Bula Ltd ((in Receivership)) and Others v Laurence Crowley and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Barr
• Judgment Date: 01 February 2002
• Neutral Citation: [2002] IEHC 4
• Court: High Court
• Date: 01 February 2002

[2002] IEHC 4

THE HIGH COURT

No. 6624P/1986

BULA LTD & ORS v. CROWLEY & ORS

BETWEEN

BULA LIMITED (IN RECEIVERSHIP), BULA HOLDINGS, THOMAS C. R ÓCHE, THOMAS J. ROCHE, RICHARD WOOD AND MICHAEL WYMES

PLAINTIFFS

AND

LAURENCE CROWLEY, NORTHERN BANK FINANCE CORPORATION LIMITED, ULSTER INVESTMENT BANK LIMITED AND ALLIED IRISH INVESTMENT BANK LIMITED AND MACKAY AND SCHNELLMANN LIMITED

DEFENDANTS

Citations:

STATUTE OF LIMITATIONS 1957 S2(1)

STATUTE OF LIMITATIONS 1957 S2(6)

STATUTE OF LIMITATIONS 1957 S13(2)

STATUTE OF LIMITATIONS 1957 S18(1)

STATUTE OF LIMITATIONS 1957 S18(3)

STATUTE OF LIMITATIONS 1957 S20

STATUTE OF LIMITATIONS 1957 S24

STATUTE OF LIMITATIONS 1957 S32(2)

STATUTE OF LIMITATIONS 1957 S33

STATUTE OF LIMITATIONS 1957 S37

STATUTE OF LIMITATIONS 1957 S38

STATUTE OF LIMITATIONS 1957 S53

STATUTE OF LIMITATIONS 1957 S63

REGISTRATION OF TITLE ACT 1964 S62(7)

LLOYD DECEASED, RE WATER V LLOYD 1911 IR 153

MURPHY V MURPHY 1980 IR 183

CROWE V ESB 1984 ICLR 571

GASKELL V GOSLING 1896 IQB 669

BULA LTD, RE 1990 1 IR 440

DURACK MANUFACTURING LTD V CONSIDINE 1987 IR 677

POWELL V MCFARLANE 38 P&CR 452

OUGHTON & LOWRY LIMITATION OF ACTIONS 1998 384

WYMES V CROWLEY 1963–1993 ICLR 610 1987/4/1221

GOMBA HOLDINGS V HOMAN 1986 BCLC 331

ROTTENBERG V MONJACK 1993 BCLC 374

IRISH OIL & CAKE MILLS V DONNELLY 1963–1990 ICLR 564 1986/6/798

LASCOMME LTD V UDT BANK 1993 3 IR 412

JOHNSON, RE 1955 1 CH 634

ARDMORE STUDIOS (IRL) LTD V LYNCH 1965 IR 1

KERR ON RECEIVERS 16ED 304

Synopsis:

LAND LAW

Statutory interpretation

Company law - Banking law - Credit and security - Powers and duties of receiver - Agency - Adverse possession -- Whether appointment of receiver brought about change in occupation of lands - Whether receiver agent of company - Whether actions of banks statute barred - Statute of Limitations, 1957 (1986/6624 P - Barr J - 01/02/2002) - [2003] 1 ILRM 55

Bula Ltd v Crowley

Facts: It was the intention of Bula to engage in major mining operations and to that end large sums of money were borrowed from Banks and duly secured by a number of mortgages and debentures, which entitled the relevant bank holding security to appoint a Receiver over the property of the company in the event of default being made by Bula in its obligations to the bank in question. Bula’s commercial intentions were not realised and major financial difficulties ensued in consequence of which the Banks called in their loans by formal demands. The Banks appointed the first defendant as receiver over Bula’s secured property, issued proceedings seeking the recovery of principal and interest and brought well charging order proceedings against Bula. It was contended on behalf of the plaintiffs that having regard to the provisions of sections 33 and 38 of the Statute of Limitations (the Statute), the title of the Banks to Bula’s lands had become extinguished and the right of the mortgagees to principal and interest secured by the mortgages and debentures had also become extinguished. It was submitted that both sections must be interpreted in accordance with the plain ordinary meaning of the words used, however harsh, incongruous, contrary to common sense or even absurd the result might be. It was also submitted on behalf of the plaintiffs that “to bring an action” means not merely the issuing of a summons to commence judicial proceedings but the successful conclusion of the action within the statutory time limit. A crucial issue revolved around whether or not the plaintiffs could establish adverse possession against the Banks. It was contended that the appointment of the receiver had the consequence of putting Bula under his managerial control and secondly, the dis-empowerment of the directors of the company. It was submitted that the appointment of the receiver did not bring about possession of the assets by the receiver to the exclusion of the company. It was contended that the receiver derived his powers solely from the debentures under which he was appointed to be the agent of the company and not of the Banks. The defendants submitted that the receiver was lawfully appointed by the mortgagees under the debentures and had taken effective possession and control of Bula for the purpose of achieving the objective of the Banks. It was contended that the receivership was outside the scope of the Statute and had no part to play in the relationship between Bula, the Banks and the receiver. It was contended that the essence of the Statute in the context of property rights was adverse possession i.e. for the statutory limitation period to apply there must be (per section 18(1), possession of the relevant land which was adverse to the interest of the true owner or the person (in this instance the Banks) who claimed the right to de facto ownership thereof.

