McCann v Halpin

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 11 March 2016
• Neutral Citation: [2016] IESC 11
• Docket Number: [Appeal No. 13/2014]
• Court: Supreme Court
• Date: 11 March 2016

[2016] IESC 11

THE SUPREME COURT

Laffoy J.

[Appeal No. 13/2014]

Laffoy J.

Dunne J.

Charleton J.

IN THE MATTER OF ELEKTRON HOLDINGS LIMITED (IN RECEIVERSHIP)

AND

IN THE MATTER OF CROSSPLAN INVESTMENTS LIMITED (IN RECEIVERSHIP)

AND

IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 316(1) OF THE COMPANIES ACT 1963

BETWEEN

PAUL McCANN

APPLICANT/RESPONDENT

AND

PATRICK HALPIN

AND

ANN KEANE

RESPONDENTS/APPELLANTS

Insolvency ? Company ? Receivership ? Appointment of receiver ? Whether appointment valid ? S 316 Companies Act 1963

Facts: The respondent had been appointed as receiver of certain companies of which the appellants had been directors of. The respondent had applied for directions in respect of the exercise of his powers, and inter alia a query was raised about whether the respondent had been validly appointed as receiver. The High Court had found that he was, and the matter now came to the Supreme Court on appeal from the decision below.

Held by Ms Justice Laffoy, the other Justices concurring, that the appeal would be dismissed. The trial judge?s interpretation of the phrase ?close of business? for a payment deadline was correct and on that basis the appeal was dismissed. Other submissions made by the relevant bank as to the appointment were not required to be considered.

Judgment of Ms. Justice Laffoy delivered on the 11th day of March, 2016.

The application which gave rise to the order appealed against

1 The application in the High Court which has given rise to this appeal was initiated by an originating notice of motion filed on 13th July, 2012 in which the applicant/respondent, hereinafter referred to as ?the Receiver?, invoking s. 316(1) of the Companies Act 1963 (the Act of 1963), sought certain directions in relation to the exercise of his powers as receiver over the property and assets of the companies named in the title hereof, hereinafter respectively referred to as ?Elektron? and ?Crossplan?. The respondents/appellants, hereinafter collectively referred to as ?the Appellants?, were joined in the proceedings as directors of each of those companies. The issues which arose on the application were narrowed down considerably when the matter came before the trial judge, Peart J., in the High Court on 25th September, 2013. On the appeal from the judgment and order of Peart J., the terms of which will be outlined later, the issues have been narrowed down even further and, in reality, there is only one issue on the appeal, that is to say, whether the Receiver was validly appointed as receiver of Elektron and of Crossplan. The Appellants now argue that the Receiver was not validly appointed on one ground only, namely, that, on the basis of the relationship and interaction between Irish Bank Resolution Corporation Limited (IBRC), which appointed him, and Elektron and Crossplan and the Appellants, he could not have been validly appointed at the time the deeds relied on as appointing him were executed. In essence, the issue as to the validity of the appointment of the Receiver arises from the same factual circumstances in relation to each of the companies and, following the approach sensibly adopted on the hearing of the appeal by the parties, the factual background will be considered primarily by reference to Elektron.

The factual background to the application

2 The deed of appointment of the Receiver as receiver over the assets of Elektron was dated 17th February, 2012 (the Deed of Appointment). It was expressed to be made by IBRC pursuant to the powers contained in mortgages and charges listed in the first schedule thereto. There were six Deeds of Mortgage listed in the first schedule, all of them being in favour of Irish Nationwide Building Society (hereinafter referred to as ?the Society?). It is sufficient for present purposes to record that, by February, 2012, IBRC was the successor in title of the Society as mortgagee under each of the said Deeds of Mortgage.

3 Chronologically the earliest in time of the Deeds of Mortgage listed in the first schedule was described as a Deed of Commercial Fixed Mortgage (with Floating Charge) dated 9th October, 1998 granted by Elektron to the Society (the 1998 Mortgage). The 1998 Mortgage was an ?all sums? mortgage. Before considering its provisions which are relevant for present purposes, it is convenient to consider the facility letter, referred to in later documentation as an ?Offer Letter?, which preceded the 1998 Mortgage, as counsel for the Receiver did on the hearing of the appeal.

