Charleton v Scriven

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 08 May 2019
• Neutral Citation: [2019] IESC 28
• Court: Supreme Court
• Docket Number: Appeal No: 416/2014
• Date: 08 May 2019

Between/

Luke Charleton

and

Michael Cotter

Plaintiffs/Respondents

and

Gerard Scriven

Defendant/Appellant

[2019] IESC 28

Clarke C.J.

Clarke C.J.

O'Donnell Donal J.

O'Malley Iseult J.

Appeal No: 416/2014

THE SUPREME COURT

Interlocutory injunction – Mortgages – Receivers – Respondents seeking an interlocutory injunction – Whether it was arguable that the respondents were not validly appointed as receivers on foot of mortgages

Facts: Bank of Scotland Plc purported to appoint the plaintiffs/respondents, Mr Charleton and Mr Cotter, as joint receivers over eight separate residential properties which were the subject of mortgage agreements originally entered into between the bank and the defendant/appellant, Mr Scriven. Thereafter, following disputes about the collection of rent for the properties concerned, the receivers brought an application seeking an interlocutory injunction from the High Court which, in substance, sought that they be allowed to take over the properties which were the subject of the mortgages. The High Court granted the injunction sought. Mr Scriven appealed against that order to the Supreme Court. At the core of the appeal was a technical issue about whether it was arguable that the receivers were not validly appointed on foot of the mortgages.

Held by Clarke CJ that it was appropriate to distinguish between those aspects of the interlocutory reliefs sought which concerned the entitlement of the receivers to have the rent on the properties which were the subject matter of the proceedings paid over to them without interference by Mr Scriven, on the one hand, and some of the other reliefs claimed and granted by the High Court, on the other. Clarke CJ held that much of those ancillary reliefs were of little practical benefit in all the circumstances of the case, for all of the properties were rented out. In those circumstances, and in the absence of a move to sell the properties, Clarke CJ held that the substance of the receivers’ practical entitlement was to ensure that the rent was paid to them. Clarke CJ thought that it was appropriate to characterise those aspects of the relief which preserve the payment of rent to the receivers as being prohibitory rather than mandatory in character and, having regard to his finding that there was a fair case to be tried, he was satisfied to uphold the decision of the High Court to grant relief along those lines.

Clarke CJ held that somewhat different considerations applied in respect of the additional relief claimed, partly because it was appropriate to characterise that relief as mandatory, and thus requiring a strong case to be established, and also because, in the circumstances, it would not be appropriate to allow for orders which would have the effect of permitting those properties to be sold without a full trial. In those circumstances, Clarke CJ proposed that counsel be heard further on the precise orders which should be confirmed by the Court, being those orders which were necessary to ensure that the rents were paid to the receivers without interference by Mr Scriven.

Relief granted.

Judgment of Mr. Justice Clarke , Chief Justice, delivered the 8th May, 2019

1. Introduction

1.1 At the core of this appeal is a technical issue about whether it is arguable that the plaintiffs/respondents (‘the Receivers’) were not validly appointed on foot of a series of mortgages originally entered into between Bank of Scotland Plc (‘the Bank’) and the defendant/appellant (‘Mr. Scriven’).

1.2 The Bank purported to appoint the Receivers as joint receivers over eight separate residential properties which were the subject of the mortgage agreements concerned. Thereafter, following disputes about the collection of rent for the properties concerned, the Receivers brought an application seeking an interlocutory injunction from the High Court which, in substance, sought that they be allowed take over the properties which were the subject of the mortgages. As the properties had been let by Mr. Scriven, it may well be the case that in practice, the role of the Receivers was likely to be, at least initially, confined to the collection of rent.

1.3 The High Court granted the injunction sought (see the judgment of Keane J. – Charleton & anor. v. Scriven [2014] IEHC 415). Mr. Scriven appealed against that order to this Court. This appeal was one of those cases which were transferred to the Court of Appeal on the establishment of that Court but which have recently been returned to this Court as part of the attempt to assist the Court of Appeal with its backlog.