Held by Mr. Justice Barr in making the following orders. Subject to long established tenets of construction, words in a statute should be construed in accordance with their plain, ordinary meaning. The Court had no function in remedying error in circumstances where legislation, though clear in its terms, was found to be defective. The activation of rights under the debentures which arose when, consequent upon default by the company in paying its debts, the Banks appointed the receiver to take control of the company and to arrange the sale of its secured assets for the benefit of the mortgagees, did not create a situation of adverse possession within the meaning of section 18(1) because there was no possession without right or authority which was the essence of “adverse possession” within the meaning of the Statute. A receivership involved two distinct relationships. First, that between the appointing mortgagee and the receiver which related to the fundamental objective of the receivership, being entry into possession of the company’s assets for the purpose of sale in the interest of the mortgagee. In practical terms vis-à-vis mortgagee and mortgagor the control over the company’s assets exercised by the Receiver amounted to possession of the debtor’s secured assets by him which in turn in practical terms was possession by the mortgagee who appointed him. The second relationship was that between the receiver and third parties arising out of the receivership. Debentures normally provided, as in the instant case, that such dealings were conducted by the receiver as agent of the company in receivership. The mortgagees had no right to interfere in the receivership in that regard. There was no inconsistency between the foregoing relationships which represented long established commercial good sense. The plaintiffs had failed to establish the fundamental requirement of adverse possession of the lands under section 18(1) which was essential to the operation of the Statute. The relationship between Bula, the Banks and the Receiver was one derived from the debentures and mortgages. It was not within the realm of the Statute.

1 JUDGMENT delivered by Mr. Justice Barr on the 1st day of February, 2002

2 As already stated in my reserved ruling made on 20th February, 2001, there is a protracted, intricate history of litigation between the parties to the present action and other parties regarding or relating to lands the property of the first named plaintiff company (Bula) which has continued for upwards of fifteen years. A broad outline of that history is set out in the ruling to which I have referred and I do not purpose to elaborate on it herein. Suffice to state that the fifth and sixth plaintiffs are directors of Bula and of Bula Holdings. They act in consort and the sixth plaintiff is the moving party in the litigation. The third plaintiff (now deceased) and his son, the fourth plaintiff, have taken no part in the action. They were directors of Bula. The first defendant is the Receiver appointed by the other defendants (the Banks) over the assets of Bula. It was the intention of Bula and its directors to engage in major mining operations on it's lands and to that end large sums of money were borrowed from the Banks and duly secured by a number of mortgages and debentures, which entitled the relevant bank holding security to appoint a Receiver over the property of the company in the event of default being made by Bula in its obligations to the bank in question.

3 Bula's commercial intentions were not realised and major financial difficulties ensued in consequence of which the Banks called in their loans by formal demands dated respectively 25th June; 28th July and 5th August, 1982.

4 The latest dates for uncontested repayments in respect of the sums borrowed are 19th February, 1986 as to NBFC; 31st October, 1984 as to UIB and 19th October, 1983 as to AIIB. Regarding UIB; there is a contested payment made on 23rd May, 1986. There are also contested issues as to whether certain alleged acknowledgements were made by or on behalf of Bula which would have the effect of extending respective commencement dates for the running of time under the Statute of Limitations, 1957 (the Statute).

5 On 8th October, 1985 the Banks appointed the first defendant as Receiver over Bula's secured property and it is contended by the Banks that he thereupon entered into possession of the property.

6 On 4th April, 1997 each of the Banks issued proceedings seeking the recovery of principal and interest due by Bula to the respective banks.

7 On 22nd April, 1997 each of the Banks brought well charging order proceedings against Bula. None of the summonses relating to these actions were served until 30th March, 1998.

8 It is not in dispute that the purpose of the Banks in appointing the Receiver was that he would take control of the company's assets and arrange for the sale of it's lands, including the purposed mine, in discharge of the debts owing by Bula to the Banks. The Receiver has actively pursued that objective since appointment...