Holohan v Friends Provident and Century Life Office

• Jurisdiction: Ireland
• Court: Supreme Court
• Judgment Date: 15 December 1966
• Docket Number: (1963. No. 506 P.)
• Date: 15 December 1966

Holohan v. Friends Provident and Century Life Office.

CHARLES J. HOLOHAN

Plaintiff

and

FRIENDS PROVIDENT and CENTURY LIFE OFFICE

Defendants.

(1963. No. 506 P.)

Supreme Court.

Mortgage - Mortgagee's power of sale - Duty of mortgagee in exercising power - Price.

Parties - Mortgagor's action to restrain completion of sale - Whether purchaser a necessary party - Conveyancing Act, 1881 (44 & 45 Vict., c. 41) s. 21,sub-s. 2 - Conveyancing Act, 1911 (1 & 2 Geo. 5, c. 37), s. 5, sub-s. 1.

A life insurance company in the exercise of its powers of sale as legal mortgagee entered into a contract for the sale of certain property of which the plaintiff was mortgagor. In negotiating the sale and the purchase price to be paid, the company offered the premises for sale on an investment basis without attempting to disturb the occupying tenants and refused to consider an alternative mode of offering the premises for sale notwithstanding the advice of auctioneers and house agents that a sale with vacant possession should realise an enhanced purchase price. In an action by the mortgagor against the company, seeking an order restraining the company from completing the sale (to which proceeding the purchaser was not a party) Budd J. refused the relief sought. On appeal it was

Held by the Supreme Court ( Ó Dálaigh ó dálaigh C.J., Lavery and Walsh JJ.), 1, that a mortgagee with a power of sale has not power to dispose of the mortgagor's property with the same freedom as if it were his own;

2, That the question to be investigated in such an action is whether or not the mortgagee acted as a reasonable man would have acted in selling the mortgagor's property;

3, That the conduct of the defendant company in refusing to consider an alternative mode of sale to that upon which they had decided and in refusing to examine the possibilities of obtaining a better purchase price by adopting such a method of sale was unreasonable conduct on their part;

4, That the defendants should be restrained from completing the sale;

5, That the omission to join the purchaser named in the contract of sale as a party to the action did not vitiate the proceedings.

Plenary Summons.

By indenture of mortgage, dated the 31st December 1946, made between the plaintiff, Charles J. Holohan, as mortgagor and the defendants, the Friends Provident and Century Life Office, as mortgagees, the premises known as Raglan Hall, Clyde Road, Dublin, were sub-demised to the defendants to secure repayment of present and future advances made and to be made by the defendants to the plaintiff. The plaintiff having failed to comply with the terms of the contract on his part, the defendants decided to realise their security by a sale of the premises under their powers of sale. The premises, Raglan House contained,inter alia, three unfurnished flats which at relevant times were let to occupying tenants; other portions of the premises were vacant. At the time of the defendants' decision to sell, the premises had certain potentialities as a development site and the defendants were advised that an attempt to obtain vacant possession of the premises, if successful, would enable them to obtain a larger purchase price than would be realised by a sale of the property on an investment basis with the tenants in occupation. The defendants decided not to seek vacant possession of the premises, caused them to be advertised for sale and placed them on the books of a number of auctioneering firms for sale with occupying tenants. Offers ranging between £4,000 and £6,750 were received but the offers did not result in any contract for sale. On the 31st October, 1961, the defendants contracted with one, Francis Sweeney, for the sale of the premises to him for the sum of £5,500. On the 19th March, 1963, the plaintiff instituted proceedings against the defendants in which he alleged that the price at which the premises were agreed to be sold was a gross undervalue and that in the circumstances the sale was an improper and unreasonable exercise of their powers of sale by the defendants.

The facts appear fully in the judgment of Budd J., post.

Cur. adv. vult.

Budd J. :—

The plaintiff in this proceeding is a solicitor who has purchased a considerable amount of house property from time to time. He engaged in the business of buying and selling such property in a large way. The defendants are a well known insurance company to whom the plaintiff in the course of his dealings became heavily indebted.

