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Cite as: [2014] IEHC 324
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Judgment Title: Tola Capital Management LLC -v- Linders & anor (No.2) Neutral Citation: [2014] IEHC 324 High Court Record Number: 2014 4500 P Date of Delivery: 26/06/2014 Court: High Court Composition of Court: Judgment by: Cregan J. Status of Judgment: Approved |
Neutral Citation: [2014] IEHC 324 THE HIGH COURT [2014 No. 4500 P] BETWEEN TOLA CAPITAL MANAGEMENT LLC PLAINTIFF AND
JOSEPH LINDERS AND PATRICK LINDERS (NO.2) DEFENDANTS JUDGMENT of Mr. Justice Cregan delivered on 26th day of June, 2014 Introduction 2. I have already in these proceedings delivered a judgment on the plaintiff’s application for an interlocutory injunction restraining the defendants from completing a debt purchase agreement with Ulster Bank in respect of certain properties, otherwise than in trust for the plaintiff. 3. I have set out in that judgment the factual background to that application. However, for ease of reference, I also set out herein a summary of the background facts which provide the context in which this application is brought by the defendants. Factual Background to the Application 5. The defendants are sued in their personal capacities. 6. The defendants wished to enter into an agreement with Ulster Bank to buy back certain loans which they or their companies owed to Ulster Bank and which were secured on properties which either they, or companies controlled by them, owned. In order to buy back these loans they needed to obtain finance from alternative financiers. One possible financier was the plaintiff and, according to the defendants, the role of the plaintiff in the renegotiations of the defendants’ refinancing of their loans with Ulster Bank was that the plaintiff would provide evidence of alternative funding to Ulster Bank. 7. The plaintiff alleges that the parties entered into a Binding Option Agreement on 6th February, 2014. 8. Under the terms of the option agreement, the defendants granted the plaintiff an exclusive option to acquire certain properties. The agreement also set out two possible structures to purchase the properties as follows:-
(2) Method B - Partnership Structure 10. Paragraph 2 of the agreement provided that for a period of thirty to forty five days after the date in which the Bank provided written notice of its acceptance of the purchase price, the parties would negotiate to reach an agreement for the purchase of the properties under the terms of Method B: Partnership Structure set out in the agreement. 11. Paragraph 3 of the option agreement provided that, in the event that the parties were unable to reach agreement on the terms of the purchase of the properties under Method B: Partnership Structure, “then Tola shall have the right, but not the obligation, to purchase the properties under the terms of Method A: Loan Structure” as set out in the agreement. It also provided that Tola could exercise its option by a notice of intent to purchase to the Linders within seven days of the expiration of the negotiation period. 12. Subsequently, the defendants entered into an agreement with Ulster Bank for the repurchase of their loans on 23rd April, 2014. The terms of this agreement were clearly confidential but were given to the plaintiff by the defendants in good faith 13. The parties then entered into negotiations to see if they could agree a partnership structure under the Binding Option Agreement. 14. However, these negotiations proved inconclusive and on 18th April, 2014, the defendants (through a Mr. Tuite), sent an email confirming that the defendants were withdrawing from the negotiations. 15. On 22nd April, 2014, the plaintiffs then, by notice, exercised its option to purchase the Tola properties in accordance with Method A: Loan Structure set forth in the option agreement. 16. On 28th April, 2014, the defendants gave notice of their intention to decline to proceed with the purchase by the plaintiff of the Tola properties in accordance with Method A; they stated that they had obtained alternative financing comprised entirely of debt with no third party equity participation which would allow them to complete the debt purchase agreement with Ulster Bank and requested the plaintiff’s bank details in order to make a payment of €500,000 pursuant to clause 4(b) of the Binding Option Agreement. 