Togher Management Company Ltd and Another v Coolnaleen Developments Ltd ((in Receivership))

• Jurisdiction: Ireland
• Judge: Mr. Justice Haughton
• Judgment Date: 19 December 2014
• Neutral Citation: [2014] IEHC 596
• Court: High Court
• Date: 19 December 2014

Togher Management Co Ltd & National Enterprise Park Management Co Ltd v Coolnaleen Developments Ltd (in receivership)

Approved Judgment

BETWEEN

TOGHER MANAGEMENT COMPANY LIMITED AND NATIONAL ENTERPRISE PARK MANAGEMENT COMPANY LIMITED

PLAINTIFF

AND

COOLNALEEN DEVELOPMENTS LIMITED (IN RECEIVERSHIP)

DEFENDANT

[2014] IEHC 596

[No. 8955 P/2014]

THE HIGH COURT

Land and development - Management agreements - Conditions of sale - Frivolous or vexatious - Argued pleadings disclose no cause of action-Inherent jurisdiction of the court to dismiss claim as bound to fail-s.123 Land and Conveyancing Law Reform Act 2009 - Vacating lis pendens - Bona fides

Facts The defendant company acquired lands comprised in Folios LS20495F, LS11259 and LS3191L in County Laois, extending to approximately 27 hectares, with monies advanced by Anglo Irish Bank Corporation for the purpose of developing a business park. The borrowing was secured pursuant to a mortgage debenture and the company duly commenced building. The management company structure put in place for the development involved the establishment of two management companies, the first and second named plaintiffs. The first named plaintiff “Togher” was established for the management of the entire park. The second named plaintiff “National” was established for the management of “the centre”. The agreements provided for the sale by the defendant company to the plaintiffs of the development”s common areas for an estate in fee simple in possession. In this regard the units constructed on the land were to be demised by way of long lease (950 years). The statutory receiver, appointed pursuant to the National Asset Management Agency Act 2000, ascertained from the balance sheet that while the aggregate value attributed to work in progress and the defendant”s bank account was €1,850,000, the defendant”s liability exceeded assets by €9,494,925. Accordingly, he decided to sell the assets over which he was appointed receiver by way of public auction with Allsop Space. He instructed solicitors to draft conditions of sale. The plaintiff”s solicitors objected to the conditions. They argued the proposed sale would fundamentally prejudice the plaintiffs in fulfilling their role and contractual obligations. The defendant”s solicitor while agreeing to a minor amendment, fundamentally denied any misrepresentations, denied that the freehold interest in the lots had been transferred to the management companies and reasserted the defendants right to sell both lots, pointed out that the leases of units and the management agreements were disclosed in the conditions of sale and contested that any beneficial interest in the property was held by the defendant on trust for the plaintiffs. Accordingly, the receiver declined to withdraw the lots from auction. The defendant sought an order pursuant to Order 19, rule 28 of the Rules of the Superior Courts dismissing the claim of the plaintiffs on the grounds that the claim as pleaded was frivolous and/or vexatious and the pleadings disclosed no reasonable cause of action. Further and in the alternative, an order was sought pursuant to the inherent jurisdiction of the court dismissing the plaintiffs claim on the grounds that the claim as pleaded was bound to fail. Further and/or in the alternative, an order was sought pursuant to Section 123 of the Land and Conveyancing Law Reform Act 2009 vacating the lis pendens registered by the plaintiffs on the grounds that the within proceedings were not being prosecuted bona fide.

Held The court concluded the proceedings should not be dismissed as frivolous or vexatious and indicated that the matters considered in respect of such decision applied equally to the question of bona fides under Section 123(b) (ii) Land and Conveyancing Law Reform Act 2009. The judge stressed where there is no compelling evidence adduced on the part of the defendants/receiver to suggest a lack of bona fides and where the plaintiffs plausibly assert their bona fides (and in the absence of oral evidence or any cross examination on affidavit) it would be unreasonable to find against the plaintiffs. Accordingly the court refused the defendant/receiver”s application for an order dismissing the claim pursuant to Order 19 rule 28 of the Rules of the Superior Courts or pursuant to the inherent jurisdiction of the court.

