Court of Appeal: Appeal against appointment of receiver over substantial site on Dublin Quays rejected
The Court of Appeal has rejected an appeal against the appointment of a receiver over a substantial property on the Dublin Quays. The defendant, Dengrove DAC, had appointed a receiver to sell the property after the plaintiffs, Mr Pat Ryan and Mr Phil Monaghan, failed to uphold the terms of a settlement agreement.
On Wednesday, Mr Justice Brian Murray determined that the trial judge was correct to find that the balance of justice required the court to refuse the injunction. The plaintiffs had failed to prove that they would be at any loss if the property was sold by way of receiver. Further, the plaintiff’s assertion that their property rights justified the grant of an injunction was not correct, the court said.
The plaintiffs were members of two partnerships which owned properties at City Quay, Gloucester Street and Moss Street, which was described as the “last remaining substantial plot of development land along the south city centre quays.” The loans for the property were transferred to NAMA in 2011 and were subsequently bought by Dengrove in 2017.
As no monies were repaid on the loans for more than a decade, Dengrove sought to sell the secured property in satisfaction of the debt. A key point of dispute between the parties was the amount of money owed by the plaintiffs to Dengrove. On the plaintiffs’ account, they owed €17.3 million which they claimed they could redeem to take possession of the property. However, Dengrove argued that all the sums on the partnerships were due, which was approximately €430 million.
Mr Ryan initiated proceedings in 2018 seeking declaratory orders regarding his right to redeem his loans and take possession. These proceedings opened in the Commercial Court but, mid-trial, the case settled. It was agreed that the property would be sold on the open market by the partnerships, with the redemption loan sum agreed at €17.3 million.
Critically, the parties agreed that there would be an adjourned period for six months after the settlement to allow the sale to take place. If the sale did not go ahead, the trial would resume. However, Mr Ryan was entitled to ask for an extension of time from Dengrove of the six-month period.
The six-month period passed and the property was not sold. No request for an extension of time was received. In April 2020, the proceedings were adjourned generally due to the Covid-19 pandemic. Dengrove alleged that the inaction of Mr Ryan caused the sale to stall indefinitely and duly appointed a receiver in July 2020.
In response, Mr Ryan challenged the appointment of the receiver. When Dengrove affirmed the appointment, injunction proceedings were taken by the plaintiffs seeking to restrain the receiver from acting in the matter.
The application for an injunction was refused in the High Court. The court applied the principles contained in Merck, Sharpe and Dhome Corporation v. Clonmel Healthcare Limited  IESC 65 and ruled that that the balance of justice required the relief to be refused.
Court of Appeal
The plaintiffs appealed the decision. In a 61-page judgment, Mr Justice Murray affirmed the refusal of the application by the High Court.
The central contentions were (1) if the assets were sold by a receiver, then the property would sell at an undervalue and (2) that issues around the solvency of Dengrove’s parent company would mean that the loss would not be recoverable. It was also argued that the vindication of the plaintiff’s property rights favoured the grant of the injunction.
After outlining the principles which were to be derived from Merck, the court held that there was undoubtedly a fair issue to be tried in the case. The question of Dengrove’s entitlement to appoint a receiver after the deadline was legitimate.
However, the court said that the plaintiffs had offered no evidence (beyond mere assertion) that the sale of the property by the receiver would cause the properties to be undervalued. As such, the plaintiffs had not established that there would be any loss from the sale by receiver. Further, Dengrove had stated in categorical terms that its solvency was not dependent on the parent group, and therefore would be good for any losses that arose in any event.
The court also rejected the plaintiffs’ submission that the injunction should be granted because their property rights would be infringed. Mr Justice Murray held that, in commercial property cases, there were frequently two sets of competing property rights in play. The court said that the plaintiffs’ submissions were highly theoretical and there were certain commercial realities to the case. For example, Mr Ryan actually agreed to the sale of the property under the settlement and he was free to purchase the asset on such sale. Further, the plaintiffs’ claim of a right of redemption over the property loan was incompatible with the sale of the property under the settlement agreement, which the plaintiffs argued was still valid.
The court held that the key feature of the plaintiffs’ asserted property rights was to preclude a sale by a method with which the plaintiffs disagreed, i.e. sale by receiver. As such, to succeed on the balance of justice, it was incumbent upon the plaintiffs to provide a coherent explanation as to why they did not agree to the sale by a receiver. This had simply not been done in the case.
The court concluded that there was no reason why the property rights of the plaintiffs should prevail over Dengrove’s and the plaintiffs had failed to show that any damage would accrue to them as a result of the sale by the receiver. The court refused to grant the injunction and upheld the ruling of the trial judge.
© Irish Legal News Ltd 2021