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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Ardfert Quarry Products -v- Moormac Developments Ltd (In Receivership) [2013] IEHC 572 (13 December 2013)
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Cite as: [2013] IEHC 572
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Judgment Title: Ardfert Quarry Products -v- Moormac Developments Ltd (In Receivership) Neutral Citation: [2013] IEHC 572 High Court Record Number: 2013 162 COS Date of Delivery: 13/12/2013 Court: High Court Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation: [2013] IEHC 572 THE HIGH COURT (2013 No. 162 COS) IN THE MATTER OF MOORMAC DEVELOPMENTS LIMITED (IN RECEIVERSHIP) IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 316 OF THE COMPANIES ACTS 1963 - 2012 BETWEEN ARDFERT QUARRY PRODUCTS APPLICANT AND
MOORMAC DEVELOPMENTS LIMITED (IN RECEIVERSHIP) RESPONDENT Judgment of Ms. Justice Laffoy delivered on 13th day of December, 2013. The application
(b) an order directing the receiver to permit the applicant to access the site upon which its materials have been placed in order to recover its materials; and/or (c) an order directing the receiver not to mix the applicant's materials with any of the assets over which the receiver has been appointed. 3. The first unusual feature is the nature of the applicant's "materials". In the grounding affidavit of Michael Higgins, the Financial Manager of the applicant, sworn on 3rd April, 2013, the materials are described as "various building materials". In the various items of inter-partes correspondence exhibited, the property to which the applicant claimed title was described as "material", although it was clear from photographs exhibited by Mr. Higgins that the material was, in fact, small stones which were spread on the ground of a part-completed residential development, which counsel for the applicant aptly described as a "ghost estate". On its procedural voyage through the Chancery 2 List, the case became known as the "rubble" case. However, while so describing the case may have given rise to an element of light relief, the reality is that the applicant, like many other suppliers of building materials and other sub-contractors, has a genuine grievance. Whether it has a remedy of the type sought, however, is a very difficult question. 4. The second unusual feature is that, while the person named by the applicant as respondent is the Company to which it supplied the material, which is now in receivership, it appears that the Company does not own the land over which it is now spread. However, the receiver of the Company, Gearoid Costelloe (the Receiver) of Grant Thornton, Chartered Accountants, Limerick, was also appointed receiver and manager of all of the assets of an individual, Michael McKenna (Mr. McKenna) comprised in and charged by a mortgage dated 19th December, 2005 made between Mr. McKenna and Anglo Irish Bank Corporation Limited (the Bank), having been so appointed by deed of appointment dated 7th May, 2010. At the hearing of the application issue was taken with the fact that the Receiver had exhibited in his replying affidavit sworn on 6th June, 2013 a copy of his appointment as receiver and manager of the assets of Mr. McKenna, rather than the deed by virtue of which he was appointed as Receiver of the Company. I do not think it would serve any useful purpose to attach any significance to the omission to exhibit the deed of appointment of the receiver as Receiver over the assets of the Company, which, at the hearing, was put before the Court. Mr. Higgins himself was aware of the position because in his grounding affidavit he had averred that the Receiver was receiver of the Company by virtue of a deed of appointment dated 7th May, 2010 on foot of a debenture dated 1 ih September, 2006 made between the Company and the Bank. Further, he had averred that he also understood that the Receiver had also been appointed as receiver over the lands of Mr. McKenna. Therefore, there is no sense in which the applicant or its legal advisers were misled as to the status of the Receiver in relation to the land on which the material is spread. 5. However, the dual role of the Receiver undoubtedly is a complicating factor. It appears that it is over land owned by Mr. McKenna that the applicant seeks access, whereas Mr. McKenna is not before the Court. As I understand the position from the totality of the documentation before the Court, Mr. McKenna was the owner of land at Lixnaw, County Kerry comprised in Folio 5553F of the Register, County Kerry. That land was being developed from at least 2008 by the Company, of which Mr. McKenna was a director, presumably under some development agreement or licence agreement with Mr. McKenna. In any event, for present purposes I consider it appropriate to assume that Mr. McKenna was at all material times the owner of the land and that, under agreement with him, the Company was developing the land as a residential development, and that the respective interests of the Company and Mr. McKenna were charged in favour of the Bank, whose interests the Receiver is protecting. Against that background I will now summarise the relevant facts. Relevant facts
7. By letter dated 22nd September, 2010 to the Bank at its Limerick Street branch, the solicitors for the applicant indicated that the applicant had a retention of title clause in relation to the materials on the development at Lixnaw. It would appear, although the relevant correspondence has not been exhibited, that the line taken by the Bank was that the applicant's retention of title clause had been defeated due to the "mixing of the materials". In any event, by letter dated January 2013 from the solicitors for the applicant to the Receiver, the applicant's solicitors contended that the material was clearly identifiable and had not been mixed in any process with any other materials and was recoverable. Access to the site by the applicant was requested, so that it could recover the materials it had provided to the Company, which had not been paid for. The request was not acceded to and that led to this application, which was grounded on the affidavit of Mr. Higgins referred to earlier. 8. In his replying affidavit sworn on 6th June, 2013, the Receiver did make the case that the materials supplied by the applicant to the Company, which he described as "stone fill, gravel and rubble" were mixed with other materials. He made the following points:
