High Court: Interlocutory injunction granted against fund seeking to sell lands with mortgagor in possession

About this case:

• Citation:
  [2022] IEHC 109
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Senan Allen

Delivering an ex tempore judgment in the case, Mr Justice Senan Allen granted the injunction to restrain the sale pending the trial of the action. In so ruling, the court was persuaded by the sudden decision to sell without prior demand for possession and the absence of meaningful marketing of the property.

Background

The plaintiff had purchased 77 acres at Kilbreedy, County Laois in 2005. Loans had been provided by Allied Irish Banks plc which was secured by a charge. The plaintiff failed to repay the loans and in November 2016, AIB issued summary proceedings for the return of the monies. The proceedings did not progress thereafter.

In 2019, the plaintiff’s loans and security were sold to Everyday Finance DAC, which was duly registered as the owner of charges over the plaintiff’s properties. Although there was engagement between the plaintiff and Everyday, the debts were not resolved.

In September 2021, Mr Ken Tyrrell was appointed by Everyday as receiver over the Kilbreedy property. However, the receiver’s powers were limited to the collection of rents and profits from the lands pursuant to the standard form AIB charge. The plaintiff and his brother had a company which held licensed to farm the lands for €10,800 per annum, although none of this income was paid to the receiver.

The plaintiff and his brother were unable to pay their debts to Everyday and no restructuring was accepted. There was no evidence presented to court on the payments which had been made since the loans were called in by AIB.

While it was not contested that a power of sale had arisen in the case, the plaintiff sought to prevent the sale in the manner proposed by Everyday and the receiver. On 2 February 2022, the plaintiff was told that the receiver intended to sell the lands. There had been no previous threat to sell.

Three days later, the plaintiff learned that the property was advertised for sale in a public online auction on 24 February 2022. The sale was being offered on foot of a proposed contract between the plaintiff “acting by the receiver Ken Tyrrell” and a purchaser. It transpired that two deeds of appointment were executed in January 2022 where the receiver was appointed as agent to Everyday to market and sell the property. However, the plaintiff only found out about this agency in the application for the injunction.

There were three reasons offered for why the injunction should be granted. First, it was said that Everyday was not entitled to appoint the receiver as agent to sell the property. Second, it was argued that the marketing and sale of the property was not appropriate. Finally, it was said that damages were not an adequate remedy for the plaintiff.

High Court

Mr Justice Allen began by noting that it was common case that the receiver did not have a power of sale over the property. It was conceded that there was ambiguity in the proposed contracts as to the capacity in which the receiver would enter the contract. Everyday had argued that the agency agreement was a workaround for the fact that Mr Tyrrell had no power of sale. The court was not persuaded that there was a serious question to be tried as to “Everyday’s entitlement to appoint an agent to do anything that it is entitled to do itself.”

Next, the court considered Holohan v. Friends Provident and Century Life Office [1966] I.R. 1, which provided that certain defendants could not proceed with a sale because, inter alia, the conduct in refusing an alternative mode of sale was unreasonable.

The court noted that Everyday were seeking to sell the property with the plaintiff and his company still in possession of the lands. Although the court stated that it was hyperbole to suggest that Everday sought to achieve the lowest price for the lands, it appeared correct that the lands would be more valuable if they were offered as a vacant plot.

The court rejected a suggestion by Everyday that it was speculation as to whether a higher price would be achieved with vacant possession. The court noted that the minimum opening bid for the lands was €730,000, which was 66 times higher on a per-acre basis than was being paid by the plaintiff’s company under the license. The court therefore described Everyday’s submission as “an advocate’s argument.”

The court was satisfied that the plaintiff established a fair issue to be tried on the circumstances of the proposed auction. However, the court noted that it was highly likely that Everyday would successfully obtain vacant possession of the lands if they issued special summons proceedings. Further, the court held that the plaintiff had not made out a strong case that Everyday was not entitled to offer the lands for sale without vacant possession.

Ultimately, the court was influenced by “the apparent suddenness of the decision to sell; the absence, as far as the evidence goes, of any previous demand for possession; and the absence of any meaningful marketing of the land.” Applying Merck Sharp & Dohme v. Clonmel Healthcare [2020] 2 I.R. 1, it was held that the plaintiff could secure a permanent injunction restraining the sale to anyone who had seen the listing on the surveyor’s website without an opportunity to walk the lands.

Conclusion

Although the court held that damages would also not be an adequate remedy for Everyday, the least risk of injustice was found in granting the interlocutory injunction and managing the case to an early trial. The court outlined a provisional view that the costs of the application should be costs in the cause.