McCleary v McPhillips & ors

Factual and Procedural Background

The case involves two linked sets of proceedings concerning the appointment and actions of receivers over properties owned by the Defendant. The Plaintiff in the first proceedings, acting as a receiver, sought possession orders and injunctions against the Defendant to prevent interference with the receivership. In the second proceedings, the Defendant challenged the validity of the appointment and discharge of the first receiver and the appointment of the second receiver.

The loans at issue were provided by ACC Bank (now ACC Loan Management Ltd) to the Defendant and an associated company. Following defaults on repayment obligations by both, ACC Bank appointed a first receiver on 4th February 2013. This receiver was discharged on 17th January 2014, and a second receiver was appointed the same day.

The Defendant obstructed the second receiver's agents from taking possession of the property on 25th June 2014, leading to interlocutory injunctions and subsequent possession orders. The Defendant later issued proceedings challenging the validity of the receivers' appointments. The High Court linked both proceedings for hearing together.

Legal Issues Presented

1. Was the first receiver validly appointed?
2. Was there a valid deed of discharge for the first receiver?
3. Was the second receiver validly appointed?
4. Did the second receiver's agents represent themselves as agents of the first or second receiver during possession attempts?
5. Did ACC Bank hold the mortgage over the Defendant's property or had it sold the debt?
6. Did the mortgage contain express powers to take possession or sell the property?
7. Is the Defendant entitled to damages for trespass due to invalid receiver appointments?
8. Is the Defendant entitled to declarations regarding false documents and improper injunctions?

Arguments of the Parties

Defendant's Arguments

• The deeds appointing the receivers were invalid because the appointments were not made in accordance with the deed of mortgage/charge.
• The first receiver was appointed over all assets, but the second receiver was appointed only over some assets.
• The company seal was not correctly affixed to the deeds.
• The deeds were executed under seal when they should have been executed under hand.
• The Defendant was confused about who the valid receiver was due to lack of proper notification.

Plaintiff's Arguments

• The receivers were validly appointed by deeds under seal, which complied with the Bank's internal authorization and Articles of Association.
• The deeds of appointment and discharge were executed in accordance with the Bank's sealing authority and witnessed by authorized persons.
• The Bank retained the debt and had the contractual right to appoint receivers.
• The mortgage contained express powers to take possession and sell the property.
• The second receiver was the valid receiver and the agents acted under his authority during possession attempts.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Merrow Ltd v. Bank of Scotland Plc [2013] IEHC 130	Receiver's authority derives from the contract; appointment must strictly comply with terms of debenture or mortgage.	Supported the principle that non-compliance with appointment formalities renders the appointment void.
R Jaffe Ltd. (in liquidation) v. Jaffe (No.2) (1932) NZLR 195	Receiver's authority depends on the contract; appointment without court aid must follow contract terms.	Reinforced that strict compliance with contractual appointment terms is essential.
Trustee Solutions Ltd & Ors v. Dubery [2006] EWHC 1426	Interpretation of "writing under hand" requires signature; deeds must be signed, sealed and delivered.	Distinguished the strict interpretation of appointment under mortgage from more purposive interpretation in pension scheme rules.
Electronic Rentals Pty Ltd v. Anderson [1971] 124 CLR 27	"Under hand" means "with the signature of".	Confirmed the necessity of proper signature for documents "under hand".
Windsor Refrigerator Co. Ltd. & Anor. v Branch Nominees Ltd & Ors. [1961] Ch 375	Distinction between deeds and instruments in writing; validity depends on facts and authority.	Held that a defective deed may still be an instrument in writing but facts must be established; not directly applicable here.

Court's Reasoning and Analysis

The Court examined the deeds of appointment and discharge alongside the Bank's internal authority and the terms of the deed of mortgage/charge. The mortgage required that appointment of a receiver be made "by writing under its hand," which entails a written document signed by a person duly authorized to sign on behalf of the Bank.

The Bank's internal memorandum distinguished between documents executed under seal and those executed under hand, authorizing different persons for each category. The deeds appointing the receivers were executed under seal and witnessed by persons authorized to witness the seal but not authorized to sign documents "under hand" on behalf of the Bank.

The Court rejected the argument that a deed executed under seal automatically satisfies the "writing under its hand" requirement. It found that the deeds were not signed by persons duly authorized to sign under hand as required by the mortgage.

Consequently, the appointments of both the first and second receivers, and the deed of discharge of the first receiver, were invalid as they did not comply with the strict contractual requirements of the mortgage.

The Court acknowledged the confusion caused by the failure of the receivers and Grant Thornton to communicate changes in receivership to the Defendant and errors in correspondence that misrepresented the status of the receivers.

The Court found that the Bank held the debt and that the mortgage contained express powers to take possession and sell the property.

Regarding the possession attempt on 25th June 2014, the Court found that the Defendant and his associate obstructed the receiver's agents, and the associate made intimidatory threats. The agents did not gain access to the property forecourt, which was not trespass as it was open to the public.

Holding and Implications

The Court held that the appointments of both the first and second receivers were invalid as they were not made in strict compliance with the terms of the deed of mortgage/charge.

The deed of discharge of the first receiver was also invalid. As a result, the Defendant is entitled to damages for trespass due to the invalidity of the receivers' appointments and is entitled to a declaration confirming the invalidity of those appointments.

The Court declined to grant a declaration regarding the production of false documents by the receivers' agents and reserved judgment on whether the Defendant is entitled to damages for the interlocutory injunction granted.

The decision directly affects the parties by invalidating the receivers' authority and entitles the Defendant to remedies accordingly. No new precedent beyond the strict application of established principles on receiver appointments was established.