Grehan v Maynooth Business Campers Owners Management Company Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 31 July 2020
• Neutral Citation: [2020] IECA 213
• Docket Number: Court of Appeal Record No. 2020/31
• Court: Court of Appeal (Ireland)
• Date: 31 July 2020

BETWEEN/

RAY GREHAN, DANNY GREHAN

AND

GLENKERRIN HOMES UNLIMITED COMPANY (IN RECEIVERSHIP), MICHAEL McATEER

AND

PAUL McCANN

PLAINTIFFS/APPELLANTS

- AND -

MAYNOOTH BUSINESS CAMPUS OWNERS’ MANAGEMENT COMPANY LIMITED BY GUARANTEE

DEFENDANT/RESPONDENT

[2020] IECA 213

Costello J.

Noonan J.

Murray J.

Court of Appeal Record No. 2020/31

THE COURT OF APPEAL

Management agreement – Liability – Implied term – Plaintiffs appealing against High Court orders – Whether the plaintiffs ought to carry out remedial works utilising the net funds arising from the sale of a unit on the lands

Facts: The first and second plaintiffs, Messrs Grehan, were the owners of the lands comprised in Folio 34112F Co. Kildare. They developed a business campus known as Maynooth Business Campus on the lands through the third plaintiff, Glenkerrin Homes Unlimited. The fourth and fifth plaintiffs, Mr McAteer and Mr McCann, were receivers appointed by National Asset Management Agency (NAMA) in respect of the debts of the first, second and third plaintiffs which were secured on the lands (the Receivers). The defendant, Maynooth Business Campus Owners’ Management Company Limited by Guarantee, was the management company of the common areas of the campus. The underground car park on the campus required extensive work to remedy serious deficiencies in its condition. The Receivers had been realising the security for the benefit of National Asset Loan Management (NALM) and intended to remit the net proceeds of sale of the last unit to be sold on the estate, without carrying out substantial remedial works. They required the defendant to cooperate in the sale. The defendant maintained that it should not be required to pay for the remediation of the car park, as this was properly the obligation of Glenkerrin. The plaintiffs sued to compel the defendant to execute a Lease of Easements and to facilitate the sale of the last unit in the estate. The defendant counterclaimed for certain declaratory reliefs. On 22 November 2019, the High Court (Haughton J) ordered Glenkerrin and the Receivers to carry out remedial works to the car park of the campus, utilising the net funds arising from the sale of the last unit on the lands, the secured property. The plaintiffs appealed the orders in full and the defendant cross-appealed the declaration by Haughton J that it was an implied term of an agreement dated 6 April 2001 between the first, second and third named plaintiffs and the defendant (the Management Agreement) that it execute a Lease of Easements as requested by the plaintiffs.

Held by the Court of Appeal (Costello J) that as the Receivers had no personal liability in respect of the obligations of Glenkerrin under the Management Agreement, the “receivership” could not be liable to expend the proceeds of sale of Unit C to discharge those obligations; such an outcome renders the secured creditor liable for the claims of an unsecured creditor against the insolvent counterparty to a pre-appointment contract, and is not the law. Costello J held that it was an implied term of the Management Agreement that the defendant execute a Lease of Easements to facilitate the sale of each unit in the development.

Costello J held that she would allow the appeal and refuse the cross-appeal.

Appeal allowed. Cross appeal dismissed.

JUDGMENT of Ms. Justice Costello delivered on the 31st day of July 2020

Introduction

1 This is an appeal against a judgment and order of Haughton J. ( [2019] IEHC 829) delivered on 22 November 2019. The first and second named plaintiffs are the owners of the lands comprised in Folio 34112F Co. Kildare (“the lands” or “the Folio”). They developed a business campus known as Maynooth Business Campus on the lands through their company. Glenkerrin Homes Limited – which subsequently changed its name and status to Glenkerrin Homes Unlimited – (“Glenkerrin”), the third named plaintiff. The fourth and fifth named plaintiffs are receivers appointed by National Asset Management Agency (“NAMA”) in respect of the debts of the first, second and third named plaintiffs which were secured on the lands (the “Receivers”). The defendant is the management company of the common areas of the campus. It was at all times intended that it would assume the management of the common areas of the campus upon the completion of the development.

