Court of Appeal: AIB entitled to right-of-way to ‘landlocked’ apartments

About this case:

• Judgment:
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Mr Justice Sean Ryan, President of the Court of Appeal, found that AIB was entitled to a right-of-way to the apartments prior to the execution of this court-ordered deed, and its right was not affected by that transaction. The management company’s actions were therefore nothing short of ‘quarantining property’ to which AIB was entitled.

Background

Ms Gail Coles proposed to develop a building to provide 9 apartments in a block which would be operated and controlled by a management company.

In December 2003, she agreed to sell and convey the common areas to Palaceanne Management Ltd in fee simple. It was agreed that easements, rights and privileges over the common areas of the block would be granted to purchasers of the units and to Palaceanne.

Purchasers of apartments did so by long lease from Gail Coles to which Palaceanne was also a party, and the purchaser also became a shareholder in Palaceanne.

By deed dated 20th May 2005, Gail Coles mortgaged 5 unsold apartments to AIB of which 3 were subsequently purchased leaving two apartments still subject to the mortgage.

In 2009, by order of the Circuit Court in Cork, AIB were granted possession of the two apartments.

Under the terms of this deed, the two mortgaged apartments were not transferred and they retained the easements, rights and privileges including rights-of-way.

Landlocked

Unfortunately, these exceptions and reservations in the 2009 conveyance were overlooked in the High Court and the trial judge relied on the common but erroneous understanding that no such reservations were contained in the deed.

The High Court held that AIB did not have any entitlement to the use of rights including a right-of-way over the common areas, except for access to a site beside the block.

The two apartments held by AIB were therefore in landlocked isolation surrounded by property held by Palaceanne and AIB cannot lawfully gain access to the apartments.

Palaceanne maintained that they were entitled to payment of service charges by AIB in respect of the two apartments, however AIB was not willing to pay the charges as demanded.

Court of Appeal

Appealing the order of the High Court, AIB submitted that the issue was whether the mortgage of 20th May 2005, gave it easements over the common areas of the development “sufficient to enable it and Purchasers from it to access those apartments and also rights of support and running of services, enabling it to enforce against the Management Company for the Development.”

Palaceanne proposed that the primary issue was:

“Whether a way of necessity or other implied right-of-way could be said to arise where a property, which is part of a multi-unit development in respect of which an estate scheme is in the course of being implemented (and whether that scheme would have provided for an express right-of-way), is the subject of mortgage by demise outside the scope of the scheme and with no express grant of a right-of-way.”

Justice Ryan explained that a ‘major new controversy’ arose in the appeal with the submission by AIB that the argument in the High Court proceeded on a mistaken understanding by the parties of the 2009 deed. Accordingly, it was submitted that the legal positions of the parties as found by the High Court could not be reconciled with the deed when correctly understood.

Justice Ryan stated that it was important to note that this point about the deed was not referenced in the Notice of Appeal.

On behalf of Palaceanne, it was argued that AIB should be confined to the grounds appearing in the Notice of Appeal, on which the High Court was correct, notwithstanding the inadvertent misinterpretation of the conveyance upon which, in any event, Palaceanne would have succeeded ‘on a true construction of the instrument’.

Right-of-way

Justice Ryan was satisfied that the AIB could sell the apartments and that the purchasers would have full entitlement to participate in Palaceanne – therefore it would be unusual to say that the law did not provide for a right of way for AIB to gain access to the apartments.

Finding that it was impossible to contend that the 2009 conveyance prevented AIB’s access, Justice Ryan stated that the deed expressly provided otherwise. The 2003 agreement did not of itself transfer property but whatever rights it conferred on Palaceanne, they could not operate in a manner wholly inconsistent with the estate scheme, the rights of Gail Coles, and the rights of AIB as a mortgagee.

Before the transfer deed of 2009, AIB was entitled to a right-of-way to the apartments; and the 2009 conveyance could not have prevented AIB’s access.

Furthermore, a right of way of necessity or by implication of law would arise in the circumstances (Halsall v Brizell; Maguire v Browne; Nickerson v Barracloug; and Wheeldon v Burrows considered).

Allowing AIB’s appeal, Justice Ryan described Palaceanne’s actions as being nothing less than the quarantining of property to which AIB was entitled – AIB was entitled to a right of way to the apartments prior to the execution of the court-ordered deed of 2009 and its right was not affected by that transaction.