Grehan v Maynooth Business Campus Owners Management Company Ltd by Guarentee

• Jurisdiction: Ireland
• Judge: Mr. Justice Robert Haughton
• Judgment Date: 22 November 2019
• Neutral Citation: [2019] IEHC 829
• Docket Number: [2018/5402 P.]
• Court: High Court
• Date: 22 November 2019

BETWEEN

RAY GREHAN, DANNY GREHAN

AND

GLENKERRIN HOMES UNLIMITED COMPANY (IN RECEIVERSHIP)

MICHAEL MCATEER

AND

PAUL MCCANN

PLAINTIFFS

AND

MAYNOOTH BUSINESS CAMPUS OWNER’S MANAGEMENT COMPANY LIMITED BY GUARANTEE

DEFENDANT

[2019] IEHC 829

Robert Haughton

[2018/5402 P.]

THE HIGH COURT

Liability – Repairs – Structural defects – High Court required to determine the obligations of the parties – Whether plaintiffs were liable to fix structural defects

Facts: These proceedings, as they had evolved, required the High Court as its primary task to rule on whether the obligation to carry out repairs to a defective surface and underground carpark in Maynooth Business Campus fell on the plaintiffs, Messrs Grehan, Glenkerrin Homes Unlimited Company (in receivership), Mr McAteer and Mr McCann, as owners/developers/receivers, or the defendant, Maynooth Business Campus Owners Management Company Limited by Guarantee.

Held by the High Court (Haughton J) that: (1) the Management Agreement was to be construed as imposing a legal obligation on Glenkerrin to complete the Campus including the carpark to a standard such that it could be certified in accordance with General Condition 36 of the Law Society General Conditions of Sale (1995 Edition); (2) this was not a standard “of good workmanship free from defects”, but it did require completion in “substantial compliance” with planning permission, plans and specifications, the Building Control Act 1990, and Building Regulations made thereunder; (3) this legal obligation was also owed by the Receivers who had since their appointment adopted and benefitted from the Management Agreement in successive sales of Campus units and were estopped or otherwise not entitled to disclaim or repudiate the Management Agreement; (4) the concrete surface of the carpark (over basement level) was constructed without any thermal expansion joints rendering it structurally defective having regard to its size; (5) an intrusive structural investigation needed to be carried out before the full extent of the remedial works required could be ascertained and Glenkerrin and the Receivers had the legal obligation to carry out those works; (6) it was an implied term of the Management Agreement that Glenkerrin/the Receivers must serve the 28 day completion notice referred to at clause 3.2 “as soon as is practicable” after the sale of the last unit and although the last unit had been sold it was not “practicable” for Glenkerrin/the Receivers to serve such a notice while they were not in a position to furnish certification in accordance with General Condition 36 so the date for service must be postponed until the remedial works to the car park were carried out and certified; (7) the defendant must be afforded the opportunity to have its own engineering or other experts informed, by being present at inspections, opening up, and at critical stages of the work, by being briefed with all relevant scoping and remedial work specifications/plans or other relevant documents, and by being given the opportunity to express views on what is proposed, and on the works as carried out, and should be kept informed and copied in a timely fashion with all relevant documentation; (8) the cost was estimated at €2.26 million to which was added consequential repair works plus 10% for professional fees; (9) the sale of the last unit yielded in excess of €5 million and as Glenkerrin had no funds to carry out these works, and as the Receivers were contractually protected from any personal liability, the remedial works must be funded from these proceeds of sale; (10) it expected the Receivers to undertake to utilise the funds so held to fully and properly investigate and scope the remedial works required to the car park, and to carry them out as soon as was practicable in accordance with their legal obligations and to the standard required to provide certification in accordance with General Condition 36, and to do so with the transparency that Haughton J indicated was necessary, and then to serve the notice required by clause 3.2 of the Management Agreement, and finally to complete the Transfer of the estate common areas.

Haughton J held that, in the absence of appropriate undertakings, it would make declarations and orders in line with the findings and conclusions in this judgment.

Receivers liable to fix 'structurally defective' carpark at Maynooth Business Campus.

