Leases & Mortgages
Cases on Mortgages
Ulster Investment Bank Ltd v Rockrohan Estate Ltd
2015 IESC 7
Judgment delivered by Charleton, J.
1. At issue in this appeal is the application of the Statute of Limitations 1957, in circumstances where a mortgagor has remained in possession of lands for more than twelve years after the High Court has made a well charging order together with an order for sale. The lands in question comprise about 120 acres, and are entered in the Register of Freeholders for County Cork on folio 28285. As is usually the case on making such an order, no order for possession was made with the primary order. Central to that issue is the question of whether such occupation, after the making of an order for sale, is in fact adverse to the mortgagee. Estoppel by convention, based on the shared understanding of the parties, is claimed by the mortgagee bank to ensure that there has been neither an adverse occupation by the mortgagor nor an efflux of time to enable the creation of a title by adverse possession. The mortgagor of the lands in question is the defendant/appellant Rockrohan Estate Limited and the mortgagee is the plaintiff/respondent Ulster Investment Bank. In the High Court, the trial judge, Irvine J, decided that the Statute of Limitations had no applicability in the circumstances of this case; Ulster Investment Bank Limited v Rockrohan Estate Limited [2009] IEHC 4.
Background
2. The background to this case is fully described in the judgment of Irvine J. A feature of this background is the long-running dispute involving a company called Bula Limited, an enterprise proposing to mine for zinc and lead in County Meath. The obligation of Rockrohan to the bank in this case came about through a guarantee debenture dated 22 nd September 1981 which was, on the face of it, an obligation limited to the recovery of €1 million, together with interest applicable under the primary contract of borrowing. On Bula defaulting on the loan in July 1982, a receiver was appointed over its assets. In July 1986, Rockrohan was called upon to meet its obligation under the debenture. The relevant rate of interest was specified, as was the degree to which other securities had realised cash against the obligation guaranteed. Bula Limited became involved in a series of actions against a number of parties. These proceedings are relevant as forming part of the origin of this case, but are not as to the amount charged on the land or as to the propriety of the realisation of the debenture, since no such defence was raised. Instead, the solution proposed by Rockrohan in the High Court in respect of the sum that was sought to be declared well charged on the land pursuant to the guarantee debenture was a plea, by way of affidavit filed back in 1989, than Rockrohan would be able to discharge its obligations upon the litigation concluding against Tara Mines Limited, together with other related litigation, including a claim against this bank and other banks and against the State. Sets of litigation had been started in 1986, which involved other parties meeting claims of breach of contract and tort related to the mining enterprise and the funding thereof. It was averred that it would be inequitable to allow the bank to proceed to execute against the lands “as such relief may be entirely unnecessary.” Among the reliefs sought in the litigation involving this bank were declarations that all consent judgments, all guarantees and all contracts were unenforceable. That remedy, should it have been granted, would have meant that this guarantee debenture was void. An adjournment was sought in this matter until the conclusion of the litigation. That was not granted. After hearing argument, Blayney J proceeded to make an order declaring “the principal moneys secured by the said Guarantee Debenture” together with the interest thereon “and the costs hereinafter awarded” well charged on the interest of Rockrohan in the lands. Then the sum involved was IR £1,267,149.02; but with growing interest on that amount if not paid within three months, and costs. The order of 16 th February 1987 continued that should payment not be made by Rockrohan:
… the said lands and premises be sold at such time and place subject to such conditions of sale as shall be settled by the Court and the following Account and Inquiry are to be taken and made in the Examiner’s Office namely:-
No. 1. An Account of all incumbrances subsequent as well as prior to and contemporaneous with the Plaintiff’s demand
No. 2. An Inquiry as to the respective priorities of all such demands as shall be …
3. The Court did not grant me bank an order for possession, as had been sought. The reason for that would have been well known to all the parties, as counsel’s note of the judgment of Blayney J of the same date makes clear:
The Defendant is saying that there is a different method by which the Plaintiff Bank may be paid. The Defendant argues that if the Plaintiff waits until the other proceedings are determined then the Bank will be paid and there is an inference that the Bank will be paid more expeditiously in this way and the claim by the bank will be satisfied more fully. But the Bank is entitled to choose by which method it will realise money due to it. No real case is being made alleging any invalidity in the Debenture. The only case being made is that the bank in effect should wait and if it were to wait, it would be paid off by the moneys recovered in the other proceedings. That however is not a ground to resist the Order which the plaintiff is seeking. By virtue of the fact of the guarantee debenture, the Bank has a good charge over the lands for the amount which is currently due under the guarantee. Therefore the bank is entitled to the usual Order declaring these sums well charged on the lands in question. The bank also seeks an Order for possession. However, there does not appear to me to be any reason to make an order for possession. There is no evidence before the court such as would satisfy me that there is any necessity for such an Order. There is nothing to suggest that the Bank would be impeded in the sale of the land if the well charging order is made.
4. This ruling was appealed to this Court by notice dated 3 rd of April 1987. The matter came on for hearing some time later. The principal affidavit grounding the appeal did not challenge the decision of the High Court either as to liability or as to the amount charged. Instead, it was contended that the order charging the debt on the land ought to have been postponed until the Bula litigation against Tara, against the State and against other banks and parties, had concluded. But for the wrongs therein complained of, it was averred, the relevant loans would have been repaid, and no question of enforcing the security would ever have arisen. In the result of the appeal, the initial stay granted by Blaney J in the High Court was extended over three months to the 2 nd of October 1990.
5. The issues on this appeal were initiated by a motion seeking possession in favour of the bank for the purposes of sale, dated the 17 th of July 2008. This was immediately countered by a motion dated 25 th July of the same year from Rockrohan seeking a declaration that the bank has no interest in the lands or entitlement to enter into possession of, or to sell, same.
Facts
6. It was not until the 10 th of June 2005 that the Bula Limited litigation against the various banks and other defendants including the State and Tara Mines concluded. On that date, an order restraining all further litigation without leave of the High Court was made. Litigation had failed first in the High Court and then on appeal to this Court in relation to the action against Tara Mines Limited and other parties.
7. The claims against banks, including the bank in this case, were dismissed in the High Court on the 1 st of February 2002, and on appeal, by this Court in February 2003. Those behind the litigation then claimed to have fresh evidence that the High Court and the Supreme Court had been deceived by fraud and a new action based on deceit was commenced. That fresh case was only eventually dismissed in June of 2005.
8. When an order for sale is made in a mortgage suit, the sale takes place under the direction of the court; see Order 51 of the Rules of the Superior Courts. The process leading to a sale is commenced in the Examiner’s Office by the service of a Notice to Proceed in accordance with Order 55 R 11 of the RSC. In this case, the Notice to Proceed issued on the 12 th of February 1999 and was duly served on Rockrohan. On the 26 th of September 2006, the Assistant Examiner of the High Court set the conditions and date for the sale of the lands of Rockrohan, which were charged to the bank. As a matter of procedure, in the normal course of sale, no further application to court would ever have been needed. The conditions of sale would have been set by court conveyancing counsel. It would have been the mortgagor, Rockrohan, who would have sold the property under the supervision of the Examiner of the High Court, and that company, on the sale being completed, would have been bound to deliver up good title and peaceful possession to the purchaser. As a matter of practicality, it is not always necessary for mortgagors in possession to have an order against them requiring the vacation of the property for the purpose of sale. Most often, such an order is made in court because grounds are shown whereby vacant possession becomes a necessity, perhaps because of an apprehension of obstruction of, or of less than full cooperation in, the sale, or because repairs are needed to a premises that has deteriorated through waste.
9. A judicial review application was then commenced by Rockrohan against the Assistant Examiner and others which, after leave was granted, came on for hearing before McGovern J in the High Court. This judgment was issued on the 30 th of March 2007; Rockrohan Estate Limited and Richard Wood v Thomas Kinirons and Ulster Investment Bank Limited, Ireland and the Attorney General [2007] IEHC 112. On behalf of Rockrohan, it was averred that the motion to enable the sale of the lands in February 1999 was a “colourable device in pursuance of a misconceived attempt to defeat the statute of limitations and keep alive a power of sale”. It was alleged that the guarantee to the bank was collateral, and that since the main debt had been discharged, there could be no amount due to the bank from Rockrohan. Ultimately, however, notwithstanding these pleas, the High Court was ultimately asked only to resolve the issue of whether the rule preventing counsel from appearing before the Examiner was in breach of fair procedures, and whether the Examiner had failed to apply Article 6 of the European Convention on Human Rights. That Article guarantees that in “the determination of his civil rights and obligations … everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. In the course of his judgment, McGovern J referenced the wide ranging allegations of fact exchanged between the parties and, in particular, expressed a view, which Irvine J rightly did not regard as binding, that Rockrohan were never in possession of the lands in a manner adverse to the bank. This comment was not surprising in light of the contention on affidavit by Rockrohan that since 1989 that company had been in unchallenged possession of the lands, and consequently, at that point, had the benefit of a title through adverse possession. At pages 5 to 6 of his unreported judgment, McGovern J, in refusing the relief sought, stated:
In the course of the hearing counsel for the applicants spent a great deal of time arguing that the first named notice party had failed to act with expedition in enforcing the order for sale and had in effect for many years done nothing about enforcing it and that it is now to be estopped from doing so. Counsel claimed, inter alia, that the applicants had acquired adverse possession of the lands against the first named notice party and that the lands could not therefore be sold. I reject this argument. Blayney J. did not give an order of possession to the first named notice party and at all times the first named applicant has been in possession of the lands since they have not yet been sold. The Applicants have not been in possession adverse to anyone else so the question of adverse possession does not arise. Furthermore I am satisfied that the arguments relating to the alleged delay on the part of the first named notice party are irrelevant to the issues which I have to decide in this judicial review application. They seem to be directed more towards showing that the lands in question should not be sold or that the order of Blayney J. should not be or cannot be enforced. Having heard the submissions of the parties and in particular the submissions of the first named notice party on this issue I am quite satisfied that the delay in achieving a sale of the lands in question is due to protracted litigation which has continued by one or other or both of the applicants up to this date in both the High Court and Supreme Court. These proceedings raise issues such as a declaration that the ‘Bula debt’ was discharged and unenforceable, a claim relying on the statute of limitations including the release of securities collateral to the guarantees given by the second named applicant. It is clear from the proceedings in the various actions which have continued through to the end of 2004 that the basis upon which the judgment of Blayney J. was given has been under attack by the second named applicant.
10. The way was then, apparently, clear for the sale of the lands charged, but, as indicated, the motion of the bank in that regard was countered by the contention that adverse possession had extinguished the rights of the bank over the land charged.
Adverse possession
11. Central to the question of the extinguishment of rights is whether, over the period from the order of the Supreme Court whereby the stay on the order of Blayney J expired, which was the 2 nd of October 1990, Rockrohan could be regarded in law as being in adverse possession of the lands. The statutory basis for any such claim is to be found in section 13 (2)(a) of the Statute of Limitations, which fixes a bar on recovery of land after twelve years has elapsed from “the date on which the right of action accrued to the person bringing it”; and in section 18(1), which provides that no “right of action to recover land shall be deemed to accrue unless the land is in the possession … of some person in whose favour the limitation period can run”; which requires, as section 18(2)(b) provides, that a “right of action” only accrues “unless and until adverse possession is taken of the land”; thereupon section 24 provides that “at the expiration of the period fixed” in the legislation “the title of that person to the land shall be extinguished.”
12. Not all possession of land or premises, otherwise than by its owner, is adverse. In some cases it has been held that the intention of the owner as to the future use of the land may result in what would otherwise be the ordinary and complete use and possession of land by a stranger to the title not being adverse; Leigh v Jack (1879) 5 Ex D 264, Wallis’s Cayton Bay Holiday Camp Ltd v Shell-Mex and BP Ltd [1975] 1 QB 94, Cork Corporation v Lynch [1995] ILRM 598. This line of authority was criticised by Brady and Kerr as being “arguably subversive of the policy reasons which have undergirded successive statutes of limitations”; Brady and Kerr – Limitation of Actions (2 nd edition, Dublin, 1994) at page 101. It was not followed by Barron J in Seamus Durack Manufacturing Limited v Considine [1987] IR 677. Such a principle, those commentators point out, would also make apparently overt acts of dispossession as may found adverse possession depend upon the subjective intention of the owner of the title to land. Some parcels of land, however, may be such as to constitute waste land, or land which is not capable of use or enjoyment, save perhaps on rare occasions. An example of this would be land beside or under a bridge that the owner used only for periods of inspection of the structure; Dundalk UDC v Conway [1987] IEHC 3. Founding the concept of adverse possession is the principle that the party thereby claiming rights must not take or hold the land by force, by deception or with the permission of the owner of the legal title; or as lawyers of an earlier generation would have expressed it nec vi, nec clam, nec precario. O’Hanlon J explained the use which a possessor must make of land or premises, so that it was adverse to that of the owner, in Doyle v O’Neill (High Court, unreported, O’Hanlon J, 13 January 1995) at page 20 thus:
In order to defeat the title of the original landowner, I am of opinion that the adverse user must be of a definite and positive character and such as could leave no doubt in the mind of a landowner alerted to his rights that occupation adverse to his title was taking place. This is particularly the case when the parcel of land involved is for the time being worthless or valueless for the purposes of the original owner.
13. Mere occasional user of land is therefore insufficient. There must be a taking over and use of the land or premises in a way that is inconsistent with the title held by the owner. Particular regard must be had to the individual circumstances of possession. The matter was put thus by Lord O’Hagan in Lord Advocate v Lord Lovat (1880) 5 App Cas 273 at page 288:
As to possession, it must be considered in every case with reference to the peculiar circumstances. The acts, implying possession in one case, may be wholly inadequate to prove it in another. The character and value of the property, the suitable and natural mode of using it, the course of conduct which the proprietor might reasonably be expected to follow with a due regard to his own interests – all these things, greatly varying as they must, under various conditions, are to be taken into account in determining the sufficiency of a possession.
14. In many subsequent cases, this analysis has been quoted with approval, most importantly by this Court in Bula Ltd v Crowley (No 3) [2003] 1 IR 396 at page 425 per Denham J. In addition, see Canny – Limitation of Actions (Dublin, 2010) at pages 67-70. The application of the test of adverse possession can be difficult; as in Murphy v Murphy [1980] IR 183, where a widow whose deceased spouse had left land divided by a road to her and their two sons, one of whom exercised rights over what was her portion as residuary legatee without her ever understanding her entitlement. At page 202 of the report on the appeal to this Court, Kenny J amplified the nature of possession which is adverse, specifically excluding possession by consent:
Before the year 1833 the common law had engrafted the doctrine of non-adverse possession on to the earlier Statute of Limitations so that the title of the true owner was not endangered until there was possession clearly inconsistent with recognition of his title, i.e., adverse possession, and so there had to be an ouster. This doctrine of non-adverse possession was abolished by the Real Property Limitation Act, 1833, in which the words “adverse possession” were not used (Lord Upjohn in Paradise Beach & Transportation Co. Ltd. v. Price-Kobinson [ [1968] A.C. 1072]). The use of the words “adverse possession” in the Act of 1957 does not revive the doctrine of non-adverse possession which existed before 1833. In s. 18 of the Act of 1957, adverse possession means possession of land which is inconsistent with the title of the true owner: This inconsistency necessarily involves an intention to exclude the true owner, and all other persons, from enjoyment of the estate or interest which is being acquired. Adverse possession requires that there should be a person in possession in whose favour time can run. Thus, it cannot run in favour of a licensee or a person in possession as servant or caretaker or a beneficiary under a trust: Hughes v Griffin [ [1969] 1 W.L.R. 23.]