RSC O.19 r28

LAND & CONVEYANCING LAW REFORM ACT 2009 S123

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S182(2)

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S195

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S182(1)

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S182(4)

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S182(6)

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S182

BARRY v BUCKLEY 1981 IR 306

SUN FAT CHAN v OSSEOUS LTD 1992 1 IR 425

ENNIS v BUTTERLY 1996 IR 426

SALTHILL PROPERTIES LTD & CUNNINGHAM v ROYAL BANK OF SCOTLAND PLC & ORS UNREP CLARKE 30.4.2009 2009/52/13214 2009 IEHC 207

TULK v MOXHAY 1848 2 PH 774 41 ER 1143

REGISTRATION OF TITLE ACT 1964 S72

LAND & CONVEYANCING LAW REFORM ACT 2009 S49

HEIDELSTONE CO LTD, IN RE 2007 4 IR 175

LAND & CONVEYANCING LAW REFORM ACT 2009 S121(2)

TOLA CAPITAL MANAGEMENT LLC v LINDERS (NO 2) UNREP CREGAN 26.6.2014 2014 IEHC 324

LAND & CONVEYANCING LAW REFORM ACT 2009 S123(B)(II)

Introduction

1 1. In this motion the defendant seeks inter alia the following orders:-

1 ) An order pursuant to Order 19, rule 28 of the Rules of the Superior Courts dismissing the claim of the plaintiffs on the grounds that claim as pleaded is frivolous and/or vexatious and the pleadings disclose no reasonable cause of action.

2 ) Further and in the alternative, an order pursuant to the inherent jurisdiction of the court dismissing the plaintiffs claim on the grounds that the claim as pleaded is bound to fail.

3 ) Further and/or in the alternative, an order pursuant to Section 123 of the Land and Conveyancing Law Reform Act 2009 vacating the lis pendens registered by the plaintiffs on the grounds that the within proceedings are not being prosecuted bona fide.

2 2. Further reliefs including security for costs and other directions are sought in the notice of motion but it has been agreed that the hearing in relation to these matters will be adjourned pending the courts decision in relation to the reliefs mentioned above.

Background

3 3. The defendant company acquired lands comprised in Folios LS20495F, LS11259 and LS3191L in County Laois, extending to approximately 27 hectares, located in Portlaoise, County Laois, with monies advanced by Anglo Irish Bank Corporation, for the purpose of developing a business park thereon. The borrowing was secured with a first legal charge for the lands pursuant to a Mortgage Debenture dated 8 ^th October, 2004. By deed of appointment dated 31 ^st October 2012 Mr. Kieran Wallace was appointed as receiver on foot of the debenture and as statutory receiver by exercise of the powers of the National Asset Management Agency (NAMA) to appoint.

4 4. The defendant company duly commenced development of an industrial estate upon the lands and in total developed 33 units. Of these, 31 units are located within "lot 51", and the remaining 2 are located within the largely undeveloped "lot 52". Of the total number of units as constructed, 16 units have been demised under long leases.

5 5. The management company structure put in place for the lands development involved the establishment of two management companies being the first and second named plaintiffs, both of which are companies limited by guarantee. The first named plaintiff ("Togher") was established for the management of the entire park. The second named plaintiff ("National") was established for the management of "the Centre" being that part of Lot 51 on which 31 of the units were developed. Consistent with this scheme National is a member of Togher.

6 6. The defendant company as developer of the lands entered into separate Agreements with both Togher and National dated respectively 11 ^th May, 2006 and 25 ^th July, 2007 ("The Management Agreement(s)"), and these agreements are central to the case being pursued by the plaintiffs. The Management Agreements provided for inter alia the sale by the defendant company to the plaintiffs of the development's common areas for an estate in fee simple in possession or such superior leasehold reversion as was/is held by the defendant company, and for the purposes of the plaintiff companies performing and observing the covenants, obligations and agreements on the part of the defendant company pursuant to the lease agreements ('Deeds of Assurance') entered into between the defendant company as lessor, one of the plaintiffs as management company, and the lessee owners of the completed units.

7 7. In this regard the units constructed on the lands, or to be constructed, were demised and/or were to be demised by way of long lease (950 years) between the defendant company as lessor and the first or second named plaintiff as the case may be as the development's management company.

8 8. On the appointment of Mr. Kieran Wallace as statutory receiver pursuant to the National Asset Management Agency Act, 2000 ('NAMA Act, 2009') he ascertained from the balance sheet on the accounts of the defendant for the year ended 30 April 2013 that, while the aggregate value attributed to work in progress and the defendants bank account was €1,850,000, the defendants liability exceeded his assets by €9,494,925. Accordingly, he decided to sell the assets over which he was appointed receiver by way of public auction with Allsop Space. He instructed Messrs Kane Tuohy Solicitors to draft conditions of sale. He decided to sell the lands in two lots, namely Lot 51 (in respect of which National is the management company) and Lot 52 (Togher). The auction date was set...