Ruby Property Company Ltd v Kilty

• Jurisdiction: Ireland
• Judge: Mr. Justice William M. McKechnie
• Judgment Date: 31 January 2003
• Neutral Citation: 2003 WJSC-HC 11214
• Court: High Court
• Date: 31 January 2003

2003 WJSC-HC 11214

THE HIGH COURT

7453P/Rec. No. 1995

RUBY PROPERTY CO LTD & MCNALLY v. KILTY & SUPERQUINN

BETWEEN

RUBY PROPERTY COMPANY LIMITED JOHN McNALLY AND CATHERINE ANN McNALLY

PLAINTIFFS

AND

RAYMOND KILTY AND SUPERQUINN

DEFENDANTS

Citations:

COMPANIES ACT 1990 S31(1)(C)

CONVEYANCING ACT 1881 S21(2)

COMPANIES ACT 1963 S316(A)

COMPANIES ACT 1990 S172

COMPANIES ACT 1963 S316(A)(2)(A)

COMPANIES ACT 1963 S316(A)(2)(B)

HOLOHAN V FRIENDS PROVIDENT & CENTURY LIFE OFFICE 1966 IR 1

CUCKMERE BRICK CO LTD V MUTUAL FINANCE LTD 1971 CH 949

KENNEDY V DE TRAFFORD 1896 1 CH 7621897 AC 180

TOMLIN V LUCE 1889 49 CH 191

LAMBERT JONES ESTATES LTD V DONNELLY UNREP O'HANLON 5.11.1982 1983/3/626

LATCHFORD V BEIRNE 1981 3 AER 705

STANDARD CHARTERED BANK LTD V WALKER 1982 3 AER 938

EDENFELL HOLDINGS LTD, RE 1999 1 IR 443

CASEY V IRISH INTERNATIONAL BANK 1979 IR 364

MCGOWAN & ORS V GANNON 1983 ILRM 516

BANK OF CYPRUS (LONDON) LTD V GILL 1980 LLOYDS 51

CHINA & SOUTH SEA BANK LTD V TAN SOON GIN 1990 1 AC 536

AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION V HURLEY 1985 3 AER 564

DOWNSVIEW NOMINEES LTD V FIRST CITY CORPORATION LTD 1993 AC 295

LATHIA V DRONSFIELD BROTHERS LTD 1987 BCLC 321

WOLFF V VANDERZEE 1869 20 LT 353

SKIPTON BUILDING SOCIETY V STOTT 2000 2 AER 779

NATIONAL BANK OF AUSTRALASIA V UNITED HAND IN HAND & BAND OF HOPE CO 1879 4 AC 391 (PRIVY COUNCIL)

COMMERCIAL & GENERAL ACCEPTANCE LTD V NIXON & ANOR 1982 152 CLR 491

COMPANIES ACT 1963 S218

HANRAHAN V MERCK SHARPE & DOHME 1988 ILRM 629

CONSTITUTION ART 40.3

COMPANIES ACT 1990 S8(2)

DERELICT SITES ACT 1990

Synopsis:

COMPANY LAW

Receivership

Sale of assets - Property - Duties of receivers - Power of sale - Credit and security - Valuation of assets - Fair market value - Current market value - Whether assets of company sold at undervalue - Whether receiver acted in best interests of company - Companies Act, 1963 - Companies Act, 1990 (1995/7453P - McKechnie J - 31/1/2003)

Ruby Property Compamy Ltd v Kilty

The proceedings concerned the sale of the assets of a company which had been in receivership. The plaintiffs as representatives of the company had initiated proceedings against the bank which had advanced the company monies. The company had been unable to pay off the loan and the main assets (a property) of the company was sold by a receiver who had been appointed on foot of security held over the assets. The plaintiffs sought to challenge a number of issues including the validity of the security held. However the High Court had already determined by way of preliminary issues that only one issue fell to be decided namely whether the receiver in selling the property had acted in accordance with his duties as set out in section 172 of the Companies Act, 1990. The plaintiffs had claimed that the property in question had been sold at an undervalue. Various evidence was tendered as the valuation of the property and evidence was also given in relation to the relevant planning history of the site.

Held by Mr. Justice McKechnie in dismissing the case. The planning history of a property was of significant importance. On the evidence adduced there was no basis for a finding of negligence against the receiver. It had been reasonable for the receiver to identify the existence of special purchasers in relation to the property. The best price which could have been obtained for the property was in fact obtained.

1 The second and third named plaintiffs, now deceased, were at all material times the directors and sole shareholders of the first named plaintiff company, which company was in effect a vehicle used by them for the purposes of owing, on their behalf, an investment property known as Austinville, No. 1 Station Road, Sutton Cross, Co. Dublin. No issue arises in the case before me, as to the status of the company to mount and maintain these proceedings or as to the absence of the same having being reconstituted following the deaths of both Mr. and Mrs. McNally.