15. Possession by a mortgagor can be adverse to the interests of a mortgagee. That depends upon the circumstances, however. Where, for instance, repayment to a bank stops, and the bank takes no steps to enforce their security over decades, albeit that this is an unlikely scenario, possession in such circumstances may be adverse to the interests of the bank. In National Westminster Rank Pic v Ashe [2008] 1 WLR 710, a couple, by the name of Babai, mortgaged the house in which they lived to the plaintiff bank. Financial difficulties caused payments between 1990 and 1993 to be intermittent. In 1993, the husband was declared bankrupt. The bank acted only by issuing a formal demand and by engaging in correspondence. Thirteen years later, the trustee in bankruptcy of the husband, as legal holder of his entire property, successfully sought a declaration of adverse possession in the High Court, which was upheld in the Court of Appeal. The argument accepted was that a mortgagor in possession in such circumstances did not hold the premises with the permission of the bank. At paragraphs 86 and 87 of his speech, Mummery LJ stated:
In my judgment, however, the continued possession of the property by Mr & Mrs Babai after they had mortgaged it was referable to their property interest in it. This was not objected to by the bank. It must have been tacitly accepted by the bank in the context of the charge, but the bank’s right of action and its tolerance of their possession did not prevent them from being in ordinary possession of the property which satisfied the requirements of paragraph 8[of the limitations legislation]. The nature of this possession did not therefore prevent time running against the bank once its cause of action had accrued, or had accrued afresh by reason of a part payment.
In summary, the bank had a right of action. More than 12 years passed since it accrued afresh. Mr & Mrs Babai’s continued possession of the property with the apparent leave and licence of the bank did not prevent them from being persons against whom the bank’s right of action to recover the property arose on the granting of the legal charge, which right is treated as having accrued afresh when a payment in respect of it was made. Nor did it prevent Mr & Mrs Babai from being persons in whose favour time can run under the 1980 Act. According to the ruling in the Pye case [2003] 1 AC 419 their possession was adverse possession within paragraph 8.
16. The central nature of the relationship between the party ostensibly in possession and the holder of the legal title is illustrated by Bula Ltd v Crowley (No 3) [2003] 1 IR 396. In law, a receiver technically acts as agent for the mortgagor, in that case Bula Limited, and not for the mortgagee bank. The plaintiff company in that earlier case, which is part of the chain of litigation of which this case forms a link, made the claim that where a receiver was in possession of lands pursuant to a mortgage debenture secured on the lands pursuant to a contract with, among others, the plaintiff bank in this appeal, that his possession was adverse to the bank. In other words, possession by a receiver is possession by the mortgagor and so adverse to the bank. This was rejected in the High Court and, on appeal, in this Court. Receivership is essentially a device to protect the mortgagee. While the receiver was treated as an agent of the mortgagor, that was to ensure effective dealings with third parties. The concern of the receiver was to ensure the benefit of the secured property for the bank, to which the property was mortgaged. At page 425, Denham J stated:
It is this relationship which governs this case and is the key. Approaching the relationship from another aspect, this unique position may be further illustrated. In considering the possession of land, one has to consider all the relevant circumstances. If a person is in possession with consent, that is a critical factor.
17. At all times Rockrohan were in possession of the lands with the permission of the bank. There is no sense that in making the order that he did on the 16 th of February 1987, Blaney J was in some way handing Rockrohan some aspect of possession without the consent of the bank. In no way was this possession adverse to the bank. At any stage, the bank, as holders of an order for sale, would have been entitled to put the property on the market, in which case the lands would, in the course of sale by Rockrohan, be under an implied covenant to yield good title and peaceful possession to a purchaser. The bank held off in this step at the express pleading of Rockrohan to await the end of the litigation. The bank did not have to do this, but everyone involved knew that this was their approach and further knew the reasons why.
18. In terms of fundamental rational, this claim by Rockrohan was correctly characterised by Irvine J, at page 29 of her judgment, as outside the purpose for which limitations on actions to recover land were imposed by legislation. Her reasoning is clearly correct:
Given that so much of the submission of Rockrohan is based upon various provisions of the Act of 1957, it is worthwhile briefly reflecting upon the purpose of legislation of this nature. Limitation statutes are intended to prevent stale claims and to relieve certain classes of defendants of the uncertainty of late claims being made against them. They are designed to further remove the potential injustice that may be generated by the increased difficulty of proving a claim or defence after an extended period of time. Brady and Kerr in their 2 nd Ed. of The Limitation of Actions at p. 3 described such concerns as follows:-
“One can therefore conclude that the underlying rationales of the Statutes of Limitations 1957 and 1991, are threefold, and that they may be described as the certainty, evidentiary and diligence rationales.”
These considerations do not apply where one party seeks to enforce a judgment or order previously made against the other party thereto at sometime removed from the date upon which it was made. There is no surprise or evidential unfairness inherent in such a process. This being so there are good policy reasons for the courts to distinguish between “actions” within the meaning of s. 2 of the Act of 1957 and procedures whereby an order or judgment may be executed. Similarly, there are good reasons, beyond the consideration of time limits, why a further distinction should be made between applications for leave to issue execution in respect of a prior order or judgment and an order required for the purposes of giving effect to an existing court order and these reasons emerge in the case law referred to later in this judgment.
19. It might also be noted that here are many aspects of the Statute of Limitations which do not apply to bar litigation or settle entitlements through the passage of time; equity actions are the most obvious example in this regard but, there, equitable principles such as delay and estoppel substitute as a straightforward manner of enabling a fair appraisal of the justice of the situation. Had there been a lack of action by the bank, circumstances might have arisen whereby the bank could possibly be estopped from asserting title as against Rockrohan. That, however, did not happen. Estoppel is the matter which must next be considered, however, in relation to the claim made by Rockrohan.
Estoppel
20. Every fact in this protracted history points to the bank not proceeding because of the posture adopted by Rockrohan in this, and in related litigation. Their position was that there was an expectation of success in the proceedings, whereby the guarantee debenture would be overturned, or to more particularly deal with the representations made, to stop the bank proceeding to obtain an order for sale in this case, whereby a sufficient sum in damages would ultimately be recovered from the State defendants or other defendants to cover and to discharge the debt charged on the land.
21. One of the arguments advanced in the High Court, but effectively abandoned on this appeal, was that the Rules of the Superior Courts would not permit what was contended to be the extension of time necessary under Order 42, rules 23 and 24, whereby leave might be given by the court to issue execution. Irvine J did not find that to be a good argument; and correctly so. She found support for the averments of the bank that it was the existence of these proceedings and the challenges to the underlying securities which resulted in the bank taking no further steps to enforce the order for sale of Blayney J, once it had been made. That must be correct. Everything in this case suggests that the bank did not sleep on its rights or represent that it had no rights, but instead, was primarily concerned to see an end to litigation, which had extended over decades, and which had resulted in an argument being made before Blayney J in 1987 by Rockrohan that time should be allowed to pass in order to facilitate success in that litigation. There is every reason to believe that had the bank not waited until the end of that litigation, the same argument would have been reiterated on every occasion. Furthermore, given that the bank itself was the subject of serious allegations in that related litigation, it was reasonable for the bank not to effectively sell property out from under the feet of one of the litigants in circumstances where serious allegations of breach of contract and tortious wrongdoing were being made against it.
22. The case of Revenue Commissioners v Moroney [1972] IR 372 is an example of a classic estoppel situation; though in that case, estoppel based on representation was at issue. At page 381, Kenny J adopted the formulation from the 26 th edition of in Snell on Equity whereby the defence is founded upon unequivocal representation, as opposed to a mutuality of understanding:
Where by his words or conduct one party to a transaction makes the other a promise or assurance which is intended to affect the legal relations between them, and the other party acts upon it, altering his position to his detriment, the party making the promise or assurance will not be permitted to act inconsistently with it.
23. A more modern version of that work, Snell’s Equity, 32 nd Ed., (London, 2010), sets out the approach to estoppel which can encompass the embracing by parties of a situation contrary to the accrual of legal rights through representation, or where entitlements can arise through an assumption adopted on the basis of conduct as to how the parties expect each other to act. At paragraph 12-009, this edition indicates:
Where by his words or conduct one party to a transaction freely makes to the other a clear and unequivocal promise or assurance which is intended to affect the legal relations between them (whether contractual or otherwise) or was reasonably understood by the other party to have that effect, and, before it is withdrawn, the other party acts upon it, altering his her position so that it would be inequitable to permit the first party to withdraw the promise, the party making the promise or assurance will not be permitted to act inconsistently with it.
24. Estoppel may go beyond unequivocal oral or written representation. An unequivocal representation, however, is the normal situation. Very often in litigation, it is not the legal basis that is disputed, but the facts whereby estoppel is said to be founded. Facts may be asserted by one side and denied by the other. Estoppel can arise, however, through an assumption shared by those interacting. This does not necessarily always have to be written or spoken once the state of affairs is clear, and therefore obvious, and the parties act upon it. For estoppel to arise, it is essential that there is conduct which establishes an objective state of affairs, whereby the party to be estopped, who would otherwise be bound by the legal relations, is placed in circumstances whereby it is clearly understood that a new state of affairs governs the rights and obligations as between the parties. This requires some demonstrable action, behaviour or representation by the party who is to be bound by the altered state of affairs. It is insufficient, to establish estoppel, merely for the party later pleading that defence to conclude that matters must be so. There must, instead, be a foundation in the behaviour of the party who is to be estopped from asserting a legal entitlement, either pursuant to contract or otherwise. The same applies where estoppel is used not as a shield but as a sword. It would be an unwarranted and dangerous extension of the doctrine of estoppel to permit it to be one-sided; which it would be if based on bare assumption. It has always been central to the equitable principle of estoppel that it derives either from representations or from situations of behaviour that, reasonably construed, clearly withdraw or alter the strictures of legal obligations ir such a way that circumstances may later arise whereby it would be unfair to enforce these. Where the matter is one of representation, it should be relatively simple to identify the legal term supposedly set aside thereby, and where, and in what terms, the representation had been directed in this regard. Where, on the other hand, it is a matter of both parties proceeding on the basis of a clear common understanding, the mutual convention of the parties may suffice as a foundation for estoppel. Depending on the facts, estoppel may become operative in that situation, but only because of that common understanding. In Treitel’s The Law of Contract, 13 th Ed. (London, 2011) at 3.094 the learned editor sets out the law thus:
Estoppel by convention may arise where both parties to a transaction “act on an assumed state of fact or law, the assumption being either shared by both or made by one and acquiesced in by the other”. The parties are then precluded from denying the truth of that assumption, if it would be unjust or “unconscionable” to allow them (or one of them) to go back on it. Such an estoppel differs from estoppel by representation and from promissory estoppel in that it does not depend on any “clear and unequivocal” representation or promise. It can arise where the assumption was based on a mistake spontaneously made by the parry relying on it, and acquiesced in by the other party, though the common assumption of the parties, objectively assessed, must itself be “unambiguous and unequivocal.
25. The decision of this Court in Courtney v. McCarthy [2008] 2 IR 376 has been described as an estoppel by convention finding. In that case, however, there was in fact the clearest possible representation that legal rights were to be held in abeyance, namely the passing of the closing date for the sale of property. Geoghegan J relied on the authority of Amalgamated Property Co. v. Texas Bank [1982] 1 QB 84. At pages 389-390, he set out an analysis of the law, which is of general application to cases of estoppel, as follows:
The case related to a bank guarantee given by a company, the validity of which was being disputed by the liquidator of that company. A question arose as to whether even if the guarantee was not valid an estoppel had arisen by virtue of the conduct of the company which precluded denial of the guarantee. Brandon L.J., though forming the view that the guarantee was in fact effective, went on to consider the estoppel question in the event that he was wrong. Two main arguments against the existence of the estoppel had been put forward in the High Court and the Court of Appeal. The first was that since the bank held its mistaken belief as a result of its own error alone and that the company had at most innocently acquiesced in that belief which it also held, there was no representation which could found an estoppel. The second argument was that the bank was seeking to use the estoppel not as a shield but as a sword and that that was not permitted by the law of estoppel. Brandon L.J. rejected both arguments. He expressed the view that the particular estoppel relied on was of the kind described in Spencer Bower and Turner, Estoppel by Representation (3rd ed., 1977), at pp. 157 to 160 as “estoppel by convention”. He cited the relevant passage of that work as follows:-
This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in their transaction upor the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped as against the other from questioning the truth of the statement of facts so assumed.
In this particular case, both parties knew that the contract was lawfully rescinded and both parties accepted that that was to remain the position subject only to the proviso that both would act on the artificial assumption that the contract was still alive and enforceable if the sale was completed on a particular date and time. Brandon L.J. then dealt with the second argument which, as I have already pointed out, was an argument which featured heavily in this case and particularly in the High Court. Counsel for the plaintiff argued strongly that estoppel here was being used as a sword and not a shield. But this is what Brandon L.J. had to say in relation to this alleged principle at pp. 131 to 132 of Amalgamated Property Co. v. Texas Bank [1982] 1 Q.B. 84:-
In my view much of the language used in connection with these concepts is no more than a matter of semantics. Let me consider the present case and suppose that the bank had brought an action against the plaintiffs before they went into liquidation to recover moneys owed by A.N.P.P. to Portsoken. In the statement of claim in such an action the bank would have pleaded the contract of loan incorporating the guarantee, and averred that, on the true construction of the guarantee, the plaintiffs were bound to discharge the debt owed by A.N.P.P. to Portsoken. By their defence the plaintiffs would have pleaded that, on the true construction of the guarantee, the plaintiffs were only bound to discharge debts owed by A.N.P.P. to the bank, and not debts owed by A.N.P.P. to Portsoken. Then in their reply the bank would have pleaded that by reason of an estoppel arising from the matters discussed above, the plaintiffs were precluded from questioning the interpretation of the guarantee which both parties had, for the purpose of the transactions between them, assumed to be true.
In this way the bank, while still in form using the estoppel as a shield, would in substance be founding a cause of action on it. This illustrates what I would regard as the true proposition of law, that, while a party cannot in terms found a cause of action on an estoppel, he may, as a result of being able to rely on an estoppel, succeed on a cause of action on which, without being able to rely on that estoppel, he would necessarily have failed. That, in my view, is, in substance, the situation of the bank in the present case.
As I have illustrated earlier in this judgment that is exactly the position which pertains in this case.
26. The facts of that case illustrates the principle that what is involved in the matter before the Court is not a case of sleeping entitlement being allowed to die through neglect. Rather, while unequivocal representations by Rockrohan are not to be found to establish an estoppel of the legal effect of the passage of time for limitation purposes, neither can it be said that the bank, as mortgagee, merely jumped to an assumption that everything would remain as it was as and from the order of Blayney J in 1987. On the contrary, the position of the parties was clear. Through the decades following the making of the order, the bank was engaged in protracted litigation, in circumstances where the parties knew that the rights of the bank had been the subject of an order which was being held in abeyance at the express and open request of Rockrohan, made in the public forum of a court hearing, pending an expectation of success by Rockrohan as against that bank and as against the State. There was a common assumption between these parties, reasonably held and based on unequivocal circumstances, that the parties would hold their hand as against each other until such time as that litigation had come to a practical conclusion one way or the other. Had it come to a conclusion as against the bank, both parties assumed, again reasonably, as Rockrohan had expressly and publicly represented, that the debt would be paid out of the profit from the litigation. Had it come to a conclusion, which it did, as against Rockrohan, then that would be the end of any excuse whereby it could be claimed that the bank should hold off on selling the property or in making an application to court, usually only made in the case of some form of difficulty or obstruction, that an order for possession for the purpose of sale was not appropriate.
