In a recent High Court decision, the validity of the appointment of joint receivers by ACC Loan Management Limited by deed under seal was upheld, and an order for possession in favour of those receivers was made.
On 2 March 2016 in Farrell & Kelly v McLoughlin and others (“McLoughlin”), the High Court held that steps taken by ACC Loan Management Limited (“ACC”) to retrospectively ratify certain receivership appointments made by it by deed under seal were valid and effective. The steps were taken by ACC as a result of the decision of Mr Justice Cregan in the McCleary v McPhillips1 decision (“McPhillips”), which remains under appeal.
McLoughlin involved an application for an interlocutory injunction brought by joint receivers (the “Receivers”) seeking possession of a commercial building in Dublin City centre as against Ms McLoughlin and a family member. Mason Hayes and Curran acted for the Receivers.
The Receivers had been appointed by ACC on foot of two mortgages. One of the mortgages allowed for the appointment of a receiver under seal or under hand. The other mandated the receiver to be appointed in writing under hand. The Receivers had been appointed by ACC in respect of both mortgages under deeds of appointment that were each executed under seal.
A number of defences were raised by Ms McLoughlin against the Receivers’ action for possession. One such defence was that the Receivers had not been validly appointed by ACC. In reliance on the decision in McPhillips, Ms McLoughlin contended that the appointment that was made by deed under seal was invalid since the mortgage required the appointment to be made by writing under hand of ACC.
In McPhillips, it was held that the appointment of a receiver by ACC under seal was not valid in circumstances where:
(i) the mortgage provided for the appointment of a receiver by ACC by writing under its hand;
(ii) the deed of appointment had been executed under seal; and
(iii) significantly, the individual who countersigned the application of the seal to the deed of appointment had not been authorised to execute documents under hand of ACC.
In opposing Ms McLoughlin’s defence, the Receivers relied on the fact that after the decision in McPhillips, ACC had retrospectively ratified (i) the authority of relevant individuals to execute appointments on its behalf under hand and (ii) previous appointments of receivers made under seal.
The Court held that any defect that may have arisen in the manner of the Receivers’ appointment had been remedied by the ratification steps action taken by ACC. Therefore, no defence to the Receivers’ action for possession was available on this basis to the borrower.
As no other credible defence was put forward, an order for possession of the property was granted by the Court.
The McLoughlin decision makes it clear that previous receivership appointments, made by ACC under seal and where the mortgage provides for execution under hand, will not be invalid as a result of the discrepancy identified in McPhillips. The decision also provides certainty for receivers appointed by ACC in such circumstances.