Porterridge Trading Ltd v First Active Plc

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 04 October 2006
• Neutral Citation: [2006] IEHC 285
• Court: High Court
• Date: 04 October 2006

[2006] IEHC 285

THE HIGH COURT

[No. 18785 P/2004]

PORTERRIDGE TRADING LTD v FIRST ACTIVE PLC

BETWEEN

PORTERRIDGE TRADING LIMITED

PLAINTIFF

AND

FIRST ACTIVE PLC

DEFENDANT

MOORVIEW DEVELOPMENTS LTD v FIRST ACTIVE PLC UNREP CLARKE 2005 IEHC 323 2005/39/8164

COMPANIES ACT 1963 S316

SALTHILL PROPERTIES LTD, RE UNREP LAFFOY 30.7.2004 2004/46/10491

SALTHILL PROPERTIES LTD, RE UNREP SUPREME 29.5.2006

RSC O.19 r28

BARRY v BUCKLEY 1981 IR 306

HENDERSON v HENDERSON 1843 3 HARE 100

A (A) v MEDICAL COUNCIL 2003 4 IR 302

SUN FAT CHAN v OSSEOUS LTD 1992 1 IR 425

LAC MINERALS v CHEVRON CORPORATION 1995 1 ILRM 161

1. Introduction

2 2 1.1 These proceedings are one of a series of cases involving disputes between companies controlled, or formally controlled, by Mr. Brian Cunningham ("Mr. Cunningham") on the one hand and the defendant ("First Active") together with Mr. Ray Jackson (who has been appointed by First Active as receiver to many of the companies concerned) on the other hand. For a general overview of the totality of the proceedings reference should be made to an earlier judgment delivered by me which related to each of the relevant proceedings (High Court, Unreported, Clarke J., 20th October, 2005). These proceedings are referred to in that judgment as the "second related proceedings" and are outlined at paragraph 1.4 of that judgment. In this application First Active contends that these proceedings should be stayed as bound to fail.

3 3 1.2 These proceedings relate to three leases and/or agreements which would appear to have been executed by Salthill Properties Limited ("Salthill") on 22nd December, 1999 in favour of the plaintiff ("Porterridge"). It would appear that on 20th August, 2004 First Active went into possession of the premises the subject matter of these leases. It is the lawfulness of that action and the subsequent attempts by First Active to sell the property concerned that is the subject of these proceedings. The substance of the defence put forward by First Active is that, prior to the execution of the relevant leases, Salthill had entered into a mortgage debenture which, amongst other things, created a first charge in favour of First Active in respect of the premises the subject of the leases. In addition it is contended that the debenture created a first floating charge on all of the assets of Salthill, which included the relevant premises. It would appear that the relevant debenture agreement provided that Salthill should not, amongst other things, lease the property without the written consent of First Active. On that basis First Active contends that the leases were, at least insofar as the interests of First Active are concerned, ineffective. On that basis First Active contends that it was lawfully entitled to enter into possession of the premises.

4 4 1.3 In its reply delivered on the 21st June, 2005 Porterridge denies or puts in issue most of the matters raised by way of defence but goes further in paragraph 7 in alleging that First Active:-

"Was at all material times aware of the execution and/or existence of the leases dated 22nd December, 1999 and is thereby estopped from now relying on any clause which it is alleged required the giving of prior written consent to the making of such leases."

In similar vein paragraph 8 contends that the receiver/manager:-

"Accepted that the leases dated 22nd December, 1999 were valid and accordingly the defendant is estopped from alleging that the said leases are invalid".

2 2 1.4 While these proceedings were pending the receiver brought an application pursuant to s. 316 of the Companies Act 1963for directions relating to his entitlements in respect of the property ("the directions application"). That application was the subject of a judgment in this court in Re Salthill Properties Limited (High Court, Unreported, Laffoy J., 30th July, 2004) and in the Supreme Court (Supreme Court, Unreported, McCracken J. 29th May, 2006).

3 3 1.5 On the basis of the determination of the directions application, First Active now contends that this court should stay or dismiss these proceedings either under Order 19 Rule 28 of the Rules of the Superior Courts or alternatively under the inherent jurisdiction of this court. In substance it is contended that as a result of the decision of this court and of the Supreme Court in the directions application these proceedings are bound to fail.

4 4 1.6 In that context it is necessary to look at the issues which were before this court and the Supreme Court in the directions application and the manner in which that application was determined. I now turn to that issue.

2. The Directions Application

2 2 2.1 As appears from the judgment of Laffoy J. the specific issues on which directions were sought were the following:-

2 "1. Whether the leases, which in the notice of motion are referred to as "purported" leases, are valid?

2 Whether the leases contravene the negative pledge clause contained in certain mortgages between the company and First Active plc (the Bank)?

3 Whether the leases were determined by reason of forfeiture notices served by the company on the lessees dated 20th December, 2001?

4 Whether the leases were surrendered by the lessee in January 2002?

5 Whether the lessee currently has any valid or enforceable leasehold or other interest in the lands thereby demised?"

The judgment also notes that at the hearing the receiver did not pursue the question of the validity of the leases as referred to at 1. It should also be noted that Porterridge was a party to the application.

2 2 2.2 As is clear from p. 10 of the judgment of Laffoy J., amongst the matters raised by Porterridge in its submissions was the suggestion that the issues raised by the receiver should more properly be dealt with in these proceedings and that an application under s. 316 of the Companies Act 1963was inappropriate for the resolution of contested facts.

In relation to that argument Laffoy J. concluded, at p. 13, as follows:-

"While it is probable that, when the issues are joined in the plenary proceedings, there will be a certain similitude between those issues and the issues which arise in this application, in my view, that is not a basis for the court refusing to exercise its jurisdiction under s. 316(1).

Prima facie, the receiver was entitled to bring this application. Whether it would be just for the court to declare rights as between the company (in receivership) and the lessee on this application on the basis of the current state of the evidence remains to be considered having regard to the admissible evidence considered in the context of the issues which arise".

2 2 2.3 Having reviewed the evidence Laffoy J., at p. 15, indicated that the issues which remained for determination were the following:-

2 "1. Whether, as between the company and the lessee, the leases have terminated by -

a (a). forfeiture; or

b (b). surrender

2 What impact the existence of the mortgage debentures had on the leases".

3 3 2.4 Laffoy J. was not satisfied that there was evidence to justify a conclusion that the leases had been terminated either by forfeiture or surrender.

Having reviewed the evidence in relation to bank consent Laffoy J. concluded, at p. 21, as follows:-

"On the basis of evidence adduced by the lessee, I am satisfied that the creation of the leases contravened clause 6 in that they were granted without the written consent of the bank".

As if further clear from a passage at pp. 21 and 22 of the judgment, Laffoy J. went on to consider whether the bank might have given retrospective consent. Laffoy J. reached the conclusion that the bank had indicated that it would give such consent on condition which condition was not fulfilled. On that basis the court concluded that there was no retrospective consent.

Laffoy J., for reasons set out in the following paragraphs of her judgment, further concluded that the lessee had failed to establish that it did not have actual notice of the existence of clause 6.

On that basis, insofar as material to the issue which I have to decide, Laffoy J. concluded that the leases contravened clause 6.

2 2 2.5 As noted above, the judgment of the Supreme Court was delivered by McCracken J.. In dealing with the question of the appropriateness of the procedure adopted, McCracken J. stated the following, at p. 6:-

"I am quite satisfied that the directions sought by the receiver in this case clearly come within the provision of s. 316. The primary issue is the priority of charges on the assets of the company. If a receiver is to perform his functions properly, and in particular if he were to wish...