17. By letter dated 28th April, 2014, the plaintiff confirmed receipt of the defendants notice declining to proceed with method A and sought documentary confirmation that the requisite alternative financing (i.e. entirely debt with no equity participation) had been obtained as required by the option agreement. 18. Further correspondence took place between the parties and on 14th May, 2014, solicitors on behalf of the defendants wrote to the plaintiff stating that the defendants’ sole remaining obligation under the option agreement was to make a payment of €500,000 to the plaintiffs, and asserted that the plaintiff had no entitlement to demand further information. However, the plaintiff contended that the defendants were under a contractual obligation to provide specific information to the plaintiff to confirm that the defendants had, indeed, met the precondition for declining the exercise of the plaintiff’s option to purchase, (i.e. that they had obtained alternative debt financing from another financier without any equity participation). The plaintiff also stated in its affidavit that the defendants’ failure to provide this information was unreasonable and that the only conclusion to be drawn from the refusal to supply such information was that the defendants had not complied with clause 4. More importantly, the plaintiff contends that there is a binding agreement for the purchase of the properties under Method A: Loan Structure. 19. Thus, the defendants are of the view that the Option Agreement has been terminated (and that all they need to do is pay the plaintiff the sum of €500,000); the plaintiff, on the other hand, maintains that it is still entitled to exercise its option to purchase certain properties in accordance with the terms of Method A: Loan Structure. 20. Given the impasse between the parties the plaintiff then issued a plenary summons on 16th May, 2014. (I shall refer to the pleadings and the nature of the pleadings later in this judgment.) The Registration of the Lis Pendens
23. There are, in fact, two lites pendentes which have been registered by the plaintiff in this matter. The first is against Joseph Linders and the second is against Patrick Linders. 24. It is noteworthy when reviewing the particulars of the lis pendens that no property is identified in the particulars of the lis pendens. It simply states the name, place of residence and description of the person whose estate is intended to be affected by the registration of the lis pendens. The Relevant Properties the Subject Matter of the Dispute 25. The first paragraph of the “Option Agreement” provides as follows:-
• Metropolitan House, James Joyce Street, Dublin 1 • Colville House, James Joyce Street, Dublin 1 • 95 residential apartments James Joyce Street, Dublin 1”
• Irish Distillers Properties, Smithfield, Dublin 1 • Linders Trading Company Assets
The Tola properties will be transferred to and retained by Hold Co.” (Emphasis added) 31. It is important in the light of this description and definition of the Tola properties to review the pleadings to see what the plaintiff is claiming in respect of these properties. The Claims made by the Plaintiff in the Original Statement of Claim 33. At paras. 2 and 3 of the statement of claim it pleads as follows:-
3. Linders of Smithfield Ltd by itself or through its subsidiaries (herein after collectively referred to as the “companies” are the owners of the following properties (hereinafter collectively referred to as the properties).” (The statement of claim then sets out six properties which correspond to the Tola properties and the Linders properties set out in the option agreement.) 35. At para. 5 of the statement of claim the plaintiffs plead that:
The Claims in the Amended Statement of Claim 38. At para. 3 of the amended statement of claim it is pleaded as follows:-
Tola Properties 1. Metropolitan House, James Joyce Street, Dublin 1 2. Colville House, James Joyce Street, Dublin 1 3. 95 residential apartments, James Joyce Street, Dublin 1 Linders Properties 4. Bloom House, James Joyce Street, Dublin 1 5. Irish Distillers Property, Smithfield, Dublin 1 6. Linders Trading Company Assets.”
