Harrington v Gulland Property Finance Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 29 July 2016
• Neutral Citation: [2016] IEHC 447
• Court: High Court
• Docket Number: [2016 No. 2445 P]
• Date: 29 July 2016

BETWEEN

MICHAEL HARRINGTON

AND

ANTHONY (OTHERWISE TONY) HARRINGTON

PLAINTIFFS

AND

GULLAND PROPERTY FINANCE LIMITED

AND

STEPHEN TENNANT

DEFENDANTS

[2016] IEHC 447

Baker J.

[2016 No. 2445 P]

THE HIGH COURT

Landlord & Tenant – Deed of transfer – Charge – Power to appoint a receiver – Section 64 of the Registration of Title Act, 1964.

Facts: The plaintiffs sought an interlocutory injunction restraining the second named defendant, a receiver appointed by the first named defendant from acting as a receiver. The plaintiff argued that the instrument by which the charge had been transferred had not been registered in the Land Registry and had not been lodged for registration as yet. The plaintiff argued that no interest in the charge had become vested in the first named defendant and that as a consequence, it did not, at the date of the appointment of the receiver, had power, whether contractual or statutory, to effect the appointment. The defendants argued that no frailty could be found in the appointment as the power to appoint a receiver had been derived from the terms of the mortgage or charge and had not been done in the exercise of any statutory power.

Ms. Justice Baker held that the application for an interlocutory injunction restraining the second named defendant, a receiver appointed by the first named defendant from acting as receiver, would be granted. The Court observed that the plaintiffs had put sufficient circumstances before the Court on the interim application to justify the granting of relief. The Court held that the plaintiffs made out an arguable case that the power to appoint a receiver had not vested in the first named defendant at the date of the deed of appointment.

JUDGMENT of Ms. Justice Baker delivered on the 29th day of July, 2016.

1 This judgment is given in an application by the plaintiffs for an interlocutory injunction restraining the second named defendant, a receiver appointed by the first named defendant, from acting as receiver of certain commercial units comprised in Folio 118347F, Co. Cork, and Folio 152304F, Co. Cork.

2 An interim injunction was granted on 18th March, 2016 and that order was made without notice having regard to the fact that it came on in the last day of term before the Easter vacation. By that order the receiver was restrained until after 11th April, 2016 or further order, from acting as receiver over the relevant assets, but by way of protection for the defendants and because the order was made ex parte, an order was made that any rent collected in respect of the properties would be retained by the solicitor for the plaintiffs until further order.

3 Several affidavits have been filed in furtherance of the claim and in response by the second defendant.

4 The facts may be briefly stated. The plaintiffs are brothers and the registered owners as tenants in common of commercial units contained on lands comprised in Folio 118347F and Folio 152304F, Co. Cork. In each case there is registered as a burden on the respective Folio a charge in favour of Anglo Irish Bank Corporation plc. ('Anglo').

5 The charge was created pursuant to an agreement entered into between Anglo and the defendants on 18th October, 2000 to secure a loan in the amount of £600,000 (€761,842) therein agreed to be advanced, and in pursuance of an agreement made in a later facility letter of 27th November, 2003 by which the further amount of €465,797 was agreed to be lent.

6 The facility letter of 18th October, 2000 provided for repayment on an interest only basis, and was to be cleared within two years from the proceeds of sale of each warehouse unit as they were released from Anglo's charge. The second facility was also an interest only facility but was stated to be repayable in full on or before July, 2012. I will return later to the detailed conditions in the facilities.

7 By agreement made on 14th December, 2014 the special liquidators of IRBC, the successor in title of Anglo, agreed to sell to Gulland Property Finance Limited ('Gulland') the benefit of the loan facilities of the plaintiffs and the security. By letter of 6th February, 2015 the special liquidators informed the plaintiffs of this fact and Gulland, through its agent Pepper by letter of 16th February, 2015 notified the plaintiffs of the transfer of the loan. No argument is made that the transfer of the debt was not effective.

8 By deed of transfer made on 6th February, 2015 IBRC, through its special liquidators, transferred the interest in the charge to Gulland, and the deed of transfer was in conformity with Form 56 of the Rules governing the transfer of interests in registered lands.