Action to recover land
27. In addition to the provisions of sections 13 and 18 of the Statute of Limitations 1957 set out in paragraph 11 above, it must be added that section 2(1) thereof, while not containing a definition of what an action is, provides that this word “includes any proceeding (other than a criminal proceeding) in a Court established by law.” Section 11(6)(a) provides that no action is to be “brought upon a judgement after the expiration of twelve years from the date on which the judgement became enforceable.” While section 11(6)(b) provides against the recovery of arrears of interest “in respect of any judgement debt … after the expiration of six years from the date on which the interest became due”, no argument in this regard was pursued at the oral hearing of this appeal. Section 37 also deals with the barring of interest recovery. After an analysis of the relevant case law, the reasoning of Irvine J on the application of the specific interest provisions was shown to be equally applicable to her rejection of the other argument made in relation to adverse possession. At pages 40-41, the trial judge stated:
There are also practical reasons why the Court believes that the provisions of s. 11 (6) (b) nor indeed any other provision of the Act of 1957, were [not] intended to apply in the manner contended for by Rockrohan. The relief granted by the court in proceedings brought on foot of an equitable mortgage or charge provides the plaintiff with the right to recover monies outstanding by seeking a sale of the defendant’s lands. That sale is under the control of the court and is for the benefit of all who may have a charge or encumbrance burdening the land. The plaintiff’s ability to realise a defendant’s assets is not entirely within its control. The uncertainty of the plaintiff’s ability to realise the assets the subject matter of the court order within any defined period is all too readily apparent from the facts in the present case. Firstly, there was the delay generated by the earlier proceedings wherein a challenge was made to the security on foot of which the plaintiff obtained its order for sale. Secondly, there was the claim of Mr Hegarty to adverse possession of certain portions of the lands the subject matter of the well charging order. Whilst this claim did not ultimately trouble the Court on the present application, in another case such a claim could have delayed an application for possession or the possibility of [e]ffecting a sale for many years. Finally, the judicial review proceedings instituted by Rockrohan also delayed [the plaintiff bank’s application] for a further period of approximately eighteen months.
Any number of complications may arise, unrelated to any default on the part of a plaintiff, which could result in the lands charged not being sold within six years of obtaining a well charging order. On the basis of Rockrohan’s arguments, the plaintiff might find itself unable, because of matters outside its control, including obstruction tactics on the part of the defendant, to recover the sums due for principal and interest which a defendant had contracted to pay at the time the charge was created. All of these factors would suggest that it is unlikely that the legislature intended to impose any time limit on firstly, the right of a plaintiff to enforce a well charging order, secondly, its rights to take such steps as might prove necessary to enforce that order or thirdly, its right to recover interest on the monies outstanding on foot of such order.
28. It has not been demonstrated that this analysis by Irvine J is in any way incorrect. Rather, that reasoning is compelling. Even were that not so, there has been an action to recover land within the meaning of the Statute of Limitations. The only action there has been, in that regard, ended in an order being made against Rockrohan, in favour of the bank, in 1987. Thereafter, the lands possessed by Rockrohan were subject to the order of the High Court, securing the rights of the Bank, at a time when Blayney J had concluded that no order for possession was necessary, as there was “nothing to suggest that the Bank would be impeded in the sale of the land if the well charging order is made”. Every single step that should have arisen thereafter, and which was only delayed because of the litigation between the parties, would have been conducted through the Examiner’s Office. Conditions of sale would have been set out of court, normally by conveyancing counsel, and the sale would have been conducted by Rockrohan, as vendor, and with the burden of all encumbrances on the land. In the ordinary way, distribution following sale would be by the Examiner’s Office in appropriate order to those banks and other debtors according to the ranking in priority afforded to them by virtue of the date of registry of their charge or other security. The need to seek an order for possession would have arisen through a concern that the vendor would not cooperate in the sale, or would somehow cause prospective purchasers to be put off. Only in that circumstance would it have been necessary to go to court to seek an order for possession for the purpose of sale; though such circumstances are not a prerequisite to the making of such an order. On that necessity arising, which, in fact, it has in this case, due to the most particular circumstances, that would not have been, and this is not, an action to recover land. That action has already taken place. Any order in respect of possession for the purpose of sale is entirely supplementary to the conclusion of that action.
29. The supplementary nature of the order sought is immediately apparent from the nature of is the order sought and the circumstances in which the order for sale was made; and on the basis by which this supplementary step became possible. An action is, of its nature, a dispute between parties, where there is an assertion of fact or an argument of law, whereby one party seeks the benefit of some legal entitlement as against the other. The action in this case took place when the bank, as mortgagee, asserted that they had a charge over the lands held by Rockrohan as mortgagor and whereby Rockrohan had an entitlement to plead to the contrary or to offer any evidence to challenge that assertion, or to demonstrate through cross examination or legal argument that the action should fail. No such step was taken by Rockrohan and in no sense is any aspect of the definition in section 2(1) of the Act of 1957 be taken as embracing supplementary steps once an action, so property described, as either succeeded or failed.
Conclusion
30. Rockrohan, as mortgagor of the lands in County Cork, was made subject to a debenture in favour of the bank, as mortgagee, in respect of borrowings by third parties related to a proposal to develop a mining project through Bula Limited. In 1987, due to the failure of that project, the guarantee was activated by the bank, and the borrowings of the primary debtors were charged as against the lands. While an order for sale was made by the High Court in that year, no order for possession for the purpose of sale was made, because of the express plea on behalf of Rockrohan that other litigation challenging that debt, and alleging other wrongdoing against the bank and other parties, was likely to be successful. As it turned out in the decades thereafter, the expectation of Rockrohan of success and the generation thereby of sufficient funds to repay those liabilities did not come to pass. A claim of adverse possession by Rockrohan, in circumstances where the bank held off the sale of the property in order to facilitate that litigation through to a conclusion, is untenable. Rockrohan continued in possession of the property with the consent of the bank and under the order of the High Court in favour of the bank for the sale of the lands. Consent to the occupation of land and adverse possession are mutually exclusive concepts. Time did not begin to run under the Statute of Limitations 1957 because at no stage was any continued occupation by Rockrohan adverse to the bank’s interest. Even were that so, the motion to obtain possession of the land by the bank as against Rockrohan is not an action to recover land; the concept of action being essential to bar this claim. An action had already taken place, namely the action which resulted in the bank obtaining an order for sale in 1987. Finally, the relation of the parties has been such that each clearly continued, after the order for sale, in a holding position on the mutual understanding that it was only on the conclusion of the related litigation that the repayment of the debt or the disposal of the land would take place. It would be inequitable to allow Rockrohan to now resile from that mutual understanding.
31. The appeal is therefore dismissed.
Bula Ltd. (In Receivership) v. Crowley
[2002] IEHC 4 (1st February, 2002)
THE HIGH COURT
1986 No. 6624P
BETWEEN
BULA LIMITED (IN RECEIVERSHIP), BULA HOLDINGS, THOMAS C. ROCHE, THOMAS J. ROCHE, RICHARD WOOD AND MICHAEL WYMES
PLAINTIFFS
AND
LAURENCE CROWLEY, NORTHERN BANK FINANCE CORPORATION LIMITED, ULSTER INVESTMENT BANK LIMITED AND ALLIED IRISH INVESTMENT BANK LIMITED AND MACKAY AND SCHNELLMANN LIMITED
DEFENDANTS
JUDGMENT delivered by Mr. Justice Barr on the 1st day of February, 2002
1. As already stated in my reserved ruling made on 20th February, 2001, there is a protracted, intricate history of litigation between the parties to the present action and other parties regarding or relating to lands the property of the first named plaintiff company (Bula) which has continued for upwards of fifteen years. A broad outline of that history is set out in the ruling to which I have referred and I do not purpose to elaborate on it herein. Suffice to state that the fifth and sixth plaintiffs are directors of Bula and of Bula Holdings. They act in consort and the sixth plaintiff is the moving party in the litigation. The third plaintiff (now deceased) and his son, the fourth plaintiff, have taken no part in the action. They were directors of Bula. The first defendant is the Receiver appointed by the other defendants (the Banks) over the assets of Bula. It was the intention of Bula and its directors to engage in major mining operations on it’s lands and to that end large sums of money were borrowed from the Banks and duly secured by a number of mortgages and debentures, which entitled the relevant bank holding security to appoint a Receiver over the property of the company in the event of default being made by Bula in its obligations to the bank in question.
2. Bula’s commercial intentions were not realised and major financial difficulties ensued in consequence of which the Banks called in their loans by formal demands dated respectively 25th June; 28th July and 5th August, 1982.
3. The latest dates for uncontested repayments in respect of the sums borrowed are 19th February, 1986 as to NBFC; 31st October, 1984 as to UIB and 19th October, 1983 as to AIIB. Regarding UIB; there is a contested payment made on 23rd May, 1986. There are also contested issues as to whether certain alleged acknowledgements were made by or on behalf of Bula which would have the effect of extending respective commencement dates for the running of time under the Statute of Limitations, 1957 (the Statute).
4. On 8th October, 1985 the Banks appointed the first defendant as Receiver over Bula’s secured property and it is contended by the Banks that he thereupon entered into possession of the property.
5. On 4th April, 1997 each of the Banks issued proceedings seeking the recovery of principal and interest due by Bula to the respective banks.
6. On 22nd April, 1997 each of the Banks brought well charging order proceedings against Bula. None of the summonses relating to these actions were served until 30th March, 1998.
7. It is not in dispute that the purpose of the Banks in appointing the Receiver was that he would take control of the company’s assets and arrange for the sale of it’s lands, including the purposed mine, in discharge of the debts owing by Bula to the Banks. The Receiver has actively pursued that objective since appointment but has been frustrated in his efforts by persistent unsuccessful litigation orchestrated by the sixth defendant who has demonstrated that he is implacably opposed to the sale of the potential Bula mine in any circumstances and is determined to place every possible obstacle in the way of the Banks obtaining the benefit of their securities through such a sale.
8. The issues remaining for determination all relate to the Statute of Limitations and are as follows:-
Whether time has run against the Banks.
Whether the title of the Banks has been extinguished.
Whether the Banks are entitled to recover six years interest on capital monies due to them under the securities.
Whether the summonses issued in 1997 have the effect of stopping time running for the purposes of the statute. (I have already held that the NBFC summonses were served within time)
Whether the monies paid to the Banks relating to the Bula debts are repayable.
Whether the Receiver is entitled to pay a statute-barred debt.
Whether, in the light of findings on the foregoing matters, the Banks are obliged to return to Bula the title documents to its property.
Whether the sale of the Orpheus Mining shares in 1986 was a part-payment for the purposes of the Statute.
Whether there have been any acknowledgements of debt by or on behalf of Bula which affects time under the Statute.
Whether the Statute can run in the face of an active Receiver.
9. The following provisions in the Statute will be referred to in course of the judgment:-
“Section 2(1) In this Act ….
“Action to recover land” includes – ….
(b) proceedings by a mortgagee for the delivery of possession of land by a mortgagor,
Section 2(6) In this Act – ….
(a) references to a right of action to recover land shall include references to a right to enter into possession of the land….
(b) references to the bringing up an action to recover land shall include references to the making of an entry into possession of the land….
Section 13(2) The following provisions shall apply to an action by a person to recover land –
“(a) subject to paragraph (b) of this subsection, no such action shall be brought after the expiration of twelve years from the date on which the right of action accrued to the person bringing it or, if it first accrued to some person through whom he claims, to that person;…
Section 18(1) No right of action to recover land shall be deemed to accrue unless the land is in the possession (in the section referred to as adverse possession) of some person in whose favour the period of limitation can run.
Section 18(3) Where a right of action to recover land has accrued and thereafter, before the right of action is barred, and the land ceases to be in adverse possession, the right of action shall no longer be deemed to have accrued and no fresh right of action shall be deemed to accrue unless and until the land is again taken into adverse possession….
Section 20 – For the purposes of this Act –
(a) no person shall be deemed to have been in possession of any land by reason only of having made a formal entry thereon….
Section 24 – Subject to section 25 of this Act and to section 52 of the Act of 1891, at the expiration of the period fixed by this Act for any person to bring an action to recover land, the title of that person to the land shall be extinguished.
Section 32(2) The following provisions shall apply to an action by a person (other than a State Authority) claiming the sale of land which is subject to a mortgage or charge:-
(a) subject to paragraph 4(b) of this subsection, no such action shall be brought after the expiration of twelve years from the date on which the right of action accrued to the person bringing it, or, if it first accrued to some person through whom he claims, to that person;
Section 33 – At the expiration of the period fixed by this Act for a mortgagee to bring an action claiming sale of the mortgaged land, the title of the mortgagee to the land shall be extinguished.
Section 37 – No action shall be brought to recover arrears of interest payable in respect of any principal sum of money secured by a mortgage or charge of land …..or to recover damages in respect of such arrears after the expiration of six years from the date on which the interest became due.
Section 38 – At the expiration of the period fixed by this Act for a mortgagee of land to bring an action to recover the land or for a person claiming as mortgagee or chargeant to bring an action claiming sale of the land, the right of the mortgagee or such person to the principal sum and interest secured by the mortgage or charge shall be extinguished.
Section 53 – Where –
(a) the right of an incumbrancer of land to bring an action claiming sale of the land has accrued, and
(b) the person in possession of the land or the person liable for the debt secured by the incumbrance acknowledges the debt. The right of action shall be deemed to have accrued on and not before the date of the acknowledgement.
Section 63 – Where –
(a) the right of an incumbrancer of land to bring an action claiming sale of the land has accrued, and
(b) the person in possession of the land or the person liable for the debt secured by the incumbrance makes any payment in respect thereof, whether of principal or interest. The right of action shall be deemed to have accrued on and not before the date of the payment.”
The essence of the plaintiffs’ primary claim against the defendants:-
10. Bula, having failed to discharge it’s indebtedness consequent upon the formal demands for payment made on it, the Banks had three remedies open to them:-
(a) an action claiming the sale of the land;
(b) proceedings under section 62(7) of the Registration of Title Act, 1964 as owners of charges on registered land for possession of the property;
(c) appointment of a Receiver on foot of the debentures for the purpose of taking control of the company with a view to arranging the sale of it’s assets in discharge of Bula’s indebtedness to the Banks. It is not in dispute that on appointment the Receiver took de facto control of the company and since then has actively endeavoured to arrange a sale of its assets in the interest of the Banks in accordance with the primary objective of his appointment by them.
Under section 32(2) of the Statute each of the Banks had twelve years to bring an action claiming the sale of the land from the respective dates upon which that right of action accrued to them. In the case of NBFC the accrual date is 19th February, 1986. Subject to an alleged payment to UIB and disputed acknowledgements of debt, the UIB accrual date is 31st October, 1984 and that of AIIB is 19th October, 1983. In short, NBFC issued its proceedings within the twelve year period but each of the other Banks were apparently out of time.
