Siobhan O'Dwyer v Desmond Grogan and Mary Grogan

• Jurisdiction: Ireland
• Judge: Ms. Justice Eileen Roberts
• Judgment Date: 08 December 2022
• Neutral Citation: [2022] IEHC 697
• Court: High Court
• Docket Number: 2021 No. 6283P

Between

Siobhan O'Dwyer

Plaintiff

and

Desmond Grogan and Mary Grogan

Defendants

[2022] IEHC 697

2021 No. 6283P

THE HIGH COURT

JUDGMENT of Ms. Justice Eileen Roberts delivered on 8 December 2022

Introduction

1 On 12 January 2016 the plaintiff was appointed by AIB Mortgage Bank (the ‘ Bank’) as receiver over five residential investment properties (the ‘ Properties’) owned by the defendants, who had, between 2004 and 2006, borrowed in excess of €2.2 million from the Bank's predecessor entity, Allied Irish Banks plc (‘ AIB’), to fund the purchase of the Properties which were secured in favour of AIB.

2 There is no dispute that the defendants borrowed these monies and entered into mortgages in respect of these borrowings which were secured on the Properties. There is also no dispute that the defendants ceased making repayments to the Bank in or around March 2014 and that they have made no repayments on their mortgages since that date.

3 In the circumstances set out hereunder, there was a delay in advancing the receivership.

4 Plenary proceedings issued by the plaintiff on 12 November 2021. A notice of motion issued that same day seeking interlocutory orders against the defendants, their servants or agents, or any other person having notice of the order, in the following general terms:—

• (1) restraining the defendants from preventing, impeding and/or obstructing the plaintiff from taking possession of the Properties;

• (2) restraining the defendants from preventing, impeding and/or obstructing the plaintiff, from collecting the rent or other income of the Properties;

• (3) restraining the defendants from preventing, impeding and/or obstructing the plaintiff from securing the Properties;

• (4) restraining the defendants from trespassing upon, entering upon or otherwise attending the Properties;

• (5) directing the defendants to deliver up to the plaintiff forthwith any keys, alarm codes, locks and any other security and access devices and equipment in respect of the Properties; and

• (6) directing the defendants to deliver up to the plaintiff all title documents, books and/or records in relation to the Properties.

5 Counsel for the plaintiff accepted that the relief sought at paragraph 1 of the notice of motion is effectively an order seeking possession of the Properties and is therefore in the nature of a mandatory rather than a prohibitory injunction. In order to secure that particular relief, it is accepted by the plaintiff that she would have to satisfy this court that she had a strong case likely to succeed at trial.

6 The relief sought at paragraph 2 concerns the collection of rents from tenants in the Properties and is a prohibitory injunction requiring the plaintiff to meet the lower threshold of a fair issue to be tried. Counsel for the plaintiff submitted that the reliefs sought at paragraphs 4 and 5 of the notice of motion are ancillary to the relief claimed at paragraph 2 and are covered by the same lower threshold. It appears to this court that this may not be the case in relation to paragraph 4 which seeks to prevent the defendants from entering the Properties. Paragraph 3 might correctly be described as an order ancillary to the relief sought at paragraph 1 of the notice of motion if it interpreted as permitting the plaintiff to secure the Properties for the purposes of taking possession of them (but not for a more limited purpose such as to collect rents).

7 The defendants dispute the plaintiff's entitlement to any of the orders sought. In summary, the defendants argue that their loans were not in arrears when the receiver was appointed in January 2016 and that the appointment of the receiver is therefore invalid. They say that they were overcharged interest and that this has been admitted by the Bank and that there is also a serious issue regarding the relevant interest rate to be charged in circumstances where the rate specified in the loan agreements ceased to exist in December 2008. They complain about the plaintiff's delay in advancing the receivership and these proceedings. They complain about the general behaviour of the Bank and say it must come to this court with clean hands if it is to request equitable relief. They say that the Properties in Drumcondra are not currently rented out and it would be incorrect for this court to assume that there is a significant rental income being derived from the Properties.

The Loan Agreements and the Bank's entitlement to appoint a receiver under the mortgage documentation.

There are three separate mortgage loans at issue in these proceedings dated 4 August 2004, 7 March 2006 and 22 June 2006 respectively.

