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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> George Maloney v Paul O'Shea & Anor [2013] IEHC 354 (19 July 2013)
URL: http://www.bailii.org/ie/cases/IEHC/2013/H354.html
Cite as: [2013] IEHC 354
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Judgment Title: George Maloney v Paul O'Shea & Anor Neutral Citation: [2013] IEHC 354 High Court Record Number: 2013 4620P Date of Delivery: 19/07/2013 Court: High Court Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation: [2013] IEHC 354 THE HIGH COURT [2013 No. 4620P] BETWEEN GEORGE MALONEY PLAINTIFF AND
PAUL O’SHEA AND CANNON AGRI LIMITED DEFENDANTS Judgment of Ms. Justice Laffoy delivered on 19th day of July, 2013. The proceedings and the application 2. The proceedings were initiated by a plenary summons which issued on 8th May, 2013 in which the first relief sought by the plaintiff is an order granting the plaintiff possession of the property over which he was appointed receiver by the Bank, being part of the lands registered on Folio 976, which will be referred to as “the Receivership Property”. Various other reliefs are sought, including damages. 3. The application to which this judgment relates is an application for interlocutory injunctive relief which was initiated on the same day as the plenary summons issued, in which the plaintiff seeks orders –
(b) prohibiting the defendants from impeding and/or obstructing the plaintiff in securing the Receivership Property; (c) prohibiting the defendants from actually or implicitly harassing, intimidating, threatening or interfering with the plaintiff or his staff or the staff of the estate agent retained by the plaintiff; (d) prohibiting the defendants from telephoning, attending at or otherwise contacting the private residences of the plaintiff or his staff or the staff of the estate agent; (e) prohibiting the defendants from trespassing or entering upon or otherwise interfering with the Receivership Property; (f) directing the defendants to deliver up to the plaintiff forthwith any keys, alarm codes and/or other security and access devices in respect of the Receivership Property; (g) prohibiting the defendants from purporting to collect rents or other payments in respect of the Receivership Property or holding themselves out as the party entitled to let the Receivership Property; and (h) directing the defendants to disclose full details of, and to provide copies of, all documents pertaining to their “purported legal relationship” to the extent that it affects or concerns the Receivership Property. 4. Mr. O’Shea was accompanied at the hearing of the application by a McKenzie friend, who addressed the Court on his behalf in an appropriate manner. Although, on the authority of the decision of the Supreme Court in Battle v. Irish Art Promotions Centre Limited [1968] I.R. 252, neither Mr. O’Shea nor his McKenzie friend was entitled to represent the Company, the reality of the situation is that the arguments advanced on behalf of Mr. O’Shea in support of his contention that the Court should dismiss the plaintiff’s application addressed the position of the Company as well as that of Mr. O’Shea. I am satisfied that it is possible to determine the status of the Company vis-à-vis the Bank and the plaintiff without in any real sense “lifting the corporate veil”. 5. The arguments advanced by and on behalf of Mr. O’Shea in resisting the application for interlocutory relief were all of a technical nature. I propose considering them in the course of outlining the relevant aspects of the contractual relationship of Mr. O’Shea with the Bank and the plaintiff’s position as receiver arising from that relationship. Folio 976 County Kildare The Charge 8. The provisions of the Charge which are of relevance for present purposes are the following:
(b) Clause 6(6) provides as follows: “That the mortgagor shall not except with the written consent of the Bank grant or agree to grant any lease or tenancy of the mortgaged property or any part or parts thereof or part with possession thereof or accept or agree to accept a surrender of any lease or any tenancy thereof and Sub-section (1) of Section 18 of the Conveyancing and Law of Property Act 1881 shall not apply to this security”. Transfer from National Irish Bank Ltd. to Danske Bank A/S 10. For whatever reason, the Charge, which was created in October 2003, was apparently not lodged with the Property Registration Authority (PRA) for registration until 2010. By that stage, the interest of National Irish Bank Limited as chargee under the Charge had vested in Danske Bank A/S. The requirements of the PRA in relation to producing evidence as to the ownership of the Charge were obviously considered to have been complied with and the PRA registered Danske Bank A/S as the owner of the Charge. In this connection it is a matter of public knowledge that a copy of the Agreement for Transfer of Banking Business dated 30th November, 2006 and S.I. No. 29 of 2007 were filed with the PRA. This is set out in what is described as “National Irish Bank Limited to Danske Bank A/S Legal Office Notice 4 of 2013” which is posted on the PRA website and which states as follows:
. . . All registrations effected on or after 1st April, 2007 will be in the name of Danske Bank A/S.” Summary proceedings Appointment of plaintiff as receiver
14. The execution of the Appointment Document appointing the plaintiff as receiver was effected on 5th September, 2012 at ten o’clock in the forenoon. Execution was by signing and delivery by two individuals, Keith Waine and Graham Jenkinson. Beneath their signatures there is a statement in the following terms:
15. An issue has been raised by Mr. O’Shea as to the proper execution of the Appointment Document appointing the plaintiff as receiver and, in essence, his argument is that it was not properly executed by or on behalf of the Bank and is of no effect. 16. The manner in which the Appointment Document was executed on behalf of the Bank is explained in the affidavits filed on behalf of the plaintiff. The plaintiff in his second affidavit sworn on 4th June, 2013 has exhibited a certified copy of the Articles of Association of the Bank, which is a company incorporated in accordance with the law of Denmark. Article 20 deals with “Signing power” and provides as folows:
20.2 The Executive Board may grant mandates or powers of attorney to any employee of Danske Bank.”
(b) A power of attorney dated 28th March, 2007 given by Andrew Healy and Kevin Gallen as lawful attorneys of the Bank, wherein, having referred to the power of attorney at (a) above, it was provided as follows:
19. I am satisfied that the foregoing documentation establishes that the Appointment Document appointing the plaintiff as receiver was properly executed on behalf of the Bank. The appointment did not have to be made by deed; it was sufficient that it was in writing, because of the incorporation by reference of s. 24(1) of the Act of 1881 in the Charge. If it had to be by deed, which was not the case, then, the Bank being a foreign body corporate, it would have required to be executed in accordance with the legal requirements governing execution in the jurisdiction in which it was incorporated, that is to say, Denmark, by virtue of s. 64(2)(b)(iv) of the Land and Conveyancing Law Reform Act 2009 (the Act of 2009). 20. Mr. O’Shea also raised issues about the fact that the plaintiff as receiver was expressed in the Appointment Document to be the agent of Mr. O’Shea and to be his attorney, insofar as is necessary. By virtue of s. 24(2) of the Act of 1881 the plaintiff, as receiver, is deemed to be the agent of Mr. O’Shea as the mortgagor and chargor. Clause 6(3)(ii) of the Charge confers on a receiver appointed by the Bank on a sale of the mortgaged property power “to convey the same in the name and on behalf of the Mortgagor”. The provision in the Appointment Document must be interpreted and applied in the light of s. 24(2) and Clause 6(3)(ii). 21. Finally, in relation to the Appointment Document appointing the plaintiff as receiver, it also incorrectly gave the plaintiff’s address as “Davidstown, Castledermot, County Carlow”. As is the case with the Charge, that error does not affect the validity of the appointment of the receiver. Action taken by plaintiff as receiver/relevance of Code of Conduct 23. After the Bank obtained judgment in the Summary Proceedings, the plaintiff took steps to take possession of the Receivership Property unsuccessfully. He then instructed Kennedys, Solicitors, who by letter dated 2nd May, 2013 threatened injunctive proceedings, if Mr. O’Shea did not vacate the Receivership Property and undertake not to impede the plaintiff in the conduct of the receivership. 24. The plaintiff followed through on the threat and initiated these proceedings and this application. Mr. O’Shea has opposed the application, inter alia, on the ground of alleged non-compliance by the Bank and the plaintiff with the Code of Conduct on Mortgage Arrears of the Central Bank. As I have already recorded, the Receivership Property comprises two fields and is non-residential. Therefore, that Code has no application. The Lease 26. In his first replying affidavit sworn on 28th May, 2013, Mr. O’Shea averred that the Company was formed and the Lease was granted “for tax reasons and on the advice of his accountant”. In fact, the Company was incorporated on 14th October, 2011. In his second replying affidavit sworn on 20th June, 2013, Mr. O’Shea has exhibited a letter dated 19th June, 2013 from Donohoe Flanagan Reddy & Co., Chartered Certified Accountants & Registered Auditors, who have confirmed that they have prepared accounts for the Company up to 31st December, 2012 and that they have submitted corporation tax returns to the Revenue Commissioners for the period up to 31st December, 2012 and that they have submitted abridged accounts to the Companies Registration Office. They also stated as follows:
27. The core issue in relation to the Lease is its status vis-à-vis the Bank and the plaintiff, given that, as deposed to in the first affidavit of Rachel Keane, which was sworn on 8th May, 2013, the Bank was not made aware of the creation of the Lease in favour of the Company nor was its consent ever sought either before or after its creation and the Bank has not given consent to the creation of the Lease. 28. This Court has had occasion recently to consider the position of lessees under leases created by a mortgagor without the necessary consent of the mortgagee in McCann v. Morrissey & Ors. [2013] IEHC 288. With the objective, hopefully, of explaining the position to Mr. O’Shea and his McKenzie friend, I propose reiterating what I said in the judgment in that case, which also concerned an application by a receiver for interlocutory relief in relation to the leased property as against the mortgagor and the lessees. 