The High Court has granted interlocutory injunctive relief to James and Louise McGarry in a dispute over two properties in Co. Sligo, finding fair questions to be tried about the appointment and powers of Tom O’Brien as receiver.
In a judgment delivered on 12 December 2017, Ms Justice Stewart said the receivership administration should be stayed until O’Brien establishes that Karl Smith was entitled to appoint him and that he was entitled to take possession of the properties. The court did not decide the underlying issues at trial, and its ruling does not determine whether the receiver may complete a sale.
The McGarrys argued that the mortgage documents did not empower a receiver to take possession or sell the properties. They alleged that O’Brien’s agents entered one property, removed furniture and damaged it. O’Brien denied that his agents damaged belongings and disputed the McGarrys’ account of his efforts to take possession. He said he had been appointed in September 2016 and was preparing the properties for sale before Havbell DAC, which claims the mortgage security, entered as mortgagee in possession and completed any sale.
The judge found no fair question to be tried over the transfer of the mortgage to Havbell, the amount due or the stamp duty challenge. She said the mortgage conditions permitted transfer without the borrowers’ consent, the transfer documents showed the security had moved to Havbell, and the borrowers had been notified. A demand letter dated 23 May 2017 stated that €436,833.56 was due, plus interest accruing after that date.
However, the court was not satisfied that the evidence established Smith’s authority to appoint O’Brien. The power of attorney referred to services under a master servicing agreement that had not been produced, leaving the scope of Smith’s authority unclear. Smith also relied on his position as a company director, but the court said the evidence did not show that Havbell’s board had approved the appointment. The judge found a fair question to be tried on the appointment’s validity.
The court also found a fair question about O’Brien’s right to take possession without first seeking an order from the court. The mortgage provisions gave a receiver powers concerning income, rents and profits, and the judge accepted that some forms of possession could be needed to carry out those duties. But whether those powers allowed a receiver to take possession from a protesting mortgagor without court recourse required fuller determination. The court said no sale by O’Brien was then in issue and expressed serious doubt that he had power to sell.
Although the McGarrys’ undertaking to pay damages was not substantiated, the judge concluded that damages were not adequate and the balance of convenience favoured them, given the unresolved questions and the risks to their property rights. The court proposed to grant the requested injunction.