1.4 In essence, there are two issues of substance which arise on this appeal. The first concerns the standard to be applied in assessing the strength or otherwise of the case which the Receivers make. While it will be necessary to address this issue in more detail in due course, it is well settled that there are certain categories of injunction application which, at the interlocutory stage, require the plaintiff to establish a higher degree of likelihood of success than the ‘fair issue to be tried’ standard applied in most interlocutory injunction applications. That issue is not decisive given that, irrespective of the standard to be applied, there is an issue as to whether the Receivers have met it. Obviously, however, it would be more difficult for the Receivers to meet the higher standard, if it is that which is properly to be applied.

1.5 So far as the strength of the Receivers” case is concerned, it is necessary to consider the potential defences which might be open to Mr. Scriven for, in the particular circumstances of this case, an assessment of the strength of the Receivers” case largely involves an assessment of the strength or otherwise of the defences which Mr. Scriven may be able to put up.

1.6 Mr. Scriven originally represented himself and had filed written submissions making a number of points of defence. However, by the time the case came to hearing, Mr. Scriven was represented and counsel who, while not abandoning any of the points made in the written submissions, quite properly concentrated on what was considered to be the strongest ground, that being the language used in the purported appointment of the Receivers. In substance, therefore, the question of the strength or otherwise of the Receivers” case has to be assessed by reference to the basis on which it is argued on behalf of Mr. Scriven that the appointment of the Receivers was defective.

1.7 In order to understand those issues more fully, it is appropriate to turn first to the facts.

2. The Facts

2.1 In 2007, the Bank and Mr. Scriven had entered into two loan facility agreements on foot of which the Bank advanced more than €3.69m to Mr. Scriven. The loans advanced to Mr. Scriven were secured, at least in part, by charges over eight residential properties. Mr. Scriven accepted before the High Court that he had been in default in relation to those loans since 2009 and had not made any repayment on the loans since 2013.

2.2 On 26 May 2014, the Bank's solicitors wrote to Mr. Scriven demanding immediate repayment of the sums owed by him under the loan facilities, and stated:-

‘We also give you notice that, failing payment by you of the sums herein demanded forthwith, the Bank reserves the right without further notice to issue proceedings in the appropriate court or take such further action as it deems fit including the appointment of a receiver.’

2.3 On the 4th June 2014, the Receivers were appointed on foot of the deeds of charge as receivers over the eight charged properties.

2.4 Following their appointment, the Receivers engaged in correspondence with Mr. Scriven concerning their appointment as receivers over the eight charged properties. In the High Court, Keane J. summarised that correspondence as follows at paras. 11 and 12:-

‘11. The plaintiffs initiated a correspondence with the defendant on the 5th June 2014, which prior to the issue of the motion at hand rested with the defendant's letter of the 9th July 2014. In the course of that correspondence, the plaintiffs furnished the applicant with a copy of the deed appointing them in respect of each property and subsequently, at the defendant's request, with a copy of the mortgage deed in relation to each. The plaintiffs requested the defendant to furnish them with details concerning the mortgaged properties to include copies of all leases, and details of the tenants and rental income in respect of each.

12. The defendant responded that he had been incorrectly notified of the appointment of the receivers and that he did not accept the validity of their appointment. The defendant has asserted that he is entitled to continue to exercise all of his rights as owner of each of the properties concerned, and that the receivers are not entitled to exercise any such rights, until –as the defendant puts it - he has validated their appointment. The defendant acknowledges that he has written to the tenants of each of the mortgaged properties to the effect that the receivers” appointment is invalid and that the receivers are not, in consequence, entitled to collect rents or exercise any other rights in respect of any of those properties.’

2.5 On 2 July 2014, solicitors acting on behalf of the Receivers wrote to Mr. Scriven enclosing copies of the mortgage deeds in relation to each property, and stated:-

‘Notwithstanding this we are instructed that you have persisted to make contact and correspond with the occupants of the Properties and have told the tenants that they are to pay the rents to you and not pay the rents to our clients. Please note that as and from their appointment our clients are the only persons legally entitled to deal with these properties. Our clients are the only parties entitled to receive the rent from the tenants of these properties.

Our clients explained to you that on their appointment they, as it...