Re Jeffel ((in Receivership))

JurisdictionIreland
JudgeMr. Justice Gilligan
Judgment Date03 February 2012
Neutral Citation[2012] IEHC 279
CourtHigh Court
Date03 February 2012

[2012] IEHC 279

THE HIGH COURT

[No. 403 COS/2011]
Jeffel (in receivership), In re
IN THE MATTER OF JEFFEL (IN RECEIVERSHIP)
AND IN THE MATTER OF SECTION 316 OF THE COMPANIES ACT 1963
DONNA COSGRAVE
NOTICE PARTY

COMPANIES ACT 1963 S316

HSS (IN RECEIVERSHIP), IN RE UNREP CLARKE 28.10.2011 2011/26/6865 2011 IEHC 497

SALTHILL PROPERTIES LTD (IN RECEIVERSHIP), IN RE UNREP SUPREME 29.5.2006 2006/52/10997 2006 IESC 35

GOUGH COMPANY CHARGES 2ED P228

BULA LTD v CROWLEY (NO 4) 2003 2 IR 430

COMPANIES ACT 1963 S316(1)

WELCH v BOWMAKER (IRL) LTD 1980 IR 251

V (B) v ZURICH INSURANCE CO 2005 1 IR 274

BNY TRUST CO (IRL) LTD & ARK LIFE ASSURANCE CO LTD v TREASURY HOLDINGS UNREP CLARKE 5.7.2007 2007/5/998 2007 IEHC 271

REGISTRATION OF TITLE ACT 1964 S68(2)

DELANEY EQUITY & THE LAW OF TRUSTS IN IRELAND 5ED 2011 37

WYLIE IRISH LAND LAW 4ED 2010 PARA 3.79

TEMPANY v HYNES 1976 IR 101

ANSTIS, IN RE 1886 31 CH D 596

REGISTRATION OF TITLE ACT 1964 S72(1)(J)

NORTHERN BANK v HENRY 1981 IR 1

CONVEYANCING ACT 1882 S3

FAMILY HOME PROTECTION ACT 1976 S3(7)

CONVEYANCING ACT 1882 S1(4)

HUNT v LUCK 1901 CH 45

WYLIE IRISH LAND LAW 4ED 2010 139

BANK OF IRELAND v ROCKFIELD 1979 IR 21

MANCHESTER TRUST v FURNESS 1895 2 QB 539

DANKSE BANK A/S (T/A NATIONAL IRISH BANK PLC) v MADDEN UNREP 3.7.2009 2009/12/2672 2009 IEHC 319

LAND & CONVEYANCING LAW REFORM ACT 2009 S8(3)

LAND & CONVEYANCING LAW REFORM ACT 2009 (COMMENCEMENT) ORDER 2009 SI 356/2009

LAND & CONVEYANCING LAW REFORM ACT 2009 S52

FAMILY HOME PROTECTION ACT 1976 S7

NESTOR v MURPHY 1979 IR 326

FAMILY HOME PROTECTION ACT 1976 S3

FAMILY HOME PROTECTION ACT 1976 S3(1)

FAMILY HOME PROTECTION ACT 1976 S3(3)(B)

WALPOLES (IRL) LTD v JAY UNREP HIGH 20.11.1980

SHANNON FAMILY LAW PRACTITIONER 2008 PARA BD-049

SHATTER SHATTERS FAMILY LAW 4ED 1997 728

BANK OF IRELAND v PURCELL 1989 IR 327

Company - Receivership - Receiver - Land - Rights over - Receiver seeking relief in relation to company's alleged rights over land - S 316 Companies Act 1963

Facts: The applicant appointed by a bank as receiver of a company, said company being indebted to the bank. The bank had entered into a debenture agreement with the company secured on certain assets, and accordingly the applicant contended that the company had rights in a property in County Dublin ("the property").

The property was currently occupied by a Ms. Cosgrave and her family. Ms. Cosgrave was separated from her husband, a director and shareholder of the company. The company had agreed to sell the property to a member of her husband's family, and as part of her separation agreement Ms. Cosgrave was permitted to reside in the property as a family home.

The applicant therefore sought directions under s 316 of the Companies Act 1963 ("s 316") from the Court in relation to the respective rights of the company and Ms. Cosgrave, as well as applying for reliefs in relation to the property.

Held by Gilligan J, that a number of questions had to be determined before giving directions on the parties' respective rights. Firstly, the Court had to decide on whom the burden of proof fell under s 316 applications, and secondly was the Court constrained in hearing the matter on exchange of affidavit evidence.

The Court stated the burden of proof in s 316 applications fell on the party seeking to disturb prior interests, and this was to be considered on the facts of the case. Having considered the law, the Court was satisfied it was appropriate to proceed in the matter of the basis of affidavit evidence.

