The High Court ruled that Allied Irish Banks plc (AIB), as mortgagee of two unsold apartments at Palaceanne Mills in Murragh, County Cork, had no current duty to contribute to the development’s management costs and no right of way or other easement to access those apartments over the common areas.
Mr Justice Clarke’s judgment, delivered on 4 May 2012, arose from a dispute between AIB and Palaceanne Management Limited, the company that owned the development’s common areas and freehold reversion. The bank’s mortgage, granted by developer Gail Coles in 2005, covered specified apartments and a separate vacant site, but not the common areas.
The dispute followed earlier proceedings over structural defects. Buyers of sold apartments had obtained damages judgments against Coles and Enniskeane Developments Ltd. The court had also ordered Coles to transfer the development’s common areas to Palaceanne. A receiver appointed in those proceedings accepted that AIB’s security ranked ahead of the buyers’ claims over the two unsold apartments.
At trial, the parties agreed AIB was not a mortgagee in possession. They also agreed the vacant site was outside the apartment estate and had a right of way of necessity over the common areas. AIB did not claim membership of Palaceanne, but accepted that any sale of the apartments would have to be through leases in the form used for other buyers, binding purchasers into the estate scheme.
The judge found that AIB had taken its mortgage with notice of that scheme, but its mortgage by demise was a different arrangement from the leases held by apartment buyers. AIB was a mortgagee, not a purchaser, and the court found no basis for transferring Coles’s management obligations to the bank. It also held that the intended scheme of express access rights negated any right of way of necessity or claim under the rule in Wheeldon v Burrows for AIB’s unsold apartments.
The court did not decide whether AIB or later purchasers might have to contribute to structural repair costs incurred before a sale. It said that question was premature and would require the basis for AIB’s acceptance of the estate scheme obligation, as well as proposed works, to be clarified. It did decide that neither AIB nor a later purchaser could be liable for ordinary day-to-day costs incurred before the calendar year in which a lease was executed.
The judge urged the parties to consider mediation. He listed the case for mention on 15 May 2012 so the parties could address the form of order and issues including costs. The judgment did not resolve those later matters.