Court of Appeal: O’Donnells have the right to challenge Gorse Hill injunction

About this case:

• Judgment:
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Background

The statement of claim in these proceedings pleaded that Vico Limited, a company registered in the Isle of Man, had mortgaged and charged to the Bank of Ireland its interest in the property at Gorse Hill as security in relation to guarantees Vico had provided to the bank in respect to indebtedness of inter alios Mr and Mrs O’Donnell.

In December 2010, the Bank of Ireland initiated summary proceedings seeking judgment in relation to the O’Donnell’s indebtedness to the bank. In March 2011, the settlement agreement in these proceedings included an agreement from the O’Donnell’s that they would provide full vacant possession of the premises at Gorse Hill.

In December 2011, judgment was obtained in excess of €71 million, and in May 2012 the bank called in the debt. Since the debt was nit discharged, the bank sought to rely on its security – appointing Mr Kavanagh as receiver and manager of the assets of Vico, who then sought to take possession of the property.

The O’Donnell’s were adjudicated bankrupt on the 2nd September 2013, and therefore their property vested in the Official Assignee from this date.

Questions before the Court of Appeal

In the High Court, Justice Costello granted the Official Assignee a permanent injunction restraining the O’Donnell’s from ‘trespassing, interfering with entering upon or otherwise attending’ the house and lands at Gorse Hill. This injunction was the particular claim being challenged by the O’Donnell’s in the Court of Appeal.

On this appeal, the O’Donnell’s raised four points:

In relation to the first two points, which were procedural objections, Justice O’Donnell asserted that the challenges were misconceived and not applicable in this case.

Justice O’Donnell then turned to consider the latter two points – ccontentions raised by both Mr and Mrs O’Donnell that they are entitled to a right of residence in Gorse Hill, which has not been validly terminated, and the claim made on behalf of Mrs O’Donnell that the mortgage executed by Vico Limited is invalid because of the failure to secure her consent in writing pursuant to the Family Home Protection Act 1976.

The Family Home Protection Act and the right of residence

Section 3(1) of the Family Home Protection Act 1976 provides that: ‘Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then subject to subsections (2) and (3) and section 4, the purported conveyance shall be void’.

It was argued that the absence of Mrs O’Donnell’s valid consent under the Family Home Protection Act has the effect of invalidating the mortgage by Vico to Bank of Ireland – and that because the solicitors for the Bank of Ireland once sought family home consent that it must have been necessary.

Justice O’Donnell stated that this argument was ‘self-evidently threadbare’ and that it would be more logical to conclude that the fact that the solicitors for the bank did not press the request shows that a Family Home Protection Act declaration was not necessary.

In any event, the question was not what the solicitors believed was required at any given time but what the statute required as a matter of law.

Given that the transaction here was between Vico Limited and the bank, Justice O’Donnell stated that it was very difficult to see how this case could be made to come within section 3(1).

The question was who should be entitled in law to assert the claim.

The Family Home Protection Act 1976 was designed to provide protection to spouses, particularly those who were not on the title of the land, by making prior consent a requirement of a transaction and sought to enforce this by providing for the invalidity of any transaction which did not have the required consent. The Act sought therefore to provide a measure of practical protection for spouses reinforced by the sanction of invalidity.

Due to the fact that the right of residence was one which could not be converted into money and therefore benefit the estate of the bankrupt, and allegation of invalidity, this could not be said to be a right of property which vests on adjudication.

Justice O’ Donnell held that although Mrs. O’Donnell may be exposed to costs if she is unsuccessful in this contention, that in itself was not enough to mean that the right to raise this claim is one which vests in the Official Assignee, and it may accordingly be maintained by Mrs. O’Donnell if she wishes to continue to defend the injunction claim on this basis.

Conclusion

Justice O’Donnell affirmed the decision of the High Court, with the exception only of the claim made in respect of the Family Home Protection Act 1976 on behalf of Mrs O’Donnell, and the claim made in respect of the right of residence.

He emphasised that these were now the only matters may now be raised by the O’Donnell’s in the defences to the claim for an injunction.