Vigeson Ltd v O'Brien
| Jurisdiction | Ireland |
| Judge | MR. JUSTICE HAUGHTON |
| Judgment Date | 09 November 2017 |
| Neutral Citation | [2017] IEHC 846 |
| Court | High Court |
| Docket Number | Record No. 2016/10270P |
| Date | 09 November 2017 |
[2017] IEHC 846
Haughton Robert J.
Record No. 2016/10270P
THE HIGH COURT
COMMERCIAL
Transfer of loan facilities – Transfer of security – Appointment of rent receiver – Plaintiffs seeking to challenge the purported transfer of Allied Irish Bank's loan facilities and security from NALM to the second defendant – Whether the second defendant acquired the loan facilities and security in respect of which the plaintiffs were in default
Facts: The plaintiffs, Vitgeson Ltd and Mr Farrelly, challenged the purported transfer of Allied Irish Bank's loan facilities and security from NALM to the second defendant, Promontoria (Arrow) Ltd, and also the validity of the purported appointment by Promontoria of the first defendant, Mr O'Brien, as a rent receiver and in relation to his activities in relation to the secured properties. Promontoria, on its part, in its amended defence and counterclaim, asserted that it had acquired the loan facilities and security in respect of which the plaintiffs were in default. It asserted that demands were made and that it was contractually entitled to appoint Mr. O'Brien as receiver. Promontoria sought judgment on foot of the facilities and other ancillary reliefs.
Held by the High Court (Haughton J) that there was no substance or merit behind any of the arguments that were pursued on behalf of the plaintiffs in this case.
Haughton J held that he would hear counsel further in relation to the appropriate orders but these would include: 1) an order dismissing the plaintiffs' claim; 2) judgment on the counterclaim against Vitgeson Ltd for €11,383,442.86; 3) judgment on the counterclaim against Mr Farrelly for €15,335,201.88.
Claim dismissed.
MR. JUSTICE HAUGHTON: In this case, the Plaintiffs challenge the purported transfer of Allied Irish Bank's loan facilities and security from NALM to the Second Defendant, Promontoria (Arrow) and also the validity of the purported appointment by Promontoria of Mr. O'Brien as a rent receiver and in relation to his activities in relation to the secured properties.
Promontoria, on its part, in its Amended Defence and Counterclaim, asserts that it has acquired the loan facilities and security in respect of which the Plaintiffs are in default. It asserts that demands were made and that it was contractually entitled to appoint Mr. O'Brien as receiver. Promontoria seek judgment on foot of the facilities and other ancillary reliefs.
Three issues loom largest. Firstly at the outset, the Plaintiffs put the Defendants on proof of many matters and particularly the transfer of the loan facilities to Promontoria. A real issue was raised as to whether and to what extent heavily redacted or copy documents of title in respect of the facilities and attendant security could be relied upon, both on the grounds of admissibility and the absence of proof as to content.
Secondly, a legal issue of construction arises as to the whether the mortgage deeds relied upon by Promontoria contain a contractual power to appoint a rent receiver as opposed to a statutory power.
Thirdly, a second related issue arises if the Court finds that there was not a contractual power to appoint, that is to say whether the statutory power to appoint a receiver under The Conveyancing Act 1881 (As Amended) and particularly under Section 19 (1)(iii) can be relied upon by Promontoria to appoint a receiver before the registration of the charges in Promontoria's name is completed and at a time when registration was pending.
Over six days of hearing, many other issues, both factual and legal, were raised, or were raised in the Plaintiff's Pleadings, but fell away or were disposed of based on admissions made by the Plaintiffs' witnesses, Mr. Farrelly and his partner and fellow Director in Vitgeson Limited, Ms. Kathleen Mangan. It is convenient to address some of these first.
Firstly, that the facilities were entered into by the Plaintiffs with Allied Irish Banks was not disputed. Lists of these that are not disputed are set out in Schedules 4, 8 and 9 of the Statement of Claim. In the evidence and witness statements of Ms. Lisa Burns of Capita Asset Services Ireland Limited, a company providing loan administration and asset management services to Promontoria, there is set out the accounts now representing the borrowings under these facilities that are relevant to these proceedings. For the purposes of these proceedings, two of the loan accounts listed by Ms. Burns in respect of which no demands for payment had been made fall to be disregarded. These are account numbers 55001303 and 55001981.
