Judgment Title: Peleton Ltd [in recievership] -v- Companies Acts Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation Number: [2011] IEHC 479 THE HIGH COURT 2011 591 COS IN THE MATTER OF PELETON LIMITED (IN RECEIVERSHIP) AND IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 106 OF THE COMPANIES ACTS 1963 – 2009 Judgment of Miss Justice Laffoy delivered on 19th day of December, 2011. 1. The application 1.2 By a Deed of Appointment of Statutory Receiver dated 16th June, 2011, the Applicant, in pursuance of the powers contained in s. 147 of the National Asset Management Agency Act 2009 (the Act of 2009) appointed Declan Taite (the Receiver) to be Statutory Receiver of all the assets referred to and comprised in and charged by the security documents listed in the schedule thereto. The schedule referred to “Mortgage Debentures dated 15 March 2004 and 20 October 2004 between Peleton Limited of the one part and Allied Irish Banks Plc of the other part”. On 15th July, 2011 the Companies Registration Office (CRO) received a form E8 (notice of appointment of a receiver) in relation to the appointment of the Receiver. By letter dated 29th September, 2011 the CRO returned the form E8 because there was no record of a mortgage dated 20th October, 2004 in the CRO and sought clarification. 1.3 On this application the Applicant seeks an order pursuant to s. 106 of the Companies Act 1963 (the Act of 1963) extending the time for registration in the CRO of a “Deed of Charge” dated 20th October, 2004 entered into between Peleton Limited (the Company) of the one part and Allied Irish Bank Plc (the Bank) of the other part. 2. Section 106
3. The evidence to support the application
(2) On 9th March, 2006 a charge for present and future advances repayable with interest was registered and Musgrave Ltd. (Musgrave) was registered as owner of the charge. 3.2 There was an averment in the grounding affidavit that, having made appropriate inquiries, it appeared that the delivery of the particulars in relation to the October 2004 Charge to the CRO in accordance with s. 99 of the Act of 1963 was, due to inadvertence, never attended to. However, the nature of the inquiries made by the solicitors for the Applicant was not outlined. 3.3 There was also exhibited in the grounding affidavit a CRO printout dated 10th October, 2011 in relation to the Company, which disclosed that particulars of the following charges created by the Company had been filed in the CRO:
(b) A Charge on land created on 21st December, 2004 (the December 2004 Charge) in favour of the Bank. The particulars of the property charged disclosed that the property charged was the property the subject of the October 2004 Charge. In other words, the December 2004 Charge appeared to be a replica of the October 2004 Charge. The December 2004 Charge was registered on 23rd December, 2004. (c) A charge in favour of Musgrave, which was created on 23rd February, 2006 and registered on 7th March, 2006. 3.5 When the matter was before the Court on 7th November, 2011, the Court sought an explanation as to the registration of the December 2004 Charge, which appeared to replicate the October 2004 Charge. There is now before the Court the following additional evidence:
(b) an affidavit sworn on 15th December, 2011 by Neil Campbell, a solicitor of the Bank. Mr. Campbell was not personally involved in the original security process and his explanation of what happened is based on his examination of the Bank’s records and correspondence with the Company’s solicitors. However, he has acknowledged in his affidavit that, while the Company’s solicitors were responsible for registration in the Land Registry, he could find no undertaking from them, which “left the Bank with the obligation to ensure compliance with the provisions of the Companies Acts governing the registration of charges”. (c) A certified copy of the dealing which was lodged in the Land Registry to register the June 2004 Lease and the incumbrances in favour of the Bank obtained from the Property Registration Property (PRA). 4. The full story 4.2 The application to the PRA was, in effect, an application for first registration of the leasehold interest created by the June 2004 Lease. It took some time to process and, as Folio 3380L discloses, registration was not complete until April, 2009. 4.3 By letter of 7th October, 2008 the PRA informed the Company’s solicitors that the documents presented could not be registered until the defect outlined therein had been remedied. The defect was set out as follows:
4.4 By letter dated 5th December, 2008 the Company’s solicitors responded to the PRA query. The letter stated that the writer was returning “the Deed of Charge dated 20th October, 2004 referring to the Charged Property in the schedule thereto”. It is clear that it was the March 2004 Debenture which was returned by the PRA and that the October 2004 Charge had not been previously lodged in the Land Registry. The copy of the October 2004 Charge held by the PRA was exactly the same as the copy exhibited in the grounding affidavit on this application. It showed no particulars of stamping. I surmise that it was assumed by the PRA official that the copy document it received with the letter of 5th December, 2008 was a copy of the original charge (the March 2004 Debenture), which it had returned to the Company’s solicitors on 7th October, 2008. While that was not the case, it explains why the PRA registered, as a burden on Folio 3380L, a charge which had not been stamped. However, that deficiency has been corrected, because on 7th December, 2011 the Revenue issued a stamp certificate establishing that the stamp duty and penalties have been paid in relation to the October 2004 Charge. 4.5 To summarise the title position, the October 2004 Charge has been registered as a burden on Folio 3380L, having been lodged with the PRA in December 2008. However, as I have pointed out, the date of the lease under which the property is held by the Company is incorrectly stated in the schedule to the October 2004 Charge. 