Highland Finance Ireland Ltd v Sacred Heart College of Agriculture Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 18 June 1992
• Neutral Citation: 1992 WJSC-HC 2110
• Docket Number: Record Number No. 2904P/1991,[1991 No. 2904P]
• Court: High Court
• Date: 18 June 1992

HIGHLAND FINANCE (IRL) LTD v. SACRED HEJART COLLEGE OF AGRICULTURE LTD

HIGHLAND FINANCE IRELAND LIMITED

PLAINTIFFS

AND

SACRED HEART COLLEGE OF AGRICULTURE LIMITED, EDWARD McELLIN AND THE BANK OF IRELAND

DEFENDANTS

1992 WJSC-HC 2110

Record Number No. 2904P/1991

THE HIGH COURT

Synopsis:

CONTRACT

Loan

Lender - Rights - Subrogation - Equity - Money used by borrower to purchase property - Vendor paid - Failure to repay loan - Whether lender entitled to enforce rights of an unpaid vendor - (1991/2904 P - Murphy J. - 18/6/92) [1992] 1 I.R. 472 [1993] ILRM 260

|Highland Finance Ireland Ltd. v. Sacred Heart College of Agriculture Ltd.|

EQUITY

Subrogation

Principles - Loan - Repayment - Failure - Lender provided price for borrower's purchase of property - Seller paid - Whether lender entitled to enforce rights of an unpaid seller - (1991/2904 P - Murphy J. - 18/6/92) [1992] 1 I.R. 472 [1993] ILRM 260

|Highland Finance Ireland Ltd. v. Sacred Heart College of Agriculture Ltd.|

Citations:

BANK OF IRELAND FINANCE LTD V DALY 1978 IR 79

ORAKPO V MANSON INVESTMENTS 1977 3 WLR 230

THURSTAN V NOTTINGHAM PERMANENT BENEFIT BUILDING SOCIETY 1903 AC 6

NIVES V NIVES 15 CH D 649

HUGHES V KEARNEY 1 SCHOALE & LEFROY 133

MARTIN, SUBROGATION & THE UNPAID VENDORS LIEN 1975 38 MLR 580

1 Judgment of Mr. Justice Murphy delivered the 18th day of June 1992 .

2 Counsel on behalf of the parties to these proceedings were able to express the principal issue herein by posing the question "should this Court follow the Judgment delivered by McMahon J. in Bank of Ireland Finance Limited v. Daly 1978 I.R. 79 in the terms in which that Judgment was expressed or should this Court review in whole or in part the conclusions or assumptions made by the learned Trial Judge in that case?"

3 It was unneccessary to call oral evidence. The material facts appear from the admitted documents.

4 By an Indenture dated the 15th November 1984 the first named Defendant, Sacred Heart College of Agriculture Limited ("the College") granted a debenture to the thirdly named Defendants, The Governor and Company of the Bank of Ireland ("the Bank") by which the College charged in favour of the Bank all its undertaking property and assets present and future with the payment of all moneys thereby secured and empowered the Bank to appoint a Receiver and Manager with the powers and for the purposes therein mentioned.

5 The College bought two milk quotas one of 30,000 gallons and the other of 28,731 gallons from North Connaught Farmers Co-operative Society Limited ("the Co-operative") in the year 1988 at a cost of £30,000 and £28,731 respectively. It is not disputed that the purchase price was payable and paid by the College to the Co-operative at the time when the transactions were entered into.

6 The College had sought and obtained from the Plaintiffs Highland Finance Ireland Limited (then known as Highland Leasing (Ireland) Limited and hereinafter referred to as "Highland") two loans of £30,000 and £28,731 respectively. It is clear that the purpose of those loans was to enable the College to complete the purchase of the two milk quotas aforesaid. However the application forms are material in another respect. They set out in detail the dates and the manner in which the two loans together with interest thereon were to be repaid. In the application forms the loans were specified and the interest payable over the term thereof quantified giving a total debt which was to be repaid in one case over a period of six years and in the other seven years by five monthly payments during each of the years that the loans were outstanding. The instalments were to be paid during the Summer months by the Co-operative out of the College's milk account with them pursuant to an irrevocable authority in that behalf contained in the application form. The total of the instalments so payable would equal the amount of the loans together with the interest thereon. In addition to the provision for payment as aforesaid the Highland sought and obtained guarantees from Ballagh Co-operative Mart Limited (an associate of the College) but it appears that these guarantees were invalid on the grounds that they were not executed in accordance with the rules and regulations of the Society purporting to give them.

7 Whilst precise figures were not put in evidence it appears that the repayment of the debt due to Highland by instalments of capital and interest payable by the Co-operative out of the College's milk account with them operated successfully and effectively for a period of more than two years until the appointment by the Bank on the 2nd day of October 1990 of the secondly named Defendant Mr. McEllin as Receiver and Manager under the debenture aforesaid.

8 In these circumstances Highland do not claim that the written irrevocable authorization of the College amounted either to an absolute assignment or a charge on any part of the assets or property of the College. What Highland contend is that the loans having been provided by them for the purpose of discharging the purchase price of the milk quotas and having been used for that purpose that they, Highland, are entitled to stand in the shoes of the Co-operative and to enjoy the same rights which the Co-operative would have enjoyed as an unpaid vendor if the purchase price had not been discharged. The Plaintiffs contend that this proposition is fully supported by the decision of Mr. Justice McMahon in Bank of Ireland Finance and Daly (above). On the face of it this would appear to be so. In that case the learned Judge clearly accepted that where moneys are advanced for the purchase of property by the borrower that the lender is entitled to be subrogated to the rights of the vendor unless the bargain between the lender and the borrower is inconsistent with the retention of a right of subrogation. In the particular case Mr. Justice McMahon held that the acquisition of an equitable (as opposed to a legal) security by the lender was not inconsistent with the right of subrogation.

9 On behalf of the Bank it is said that there does not appear to have been any argument made to Mr. Justice McMahon as to the precise circumstances in which or the reasons for which a lender is subrogated to the rights of an unpaid vendor and that the learned Judge has assumed rather than decided that the right of subrogation...