9 By deed of appointment made on 10th February, 2016 Gulland appointed Stephen Tennant, the second defendant, to be receiver of the lands comprised in the two Folios. The deed of appointment was made in pursuance of the power contained in the deed of charge made on 17th October, 2000 between the plaintiffs of the one part and Anglo of the other part, and recited that the interest of the lender and the interest in the indebtedness and other obligations of the borrowers to Anglo as secured thereby had been acquired by Gulland.

10 No argument is made that the charge was not effective to create a security in favour of Anglo in respect of the loans of the plaintiffs, and as noted above, the charge was registered as a burden on each of the Folios.

11 Clause 9 of the charge provides that the lender may, at any time after the liabilities thereby secured had become payable and the security thereby constituted had become enforceable, appoint a receiver, and no argument is made that this express and clearly stated power was not effective to vest in Anglo the power to appoint a receiver on the conditions therein stated.

12 The primary argument raised by the plaintiffs with regard to the power of Gulland to appoint a receiver arises from the undisputed fact that the instrument by which the charge was transferred from IBRC to Gulland, made on 6th February, 2015 has not been registered in the Land Registry, and has not yet been lodged for registration. It is argued in those circumstances that no interest in the charge has become vested in Gulland and that as a consequence it did not at the date of the appointment of the receiver have a power, whether contractual or statutory, to effect that appointment.

13 Section 64 of the Registration of Title Act, 1964 ('the Act of 1964') is engaged in the present case. That section deals with the means by which the interest in the charge may be assigned:

'(1) The registered owner of a charge may transfer the charge to another person as owner thereof, and the transferee shall be registered as owner of the charge.

(2) There shall be executed on the transfer of a charge an instrument of transfer in the prescribed form, or in such other form as may appear to the Registrar to be sufficient to transfer the charge, but until the transferee is registered as owner of the charge, that instrument shall not confer on the transferee any interest in the charge.

(3) The Registrar shall deliver to the registered transferee a certificate of charge in the prescribed form.

(4) On registration of the transferee of a charge, the instrument of transfer shall operate as a conveyance by deed within the meaning of the Conveyancing Acts, and the transferee shall—

(a) have the same title to the charge as a registered transferee of land under this Act has to the land, under a transfer for valuable consideration or without valuable consideration, as the case may be; and

(b) have for enforcing his charge the same rights and powers in respect of the land as if the charge had been originally created in his favour.'

Appointment of receiver

14 The first issue on foot of which the application for the injunction is brought concerns the question of whether the receiver was validly appointed by Gulland, and no question arises as to whether Gulland is entitled to exercise any of the statutory powers, including the power to overreach puisne mortgages, pursuant to the powers contained in the Act of 1964.

15 The defendants argue that as the power to appoint a receiver is derived from the terms of the mortgage or charge, and was not done in the exercise of any statutory power, that no frailty can be found in the appointment. The defendants point to the decision of the Supreme Court in Freeman v. Bank of Scotland Plc & Ors. [2016] IESC 14 where Bank of Scotland was not the registered owner of the charge. With regard to the question of whether the bank, not being the registered owner of the charge, could appoint a receiver, Dunne J. said as follows:-

'... but the non registration of the Bank does not vitiate or invalidate the appointment of the Receiver. It simply creates a problem for the transferees of the properties concerned in perfecting their title. In the event that any transferee sought a remedy directly against the Appellants arising out of the problem caused by the non-registration of the Bank, it is inconceivable that the Appellants would not have a remedy against the Bank for any potential liability ... The remote possibility that such liability could be asserted does not in my view have any bearing whatsoever on the validity of the appointment of the Receiver.'

16 A similar view is taken by O'Malley J. in McAteer & Ors. v. Sheahan [2013] IEHC 417, [2013] 2 I.R. 328 which dealt extensively with the provisions of the Act of 1964 and the consequences of the repeal of the statutory powers contained in the Conveyancing Act, 1881 to 1911 by the Land and Conveyancing Law Reform Act, 2009. She held that the power to appoint a receiver arose as a matter of contract and was not dependent for its exercise on any statutory power created by the Act of 1881, and relied on the High Court decision of Laffoy J. in Kavanagh & Anor. v. Lynch &...