41. It is noteworthy again that the plaintiff’s case as set out in the option agreement and as formally pleaded in the amended statement of claim, is that in fact the Tola properties as a matter of contract, would be transferred to, and retained by, a newly formed Irish limited liability company 100% owned and controlled by the plaintiff but not to the plaintiff itself. 42. In the prayer for relief, the plaintiff claims an order for specific performance of Method A: Loan Structure set out in the Binding Option Agreement directing the transfer of the Tola properties by the defendants to the plaintiff, a declaration that the plaintiff holds the benefit of a contract for the transfer to it of the Tola properties and a declaration that the defendants and each of them hold the properties in trust for the plaintiff. 43. Thus, the original statement of claim and amended statement of claim both plead that the Tola properties are owned by the companies, not by the first and second defendants personally. The plaintiff has not sought to resile from that plea in any respect. 44. This is accepted by the first and second defendants in their affidavits. The Affidavit Evidence 46. In an affidavit of Michael Breslin for the plaintiff (described as his “second affidavit” but in fact his first affidavit) sworn on 20th May, 2014, Mr. Breslin states that he is the managing member of the plaintiff and states the plaintiff has registered a lis pendens against the defendants in the Central Office of the High Court. 47. In the second affidavit of Mr. Joseph Linders sworn in the injunction proceedings Mr. Linders stated at para. 3, as set out above, that he was surprised and disappointed that the plaintiff had registered a lis pendens against the defendants. He also stated at para. 3:-
49. The defendants brought their motion to vacate the lis pendens by notice of motion dated 22nd May, 2014. It was made returnable to 28th May, 2014. By this time the plaintiff would have been in a position to consider (in the light of the second affidavit of Mr. Linders in the injunction proceedings), whether the lis pendens had, in fact, been registered against the correct persons. 50. Moreover, Mr. Linders in his second affidavit also stated at para. 3 that the plaintiff did not have, nor could they have, any estate, right, title or interest whatsoever in any of the properties referred to in the Binding Option Agreement. 51. In the grounding affidavit of Mark Heslin, (the defendants’ solicitor), Mr. Heslin stated that he believed that on any construction or interpretation of the proceedings, they did not concern an interest in property, that the registration of the lis pendens was an abuse of process and was “further evidence of the cynical intention of the plaintiff to disrupt the extremely important financing arrangements agreed between the defendants, their financier and third party financial institutions who have agreed to refinance the defendants indebtedness with their financier”. 52. Mr. Joseph Linders, the first named defendant, swore a third affidavit dated 27th May, 2014, in respect of the application to vacate the lis pendens. At para. 2 of his affidavit he states as follows:-
4. I am advised and believe that in the circumstances where the 6th February, 2014, agreement never contemplated the plaintiff acquiring Bloom House under any circumstances there is no bona fide basis for the plaintiff registering the lis pendens against myself and/or my brother Patrick Linders.”
8. I am advised and believe that where a plaintiff asserts a claim to an estate or interest in land the appropriate defendant is the owner of the land in question. For the reasons deposed to above, the defendants are not the owner of any land or property which, even on the interpretation of 6th February, 2014 agreement contended for by the plaintiff was ever to be acquired.” 56. The response of the plaintiff was to bring a motion dated 29th May, 2014, seeking to join Linders of Smithfield Ltd, Equipoint Ltd and Equiside Ltd as co-defendants to the proceedings. This application was grounded on the affidavit of Mr. Dodd, the plaintiff’s solicitors, sworn on 29th May, 2014. At para. 13 Mr. Dodd avers to the following:-
Applicable Legal Principles 60. Therefore, the effect of a lis pendens and the registration of a lis pendens is effectively to freeze any further disposition of land until the proceedings are determined. It can, therefore, have the same effect as an interlocutory injunction restraining the disposition of land pending the hearing of the action without the necessity of the moving party having to establish that there is a serious issue to be tried, that damages are not an adequate remedy and that the balance of convenience is in favour of the application. Moreover, the moving party does not have to give an undertaking as to damages. 61. It should be noted that this concept of a lis pendens in respect of land is quite a different concept to the concept of, for example, a lis pendens under the Brussels Regulation. In that case the lis could be of any kind; it does not have to concern estates or interest in land. Moreover, there is no system of registration of such lites pendentes because it is not necessary. The issue of lis pendens only become relevant if there are two possible courts within the EU which might have jurisdiction over a particular claim. 62. It is necessary in this case to review the historical developments in relation to the lis pendens because of the submissions of the parties in relation to the jurisdiction of the court to vacate a lis pendens under the Land and Conveyancing Law Reform Act 2009. 63. In Giles v. Brady [1974] I.R. 462, Kenny J. considered the nature and history of the lis pendens in Ireland and in England. He first considered the Judgments (Ireland) Act 1844, but noted that that Act provided a system of registration but did not alter the nature of a lis pendens. As he stated at p. 463:-