This particular matter arises out of the purchase by the plaintiff of a certain house and premises, known as Raglan House, Clyde Road, Ballsbridge, in the City of Dublin. The plaintiff financed the purchase of the premises by borrowing from the defendant Company, and the repayment of the monies raised was secured by an indenture of legal mortgage. The premises were held under an indenture of lease, dated the 29th day of August, 1857, made between the Right Honourable Sidney Herbert, of the one part, and John Dempsey, of the other part, for a term of 150 years.

The plaintiff acquired the property for the residue of that term on the 31st December, 1946, and the mortgage to the defendants was effected by a sub-demise. The mortgage was to secure a loan of £20,000. The amount advanced was not repaid. In the year 1961 the defendant Company, in pursuance of the powers of sale which it had as mortgagee, entered into a contract to sell the premises to a Mr. Sweeney for a sum of £5,500. This contract was made on the 31st October, 1961.

The plaintiff now contends that the sale was at a gross undervalue. In the statement of claim it is pleaded that"the said price represents a gross undervalue of the said dwelling-house and premises and in the circumstances the sale is an improper and unreasonable exercise of the power of sale of the defendants." These allegations the defendants deny. They also plead that the plaintiff was guilty of laches and is estopped from bringing the action because he had been informed of the intended sale and acquiesced therein. In my view it is unnecessary for me to consider the defence of laches and acquiescence. These matters were not discussed during the hearing and the case has been presented on the merits.

At the date of the sale there was due to the defendants on foot of the mortgage a sum of £12,957 16s. 0d. The proceedings were not issued by the plaintiff until the 19th March, 1963.

The premises are situated in a fashionable quarter of the City, and in one in which properties have commanded high prices for a few years past. The premises, Raglan Hall, have a frontage to Clyde Road to which the house faces. The grounds are of a peculiar shape; the house is situated off centre of the grounds, and a considerable area is covered by a conservatory which is on the left of the house as one faces it. There is a laneway on one side—Raglan Lane— and there is a yard, garage and a mews on the premises. The premises appear on the town planning maps as being within the planning area, which means that freedom of building on the site is restricted, but in this respect one must bear in mind that the planners envisage an ideal situation which can be impinged upon or altered with permission of the planning authority and one should not lose sight of this possibility. Accordingly, I prefer to approach this case on the basis that permission for development might be forthcoming if applied for.

The premises were sold for £5,500, and from the plaintiff's point of view a rather curious situation arises. Mr. Burns, a valuer acting on behalf of the plaintiff, gave evidence which suggested that the premises were sold at an undervalue, but counsel for the plaintiff considers that he cannot succeed in this case on the basis of a sale at an under-value alone; he says however that the sale was not carried out in a fair and bona fide fashion and that, coupled with the matter of sale at an undervalue, is a proper reason for setting it aside. As regards price, Mr. Burns stated in evidence that in his opinion in 1961 the premises were of the value of £12,000. In arriving at this figure he had regard to the potentialities of the premises and he states that he included the mews, the present income being derived from three tenancies and the possibility that in some way or another the tenants could be persuaded to vacate the premises. In fact, Mr. Burns visualised a sale of the mews as a separate entity, and the utilisation of the proceeds of that sale for the purpose of buying out the tenants of the house. Approaching the matter on that basis he arrived at the figure of £12,000, but he admitted in evidence that there were hazards attached to the property which gave room for differences of opinion on the value of the premises.

Before the sale which I am considering took place the defendants were considering a sale by private treaty. It has been established in evidence that they never considered the possibility of getting vacant possession of the premises or bargaining with the tenants, and they did not consider the potentialities of the premises from that angle. The defendants had a number of offers. Messrs. Lisney, auctioneers, acting for the defendant Society, had written on the 28th June, 1959, that having considered the situation they valued the premises at £4,000 as of January, 1958, and they put a similar value on the premises in the year 1959. On the 26th February, 1959, Mr. Haughton, an official of the defendant Society, who had been appointed receiver, wrote on behalf of the defendants to a Miss Wass who was interested in the premises. His letter was as follows:—

"Dear Madam,

Re Raglan Hall.

I understand that you are interested in the purchase of the above including the small house at the rear known as Raglan Lodge, and would advise you that I am prepared to consider selling this property for a purchase price of £5,000.

Mr. Holohan was written to on the 18th March, 1959, in the...