4 The relevant Offer Letter was dated 30th September, 1998 and it issued from the Society to Elektron. It indicated that the Society was prepared to make available to Elektron a loan in the amount of IR£970,000. Clause 6 provided that the loan was to be repayable on demand, and that the demand might be served at any time by the Society at its sole discretion and without stating any reason for such demand. Clause 17 provided that the Society's Standard Loan Conditions, as set out in the schedule enclosed with the Offer Letter, were attached to the facilities. Attention was drawn by counsel for the Receiver to Condition 8 which outlined events of default and stated that the Society reserved the right to terminate its commitment to lend thereunder and to call for immediate repayment of all monies outstanding, including accrued interest, should any of the specified events which were then outlined occur, the first event outlined being, if the borrower, in this case Elektron, should fail to pay on the due date any monies payable or due by it from time to time to the Society.

5 Of more significance for present purposes are the relevant terms of the 1998 Mortgage, which was the document which authorised the Society to appoint a receiver in certain circumstances.

6 The first relevant provision was Clause 1 thereof, which, as the heading over it indicated, was the covenant to pay principal or other monies. It provided that Elektron would pay to the Society in accordance with the provisions of Clause 8E thereof all such monies as were then or should from time to time thereafter become due or owing to the Society by Elektron on the balance of any account or accounts of Elektron.

7 In general, Clause 8, as the heading over it indicated, contained provisions relating to crystallisation of the security and events of default. Clause 8E, which was specifically referred to in Clause 1, commenced as follows:

?Notwithstanding anything hereinbefore contained, all monies hereby secured shall become immediately payable or shall be deemed to become immediately payable as the case may be and the security shall be enforceable if the Society shall by Notice in writing make a demand on [Elektron] for payment of the monies hereby secured ??

Clause 8E then outlined no less than twenty events on the happening of which all the monies secured should ?become immediately payable?, whether notice in writing of demand had been made by the Society or not. The first of the broad range of default events was the following:

?If the Company shall fail to repay any monies due to the Society on demand or on the date on which the same ought to be paid in accordance with the provisions of this Debenture or in accordance with the terms and conditions upon which the same may have been advanced or be payable.?

8 Clause 9A of the 1998 Mortgage, as the heading over it indicated, provided for the appointment of a receiver in the following circumstances:

?The Society may at any time after the monies hereby secured have become payable and the security hereby constituted has become enforceable appoint by writing ? any person or persons to be a Receiver ? of the Charged Properties and Assets ??

The expression ?the Charged Properties and Assets? was defined earlier at the end of Clause 4, in which clause the security in favour of the Society was created, and it included, inter alia, the property specified in the schedule. The schedule to the 1998 Mortgage refers to only one property, which was described as ?the premises known as and situate at nos. 53 and 55, Park Avenue, Sandymount in the City of Dublin?.

9 Prior to the appointment of the Receiver by the Deed of Appointment, IBRC issued a letter of demand dated 15th February, 2012 to the directors of Elektron (the Demand Letter). In its first paragraph, the Demand Letter referred to facilities referred to in the schedule thereto ?advanced pursuant to offer letters dated 30 September 1998 and 5 March 2010 (the ?Offer Letters?) issued by [the Society] to [Crossplan]?. On the same day, 15th February, 2012, a similar type Demand Letter issued to the directors of Crossplan. Although, apparently, up to now nobody has noticed the mistake in the first paragraph of the Demand Letter under consideration, it is clear that it did contain a mistake and that it should have referred to Offer Letters issued by the Society to Elektron, the Demand Letter having been headed ?Facilities to Elektron ??. It is also clear that, notwithstanding the mistake, the directors of Elektron understood that the letter under consideration related to facilities made available to Elektron. It is common case that the Appellants received the Demand Letter, which had been sent by post, on 16th February, 2012.

10 In the Demand Letter ?

(a) having referred to the obligation of Elektron to repay the facilities on demand and, notwithstanding the demand nature of the facilities, to repay the facilities on or before an accrual of any of the events listed in Condition 8 as incorporated in the Offer Letters, and

(b) having recorded the fact that Elektron had failed to pay on the due date monies payable and due by it pursuant to the terms of the Offer Letters, and

(c) having set out the amount of the principal and interest which, as of 15th February, 2012, remained outstanding under the Offer...