11. It is contended on behalf of the plaintiffs that having regard to the provisions of sections 33 and 38 of the Statute, the title of the Banks to Bula’s lands became extinguished and the right of the mortgagees to principal and interest secured by the mortgages and debentures have also become extinguished. It was submitted that both sections are clear and unambiguous in their wording and must be interpreted in accordance with the plain ordinary meaning of the words used, however harsh, incongruous, contrary to common sense or even absurd the result may be. It is for the legislature to remedy any error or unintended consequence emerging from legislation. I have no difficulty in accepting that, subject to long established tenets of construction, words in a statute should be construed in accordance with their plain, ordinary meaning. The Court has no function in remedying error in circumstances where legislation, though clear in its terms, is found to be defective.
12. It will be noted that the phrase which is the kernel of respectively sections 33 and 38 are almost identical. In the first it is “…to bring an action claiming sale of the mortgaged land…” and in the second it reads “…to bring an action to recover the land…”. It is submitted on behalf of the plaintiffs that “to bring an action” means not merely the issuing of a summons to commence judicial proceedings but the successful conclusion of the action within the statutory time limit – including the final successful outcome of any appeal which might be brought against the judgment of the court of first instance. No authority has been furnished in support of that far-reaching proposition, but it is contended that if the mere issuing of a summons was regarded as sufficient to satisfy the sections then that should be made clear in the Statute as, for example, by including in the definition section what was intended by the phrase “to bring an action”. If the foregoing constructions of sections 33 and 38 are correct then all three banks are out of time as they have not done any more than to issue and serve their respective summonses.
13. A crucial issue facing the plaintiffs is whether there is a requirement under section 18(1) to establish that there was possession of the lands adverse to the interest of the Banks. In that regard a distinction is sought to be drawn between “an action to recover land” where adverse possession is required and “an action claiming sale of the mortgaged land” for which proof of adverse possession is not necessary. It was contended that they are not the same and reliance in that regard was placed on Re Lloyd deceased Waters -v- Lloyd [1911] IR 153 . In the alternative it is contended that adverse possession against the Banks is in fact established in that the receivership, though it dis-empowered the directors of the company and substituted control by the Receiver, it did not dislodge Bula’s possession of the lands which remained undisturbed after the appointment of the Receiver in 1985. The judgment of Kenny J. in Murphy -v- Murphy [1980] IR 183 at p202 is relied upon as establishing that adverse possession entails possession inconsistent with the title of the true owner and that this necessarily involves an “intention to exclude the true owner” i.e. the Banks “from enjoyment of the estate or interest being acquired” i.e. the estate in possession.
14. Counsel for the plaintiffs also submitted that the appointment of the Receiver did not bring about a change in occupation of the lands. Reliance was placed on the judgment of Costello J. in W. and L. Crowe Ltd and Another. -v- ESB ICLR 571 at p579 and that of Rigby LJ. in Gaskell -v- Gosling [1896] IQB 669 at p697 (a dissenting judgment which was subsequently affirmed by the House of Lords). It was contended that the appointment of the Receiver had two consequences. First, the putting of Bula under his managerial control and, secondly, the dis-empowerment of the directors of the company. It did not bring about possession of the assets by the Receiver to the exclusion of the company.
15. The plaintiffs further submitted that the Banks had no authority to issue instructions to the Receiver and he had no authority to accept such instructions or act on them. It was contended that the Receiver derived his powers solely from the debentures under which he was appointed to be the agent of the company and not of the Banks. Furthermore, the debentures did not empower the Receiver to act as agent for the mortgagees and they had no authority to give instructions to him amounting to an interference with the conduct of the receivership. [It must be appreciated, of course, that there is a clear distinction between performance by a Receiver of the functions for which he was appointed (i.e. taking control of the company and arranging for the sale of its assets in the interest of the mortgagees) and interference in the conduct of the receivership]. The conclusion advanced by counsel for the plaintiffs was that in the context of adverse possession as defined in section 18(1) it was, strictly speaking, irrelevant whether Bula or the Receiver was deemed to be in possession of the lands as in either case such possession was to the exclusion of the Banks and the actual possession under section 18(1) was adverse to the mortgagees.
The response of the Receiver and the Banks to the plaintiffs’ primary argument.
16. Reduced to its ultimate simplicity, the defendants submit that the Receiver, having been lawfully appointed by the mortgagees under the debentures and having taken effective possession and control of Bula within time for the purpose of achieving the objective of the Banks in appointing him (i.e. arrangement of the sale of its land in discharge of debts owing by Bula to them) the receivership is outside the scope of the Statute which in the premises plays no part in the relationship between Bula, the Banks and the Receiver inter se. It is contended that the essence of the Statute in the context of property rights is adverse possession i.e. for the statutory limitation period to apply there must be (per section 18(1), possession of the relevant land which is adverse to the interest of the true owner or the person (in this instance the Banks) who claims the right to de facto ownership thereof.
17. The primary argument relied upon by the defendants is succinctly stated in the following passage from the Receiver’s first submission at pp 19 et seq.
“The running of the Statute of Limitations as against an active Receiver and the principles of adverse possession .
General
The particular issue arises in the following way. As with any claim under the Statute of Limitations, the first critical issue to be determined by the Court is the date upon which the causes of action which are alleged to be statute barred, accrued. It is only from that point of time that the Limitation period begins to run. Specifically, in this case, that issue presents itself in the form of the question as to whether debenture holders, who have exercised their powers to appoint a receiver, which receiver is empowered to and has, taken possession of land comprised in the assets subject to the mortgage or charge, have during the period of the receivership and while the receiver remains in possession, lost their right to sue to recover possession of the land and proceed to sell same and apply the proceeds in discharge of the debts owing to them.
At the level of generality, that argument boils itself down to the following; the Banks and Receiver would assert that it makes little sense to say that a debenture-holder who has taken the steps to protect it’s interests in a debt or security, by appointing a Receiver, has in some sense lost the right to bring proceedings in Court in respect of those interests. Specifically, the Receiver’s possession of the lands (whether it is his own possession, or the possession of the company, as necessarily altered following the commencement of the receivership) – it would be argued – are not and cannot be said to be adverse to those of the person who appointed him. At a general level, a Receiver owes duties to the debenture-holder, and those duties are derived from his over-riding obligation to dispose of the assets subject to the charge, in discharge of the creditors’ debt. This is particularly the case in a context where the Supreme Court refused to facilitate the winding up of Bula Limited because the powers of the Receiver were as great as those of a Liquidator – see Re Bula Limited [1990] 1 IR 440 at 451….
The plaintiffs will point to the fact that the Statute of Limitations prescribes a strict code which must be complied with; the fact that in a particular case it operates in an apparently unjust or unreasonable manner, is not relevant. Further, they will say that the Receiver is the agent of the company, therefore his possession of the lands is the possession of the company, and is indeed thus adverse to that of the Banks who make the appointment.
The Relevant Provisions;
It is submitted that the plaintiffs’ claim in this issue stands or falls on section 32(2) of the Statute… . That states… “….no such action shall be brought after the expiration of twelve years from the date on which the right of action accrued to the person bringing it…”
18. The central phrase in this provision is “the date on which the right of action accrued”. Even on the assumption (… not accepted…) that the right of the Banks to claim a sale of the land first accrued more than twelve years ago, the plaintiffs cannot rely upon this provision because of the terms of section 18 of the 1957 Act.
Section 18(1) provides as follows:-
“No right of action to recover land shall be deemed to accrue unless the land is in the possession (in this section referred to as adverse possession) of some person in whose favour the period of limitation can run”
Section 2(1) of the Act defines “action to recover land” as including inter alia; “Proceedings by a mortgagee for the delivery of possession of land by a mortgagor”.
19. Even on the assumption (… not admitted…) that Bula was in possession of the lands at the time the right to seek a sale first accrued, it has not been in adverse possession of those lands for the past twelve years. The lands, instead, have been in the possession either of the first named defendant or of Bula Limited at a point in time when the Receiver was the directing mind and will of the company in so far as the charged assets were concerned. In this regard section 18(3) is of importance… [See p4 above] The effect of this provision is clear. There must during the period in which it is alleged that the limitation period has expired, be a person in possession of the land which is adverse to that of the mortgagee seeking a sale. That, it is submitted, cannot be the case where the Receiver is in possession of the land appointed by the same mortgagee or the land is in the possession of a company managed and operated by the Receiver.
The meaning of “Adverse Possession”.
In Murphy -v- Murphy [1980] IR 183, 202 Kenny J. defined adverse possession as that phrase is used in the Statute… He said:-
“In section 18 of the Act of 1957 adverse possession means possession of land which is inconsistent with the title of the true owner; this inconsistency necessarily involves an intention to exclude the true owner and all other persons, from enjoyment of the estate or interest which is being acquired. Adverse possession requires that there should be a person in possession in whose favour time can run.”
20. It is submitted that in the instant case whether the Receiver or the plaintiffs are in possession of the land, that possession cannot be “adverse” to the Banks. If nothing else this follows from the obvious fact that a person having possession of lands so as to defeat the operation of the Statute must establish animus possidendi on his part (see Seamus Durack Manufacturing Limited -v- Considine [1987] IR 677). It is simply impossible to see how it could be said that a Receiver could be said to be possessed of this intent vis-à-vis the debenture-holder who appointed him. If Bula Limited remains in possession of the lands it is the Receiver’s intention which conditions the state of mind of the company in so far as those lands are concerned. He is the person in charge of the management of these assets.
21. In relation to the first of these questions – whether the Receiver is in possession of the lands – it must be noted initially that (as stated by Kenny J. in Murphy at page 203) the question of whether there is adverse possession is “ultimately a question of fact”. It is highly significant as a matter of fact that in the instant case from his appointment the Receiver was in possession of the lands and that possession was, and was acknowledged by the plaintiffs to be, exclusive of the possession of the company. This is clear, in particular, from the correspondence issuing from the solicitors for the directors of Bula in 1986 in which they sought access to the lands….
22. In seeking to determine the appropriate approach to the question of whether possession of one person (here the receiver or the company) of lands, is adverse to that of another (here the Banks), it is respectfully submitted that the Court should have regard to the analysis suggested by Costello J. In Murphy -v- Murphy [1980] IR at 195. This judgment of the High Court was affirmed by the Supreme Court. Costello J., as he then was, asserted as follows:-
“Turning then to the nature of the defendant’s possession, I think the test I should apply is this. Was the defendant’s possession inconsistent with and in denial of the widow’s rights as legal owner of the lands… If it was, then the defendant would be “a person in who’s favour the period of limitation could run” within the meaning of section 18 of the Act of 1957 and his possession would be adverse. In considering a problem of this sort, the relationship between the owner of the lands and the person in possession and the nature of the lands in controversy are highly relevant matters to be taken into account. If a person is in possession of lands with the consent or licence of the owner, then his possession is not adverse…”
23. This has reflection in the judgment of the Chief Justice also. He said (at page 199) “the period would not run in favour of a person in possession as a licensee or as an agent or as a trustee…”
24. The application of this approach to the instant question, with the Receiver being the occupant/defendant and the Banks standing in the position for the purposes of the provision, as the owner, demands that the Court focus on whether the Receiver’s possession of the land was intended to be inconsistent with, and a denial of, the rights of the Bank. It is simply impossible to see how this could be said to be the case. The pithy formulation of the meaning of animus possendi by one English Court [ Powell -v- McFarlane 38P and CR 452, 471] requires an analysis of whether the person in possession had the intention “in one’s own name and on one’s own behalf to exclude the world at large including the owner with paper title if he be not himself the possessor, in so far as reasonably practicable and so far as the processes of the law will allow”. It is (it is submitted) inconceivable that a receiver could have such intention inconsistent with the duties owed by him to the debenture-holder who appointed him. He cannot have, as a matter of law and consistent with the duties owed by him to the mortgagee, the requisite intention to possess the land to the exclusion of the Banks [this accords with the test as expressed in Oughton and Lowry Limitation of Actions (1998) at page 384].
25. It is extremely important to note that it matters not in this regard whether the Receiver is deemed to be in possession of the lands for these purposes, or whether the company remains in possession with the Receiver as the person managing the assets. If the possession is that of the Receiver, then his intention cannot be adverse to the Banks. If the possession is that of the company, then where the Court seeks to divine the company’s intention (whether to dispossess the Banks or not) it is from the Receiver who is in charge of the company for these purposes. The directors of a company in receivership have no power to take any act that would deprive the Banks of their security, and it is the Receiver who controls the assets charged. This point was aptly made by Murphy J. in the context of this very case, in the course of his judgment in Wymes -v- Crowley (1963 – 1993) ICLR 610, 613 (a judgment which is also significant in that it seems clearly to reflect the view of the Court that as between the plaintiffs here and the Receiver, the later was in possession of the lands);
“I have no doubt but that the directors of Bula Limited retain their power to institute proceedings in an appropriate case. The limitation on their powers is that they must not deprive the debenture-holders of the security granted to them….”
26. In the light of submissions made on his behalf the following conclusion was expressed on behalf of the receiver and supported by counsel for the Banks:-
“Where the Banks have appointed a Receiver over the lands, the effect is to precluded it being contended that the time for bringing either proceedings seeking delivery of possession or proceedings seeking orders for sale has accrued. Therefore, there is no basis for the contention that the Banks’ title to the lands has been extinguished under either section 24 or section 33. Similarly, the claims to principal and interest are not extinguished by section 38”
MY CONCLUSIONS
27. The objective of statutory limitation of actions is to bring order into practical situations which otherwise could be chaotic and might lead to injustice. For example, it is recognised that a person claiming damages for personal injury caused by the negligence of another should not be allowed to remain inert indefinitely before launching his/her action against the wrongdoer. A limitation period of three years for instituting such proceedings from the happening of the event which gave rise to the injury is prescribed by the Statute, after which such a claim (subject to certain exceptions) is statute barred. In the area of property rights there are even stronger reasons for regulating the practical ownership of land. It has long been recognised through a series of Statutes of Limitation over the centuries that it is contrary to the ordered regulation of property rights that the owner of land in the unlawful occupation of another may sleep on his rights indefinitely and do nothing, (perhaps for generations after the original wrongful occupation), to recover the land by action from the trespasser or his successors. Accordingly, it is provided by the Statute that where there is adverse possession of land against the interest of the true owner (or other person having analogous rights such as the Banks in the instant case) the later must bring proceedings to recover possession within twelve years from the date when the right of action first accrued.
28. The problems of land ownership which the Statute is intended to regulate concern unlawful occupation and do not arise in circumstances where there has been a change in the possession or control of land pursuant to a relationship (such as that created by mortgages and debentures) between the original owner and occupier of the land and those in whose favour the change in possession and/or control has come about. No adverse possession in the context of section 18(1) arises where such change occurs consequent upon an activation of rights in particular circumstances as provided for in the mortgages and debentures the terms of which were accepted by the debtor prior to default. In short, the activation of rights under the debentures which arose when, consequent upon default by the company in paying its debts, the Banks appointed the Receiver to take control of the company and to arrange the sale of its secured assets for the benefit of the mortgagees, does not create a situation of adverse possession within the meaning of section 18(1) because there is no possession without right or authority which is the essence of “adverse possession” within the meaning of the Statute.
29. Counsel for the plaintiffs has placed much emphasis on the judgment of the Court of Appeal in Lloyd deceased, Waters -v- Lloyd [1911] IR 153. However, that judgment is not concerned with a definition of “an action for sale” as that phrase had no materiality in law when Waters -v- Lloyd was decided. I do not regard it as being of assistance in the interpretation of the Statute.