In the 18th and 19th centuries, Chancery suits often continued for many years and, as most of them related to land, the position of a purchaser, lessee or mortgagee of the property to which the action related presented a difficult problem. If a person acquired his interest from a defendant without notice of the proceedings, did he take it subject to the rights to which the plaintiff was subsequently declared to be entitled in the suit, which might have been started many years before? The answer given in Ireland and England was, that a person who acquired an estate or interest in relation to which a suit had been started when he got his title, took it subject to the rights and liabilities which might be declared in the suit whether he had notice of it or not. This was based originally on the remarkable view that everyone knew of all the actions which were pending in the courts, and so took his interest with notice of them…”
‘It is scarcely correct to speak of lis pendens as affecting a purchaser through the doctrine of notice, though undoubtedly the language of the Courts often so describes its operation. It affects him not because it amounts to notice, but because the law does not allow litigant parties to give to others, pending the litigation, rights to the property in dispute, so as to prejudice the opposite party. Where a litigation is pending between a plaintiff and a defendant as to the right to a particular estate, the necessities of mankind require that the decision of the court in the suit shall be binding, not only on the litigant parties, but also on those who derive title under them by alienations made pending the suit, whether such alienees had or had not notice of the pending proceedings. If this were not so, there could be no certainty that the litigation would ever come to an end. A mortgage or sale made before final decree to a person who had no notice of the pending proceedings would always render a new suit necessary, and so interminable litigation might be the consequence . . . The language of the Court in these cases [ Culpepper v. Aston; and Sorrell v. Carpenter], as well as in Worsley v. The Earl of Scarborough, certainly is to the effect that lis pendens is implied notice to all the world. I confess, I think that is not a perfectly correct mode of stating the doctrine. What ought to be said is, that, pendente lite, neither party to the litigation can alienate the property in dispute so as to affect his opponent.’” 66. A further issue which arose in the Brady case was that counsel for the defendants (who were seeking to vacate the lis pendens) argued that the Lis Pendens Act 1867 gave the court power to vacate a lis pendens before the termination of the action, even if the party who had registered it was opposed to this. 67. Kenny J. reviewed the Lis Pendens Act 1867, which contains only two sections. The main operative section is s. 2 which provides as follows:-
69. He also considered the provisions of the Judgment Registry (Ireland) Act 1871, but concluded that s. 21 of this Act also did not give the court jurisdiction to order a vacate of a lis pendens during the course of the action when this was opposed by the party who registered it. Thus, he concluded that the court had no jurisdiction to order that a lis pendens be vacated against the will of the party who registered it until the suit had been determined. 70. This view, however, was overruled by the Supreme Court in Flynn v. Buckley [1980] I.R. 423. O’Higgins C.J. giving the decision of the unanimous Supreme Court stated as follows at p. 428:-
73. In AS v. GS & AIB [1994] 2 ILRM 68, Geoghegan J. considered the issue of whether a claim for a property adjustment order amounted to a lis pendens. In the course of his judgment he set out some of the above quotations from Kenny J. in Giles v. Brady and, in particular, Lord Cranworth’s explanation of the effect of a lis pendens in Bellamy v. Sabine. He then stated at p. 73:-
75. In the UK, the common law concept of a lis pendens appears to have been replaced by the statutory concept of a “pending land action” which was defined in the Land Charges Act 1972. Section 17(1) of the said Act defines a “pending land action” as any claim or proceeding pending in court relating to land or any interest in or charge on land. (See Halsbury “Laws of England” (5th Ed.) 2012 Vol. 87, p. 536, para. 739, footnote 2). It is also stated at footnote 1:-
80. Russell L.J. in his judgment at p. 848 stated:-
