High Court holds that appointment of receiver under seal of the bank also constitutes appointment by the bank “in writing under its hand”

Summary

In a recent judgment in the case of Ken Fennell v Ben Gilroy & Ors(1), the High Court has held that a deed of appointment of a receiver executed by the bank under its seal must also constitute a document executed by the bank “in writing under its hand” in accordance with the provisions of section 24 of the Conveyancing Act, 1881 in circumstances where:

  1. it is a document;
  2. it is in writing; and
  3. a signature of an authorised signatory of the bank appears on the bottom of it.

In this case the Court was satisfied on the evidence that the two signatories who had witnessed the affixing of the seal had been authorised to sign deeds of appointment on behalf of the bank and the fact that a seal had been affixed to the appointment did not otherwise affect its validity. The Court went on further to hold that, even if they had not been so authorised, the bank had subsequently passed a resolution ratifying the authority of the persons to so act and that the bank was perfectly entitled to pass such a resolution in circumstances where it is a basic principle of the law of agency that a principal can ratify the authority of an agent.

The decision of Cregan J in McCleary v McPhillips(2) was distinguished on its facts.

Facts

This case concerned an application by the receiver appointed by Allied Irish Banks, p.l.c. for an injunction to restrain the occupants of secured property from interfering with, obstructing or in any other way preventing the receiver from exercising his powers, including entering upon and taking possession of the secured property. One of the main issues before the court was the validity of the deed of appointment.

Mr Gilroy sought to challenge the authority of the receiver claiming (among other things), that the deed of appointment had not been validly executed. In this regard, Mr Gilroy submitted that as the deed of appointment had been executed under seal it did not conform with the requirement under section 24 of the Conveyancing Act, 1881 that the appointment be executed by the bank “in writing under its hand”. In support of this, Mr Gilroy sought to rely on the decision of Cregan J in McCleary v McPhillips in which the Court held that deeds of appointment by ACC Loan Management Limited were invalid on the basis that the deeds had not been signed by authorised signatories.

It was argued on behalf of the bank in the present case that, while a document may be executed under seal, that does not alter the fact that the document also constitutes a document “in writing under its hand”. It was submitted that the signatories in question regularly executed deeds of appointment of receivers on behalf of the bank in the ordinary course of their duties and it was part of their responsibilities within the bank to do so. Their superiors within the bank knew of this, did not object to it, and authorised them to act in this way. It was submitted by the bank that, insofar as it might be argued that the bank’s express authority to these signatories did not meet the requirements of section 24 of the 1881 Act, the bank had ratified any apparent lack of express authority through its having been aware of the fact that they signed such documents on a regular basis and its having acquiesced in this practice. Notwithstanding the bank’s position in this regard, it had for prudence passed a resolution, following the McCleary case, expressly ratifying the authority of the signatories to execute deeds of appointment (to the extent that this had not already been authorised by the bank either expressly or by implication).

The Court distinguished the McCleary case on the basis that the bank had in that case had created two separate lists of authorised signatories; one in relation to documents to be executed under hand and one in relation to documents to be executed under seal. The persons authorised to execute documents under seal had not been expressly authorised to execute documents under hand on behalf of the bank.

The Court was satisfied that in the present case, on the evidence, the signatories had been authorised to sign the deeds of appointment and the fact that a seal had been affixed to the deed of appointment did not otherwise affect its validity purusant to the provisions of section 24 of the 1881 Act.

Gilligan J went on to say that even if they had not been so authorised (which he found they had), the bank was perfectly entitled to pass a resolution ratifying the authority of such persons to execute deeds of appointment. It is a basic principle of the law of agency that a principal can ratify the authority of an agent retrospectively, as was upheld recently in the case of Farrell & Kelly v Petrosyan & Ors(3). In that case, O’Connor J held that, even if there had been some omission on the part of ACCLM (as identified in the McCleary case), this had subsequently been remedied by the passing of a resolution expressly ratifying the authority of those persons to sign appointments on behalf of the bank, and accordingly there was no longer any issue to be tried in that regard.

Some of the other issues of interest addressed in this judgment were as follows:

  • The bank official who swore one of the grounding affidavits in support of the receiver’s application was perfectly entitled to swear the affidavits on behalf of the bank. He was not giving evidence under the Bankers' Books Evidence Act, 1879, as suggested by Mr Gilroy, but was merely giving evidence of facts within his own knowledge.
  • The General Mortgage Conditions were binding on the borrower in circumstances where the borrower had signed a mortgage agreement which expressly stated that the mortgage was subject to those conditions. The general conditions had therefore been duly incorporated into the mortgage contract.

Comment

This decision provides further clarification with regard to valid execution of deeds of appointment of receivers pursuant to the provisions of the Conveyancing Act, 1881 and will be welcomed by financial institutions.