O'Hagan v Harper and Another

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr Justice Kennedy
• Judgment Date: 12 July 2024
• Neutral Citation: [2024] IEHC 410
• Docket Number: [Record No. 2023/6170P]

Between

Fintan O'Hagan

Plaintiff

and

Damien Harper and Promontoria Scariff DAC

Defendant

[2024] IEHC 410

[Record No. 2023/6170P]

THE HIGH COURT

JUDGMENT of Mr Justice Kennedy delivered on the 12 ^th day of July 2024 .

1 . The Plaintiff sought interlocutory relief to prevent the Defendants, a receiver and mortgagee, from marketing or selling a mortgaged property (“the Property”) pending trial. Although the affidavits canvassed various issues, most were resolved by constructive engagement. The remaining issues were whether the Plaintiff has established a fair issue to be tried that the proposed sale of the Property would be at an undervalue and thus breach his rights and, depending on that issue, the balance of justice, including the adequacy of damages as a remedy and the Plaintiff's undertaking as to damages.

2 . There is no dispute about the facts that: (i) the Plaintiff borrowed from First Active Plc, secured by a mortgage over the Property dated 20 August 2002; (ii) the loan is in substantial arrears and the Plaintiff in long-term default; (iii) the loan and mortgage have been assigned to the Second Defendant which appointed the First Defendant as the receiver on 13 July 2023; (iv) negotiations have been unsuccessful; (v) the receiver took possession of the Property in September 2023 and Hunter Estate Agents started to market it on or about 13 October 2023 with an asking price of €595,000; (vi) the asking price was reduced to €550,000 in early November 2023 and the Second Defendant informed the Plaintiff at that time that the Property would be auctioned in January 2024; (vii) contrary to the intimation of a January auction, in early December 2023, the First Defendant agreed to sell the property for €560,000, being the best price received and a figure slightly above the reduced asking price but less than the estimated market value; and (ix) in correspondence, the Plaintiff complained that the Property was being sold hastily and at an undervalue, which the receiver denied.

3 . The Plaintiff challenges the decision to market the Property for €595,000, its estimated value four years earlier (and there appeared to be no dispute about the rise in property prices since then). He expected that the property would actually sell for more:

“ Given property price inflation and the shortage of houses, I am surprised that the Property has been sold for so little. The Property is in very good condition, is modern, is located in a prestigious and desirable location and has many design features which elevate it above other properties. Similar properties have sold for higher prices …”.

4 . Although neither side tendered expert evidence, the Plaintiff exhibited evidence from Lisney Estate Agents (“Lisney”) of sale prices achieved locally. He particularly relied on the sale of a property on the same street (“the Neighbouring Property”) for €670,000 on 19 March 2020. He also expressed concerns about the proposed sale's Capital Gains Tax implications and the fact that the proposed transaction would not resolve his indebtedness.

5 . A letter dated 15 December 2023 from the receiver's solicitor's rejected the Plaintiff's claim, saying that the property was on the open market since 14 October 2023, the highest offer had been accepted and that the receiver had discharged his obligation to obtain the best possible price. The Defendants' replying affidavits likewise claimed to have met the First Defendant's (undisputed) obligation to secure the best price available, relying on the appointment of Hunters Estate Agents (“Hunters”), experienced estate agents who had sold the Neighbouring Property. The receiver likewise appointed Hunters to advise and conduct the Property's marketing and sale on the open market. It was sold on the basis of the highest bid.

6 . Although the Defendants' affidavits were lengthy and supported by numerous exhibits, comprehensively responding to various points raised by the Plaintiff which were ultimately resolved by agreement, they were noticeably less detailed as to the reasoning behind the proposed sale or as to the advice received from Hunters. They did not engage in detail with the points raised by the Plaintiff in relation to the value of the Property, simply confirming that the receiver obtained “ a desktop valuation” from Hunters on 19 September 2023, along with brochures and details of prices achieved for two comparable properties they had sold locally, one being the Neighbouring Property, but suggested that both were in better condition than the Plaintiff's property. Hunters' “ desktop valuation” suggested an estimated market value of circa €600,000 and a figure of €575,000 by way of both guide price and reserve. Informal estimates were also received from DNG Estate Agents (“DNG”) and BidX1. The attached table summarises all these details, including the actual sale details of the Plaintiff's property:

