Mahon v Yeronga Ltd and Others
| Jurisdiction | Ireland |
| Judge | Mr. Justice Rory Mulcahy |
| Judgment Date | 14 July 2023 |
| Neutral Citation | [2023] IEHC 416 |
| Court | High Court |
| Docket Number | Record No.: 2023/2546 P |
[2023] IEHC 416
Record No.: 2023/2546 P
THE HIGH COURT
EX TEMPORE JUDGMENT of Mr. Justice Rory Mulcahy delivered on the 14 th day of July 2023
This is the Plaintiff's application for an injunction to restrain the Defendants from dealing in any way with the proceeds of sale of a property known as Trinity Haus, Quarry Lands, Dunboyne, Co. Meath (“ the Property”) which was sold by the first Defendant.
More accurately, the Plaintiff seeks to restrain the first Defendant from dealing with any proceeds of sale over and above the portion of the proceeds to which he accepts the first Defendant is entitled. For reasons I will explain later, the Plaintiff calculates this sum as being in or about €96,000.
The sale of the property and the Plaintiff's interest in it arose in the following circumstances. The Plaintiff had been director of the first and second Defendants, the first Defendant being a wholly owned subsidiary of the second. Those two companies were engaged in property development, in particular social and affordable housing on behalf of local authorities.
The third and fourth Defendants were investors in the company. They were special purpose vehicles (SPVs) incorporated for the purpose of allowing wealthy foreign nationals to make investments in the State pursuant to the Immigrant Investor Programme (IIP). The IIP provided a pathway for non-EEA nationals to secure an immigration permission in the State on the basis of certain long-term investments within the State, the investments were required to be made in community facilities, including social housing. The IIP closed in February 2023.
For completeness, the fifth Defendant is a director of the third and fourth Defendant and seems to have been involved in facilitating the investment by the foreign investors. The sixth Defendant is, like the first Defendant, a wholly owned subsidiary of the second Defendant.
The first and second Defendant (“ the Companies”) ran in to financial difficulties and, as a consequence, entered a joint examinership process, which was successful. By Order of the Circuit Court dated 18 February 2022, that Court confirmed the proposed scheme of arrangement prepared by the joint examiners. On foot of that scheme of arrangement, the secured creditors of those companies, being the third and fourth Defendants and certain of the investors therein, became the sole shareholders in the first and second Defendant. They converted €3 million of their secured debt in the companies to equity and invested further sums of money at favourable rates.
The Plaintiff's shareholding in the companies was extinguished and he was required to resign as a director and employee.
The Companies maintained claims against the Plaintiff, including in relation to an acknowledged breach of s. 117 of the Companies Act 2014. Likewise, the Plaintiff maintained claims against the Defendants regarding the repayment of director's loans and the manner in which outstanding loans had been called in.
Following what were described by both parties as “fraught” negotiations, during which both parties were legally represented, the parties executed a settlement agreement (“ the Settlement Agreement”) dated 11 February 2022.
The key term of the Settlement Agreement, for present purposes, relates to the sale of the Property.
The Property was owned, and apparently paid for, by the first Defendant, but it is not disputed that the Plaintiff had lived in it with his family since 2016. By the Settlement Agreement, the parties agreed as follows:
“2. Sale of Property
a. In consideration of the various provisions of this settlement agreement and obligations on the part of SM, Yeronga agrees to place the Property on the market for sale, on the advice of Sherry Fitzgerald Sherry Estate Agents of Fingal House, Main St, Grange End, Dunshaughlin, Co. Meath and to sell the Property for the best reasonably achievable open market price. In this regard, Yeronga shall be bound by the reasonable considered advices of said estate agents.
b. Under no circumstances shall the property be sold at a price of less than €500,000 (five hundred thousand euros).
c. Yeronga's solicitors shall have carriage of sale of the property.
d. Subject to Yeronga retaining the first €200,000 (two hundred thousand euros) of the net sales proceeds, the balance of net sales proceeds shall be paid to SM. this payment shall take place no later than 14 days after completion (“the long stop date).
e. SM shall be responsible for any tax or related obligations arising from the payment to him of the aforementioned portion of the net sales proceeds.