The Court reviewed the evidence and relevant case law, and accepted the bank had a charge over the property. Ms. Cosgrave had received a beneficial interest in the property from the company before the purchase price was paid to the company. This interest dated from 2006, the point at which she took up residence, and was an equitable interest. Welch v Bowmaker (Jr.) Ltd. [1980] IR 251 applied.

On the basis of the above, the Court proceeded to consider whether the bank was a bona fide purchaser for value without notice of Ms. Cosgrave's interest. The burden of proof in this regards fell on the bank, and the bank could not be said to have investigated title fully. The interest of the bank was therefore subject to Ms. Cosgrave's interest. In addition, the transfer of the property to the bank was void for offending the provisions of the Family Home Protection Act 1976. The application for reliefs would therefore be dismissed. Northern Bank v Henry [1981] IR 1 followed.

Headnotes

Introduction
1

1. The property at the centre of the present application, known as Saggart Lodge, is a detached Victorian house of circa 3,500 sq. ft., built around 1850 and situate on approximately one half acre (the "Property"). The Property was purchased as part of a larger parcel of land in May 2004 and was, at that stage, in a considerable state of disrepair. The remainder of the land was subsequently developed for housing and has, to a greater or lesser extent, since been sold off. That development, or a part thereof, also shares the name "Saggart Lodge".

2

2. It would appear that that parcel of land formed part of a single folio which was, however, dissected by a roadway. This appears to have had the effect of confusing matters somewhat and may at least be part of the reason why the present application has arisen at this stage.

3

3. The receiver of Jeffel (the "Receiver") has brought an application seeking the court's directions as to the nature of the respective property rights as and between the company and Ms. Donna Cosgrave, who presently resides in the Property with her children, and who is a notice party to the application.

Reliefs Sought
4

4. The following reliefs are sought by the applicant:

2

"1. A direction and/or declaration that Martin Ferris, receiver is immediately entitled to possession of that portion of Folio 180093F County Dublin known as Saggart Lodge.

2

A direction and/or declaration that the Debenture dated 14 March 2007 ranks in priority to any purported conveyance of the said property to Ms. Donna Cosgrave (otherwise Mansfield).

3

Such further or other Order as this Honourable Court shall deem fit in the circumstances.

4

An Order for costs."

Procedure
5

5. The Receiver's application is brought pursuant to s. 316 of the Companies Act 1963 (as amended) (the "1963 Act"). Section 316 provides that:

2

"(1) Where a receiver of the property of the company is appointed under the powers contained in any instrument, any of the following persons may apply to the court for directions in relation to any matter in connection with the performances or otherwise by the receiver in relation to his functions, that is to say -

(a) (i) the receiver […]

and on any such application, the court may give such directions, or make such order declaring the rights of persons before the court or otherwise, as the court thinks just."

6

6. It is in the nature of s. 316 proceedings that they are ordinarily tried on affidavit evidence alone, subject of course to legal submission and oral argument, and are not therefore by way of a full plenary hearing. In the first instance, and before turning to the substantive issues of dispute, it is useful to examine the nature of a s. 316 application insofar as it may be said that the form of these proceedings can have any bearing on the relief granted by the court, as contended by counsel for the Receiver.

Case law in relation to s. 316
7

7. The most recent case which dealt with s. 316 is that of Clarke J. in In the matter of HSS (in receivership) (Unreported., High Court, 28 th day of October, 2011), and on which counsel for the Receiver sought to place reliance in the course of his submissions.

8

8. While the Receiver is correct, in his reference to para. 4.9 of that judgment, that the court does not have discretion under s. 316 to alter the legal rights of parties as determined by corporate insolvency, that proposition must be seen against the background facts of that case. There, unlike the position here, the receiver was appointed by a debenture holder who had the benefit of a first legal charge which was registered in a timely fashion in the Land Registry against the folio of the property concerned. Furthermore, it was undoubtedly the case that any right taken by the respondent came subsequent to that of the relevant bank. Here the matter is not so clear.

9

9. The purpose of the s. 316 procedure then was articulated by Clarke J., at para. 4.11, where he stated that:

"[…] s. 316 is concerned with determining the rights of parties in the context of corporate insolvency law and making whatever orders or giving whatever directions are necessary to ensure that parties, having regard to those rights, are not dealt with in an unfair way. The starting point has to be, however, a determination of the party's legal rights. […]"

10

10. Before turning to that determination, a number of other questions arise for consideration: namely who bears the burden of proof in such an application and to what extent (if any) is the court constrained in making any findings in the context of proceedings tried on affidavit?

Onus of proof
11

11. In Salthill Properties Limited v. Porterridge Trading Limited [2006] IESC 35 the Supreme Court addressed the question of where the onus of proof lies in s. 316 applications. The facts of the case are that the receiver sought directions from the High Court as to whether the transfer of certain property contravened a negative pledge clause in a prior debenture. The question therefore turned on whether the purchaser had notice of the existence of the negative pledge clause. In that case, McCracken J. expressly approved the following passage from Gough on "Company Charges" (2 nd Ed. 1996) at p...

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