Secondly, that the Plaintiffs borrowed and drew down monies on foot of these loan facilities is not disputed.
Thirdly, that on foot of these facilities, the Plaintiffs granted security over various lands and properties is accepted. Admitted security arises under mortgages listed in Schedules 5 and 7 of the Statement of Claim, mortgages created either by Vitgeson or Mr. William Farrelly with AIB between 1994 and 2010.
Fourthly, it is not contested that Allied Irish Banks' interest in these facilities and mortgages transferred from it to NAMA. Both Mr. Farrelly and Ms. Mangan accepted that under cross examination.
Fifthly, on 17th February 2015, Vitgeson entered into five more deeds of mortgage with NALM. The execution of these by Vitgeson was not disputed. However, this occurred at the request of NALM followed by a proposal or ‘letter of comfort’, as the Plaintiffs described it, from NALM in a letter of 4th July 2014. This was sent at a time when the Plaintiffs were cooperating with NALM in the management of the property and investment portfolio which bore the NAMA debtor ID code 0910 and this ID was NAMA's designation of the connection. It covered both Plaintiffs and all their AIB or NAMA borrowings and all of the security. This was accepted by Mr. Farrelly and Ms. Mangan in evidence.
The letter of 4th July 2014 has some parts that should be referred to. It notes on page 2 that Allied Irish Banks, which was acting as an effective manager or agent with NAMA in the supervision of this connection was not satisfied with a business plan that had been submitted by the Plaintiffs and in response to that plan, indicated that:
‘The following sets out the principal required conditions and commercial terms underpinning continued support by NAMA of the connection. It does not constitute a legally binding commitment nor does it create any legal obligations on or for NAMA or the connection.’
It then goes on to state the terms and conditions. Number 1 reads:
‘NAMA is prepared to continue to support the connection to the period ending 31st December 2014 subject to regular review or as may be required by NAMA at its discretion from time to time when the performance of the connection will be assessed on the following basis to include, but not limited to:
And so forth.
‘2. The connection fully implements the current property strategy and in particular puts plans in place to meet all property disposal targets and complies both with the requirements for enhanced security and disclosure as well as the other connection specific commercial conditions as set out below and in the appendices to this letter.’
And No. 3 was that the connection fully co operates with NAMA. It is not necessary to read through the rest of the conditions save to note that in the appendices, there is reference to security disclosure and connection specific requirements, and on the third page of that, Appendix 2, it is stated:
‘NAMA, at its sole discretion, will consider funding the following expenditure up to a maximum of the following. €125,000 per annum, €250,000 in total, as remuneration for the Directors of Vitgeson Limited for each of the two years 2014 to 2015 inclusive.
Those payments were strictly conditional upon full adherence to certain other terms and conditions and in addition to that NAMA approved, the following budgets for 2014 and it then set out an operating budget of €160,000 for property management expenses, €30,000 for office administration and small sums of money in respect of capital expenditure.
So the Plaintiff challenges the validity of the 2015 mortgages on the ground that there was no consideration for provision of the additional security that was put in place in those mortgages. Those mortgages, however, were entered into following on that ‘letter of comfort’ or proposal.
The Plaintiffs' argument on this is unstateable because the deeds executed in 2015 were under seal and in any event, as I have just outlined, there was consideration moving from NAMA to the Plaintiffs in relation to continued support of the connection and their remuneration and in relation to budgets or the continued operation of the properties.
Sixthly, it is not disputed that the 2015 mortgages contained contractual powers for the mortgagee to appoint a receiver in case of default, and I emphasise that that is in relation to the 2015 mortgages, in addition to any statutory right arising under the Land and Conveyancing Law Reform Act 2009, and it is not disputed that the receiver so appointed would have a power of sale. The relevant provision, and I quote from one of the mortgages that is under discussion, is at Clause 18 headed ‘Receiver’ which states at 18(1)(a):
‘The lender may appoint any one or more persons to be receiver of all or any part of the security assets if the security has become enforceable or the charger so requests the lender in writing at any time.’
Over the page, at Clause 19, the powers of the receiver are set out and it is stated at 19.1(a):
‘Any receiver appointed hereunder shall have all the rights, powers and discretions set out in this deed in addition to those...
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