JUDGMENT of Mr. Justice Robert Haughton delivered on the 22nd day of November, 2019

Introduction

1 These proceedings, as they have evolved, now require the court as its primary task to rule on whether the obligation to carry out repairs to a defective surface and underground carpark in Maynooth Business Campus (“the Campus”) falls on the plaintiffs as owners/developers/receivers, or the defendant management company. The Campus is a largely completed commercial business campus with light industrial units and office accommodation. While certain issues of fact fall to be determined, particularly in relation to the nature and extent of the defects in the carpark, and in relation to the context and circumstances in which an agreement between the developers and the management company was entered into, many of the salient facts are undisputed and the primary task of the court relates to construing that agreement and determining the obligations of the parties arising from that agreement and related conveyancing documentation.

The Parties

2 The first and second named plaintiffs are businessmen who have been involved in property development from 1989. They acquired the property on which the Campus was later developed, and title to the common areas are still vested in them. The first and second named plaintiffs have a track record of developing five or six large multiuse/mixed-use developments with common areas, including carparks, and the involvement in those developments of management companies. These included Glen Royal Centre in Maynooth, a mixed retail, hotel, leisure and department development, St. Wolstan's Abbey in Celbridge, and developments in Ballinteer, Dundrum, the Grange in Blackrock, St. Edmund's in Lucan, Alder Park Court in Tallaght, and Friary Gate in Naas.

3 The third named plaintiff (“Glenkerrin” or “the developer”) is an unlimited company with its registered office at Unit J1 in the Campus. It is a company formed by the first and second named plaintiffs, for the purpose of developing the Campus. The first and second named plaintiffs were directors of Glenkerrin, but all three ceased to have involvement in the development of the Campus when Glenkerrin went into receivership on 3rd May, 2011.

4 The fourth and fifth named plaintiffs (“the Receivers”) are insolvency practitioners in the firm of Grant Thornton. By Deed of Appointment dated 3rd May, 2011 the Receivers were appointed by the National Asset Management Agency (NAMA) as joint statutory receivers in respect inter alia of the first second and third named plaintiffs’ indebtedness owed to and securities held by Allied Irish Banks plc (“AIB”), all of which were acquired by NAMA pursuant to the NAMA Act, 2009. These securities included the lands upon which the Campus is situate, being described in Folio KE34112F, and a debenture over the undertakings of Glenkerrin.

5 The defendant (the “Management Company”) is a company limited by guarantee, having its registered office at Unit F4 in the Campus. It was incorporated by the first and second named plaintiffs inter alia for the purposes of being the Management Company in respect of the Campus. The unit holders in the Campus are all members of the Management Company.

Background facts and relevant documentation

6 The first and second named plaintiffs acquired the Campus lands, then comprising Folio 15989F of the Register County Kildare, from one Francis Brady, on 1st September, 2000, with funds provided by AIB. The Campus lands were later registered in Folio 34112F.

7 By Deed of Mortgage also dated 1st September, 2000 the first and second named plaintiffs mortgaged the Campus lands to AIB. The Mortgage is in standard form and includes –

(1) a covenant on demand to pay to AIB all monies due (Clause 3.01).

(2) a covenant by the mortgagors to keep the property in good and substantial repair and to complete the construction of partially constructed buildings hereon to the satisfaction of AIB and to permit its servants or agents and workman to enter the property and examine its condition and make good defects, and at the cost of the mortgagors to remedy defects (Clause 7.01).

(3) a covenant “not to do or cause or permit to be done anything which might in anyway depreciate jeopardise or otherwise prejudice a value to the Bank of the security hereby created” (Clause 7.01(i)).

(4) Clause 8 conferring on AIB the statutory powers conferred on mortgagees by the Conveyancing Acts, including the power to appoint a receiver who “… shall be deemed to be the agent of the Mortgagor and the Mortgagor shall be solely responsible for the acts and defaults of such receiver and for his remuneration and the Bank shall not under any circumstances be answerable for any loss or misapplication of the rents and profits of the mortgage property or any part thereof …” (Clause 8.01(d))

(5) agreement that the mortgage is a continuing security (Clause 9.02), and “… is in addition to and not in substitution for any other remedy lien security or securities or which may hereafter be held by the Bank for the secured monies or any of them … (Clause 9.03).

8 On 6th April, 2001 the first and second named defendants contracted to sell the lands upon which the Campus was developed to Glenkerrin for IR£12m. The development of the Campus was to be undertaken by Glenkerrin, using funding obtained by the first, second and third named plaintiffs from AIB. Early in the process the defendant Management Company was incorporated. The plan was that...