Whelan v Promontoria (Finn) Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Stewart
• Judgment Date: 12 December 2017
• Neutral Citation: [2017] IEHC 739
• Docket Number: [2017 No. 1421 P]
• Court: High Court
• Date: 12 December 2017

[2017] IEHC 739

THE HIGH COURT

CHANCERY

Stewart J.

[2017 No. 1421 P]

BETWEEN

MICHAEL WHELAN

PLAINTIFF

- AND -

PROMONTORIA (FINN) LIMITED

KEN FENNELL

DEFENDANTS

Banking & Finance – Interlocutory injunction – Balance of convenience – Adequacy of damages – Fair issue – Ulterior motive

Facts: The plaintiff sought injunction for restraining the defendants from selling the property, which was kept as a security for loans advanced by the predecessor in title of the first defendant/bank. The plaintiff claimed that he was making regular payments in relation to the loan advanced to him and thus, the appointment of receiver by the first defendant was not justified. The plaintiff cited alleged ulterior motives of the defendants for calling in the loans for making commercial gains.

Ms. Justice Stewart granted injunction to the plaintiff. The Court held that the plaintiff had established an arguable case. The Court noted that the plaintiff had been making regular payments in relation to his loan obligations. The Court stated that the plaintiff was ready to give undertaking as to the damages. The Court found that there were fair issues to be tried namely, repayment of loan on demand and validity of appointment of receiver and thus, it would warrant the grant of injunction sought.

JUDGMENT of the Hon. Ms. Justice Stewart delivered on 12th day of December, 2017.

1 The plaintiff in these proceedings is a debtor of the first-named defendant and seeks a number of declaratory reliefs related to the first-named defendant's attempt to call in the plaintiff's loans. However, in the application currently before the Court, he seeks interlocutory relief restraining the defendants from taking action on foot of the deed of appointment of a receiver dated 20th January, 2017. In particular, he seeks to restrain the defendants from selling the property that served as security for the loans in question and from dealing with the tenants currently residing therein. The originating notice of motion is dated 15th February, 2017, and grounded on the plaintiff's affidavit of that same date. Replying affidavits from Ken Fennell and Stephen McKeever were sworn on 22nd and 23rd February, 2017. A second affidavit was sworn by the plaintiff on 27th February, 2017. A second affidavit was sworn by Mr. Fennell and Mr. McKeever on 3rd and 6th March, 2017. An affidavit was sworn by Alex Brett on 13th March, 2017. In those affidavits, the following background information is set out.

2 The deed of appointment appointing the second-named defendant as receiver operates on foot of a Deed of Mortgage and Charge dated 19th February, 1997. The terms of this loan were agreed between the plaintiff and Ulster Bank Limited. It was a term loan based on two rolled up facilities, issued in 2003 and 2004 as variable rate term loans, to be repaid in full in 2019. The manner in which the loan was repaid was reformulated in 2004, when the second loan was rolled up into the first loan. While the terms of the loan require repayments on a capital-and-interest basis, all repayments to date have been on an interest-only basis. The plaintiff avers that Ulster Bank never took issue with this deviation from the loan's terms and never alleged that an event of default had occurred. It is alleged that this state of affairs was regularised in 2009 by Alex Brett, acting on the plaintiff's behalf, and the loans were repaid on an interest-only basis. Two properties located in Ballsbridge served as security for the loan. Promontoria Holding 152BV purchased the loan by mortgage sale deed on 23rd July, 2015, and transferred its interests in the loan to the first-named defendant (hereon referred to as PFL) on 14th September, 2015.

3 The plaintiff states that he was initially contacted by PFL, acting through Capita Asset Management Services (hereinafter referred to as CAS), in December, 2015/January, 2016, wherein they confirmed that the loans were performing, requested that the loans be repaid on a capital-and-interest basis and enquired as to his intentions about the future of the loans. He avers that he was contacted again in January, 2016, wherein PFL asserted that the loan had been in default since December, 2013 and requested full repayment. In later affidavits, it was clarified that the reference to 2013 is a typographical error and that PFL was referring to December, 2003, when the first loan was issued. In any event, the plaintiff states that any event of default alleged by the defendants is contrived. Extensive correspondence continued between the parties over the course of 2016, including a meeting on 16th August, 2016. Following on from the appointment of the second-named defendant as receiver, CAS referred to the possibility of legal action for repossession and the property was advertised for sale on 13th February, 2017. The defendants also made contact with the tenants of the secured property, indicating that their future rent payments should be made to the receiver. Once he became aware of the advertisement for sale, the plaintiff made this application to secure interlocutory relief.

