High Court finds receiver to be invalidly appointed and a trespasser

Discussion in 'Mortgage arrears & negative equity case studies' started by Asphyxia, Oct 3, 2015.

  1. Asphyxia

    Asphyxia Registered User

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    Bronte,

    referring back to house sold for 60% of value thread which for some reason is now closed, I refer you to the High Court Decision of the 2/10/2015 in the case of Paul McPhilips V ACC loan Managment Ltd and Grant Thornton ( 2015 )IEHC 591 where Justice Gregan ruled that the receivers in the case, Stephen Tennant and Paul McCleary were found to be invalidly appointed subject to mortgage deed and indeed found that Paul McPhilips can sue for damages for trespass on his property. I note that this case was taken in lay litigant albeit with the support of Ben Gilroy.

    I now give you the findings of Judge John Gregan :-

    Conclusions
    166. In the circumstances I would make the following conclusions:


    • 1. Mr. Stephen Tennant was not validly appointed as first receiver.
      2. There was no valid deed of discharge in respect of Mr. Tennant.

      3. Mr. McCleary was not validly appointed as receiver.

      4. Mr. McCleary’s servants, or agents, represented themselves as agents of Mr. Tennant, not Mr. McCleary on 25th June, 2014.

      5. ACC did not sell on the debt which Mr. McPhillips owed to it.

      6. The mortgage did contain an express power to take possession of the property and/or express power of sale over the property.
    167. In relation to the second set of proceedings:

    • 1. Mr. McPhillips is entitled to damages for trespass to his property because the receivers were not validly appointed.
      2. It is not necessary to give a declaration that the servants or agents of the receivers produced false documents.

      3. Mr. McPhillips is entitled to a declaration that the receivers were not validly appointed.

      4. I will hold over any issue of whether Mr. McPhillips is entitled to damages because an injunction had been wrongly granted.
    FOOD FOR THOUGHT for the great unwashed.
     
  2. Sarenco

    Sarenco Frequent Poster

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    Last edited: Oct 3, 2015
    This case related to the formalities of appointing and discharging receivers and not whether a receiver had discharged his duty to take reasonable steps to obtain the best price for a property where he exercises a power of sale.

    I am attaching a link to a Irish Independent article on Ben Gilroy's activities for readers' information.

    http://www.independent.ie/irish-new...d-of-putting-receivers-off-land-29569638.html
     
    Last edited: Oct 3, 2015
  3. Rebuttal

    Rebuttal Registered User

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    Yes, the case highlights the rather troublesome matter of the LEGAL formalities for appointing receivers. What was the Judge thinking of.

    I believe Ben Gilroy has been in court for trespass, now it's the turn of the receivers. Shoe is on the other foot so as to speak.
     
    Last edited: Oct 3, 2015
  4. Sarenco

    Sarenco Frequent Poster

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    In this case, the Court simply re-iterated the common law position that a receiver must be appointed in accordance with the relevant security instrument and if not appointed in accordance with the terms of that instrument the receiver is not validly appointed.

    Hardly groundbreaking.
     
  5. Rebuttal

    Rebuttal Registered User

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    Where was the professionalism on the part of the receiver for not checking whether he was validly appointed, the only legal thing a receiver has to do really. Hardly rocket science. Next question is, did the receiver actually have sight of the security documents before he accepted his appointment. Let's not open that can of worms. Just thinking of the claim for professional negligence down in the courts, receiver cannot mount much of a defence methinks, maybe it will be settled without the need for a court case. ( usual scenario ). If you read the judgment in full, you get the impression that the receivership was a litany of errors and blunders from start to finish, hardly professional, in fact very unprofessional. This is somewhat publicly humiliating for a large company such as Grant Thornton. If I was fortunate enough to be CEO of a bank, I would think twice about employing this company, and if I did, I certainly would not be signing any indemnity bond with them.
     
    Last edited: Oct 3, 2015
  6. Sarenco

    Sarenco Frequent Poster

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    Well the bank certainly made a costly mistake in not scrupously following the legal formalities relating to the appointment although I suspect this particular ruling will be appealed.
     