30. Another contention strongly urged by counsel for the plaintiffs is that the debentures specifically state that the Receiver is the agent of the company and not of the mortgagees. On that premise it is argued that his possession in reality is that of the company. It cannot be regarded as adverse to the later and, therefore, it must be interpreted as being adverse to the Banks. I do not regard that argument as well founded.
31. The relationship between a receiver, the mortgagee who appoints him and the debtor company which owns the secured assets is exceptional, if not unique. The appointment of a receiver is one of the remedies open to a debenture-holder in respect of a defaulting company whose assets are secured by the debenture. There are two distinct relationships involved. As between the mortgagee and the debtor company, the duty of the receiver is to take control of the later with a view to realising its assets in discharge of debt owing by the company to the mortgagee. This is the fundamental objective of the receivership. The appointment of the receiver entails taking possession of the company lands and in practical terms vis-à-vis the Banks and Bula in the instant case it amounts to possession by the mortgagees. In short, the Banks’ purpose for the appointment of the Receiver is to put him into control and effective possession of the company assets so as to realise the mortgagees’ security by sale of the lands. The fact that under the terms of the debentures the Receiver is stated to be the agent of the company does not detract from the foregoing relationship as between the Receiver, the Banks and Bula. The agency as stated in the debentures is one which is relevant to third party claims on the company. It is a long-standing practice in financial and commercial life that debenture holders (commonly banks or other such institutions) generally prefer not to become directly involved in the conduct of receiverships with consequent risk of liability to third parties, and so, in the context of dealings between a Receiver on behalf of a company and third parties who make claims upon it, the debenture normally provides that the former is agent of the company. In short, a receivership, such as that in the instant case, involves two distinct relationships. First, that between the appointing mortgagee and the Receiver which relates to the fundamental objective of the receivership, being entry into possession of the company’s assets for the purpose of sale in the interest of the mortgagee. In practical terms vis-à-vis mortgagee and mortgagor the control over the company’s assets exercised by the Receiver amounts to possession of the debtor’s secured assets by him which in turn in practical terms is possession by the mortgagee who appointed him.
32. The second relationship is that between the Receiver and third parties arising out of the receivership. Debentures normally provide, as in the instant case, that such dealings are conducted by the Receiver as agent of the company in receivership. The mortgagees have no right to interfere in the receivership in that regard. In my view there is no inconsistency between the foregoing relationships which represent long established commercial good sense.
33. Both aspects of a Receiver’s function are explained by Hoffmann J. as he then was in Gomba Holdings -v- Homan [1986] BCLC 331 at 334 as follows:-
“A Receiver is an agent of the company and an agent ordinarily has a duty to be ready with his accounts and provide his principal with information relating to the conduct of his agency. But these generalisations are of limited assistance because a Receiver and manager is no ordinary agent. Although not only the agent of the company, his primary duty is to realise the assets in the interest of the debenture-holder and his powers of management are really ancillary to that duty.”
34. In that case it was held that a receiver was not under an obligation to disclose information to a company whose agent, he, in theory, was, where disclosure of that information would be contrary to the interests of the debenture-holder who appointed him, in realising that security. This judgment is also authority for the proposition that the receiver’s possession is not “adverse” to the debenture-holder who appointed him.
35. The same point was made by Fox LJ in Gomba Holdings -v- Minories Finance [1989] BCLC 115 at 117 as follows:-
“Whilst the receiver is the agent of the mortgagor he is the appointee of the debenture-holder and, in practical terms, has a close association with him. Moreover, he owes fiduciary duties to the debenture-holder, who has a right, as against the receiver, to be put in possession of all the information concerning the receivership available to the receiver.”
36. In a subsequent judgment in the High Court of England and Wales in Rottenberg -v- Monjack [1993] BCLC 374 Cooke J. observed:
“It is quite clear both from these powers and from the purpose for which receivers are appointed and the job they are called on to do, that their duty must be to the secured creditor. They cannot be put in the position, negligence and dishonesty apart, of having to weigh discretion’s between the secured creditor and the debtor. If they behave efficiently and honestly, the secured creditor must come first.”
37. The approach in this jurisdiction is similar to that in England. The issue was raised in Irish Oil and Cake Mills -v- Donnelly [ICLR (1963-1990) 564] in connection with a question as to whether a receiver was under a duty to account to the company and to provide it with information relating to a particular transaction. If the receiver had been in the normal sense an agent of the company he would have been obliged in ordinary course to provide such information to his principal. However, it was determined by the Court that because of the nature of the agency orders compelling the provision of such information were not possible. The judgment of Costello J. contains the following passage pp567/568:
“The receiver derives his appointment and his authority from the contract entered into between the parties. In this case, as is usual, the parties agreed that he is to be treated as the agent of the mortgagors, the plaintiffs herein. The provision protects the debenture-holders from liability as mortgagees in possession and establishes the relationship between the receiver and company. The contract is silent as to the nature of his duties and the plaintiffs here submit that there is to be employed an obligation to account as claimed in the February letter. The agency here is of course very different from the ordinary agency arising every day in commercial transactions. Here the receiver has been appointed by the owner in equity of these companies’ assets with the object of realising their security and for this purpose to carry on the companies’ business. The exceptional nature of his status is to be seen from the fact that notwithstanding his appointment as agent he is to be personally liable under the contracts entered into by him….”
38. The exceptional nature of a Receiver’s agency relationship was also recognised in Lascomme Limited -v- UDT Bank [1993] 3 IR 412 at 416. This case concerned the question of whether the directors of a company in receivership retained the right to bring proceedings in the name of the company against the financial institution which had appointed the receiver. It was held by Keane J. (as he then was):-
“It is clear that when a receiver is appointed by a debenture-holder under the powers in that behalf in the debenture, the powers vested by law in the directors of the company are not thereby terminated. They may not, however, be exercised in such a manner as to inhibit the receiver in dealing with and disposing of the assets charged by the debenture or in a manner which would adversely effect the position of the debenture-holders by threatening or imperilling the assets which are subject to the charge.”
39. In the light of this judgment the Receiver urges that even if the company remains in possession of the lands, and even if the directors of the company are persons whose knowledge and intention are relevant, the effect of the appointment of a receiver is that the company may not thereafter adversely affect the secured assets. As and from that point, therefore, there can be no adverse possession. It seems to me that that interpretation is well founded.
40. The relationship between mortgagee and receiver was also considered by Evershed MR in Re Johnson and Co. [1955] 1Ch 634 in the following terms at p. 644:-
“It has long been recognised and established that receivers and managers so appointed are, by effect of statute law, or of the terms of the debenture, or both, treated, while in possession of the company’s assets and exercising the various powers conferred upon them as agents of the company, in order that they may be able to deal effectively with third parties. But, in such a case as the present at any rate, it is quite plain that a person appointed as receiver and manager is concerned, not for the benefit of the company but for the benefit of the mortgagee Bank, to realise the security; that is the whole purpose of his appointment and the powers which are conferred upon him and which I have, to some extent recited, are …. rarely ancillary to the main purpose of the appointment which is the realisation by the mortgagee of security in this case (as commonly) by sale of the assets.”
41. Jenkins LJ in course of his judgment at p. 622 stated:-
“Again his power of sale is in effect that of a mortgagee, and he therefore commits no breach of duty to the company by a bona fida sale, even though he might have obtained a higher price and even though from the point of view of the company, as distinct from debenture-holders, the terms might be regarded as disadvantages.”
42. The foregoing decision of the English Court of Appeal in Johnson and Co. was approved and followed by McLoughlin J. in Ardmore Studies (Ireland) Limited -v- George Lynch and Others [1965] IR 1.
43. It is of interest that in Kerr on Receivers (16th edition) at p304 it is observed that:-
“The receiver’s agency for the company is, of course, one with some very peculiar incidents. Thus the principal may not dismiss the agent, and his possession of his principal assets is really that of the mortgagee who appointed him. He owes no prior duty to the principal other than that of a mortgagee in possession.”
44. In the light of the foregoing I conclude that the plaintiffs have failed to establish the fundamental requirement of adverse possession of the lands under section 18(1) which is essential to the operation of the Statute. Furthermore, as already stated, the relationship between Bula, the Banks and the Receiver is one derived from the debentures and mortgages. It is not within the realm of the Statute. In arriving at my decision I have also come to the conclusion that the arguments advanced by the defendants to which I have referred herein are well founded.
45. In the light of this judgment other issues argued in course of the trial have become moot and it is unnecessary to address them.
Bula Ltd v Crowley
Supreme Court, February 13, 2003Denham J., [Nem Diss].
10. Other Issues
The other issues argued in the course of the trial were listed as:
the provisions of the Statute of Limitations cannot run against an active receiver and/or the party who appointed him;
the Statute of Limitations has no application to the receivership herein;
if time has run for the purposes of the Statute of Limitations, which the banks deny, the banks have issued proceedings within the limitation period for both recovery of the debt due and possession of the lands in issue;
the claim of the plaintiffs is a redemption action which requires payment of the debt due including all interest before the reliefs sought could be granted;
there had been acknowledgements in writing made by or on behalf of the plaintiffs within the limitation period so that the same has not run;
there have been part payments made by or on behalf of the plaintiffs within the limitation period so that same has not run;
the title of the banks to the lands in issue cannot be extinguished under s. 33 of the Statute because an action claiming sale within the meaning of the section is equivalent to an action for recovery of land and such a cause of action has not yet accrued;
the banks will have a right of action for the proceeds of sale of the said lands when a sale takes place and such cause of action has not yet accrued;
the banks are not confined to recovering six years interest.
11. Statutory Law
A significant part of the claim of the plaintiffs is based on legal argument as to the true construction of a number of sections of the Statute of Limitations, 1957. The relevant sections are:
“Section 2(1) In this Act . . .
‘action’ includes any proceeding (other than a criminal proceeding) in a Court established by law;
‘action to recover land’ includes . . .
(b) proceedings by a mortgagee for the delivery of possession of land by a mortgagor. . .
Section 2(6) In this Act –
(a) references to a right of action to recover land shall include references to a right to enter into possession of the land . . .
(b) references to the bringing up an action to recover land shall include references to the making of an entry into possession of the land . . .”
At the commencement of Part II of the Statute of Limitations, 1957 is s. 10, which states:
“The subsequent provisions of this Part of this Act shall have effect subject to the provisions of Part III of this Act which provide for the extension of the periods of limitation in the case of disability, acknowledgment, part payment, fraud and mistake.”
“Section 13(2) The following provisions shall apply to an action by a person to recover land:
(a) subject to paragraph (b) of this subsection, no such action shall be brought after the expiration of twelve years from the date on which the right of action accrued to the person bringing it or, if it first accrued to some person through whom he claims, to that person; . . .”
Section 13(2)(b) is not relevant.
“Section 18(1) No right of action to recover land shall be deemed to accrue unless the land is in the possession (in this section referred to as adverse possession) of some person in whose favour the period of limitation can run.”
“Section 18(3) Where a right of action to recover land has accrued and thereafter, before the right of action is barred, and the land ceases to be in adverse possession, the right of action shall no longer be deemed to have accrued and no fresh right of action shall be deemed to accrue unless and until the land is again taken into adverse possession. . . .”
“Section 20 – For the purposes of this Act –
(a) no person shall be deemed to have been in possession of any land by reason only of having made a formal entry thereon. . . .”
“Section 24 – Subject to section 25 of this Act and to section 52 of the Act of 1891, at the expiration of the period fixed by this Act for any person to bring an action to recover land, the title of that person to the land shall be extinguished.”
“Section 32(2) The following provisions shall apply to an action by a person (other than a State authority) claiming the sale of land which is subject to a mortgage or charge:-
(a) subject to paragraph (b) of this subsection, no such action shall be brought after the expiration of twelve years from the date on which the right of action accrued to the person bringing it, or, if it first accrued to some person through whom he claims, to that person; . . .”
“Section 33 – At the expiration of the period fixed by this Act for a mortgagee to bring an action claiming sale of the mortgaged land, the title of the mortgagee to the land shall be extinguished.”
“Section 34 (1)(a) Where a mortgagee of land has been in possession of any of the mortgaged land for a period of twelve years, no action to redeem the land of which the mortgagee has been so in possession shall thereafter be brought by the mortgagor or any person claiming through him.”
“Section 37 – No action shall be brought to recover arrears of interest payable in respect of any principal sum of money secured by a mortgage or charge of land . . . or to recover damages in respect of such arrears after the expiration of six years from the date on which the interest became due.”
“Section 38 – At the expiration of the period fixed by this Act for a mortgagee of land to bring an action to recover the land or for a person claiming as mortgagee or chargeant to bring an action claiming sale of the land, the right of the mortgagee or such person to the principal sum and interest secured by the mortgage or charge shall be extinguished.”
“Section 53 – Where –
(a) the right of an incumbrancer of land to bring an action claiming sale of the land has accrued, and
(b) the person in possession of the land or the person liable for the debt secured by the incumbrance acknowledges the debt,
the right of action shall be deemed to have accrued on and not before the date of the acknowledgement.”
“Section 63 – Where –
(a) the right of an incumbrancer of land to bring an action claiming sale of the land has accrued, and
(b) the person in possession of the land or the person liable for the debt secured by the incumbrance makes any payment in respect thereof, whether of principal or interest,
the right of action shall be deemed to have accrued on and not before the date of the payment.”
12. Case Law
Very extensive case law was opened to the Court, as it had been to the High Court. Many cases cited related to the Statute of Limitations. Thus the Court was referred to Touhy v. Courtney [1994] 3 I..R. 1 at 48 where Finlay C.J. stated:
“The primary purpose [of Statutes of Limitations] would appear to be, firstly, to protect defendants against stale claims and avoid the injustices which might occur to them were they asked to defend themselves from claims which were not notified to them within a reasonable time.”
Many cases were cited relating to the construction of statutes, such as Howard v.Commissioners of Public Works in Ireland [1994] 1 I.R. 1. Extensive reference was made to case law relating to the word ‘action’ and to the references to ‘a right of action to recover land’ in the Statute of Limitations, 1957. Also, there was extensive reference to case law relevant to a receiver. There was a considered analysis of Hibernian Bank v. Yourell [1916] 1 I.R. 312 (H.C. and C.A.), Yourell v. Hibernian Bank [1918] A.C. 372 and Hibernian Bank v. Yourell (No. 2) [1919] I.R. 310 by the parties. While I have not referred to all the cases opened and considered in these appeals they were of significant benefit in the analysis.