82. In Calgary & Edmonton Land Co. Ltd v. Dobinson [1974] 1 All E.R. 484, the liquidator of the company entered into contracts for the sale of some of the company’s lands and also into an agreement to sell the remainder subject to contract. The defendant who was a contributory to the company and also claimed to be a shareholder issued a summons in the Companies Court seeking an order to restrain the liquidator from disposing of any of the company’s lands. Subsequently, the defendant registered a pending land action in respect of the company’s lands. The company issued a motion to vacate the pending land action. 83. The court held that what was registerable as a “pending land action” within s. 17(1) of the 1972 Land Charges Act was an action or proceeding which claimed some proprietary right in the land and not an action merely claiming that the owner should be restrained from exercising his powers of disposition. 84. As McGarry J. stated at p. 486:-
87. McGarry J. stated at p. 489:-
As for more general considerations, it seems to me that once it is accepted (as it has been) that some restriction must be placed on the wide statutory language, the question becomes one of what restriction is most consonant with the language and general purposes of the statute and with commonsense and practicability. The rights made registerable under the Land Charges Act 1972, as under the Land Charges Act 1975, are, in general, substantive rights in the land…What is protected is some substantive right adverse to the owner rather than a mere fetter on the owner’s right of disposition. That being so, it is not surprising that an expression as wide and general in its literal meaning as “any action or proceeding pending in court relating to land or any interest in or charge on land” should be given a narrower meaning more in conformity with the generality of rights registerable under the Act. What is registerable as a pending land action is an action or proceeding which claims some proprietary right in the land and not an action merely claiming that the owner should be restrained from exercising his powers of disposition. Accordingly, on authority both ancient and modern and on principle, I hold that the defendant’s proceedings in the company court do not constitute a “pending land action” within the meaning with the Land Charges Act 1872.” (Emphasis added)
90. In Dan Morrissey (Ireland) Ltd & Ors v. Donal Morrissey & Ors [2008] 3 IR 752, the High Court (Clarke J.) held that a plaintiff was entitled to register a lis pendens in the Central Office of the High Court provided the proceedings were being prosecuted bona fide. Clarke J. also held that the jurisdiction to vacate a lis pendens was grounded on whether the cause of action was being prosecuted bona fide. But the lis which was registered in that case was, in his view, appropriate because the plaintiff was claiming a proprietary estate or interest in the defendant’s lands. 91. In Gannon v. Young [2009] IEHC 511, Laffoy J. considered an application that a lis pendens registered by the defendant should be vacated. In the course of her judgment at p. 9 she stated:-
92. In Kelly v. IBRC [2012] IEHC 401, Ryan J. held that the proceedings insofar as they asserted an interest in land such as to justify the registration of a lis pendens, were an abuse of process. In this case the defendant had already issued ejectment proceedings against the plaintiffs; these were settled on consent and the plaintiffs agreed to an order for possession subject to a stay on terms. Subsequently, the terms were not honoured by the plaintiffs and the bank obtained possession of the property. (The plaintiff then issued another set of proceedings against the bank and registered a lis pendens). 93. The other recent authority which is of assistance in this matter is Moorview Development Ltd & Ors v. First Active Plc & Ray Jackson & Ors (High Court, Clarke J., 5th February, 2010). In this case Mr. Jackson was appointed as a receiver to certain companies within the Cunningham Group. Thus, he had an entitlement to cause any of the companies to sell any of the properties which it owned which were captured by any relevant mortgage debenture. Mr. Jackson was appointed as a receiver to the companies which owned the relevant properties. He argued that he did not have an interest in the relevant lands so that the proceedings, at least insofar as they related to him, did not involve a claim as against him relating to any interest in the lands concerned. 94. The plaintiffs had registered a lis pendens against Mr. Jackson and also First Active Plc. Mr. Jackson applied for an order vacating the lis pendens as far as he was concerned. 95. As Clarke J. stated at para. 3.2 of his judgment under the heading “Preliminary Points”:-