2 On 2 ^nd August, 1990 Industrial Credit Corporation Plc. (ICC), offered by way of letter, to advance to the personal plaintiffs the sum of IR£200,000 on the terms and conditions therein contained. A loan period of 15 months was specified with repayment of both principal and interest to be effected by one instalment not later than 31 ^st October, 1991. The security demanded was as follows:-

1 A first specific mortgage over the freehold lands and premises of the borrowers consisting of their private dwelling house known as "Corr Lodge", Deerpark, Howth Road, Co. Dublin.

2 A collateral first floating charge over all the assets of Ruby Property Company Limited.

3 A collateral first specific mortgage over all the freehold lands and premises of Ruby Property Company Limited, consisting of No. 1 Station Road, Sutton Cross, Sutton, Co. Dublin.

4 The personal guarantee of Mr. Fintan Gunne in the amount of IR£200,000 plus accrued interest thereon,

5 The guarantee of Ruby Property Company Limited in the amount of IR£200,000 plus accrued interest therein and

6 ........

3 This said offer, on these terms and conditions was accepted on 3 ^rd August, 1990, with the bank receiving the required mortgage over the family home from Mr. and Mrs. McNally. In addition, by an instrument of that date, entitled "Collateral Mortgage Debenture", Ruby Property Company Limited granted to ICC a first floating charge over its assets, and, secondly, also granted a first specific mortgage over the property referred to above (and described in the schedule thereto), which property, for descriptive purposes only, can be referred to as No. 1 Station Road. In addition, the company also guaranteed the amount of any indebtedness to include all accrued interest which might arise out of this said facility letter.

4 The repayment obligation under the aforesaid letter was not complied with, in that the amount outstanding and the accrued interest thereon, was not paid prior to 31 ^st October, 1991. On 23 ^rd January, 1992, the bank offered to the borrowers revised terms, namely that the period of the loan should be 32 months from the date of the original drawdown, that commencing on 31 ^st March, 1992 and thereafter monthly, a sum of £2,950 should be paid to the bank and thirdly that the outstanding balance together with all accrued interest should be discharged in full by 31 ^st March, 1993. In all other material respects the original terms and conditions were to continue. On the following day, these terms were accepted by the personal plaintiffs, who were the only persons to whom the revised terms were addressed.

5 Unfortunately this time limit was once more not adhered to with the result that the bank engaged in a series of steps in order to establish and realise its security. On 21 ^stFebruary, 1994, it obtained from this court an order for possession in respect of the family home with a stay of six months thereon. This order was eventually executed on 12 ^th October 1994. In the month following, I think on 23 ^rd November, the house and property obtained on sale a sum of £305,127.72. As of 30 ^thOctober, 1994, a statement of account prepared on 9 ^thFebruary, 1995 showed an indebtedness to ICC of £289,310.91. Out of the proceeds of sale, the bank claimed a sum of £28,385.98 for costs and outlay in relation to the realisation of its security, which sum was "itemised in the attached schedule" thereto (see the bank's letter dated 13 ^th February, 1995). Accordingly, the mortgagee only credited the account of Mr. and Mrs. McNally with the sum of £276.741.74. This left the account showing a balance due of £15,554.08 on 31 ^st January, 1995,.

6 Under clause 10 of the debenture executed by Ruby Property Company Limited ("the company") on 3 ^rdAugust, 1990, the bank had the power, in certain circumstances, to appoint a receiver over the property of that company. These circumstances included the failure after the due date to discharge the mortgage debt. As supplementary to its move on the family home, ICC by demand letter dated 11th October, 1994 also sought from this company the sum of £287,161.13, being the amount then due by the borrowers on the loan account. Payment was requested within seven days. Such payment was not forthcoming. Accordingly, on 20 ^th October, 1994, the bank appointed the first named defendant as receiver over the assets and property of the company. In circumstances which are later described in this judgment, the receiver sold the only asset of the company, namely No. 1 Station Road, to Superquinn on 28 ^th April, 1995. In fact, the contract was dated 21 ^st April. The purchase price obtained and paid in full was £102,500. This sum was clearly in excess of what was due and payable to either the bank or the receiver, and accordingly I must assume that the balance was at some stage repaid to the company. This company on the figures which I have quoted did not appear - certainly after the sale of the family home — to be anything other than a solvent company.

7 These proceedings were commenced against the receiver by plenary summons dated 26 ^th September, 1995. Later Superquinn was added by court order as a co-defendant. An amended statement of claim and defence, coupled with various notices for and replies to particulars, were then exchanged between the parties. At the close of these pleadings several issues were raised for consideration. It was alleged, inter alia, on behalf of the plaintiffs:-

(a) that in November 1991, the collateral mortgage debenture lapsed — this because the 15 month period specified in the original letter of offer as being the duration of the loan expired at that time. Accordingly, the revision of these terms in January 1992 could not reinstate the security on the company's assets previously available to the bank. This by reason of s. 31(1)(c), Companies Act 1990and also on the more general ground that the company was not...