Ardfert Quarry Products v Moormac Developments Ltd ((in Receivership))

• Jurisdiction: Ireland
• Court: High Court
• Judge: Ms. Justice Laffoy
• Judgment Date: 13 December 2013
• Neutral Citation: [2013] IEHC 572
• Docket Number: [No. 162 COS/2013]
• Date: 13 December 2013

Ardfert Quarry Products v Moormac Developments Ltd (in Receivership)

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

[2013] IEHC 572

[No. 162 COS/2013]

THE HIGH COURT

Company law - Section 316 of the Companies Act 1963 - Receivers - Recovery of materials - Conditions of sale - Retention of title - Whether material affixed to the ground - Whether materials ceased to be chattels

In these proceedings, the applicant, Ardfert Quarry Products, sought various orders under section 316 of the Companies Act 1963 against the respondent, Moormac Developments Limited. These were: an order directing the receiver of the respondent company to return the applicant”s building materials under their retention of title clause; and/or an order directing the receiver to allow the applicant to have access to the site where the materials were located; and/or an order directing the receiver not to mix the applicant”s materials with any of the assets the receiver was appointed.

In April 2008, the applicant supplied the respondent with the materials at issue in these proceedings to be used for construction purposes in a site in Lixnaw. The Conditions of Sale stipulated that the applicant retained title to the materials. The respondent company failed to pay for the materials and in summary proceedings, the applicant entered final judgment for the sum of €121,233.75 plus interest. On attempting to recover the materials, the applicant wrote to Anglo Irish Bank Corporation Limited (the bank). The bank, however, indicated that the retention of title clause was defeated due to a ‘mixing of materials’. In January 2013, the applicant contended by letter to the Receiver that the material was clearly identifiable and recoverable. Access to the site was requested. This was not granted which resulted in these proceedings.

The Court was satisfied that on the balance of probabilities, the crushed limestone which the applicant sought to recover was not paid for. The Court was also satisfied by the evidence of engineer Mr O”Keefe, who, on inspecting the site, found that there would be no difficulty in getting machinery to remove the limestone without damage and that the material was identifiable. It was submitted that the key issue for consideration was whether the goods had become attached to the land, thus losing their status as goods and defeating the retention of title clause in conjunction with the maxim: ‘whatever is affixed to the ground, becomes part of it’.

Held by the Court, two elements fell to be determined. The first consideration was whether the material supplied was attached to the surface of the land by its own weight. On the basis of the evidence and the report of Mr O”Keefe, the Court was satisfied that it was attached only by its own weight. The second consideration was whether the circumstances objectively showed that the material was intended to be part of the land—that is, whether it ‘ceased to be in the nature of chattels’. Laffoy J. determined, against the applicant”s contention, that it was clear that the use of the crushed limestone was the first step on the creation of the roads and buildings to be carried out on the site. The Court was satisfied that the respondent discharged the onus of showing that the materials were intended to be a part of the land and that the applicant had not discharged the onus of showing that it was intended that the material would remain a chattel.

The retention of title clause was held to have been defeated and the application was dismissed.

COMPANIES ACT 1963 S316

HICKEY (WJ) LTD, IN RE 1988 IR 126

COMPANIES ACT 1963 S316(1)

COMPANIES ACT 1963 S316(1)(A)

LYNCH-FANNON CORPORATE INSOLVENCY & RESCUE 2ED 2012 PARA 7.50

LYNCH-FANNON CORPORATE INSOLVENCY & RESCUE 2ED 2012 PARA 7.51

LYNCH-FANNON CORPORATE INSOLVENCY & RESCUE 2ED 2012 PARA 9.47

GALWAY CONCRETE LTD, IN RE 1983 ILRM 402 1983/2/479

HOLLAND v HODGSON 1861-73 AER 237 1872 LR 7 CP 328

MAYE v REVENUE CMSRS 1986 ILRM 377 1985/9/2514

ELITESTONE v MORRIS 1997 2 AER 513 1997 1 WLR 687 1997 27 EG 116

RENT ACT 1977 S1 (UK)

MCCORMACK RESERVATION OF TITLE 2ED 1995 192

Ms. Justice Laffoy

1 The applicant's application, which was initiated by an originating notice of motion dated 10^th April, 2013, invoked s. 316 of the Companies Act 1963 (the Act of 1963) and sought orders in the following terms:

2 (a) an order directing the receiver of Moormac Developments Limited (the Company) to return the applicant's materials pursuant to the applicant's retention of title clause; and/or

3 (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

4 (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.

5 2. There are a number of unusual features of this application.

6 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 3^rd 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.

7 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 19^th December, 2005 made between Mr. McKenna and Anglo Irish Bank Corporation Limited (the Bank), having been so appointed by deed of appointment dated 7^th 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 6^th 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 7^th May, 2010 on foot of a debenture dated 12^th 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.

8 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.

9 6. In April 2008 the applicant supplied the materials in issue to the Company under Conditions of Sale, which provided in Clause 11 as follows:

"All goods supplied by the [applicant] to the [Company] shall remain the property of the [applicant] until all amounts outstanding in respect of the said goods have been paid to the [applicant]. The Company hereby grants an irrevocable right and licence to the applicant through its servants or agents to enter with or without vehicles upon all or any of the said premises or sites on which the goods may be for the purposes of recovering the same."

10 The Company did not pay for the material supplied and in summary proceedings in the High Court (Record No. 2010/645S) between the applicant, as plaintiff, and the Company, as defendant, by order...