29. The first point to be made is that the leasing powers of Mr. O’Shea, in his capacity as chargor under the Charge, are governed by the law in force prior to the commencement of the Act of 2009 on 1st December, 2009, because s. 112(5) of the Act of 2009 provides that the power of leasing conferred by s. 112 “applies only to mortgages created after the commencement of this Part”. As was the case in relation to McCann v. Morrissey & Ors., the decision of the High Court which is of most relevance to the status of the Company as lessee on this application is the decision of Lynch J. in ICC Bank Plc v. Verling [1995] 1 ILRM 123, because it was given on an application by a mortgagee seeking interlocutory relief, both prohibitory and mandatory, against the lessees of the mortgagor. In that case, the dispute on which Lynch J. was adjudicating was a dispute between ICC Bank Plc, as mortgagee, and the second and third defendants, who had obtained a lease from the mortgagor, Mr. Verling, without the consent of the bank, and who were resisting the application for interlocutory relief against them, so that it is analogous to the dispute here between the plaintiff as receiver appointed by the Bank and the Company as lessee of the chargor, Mr. O’Shea. In relation to the effect of the lease which had been created without consent of ICC Bank Plc, Lynch J. stated (at p. 129):
30. Counsel for the plaintiff also referred the Court to academic commentary on the law in relation to the creation of leases by mortgagors and judicial decisions in which the status of a lease made by a mortgagor without the necessary consent of the mortgagee was considered at the hearing of the substantive issues, the most recent being the decision of the High Court (Dunne J.) in Fennell v. N 17 Electrics Limited [2012] IEHC 228. The following passage from the judgment of Dunne J. (at para. 30) in that case outlines what is to be derived from the authorities.
31. Adopting the approach adopted by Lynch J. in ICC Bank Plc v. Verling, it is appropriate to conclude, but without in any way purporting to decide the issue in any final manner, that the plaintiff has made out “a strong prima facie case” that the Lease in favour of the Company is void as against the Bank and as against the plaintiff as receiver appointed by the Bank, because Mr. O’Shea did not obtain the consent in writing of the Bank to the creation of the Lease. 32. There is the unusual feature in this case in that, notwithstanding that Ms. Keane, as solicitor for the Bank, who, as a result of a search in the Land Registry had discovered the existence of the dealing pending in relation to the registration of the Lease, informed the PRA by letter dated 13th April, 2012 that the Bank objected to the Lease being registered as a burden on Folio 976 because the Bank did not consent to it, the PRA without further reference to the Bank registered the Lease as a burden on Folio 976. By letter dated 21st November, 2012, the PRA informed the Bank of its position in the following terms:
Please note also that the registered mortgage ranks in priority to the registration of the lease.” 33. However, from the perspective of making title to the Receivership Property, what has happened has implications for the Bank and the plaintiff. The provision obliquely referred to in the letter of 21st November, 2012, s. 62(10) of the Registration of Title Act 1964, provides:
The plaintiff’s entitlement to interlocutory injunctive relief
(b) It is clear, given the size of the debt owed by Mr. O’Shea to the Bank, in respect of which the Bank has obtained judgment, and what the evidence demonstrates in relation to the assets and means of Mr. O’Shea, that Mr. O’Shea would not be in a position to compensate the plaintiff for loss incurred by him as receiver, if an injunction is refused and the plaintiff is ultimately successful at the trial. On the other hand, the plaintiff, in his grounding affidavit, has proffered an undertaking as to damages to the Court, which will be in place to adequately compensate Mr. O’Shea and the Company for any loss they incur, if an injunction is granted but they are ultimately successful on the hearing of the substantive action. (c) Insofar as it arises, I am satisfied that the balance of convenience favours granting, rather than refusing, an injunction. 35. Subject to one practical matter being addressed, I propose making orders against both defendants in the terms of paras. (a), (b), (e) and (f) of the notice of motion as outlined at para. 3 above. Rather than making an order in the terms of paras. (c) and (d), the Court will accept undertakings from Mr. O’Shea in the terms of the orders sought in those paragraphs. 36. The practical matter which is of concern is whether there is a crop growing on the Receivership Property which is due to be harvested within the next few months. If there is, I will hear submissions as to whether the orders to be made should be modified to enable Mr. O’Shea to harvest the crop.
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