3.4 It follows that it seems to me that I should now decide the issue of principle which arises between the parties as to whether the connection which Mr. Jackson may have to the relevant property justifies the registration of a lis pendens against him. I now turn to that question.” 4. Analysis 4.1 Neither counsel was able to find any direct authority on the point. In those circumstances it seems to me that the matter must be determined from first principles. A lis pendens is designed to give notice of the fact that proceedings relating to land are pending before the court. Insofar as a lis pendens is registered against a named individual, then it seems to me that its purpose must be to bring to the attention of any interested party, the fact that there are proceedings in being against the person concerned which relate to the ownership of property or an interest in property. It may be that there is contained within the one set of proceedings a number of claims against a number of defendants in circumstances where not all of the claims are pursued against all of the defendants. It seems to me that, as a matter of first principle, it could never be the case that a defendant who happened to be properly joined in a set of proceedings in relation to some relief that did not relate directly to land in which the relevant defendant had an interest, could properly be the subject of a lis pendens. There would, in those circumstances, be no lis pending in relation to the ownership of land or an interest in land in respect of the person concerned. The underlying rationale behind the registration of a lis pendens is as was noted by Geoghegan J. in A.S. v. G.S. [1994] 1 I.R. 407. In the course of his judgment in that case Geoghegan J. noted with approval the explanation by Lord Cranworth in Bellamy v. Sabine [1957] 1 De. G. & J. 566. The relevant passage speaks of “litigation…pending between a plaintiff and a defendant as to the right to a particular estate…”. 4.2 That quote seems to me to express the fundamental proposition. The issue between the parties must relate to the ownership of some interest in land. Where there is more than one defendant in the proceedings, then in order that a lis pendens be validly registered in respect of a particular defendant, then the issues which arise on the pleadings and which are being bona fide pursued by the plaintiff insofar as the relevant defendant is concerned, must relate to the ownership of some interest in land. 4.3 In those circumstances, it does not seem to me that the position of a receiver or agent is captured. A receiver does not own any interest in lands which are properly described as being owned by the company to which the receiver has been appointed. The lands remain owned by the company (in receivership). The fact that the receiver may well be entitled, provided that all necessary formalities are complied with, to execute a deed of transfer of a relevant interest in property in the name of the company does not alter that fact. It is the company which transfers the property. The receiver is simply entitled, by virtue of the debenture in favour of the relevant lender, and his appointment, to cause the company to effect the transfer. There is a real sense in which the receiver’s position in this regard is no different than that of the directors of a solvent company who are, of course, entitled to act on behalf of the company, to sell its property, and, within the articles of association and the law generally, to fix the company seal to any relevant deed of assurance. The fact that, in different circumstances, it may be the receiver rather than the directors who can cause the company to execute a deed of assurance, does not make the receiver any more a person with an interest in the land owned by the company than the directors were persons with an interest in the land owned by the company. 4.4 Therefore, it seems to me that, insofar as a plaintiff may wish to contest the ownership of land held by a company in receivership, then it is that company in receivership who is the proper defendant to that aspect of any relevant proceedings rather than the receiver himself. If a party wishes to obtain injunctive or similar relief against the receiver then that is, of course, possible, but such a claim is not a claim relating to an interest in land but rather is a claim to an injunction. 4.5 In those circumstances, it does not seem to me that a receiver has a sufficient interest in any land purportedly owned by the company to which the receiver has been appointed so as to warrant the registration of a lis pendens against the receiver arising out of proceedings relating to those lands. In an appropriate case there is no reason why a lis pendens cannot be registered against a company in receivership. 5. Conclusions 5.1 In those circumstances, it seems to me that Mr. Jackson is entitled to an order vacating the lis pendens registered as against him on the 10th August, 2007.” 96. The relevant provisions of the Act which relate to the registration and vacation of a lis pendens are ss. 121 and 123. 97. Section 121 provides as follows:-
(2) The following may be registered as a lis pendens: (a) any action in the Circuit Court or the High Court in which a claim is made to an estate or interest in land (including such an estate or interest which a person receives, whether in whole or in part, by an order made in the action) whether by way of claim or counterclaim in the action; and (b) any proceedings to have a conveyance of an estate or interest in land declared void. (3) Such particulars as may be prescribed shall be entered in the register.”