13. Points of Plaintiffs
Counsel for the plaintiffs set out the main points argued by the plaintiffs. They serve as a useful indication of the issues argued before the court. The points submitted by the plaintiffs were:
(i) pursuant to the provisions of ss. 33 and 38 of the Statute of Limitations, 1957, the title of the Banks to Bula’s assets, and their right to repayment of their principal monies and interest, become, prima facie, extinguished on the following dates:
in the case of NBFC (now NIIB), on 19th February, 1998;
in the case of UIB, on 31st October, 1996;
in the case of AIIB, on 19th October, 1995;
(ii) the issue by the Banks of their legal proceedings in 1997 did not save them; the UIB and AIIB proceedings were already out of time. In the case of NBFC, as neither s. 33 nor s. 38 contain any provision saving a mortgagee’s title, or right to recover its principal monies or interest from extinguishment by the mere issue of a writ, its rights also became extinguished notwithstanding that its proceedings, when issued, were within the twelve year period established by the Act of 1957, on the 12th anniversary of the State payment of interest, on the 19th February, 1998;
(iii) if any of the Banks claims are not extinguished pursuant to
ss. 33 or 38 they only have the right to receive the repayments of their principal monies and 6 years arrears of interest pursuant to the provisions of s. 37(1) of the Statute of Limitations, 1957;
(iv) in the case of NIIB, the principal monies advanced totalled only IR£2.75 million. Its right (should it continue to exist) to charge interest is limited to 6 years arrears of interest. The 6 years arrears of interest must be calculated on the principal monies due; the effect of earlier compounding is excluded. The NIIB principal sum of IR£2.75 million and 6 years arrears of interest at prevailing rates of interest is relatively modest (circa IR£5 million);
(v) if the AIIB is statute barred, Mr. Woods qua Guarantor is entitled to the repayment of the securities realised by AIIB amounting to IR£1,190,012.00 plus interest thereon. (The AIIB realisations, like those of NIIB, were kept in separate securities realised accounts and not appropriated to Bula’s debt). Mr. Wood is willing, and would wish in that event, to apply those monies towards the reduction of any monies owing to NIIB that have not been extinguished;
(vi) NIIB also has other monies available to it on suspense account, being monies realised from other guarantors. Barr J. refused to allow the plaintiffs to expressly plead an entitlement to have these monies taken into account in his ruling of the 21st February, 2001. The plaintiffs submit that he erred in this regard. In any event, if the plaintiffs are entitled to succeed in this action, the reliefs claimed by them at paragraph (xiii) of the prayer to their claim will permit such monies to be taken into account in any final reckoning of the final sum due to NIB;
(vii) the plaintiffs believe that, in the event that the NIIB’s right to receive repayment of its principal sum and 6 years interest has not been extinguished, that the application of the monies to the repayment to which Mr. Wood may be found entitled to received from AIIB, coupled with the availability of the collateralised assets furnished by Mr. Wood and Mr. Wymes and their companies to the Banks in support of their guarantor liabilities, coupled with the NIIB suspense account monies, and any other money received, e.g. from the Roches, will be sufficient to offset any monies remaining properly due to NIIB under the terms of its charges; and will be such as to obviate the need for any sale of Bula’s assets;
(viii) in the event of the Banks’ titles being extinguished pursuant to s. 33 of the Statute of Limitations, 1957 Bula is entitled to the return of all its original documents of title;
(ix) in the event of the Banks’ rights to payment of their principal monies and arrears of interest being extinguished, Mr. Wymes and Mr. Wood and their nominee companies are entitled to be relieved of all past and present liabilities to the Banks on foot of their guarantees, and are entitled to have the Banks’ unsatisfied judgments against them set aside; alternatively, the Banks must be held disentitled from issuing execution in respect of such judgments against Mr. Wymes and/or Mr. Wood and/or their associated companies.
In the defences filed to the plaintiffs’ claims pursuant to the Statute of Limitations, the Banks and the Receiver, while disputing the plaintiffs’ primary claims, also sought to make two further contentions:
(i) that a number of documents purporting to have emanated from Bula and/or the Receiver and/or their servants or agents, constitute acknowledgements in writing sufficient to postpone the running of their respective causes of action; thereby preserving their titles and debts from extinguishment;
(ii) in the case of UIIB, that a payment made by a company called Orpheus Mining Limited, of which Mr. Wymes and Mr. Wood were directors, and which was made in May 1986, was a payment made by or on behalf of Bula, and thereby operated as a part payment within the meaning of the Statute of Limitations, 1957, also preserving UIIB’s rights from extinguishment.
These points, submitted by the plaintiffs, are a clear statement of the issues opened before this court on the first appeal.
14. Preliminary Issues
The first appeal raises preliminary issues to the main appeal. The plaintiffs have sued the defendants in what may be referred to as the main action, and which may also be referred to in the overall litigation between the parties as the Banks’ case. These are appeals on preliminary issues to that main action against the Banks. The issues in these cases centre around the application of the Statute of Limitations, 1957.
15. Facts
The facts have been found by the learned High Court judge in his judgment. On the first issue in the first appeal the issue is one of law and there was no dispute on the relevant facts.
16. Time
At the core of the plaintiffs’ claim is the submission that time has run against the Banks. Section 33 of the Statute of Limitations, 1957 is the bedrock of the claim of the plaintiffs. Counsel for the plaintiffs stressed that the section related to an action claiming sale of the mortgaged land, that the period fixed for the mortgagee is 12 years from the date the right accrued, and that at the end of that time the title of the mortgagee is extinguished. Further, it was submitted that the right of action to seek sale of the land accrues when the money becomes due. It was submitted that a part payment or an acknowledgment would stop time, which would then recommence. It was submitted that the 12 year period after which the right of the mortgagee is extinguished is independent of the right of a mortgagee to possession. It was submitted that the key sections to be construed were s. 33 and s. 38 of the Statute of Limitations, 1957. The approach to be taken by a court to the construction of the statute was addressed and the court was referred to Howard and Ors. v. Commissioners of Public Works in Ireland [1994] 1 I.R. 101; Perry v. Woodfarm Homes Limited [1975] I.R. 104; D.P.P. (Ivers) v. Murphy [1999] 1 IR 98 and Gooden v. Waterford Regional Hospital (Supreme Court, Unreported, 21st February, 2001 per McGuinness J.), amongst other cases.
17. Decision on First Appeal
(i) Basis for the appointment of the Receiver
The issue for decision is one of law. I am satisfied that the core of the case is to be found in the appointment of the Receiver. An analysis of the legal relationships of the parties, the plaintiffs, the Receiver and the Banks, and the consequences arising from those relationships, is the kernel of the matter.
The factual matrix which is not in dispute, save where expressly indicated, upon which the legal decision falls to be made is as follows. Bula borrowed money from the Banks. The borrowings were secured by a number of mortgages and debentures each of which entitled the relevant bank holding security to appoint a receiver over the property in the event of default being made by Bula in its obligations to the relevant Bank. In default of repayment of the loan the Northern Bank Finance Corporation Limited demanded repayment on the 25th June, 1982, the Ulster Investment Bank Limited demanded repayments on the 28th July, 1982 and Allied Irish Investment Bank Limited demanded repayment on the 5th August, 1982. The latest dates for uncontested repayments of the sums borrowed were the 19th February, 1986 in respect of Northern Bank Finance Corporation Limited, the 31st October, 1984 in respect of Ulster Investment Bank Limited, and the 19th October, 1983 in respect of Allied Irish Investment Bank Limited. In respect of Ulster Investment Bank Limited there is a contested payment of the 23rd May, 1986. On the 8th October, 1985 the banks appointed Laurence Crowley Receiver over the secured property. The Receiver has been an active receiver. On the 4th April, 1997 each of the Banks issued proceedings seeking the recovery of principal and interest due by Bula to the Banks. On the 22nd April 1997 each of the Banks brought well charging order proceedings against Bula. None of these proceedings was served until the 30th day of March, 1998. The secured property has now been sold by the Receiver, who wishes to distribute the money to the Banks.
The first matter which I would stress is the contractual base to the tripartite relationship of Bula, the Receiver and the Banks. Since the core of the case is to be found in the appointment of the Receiver, the key to the situation is to be found in the contractual documents establishing the relationships between the parties on the establishment of the loans. The documents relating to each bank are broadly the same and may be treated as such as regards the relevant issues of law. In this case, thus, facility letters were entered into to govern the arrangement. An example is the letter of the Northern Bank Finance Corporation Limited dated the 16th October, 1974. It states:
“Northern Bank Finance Corporation Limited
16th October, 1974.
The Directors
Bula Limited
Hill Samuel House
25-28 Adelaide Road
Dublin 2.
Dear Sirs,
I have pleasure in advising you that Northern Bank Finance Corporation Limited (hereinafter referred to as the Corporation) will make loan facilities available to Bula Limited (hereinafter referred to as the Borrower) on the following terms and conditions:-
1. Amount of the loan:
£1,750,000 (One million, seven hundred and fifty thousand pounds) subject to further review as set out in Paragraph 6.
2. Purpose of the loan:
a) To complete further land purchases and to meet the company’s requirements for working capital, capital expenditure and interest payments in the period to June, 1976.
b) To take over existing borrowings of approximately £653,000 from Bank of Ireland.
c) Guarantee of an overdraft facility of £100,000 from Northern Bank Limited, it being understood that the amount due on foot of this guarantee is included in the total facility mentioned at 1, above.
3. Security
a) A floating debenture over all the assets of the Borrower.
b) A fixed charge over 117 acres of unregistered freehold land at Nevinstown, Co. Meath, underlain by mineral deposits.
c) A fixed charge over a further 143 acres surrounding the land mentioned in b.
4. Rate of Interest:
The rate of interest will be 2% per annum over the average cost to the Corporation of raising funds on the Dublin Inter-bank Market in the week prior to the date of drawdown, and will be reset every three months thereafter on the same basis. Interest will be calculated on the outstanding balance on a day-to-day basis and will be payable without deduction of tax in arrears on the 30th April and 31st October during the term of the loan and on final repayment of the loan, but without prejudice to the provisions of the other terms and conditions of this facility, if interest is not paid on the due date the amount thereof will bear interest at the same rate as if it were a capital sum.
5. Reserve Requirements:
If there shall be any increase in the cost to the Corporation of making or maintaining the loan by an amount which the Corporation deems material resulting from any changes in the reserve or liquidity requirements of the Central Bank of Ireland, then the Borrower shall pay as additional in interest such amount as the Corporation shall certify as will compensate for such increased cost as from the date of notification.
The Borrower shall be at liberty at any time after such notification and without payment of any premium or penalty to repay the full amount of the loan outstanding.
6. Period:
The loan and interest thereon will be repayable on demand, but it is the Corporation’s general understanding that repayment will be effected from re-financing to be arranged not later than the 30th June, 1976, subject to a general review of requirements not later than the 31st December, 1975.
7. Arrangement Fee:
An arrangement fee of £10,000 is payable by the Borrower on acceptance of the facility.
8. Commitment Fee:
A commitment fee is payable at the rate of ½% per annum, payable half-yearly in arrears, on any undrawn portion of the loan with effect from the date of acceptance of this facility until such date as the loan is fully drawn.
9. Drawdown of the loan:
The loan may be drawn down in tranches of a multiple of £100,000 subject to a minimum drawing of £100,000. On completion of the security arrangements drawings up to a maximum amount of £400,000 may be made in respect of Purpose a in Clause 2 above, together with the amount set out in respect of Purpose b in the same Clause. The balance of the total facilities may not be drawn until:
1. the completed formal contract regarding the acquisition by the State of 49% of the issued share capital of the Borrower has been produced to the Corporation. The Corporation is to be satisfied that the terms of this contract are in line with the Agreement in Principle dated the 26th July, 1974 already executed.
10. Insurance:
The property described in Clause 3 is to be insured in an office approved by the Corporation against all normal risks at amounts as may be considered necessary, and the Borrower is to provide the Corporation with a copy of the relevant policy together with premium receipts. The Corporation will require its interest as mortgagee to be noted by the insurer.
11. It is a condition of this loan that in any transaction involving the appointment of Merchant Bankers or Banking Advisors, the Corporation will be so appointed. The Corporation is also to be firstly offered the opportunity of providing or arranging the necessary long term finance for the development and operation of the mine.
12. Subject to there being no developments in the meantime that would be likely, in our opinion, to have adverse effects upon the business of the Borrower or its future prospects, the loan will be available upon completion of the security arrangements.
13. A certified copy of the Board resolution accepting the facility and authorising the loan is required to be supplied.
14. Any costs, including solicitors’ fees, stamp duty, etc., to be discharged by the Borrower.
15. The offer will remain open until the 31st October, 1974 and will be subject to re-negotiation if acceptance is not received by that date.
16. Audited balance sheets and accounts are to be provided annually and the Borrower is to make available to the Corporation from time to time such information regarding its future plans, trading and financial position as may be requested.
17. A copy of the Memorandum and Articles of Association of the Borrower is to be provided.
18. The Borrower represents and warrants to the corporation as follows:
a) the making and performance of this agreement are within the Borrower’s corporate powers and have been duly authorised by all necessary corporate action and do not contravene any law or contractual restrictions binding on the borrower;
b) there are no pending or threatened actions or proceedings before any court or tribunal which might materially adversely affect the financial condition or operations of the Borrower;
c) that the loan herein referred to is used for the purpose stated in Clause 2.
This letter supercedes and cancels all previous facility letters to the Borrower from the Corporation.
Subject to the Borrower’s acceptance of the foregoing we shall arrange for our solicitors to proceed with the necessary legal formalities.
If there is any further information required, please do not hesitate to contact us.
Yours faithfully,
FOR AND ON BEHALF OF NORTHERN
BANK FINANCE CORPORATION LTD.
—————–
M.K. Condell
Director
We, the Directors of Bula Limited, hereby confirm agreement with the terms and conditions of the foregoing and undertake to carry out all the obligations set out therein.
—————————
Michael J. Wymes
—————————
Thomas J. Roche”
Security was provided by deeds which had relevant express terms. Thus, for example, there was the floating charge made by deed dated the 25th day of November, 1974 between Bula and the Northern Bank Finance Corporation Limited. Clause 8 made provision for the appointment of a receiver. Clause 9 provided for the specific powers of the receiver. These clauses stated:
“8. At any time after the money owing upon this security shall have become due and payable as aforesaid the Bank shall have power by instrument in writing to appoint any person or persons whether an Officer or Officers of the Bank or not to be a Receiver or Receivers of the assets and may in like manner remove any such Receiver.
9. Any Receiver so appointed shall have power from time to time to take possession of collect and get in all or any of the assets and to carry on or concur in carrying on the business of the Company and (without being required to give any notice in that behalf) to sell or concur in selling all or any part of the assets including the goodwill of the Company’s business (and as to fixtures to sell or concur in selling the same either attached to or separated from the hereditaments to which they are fixed) and to make any arrangement or compromise which he may think expedient and to demise or to let the Company’s premises or any part or parts thereof for such term of years or from year to year or other less period than a year at such rent and subject to such agreements covenants and conditions and either with or without fine or premium as such Receiver shall think fit and may also accept surrenders of any Lease or Tenancy of the Company’s premises or any part thereof whether granted by such Receiver or not upon any terms (including the payment of money) which such Receiver shall think reasonable and may grant other Leases or Tenancies of the premises so surrendered or any part or parts thereof under the power aforesaid and may without the necessity for the Bank to give any written direction in that behalf effect any insurance execute any repairs and pay any outgoings which such Receiver shall think proper and may expend for such purposes not only any income which he may receive but also such further moneys as may be necessary such further moneys with interest to be repayable by the Company and in the meantime to be charged on the assets as if they had formed part of the moneys secured hereby at the time of the appointment of such Receiver and such Receiver may make any arrangement or compromise which he shall think expedient in the interests of the Bank and may take or defend any legal or other proceedings in the name of the Company or otherwise and may for the purpose of carrying on the business of the Company raise money on the assets in priority to the charge hereby created and may carry any sale demise or lease into effect by conveying assigning demising and leasing in the name and on behalf of the Company (for which purpose the Company hereby irrevocably appoints every Receiver appointed hereunder to be the Attorney of the Company) or otherwise and may make calls conditionally or unconditionally on the members of the Company in respect of the uncalled capital with such and the same powers for that purpose and for the purpose of enforcing payment of any so made as are by the Articles of Association of the Company conferred on the Directors thereof in respect of calls authorised to be made by them and in the names of the Directors or in that of the Company or otherwise and to the exclusion of the Directors’ power in that behalf and every Receiver appointed by the Bank shall be the agent of the Company and the Company shall be solely responsible for his acts or defaults and for his remuneration and in particular the receiver shall be entitled to work all or any mines and minerals the subject of this security.
