About this case:

• Citation:
  [2023] IEHC 659
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Brian O'Moore

Delivering judgment for the High Court, Mr Justice Brian O’Moore commented that the bargain “appears to be a poor one, at least on the face of it, and certainly did not contain appropriate legal provisions to accommodate any change in circumstances”.

“However,” he added, “to say that this is a good reason for refusing an order for the sale of the property would be effectively to rewrite the arrangements between the two men which have been in place for the last nine years and which have over that time been embodied in a court order. To do this would appear to be wrong in principle, and without any direct authority.”

Background

The plaintiff and defendant were brothers who took part in a failed business venture together. The brothers guaranteed the debts of their company, A Cashcard Systems Ltd, and in July 2010, the defendant provided the plaintiff with a full indemnity in respect of any liability connected with or arising from the personal guarantee in respect of monies advanced to A Cashcard Systems Ltd by Ulster Bank Ireland Ltd.

In 2013, the plaintiff commenced summary proceedings against the defendant on foot of the indemnity, seeking a sum of €156,956.53 which included €117,185.67 owing in respect of the Ulster Bank loan. By consent, an order was made in February 2014 granting judgment to the plaintiff in the sum of €117,185.67 with no order as to costs, with the balance of the motion being transferred to the non-jury list for hearing.

Despite being legally represented at the relevant time, no provision was made for revisiting or reducing the amount of the consent order in the event that any of the debt owing to Ulster Bank was paid by the defendant, or from any other source aside from the plaintiff.

The plaintiff registered the judgment in June 2014 against three properties: a property jointly-owned by the brothers in Meath, the defendant’s family home, and a house in Ballyfermot which was bequeathed to the defendant by the brothers’ father. In 2017, the Meath property was sold, with that sale almost clearing the debt due to Ulster Bank, but with no direct return to either brother.

The plaintiff sought an order for the sale of the Ballyfermot property.

The High Court

Mr Justice O’ Moore observed that the “ill-advised” consent order constituted “an unappealable order” in favour of the plaintiff for the entirety of the Ulster Bank debt, and that “Ulster Bank was free to pursue John for the totality of the debt… as the guarantee appears to have been a joint and several one. It left Thomas free to execute against John the full value of the Ulster Bank debt at the time, but… provided no mechanism by which the judgment in favour of Thomas could be varied in any way in the event that John paid some or all of the guaranteed debt to the bank.”

Noting the position of the defence that the sale of the Meath property had resolved the situation as between the parties with no loss to the plaintiff, the High Court stated that “this is incorrect… the fact that Ulster Bank were paid out of the proceeds of Mullaghboy constitutes one half of the net proceeds of sale. In other words, if John Manning had arranged the payment of the Ulster Bank debt without recourse to an asset held with Thomas Manning then Thomas would have received half of the net value of Mullaghboy when it was sold.”

Finding that “much of the opposition to the making of the order for sale founders when one considers this basic commercial fact”, Mr Justice O’Moore also noted the plaintiff’s contention that the Meath property was also sold at an undervalue.

Relying upon the judgment of Mr Justice David Keane in Quinns of Baltinglass Limited v Smith [2017] IEHC 461 as setting out the essential question — that “a good reason exists for not ordering a sale” where the proofs are otherwise in order — the High Court proceeded to consider the submissions of the defendant.

Having already found that a loss had occurred to the plaintiff in meeting the debts due to Ulster Bank, Mr Justice O’Moore focused on the second reason proffered by the defendant: that if the Ballyfermot property was sold and the monies due to the plaintiff were paid out to him from that sale, the plaintiff would have profited from the collapse of the business and the repayment of its creditors, including Ulster Bank. The defendant contended that as circumstances had changed since 2010, an order for sale would unjustly enrich the plaintiff.

The court calculated that considering the plaintiff’s half interest in the Meath property and the difference between the actual sale price and the valuation figure, “the value of the loss of Thomas Manning’s half interest in Mullaghboy was in the region of €135,000 — a figure very close to the capital sum that he now seeks to have paid out of the proceeds of sale of Ballyfermot”.

Noting that the onus rested upon the defendant to demonstrate a good reason why the sale should not proceed, Mr Justice O’Moore highlighted that “the lion’s share of the debt for which Thomas has a court order against John is the figure of some €141,000 which John, through his lawyers, agreed in February 2014 should be paid to Thomas. The bargain which John made with Thomas at the time appears to be a poor one… However, to say that this is a good reason for refusing an order for the sale of the property would be effectively to rewrite the arrangements between the two men…”

In respect of the submission that the defendant was prepared to sell his family home to meet the Ulster Bank debt, the court contemplated that it was “difficult to see how the intended sale of John’s family home to meet the liabilities of the business constitutes a good reason as to why Thomas should not be able to obtain an order for sale against the Ballyfermot property in order to satisfy the established liabilities of his brother John”.

Conclusion

Having heard no good reason to refuse the reliefs sought, the court directed the sale of the Ballyfermot property.

Manning v. Manning [2023] IEHC 659