4.6 Returning to how the December 2004 Charge came into existence and how particulars thereof came to be filed in the CRO, I assume that Mr. Campbell did not have the benefit of seeing the certified copy of the documents lodged originally in the Land Registry and now held by the PRA. In my view, it is absolutely clear that the October 2004 Charge was not lodged in the Land Registry with the dealing on 15th November, 2004. Therefore, I believe the Company’s solicitors retained the original of the October 2004 Charge. The original has not been produced on this application. However, it seems from Mr. Campbell’s inquiries and investigations that the error in failing to have particulars of the October 2004 Charge delivered to the CRO, within the time limited by, and in accordance with, s. 99 of the Act of 1963, was identified at some point and that that led to the execution of the December 2004 Charge. What appears to have happened was that although the October 2004 Charge had been executed by the Company, that fact was ignored and a replica was executed by the Company and the date 21st December, 2004 was inserted in it. The original of the December 2004 Charge has been put before the Court, as I understand it, it having been received from the Company’s solicitors. The December 2004 Charge was never stamped, and, it would appear, was never intended to be acted upon by the Bank, although particulars of it were delivered to the CRO for registration as if it were an effective charge. Clearly this should not have happened. The Bank had the benefit of the October 2004 Charge and it apparently intended to rely on it. Accordingly, an application should have been made at that stage under s. 106 to extend the time to register the October 2004 Charge. 4.7 There is exhibited in the affidavit of 9th December, 2011 a letter dated 28th November, 2011 from AIB, NAMA Case Management section, in Cork, signed by Gearoid Reddington, Manager, referring to this application and stating:
5.1 I am satisfied that the Applicant is a “person interested” who may seek relief under s. 106, having taken over the security of the Bank under the October 2004 Charge. I am also satisfied, on the basis of the evidence now before the Court in the form of Mr. Campbell’s affidavit, that the failure to deliver particulars of the October 2004 Charge to the CRO in accordance with s. 99 of the Act of 1963 was due to inadvertence on the part of the Bank, which has accepted that the delivery of the particulars was its responsibility. However, the manner in which the Bank set about rectifying the omission to register the particulars in accordance with s. 99 in December 2004 was wholly inappropriate. Therefore, as a condition to granting the relief sought on this application, I intend requiring the Bank to –
(b) in accordance with the letter of 28th November, 2011, to give an undertaking to the Court confirming that it will not rely on the December 2004 Charge and will take all steps necessary to ensure that it cannot be relied on by executing a Deed of Release in favour of the Company and having a memorandum of satisfaction registered in the CRO. 5.2 That leaves the issue of priority between the Bank and Musgrave. The Applicant has exhibited a number of letters in its original grounding affidavit relevant to that issue. The first, chronologically, is dated 17th February, 2004 and is from Ronan Daly Jermyn, Solicitors for Musgrave, to the Bank in which it is stated that Musgrave proposed to take “a charge over a Supervalu at Clonmel, County Tipperary which is leased to [the Company]”. I assume that that is the property now registered in Folio 3380L County Tipperary. The letter stated the understanding that the Bank had a first charge over the property, stating that Musgrave wished to take a second charge to be stamped to cover €750,000 and consent to that was sought. The response was a letter of 8th March, 2004 from the Bank, which was copied to the directors of the Company. In it the Bank confirmed that it was agreeable to Musgrave taking a second charge over the property “subject however to your agreement that AIB Security shall rank first in order of priority for all indebtedness of [the Company] up to a limit of €2,500,000 together with interest costs and other charges”. It was stated that the Musgrave security would rank second in order of priority “for all indebtedness of [the Company] up to a limit of €750,000 together with interest costs and other charges” and that the Bank’s security would “rank third in order of priority for all sums thereafter”. Over a year later, by letter dated 22nd April, 2005, Ronan Daly Jermyn confirmed that their client was happy with the order of priorities set out in the letter of 8th March, 2004. Broadly speaking, that agreement is reflected in the manner in which the Bank’s charge and the Musgrave charge were registered as burdens on Folio 3380L. 5.3 The usual form of order made on an application under s. 106 contains a proviso that the order is without prejudice to the rights (if any) of parties acquired between the date of creation of the charge and the date of its actual registration in the CRO. While the general rule is that a subsequent chargee will have priority over a chargee who has failed to register in time, even though he had notice of the unregistered charge at the time he obtained his own charge, it is well settled that, if the subsequent charge is expressly subordinated to the earlier charge, the earlier charge will gain priority after late registration has been effected (Re Clarets Limited; Spain v. McCann [1978] ILRM 215). 5.4 Notice of this application was not given to Musgrave. It was averred in the Applicant’s grounding affidavit that it was at all times accepted by all parties that the Bank’s charge would rank in priority to the charge of Musgrave. However, that is not entirely accurate on the basis of what is contained in the letters to which I have referred above, and, in particular, the letter of 8th March, 2004. It is also averred that acceding to the application would not prejudice Musgrave or any third party. I simply do not know what the position is as regards “any third party”. As regards Musgrave, it would appear that there was an agreement between Musgrave and the Bank. It is open to the Applicant, as successor in title to the Bank, to rely on that agreement, if a dispute arises with Musgrave. I propose including in the order the usual proviso which will not prejudice the Applicant because it will only save rights of third parties, including Musgrave, which can be established. 5.5 Accordingly, subject to the Bank giving the undertaking referred to at para. 5.1 above, there will be an order extending the time for registration of the particulars of the October 2004 Charge for twenty one days from the date of perfection of the order, but the order will be expressly without prejudice to the rights, if any, of parties acquired between the date of the creation of the said charge and the date of actual registration. Finally, the order will amend the originating notice of motion to show that the application is brought by the Applicant. 5.6 Counsel for the Applicant referred the Court to s. 218 of the Act of 2009, which provides that an acquired bank asset is not invalidated or rendered void or voidable as against the Applicant by, inter alia, s. 99 of the Act of 1963. The conclusions set out above were not influenced by that provision.
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