	Hunters Property A	Hunters Property B (Neighbouring Property)	DNG Estimate (2 comparators)	Bidx1 Estimate (3 comparators)	Plaintiff's Property
Agents' Recommendations			€585,000 guide price — €550,000 reserve	Reserve €525,000	Hunters — €600,000 estimated market value — €575,000 reserve
Asking Price	€650,000	€685,000			€595,000, reduced to €550,000
Actual Sale Price	€660,000	€670,000			€560,000

7 . The Defendants' affidavits emphasised that Hunters were highly experienced. They commenced marketing the property on or about 14 October 2023, engaging a professional photographer and producing a high-quality digital brochure for the Property, which was advertised on myhome.ie and daft.ie. The Defendants argued that the receiver's primary duty was to ensure the repayment of the debt and that the Plaintiff, as a borrower in default, had lost control of the arrangements for or timing of the sale. They said they had obtained valuations and advice from three estate agents, appointed reputable estate agents and followed their advice as to the valuation of the Property and the methods of marketing and selling it. The Property was advertised for sale on the open market and the highest bid was accepted. The Defendants also queried whether the (heavily indebted) Plaintiff had the means to honour his undertaking as to damages.

8 . A further affidavit from the Plaintiff questioned the speed with which the Property was marketed, the price reduced and an offer accepted, comparing the proposed price with that achieved for the Neighbouring Property. He insisted that the price was too low and that, in particular, the Property should have sold for a higher price than the Neighbouring Property:

“ as they are similar properties and property prices have risen over the passing years, my house was on the market for a short period of time, a longer marketing period extending after the Christmas holidays would have been more appropriate and resulted in a higher sale price. I believe that, the first named Defendant has not done enough to achieve the best price or even the market price”.

The Plaintiff noted that the proposed sale price was less than the Defendant's two main valuations — he discounted the BidX1 estimate on the basis that:

“ BidX1 specialise in selling distressed properties at auction and they have limited experience in valuing and selling premium properties”.

Accordingly, the Plaintiff argued that the receiver had marketed the property for sale and sold it for less than its estimated value and correctly noted that the First Defendant had not attempted to explain why he agreed the sale for less than was achieved in respect of a similar property and less than the Hunters valuation.

The Law

9 . There was no dispute as to the receiver's duty to obtain the true market value on the sale of a mortgaged property, often referred to as the “ Cuckmere test”. In Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 (“ Cuckmere”), at pp. 968–969, Salmon L.J. held that:

“ a mortgagee in exercising his power of sale does owe a duty to take reasonable precaution to obtain the true market value of the mortgaged property at the date on which he decides to sell it. No doubt in deciding whether he has fallen short of that duty the facts must be looked at broadly, and he will not be adjudged to be in default unless he is plainly on the wrong side of the line.”

10 . In Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410 (“ Chartered Bank”), Lord Denning cited Cuckmere as establishing the receiver's duty to the mortgagor to use reasonable care to obtain the best possible price when selling a mortgaged property:

“ He owes a duty to use reasonable care to obtain the best possible price which the circumstances of the case permit.”

11 . The concept of such duties being owed to the mortgagor was recognised in Ireland before Cuckmere and Chartered Bank. For example, in Holohan v Friends Provident and Century Life Office [1966] IR 1 (“ Holohan”), the mortgagee defendants had disregarded the advice they received and failed to give reasonable consideration to an alternative mode of sale recommended by their surveyors which could have elicited a better price. The defendants were criticised for not considering the option of buying out the tenants to achieve a better price on the disposal of the property. The obligation to have regard to professional advice was clearly signalled in the Supreme Court decision; the Chief Justice observed at p. 25 that:

“ …if the position turned out to be as the defendants' own advisers anticipated, I would find it difficult to say that it would be reasonable for the defendants to reject out of hand the course proposed to them.

What in fact happened, as has been demonstrated, is that the defendants refused to look into the value of the plaintiff's property on a basis which their own surveyors advised would show a considerably higher price than...