The Settlement Agreement also provided that the Plaintiff could remain in occupation of the property at a rent of €1000 per month, he was required to cooperate in the sale of the property and in no way to obstruct the delivery of vacant possession.
It appears that in late 2022 a sale of the property had been agreed at a price in the region of €810,000. However, a fire which occurred at the property in December 2022 caused this sale to fall through.
In March 2023, the Plaintiff was advised by the Defendants' auctioneers that the sale of the property had completed. The Plaintiff subsequently discovered through his solicitors' investigation of the property price register that the sale price for the property was €500,000. Following correspondence between the Plaintiff's solicitors and solicitors for the Defendants, the Plaintiff also learned that the Defendants had received a payment on foot of an insurance policy in light of the fire in the property. It emerged during the course of the exchange of affidavits in this application that the sum paid, net of costs, was €231,399.
It is the sale proceeds together with the proceeds of the insurance claim which are the subject matter of this application.
Before addressing the exchanges between solicitors immediately preceding this injunction application it is necessary to refer to an Order made in family law proceedings between the Plaintiff and his estranged wife.
It appears that the Plaintiff's wife obtained an Order restraining the first defendant's solicitors, Clark Hill, from in any way disposing of, transferring out of the jurisdiction or otherwise dealing with any monies in respect of the disposal of the property (“ the Family Law Order”). I will return to the significance of that Order below.
On 17 May 2023, the solicitors for the Plaintiff wrote to the solicitors for the Defendants noting the sale of the property, and the fact that they had not been advised of same. They also raised queries in relation to the insurance payment which had been made in respect of the damage to the property caused by the fire. Further, they noted the existence of the Family Law Order. The letter sought confirmation that all money is derived from the sale of the property, including the insurance proceeds, had been retained on trust by the Defendants on behalf of the Plaintiff. Injunction proceedings were threatened.
The Defendants' solicitors replied by letter dated 19 May 2023 in which they confirmed the sale price of the property but did not say anything about the proceeds of the insurance claim and said that the threat of an injunction was baseless in circumstances where the Family Law Order remained in place. The letter did not refer to the Defendants' efforts to have the Family Law Order varied.
The Plaintiff's solicitors replied the same day raising further queries in relation to the proceeds of the insurance claim and again threatened injunction proceedings to prevent any monies being dissipated.
The Defendants' solicitors replied on 22 May 2023 stating that the insurance proceeds had not been addressed in circumstances where they were not the subject of the Settlement Agreement. It was also suggested for the first time that the Plaintiff had breached the Settlement Agreement in a number of respects, including by a failure to vacate the property when called on to do so, but also in respect of his activities when in control of the companies. The Defendants' solicitors elaborated on these alleged breaches by further letter dated 24 May 2023.
The Plaintiff's solicitors replied on 25 May 2023 denying all wrongdoing. The letter noted that the Defendants had applied to vary the Family Law Order made and advised they were finalising their injunction proceedings.
The Plaintiff issued the within proceedings on 30 May 2023 and sought and obtained an interim injunction on an ex parte basis, restraining the Defendants from removing disposing or otherwise transferring out of the jurisdiction or otherwise dealing with the insurance proceeds described above.
In this interlocutory application, the Plaintiff seeks a continuation of that injunction and an injunction in similar terms restraining the Defendants from dealing with a portion of the proceeds of sale.
In this regard, the Plaintiff accepts that the Defendants are entitled to €200,000 from the proceeds of sale. However, it emerged in the exchange of affidavits that the Defendants had already spent some €103,397.10 of the proceeds of the insurance claim prior to being notified of the interim injunction. As a consequence, the Plaintiff now seeks to restrain the Defendant from dealing with all but €96,602.90 of the proceeds of sale.
In this application, the Plaintiff says that he is seeking either a proprietary injunction or a Mareva injunction.
The principles concerning the grant of an injunction are well understood and have recently been stated in Merck, Sharp & Dohme Corporation v Clonmel Healthcare...
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