Paddy Burke (Builders) Ltd ((in Liquidation) and (in Receivership)) v Tullyvaraga Management Company Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 08 April 2020
• Neutral Citation: [2020] IEHC 170
• Docket Number: [RECORD NO.: 2020 47 CA]
• Court: High Court
• Date: 08 April 2020

CIRCUIT APPEAL

SOUTH WESTERN CIRCUIT

COUNTY OF CLARE

BETWEEN:

PADDY BURKE (BUILDERS) LIMITED (IN LIQUIDATION AND IN RECEIVERSHP)

PLAINTIFF

AND

TULLYVARAGA MANAGEMENT COMPANY LIMITED

DEFENDANT

AND BY ORDER DATED 27TH NOVEMBER, 2019

STEPHEN TENNANT & PROMONTORIA (ARROW) LIMITED

DEFENDANTS TO COUNTER CLAIM

AND

MINISTER FOR JUSTICE AND EQUALITY

RESPONDENT

[2020] IEHC 170

Denis McDonald J.

[RECORD NO.: 2020 47 CA]

THE HIGH COURT

Injunction – Contract for sale – Multi-Unit Development Act 2011 – Defendants to counterclaim seeking to set aside injunction – Whether management agreements constituted contracts for the sale of land

Facts: The defendants to the counterclaim, Mr Tennant (the Receiver) and Promontoria (Arrow) Ltd (Promontoria), appealed to the High Court from an order made by the Circuit Court on 29 January, 2020, under which, at the suit of the defendant, Tullyvaraga Management Company Ltd (the management company), the Receiver and Promontoria were restrained pending the trial of the proceedings, from completing the sale of certain property to Double S Housing Ltd (the purchaser), unless the following was done: (a) the terms of the contract for sale to the purchaser are varied and amended (and accepted by the purchaser as so varied and amended in writing) in the following respects, namely, that the purchaser accepts and agrees (i) to abide in full with the terms of certain management agreements which were entered into in the course of 2005 and 2006 between the plaintiff, Paddy Burke (Builders) Ltd (in liquidation and in receivership), and the management company, (ii) that line 4 of Clause 4.9 of the contract for sale be amended by deleting the words “insofar as the Subject Property is concerned”, (iii) that the title to the property sold be in similar form (999 year leases) to the title of other units in the development, (iv) that the purchaser will become a member of the management company, and (v) that the purchaser will ensure that the title to all external and internal common areas is transferred to the defendant as required by the management agreements; and (b) that the sale proceeds be held by the Receiver in escrow pending the trial of the proceedings, and not released to, or placed at the disposal of, Promontoria. As outlined by counsel for the management company, there were four aspects to the case which it made against the Receiver and Promontoria. These were that: (a) the management agreements of 2005 and 2006 constituted contracts for the sale of land which envisaged a single transfer of the common areas to the management company; (b) it was entitled to relief under the provisions of the Multi-Unit Development Act 2011; (c) the plaintiff could not assign the burden of its obligations under the management agreements without the consent of the management company; and (d) relying on the decision of Haughton J in Grehan v Maynooth Business Campus Owners Management Company [2019] IEHC 829, the Receiver had adopted and benefitted from the management agreements such that the Receiver was not bound by them and was not entitled to disclaim the obligations of the plaintiff thereunder to keep the common areas in a proper state of repair.

Held by McDonald J that the management company had failed to establish a strong case, on the “contract for sale” ground, sufficient to satisfy the first leg of the test for the grant of an interlocutory injunction of the kind sought. He held that the management company had failed to demonstrate that it had a strong case to make that it was entitled to relief under the 2011 Act as against Promontoria and the Receiver. Regarding the case made by the management company that it was not possible to assign the burden of the developers obligations under the management agreements, McDonald J could not see any basis on which the management company could be said to have any cause of action against the Receiver or Promontoria in respect of the proposed contract with the purchaser on that ground. He concluded that the management company had failed to establish a strong case that the decision in Grehan should be applied.

McDonald J held that the appeal brought by the Receiver and Promontoria should be allowed and that the injunction granted by the Circuit Court judge should be set aside. In its place, he would make an order dismissing the application for an interlocutory injunction.

Appeal allowed.

