McEnery v Sheahan
|Mr. Justice Feeney
|30 July 2012
| IEHC 331
|30 July 2012
 IEHC 331
THE HIGH COURT
Mortgage - Debenture agreement - Security - Default - Demand for repayment - Appointment of receiver - Order for possession - Register of charges - Land and Conveyancing Law Reform Act 2009 - Conveyancing and Law of Property Act 1881
Facts: The defendant was the owner of a retail garage and service station (the Property) who entered into a mortgage debenture agreement on the 26th October 2007 with Ulster Bank in respect of it. Clause 2 provided that there was security to Ulster Bank for "all present and/future indebtedness of the mortgagor to the Bank". Sometime later, the bank issued a demand letter for repayment of the sum of €1,833,671.67 with interest. When no payment was received, the Bank appointed the plaintiff as receiver of the Property. The plaintiff sought to takeover possession of the property but was refused by the defendant who disputed their entitlement. An order compelling the defendant give possession of the Property to the plaintiff was sought.
The defendant's contended the relevant charge the plaintiff sought to rely on was not in compliance with s. 19(1)(ii) of the Conveyancing and Law of Property Act 1881 ("1881 Act"), and accordingly Ulster Bank had no right to appoint a receiver. The plaintiff denied this, and submitted the passage of the Land and Conveyancing Law Reform Act 2009 ("2009 Act") had not affected the power to appoint a receiver under the 1881 Act.
Held by Feeney J that if a mortgage agreement was made prior to 1st December 2009 which had incorporated the mortgagee's statutory rights, powers and remedies pursuant to the 1881 Act, those statutory rights, powers and remedies are enforceable even if the default occurred after the enactment of the Land and Conveyancing Law Reform Act 2009. The receiver's appointment was therefore valid. On the issue of the non-registration of the charge, it was carried out ultimately in August 2011. It was held that this point was now moot as registration is deemed effective from the date of application which was the 15th June 2009 and before the appointment of the receiver.
On the contention that the letter of demand for immediate repayment was unreasonable, inequitable and in breach of the implied terms of the contract, it was found in evidence that there had been various meetings and negotiations between the defendant and Ulster Bank and that no agreement between the parties could be reached. As such, it was held that the letter of demand was not precipitous
Order compelling the defendant to deliver up possession of the property granted. Counterclaim of the defendant dismissed.
The defendant is the owner of a retail garage and service station comprised in Folios KY12523 and KY13290, County Kerry which are located at Glenbeigh, County Kerry ("the Property"). The plaintiff was appointed as receiver of the defendant's property on the 12th April, 2011.
On the 26th October, 2007 the defendant entered into a mortgage debenture agreement with Ulster Bank Ireland Limited ("the Bank") in respect of the Property. Clause 2 of that agreement provided that there was security to Ulster Bank Ireland Ltd. for "all present and/future indebtedness of the mortgagor to the Bank". The mortgage was made as a continuing security for all the defendant's present or future indebtedness to the Bank.
Pursuant to a facility letter issued by the Bank to the defendant on the 9th December, 2010, the defendant was granted two overdraft facilities, both in the sum of €20,000. In addition, there was a facility for a demand loan in the amount of €230,958, a committed loan for €1,484,994 and three bond facilities in the sum of €1,500, €11,200 and €1,500 respectively. The Bank issued a demand letter to the defendant dated the 11th April, 2011 seeking immediate repayment of the sum of €1,833,671.67 together with interest in the sum of €9,000 and €25,000.17. No payment was received from the defendant on foot of the letter of demand and on the following day, the 12th April, 2011, the plaintiff was appointed receiver of the Property.
The deed of appointment of the 12th April, 2011 appointed the plaintiff as receiver and manager of all the property described in the schedule to that deed and provided for the plaintiff to enter upon, take possession and manage the Property. The schedule to the deed identified the Property as "part of the property comprised in Folios KY 12523 and KY 13290 the subject matter of land registry dealing D2009LR109560E.
