The Gazette 1990

GAZETTE

PRIL

1990

The mortgage by deposit for

"present and future advances"

Probably the commonest form of mortgage in Ireland is the

equitable mortgage by deposit of title deeds to secure "all present

and future liability" of the mortgagor. The great advantage is

simplicity; the great drawback is the vagueness of what is agreed.

If, as frequently, a memorandum stating that the mortgagor is

depositing the deeds to secure "all his liabilities present and future

whether as principal or surety" (or some such phrase) accompanies

the deposit, some assistance can be gained from it, but where no

such memorandum is produced, the agreement is a matter of

implication and convention.

(The practice of making such

deposits without any written

agreement apparently originated in

order to avoid a need for having a

document requiring registration in

the Registry of Deeds, and came to

be extended to deposits of register-

ed land also.)

Normally this works against the

mortgagor. In

Bank of Ireland -v-

Macaura

Kennedy C.J. remarked

drily that: —

"In matters of this kind very

wordy documents which were

not very explicit were supposed

when read to or by persons

making

deposits

understood by. them but the

effect often was that the

depositor gave a larger security

than he intended to give.

Depositors should have what

they were doing brought to their

minds. Everything depended

upon agreement and the

intention between the parties".

There are however circum-

stances in which the vagueness of

the agreement may work against

the mortagee. The first problem

which may arise is whether any

mortgage is created at all. If no

written document exists and the

customer (as frequently occurs in

a mortgage suit) denies the

existence of the mortgage, in

theory the creditor could face a

considerable difficulty in proving its

claim. It is doubtless true as Wylie

states

that the deposit of title

deeds creates a presumption of an

equitable mortgage: in

National

Bank -v- McGovern

Meredith J.

referred (in a somewhat oracular

fashion) to "the eloquence of an

unexplained possession";

how-

ever, since the presumption can be

rebutted by the simple claim that

the customer had another purpose

(normally safe-keeping) its practical

value in a contested mortgage suit

is probably nil. Where there is a

conflict of evidence, the weight of

probability will usually be with the

mortgagee; in addition, the fact

that such securities are required as

a matter of course from a

propertied customer making a

borrowing works in the mortga-

gee's favour. One interesting

exception is the deposit by a wife

as security for her husband's

liabilities. In

Northern Banking Co.

-v- Carpenter

and

National Bank -

McGovern

claims by the

mortgagee that the wife (in each

case sole owner of the property)

had voluntarily deposited deeds to

secure her husband's liabilities

were rejected. In each case two

grounds can be seen for the

decision: (i) that where there is a

conflict of evidence and the

circumstances of the deposit are

ambiguous, the mortgagee may be

unable to satisfy the Court that on

the balance of probabilities the wife

freely consented to the deposit, (ii)

that in such a case, particularly

where the wife is not inde-

pendently advised, the Court may

infer that she was unaware of the

nature of the agreement.

This raises another problem - in

such transactions, where often so

little is expressed either in writing

or orally, what are the terms of the

agreement? Further, if the parties

dispute the existence of a

fundamental term, can it be said

that they are

ad idem

? In the

passage from

Bank of Ireland

-v-

Macaura

quoted above, Kennedy

C.J. set out the central difficulties

in such cases: that while in theory

a mortgage is a matter for express

agreement, in practice the

mortgagor usually hands over the

deeds while a rather vague formula

is recited to or by him, often leaving

him completely blank as to what

has been agreed. Two common

problems are (i) the extent of the

liabilities secured (ii) the continuing

nature of the security. As to the

first, the phrase "all liabilities"

would probably cover liabilities at

different branches of a mortgagee

bank. However, if no such formula

is expressed, it may be held that

the liabilities secured are only those

at the branch where the deposit

took place. In

Bank of Ireland -v-

Macaura

a mortgagee's claim that

a deposit of title deeds was

security for all liabilities of the

mortgagor at any of its branches

was rejected by both High Court

Christopher Doyle.

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