(a) the person on whose application it was registered, or (b) any person affected by it, on notice to the person on whose application it was registered—
(ii) where the court is satisfied that there has been an unreasonable delay in prosecuting the action or the action is not being prosecuted bona fide.” 100. The phrase “estate or interest in land” is not specifically defined in the Act. 101. However, the phrase “legal estate” is defined in the interpretation section as having the meaning given to it by s. 11(1). 102. Likewise, the phrase “legal interest” as defined in the interpretation section as having the meaning given to it by s. 11(4) of the Act. 103. Section 10(1) of the Act provides that:-
Issues in this Application 107. Counsel for the defendants submitted that his argument was in two parts:-
2. Secondly, he submitted that the court could make an order to vacate a lis pendens under s. 123(b)(ii) where the court was satisfied that the action was not being prosecuted bona fide, which he submitted was the case in the present proceedings. 109. In my view, the answer to this question is clear. Section 121(2) of the Land and Conveyancing Law Reform Act 2009, provides that only certain matters may be registered as a lis pendens, i.e. those matters that fall within the precise terms of s. 121(2)(a) and (b). If a lis which has been registered as a lis pendens does not fall within the statutorily permissible type of action which can be registered as a lis pendens, then it follows that the lis should not have been registered as a lis pendens in the first place. Thus, the court may consider whether the lis pendens was properly registered at all. It is only if the court is satisfied that the lis pendens was properly registered that the court goes on to consider whether to vacate the lis pendens on the grounds set out in s. 123 of the Act. 110. As set out above the relevant part of s. 121(2)(a) provides that the following may be registered as a lis pendens:-
(b) In which a claim is made to an estate or interest in land. (c) By way of claim in the action.
(b) That the defendant has an estate or interest in the land in which the plaintiff is claiming an estate or interest. (c) That the proceedings themselves make a claim to a proprietary estate or interest in the said lands. Is the Plaintiff Claiming an Estate or Interest in the Lands? 115. The contractual provisions which Tola is seeking to enforce by way of specific performance is the loan structure set out at Method A: Loan Structure in the Option Agreement. This structure provides that:-
The Tola properties will be transferred to and retained by Hold Co.”
118. However, Hold Co is a company which is not yet in existence. It has no legal personality. Therefore, as at the date of the registration of the lis pendens the person who was claiming a title or interest over lands was in fact a legal entity which did not exist. 119. Moreover, insofar as it is clear from the Option Agreement that the new Hold Co will come into existence, it is also clear from the agreement that this new company will be 100% owned and controlled by Tola. It will, therefore, be a wholly owned subsidiary of Tola. However, the Tola properties will be owned by its subsidiary and not by the parent company. 120. It is a clear principle of company law that a shareholder does not have any proprietary interest in the property of the company in which he has that shareholding. This principle was clearly stated in Quinn & Ors v. IBRC Ltd (in special liquidation) & Ors, a decision of Finlay Geoghegan J. delivered on 20th December, 2013. At para. 21 of her judgment Finlay Geoghegan J. stated as follows:-
‘Where a company has a share capital, each of the members own at least one share of that capital and is consequently a shareholder in the company. This does not mean that he is the owner of any part of the company’s assets or that he owns them jointly with his fellow shareholder.’”
2. Even if the company were in existence it would be a wholly owned subsidiary of the plaintiff. 3. It is clear that the Tola properties would therefore be directly owned by Hold Co and that Hold co would be a wholly owned subsidiary of the plaintiff. 4. Under the normal principles of company law, this does not give the plaintiff any estate or interest in the properties which will be held by its subsidiary Hold Co company. 5. Therefore, the plaintiff has no claim for an estate or interest in the land, the subject matter of these proceedings. 123. It is clear from the pleadings and the affidavit evidence that the first and second defendants do not own any of the Tola properties. These are all owned by companies in which they have a shareholding. This is accepted by the plaintiff. 124. As set out above, it is a fundamental principle of company law that a director or shareholder does not have a direct interest in the assets of the company. All they have is a shareholding in the company. Thus, the first and second defendants do not have any estate or interest in the properties. Is the Claim in Proceedings a Claim relating to Land? Was the Lis Pendens which was Registered a Proper Lis within the Meaning of S. 121(2)(a)? 127. Having considered the pleadings in this matter, the affidavit evidence in both the injunction application, the application to vacate the lis pendens and the application for the joinder of the three defendants, I am of the view that the lis pendens which was registered by the plaintiff against Joseph Linders and Patrick Linders personally was not an appropriate lis to register as a lis pendens against each of them. 128. The reasons for my conclusion on this point are as follows:-
