Ffrench O'Carroll v Permanent TSB Plc
| Jurisdiction | Ireland |
| Judge | Ms. Justice Ní Raifeartaigh |
| Judgment Date | 18 December 2018 |
| Neutral Citation | [2018] IEHC 794 |
| Court | High Court |
| Docket Number | Record No. 2016/5892P |
| Date | 18 December 2018 |
[2018] IEHC 794
THE HIGH COURT
Ní Raifeartaigh J.
Record No. 2016/5892P
AND
AND
Banking and Finance – Property and Conveyancing – Special Case – Parties sought the opinion of the court as to legal questions arising out of the appointment of a receiver by the lender – Whether the lending bank was entitled to appoint a receiver in respect of the mortgaged property
Facts: The borrowers, the Ffrench O’Carrolls, entered into a mortgage with Permanent TSB in March 2008. The Facility Letter provided that there would interest-only repayments for the first three years. The borrowers subsequently went into arrears and a letter of demand was sent by the lenders relating specifically to the arrears and not the total sum due. The lenders appointed a receiver in February 2011. After the initial receiver’s appointment was terminated, a second receiver was appointed in February 2015. Finally, in June 2015, Permanent TSB PLC assigned their interests, securities, and liabilities to Havbell Ltd, who in turn appointed a receiver in April 2016. The borrowers argued that as a valid demand letter (i.e. a demand for the full sum owed) had not been issued, the lenders were not entitled to appoint the initial receiver in February, 2011, and that all subsequent appointments of a receiver were therefore invalid. The lender bank argued that they had a contractual right to appoint a receiver any time after the securities became enforceable.
Held by Ní Raifeartaigh J that there was not a ‘yes’ or ‘no’ answer as to whether a lender must always demand the full debt before a receiver can be appointed, rather it will depend on the provisions within the charge or mortgage in question. In this case the contractual power to appoint a receiver was triggered upon the event of the default taking place and therefore the lender was entitled to appoint a receiver.
This is a case in which the primary issue is whether or not the lending bank was entitled to appoint a receiver in respect of the mortgaged property. This depends on whether it was necessary to serve a valid letter of demand for the total outstanding debt, and if so, whether the bank did serve a valid letter of demand. The matter came before the Court by way of a Special Case pursuant to O. 34 of the Rules of the Superior Courts.
As there are two sets of proceedings I will refer to the parties, for clarity, as ‘the borrowers’ (the Ffrench O'Carrolls) and ‘the lender’ or ‘the bank’ (Permanent TSB). No submissions were made on behalf of Havbell in this Special Case.
On the 19th December, 2007 two loan facilities were offered to the borrowers by Permanent TSB by facility letters dated the 19th December, 2007 (to the value of €2,501,200 and €1,165,000 respectively). In February, 2008 a mortgage was executed over addresses on the South Circular Road, Dublin 8 as security for the €2,501,200 loan facility (the ‘February 2008 mortgage’). In March, 2008 a mortgage was executed over Diep Le Shaker Restaurant, Units 5 A, B & C, Pembroke Lane, Dublin 2 as security for the €1,165,000 loan facility (the ‘March 2008 mortgage’). I am concerned only with the March 2008 mortgage in the present judgment.
The Facility Letter dated the 19th December, 2007 in respect of the Diep Le Shaker loan expressly provided for monthly interest-only payments of €5,722.13 and (in the special conditions) for interest-only repayments for the first three years. Monthly interest payments fall within the definition of ‘Secured Liabilities’ in clause 1.1 of the March 2008 Mortgage. It is not in dispute that the borrowers subsequently defaulted on their obligations to make repayments on each of the loans secured by the mortgages in accordance with the loan agreements and the covenants for payment contained in the mortgages. The letter of the 2nd December, 2010, discussed below, referred to the substantial arrears owed by that date and the existence of arrears does not appear to be in dispute. The dispute concerns the formal preconditions to the appointment of a receiver.
On the 2nd December, 2010, Permanent TSB sent a letter of demand to the borrowers stating that the arrears under the said loan agreements amounted to €179,464.26 at that point in time. It also said that unless the borrowers remitted the amount of rental income due for that month within seven days and continued to remit the rental income on a monthly basis, it would appoint a receiver to collect the rental income from the secured properties. It may be noted that this letter referred only to the arrears and not the full sum due.
