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//High Court finds Receiver is Not Validly Appointed

High Court finds Receiver is Not Validly Appointed

In Harrington v Gulland Property Finance Limited, two Cork businessmen succeeded in obtaining an interlocutory injunction restraining a receiver from taking possession of certain registered properties at an industrial estate in Cork. The properties in question were subject to a charge in favour of IBRC which had subsequently transferred to the defendant.

The High Court, in granting the injunction, stated that because the instrument by which the charge was transferred from IBRC to Gulland Property Finance Limited (“Gulland”) had not been registered in the Land Registry, the receiver appointed to the properties was not validly appointed.

Background

Anglo Irish Bank Corporation plc. (“Anglo”) loaned money to two businessmen (the “Harringtons”) and a charge was subsequently registered as a burden over the properties. In 2015, the special liquidator of IBRC, the successors in title of Anglo, sold the benefit of the Harringtons’ loan facilities and the security to Gulland. In February 2016 Gulland appointed a receiver over the registered properties.

The High Court granted an interlocutory injunction restraining the receiver from acting following an emergency application by the Harringtons. Following this, a second hearing was held to determine whether or not the injunction should be lifted pending the full trial of the case.

Arguments made by the Harringtons

The primary argument raised by the Harringtons was with regard to the power of Gulland to appoint a receiver as, at the time of appointment, the instrument by which the charge was transferred from IBRC to Gulland had not been registered in the Land Registry and had not yet been lodged for registration. They argued that until such time as Gulland was the registered owner of the charge on the registered properties, no interest in the charge could become vested in Gulland and that as a consequence it did not, at the date of the appointment of the receiver, have a power, whether contractual or statutory, to effect that appointment.

High Court Decision

In finding for the Harringtons, the High Court made reference to the provisions and effect of section 64(2) of the Registration of Title Act 1964 (the “Act”) specifically noting that Form 56, which is used to effect registration of the transfer of the charge, did not confer on Gulland any interest in the charge until they were registered as owner of the charge. Gulland had not yet filed its Form 56 at the time it purported to appoint the receiver.

Accordingly, the High Court held that the Harringtons had made an arguable case that the power to appoint a receiver had not vested in Gulland at the date of the deed of appointment of the receiver and, as such, the receiver was not validly appointed.

Conclusion

While this judgment was delivered in the context of an injunction application and is limited in its remit to charges over registered land, it appears to broaden the interpretation of section 64(2) of the Act, which was previously thought to only deal with the requirements to register a Form 52 in the Land Registry. Prior to this decision it was generally accepted practice that the deed of transfer of the loan, even prior to its registration in the Land Registry, was sufficient to transfer the legal rights associated with loans and securities. However, this does not appear to be the case in respect of registered lands following this judgment.

Practitioners, financial institutions and loan purchase entities should be aware that a receiver’s ability to be appointed over registered land will be severely hindered following the judgment where the transferee is not registered as owner of the charge in the Land Registry. Practitioners should therefore ensure that all relevant registrations have been made prior to any receivership enforcement of security over registered land.

 

 

2018-11-13T10:47:35+01:00January 5th, 2017|Publications|

About the Author:

Lisa Killeen is a Senior Associate Solicitor in our property department. Lisa joined the firm in 2013 having previously worked in William Fry Solicitors. Lisa specialises in banking and finance […]

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