(2) It is also clear from the plaintiff’s pleaded case and the defendants evidence that the properties in dispute are not owned by Joseph or Patrick Linders personally, but are owned by three companies which have now been joined as co-defendants. In the circumstances, although Joseph and Patrick Linders are directors and shareholders of the companies, they do not have any direct interest in the assets of the companies under the normal principles of company law. Therefore, the personal defendants have no estate or interest in the land the subject matter of the proceedings. (3) In the circumstances I am of the view that the plaintiff’s action does not relate to a claim to an estate or interest in land, and in the circumstances, the lis was not properly registered and should be vacated. 129. The defendants submit that, even if they are wrong in relation to the first argument, the lis pendens should be vacated because the action is not being prosecuted bona fide. 130. I turn to an assessment of the wording of s. 123(b)(ii). This section provides that a court may make an order vacating a lis pendens where the court is satisfied that the action is not being prosecuted bona fide. The subsection does not refer to a situation where a claim is not being brought bona fide, but rather “where the action is not being prosecuted bona fide”. 131. In those circumstances, one must consider what is meant by the phrase “the action is not being prosecuted bona fide”. In my view this phrase can be interpreted as meaning either:-
B. That specific steps in the action are not being prosecuted in a bona fide manner. 133. I am of the view that the plaintiff’s action is not being prosecuted in a bona fide manner because the specific steps of registering and maintaining the lites pendentes are not being pursued in a bona fide manner. I say so for the following reasons:-
2. However, once the second affidavit of Mr. Joseph Linders was sworn where it was stated by the defendants that the relevant Tola properties were all owned by companies and were not owned by the personal defendants, it then became incumbent upon the plaintiff to consider the position anew. 3. The plaintiff had registered lites pendentes against two individual defendants and against their estates. However, it was now clear that the property over which the plaintiff was claiming was not owned by the defendants personally but was owned by companies of which they were directors and shareholders. It should then have been clear to the plaintiff that it was not appropriate to maintain a lis pendens against the two personal defendants. 4. As time went on and as the defendants brought an application to vacate the lites pendentes registered against the individual directors, and as further affidavits were exchanged between the parties clarifying the position, it became abundantly clear to the plaintiff that the properties over which the plaintiff was claiming an interest were owned not by the defendants personally, but by companies in which they had a shareholding and in which they were directors. Indeed, the plaintiff’s statement of claim and amended statement of claim plead precisely this point. 5. In circumstances where the plaintiff specifically pleaded that the properties were owned by the third, fourth and fifth named defendants being companies, and in circumstances where the defendants had given uncontroverted affidavit evidence that the properties were owned by the companies it was then incumbent upon the plaintiff to vacate the lis pendens which they had registered against the defendants personally. 6. However, despite the knowledge which the plaintiff gleaned from the replying affidavits of the defendants, and despite the specific pleadings in the plaintiff’s statement of claim, the plaintiff persisted in maintaining the lites pendentes against the two individual defendants. It also insisted on contesting in full the defendants’ application to vacate the lites pendentes. This is not explicable in the normal course of events and, therefore, gives substance to the defendants’ contention that the registration and maintenance of the lis pendens by the plaintiff is a cynical and opportunistic attempt to destroy the defendants’ refinancing agreement with Ulster Bank, to destroy the defendants’ refinancing agreement with a third party financier and to extract the maximum commercial advantage using the registration of a lis pendens as a tactic. 7. This claim by the defendants that the plaintiff is engaged in these tactics is also given some force by the fact that the plaintiff, having been unsuccessful in their application for an interlocutory injunction, is now seeking to obtain a similar result using the registration of a lis pendens as a tactic. The relevance of the injunction becomes more apparent, particularly when one considers that the plaintiff accepted in the application for injunctive relief that damages were an adequate remedy for the plaintiff. 8. No explanation was put forward to the court as to why the plaintiff sought to maintain the lites pendentes against the defendants personally in circumstances where it was also pleaded that the defendants did not personally own the properties, but the properties were owned by the companies. 9. Moreover, the plaintiff’s pleaded case is that the properties were to be transferred to Hold Co. Thus, it should also have been fully apparent to the plaintiff that it had no direct proprietary claim to an estate or interest in the Tola properties. 135. In the circumstances, I will make an order vacating the lis pendens pursuant to section 123(b)(ii). Inherent Jurisdiction of the Court Conclusion |