On the 3rd October, 2011, a letter of demand was sent from Permanent TSB's solicitors stating that the cumulative arrears on the loans had reached €277,085.55. It also stated that the principal outstanding in respect of the first loan was €2,473,683.21. It said that the amount due on the second loan amounted to €1,091,843.43, giving a total of €3,565,526.64. The letter demanded that this latter sum be discharged within ten days, failing which the solicitors were under instructions ‘to issue the appropriate proceedings so as to recover the monies due and owing’. This letter did not refer to any intended appointment of a receiver.
On the 1st February, 2011 Mr. Keith Lowe was appointed by deeds of appointment as receiver to enter upon and take possession of the secured assets.
On the 1st February, 2015 this appointment was terminated and two weeks later on the 11th February 2011, Permanent TSB, by deeds of appointment, appointed Mr. Stephen Tennant to be the receiver of the secured assets.
On the 18th March, 2016 the plaintiff's solicitors wrote to Mr. Tennant seeking copies of the deeds of appointment, the mortgage documents and the letters of demand. This letter was replied to by email on the 21st March, 2016 by a member of Mr. Tennant's staff stating that the deeds of appointment had already been provided by email dated the 1st February, 2018 and that Mr. Tennant did not hold any of the other mortgage documents.
On or about the 19th June, 2015 Permanent TSB assigned all its interest, security, and entitlements to Havbell Ltd. On the 1st April, 2016 Havbell appointed Mr. Tom O'Brien as receiver by composite instrument of appointment.
On 7th April, 2016 the plaintiff's solicitors wrote to Mr. O'Brien's office seeking, inter alia, copies of the mortgage documents and evidence that the power to appoint the receiver had become exercisable. On the 27th April, 2016 the solicitors for Mr. O'Brien and Havbell Ltd., AMOSS, wrote to the plaintiff's solicitors declining to provide a copy of the mortgage sale agreement, but furnished a copy of the letter of the 2nd December, 2010.
Having regard to the correspondence above, the borrowers contended that as of the date of the appointment of Keith Lowe, the bank had no entitlement to appoint him under the March 2008 mortgage because there had been no valid demand for the debt secured by the March 2008 mortgage; that the 2nd December 2010 letter did not constitute a valid demand because it was a demand for arrears only and did not purport to call in the entire debt (principal plus accrued interest); and that the subsequent appointment of Mr. Tennant was invalid because the appointment of Mr. Lowe had been invalid. The borrower did not take issue with the entitlement to appoint a receiver under the February 2008 mortgage because of the specific terms of that mortgage.
The bank contended that on the occurrence of one of the default events specified at clause 7 of the March 2008 mortgage (here, default in making repayments from time to time), the security became immediately enforceable; that under clause 9, the bank had a contractual right to appoint a receiver thereafter; and that the receiver had the powers specified in the contract as well as powers conferred by statute, including the power to take possession of, collect and get in the property secured by the March 2008 mortgage.
The matter came before me by way of Special Case, in which the following questions were raised:
Question 1: Whether, by virtue of clause 7.1 of the March 2008 Mortgage, the security constituted by the March 2008 Mortgage became immediately enforceable on the occurrence of the events more particularly set out in clause 7.1.1 to clause 7.1.12 (or any of them)?
Question 2: Whether, by virtue of clause 9.1 of the March 2008 Mortgage, and consequent on the security constituted by the March 2008 Mortgage becoming enforceable, the Bank had a contractual right to appoint a Receiver over the property secured by the March 2008 Mortgage without prior demand of the monies secured by the March 2008 Mortgage?
Question 3: If the answer to Question 3 is ‘no’, whether, consequent on the 3rd October, 2011 letters, the Bank had, on the date of his appointment, the right to appoint the third named defendant, Stephen Tennant, as Receiver over the property secured by the March 2008 Mortgage (a) under contract; and/or (b) under the Act of 1881.
Question 4: Whether, consequent on the 3rd October, 2011 letters, the statutory power of sale under the Act of 1881 arose notwithstanding the prior appointment of the Second named Defendant, Keith Lowe, as Receiver over the property secured by the March 2008 Mortgage?
The following clauses contained in the March 2008 mortgage between Permanent TSB and the borrowers are relevant...
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