Re Ronan and Others, Re & Taite

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 15 August 2013
• Neutral Citation: [2013] IEHC 386
• Court: High Court
• Docket Number: [No. 121 COS/2013]
• Date: 15 August 2013

Ronan & Ors, In re

IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 148(1) NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 AND SECTION 316 OF THE COMPANIES ACT, 1963 3

AND

IN THE MATTER OF JOHN F. RONAN, JOHN FRAHER, RICHARD PRATT AND SEAN WHITE

AND

IN THE MATTER OF DECLAN TAITE, RECEIVER

[2013] IEHC 386

[No. 121 COS/2013]

THE HIGH COURT

Company Law - Receivership - Mortgage - Security - Receivables - Application of monies - Loan facilities - Repayment of debt - Rent arrears - Service charges - National Asset Management Agency Act 2009 - Companies Act 1963

Facts: On the 18th September 2012, Declan Taite was appointed as receiver pursuant to s. 147 of National Asset Management Agency Act 2009 in relation to the assets outlined in two separate security documents, a mortgage dated the 27th February 2003 and a mortgage dated 22nd July 2005. The 2003 mortgage was made between Richard Pratt, John Fraher and John F. Ronan on the one part, and Allied Irish Bank plc (‘The Bank’) on the other, with a property now known as Poppyfield Retail Park (‘Poppyfield’) given as security in exchange for loan facilities. The 2005 mortgage was made between Richard Pratt, John Fraher, John F. Ronan and Sean White on the one part, and the Bank on the other, with a property known as West City Retail Park (‘West City’) given as security also in exchange for loan facilities. National Asset Loan Management Limited (‘NALM’) acquired the Bank”s interest in Poppyfield and West City prior to a receiver being appointed.

By a notion of motion dated the 15th March 2013, the Receiver sought three directions from the court pursuant to s. 316(1) of the Companies Act 1963. The first issue to be determined was how the Receiver was to apply any receivables to the various loan accounts which represented the loan facilities. The West City borrowers had contended that at the time the mortgage was made, it had been agreed with the bank that they would repay the debts of the second facility until fully repaid with monies then applied in reduction of the first facility. NALM denied that there had ever been such an agreement. The second issue to be decided was the extent to which the Receiver was entitled to recover arrears of rent and service charges from the tenants of properties in both Poppyfield and West City. The third issue to be decided was the extent to which the Receiver was entitled to the arrears of service charges held by West City Estate Managers Limited (‘the Management Company’), which had been formed by the West City Borrowers, and how those arrears should be applied.

Held by Laffoy J that in regards to the first issue, the application of receivables to the loan accounts was governed by the contractual terms the West City and Poppyfield borrowers had entered into with the Bank as evidenced in the letters of sanction dated the 6^th July 2010 that transferred the Bank”s interest in the mortgages to NALM. These letters of sanction had been signed by the borrowers therefore they were bound by the terms and conditions therein. The relevant letter of sanction did not make it clear how the receivables were to be applied therefore the general law was considered. Pursuant to the case of Re William Hall (Contractors), Ltd. [1967] 2 All ER 1150, it was held that because NALM was a secured creditor, the Receiver was entitled to apply the receivables to the discharge of the two loan facilities in whatever order he considered to be in the best interests of NALM. It was clear from this case that the West City borrowers did not have the right to require the Receiver to apply the receivables in a certain way

In regards to the second issue, it was held that by law, a receiver was entitled to arrears of rent out of the assets over which he was appointed which had accrued prior to his appointment but which were unpaid. This was said to be the case because the arrears were the property of the Poppyfield Borrowers and the West City Borrowers subject to NALM”s mortgages. On the third issue, it was held that it was not possible at that stage to determine what interest the tenants of Poppyfield and West City had on the service charges held by the Management Company. Until such an interest was determined, it was said that such service charges should not be applied by the Receiver in the best interests of NALM. It was directed that these service charges should be held in a separate account until the tenants” claims (if any) were determined.