  7. Rebuttal

    Rebuttal Registered User

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    How about all the other appointments of receivers by ACC bank in the last few years. If the receiver was appointed in the manner referred to in the case stated above, and there is no reason to think otherwise, are they lawful ? I think not. Oops. Cat out of the bag. Think of all the properties that have been sold by the receivers for ACC bank in the recent past, at knock down prices I might add. Groundbreaking it is not, it is just the breaking of a bank with respect to litigation and claim for damages. They have to appeal or go into liquidation, stark choice.
     
  8. Sarenco

    Sarenco Frequent Poster

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    Structly speaking, ACC is actually a loan management company - it no longer holds a banking licence and is essentially winding up its operations.

    In any event, I have no idea whether the appointment of any other receivers by ACC were invalid. This might or might not be a wider problem for ACC.
     
  9. Rebuttal

    Rebuttal Registered User

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    Yes, I am aware of same, just keeping post simple for viewers, but on the face of it, it appears that ACC loan management ltd will have problems with respect to legal actions on the past invalid appointment of receivers over their securities.
     
  10. Rebuttal

    Rebuttal Registered User

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    I agree with you in this regard, and because of this I find it difficult to comprehend how any appeal will succeed.
     
  11. Sarenco

    Sarenco Frequent Poster

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    Well I guess ACC would seek to argue that the receivers were in fact properly appointed.

    The case turned on whether the requirement in the security document to appoint the receiver by writing under hand could be satisfied by affixing the company seal to the deed of appointment and having two authorised signatories attest to same. I know a lot of practioners were surprised at the ruling.
     
  12. Rebuttal

    Rebuttal Registered User

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    I believe these parts of the judgment are very pertinent.



    • General Sealing and Signing Authority
      The seal of the Bank may be affixed to any document which is required to be sealed by the Bank in the ordinary course of business in the presence of the Chief Executive or the Secretary.


      Any document which is required to be signed under hand on behalf of the Bank in the ordinary course of business may be signed on behalf of the Bank by the Chief Executive or the Secretary, or the Law Agent”. (Emphasis added).
    It is noteworthy that the internal memorandum prepared for the Board of Directors by Ms. Glynn as Company Secretary, specifically distinguishes between

    • (a.) documents under seal and
      (b.) documents which are required to be signed under hand on behalf of the Bank
    105. It is also noteworthy that it sets out different persons who should have the Bank’s authority to witness the affixing of the company’s seal, (of whom there are six) and persons who should have the Bank’s authority to sign documents under hand, (of whom there are only three).
    106. Thus, in respect of documents which are required to be executed under seal, it sets out that the seal of the Bank may be affixed to particular types of documents and also provides that the seal may be affixed in the presence of any one of six persons.

    107. However, in relation to any document which is required to be signed under hand, on behalf of the Bank, in the ordinary course of business, these documents may only be signed on behalf of the Bank by the Chief Executive, or the Secretary, or the Law Agent. It is only these three persons who have the authority on behalf of the Bank to sign documents under hand, on behalf of the Bank.


    And then,


    140. Thus the Bank has authorised 6 different people to witness the affixing of the seal of the company to certain deeds. However the Bank has only authorised three specific people to put its signature to documents which are required to be in writing under its hand. These are the Chief Executive Officer, the Secretary and the Law Agent.

    141. On the facts of the present case, the deeds of appointment were not signed by one of these three duly authorised people.

    142. Therefore the documents appointing the receiver, although “in writing”, were not “under its hand” i.e. were not signed by a person duly authorised to sign such documents.

    143. In these circumstances, it must follow that the deeds appointing the receivers were not “by writing under its hand” as required by the deed of mortgage/ charge.

    It must therefore follow that the two deeds of appointment were invalid. (Given that the deed of appointment of Mr. Tennant was invalid, it arguably follows that his deed of discharge was not necessary).

    I believe the memo and articles of association of ACC bank speak for themselves, Justice Gregan merely applied same.
     
  13. Dermot

    Dermot Frequent Poster

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    Are ACC the only Bank likely to have "cocked up in the scenario outlined above in the appointment of Receivers" or are other Banks likely to have made mistakes in this regard.

    How do you find out who the authorised persons in a Bank are for signing documents appointing a receiver to a property?.
     