10. All moneys received by any such Receiver shall after providing for the matters specified in paragraphs (i) (ii) and (iii) of Section 24 (8) of the Conveyancing and Law of Property Act 1881 and in Sections 98 and 285 of the Companies Act, 1963 and for all costs charges and expenses of and incidental to the exercise of the Receiver’s powers be paid to the Bank and applied in discharge or part discharge first of any interest and secondly of any principal due and payable to the Bank hereunder. The foregoing provisions shall take effect by way of variation and extension of Sections 19 and 21 to 24 inclusive of the Conveyancing and Law of Property Act 1881 as amended by the Conveyancing Act 1911 and the provisions of those Sections and the powers thereby conferred on a Mortgagee or Receiver as so varied and extended shall apply to and be exercisable by any such Receiver so far as applicable and Section 20 of the Conveyancing and Law of Property Act 1881 shall not apply.”
The Northern Bank Finance Corporation appointed the Receiver by deed dated the 8th October, 1985. It provided:
“NORTHERN BANK FINANCE CORPORATION LIMITED having its registered office at Griffin House, 7-8 Wilton Terrace in the City of Dublin (hereinafter called ‘the Bank’) being the registered holder of a Floating Charge and Mortgages specified in the Schedule hereto (hereinafter called ‘the Securities’) issued in its favour by Bula Limited (hereinafter called ‘the Company’) to secure the monies therein specified pursuant to the powers in that behalf contained HEREBY APPOINTS LAURENCE CROWLEY F.C.A. of 1, Stokes Place, St. Stephen’s Green, in the City of Dublin to be Receiver (hereinafter called ‘the Receiver’) of and over all the undertaking property and assets of the Company charged by the Securities to the intent and so that the Receiver may exercise all the powers conferred on the Receiver by the Securities.
Dated the 8th day of October 1985.
SCHEDULE
1. Floating Charge given on the 25th day of November 1974 by the Company in the favour of the Bank.
2. Mortgage given on the 12th day of July 1984 by the Company in favour of the Bank.
3. Mortgage given on the 8th day of November 1984 by the Company in favour of the Bank.
PRESENT when the Common Seal
of NORTHERN BANK FINANCE (signed)
CORPORATION LIMITED was affixed ———————–
hereto:- Authorised Signatory
(signed)
(signed)
————————
Authorised Signatory
I, the above-named Laurence Crowley F.C.A. do hereby agree to act as
Receiver of the undertaking property and assets of the Company charged by the Securities and I hereby undertake to discharge all the duties of such office and to duly and regularly account to the Bank for all monies received by me as Receiver.
Dated the 8th day of October 1985.
SIGNED by the said LAURENCE CROWLEY”
The essence of the central issue on this appeal is grounded on the above and similar relevant documents which once implemented led to the appointment of the Receiver. On the appointment of the Receiver a special relationship between the parties was established. The plaintiffs, including Bula, had agreed to the clauses relating to the provision of a receiver and to his powers. This was done in the context of a contractual relationship. The plaintiffs agreed to the terms of the agreements and to the specific clauses relating to the Receiver. The appointment of the Receiver was a fulfilment of a term of the contractual relationship.
(ii) Unique nature of the position of the Receiver
The second matter I would stress is the unique and exceptional nature of the position of a receiver. The position of a receiver is unique. The agency of a receiver is exceptional. There is a duality in the agency of the receiver. In an analysis of this unique position may be found the answer to the first appeal.
The nature of the position of a receiver has been considered extensively in case law. In Gomba Holdings v. Minories Finance [1989] BCLC 115 Fox L.J. said at p. 117:
“The agency of a receiver is not an ordinary agency. It is primarily a device to protect the mortgagee or debenture holder. Thus, the receiver acts as agent for the mortgagor in that he has power to affect the mortgagor’s position by acts which, though done for the benefit of the debenture holder, are treated as if they were the acts of the mortgagor. The relationship set up by the debenture, and the appointment of the receiver, however, is not simply between the mortgagor and the receiver. It is tripartite and involves the mortgagor, the receiver and the debenture holder. The receiver is appointed by the debenture holder, on the happening of specified events, and becomes the mortgagor’s agent whether the mortgagor likes it or not. And, as a matter of contract between the mortgagor and the debenture holder, the mortgagor will have to pay the receiver’s fees. Further, the mortgagor cannot dismiss the receiver, since that power is reserved to the debenture holder as another of the contractual terms of the loan. It is to be noted also that the mortgagor cannot instruct the receiver how to act in the conduct of the receivership.
All this is far removed from the ordinary principal and agent situation so far as the mortgagor and the receiver are concerned. Whilst the receiver is the agent of the mortgagor he is the appointee of the debenture holder and, in practical terms, has a close association with him. Moreover he owes fiduciary duties to the debenture holder, who has a right, as against the receiver, to be put in possession of all the information concerning the receivership available to the receiver: see Re Magadi Soda Co. Ltd. (1925) 41 TLR 297.
The result is that the receiver, in the course of the receivership, performs duties on behalf of the debenture holder as well as the mortgagor. And these duties may relate closely to the affairs of the entity which is the subject of the receivership. It is, therefore, not satisfactory to approach the problem of the ownership of documents which come into existence in the course of the receivership on the basis that ownership depends on whether the documents relate to the affairs of (in this case) the companies.”
I adopt this statement of the law. I favour especially the description of the agency of the receiver as primarily a device to protect the mortgagee. This primary duty to the secured creditor was referred to in Rottenberg and Ors. v. Monjack & Anor. [1993] BCLC 374 where Judge Roger Cooke stated at p. 377-378:
“It is quite clear, both from these powers and the purpose for which receivers are appointed and the job they are called on to do, that their duty must be to the secured creditor. They cannot be put in the position, negligence and dishonesty apart, of having to weigh discretions between the secured creditor and the debtor. If they behave efficiently and honestly, the secured creditor must come first.”
I adopt this statement of the law also. Applying that statement, the Receiver was put into place pursuant to the agreements for the primary benefit of the Banks in this case.
I adopt also the analysis of Fox L.J. of the tripartite relationship of the receiver involving the mortgagor, the receiver and the debenture holder, in other words, Bula, the Receiver and the Banks. This is far removed from the routine principle and agent situation.
The special and unique nature of the agency of a receiver was described in Irish Oil & Cake Mills Ltd. v. Donnelly (Unreported, High Court, 27th March, 1983, Costello J.) which is reported in Irish Company Law Reports (1963-1993) p. 564 at p. 567-8 where he stated:
“The agency here is of course very different from the ordinary agency arising every day in commercial transactions. Here the receiver has been appointed by the owner in equity of the companies’ assets with the object of realising their security and for this purpose to carry on the companies’ business.
The exceptional nature of his status is to be seen from the fact that notwithstanding his appointment as agent he is to be personally liable under contracts entered into by him (with a right of indemnity out of the assets) unless the contract otherwise provides (section 316 (2) Companies Act 1963).”
This exceptional and unique position of the receiver was also described in Ardmore Studios (Ir.) Ltd. v. Lynch and Others [1965] I.R. 1. McLoughlin J. at p. 38-9 stated:
“In re B. Johnson & Co. (Builders) [1955] 1 Ch. 634 . . . many of the views expressed by the distinguished judges who constituted the Court of Appeal in that case are certainly helpful. At page 644 Evershed M.R., after stating some of the powers given to the receiver under the debenture, which are similar to those in this case, continued:- ‘The situation of someone appointed by a mortgagee or a debenture holder to be a receiver and manager – as it is said, “out of Court” – is familiar. It has long been recognised and established that receivers and managers so appointed are, by the effect of the statute law, or the terms of the debenture, or both, treated, while in possession of the company’s assets and exercising the various powers conferred upon them, as agents of the company, in order that they may be able to deal effectively with third parties. But, in such a case as the present at any rate, it is quite plain that a person appointed as receiver and manager is concerned, not for the benefit of the company but for the benefit of the mortgagee bank, to realise the security; that is the whole purpose of his appointment, and the powers which are conferred upon him, and which I have to some extent recited, are . . . really ancillary to the main purpose of the appointment, which is the realisation by the mortgagee of the security (in this case, as commonly) by the sale of the assets.'”
I adopt and apply these statements of the law. The Receiver is in a unique and exceptional position. It is a position unlike that of the ordinary agent in commercial transactions. Thus the Receiver is treated while in possession of the company’s assets as an agent of the company so that he may deal effectively with third parties. But the Receiver is concerned for the benefit of the mortgagee bank to realise the security, which is usually, as in this case, by the sale of the assets.
It is this relationship which governs this case and is the key. Approaching the relationship from another aspect, this unique position may be further illustrated. In considering the possession of land one has to consider all the relevant circumstances. If a person is in possession with consent that is a critical factor.
In analysing the position of the Receiver, from another angle, the test set out in Murphy v. Murphy [1980] I.R. 183 may be a guide. At p. 193 Costello J. stated:
“The first question of fact to be determined is whether the defendant was ever in ‘possession’ of the widow’s lands. In a passage which was quoted with approval in Treloar v. Nute, [1976] 1 W.L.R. 1295 Lord O’Hagan in The Lord Advocate v. Lord Lovat (1880) 5 App. Cas. 273 said at p. 288 of the report: ‘As to possession, it must be considered in every case with reference to the peculiar circumstances. The acts, implying possession in one case, may be wholly inadequate to prove it in another. The character and value of the property, the suitable and natural mode of using it, the course of conduct which the proprietor might reasonably be expected to follow with a due regard to his own interests – all these things, greatly varying as they must, under various conditions, are to be taken into account in determining the sufficiency of a possession.'”
And at p. 195 he described a test:
“Turning, then, to the nature of the defendant’s possession, I think the test I should apply is this: Was the defendant’s possession inconsistent with and in denial of the widow’s rights as legal owner of the land? – see Moses v. Lovegrove [1952] 2 Q.B. 533 at p. 538 of the report. If it was, then the defendant would be ‘a person in whose favour the period of limitation could run’ within the meaning of s. 18 of the Act of 1957 and his possession would be adverse. In considering a problem of this sort, the relationship between the owner of the land and the person in possession and the nature of the lands in controversy are highly relevant matters to be taken into account. If a person is in possession of lands with the consent or licence of the owner, then his possession is not adverse: see Hughes v. Griffin [1969] 1 W.L.R. 23”
If it were necessary, which in fact I do not think it is, to go outside the analysis of the nature of the position of the Receiver, this test would be applicable. If one applied this test it would confirm that the rights of the mortgagees, the Banks, protected by the Receiver, would not be adversely affected by any concept of adverse possession. The Receiver in this case is in possession with consent. This is a matter upon which I would lay stress. Whether one considers the situation from the aspect of the title of Bula or the title of the Banks, the Receiver is in possession by consent. That is the beginning and end of the case. That consent within the unique relationship of the receiver governs the answer.
In analysing the facts of this case I would stress also that the Receiver has been an active receiver. He took control and possession of the assets. The length of time it took to sell the assets was as a direct consequence of the litigation brought by the plaintiffs.
The powers of this Receiver have already been recognised. In In Re Bula Ltd. [1990] 1 I.R. 440 a petition for the winding up of Bula was presented to the court by the secured creditors of the company, the Banks. The petition was brought on the grounds that the company was insolvent and unable to pay its debts and that in the circumstances it would be just and equitable to make the order. The High Court made the winding up order. However, on appeal the petition was dismissed. This Court held that where a petition was brought by secured creditors whose security attached to the entire assets of the debtor company and who had appointed a receiver whose power of sale was, effectively, at least as great as that of a liquidator, the court should refuse its aid. McCarthy J. stated, at p. 449:
“In proceedings that have existed since 2nd July, 1986, but have been substantially amended, Bula Holdings, and the guarantors have sued the Receiver and the Banks for, amongst other relief, an injunction restraining the Receiver from accepting any offers to purchase the assets of Bula until such time as all of four possible events shall have occurred.
(a) The resolution of a dispute concerning the purchase of the Harris lands. These lands offer access to the ore body; such access would increase the value.
(b) The Minister for Energy shall have refused to make an ancillary rights order on foot of the Minerals Development Act, 1940, in respect of the Harris lands – the effect of such order would be to afford access.
(c) Negotiations shall have taken place and irrevocably broken down between Bula and Tara Mines Ltd. in relation to possible co-operation in the exploiting of the entire ore body, implied, it is said, by paragraph (f) of the mining lease executed by the Minister for Energy and Tara Mines Limited. This aspect would appear to have a degree of unreality attaching to it but it is, nonetheless, part of the claim.
(d) The alleged liability of the banks to participate in a re-financing package.
In this Court, apparently for the first time, the argument has been advanced, not merely justifying the Receiver’s rejection of the several alleged avenues of improved sale, but that a winding up order and the consequent appointment of a liquidator who would have a statutory power of sale to be, it is said, exercised under the control of the Court, would create a better prospect of sale. On enquiry, it seemed to prove difficult for counsel for the banks to identify any particular area in which the liquidator would be at an advantage save in the general way that he would not be encumbered by the record of the Receiver and, obviously, would not be a defendant in the action by Bula against the Receiver. He would until the appropriate application were brought to the court, be a plaintiff in that he would be Bula. More to the point, however, it is inevitable that a liquidator, court appointed, with all the independence of action and professional integrity that would be at his command would lack the enthusiasm and momentum that would be second nature to the guarantors, who, presently, control the progress of the action. This is indeed a step further in the argument; it is, in effect, saying that a liquidator, suitably monitored by the court, would be as effective in pursuing a legitimate claim of Bula as those presently in command. In my view, there is no reality in this suggestion. With the best will in the world, a court attempting such supervision is very much in the hands of the liquidator; it is his enthusiasm or lack of enthusiasm that will govern the decisions of the court – it is he who brings the matter to court – it is he who presents the case, so to speak, for continuing with litigation or ending it. In a real sense he is dominus litis, however vigilant the court may wish to be and however resourceful those upon whom notice must be given of any intended application to the court.”
Having considered legal opinion McCarthy J. concluded at p. 451:
“Shorn of these expressions of legal opinion, many dependent upon a variety of single instances and special facts, in my judgment, in this case of special facts, where a petition is brought by secured creditors whose security attaches to the entire assets of the debtor company and who have appointed a Receiver whose power of sale is, effectively, at least as great as that of a liquidator, the Court should refuse its aid.
I would allow the appeal and dismiss the petition.”
Further relevant court decisions have been made. In Wymes v. Crowley (Unreported, High Court, 27th February, 1987, Murphy J.) reported in Irish Company Law Reports (1963-1993) the plaintiffs had sought to add Bula Ltd., Thomas C. Roche, Thomas J. Roche and Richard Wood to the main action as plaintiffs. The defendants objected to the addition of Bula Ltd. Murphy J. gave permission for Bula to be joined. He stated, however:
“I have no doubt that the directors of Bula Ltd. retain their power to institute proceedings in an appropriate case. The limitation on their powers is that they must not deprive the debenture holders of the security granted to them and the very practical difficulty that the extensive nature of the charge deprives the company of the means of financing litigation. That the directors of Bula Ltd. would be entitled to institute proceedings in the name of that company to sue for negligence a receiver appointed over the assets of that company could not be questioned as a matter of law.”
