High Court: Vulture fund granted possession of four-bedroom house in Blackrock with 15 tenants

About this case:

• Citation:
  [2019] IESC 28
• Judgment:
  External link
• Court:
  Supreme Court
• Judge:
  Mr Justice Frank Clarke

Finding that the vulture fund, together with the receivers, had a “strong case” likely to succeed at trial, Mr Justice Mark Sanfey said he would hear further arguments regarding whether it would be appropriate to place a stay on the sale of the property pending the determination of the proceedings or agreement of the parties.

Background

In 1998, the defendants, Paul Smith and Jane Gleeson, entered into a mortgage agreement with Allied Irish Banks (AIB) in respect of a property in Avoca Park, Blackrock, County Dublin. In March 2008, Mr White accepted the terms of a further mortgage loan agreement with AIB for €2.75 million. Mr White fell into arrears, and the Court heard that over €3 million was due and owing under the terms of the loans.

The first named plaintiff, Everyday Finance DAC acquired the original loan facilities and mortgage in respect of the premises which the defendants had agreed and concluded with AIB. The second and third named defendants, Stephen Tennant and Nicholas O’Dwyer, were appointed as receivers in 2017 following what the plaintiffs say is the defendants’ default in repaying the loan facilities secured by the mortgage

In the High Court, the plaintiffs sought the return of possession of the property at Avoca Park to the receivers. In their application, the plaintiffs sought interlocutory injunctive relief requiring Mr White and Ms Gleeson, their servants or agents or anyone in occupation of premises to surrender vacant possession of the premises – in this regard, the Court heard that the property was not the family home of the defendants, and that over fifteen unknown people occupied the property.

Charleton v Scriven

Counsel for the defendants relied on Charleton v Scriven [2019] IESC 28, arguing that “where the relief sought by the receiver was mandatory in nature”, and would bring the proceedings to an end, the receivers would have to establish that they had a strong arguable case. Pointing to a number of inconsistencies in the documentation proffered by the plaintiffs, the defendants contended that the receivers in the present case did not have a “strong case” for a number of reasons, and did not meet the onus of proof.

In Scriven, Chief Justice Frank Clarke sought to … “distinguish between the reliefs sought which simply seek to retain the position that the receivers are entitled to collect the rent, on the one hand, from any relief which might be designed to allow the receivers to move on to selling the property on the other”.

In Scriven, the principal point raised by the defendant was that the appointment of the receivers in that case was invalid on the basis that there was a difference between a ‘receiver and manager’ and a ‘receiver’, and that the appointment of the receivers as simply ‘receivers’ rather than ‘receivers and managers’ was arguably an invalid appointment “…such that it would be properly concluded that the receivers did not have a sufficiently strong case to warrant the grant of an injunction which, it was argued, was essentially mandatory in nature”.

In the present case, Mr Justice Sanfey was satisfied that the reliefs sought were mandatory in nature, and therefore the Court had to assess whether the plaintiffs had a strong case likely to succeed at the hearing of the action.

Inconsistencies did not invalidate appointment or transfer

Considering the inconsistencies pointed to by the defendants, Mr Justice Sanfey said it was clear that the error in the instrument of appointment, ascribing the year 1988 to the mortgage rather than 1998, did not invalidate the appointment of the receiver. The defendants also suggested that the receivers were not validly appointed due to an irregularity regarding their date of appointment, but Mr Justice Sanfey said this submission was incorrect.

Mr Justice Sanfey also dismissed the argument that a further erroneous date in the documentation, referring to 1996 rather than 1998, went to the validity of the transfer of the mortgage to Everyday Finance DAC. Considering the Registration of Title Act 1964, and the case of Tanager DAC v Kane, Mr Justice Sanfey explained that, in the present case, the defendants did “not argue that a mistake occurred, in the sense that some security other than the mortgage of 12th August 1998 was intended to be transferred” to Everyday Finance DAC. Further, it was not suggested that the register was incorrect due to fraud – the contention was simply that the transfer was invalid “due to the error in the date”.

Stating that it was “clear beyond argument” when considering the totality of the document, that the reference to 1996 was a “typographical error only”, Mr Justice Sanfey accepted that the registration of Everyday Finance DAC as owner of the 1998 mortgage was correct.

A further argument from the defendants was that Ms Gleeson was not a party to the 2008 loan, and that there was no evidence that she had consented to the 1998 mortgage being used as security for a loan to which she was not a party. However, Mr Justice Sanfey said it appeared that “Ms Gleeson was aware of the terms of the 2008 loan, as it seems to be the case that she executed a letter of guarantee of the loan for €2.75m”.

In any event, Mr Justice Sanfey said that he did not have to resolve the issues surrounding this argument on the present application. Reiterating that the issue for decision was whether the plaintiffs could demonstrate a strong case likely to succeed at trial, Mr Justice Sanfey said the plaintiffs discharged that onus.

In particular, the defendants had not demonstrated “…an issue of any substance concerning the validity of the appointment and powers of receivers” (as per Scriven).

Considering the form of order, Mr Justice Sanfey said the current situation with the property was “completely unsatisfactory, in that there may be as many as 15 occupiers at present”.

In all the circumstances, Mr Justice Sanfey said it would be appropriate to make orders to enable the plaintiffs to take possession of the property. Mr Justice Sanfey added that there was considerable merit in the suggestion that he should place a stay on the sale of the property pending the determination of the proceedings or agreement of the parties.