The Bank's charge was not registered at the date of the appointment of the receiver nor on the date when the proceedings commenced but on both of those dates registration was pending. Application for registration of the charge over the mortgaged property was made on the 15th June, 2009 and was completed in August 2011.
On the day of his appointment, on the 12th April, 2011, the plaintiff attended at the Property and attempted to take possession but was refused by the defendant. The plaintiff was appointed by deed of appointment executed on the 12th April, 2011 and notice of acceptance of appointment was duly executed by the receiver (the plaintiff) on the same date. After the defendant refused to hand over possession, the plaintiffs solicitors wrote to the defendant's solicitors on 12th April, 2011 and the solicitor for the defendant responded on the following day, the 13th April, 2011, disputing the Bank's entitlement to possession of the Property.
On the 15th April, 2011, the plaintiff issued the plenary summons and applied ex parte on that date and obtained an interim order for possession of the Property.
The plaintiff”s application for an interlocutory order for possession of the Property came before the Court on the 20th April, 2011 and was adjourned to the 29th April, 2011. On that date, following a hearing, the Court made an interlocutory order granting possession of the Property to the plaintiff, the plaintiff having given an undertaking as to damages and the proceedings were adjourned for full hearing.
The plaintiff seeks an order compelling the defendant to deliver up possession of the Property together with declaratory relief. The defendant claims that the Bank had no power to appoint a receiver and that the plaintiff has no right to enter on to his properties and that not having such a right the plaintiff should not have been granted either an interim or an interlocutory order. In his defence and counterclaim the defendant contends that the charge upon which the plaintiff seeks to rely has not been registered and does not affect the Property as described by the plaintiff in his claim. The defendant pleads, at paragraph 22 of the defence and counterclaim, that it is denied that pursuant to s. 19(1)(ii) of the Conveyancing and Law of Property Act 1881, that Ulster Bank became entitled to appoint a receiver to the property of the defendant as alleged or at all. It was further pleaded that the plaintiff at no material time had a right to enter the defendant's premises since the Bank's power of sale was not exercisable as the mortgage document had not been registered. The defendant counterclaims seeking damages for trespass, breach of contract or alternatively on foot of the undertaking by the plaintiff as to damages. In the reply and defence to counterclaim the plaintiff admits that the charge upon which the plaintiff seeks to rely had not been registered, as of the date of the Reply and Counterclaim, and that the plaintiff denies that the said charge does not affect the Property in circumstances where an application to register has been lodged since the 15th June, 2009 and registration remains pending since that date. The plaintiff seeks a declaration that pursuant to the provisions of the Interpretation Act 2005 and, in particular, s. 27(1)(c) thereof that the right of Ulster Bank Ireland Limited to appoint a receiver to the premises pursuant to the provisions of the Conveyancing and Law of Property Act 1881 has not been affected by the enactment of the Land and Conveyancing Law Reform Act 2009.
There is a legal issue between the parties as to the effect that the enactment of the Land and Conveyancing Law Reform Act 2009 (the Act of 2009) has, if any, on the right of the Bank to appoint a receiver to the premises pursuant to the Conveyancing and Law of Property Act 1881 (the Act of 1881).
A separate issue which is in issue between the parties relates to the defendant's plea in paragraph 21 of his defence where it is pleaded that the letter of demand was an immediate demand for payment which was unreasonable and inequitable in all the circumstances and in breach of an implied term of the contract between the parties. The plaintiff denies that its immediate demand for repayment was unreasonable or inequitable or in breach of the alleged or any implied term of contract between the defendant and the Bank.
The first issue which the Court has to consider is the validity of the appointment of the receiver. The defendant claims that the Bank had no power to appoint a receiver.
All parties agree that the defendant and the Bank entered into a mortgage agreement in respect of the property by a deed executed on the 26th October, 2007. That mortgage was executed on foot of advances made by the Bank to the defendant.
Section 19(1) of the Act of 1881 provides:
"19(1) A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely)- …
(iii) A power, when the mortgage money has become due, to appoint a receiver of the income of the mortgaged property, or of any part...
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