National Asset Loan Management Ltd and Others v Southlodge Inns Ltd and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Michael White
• Judgment Date: 29 January 2015
• Neutral Citation: [2015] IEHC 109
• Court: High Court
• Date: 29 January 2015

[2015] IEHC 109

THE HIGH COURT

[No. 4313 P./2014]

National Asset Loan Management Ltd & Ors v Southlodge Inns Ltd & O'Shea

BETWEEN

NATIONAL ASSET LOAN MANAGEMENT LIMITED, GEORGE MALONEY AND STEPHEN SCOTT

PLAINTIFFS

AND

SOUTHLODGE INNS LIMITED AND JAMES O'SHEA

DEFENDANTS

Notice of Motion – Vacant Possession – Injunction – Trespassing – Mortgage – Loans – Lease – Consent – Acceptance of Rent – Practice and Procedures – Lease Document

Facts: In this case the plaintiffs had issued a Notice of Motion seeking orders compelling the first named defendant to deliver up vacant possession of a licensed premise known as Clonskeagh House and an injunction restraining him from trespassing or continuing to trespass on the property. The motion was at hearing on 24th October and 14th November, 2014 and judgement was reserved. James O”Shea the second Defendant had obtained loan approval on the 29th September, 2006 for a commercial mortgage with Irish Nationwide Building Society. He signed a first legal mortgage on the 20th December, 2006. Clonskeagh House Limited the company who held a lease of the licensed premises entered into a separate commercial mortgage with a floating charge. The loan was for €1,500,000. The second Defendant granted a Lease on the 8th December, 1993 to Clonskeagh House Limited for a period of 35 years from the 1st December, 1993 for an annual rent. The loan, the subject matter of the mortgage with the Irish Nationwide Building Society was transferred to the National Asset Management Agency on the 10th December, 2010. Difficulties arose over the repayment of the loan. The first Defendant was incorporated on the 18th February 2011, the directors being Seamus O”Shea and Breda O”Shea. Seamus O”Shea was the son of James O”Shea and Breda O”Shea was the spouse of James O”Shea. The second Defendant granted a lease to the first Defendant for a period of two years from June 2011. NAMA did not consent to that Lease. A second Lease was granted on the 8th January, 2014 from the second Defendant to the first Defendant for a term of two years from the 21st July, 2013 at a yearly rent of €25,000 to be paid by monthly instalments. Following considerable correspondence and loan repayment difficulties, the first Plaintiff in 2014 demanded repayment of the loan and interest. By Deed of Appointment of the 10th April, 2014 the second and third Plaintiffs were appointed as Statutory Receivers over the property. On the 17th April, 2014 the second and third Plaintiffs called to the licensed premises in order to take possession but the first Defendant refused to deliver up possession. The second and third Plaintiffs again attended at the property on the 30th April, 2014 and again the first Defendant refused to deliver up possession.

Held by Justice White, in light of the available evidence and submissions presented that it was well established that a lease created by a mortgagor without the consent in writing of the mortgagee, where the requirement of such consent was expressly stipulated for in the mortgage deed, was void as against the mortgagee and the mortgagee was not bound by it. Adopting the approach adopted by Lynch J. in ICC Bank Plc v. Verling, Justice White stated that it was appropriate to conclude, but without in any way purporting to decide the issue in any final manner, that the plaintiff had made out "a strong prima facie case" that the Lease in favour of the Company was void as against the Bank and as against the plaintiff as receiver appointed by the Bank, because Mr. O'Shea did not obtain the consent in writing of the Bank to the creation of the Lease. Thus, the Court was satisfied that the first Plaintiff and Capita acting as an agent on behalf of the first Plaintiff and NAMA engaged with the second Defendant in discharge of the statutory responsibilities of NAMA. It was appropriate that cooperation was sought from the second Defendant to deal with the outstanding debt, the sale of the property, the transfer of the liquor license and the difficulties about the license for the car park attached to the licensed premises. The Court did not regard that form of engagement as acting as any form of estoppel in the particular circumstances of the case. It was determined that NAMA Limited was within its rights to appoint the second and third Plaintiffs as Receivers. The correspondence on behalf of NAMA Limited, the first Plaintiff and Capita always stated that no consent had been forthcoming for both leases. In considering the Plaintiffs” application for an injunction the Court had to consider: (1) The merits of the Plaintiffs” claim for mandatory injunction; (2) If damages would be an adequate remedy; and (3) If necessary the balance of convenience. It was held that neither of the Defendants could compensate the Plaintiffs by way of damages if eventually the proceedings went to hearing and the Plaintiffs were successful in their action. If the Defendants were successful in defending the action and any counterclaim the first Plaintiff would be in a position to discharge any damages and costs. The merits of the case favoured the Plaintiffs. NAMA Limited had not acted precipitously and had attempted to engage with the second Defendant over a substantial period of time. Due to the amount of debt and the expected sale price of the licensed premises the second Defendant was deemed not to be in a position to discharge the amounts due. Consequently, the Court reasoned that the plaintiffs were entitled to the reliefs sought in the Motion.

1 Judgment delivered this 29th day of January, 2015 by Mr. Justice Michael White

2 1. The Plaintiffs issued a Notice of Motion on the 8 ^th May, 2014 seeking orders compelling the first Defendant to deliver up vacant possession of the licensed premises known as Clonskeagh House, Clonskeagh, Dublin 14 and an injunction restraining it from trespassing or continuing to trespass on the property. The motion was at hearing on 24 ^th October and 14 ^th November, 2014 and judgment was reserved.

3 2. James O'Shea the second Defendant obtained loan approval on the 29 ^th September, 2006 for a commercial mortgage with Irish Nationwide Building Society. He signed a first legal mortgage on the 20 ^th December, 2006. Clonskeagh House Limited the company who held a lease of the licensed premises entered into a separate commercial mortgage with a floating charge. The loan was for €1,500,000.

4 3. The second Defendant granted a Lease on the 8 ^th December, 1993 to Clonskeagh House Limited for a period of 35 years from the 1 ^st December, 1993 at the annual rent of €37,500 which had increased subsequently by rents reviews to €120,000 per annum. The loan, the subject matter of the mortgage with the Irish Nationwide Building Society was transferred to the National Asset Management Agency on the 10 ^th December, 2010. Difficulties arose over the repayment of the loan.

5 4. The first Defendant was incorporated on the 18 ^th February 2011, the directors being Seamus O'Shea and Breda O'Shea. Seamus O'Shea is the son of James O'Shea and Breda O'Shea is the spouse of James O'Shea.

6 5. The second Defendant granted a lease to the first Defendant for a period of two years from June 2011 NAMA did not consent to this Lease.

7 6. A second Lease was granted on the 8 ^th January, 2014 from the second Defendant to the first Defendant for a term of two years from the 21 ^st July, 2013 at a yearly rent of €25,000 to be paid by monthly instalments.

8 7. There was considerable correspondence between Kenny, Boyd & Co., Solicitors for the second Defendant and Beauchamps Solicitors for...