pendens was registered against the
Property. However the proceedings were
not served and notice of the lis pendens
was not given to IBRC, which became
aware of both from its own enquiries.
As IBRC had reached an agreement to
sell the Property to third parties and the
3 [2012] IEHC 401
arthurcox.com
The High Court found that because the
Plaintiffs were unable to articulate any
detail or basis for advancing a claim
to an interest in the Property, this was
fatal and confirmed an absence of bona
fides in registering the lis pendens. Mr
Justice Ryan held that the claim for
declaratory relief in respect of the Order
for possession had been “..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.”
Ordering that the lis pendens be vacated
and the claim for declaratory relief
against the Order for possession be struck
out, Mr Justice Ryan concluded that:
“..there is nothing in the materials put
before the Court or in any submission
made by Counsel… to suggest any
legitimate basis for registering the lis
pendens. It would be a clear injustice
to permit the processes of the Court
to be employed for the purpose and
only for the purpose of frustrating
the exercise of legitimate rights.
That would be the case here if the lis
pendens were permitted to remain”.
The Plaintiffs appealed and argued that
the application to vacate the lis pendens
was premature because they had not
had a chance to make their case and
IBRC should have awaited delivery of
the Plenary Summons and Statement of
Claim before bringing the application.
The Supreme Court rejected this
Approving the High Court judgment, the
Supreme Court acknowledged that there
are many cases where it is important in
the interests of justice that a plaintiff is
entitled to register a lis pendens and that
it was not a discreditable or suspicious
thing to do so. However it was important
that when a lis pendens was registered
without substantial grounds, as was
the case here, the affected party has an
entitlement to apply to set it aside.
Commentary
The case confirms that the registration
of a lis pendens must be founded upon a
genuinely held claim to an interest in
land. Anything short of this will amount
to an absence of bona fides justifying the
lifting of the lis pendens. Usefully, the case
is also authority that the affected party
may bring an application to vacate a lis
pendens even where the proceedings in
question have not yet been served.
While the Court will not permit a
lis pendens to be used to frustrate the
legitimate rights of another party,
invariably such a determination cannot
take place until after registration. As
noted by the Supreme Court, a lis pendens
can be registered for the price of the
stamp duty and the effective result is
to sterilise the property concerned.
Meanwhile, the fact remains that
considerably more time, effort and
expense is required to vacate than to
register a lis pendens.
Dublin
+353 1 618 0000
[email protected]
London
+44 207 823 0200
[email protected]
Belfast office
+44 28 9023 0007
[email protected]
New York
+1 212 782 3294
[email protected]
Silicon Valley
+1 650 943 2330
[email protected]