2 The proceedings concern the proper construction of an agreement dated 6 April 2001 between the first, second and third named plaintiffs and the defendant (referred to throughout as the “Management Agreement”) and the definition of the obligations of the parties to that agreement. Glenkerrin, the developer of the business campus, is insolvent. The underground car park on the campus requires extensive work to remedy serious deficiencies in its current condition. The Receivers have been realising the security for the benefit of National Asset Loan Management (“NALM”) and intend to remit the net proceeds of sale of the last unit to be sold on the estate, without carrying out substantial remedial works. They required the defendant to cooperate in the sale, as I shall explain more fully later. The defendant maintains that it should not be required to pay for the remediation of the car park, as this is properly the obligation of Glenkerrin. The plaintiffs sued to compel the defendant to execute a Lease of Easements and to facilitate the sale of the last unit in the estate. The defendant counterclaimed for certain declaratory reliefs.

3 The trial judge ordered Glenkerrin and the Receivers to carry out remedial works to the car park of the campus, utilising the net funds arising from the sale of the last unit on the lands, the secured property. The plaintiffs have appealed the orders in full and the defendant has cross-appealed the declaration by Haughton J. that it was an implied term of the Management Agreement that it execute a Lease of Easements as requested by the plaintiffs.

The Facts

4 The trial judge has set out the history of the matter in considerable detail. I shall limit myself to those facts which appear germane to the issues before this court.

5 On 1 September 2000, the first and second named plaintiffs (to whom, so as to ensure consistency with the decision of the High Court, I shall refer as the “plaintiffs”) purchased certain lands in Kildare, now comprised in Folio 34112F of the Register of County Kildare, utilising funds provided by AIB plc (“the bank”). The first and second named plaintiffs entered into an all sums due mortgage in favour of the bank. The first and second named plaintiffs were registered as owners of the lands on the Folio on 7 December 2000 and the charge for present and future advances in favour of the bank was also registered on 7 December 2000 (“the charge of 2000”).

6 On 6 April 2001, the first and second named plaintiffs entered into two agreements. The first was an agreement for sale of the lands by the first and second named plaintiffs to their development company. Glenkerrin. The purchase price was IR£12 million and there was no deposit and no closing date fixed. Special Condition 5 of the contract recited that Glenkerrin intended to lay out the land for development as a business park and the first and second named plaintiffs agreed, in consideration of the purchase price, to execute Deeds of Assurance of the individual sites comprised within the Folio in respect of each unit sold by Glenkerrin. As was not uncommon practice at the time, the sale never closed and the interest of Glenkerrin “rested on contract”. The precise extent of that interest is discussed further below.

7 Also on 6 April 2001. the first and second named plaintiffs, Glenkerrin and Maynooth Business Campus Management Limited (the defendant) entered into an Agreement for Sale (the Management Agreement). The proper construction of this agreement presents the central issue in these proceedings. The first and second named plaintiffs are the vendors, Glenkerrin is the developer and the purchaser is the defendant, it being the management company which was established by the first and second named plaintiffs to acquire and manage the common areas of the estate upon the completion of the development of the estate and the sale of the last unit in the estate.

8 The Agreement provides as follows:-

“2. WHEREAS:-

2.1 The Developer has entered into an Agreement with the Vendor to purchase all of the property comprised within Folio 34112F of the Register County Kildare of which the Vendor is the registered owner.

2.2 The Developer has laid out the Estate for development as a commercial business campus and intends to lease sites in the Estate to prospective purchasers and to enter into leases and Management Agreements similar in form to the draft Lease and Management Agreement furnished prior to the execution of this Agreement or on such other terms as may be agreed between the Developer and prospective purchasers or lessees.

2.3 The Developer will complete the development of the Estate in accordance with the plans and specifications produced to the Purchaser and shall lease all the units/sites on the Estate and on the demise of the last Unit/Site;-

3. IT IS HEREBY AGREED

3.1 that in consideration of the Purchaser assuming the Developer's liability under the Leases hereinafter mentioned and further in consideration of the sum of Ten Pounds (IR£10.00) the Vendor as registered owner shall transfer and the Developer as beneficial owner shall transfer and confirm unto the Purchaser ALL AND SINGULAR the freehold interest in ALL THAT AND THOSE that part of the lands comprised within Folio 34112F of the Register County Kildare more particularly described in the First Schedule hereto, subject to and with the benefit of the Leases and Management Agreements which are to be granted by the Developer and subject to the rights of the Purchaser and its members.

3.2 The transfer...