4 There are a number of points arising out of these facts that are in dispute between the parties. The plaintiff avers that the above loan was performing in compliance with the terms agreed between himself and Ulster Bank. He also avers the appointment of the second-named defendant is a tactic to force him to refinance the loan for PFL's commercial gain or, failing that, to make more immediate profits by realising their security, in anticipation of Promontoria's exit from the Irish market in 2018. The plaintiff states that those allegations have gone unrebutted. He states that the loan is performing well and that he is willing and able to pay it on a capital-and-interest basis. Indeed, he states he would have paid it on that basis had Ulster Bank requested him to do so, but they did not and the two sides came to an agreement to repay the loan on an interest-only basis. He highlights the un-controverted evidence before the Court that the loans are fully secured against the current value of the secured property and that PFL will not accrue a loss on the loan. In oral submissions, it was said that the plaintiff would be able to pay off the loans immediately without having to sell the secured property. He simply cannot do so at this precise moment in time. Finally, he avers that he sought undertakings from the defendants that they would not sell the property, which were not forthcoming, and so he makes this application.

5 Stephen McKeever, an associate director with CAS, swore a replying affidavit on 23rd February, 2017. In response to the above allegations, he avers that mortgagees such as PFL are entitled to look to their own interest in exercising their rights. He also highlights the 'on demand' nature of the loans. As for the alleged agreement between the plaintiff and Ulster Bank to pay the loans on an interest-only basis, Mr. McKeever avers that this directly contradicts the terms of the loans, as well as correspondence from the plaintiff's relationship manager in Ulster Bank, dated 21st May, 2013, which appears to suggest that the bank were actively seeking repayment. In any event, Mr. McKeever highlights that no documentation has been provided to evidence any alternative arrangement between the plaintiff and the bank. It is suggested that the plaintiff has all but admitted that he is in default in repaying his loans, notwithstanding that the presence of a default is irrelevant, as the loans are repayable on demand. While it is conceded that CAS originally characterised the loans as performing, Mr. McKeever avers that this statement was made in error and was not repeated.

6 In his affidavit of 22nd February, 2017, the second-named defendant disputes any challenge to his appointment as receiver. He also avers that his actions in this matter have not been aggressive, as the plaintiff alleges, and that steps have been taken to regularise his position and prepare the property for sale in the usual manner.

7 In his second affidavit of 27th February, 2017, the plaintiff questions the need for a written agreement approving payment on an interest-only basis, given that the loans have always been repaid on that basis and the bank never took any steps to enforce the terms of the loan facilities. As for the 2013 correspondence from the bank, which sought repayment of the loan, the plaintiff avers that those demands were part of a broader discussion regarding several other much-larger loans in which the plaintiff was involved. This dispute was allegedly resolved to the bank's satisfaction, who were happy to continue repayment of the 2003/4 loans on an interest-only basis.

8 A further dispute subsists regarding the delivery of the letters of demand. A copy of the letters was sent to the plaintiff's business premises and to his domestic residence. The plaintiff avers that the letters were not delivered to his business premises, a statement substantiated by the fact that they were returned to CAS undelivered after the date at which Mr. Fennell was appointed. However, Clause 28 of the 1997 charge states that service is effective one day after posting, notwithstanding any failure in delivery, and the defendants rely on that term. The plaintiff expresses consternation as to how the letter could not have been delivered, given that delivery of all other post has occurred without difficulty. He highlights that the letter of demand were not sent by e-mail. He also avers that the defendants have engaged in various activities aimed at intimidating him, including cancelling bin collection for the secured properties and threatening to evict tenants. The averments made by the defendants regarding the need for remedial works to address safety concerns in the properties is rebutted, as the properties were allegedly in compliance with Dublin...