8 The loan offer dated 4 August 2004 is in respect of a mortgage loan amount of €1,420,000. It refers to the property to be mortgaged as 53, 55 and 57 Drumcondra Rd, Dublin 9. The special conditions confirm that the Bank “ will rely on the following as additional security for this borrowing: All sums charge over 5 & 7 Enniskerry Road, Phibsboro, Dublin 7 and 26 Lower Beechwood Avenue, Ranelagh Dublin 6”. The applicable interest rate is described in the following terms: – “ 3.40% varying-includes margin of 1.50% over Tracker Rate (currently 2.00%). APR 3.444%”. The special conditions of this loan confirm that the Tracker Rate “ will equal the European Central Bank's main refinancing operations Minimum Bid Rate.”. This offer was accepted in writing by the defendants on 13 March 2006.

9 The second loan offer is dated 7 March 2006 for the sum of €450,000. The applicable interest rate is specified as “ 3.65% varying-(includes margin of 1.4% over tracker rate). APR 3.702%”. It refers to the Properties in Drumcondra and also confirms that the Bank will rely on the Properties in Ranelagh and in Phibsboro (as described above) for additional security as well as identified policies with Irish life and Ark Life Assurance. The Tacker Rate is defined in the special conditions in the same terms as in the earlier loan offer namely that it “ will equal the European Central Bank's main refinancing operations Minimum Bid Rate.” This loan was accepted in writing by the defendants on 15 March 2006.

10 The third loan offer is dated 22 June 2006. The mortgage loan amount is €332,000. The applicable interest rate is specified as being “ 4.15% varying-(includes margin of 1.40% over tracker rate). APR 4.232%”. It refers to the Properties at 53,55 and 57 Drumcondra Road as the mortgaged property and confirms that the Bank will rely on the Ranelagh and Phibsboro Properties as additional security. The Tracker Rate is defined in this loan offer in the same terms as the other loan offers. This loan offer was accepted by the defendants in writing on 10 July 2006.

11 The first named defendant executed a mortgage dated 18 November 1996 in favour of AIB over the Ranelagh property. The defendants executed a mortgage dated 22 August 2005 in favour of AIB over the three Drumcondra properties and the two Phibsboro properties. The obligations of the defendants to AIB pursuant to the 2004 letter of mortgage loan offer and pursuant to the mortgages were transferred to the Bank pursuant to a transfer agreement dated 8 February 2006 and the suite of documentation exhibited at exhibit “SOD4” to the plaintiff's affidavit sworn on 11 November 2021. The defendants have not disputed that transfer in these proceedings.

12 The deed of mortgage dated 18 November 1996 in relation to the Ranelagh property confirms AIB's powers as mortgagee and provides at clause 6.02 that AIB shall have the statutory powers conferred on mortgagees by the Conveyancing Acts as varied and extended by the mortgage. It is accepted by the plaintiff that she does not have a power of sale qua receiver and that she is a rent receiver. Similar provisions apply under the mortgage dated 22 August 2005 at clause 8 thereof. The Bank therefore could, under the mortgage documentation, appoint a receiver for the purposes of collecting rents and income from the secured properties, but not to sell them, if the borrowers defaulted on their repayment obligations.

13 So far as the strength of the plaintiff's case is concerned, it is necessary to consider the potential defences which might be open to the defendants. The defendants originally represented themselves with the assistance of a party who was not a qualified lawyer. However, by the time this matter came on for hearing the defendants were represented by solicitors and counsel who confirmed to the court that they were relying on the affidavit sworn by the first named defendant on 6 May 2022 with the benefit of independent legal advice. I now move to consider those potential defences raised at the hearing of this action and in that affidavit.

Was there a valid demand and were the defendants in default prior to the appointment of the receiver?

14 The first argument raised by the defendants is that their loans were not in default when the plaintiff was appointed receiver and they have also raised an argument regarding the demands made by the Bank in 2014.

15 The evidence in this case is that separate demand letters in identical terms were served on the first and second named defendants on 29 April 2014. The demand letters refer to a breach by the defendants of the facility letters dated 4 August 2004, 22 June 2006 and 7 March 2006 (details of which are set out earlier in this judgment). Payment was demanded by the Bank in respect of each of the three loan accounts. A payment of €1,041,480.01 was demanded in respect of the first loan account, €398,962.52 was demanded in respect of the second account and €302,134.57 was demanded in respect of the third loan account. Interest was stated to be accruing on all facilities until payment.

16 The letters of demand gave notice to the defendants that failing immediate payment and discharge of the sums demanded within seven days, the Bank reserved the right without...