(b) that the material has no commercial or economic value if taken away, because it has been used on site and mixed in with other materials and could no longer be sold or used in another construction site; (c) that having been on site for at least four years, an attempt to remove the materials from the site would cause significant damage to the works on site; and (d) that the materials supplied were "unmarked primary building materials consisting of stone, gravel and rubble" and, because certain invoices received by the Company from the applicant were paid and others were unpaid, it would be impossible to identify the precise materials to which the applicant claims to have retained title. 10. A colleague of the Receiver, Ray Egan, swore a further affidavit on znd July, 2013, the purpose of which was to prove that it would not now be possible to remove the crushed limestone without causing significant damage to the lands and the construction on the lands. He pointed out that the material was not in containers, silos or piles awaiting use but had actually been used in the course of road construction. He averred that, given that the stone material is "unmarked primary construction material, it is impossible now to determine with precision whether the materials used in road construction that the applicant seeks to possess form part of the materials that were paid for or part of the materials which were not paid for". In this connection, Mr. Egan averred that he had sought the assistance of Mr. McKenna, a former director of the Company, who is of the opinion that, while certain invoices were unpaid as claimed, certain other invoices were discharged by the Company prior to it entering into receivership. Of course, as counsel for the applicant pointed out, that is hearsay evidence, although it does point to the fact that Mr. McKenna, the owner of the land, was made aware of, and became concerned in relation to, the defence of the application by the Receiver. 11. In any event, on the basis of the evidence adduced, I think it is reasonable to conclude, on the balance of probabilities, that the crushed limestone which the applicant seeks to recover was not paid for and I so find. However, Mr. Egan went on to aver that he was further informed, he did not say by whom, and that he believed that the material "has no commercial or limited value if taken away due to the fact that it is mixed in and weathered". He asserted that the application is vexatious. 12. The final affidavit filed was a further affidavit of Mr. Higgins sworn on 13th August, 2013 and the purpose of that affidavit was to exhibit a report obtained by the applicant from an engineer, Ger O'Keeffe of Ger O'Keeffe Consulting Engineers Limited. The report in question was dated 25th July, 2013. The report has a comprehensive range of photographs appended to it. Mr. O'Keeffe had obtained permission from the Receiver to inspect the site, which he did on 24th July, 2013. He recorded that there was no free access to the property and one of the metal railings had to be removed to provide access for himself and his assistant. The report contains a detailed and comprehensive description of the unfinished roadways on the estate. As it has not been challenged by any other expert, I think it is appropriate for the Court to rely on Mr. O'Keeffe's conclusions as to whether the material in issue could be removed without causing damage. He stated:
The legal issues 14. It has not been contended on behalf of the Receiver, properly so in my view, that the Court does not have jurisdiction under s. 316 of the Act of 1963 to determine the ownership of the material supplied to the Company having regard to the retention of title clause. Indeed, counsel for the applicant pointed out that the construction of a retention of title clause on an application under s. 316 is not without precedent, citing the decision of the High Court (Barron J.) In Re WJ Hickey Limited [1988] I.R. 126. 15. Nor was there any controversy as to the scope of the Court's jurisdiction under s. 316. Sub-section (1) of that section provides that where a receiver of the property of a company is appointed under the powers contained in any instrument, various interested parties identified, including a creditor of the company,-
16. Nor is there any issue as to whether the Receiver is bound by a valid retention of title clause in relation to the goods supplied to the Company. On this point there is a useful summary of a receiver's position in Lynch-Fannon and Murphy on Corporate Insolvency and Rescue (2nd Ed.) at para. 7.50 and para. 7.51 and also at para. 9.47 et seq. The position is stated by the authors (at para. 7.50) as follows:
(Emphasis in original) 17. I have already addressed the controversy as to whether, on the facts, the material the subject of the retention of title clause is identifiable and I have found in favour of the applicant. 18. As to the controversy between the parties, counsel for the respondent submitted that, ultimately, the key issue is whether "the goods" have become attached to the land, thus losing their identity as "goods" and so defeating the retention of title clause relied on by the applicant. In this connection he submitted that the maxim quicquid plantatur solo, solo cedit (whatever is affixed to the ground, becomes part of it), which, it was submitted, was confirmed to exist in Irish law by the High Court (Keane J.) in Re Galway Concrete Limited [1983] ILRM 402, applies. Counsel for the applicant also identified the issue as to whether the goods remained chattels or had become fixtures. In fact, in identifying the legal principles, counsel on both sides for the most part relied on the same authorities. The legal principles to be derived from the authorities relied on 20. In his judgment in Holland v. Hodgson, Blackburn J. stated (at p. 334 et seq.):
