Derek Byrne v Desmond Killoran and Another
| Jurisdiction | Ireland |
| Judge | Mr Justice Ryan |
| Judgment Date | 27 June 2014 |
| Neutral Citation | [2014] IEHC 328 |
| Court | High Court |
| Date | 27 June 2014 |
[2014] IEHC 328
THE HIGH COURT
BETWEEN
AND
CENTRAL BANK ACT 1971 (APPROVAL OF SCHEME OF AIB FINANCE LTD & ALLIED IRISH BANKS PLC) ORDER 2006 SI 557/2006
THE MERROW LTD v BANK OF SCOTLAND PLC & O'CONNOR 2013 2 ILRM 388 2013/31/9341 2013 IEHC 130
REFUGE ASSURANCE CO LTD v PEARLBERG 1938 CH 687 1938 3 AER 231
POINT VILLAGE DEVELOPMENT LTD & CROSBIE v DUNNES STORES UNREP LAFFOY 15.11.2012 2012/38/11308 2012 IEHC 482
MOORVIEW DEVELOPMENTS LTD & ORS v FIRST ACTIVE PLC & ORS UNREP CLARKE 9.7.2010 2010/37/9346 2010 IEHC 275
THE MERROW LTD (IN LIQUIDATION) v BANK OF SCOTLAND PLC & O'CONNOR UNREP RYAN 31.1.2014 2014 IEHC 36
CENTRAL BANK ACT 1971
MOORVIEW DEVELOPMENTS LTD & ORS v FIRST ACTIVE PLC & ORS 2011 1 IR 117 2010/37/9330 2010 IEHC 35
NITTAN (UK) v SOLENT STEEL FABRICATION LTD T/A SARGROVE AUTOMATION & CORNHILL INSURANCE CO LTD 1981 1 LLOYDS 633
Property - Mortgages - Default in repayment - Rent receiver - Agent of the bank - Receiver"s entitlement to payment of rent - Validity of appointment of receiver - Mortgagee in possession - Mortgage deed executed after transfer - Mistake in mortgage deed - Validity of financial instrument - Notice of possession - Prior notice
Facts Judgment was originally given but subsequent to the hearing it became apparent that important events had been overlooked. The applicant, Mr Byrne is lessee of a large guesthouse at Upper Leeson Street, Dublin. The lessor is the first respondent, Mr Killoran, who mortgaged the property comprising three titles to Allied Irish Finance Ltd. The second respondent, Mr O"Brien, is the receiver appointed by the Bank owing to default in repayments. Mr Killoran does not accept that the receiver is entitled to have the rent paid to him. Mr Byrne is therefore faced with two claimants, thus bringing summons by way of interpleader. Thus far, he has been paying rent into an escrow account. The changed circumstances are as follows: (1) that the original lender, Allied Irish Bank Finance Limited, transferred its assets and liabilities to its parent, Allied Irish Bank Plc, by a transaction that was effected on the 1st January, 2007; (2) one of the mortgage deeds executed by Mr Killoran conveyed the property to AIF but was executed after said transfer of assets; (3) independent of the appointment by AIF of Mr O"Brien as receiver over the three mortgages comprising Mr Byrne"s leasehold take, which was central to the interpleader application, AIB served notice to enter as mortgagee in possession.
Counsel for the first respondent submitted that from the 1st January, 2007, AIF had no interest in, or claim arising from, any of the loans advanced to Mr Killoran. Counsel argued that AIF therefore had no power to appoint Mr O"Brien as receiver over the property, relying on The Merrow Limited v. Bank of Scotland Plc & Anor [2013] IEHC 130. In relation to Mr O"Brien"s position that he is entitled to collect the rent on behalf of the Bank as agent of the mortgagee in possession, counsel submitted that the Bank"s authority to take possession of the mortgaged property is contained in clause 6(b) of the deeds of mortgage – that a mortgagee can enter into possession "on giving prior notice to the Borrower before entering into possession". Mr O"Brien was appointed as receiver on the 30th May, 2013, the same date upon which notices were furnished by the Bank to the first defendant that they were entering into possession of the property. The Bank therefore failed to satisfy the requirement of "prior notice" as specified in the mortgage deed. Counsel argued such actions amounted to trespass and were entirely unlawful. Counsel further argued the second respondent could not act simultaneously as receiver and agent for the bank owing to the nature of the roles. Counsel argued Mr Killoran did not have any obligation to AIF and did not default in repaying them as when the 2009 mortgage was granted, there were no outstanding liabilities to AIF because those loans had been transferred to AIB. Naming AIF in the 2009 mortgage was deemed a mistake. The court had to determine whether such a mistake would affect the validity of the financial instrument.