The receiver receives the assets of the mortgagor for the benefit of the mortgagee. Thus in this case the Receiver received the assets of Bula for the benefit of the Banks. The principal task of the Receiver is to secure the assets of the company which have been mortgaged in favour of the debenture holder which appointed him. Thus in this case the Receiver secured the assets of Bula in favour of the Banks. It is clear that a receiver appointed under a mortgage is there as a consequence of an agreement being activated and his position and powers follow accordingly. The appointment of the Receiver was a device to protect the Banks. Thus while the Receiver acts as agent for Bula, which was a party to the agreements pursuant to which he was appointed, his actions are for the benefit of the Banks. The Receiver took possession of the assets for the benefit of the Banks. It is an unusual and unique relationship. While the Receiver is the agent of Bula yet he has a special relationship with the Banks. It is a tripartite relationship. In this case the Receiver was appointed, on certain events happening, in accordance with the agreements, by the Banks, and, whilst the Receiver is the agent of Bula, that company cannot instruct the Receiver how to act in the receivership. Thus the Receiver has duties to both Bula and the Banks. However, the first duty of the Receiver is to the Banks. The object of his appointment was to realise the banks security, that is to sell the property of Bula in this case. The duty of the Receiver is to the Banks, to realise the security, to sell the assets. That, as Costello J. said, was the whole purpose of his appointment.
In this case all the circumstances have to be considered. They include the fact that the Banks moved quickly and the Receiver was appointed on the 8th October, 1985. The Receiver is an active receiver. Much of the activity over nearly two decades has been in relation to the litigation brought by the plaintiffs. The tripartite relationship, of Bula, the Receiver and the Banks, was brought about voluntarily, under agreements. The relationship of a receiver, (and this Receiver,) with mortgagors and mortgagees, with Bula and the Banks, is a unique and exceptional relationship unlike the normal agency in commercial actions. Acting in accordance with the agreements in this case, the Receiver went into possession of the assets by consent. That consent was given by both Bula and the Banks. In this case the Receiver had a duty to get in the property, take possession and sell it. This he has done. The Banks sought to be paid and exercised the remedy of the appointment of a receiver to achieve that end. The Receiver was appointed for the benefit of the Banks, under the agreements which had been entered into by Bula and the Banks. An action for possession does not arise as the Receiver was in possession of all the assets with the consent of all relevant parties. The question of the accrual of an action for possession does not arise and the Statute of Limitations, 1957 does not arise.
(iii) Adverse Possession
I am satisfied that it is not necessary to consider any further aspects of the claims of the plaintiffs. There was no adverse possession contrary to the owner. The Receiver had control of the assets as an agent. He was in control pursuant to the contractual agreements for the benefit of the Banks. There was no possession without the authority of the owner, whether you consider it from the title of Bula or the Banks. Consequently the concept of adverse possession does not arise or apply. I would uphold the reasoning and decision of the learned trial judge.
(iv) Yourell
The plaintiffs invoked the Yourell decision in their favour. I have considered Hibernian Bank v. Yourell [1916] 1 I.R. 312 (H.C. and C.A.), Yourell v. Hibernian Bank [1918] A.C. 372, and Hibernian Bank v. Yourell (No. 2) [1919] 1 I.R. 310. The first two cases referred to above are not relevant to the issues on this appeal. The third case referred to above, Hibernian Bank v. Yourell (No. 2) [1919] 1 I.R. 310, hereinafter referred to as Yourell, was opened on the appeal by the plaintiffs as authority for the proposition that “time can run against the debt of a secured creditor even when he has appointed a receiver; and, further, that time continues to run against the secured creditor thereafter.” However, Yourell decided that a receiver appointed by a mortgagee, being essentially the agent of the mortgagor, commits a breach of duty if he pays arrears of interest on a mortgage that is statute barred. In Franks, Limitations of Actions, 1959 at p. 161 this case is cited for the proposition that such a receiver cannot pay a statute barred debt. Also Picarda, The Law Relating to Receivers, Managers and Administrators, 2nd Edition, at p. 266 refers to the case as authority for the proposition that a receiver cannot pay statute barred interest. Similarly Falcon and Chambers, Fisher and Lightwood’s Law of Mortgage, 11th Ed. At para. 16.34 so refers. I am satisfied that Yourell is an authority for the proposition that a receiver cannot pay a statute barred debt, while acting as agent for the mortgagor. However, the plaintiffs have taken the matter a step further and submitted that Yourell stated that the Statute of Limitations can run in the face of an active receiver. However, I am satisfied that Yourell is not an authority for that proposition. It was neither argued nor decided that time ran against an active receiver. At issue were the specific debts in the specific situation. Consequently I would distinguish that case from the issues at the core of this case. The circumstances, facts and law of that case are not applicable.
(v) Remaining Points on the First Appeal
In light of my findings in this case it is unnecessary to analyse the Statute of Limitations, 1957 or to consider the construction of sections in that Act. Equally the issues of part payments and acknowledgements are not relevant. There is no good reason to take a “but if” approach and analyse further why the Act does not apply. The Statute of Limitations, 1957 does not apply in the circumstances of this case.
The decision on this first issue renders the other issues irrelevant and moot.
(vi) The Passage of Time
The passage of time has been a critical element in the appeals of the plaintiffs. Having considered the technical submissions and analysis of the nature of an active receiver, the Statute of Limitations and the concept of adverse possession, I am conscious also of the equity of the situation. In this case there has been a considerable passage of time. The main action has been in being for 17 years and has not yet come to trial. It was this time, this delay, which initiated this preliminary issue and case.
Without in any way making a pejorative statement about the actions of the plaintiffs over the last 17 years, and while not denying their right of access to the courts, the findings of fact by the learned trial judge must be noted. He stated:
“It is not in dispute that the purpose of the Banks in appointing the Receiver was that he would take control of the company’s assets and arrange for the sale of its lands, including the proposed mine, in discharge of the debts owing by Bula to the Banks. The Receiver has actively pursued that objective since appointment but has been frustrated in his efforts by persistent unsuccessful litigation orchestrated by the sixth defendant who has demonstrated that he is
implacably opposed to the sale of the potential Bula mine in any circumstances and is determined to place every possible obstacle in the way of the Banks obtaining the benefit of their securities through such a sale.”
It is clear that the learned trial judge had grounds to make such a finding. It is notable that the plaintiffs claimed that the Banks had lost rights because of a lapse of time which passage of time has arisen largely because of the plaintiffs’ war of attrition against the Banks. Concepts of equity are not before this court on the first issue on the first appeal. However, all courts must be conscious of the justice of a case.
The findings on this appeal are findings of law, regarding the nature of the relationships arising on the appointment of the Receiver. On this issue, related to the delay, the finding in law is also a finding in justice.
18. Conclusion on First Appeal
First, on the appointment of the Receiver a special relationship was established between Bula and the Receiver on the one hand and the Banks and the Receiver on the other hand. This relationship was grounded on agreements entered into between the plaintiffs, Bula and the Banks. On the Receiver being appointed in 1985 he went into possession and control of the assets of Bula. The possession was for the benefit of the Banks. The Banks did not suffer a reduction in their rights by their appointment of the Receiver: rather their rights were protected. The Receiver has been an active receiver but has been frustrated by litigation brought by the plaintiffs. There was no possession contrary to the interests of the Banks. There was no possession without authority. There was no possession without consent. There was no possession that would come within the concept of adverse possession. The Receiver was there as of right. The Statute of Limitations, 1957, which is concerned with the limitation of actions, has no application. I would uphold the judgment and order of the High Court on this first issue. I would also uphold the determination of the High Court that as a consequence of that determination the other issues are moot and it is unnecessary to address them, thus no further issues fall to be decided on this first appeal.
19. Second Appeal
The second appeal before this court was against the decision of the High Court (Barr J.) given on the 20th February, 2001. On that date the High Court excluded additional pleas. Full written submissions were filed on this issue and were considered carefully. The learned High Court judge gave a considered ruling on the matters in which reasons were set out for the decision. The importance and relevance of these matters is affected by the decision of this court as to the position of the Receiver and the non-applicability of the Statute of Limitations, 1957 to the circumstances.
I have considered the arguments of the plaintiffs and the legal cases to which they referred, especially Bula Ltd. v. Crowley the decision of Carroll J. delivered on the 15th December, 2000 in a motion related to the main action; Irish Trust Bank Ltd. v. Central Bank of Ireland [1976-7] I.L.R.M. 50; Irish Land Commission v. Ryan & Ors. [1900] 2 I.R. 565; Baulk v. Irish National Insurance Company Limited [1969] I.R. 66.
I am satisfied that it was within the jurisdiction of the learned High Court judge to conclude as he did. Further, he was entitled in all the circumstances to consider himself bound by the decision of Carroll J. The trial court was a court of equal jurisdiction and it was clearly within his jurisdiction to consider himself bound by the decision of Carroll J. As to the meaning of the judgment of Carroll J. the trial judge was entitled to find it clear (as indeed do I) and to interpret it correctly on its ordinary meaning.
I am satisfied that the learned trial judge was correct in refusing the proposed amendments in paragraphs 26 and 27 as a matter of law and as they had no bearing on the determination of the Statute of Limitation issues. Further I am satisfied that the learned trial judge was entirely within his jurisdiction in refusing the paragraph 33 amendment.
I am satisfied that it would not be appropriate to remit any of these matters to the High Court. There has been a careful and reasoned decision of the High Court which has been appealed. On the appeal I am satisfied that the plaintiffs have not made any case to succeed.
20. Third Appeal
The third appeal was against the decision of the High Court (Barr J.) disallowing the further discovery sought in support of these claims. Barr J. held:
“Further Discovery
I am satisfied that the remaining Statute of Limitations issues are essentially matters of law in relation to which no further discovery of documents is required. However, it is proper that there should be up-to-date discovery relating to the suspense accounts held by NBFC and AIIB in connection with Mr. Wood and any company controlled by him.”
I am satisfied that this was a ruling which the learned trial judge was entitled to make, it was within jurisdiction, without error, and in accordance with law, thus the application by the plaintiffs should fail.
21. Conclusion
For the reasons given I would dismiss the first appeal of the plaintiffs and make no orders on the notices to vary. I would also dismiss the second and third appeals of the plaintiffs
Maunsell v. Donnellan
[1945] IR 368
Overend J.
In this case the plaintiffs, who are transferees of a mortgage, dated 27th May, 1864, claim in their summary summons a declaration that their mortgage is well charged upon certain lands in the County of Clare, and payment of the principal sum of £1,500, together with interest and salvage payments made by them in respect of head rent, etc., and the usual further relief.
The defendants are the owner of the equity of redemption and certain occupiers of portions of the lands, who claim that, having formerly been tenants of the mortgagor, they have, respectively, acquired a statutory title against him and his successors in title and are now entitled to their holdings free from incumbrance, or, at least, that each is entitled to redeem his holding on paying to the plaintiffs only the proportionate part of the mortgagee’s charge attributable on apportionment to his holding.
Only three of the defendants have appeared.
The facts are peculiar. The late Mr. Francis Gore-Hickman, a well-known solicitor, acted as agent for the mortgagor, and for many years he paid the head rents and mortgage interest out of his own pocket, without collecting the rents from the tenants, who thus acquired a statutory title against the mortgagor. He died in November, 1940, and since then no interest has been paid to the plaintiffs, who have been compelled to pay the head rent to save their lands from ejectment and also other outgoings. No claim was made by the tenants under the Land Act of 1923, apparently they preferred to rely on prescription, and no return of tenancies was made pursuant to that Act.
The first point made on behalf of the defendants who appear is easily disposed of, for it is well settled that the acquisition of a statutory title against a mortgagor does not affect a mortgagee’s right of entry under 7 Wm. 4 & 1 Vict. c. 28, Doe d. Palmer v. Eyre (1); Ford v. Agar (2); Fisher on Mortgages, 5th Ed., p. 379, par. 788.
The second contention is based on a passage in the judgment in Munster and Leinster Bank v. Croker (3), where Black J. says:”I am inclined to agree with Mr. Kelly, that if a person in possession of a portion of mortgaged premises acquires, as against the mortgagor only, and not as against the mortgagee, a title to that portion under the Statute of Limitations, he thereby acquires the right to redeem, so far as the portion in question is concerned, on paying a proportionate part of the mortgage debt and interest. This was decided in an unreported case of Fletcherv. Bird which is set out in the 5th edition of Fisher on Mortagages at page 972.”
It is to be noted that it was not necessary to decide this point, having regard to the view taken by the learned Judge, and, in my opinion, he did not intend to decide it. I think he was merely expressing a passing opinion, based, no doubt, on the concluding words of the judgment of Hawkins J. in Fletcher v. Bird where that learned Judge says (as reported in Fisher on Mortgages, 5th Edition, p. 974):”In the action, therefore, I think the plaintiff, as transferee of the mortgage, is entitled to recover possession of the premises, subject to the equity of redemption which is vested in Mrs. Bird. Mrs. Bird, in my judgment, ought to be, and is, entitled to redeem upon payment of a proportionate part of the mortgage debt and interest with costs of such proceedings in determining the amount to be paid, regard must be had to the value of the premises she claims as compared with the value of the whole property in mortgage. And I think she is entitled to have such an account taken and such declaration as she prays by her counter-claim.”
To appreciate the true meaning and effect of this passage it is necessary to follow very clearly all the facts of that case. In 1844 one, George Roberts, the father and predecessor in title of the defendants, Sarah and Harriet Roberts, mortgaged certain premises to Cook whose interest subsequently became vested in Edward Cook of Devizes. The plaintiff, Fletcher, who was a trustee for the Misses Roberts, with their money redeemed the mortgage and took an assignment in his own name from Edward Gook of the mortgagee’s estate and interest under the mortgage. He thus became legal owner in fee of the mortgaged premises subject to the equity of redemption vested in Mrs. Bird as to her portion of the premises, and was a bare trustee for the Misses Roberts. In the meantime one, John Holt, had acquired a statutory title to portion of the premises as against the mortgagor, Roberts, and at the time of action brought Holt’s estate and interest was vested in the defendant, Mrs. Bird, who was in occupation of that portion of the premises which Holt had acquired.
Mrs. Bird contended that she was entitled to her portion of the premises free from the mortgage, but the learned Judge held that, on the contrary, she still held subject to the mortgage and was bound to contribute her proportionate part of the redemption money which had in fact been paid by the Misses Roberts, who were the owners of the equity of redemption in the remainder of the mortgaged premises to which Mrs. Bird had no title.
The decision is not a decision that a person who has acquired a statutory title against a mortgagor in portion of the mortgaged premises, can redeem his portion on paying a proportionate part of the mortgage debt, but a decision that when the mortgage has been redeemed by, or on behalf of, the successors in title of the mortgagor, the person who has acquired a statutory title against the mortgagor continues to hold subject to the mortgage and upon redemption is liable to contribute the proportionate part of the redemption price.
Suppose Mrs. Bird desired to redeem, she would clearly have been entitled to do so but only on paying off the entire mortgage debt: Mutual Life Assurance Society, v. Langley (1); Hall v. Heward (2); Pearce v. Morris (3); Fisher on Mortgages, 5th Ed., paragraphs 1416-1447, together with interest, and, of course, costs to which a mortgagee is entitled as a term of his contract. See Lord Selborne’s judgment in Cotterell v. Stratton (4) and the judgment of Jessel M.R. in Turner v. Hancock (5). Had Mrs. Bird redeemed she would have had a right of contribution against the Misses Roberts.
This disposes of the second point in the case. The plaintiffs are, accordingly, entitled to the relief sought and costs with their demand.