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S147

COMPANIES ACT 1963 S316(1)

COMPANIES (AMDT) ACT 2009 S148(1)

COMPANIES (AMDT) ACT 2009 SCHED 1

DEELEY v LLOYDS BANK PLC 1912 AC 756 1911-13 AER REP EXT 1149

WILLIAM HILL (CONTRACTORS) LTD, IN RE 1967 2 AER 1150 1967 1 WLR 948

FOSTER (EX PARTE DICKIN), IN RE 1875 LR 20 Eq 767 1875-76 24 WR 221

PICARDA THE LAW RELATING TO RECEIVERS MANAGERS & ADMINISTRATORS 4ED 2006 444

CRAWFORD v ANNALY 1891 27 LRI 523

Ms. Justice Laffoy

1 By two separate deeds of appointment of statutory receiver dated 18^th September, 2012 made by National Asset Management Agency (NAMA) in favour of Declan Taite (the Receiver), the Receiver was appointed pursuant to the powers contained in s. 147 of National Asset Management Agency Act 2009 (the Act of 2009) to be a statutory receiver over the assets comprised in and charged by two separate security documents, namely:

2 (a) a mortgage dated 27^th February, 2003 made between Richard Pratt, John Fraher and John F. Ronan of the one part and Allied Irish Banks plc (the Bank) of the other part, which was an "all sums" mortgage, and which created a security over the property now known as Poppyfield Retail Park, Clonmel, County Tipperary (Poppyfield); and

3 (b) a mortgage dated 22^nd July, 2005 made between Mr. Ronan, Mr. Fraher, Mr. Pratt and Sean White of the one part and the Bank of the other part, which was also an "all sums" mortgage and which created security over the property now known as West City Retail Park, Ballincollig, County Cork (West City).

4 Prior to the appointment of the Receiver as statutory receiver in relation to each property, National Asset Loan Management Limited (NALM) had acquired pursuant to the Act of 2009 -

5 (i) the indebtedness and other obligations owing by Mr. Pratt, Mr. Fraher and Mr. Ronan (the Poppyfield Borrowers) to the Bank and secured by the mortgage dated 27^th February, 2003 (the Poppyfield Mortgage), and

6 (ii) the indebtedness and other obligations owing by Mr. Ronan, Mr. Fraher, Mr. Pratt and Mr. White (the West City Borrowers) to the Bank and secured by the mortgage dated 22^nd July, 2005 (the West City Mortgage).

7 2. The liability of the Poppyfield Borrowers to NALM, as successor in title of the Bank, is governed by the terms of a letter of sanction dated 6^th July, 2010 issued by the Bank and accepted by the Poppyfield Borrowers, which sanctioned one facility (the Poppyfield Facility). The amount sanctioned was €24.5m, its purpose being the continuation of the loan facility relating to financing the retail development at Poppyfield. In relation to repayment it was provided:

"Full Net Rental Income to be applied quarterly to meet interest and/or reduce level overall debt. Facility to be repaid in full/re-financed on or before 8 December, 2010."

8 Recourse was stated to be "Nil". The security stipulated was the Poppyfield Mortgage.

9 3. The West City Borrowers' liability to NALM, as successor in title of the Bank, is governed by the terms of another letter of sanction dated 6^th July, 2010 issued by the Bank and accepted by the West City Borrowers, which sanctioned two facilities, namely:

10 (a) facility (Facility 1) in an amount in excess of €16.7m, the purpose of which was expressed to be a continuation of loan facility originally sanctioned to fund the purchase, development and associated costs and equity release on the commercial site developed at West City; and

11 (b) a facility (Facility 2) in an amount in excess of €1.8m, the purpose of which was expressed to be a continuation of loan facility originally sanctioned "to refund promoters for costs incurred in the development of' West City.

12 In relation to each facility there was a repayment provision in precisely the same terms as the repayment provision quoted at para. 2 above. As regards recourse, it was provided:

13 (i) in respect of Facility 1, the Bank would continue to have several recourse to the West City Borrowers in the amounts following:

Mr. Ronan - €1.35m,

Mr. Fraher - €1.35m,

Mr. Pratt - €1.35m,

Mr. White - €0.45m

14 (ii) in respect of Facility 2, the Bank would continue to have joint and several recourse to each of the West City Borrowers for the amount of the debt.

15 The security stipulated was the West City Mortgage and also, but in respect of Facility 2, only the Poppyfield Mortgage.

16 4. The application before the Court, which was initiated by an originating notice of motion issued on 15^th March, 2013, is an application by the Receiver for directions pursuant to s. 316(1) of the Companies Act 1963 (the Act of 1963). By virtue of s. 148(1) of the Act of 2009, the Receiver has the powers, rights and obligations that a receiver has under the Companies Acts. He has also the powers, rights and obligations specified in Schedule 1 to the Act of 2009, to which I will return. Mr. Ronan, Mr. Pratt, Mr. Fraher and Mr. White are notice parties on the application.

17 5. The issues in respect of which the Receiver has sought directions have arisen out of the engagement of the Receiver with the Poppyfield Borrowers and the West City Borrowers and various solicitors acting for members of each class since his appointment.

18 6. The genesis of the first issue, which, broadly speaking, relates to the appropriation of receivables by the Receiver to the various loan accounts which represent the loan...