Judgment of Mr. Justice Denis McDonald delivered on 8th April, 2020

The Appeal before the Court

1 This is an appeal from an order made by the Circuit Court on 29 January, 2020, under which, at the suit of the above named defendant, Tullyvaraga Management Company Limited, (“the management company”), the above named Stephen Tennant, (“the Receiver”), and Promontoria (Arrow) Limited, (“Promontoria”), were restrained pending the trial of these proceedings, from completing the sale of certain property, (described in more detail below), to Double S Housing Limited (“the purchaser”), unless the following was done:-

(a) The terms of the contract for sale to the purchaser are varied and amended, (and accepted by the purchaser as so varied and amended in writing) in the following respects, namely, that the purchaser accepts and agrees:

(i) to abide in full with the terms of certain management agreements (described below) which were entered into in the course of 2005 and 2006 between the plaintiff and the management company;

(ii) that line 4 of Clause 4.9 of the contract for sale be amended by deleting the words “… insofar as the Subject Property is concerned”;

(iii) that the title to the property sold be in similar form (999 year leases) to the title of other units in the development;

(iv) that the purchaser will become a member of the management company;

(v) that the purchaser will ensure that the title to all external and internal common areas is transferred to the defendant as required by the management agreements;

(b) That the sale proceeds be held by the Receiver in escrow pending the trial of the proceedings, and not released to, or placed at the disposal of, Promontoria.

2 In order to understand the nature and effect of the order made, it is necessary to outline the relevant facts.

Relevant Facts

3 The property, the subject of the contract of sale to the purchaser, comprises a number of blocks of apartments, one commercial unit, and several common areas in a development in Shannon, County Clare, known as Brú na Sionna. It is important to note that the property to be sold to the purchaser is not the entire of the Brú na Sionna development. The only parts of the development which are to be sold to the purchaser are those over which the Receiver was appointed by Promontoria, pursuant to a deed of appointment dated 3 May, 2018. The receiver was not appointed over the property comprised in Blocks B, C, A, F and G of the development. Those blocks are, therefore, not the subject of any sale to the purchaser.

4 The Brú na Sionna development was carried out by the plaintiff with the assistance of loan finance provided by Anglo Irish Bank plc. (“Anglo”). These facilities were secured by:

(a) A deed of mortgage dated 28 April 2004 made between the plaintiff and Anglo, which included all of the lands comprised in Folios 27854R and 22667F County Clare, as were transferred to the plaintiff by deeds of transfer dated 28 April 2004 made between a number of parties, including the Shannon Free Airport Development Company Limited (“SFADCO”), together with the easements, rights and privileges granted to the plaintiff over part of the lands comprised in Folio 27854R County Clare by SFADCO, in connection with the construction and use of a car park and associated services for the benefit of the lands transferred;

(b) A further deed of mortgage dated 4 April 2006 made between the plaintiff and Anglo in respect of part of the lands comprised in Folio 27854R of the Register, County Clare, more particularly set out on a map which outlines the extent of the development of Phase 2 of the development;

(c) A mortgage debenture dated 26 June 2003 between the plaintiff and Anglo in respect of a property known as Mountain View situated at Lisdoonvarna, County Clare. However, no issue arises in these proceedings in relation to this debenture.

5 The Anglo facilities and related security were subsequently transferred to National Asset Loan Management Limited (“NALM”). Unfortunately, as a result of the recession, the plaintiff defaulted in its obligations to NALM. This led to the appointment in 2010 by NALM of Eoin Ryan as statutory receiver over all of the assets of the plaintiff secured by the mortgages described above. In the following year, the plaintiff was ordered to be wound-up by the court.

6 Prior to the appointment of Mr. Ryan as receiver, the plaintiff had entered into a number of agreements with the management company which was established for the purposes of taking over the maintenance and management of the common areas of the development. Three agreements were entered into as follows:-

(a) The first agreement is dated 22 August 2005. It relates to the development insofar as it is comprised in Folios 38832F and 28834F County Clare. These folios appear to contain lands that were derived from those contained in the folios described in para. 4 (a) above. No case has been made that the lands comprised in Folios 38832F and 28834F are not subject to the mortgages in favour of Anglo. The first agreement contains a number of relevant terms:

(i) under Clause 1, the company is to sell and the management company is to purchase for €10 the “Estate” which is defined as the mixed residential and commercial estate known as Brú na Sionna comprised in Folio 38832F and 38834F County Clare, subject to and with the benefit of the leases to be granted by the plaintiff in relation to individual units to be sold and with the benefit of a lease in respect...