High Court: Fair question to be tried in case concerning charge over lands
The High Court has found that a couple have established that there is a fair question to be tried as to the correct interpretation of a charge over their lands.
About this case:
Citation: IEHC 6
Judge:Mr Justice Senan Allen
Mr Justice Senan Allen heard an application by the registered owners of lands for an interlocutory injunction restraining the registered owner of a charge on the lands, and a receiver appointed by the charge holder, from marketing, taking possession of, or selling the lands.
Miceal Sammon and Cathy Sammon argued that their liabilities to the charge holder are not secured by the charge and they wanted their case heard and decided before the lands are sold. Ken Tyrrell and Everyday Finance DAC’s case was that Mr and Mrs Sammon’s liabilities are secured by the charge and they want to sell the lands now on the basis that the court will decide later how the proceeds of sale should be dealt with.
Mr and Mrs Sammon live in Kilcock, Co Kildare, in a house which they built 20 years ago and where they have lived ever since. The cost of building the house was partly funded by money borrowed in 2000 from Allied Irish Banks plc, the repayment of which was secured by a charge over the substantial site of about 10 acres or so, which Mr and Mrs Sammon already owned. That loan has since been repaid. In 2002, Mr and Mrs Sammon bought a 17-acre holding beside the house, funded by a loan from AIB, the repayment of which was secured by a charge over those lands. It has since been repaid.
Mr Sammon was owner of the Sammon Group construction business, which also banked with AIB. When, in 2007, and again in 2009, AIB extended or renewed a number of facilities to a number of the companies in the Sammon Group, Mr and Mrs Sammon signed a number of personal guarantees. In 2014 the Sammon companies got into financial difficulties. In 2015, AIB called up the loans and Mr and Mrs Sammon’s guarantees and, in July 2015, recovered judgment against them for €2,654,523.43 and costs.
In 2018 the liabilities of the Sammon Group, and security, were transferred by AIB to Everyday Finance.
The core dispute between the parties was whether Mr and Mrs Sammon’s liabilities on foot of the guarantees which they signed in 2007 and 2009 are secured by the charges they signed in 2000 and 2002. On their face, the charges were for “all sums due” but Mr and Mrs Sammon contended that the charges, properly construed within the factual matrix in which they were given, extended only to the borrowings made at the time they were given, which have been repaid.
Question to be tried
Ciaran Lewis SC and Ross Gorman BL, for Mr and Mrs Sammon, made “a straightforward argument” that a fair question to be tried had been established. The land, it was said, is an integral part of the Sammon family home, so damages would not be an adequate remedy. If the property were to be sold pendente lite it would be lost to them forever. By contrast, there was no evidence Everyday Finance would suffer any loss, if the action were to fail, by the postponement of the sale.
In support of their argument that there was a bona fide question to be tried, counsel referred to Mr Justice Peter Young’s judgment in Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13, and that of Mr Justice Michael Slattery in Meldov Pty Ltd v Bank of Queensland  NSWSC 378, both in the Supreme Court of New South Wales. They also cited the judgment of Michael Harvey QC, sitting as deputy judge of Queen’s Bench, in ING Lease (UK) Ltd v Harwood  2 BCLC 57 which set out guidelines there for the construction of “all sums due” clauses in New South Wales mortgages and English guarantees. They also relied on the decision of the Supreme Court in Bank of Ireland v McCabe (Unreported, 19 December 1994).
In support of their argument that damages would not be an adequate remedy for the plaintiffs, counsel referred to Mr Justice Frank Clarke’s judgment in Allied Irish Banks plc v Diamond  3 IR 549 as to the importance attributed by the courts to property rights and as to the importance in the balancing of the parties’ interests of assessing where the greater risk of injustice might lie. Reference was also made to Ms Justice Mary Rose Gearty’s decision in O’Flaherty’s (Nassau Street) v Setanta Centre  IEHC 272 “in which the judge quoted the canticum of Mr Neil Diamond”.
In anticipation of the Everyday’s argument that damages would not be an adequate remedy for them if the action were to fail, counsel referred to the judgment of Mr Justice Adrian Hardiman in Dunne and Lucas v Dún Loaghaire Rathdown Co. Co.  2 ILRM147. In anticipation of the argument that the Sammons’ financial circumstances were such that their undertaking as to damages was useless, counsel cited Lord Denning MR in Allen v Jambo Holdings Ltd.  1 WLR 1252, and also referred to the judgment of Mr Justice Peter Kelly in Harding v Cork County Council  IEHC 80 which considered fortified undertakings as to damages.
Rossa Fanning SC and Niall Ó hUiginn BL, for Everyday, emphasised the size of the Sammons’ liability on foot of the guarantees. Nothing has been paid on foot of the judgment obtained by AIB. Counsel stressed that an applicant for an interlocutory injunction bears the onus of establishing not only that there is a bona fide question to be tried but also that damages would not be an adequate remedy (Curust Financial Services v Loewe-Lack-Werk  1 IR 450); that cases involving commercial property are viewed differently to cases involving the family home (O’Gara v Ulster Bank  IEHC 213); and that the fact that an injunction would serve no practical purpose is a factor that militates strongly against the granting of an injunction (Vieira v Ulster Bank  IEHC 591).
Mr Fanning argued that Meldov simply followed Estoril. The foundation of that judgment, he said, was an American textbook, Nelson and Whitman on Real Estate Finance Law and that the purposive approach sits uneasily with Irish contract construction rules. He said it had not been adopted in Ireland or in England but neither, the judge noted, had it been rejected. The court was not, on an interlocutory motion, to finally decide that argument.
Citing Merck Sharp & Dohme v Clonmel Healthcare  IESC 65, Mr Fanning said that the weakness of the Sammons’ case was something which the court is entitled to have regard to where the application is otherwise finely balanced.
The judge was satisfied that Mr and Mrs Sammon established that there is a fair question to be tried as to the correct construction of the charges. While Mr Fanning had noted that the “all sums due” clause says what it says “so did the clause in the guarantee given by the Messrs McCabe” in McCabe. The judge also noted the speech of Lord Hoffman in Investors Compensation Scheme v West Bromwich Building Society  AC 261 and Analog Devices BV v Zurich Insurance  1 IR 274.
The judged accepted Mr Lewis’s submission that Everyday’s argument that it was entitled “to have the lands sold by hook or by crook is wrong in principle. Every creditor is entitled to his remedies in law, but is confined to his remedies in law. Equally, every debtor is entitled to due process.”