Held It was concluded that the appointment of Mr O"Brien as receiver had been invalid because all the relevant powers and assets had been transferred from AIF to AIB in January 2007. It was confirmed that AIB had the power to appoint a receiver for two of the three properties, yet the 2009 deed conveyed such power to AIF. This was a mistake as neither party adverted to the prior transfer of business. It was not that the wrong name was put into the deed by accident and was not noticed; the mortgagee named in the deed was the intended party but the wrong party owing to the 2007 transaction. The judge declared AIB was entitled to the rent from the Leeson Street properties based on the powers contained in the mortgage deeds, however before this could happen, the 2009 deed had to be rectified. Until then AIB could not claim rent from the property comprised in the last mortgage. The judge said it was necessary for AIB to bring an appropriate application to secure the various reliefs required to put it in the position of receiver of the rent paid by Mr Byrne. Regarding the rent held in escrow account, the judge said it would be unjust to order that the rent be paid to Mr Killoran as he was unsuccessful in his claim. The judge decided if AIB was successful in its new applications, Mr O"Brien, as its agent, would become entitled to receive the rent paid by Mr Byrne.
Application adjourned. S tatus quo should be preserved in respect of rent so that Mr Byrne continues to pay it into the escrow account.
Judgment (No. 2) of Mr Justice Ryan delivered on the 27th June, 2014.
1. I gave judgment originally in this case on the 14 th January, 2014, but subsequent to the hearing it became apparent that the application had been presented and argued on a factual basis that was mistaken and materially different from the reality because important events had been overlooked. The parties then returned with affidavit evidence and re-argued the case on the corrected facts. In the result the case as now appearing is substantially different, which creates procedural complications that, in my view, make it impossible to dispense the various orders that are required to supply the relief claimed or even to refuse them definitively.
2. The background to this application appears from the introductory paragraphs of my earlier judgment, as follows:
"The applicant is the lessee of a large guesthouse at Upper Leeson Street, Dublin. The lessor is the first respondent, Mr Killoran, who, with his wife, mortgaged the property which is comprised in three titles to Allied Irish Finance Ltd. The second respondent, Mr O'Brien, is the receiver appointed by the Bank on the 12 th December, 2012, under powers contained in the mortgages because of default in repayments. The demised premises comprises three lots with separate titles, each of which is held by the Bank as mortgagee to secure large advances made to Mr Killoran."
.......
Mr Killoran does not accept that the receiver is entitled to have the rent paid to him so Mr Byrne is faced with two claimants and has brought this summons by way of interpleader. Meanwhile, since the 1 st January, 2013, he has been paying the rent into an escrow account."
3. Mr Killoran raised two issues to deny the receiver's entitlement to the rent being paid by Mr Byrne, one of which was that there was a defect in the title of one of his mortgaged properties such that the Bank did not acquire and did not hold his interest. I accepted the submissions made on behalf of the receiver on the validity of the Bank's security. I proposed therefore to direct the applicant to pay the rent under his lease to the receiver, the second respondent, and to order the transfer of the funds in the escrow account into that party's name.
4. Mr Killoran also argued that while two of the titles of his property were not affected by this issue, it was impossible to delineate the precise boundaries or to apportion the rent because of interconnections and overlapping of the properties. It was unnecessary to rule on this point because of my decisions on the other questions but it could arise for consideration once again.
5. On the resumed hearing, the changed circumstances were first, that the original lender, Allied Irish Bank Finance Limited, ("AIF") had transferred its assets and liabilities to its parent, Allied Irish Bank Plc, ("AIB") by a transaction that was effected on the 1 st January, 2007. Pursuant to a transfer of business banking agreement of the 28 th August, 2006, as approved by the Central Bank Act 1971 (Approval of Scheme of Allied Irish Finance Ltd and Allied Irish Banks, plc) Order 2006 ( S.I. No. 557 of 2006), the business of Allied Irish Bank Finance Limited was transferred to Allied Irish Banks plc with effect from the 1 st January, 2007.
6. Secondly, one of the mortgage deeds executed by Mr Killoran conveyed the property to AIF but was executed in 22 nd April, 2009, after the transfer of assets.
7. Thirdly, independent of the appointment by AIF of Mr O'Brien as receiver over the three mortgages comprising Mr Byrne's leasehold take, which was central to the interpleader application, AIB had on the 30 th May, 2013, served notice to enter as mortgagee in possession, all of the mortgage properties of Mr Killoran and had appointed Mr O'Brien as agent. It is noteworthy that the Special Summons in the interpleader application was issued on the 13 th May, 2013.
8. These difficulties were wholly different from what had been argued at the...
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