The High Court refused a solicitor’s application to charge two Dublin premises with his legal costs, ruling that the earlier removal of a receiver had not recovered or preserved property within the meaning of the Legal Practitioners (Ireland) Act 1876.
Mr Justice Ryan delivered judgment on 31 January 2014 in an application by The Merrow Ltd (in liquidation) against Bank of Scotland plc and David O’Connor. The motion was brought by Sean Foley, who had acted for Merrow in proceedings challenging O’Connor’s appointment as receiver and manager of The Belohn Ltd.
The Belohn owned and operated a public house and restaurant known as Foleys Bar/O’Reillys, at premises comprising two buildings at Merrion Row and Upper Merrion Street. Merrow owned all the shares in The Belohn. The bank held mortgages over the properties and security over the business.
In March 2013, Gilligan J declared the receiver’s appointment invalid under both mortgages. The appointment defect concerned one mortgage, but the court ruled that the business was operated as a unit and could not practically be divided. The companies later entered examinership, which collapsed, and were wound up in July 2013.
Merrow had been awarded costs in the receiver proceedings, but the amount had not been taxed or ascertained. Foley separately sought a charge over the premises, or alternatively their sale proceeds, for costs and outlays he said amounted to €223,921.50. He argued that his work had secured the retention or preservation of valuable property, and that section 3 could apply even though the properties belonged to The Belohn rather than his client, Merrow.
The bank disputed that any property had been recovered or preserved. It argued that the successful challenge changed control of The Belohn temporarily but left its assets, liabilities and mortgages unchanged. It also raised questions about the amount and scope of Foley’s bill. The judge did not determine the fee amount or resolve the bank’s criticisms of it.
Mr Justice Ryan accepted the bank’s argument on the statutory requirement. He held that the company’s property did not change when the receiver was appointed or removed; the result of the earlier case was a change in management and control, not a recovery or preservation of property. The application therefore failed under section 3.
The judge added that, even if the statutory requirement had been met, he would have refused the charge in his discretion. He cited unresolved issues concerning the previous solicitors’ potential fees, how Foley’s costs would be assessed, priority and set-off, as well as Foley’s close connection to the client company. Any potential claim, he said, would remain subject to the mortgagee’s prior interest and to set-off. The judgment did not decide the amount of fees due or make an order charging the premises or sale proceeds.