23. In his speech in Elitestone v. Morris, Lord Lloyd of Berwick, having referred to Holland v. Hodgson, stated (at p. 692) that the answer to the question whether the materials out of which the bungalow was constructed remained chattels when they were built into the composite structure, as Blackburn J. had pointed out, depended on the circumstances of the case but mainly on two factors, namely, the degree of annexation and the object of the annexation. In considering the degree of annexation he quoted from an authority of a US Court, which counsel for the respondent highlighted in this case, to the effect:
24. In his speech, Lord Clyde, addressing the fact that the bungalow was not attached or secured to any realty, that it was not joined by physical link which would require to be severed for it to be detached, stated (at p. 697):
26. It is probably not an exaggeration to say that this Court's task in applying the legal principles to the factual scenario here is more difficult than even Blackburn J. could have envisaged. Indeed, it is complicated by the assumed fact that it is Mr. McKenna, not the Company, which owns the land on which the material sought to be recovered lies. 27. Applying what Blackburn J. suggested is the "true rule", the first question is whether the material supplied by the applicant to the Company is now attached to the surface of the residential estate at Lixnaw only by its own weight. On the basis of the evidence and, in particular, having regard to the report of Mr. O'Keeffe, I think it is appropriate to find that it is attached only by its own weight. 28. Therefore, the second question which arises is whether the circumstances are such as to show objectively that the material was intended to be part of the land. Put another way, the onus being on the respondent, the question is whether it has discharged the onus that the material has ceased to be in the nature of chattels. Counsel for the respondent attached considerable weight to the fact that Mr. Higgins in his affidavit sworn on 1ih June, 2013 averred that the crushed limestone "was used to begin works on the roadway". Mr. O'Keeffe's comprehensive report reveals that the crushed limestone was primarily placed along the line of the intended roads on the estate. Moreover, he has measured the quantum of crushed limestone which he considers to be available for removal and assessed its value primarily by the length and width of the roadway, although he has also factored in an area of a building, which he found had substantial hardcore and screenings in it, and which he considered was being prepared for a radon barrier inclusion. In the light of the evidence it is impossible to conclude, as was submitted on behalf of the applicant, that it is not clear that the crushed limestone had any function on the site as placed. On the contrary, it seems to be clear that it was the first step in the creation of roads and of the building to which Mr. O'Keeffe referred. Even though the works did not go beyond the first step, I think that the respondent has discharged the onus of showing that the material was intended to be part of the land, albeit Mr. McKenna's land. 29. Even if one looks at what happened from the contrary scenario pointed to by Blackburn J., that the material was slightly affixed to the land by gravitation, the applicant has not discharged the onus of showing that it was intended all along that the material would continue to be a chattel. The evidence, considered objectively, shows that the manner in which the material was placed on the ground indicates that it was intended to be the first step in a roadway and a building and, as such, was intended to be part of the land. 30. In arriving at that conclusion, I have given consideration to the true nature of the contest here, on the basis of the assumption as to ownership of the land on which the material is spread. The land at Lixnaw is owned by Mr. McKenna but it is subject to the mortgage given by Mr. McKenna to the Bank in 2005. The Receiver was appointed by the Bank over Mr. McKenna's freehold interest. Therefore, on a proper analysis of the contest, the Receiver stands in the shoes of the Bank, as mortgagee of the freehold interest owned by Mr. McKenna. On the other side of the contest, is the applicant, which retained title to the material when it was delivered to the Company, which subsequently, obviously by agreement with Mr. McKenna, placed it on the ground owned by Mr. McKenna, which is subject to the mortgage given by Mr. McKenna in favour of the Bank. Notwithstanding the manner in which the matter was brought before the Court, namely, for directions under s. 316 of the Act of 1963 on the basis that the Receiver was standing in the shoes of the Company, I am satisfied that the true contest is as I have outlined. In the final analysis, what is at issue is the extent of the security of the Bank and, in particular, whether it extends to the material on the ground. As appears at the end of the judgment of the Court of Common Pleas in Holland v. Hodgson, Blackburn J. implicitly recognised that what was at issue before that Court was what was the security of the mortgagee. By analogy, I find that, on the assumption, which I consider it is appropriate to make, that Mr. McKenna could not prove otherwise if he was before the Court, the material supplied by the applicant to the Company is now part of the Bank's security and the applicant has no title to it. 31. Although I have felt constrained to arrive at an outcome which is unfavourable to the applicant, it is important that it be made clear that the application brought by the applicant was in no way "vexatious", as contended in Mr. Egan's affidavit, even though by the time the application was brought, the Bank had been for two months in statutory liquidation by virtue of the provisions of Irish Bank Resolution Corporation Act 2013. The applicant and its legal representatives sought a fair resolution of the dispute between the applicant and the Company. However, I am satisfied that the Court must find that the law is against the applicant and that the Court cannot afford it the relief it seeks. Order |