Re Hss ((in Receivership))

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 28 October 2011
• Neutral Citation: [2011] IEHC 497
• Docket Number: [No. 404 COS/2011]
• Court: High Court
• Date: 28 October 2011

HSS (in receivership), In re

[2011] IEHC 497

IN THE MATTER OF HSS (IN RECEIVERSHIP)

AND

IN THE MATTER OF SECTION 316 OF THE COMPANIES ACT 1963

[2011] IEHC 497

[No. 404 COS/2011]

THE HIGH COURT

COMPANY LAW

Receivership

Charge - Directions - Receiver appointed by bank having first legal charge over lands - Bank having benefit of covenant precluding company from giving any interest in lands to third parties without bank's permission - Third party claiming that company granted him possession of property on lands as payment for services - Status of receiver in relation to properties - Whether receiver entitled to possession of properties - Companies Act 1963 (No 33), s 316 - Directions given (2011/404COS - Clarke J - 28/10/2011) [2011] IEHC 497

In re HSS (in receivership)

COMPANIES ACT 1963 S316

RESIDENTIAL TENANCIES ACT 2004

COMPANIES ACT 1963 S316(1)

COMPANIES ACT 1963 S316(2)

COMPANIES ACT 1963 S316(1A)

Mr. Justice Clarke

1 2 1.1 The receiver of the company named in the title to these proceedings ("HSS") brings an application before the Court under s. 316 of the Companies Act 1963, for directions. The directions are sought in relation to the status of the receiver in relation to two properties owned by HSS and in particular whether the receiver is entitled to possession of those properties. It will be necessary to set out the circumstances in which the receiver felt it necessary to seek the Court's directions in early course. However, it should, at this early stage, be noted that two respondents have been put on notice of this motion but that only one appeared and made submissions at the hearing.

2 3 1.2 The first respondent to the receiver's application, Mr. Patrick O'Connor of Swift Concepts Ltd., who was the relevant party in the case of one of the properties concerned, did not participate in the proceedings. The respondent relevant to the other property (namely Unit 4a The Shopping Village, Citywest, Co. Dublin (otherwise the "Property")) was Mr. Graham Mason who trades as Oxford Property Group and also operates through his company Oxford Property Lettings Ltd. (collectively "Mr. Mason"). Mr. Mason did appear and put forward, though counsel, argument as to why the Court should not direct that the receiver was entitled to possession of the Property. That argument raises one general question about the proper approach of the Court in an application under s. 316. However, to understand the point it is necessary to turn, first, to the circumstances which led to the receiver's application insofar as it is material to Mr. Mason.

3 2 2.1 HSS was associated with the Mansfield family. The Mansfield family, in addition to their interests in HSS, had other interests in Citywest and the surrounding areas (collectively the "Mansfield interests"). HSS had very substantial borrowings from a number of financial institutions including Bank of Scotland Ireland Ltd. which has now merged into Bank of Scotland Plc. (collectively "Bank of Scotland"). Those borrowings were secured through a debenture which included a first legal charge over certain specified lands. It is commoncase that the forms part of those lands. The land concerned is registered land. It is also commoncase, therefore, that Bank of Scotland holds a registered legal charge over the Property. In addition, no question was raised as to the validity of the appointment of the receiver. Furthermore, the terms of the debenture are clear.

4 3 2.2 There was again no dispute raised on behalf of Mr. Mason to the contention put forward on behalf of the receiver that the debenture contained covenants which would be broken in the event of HSS giving any interest in the lands in question to any third party. The relevant terms of the debenture are the following:

5 2 "7.1 The Company hereby irrevocably covenants and undertakes with the Bank that, during the continuance of this security, it:-

[…]

6 (u) shall not, without the prior consent in writing of the Bank exercise any of the powers of leasing or agreeing to lease vested in, or conferred on, mortgagors by common law or by statute or create or suffer to be created a tenancy of any description of the whole or any part of any of its properties or confer upon any person any contractual licence, right or interest to occupy the whole or any part of the paid property or accept or agree to accept a surrender of any lease, underlease, tenancy, licence or agreement;

[…]

7 4 2.3 While not formally conceding the point, counsel on behalf of Mr. Mason, quite correctly, in my view, did not dispute the receiver's underlying contention which was to the effect that, prima facie, the interests of the Bank of Scotland (and through Bank of Scotland, the receiver) have priority over any interest which Mr. Mason might have in the Property for any interest which Mr. Mason obtained, it was commoncase, significantly post-dated the existence of the debenture.

8 5 2.4 On that basis, the case made by counsel on behalf of the receiver was straightforward. It was said that the receiver, who obtains his entitlements through Bank of Scotland, has priority over any interest which Mr. Mason might assert, and that in those circumstances, the matters put forward by Mr. Mason in opposition to the receiver's application are not relevant. In that context, it is appropriate to turn to Mr. Mason's case.

9 2 3.1 The background to Mr. Mason's case stems from the contention which he makes that he provided significant services to HSS and, indeed, perhaps, to other interests of the Mansfield family, in relation to property management and the like, for a number of years. It is said that a point was reached where the Mansfield interests appeared to be having difficulty in meeting his reasonable invoices. It is said that it was, in that context, that he was allowed into possession of the Property, in other words, that it was in partial recognition of the fact that HSS and other Mansfield interests owed him money which they were unable to pay. This was achieved thorough a lease dated 7^th December, 2009. The receiver, quite properly, took the position that he was unable to comment on the veracity of those allegations one way or the other. For the purposes of this application, I will, therefore, assume that the contention made by Mr. Mason is factually correct.

10 3 3.2 There is a dispute as to the amount that is properly owing by HSS to Mr. Mason. From an examination of the books and records of HSS, it is suggested on behalf of the receiver that the sum owed is of the order of €15,000. Mr. Mason suggests that it is very considerably more, being of the order of €174,335.52. Either way, that dispute is not something which should ordinarily be resolved on an application such as this.

11 4 3.3 While the lease over the Property was expressly described as a "residential lease agreement" there was no dispute but that it was used by Mr. Mason for business purposes. Although in the circumstances it is not an issue now faced by the court, had the situation been one in which a truly residential lease was asserted, then it is...