  14. Rebuttal

    Rebuttal Registered User

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    Last edited: Oct 7, 2015
    You can request the authorised signature list from the particular bank in question that was in operation when the receiver was appointed. In your application be as precise as possible, ie look up the memo and articles of association of the bank. Each bank has its own set of rules regarding authorised signatories which the executive board of the bank publishes as an internal memo. Some banks give unlimited power of attorney to two signatories, others like ACC differentiate between the signatories that can sign under hand and under seal, other banks have a pecking order of authorised signatories like category 1 and 2 and in these cases a category 1 signature must accompany the other authorised signatory for the signing of the deed to be binding etc, etc.


    The answer to your question is yes, other bank's are likely to have cocked up with regard to the signatory requirements for the validation of the deed of appointment of the receiver. The bank's expect the borrower to roll over and play dead, because they receive this official looking piece of paper. ( usually two a4 sheets of paper stapled together ). Some became blasé about the legal importance of the correct signatory requirements.
     
    Last edited: Oct 7, 2015
  15. Sarenco

    Sarenco Frequent Poster

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    Hi Dermot,

    It’s certainly a possibility that other banks have made similar mistakes, although I would be very surprised if it’s a widespread problem. In the case of major receiverships, it’s standard practice for the receiver to obtain a letter from his lawyers confirming the validity of his appointment and the scope of his powers.

    If in doubt, the first thing you would look at is the mortgage document itself. Sometimes the mortgage will provide that the appointment must be made under seal or under the hand of a duly authorised officer or employee of the relevant bank. Alternatively, the wording might be more specific and provide that the bank may make the appointment without notice by writing under the hand of any director, general manager, assistant general manager or secretary for the time being of the relevant bank or any person authorised by any one of them in writing to appoint a receiver. There really is no standard wording.

    You would then look at the receiver’s deed of appointment to establish whether, on the face of it, the appointment has been made in accordance with the terms of the mortgage document itself. Depending on the circumstances, this may well prompt a mortgagor to make further investigations.
     
  16. Rebuttal

    Rebuttal Registered User

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    I agree with Sarenco, but you must write to the bank requesting their list of authorised signatories and compare same with the authorised signatories of the bank on the deed of appointment of the receiver, having regard to the bank's memo and articles of association and the specific signatory requirements of the particular bank.
     
    Last edited: Oct 7, 2015
  17. Gerry Canning

    Gerry Canning Frequent Poster

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    Asphyxia.

    Are there a few (simple) pointers on receiver to be validly appointed ?

    When (validly) appointed are there some simple actions they must do to be (legal)?

    {Reason I ask is that I find legal jargon etc very heavy}
     
  18. Asphyxia

    Asphyxia Registered User

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    Last edited: Oct 23, 2015
    The best way to attack a deed of appointment of a receiver is to see if the receiver is validly appointed. This can be done by researching the relevant financial institutions memorandum and articles of association. Most large financial institutions have a board of directors, which in turn appoint an executive board. The executive board control the day to day running of the organisation. The executive board issue orders regarding a plethora of matters, including, the requirements of authorised signatories that legally bind the bank in commercial dealings, deeds, contracts, etc. It is these executive orders which if broken or disregarded can void the appointment of the receiver. For example, an executive order of a bank states that two authorised signatories with power of attorney are necessary to sign a deed in order to bind the bank into contract with the receiver and on investigation it transpires that only one of the authorised signatories has power of attorney, then the deed of appointment of the receiver is invalid, as the banks own executive orders have been breached. I hope this clarifies things.
     
    Last edited: Oct 23, 2015
  19. Sarenco

    Sarenco Frequent Poster

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    The mortgage document itself will set out how a receiver can be appointed. This varies from document to document.

    Sometime the mortgage document will provide that specified officers of the lender can make the appointment under hand (by simple signature) or the document may require the appointment to be executed under seal and the bank's constitutive documents will specify who may attest to the affixing of the company seal to a document.

    Irish companies only have one board of directors. However, the majority of the directors of an Irish credit institution must be independent non-executive directors.
     
  20. Black_Adder

    Black_Adder Frequent Poster

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    What drives the Master insane is that in his view the process and procedures are there.
    The Banks are casual about this and why wouldn't they be?
    As costs follow events, individuals are fearful taking cases.
    Few have courage.
    I can see no fear in Banks .