Doran v Charleton & Anor (Approved)

Factual and Procedural Background

The Plaintiff is the owner of farmland located in Folio WX11291, County Wexford, which he has farmed since 1972. On 2 February 2006, the Plaintiff entered into a mortgage with Company A (Allied Irish Banks plc, "AIB") over this property. On 1 February 2021, the Defendants were appointed as joint receivers over the property by Company B (Everyday Finance DAC, "Everyday"), which had acquired AIB's rights under the mortgage.

The Defendants sent a letter to the Plaintiff asserting control over the property and management powers, which led the Plaintiff to seek interlocutory injunctions restraining the Defendants from taking possession, holding themselves out as receivers, or restricting the Plaintiff’s lawful enjoyment of the property. The Plaintiff also sought declarations challenging the validity of the appointment and the scope of receivers’ powers, though the court noted these declarations could not be granted on an interlocutory basis.

The Plaintiff’s solicitors disputed the appointment’s validity and the extent of the Defendants’ powers, contending that the receivership was limited to rent collection powers under the Conveyancing Act 1881, as the property was actively farmed and not rented. The Plaintiff initiated proceedings following no response to these contentions.

Several related proceedings involving the Plaintiff, AIB, and others were ongoing, including plenary proceedings related to mis-sold investments, summary proceedings for debt recovery, possession proceedings, and lien proceedings. Company B had been substituted for Company A in some of these proceedings but not all, notably the summary proceedings.

Legal Issues Presented

1. Whether the Defendants were validly appointed as joint receivers over the Plaintiff’s property.
2. Whether the Defendants possess powers exceeding those conferred by the mortgage and applicable statute, specifically whether they may take control and manage the property beyond rent collection.
3. Whether the appointment of the Defendants constitutes an abuse of process by attempting to short-circuit ongoing litigation.
4. How the court should balance the equities and arrange matters pending trial, including considerations of adequacy of damages and the outstanding judgment debt.

Arguments of the Parties

Plaintiff's Arguments

• The Defendants’ appointment as receivers was invalid, particularly as Company B was not registered as the mortgagee at the time of appointment and had not been substituted in all relevant proceedings.
• Even if validly appointed, the Defendants’ powers are limited to those under the Conveyancing Act 1881, namely rent collection, as the property is farmed and not rented.
• The Defendants’ letter claiming control and management powers constituted an overreach beyond their lawful authority.
• The appointment was an abuse of process intended to circumvent ongoing litigation concerning the same debt and property.
• The underlying debt had not become payable to Company B in full due to lack of demand and incomplete substitution in proceedings, challenging the basis for receivership.
• Damages would be inadequate given the nature of the farming business and the Plaintiff’s age, justifying interlocutory relief.

Defendants' Arguments

• The Defendants were validly appointed as receivers pursuant to powers conferred by the mortgage and the Deed of Appointment.
• The powers to manage and control the property are ancillary to their statutory powers to receive rents and income.
• There was no immediate or threatened possession or sale, making the interlocutory application premature.
• Company B had been substituted for Company A in key proceedings, and the outstanding judgment debt justified the appointment.
• Section 28 of the Judicature (Ireland) Act 1877 and the Deed of Transfer obviate the need for a separate demand by Company B.
• The Plaintiff’s arguments regarding the nature of the debt post-judgment and substitution were not sufficient to establish a fair question to be tried on those points.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first applied the established legal framework for interlocutory injunctions, focusing on whether there was a fair question to be tried and how to balance convenience and justice pending trial. It found that the Plaintiff had met the low threshold of establishing a fair question regarding the scope of the Defendants’ powers as receivers.

The court examined the terms of the mortgage and the Deed of Appointment, concluding that the Defendants’ powers as receivers are limited to those conferred by statute (Conveyancing Act 1881 and its successor), primarily the power to collect rents. The mortgage did not expressly delegate powers to take possession or manage the property, and the Defendants were not appointed as agents of the mortgagee, thus lacking broader powers.

The letter from the Defendants asserting control and management over the property was interpreted as raising a serious question whether they were purporting to exercise powers beyond their lawful authority. The court found no authority was provided to support the Defendants’ claim to ancillary management powers.

Regarding the validity of the appointment, the court rejected the Plaintiff’s argument that Company B was not registered at the time of appointment, as evidence showed registration had occurred prior to the appointment. The court also found no general principle preventing a charge holder from appointing receivers while pursuing other remedies such as possession or summary judgment.

However, the court acknowledged a fair question existed concerning the impact of the outstanding judgment in favour of Company A (AIB) and whether the benefit of that judgment had been effectively transferred to Company B, given the lack of substitution in the summary proceedings. The court recognized the Plaintiff’s argument that the judgment debt might not constitute debt under the mortgage was arguable and thus a fair question.

In balancing convenience and justice, the court noted the Plaintiff’s advanced age, long-standing farming use, and potential irreparable harm from interference with the property’s management. The absence of rental income meant no financial prejudice to the Defendants in delaying their functions, and damages would be inadequate given the nature of the farming business.

However, the outstanding judgment debt was a significant factor. The Plaintiff had lodged substantial funds with his solicitor to discharge the judgment but had not yet done so, reportedly due to lack of communication with Company A. The court concluded that equitable relief could only be granted if arrangements were made towards discharging this judgment amount.

Accordingly, the court was inclined to grant interlocutory injunctions restraining the Defendants from exercising powers beyond those conferred by statute, subject to conditions regarding the judgment debt. The proceedings were adjourned to allow the parties to discuss appropriate arrangements, with the injunctions continuing in the interim.

Holding and Implications

The court granted interlocutory injunctions restraining the Defendants, their servants or agents, from taking possession of or securing control over the property, holding themselves out as receivers beyond their lawful powers, or restricting the Plaintiff’s lawful enjoyment of the property. This relief was subject to the Plaintiff making arrangements to discharge the outstanding judgment debt.

The decision acknowledges a fair question exists regarding the validity of the Defendants’ appointment and the extent of their powers, but it does not finally determine these issues. The injunctions preserve the status quo pending trial, protecting the Plaintiff from potentially unlawful interference with his farming operations.

No new legal precedent was established; rather, the court applied established principles on interlocutory injunctions, statutory interpretation of receivers’ powers, and procedural fairness in the context of mortgage enforcement and related litigation.