Delaney v Allied Irish Bank, Declan Taite and Sharon Barrett IEHC 47
On 4 February 2014, the High Court refused an application, from a purported tenant of a property, for an order restraining a bank and duly appointed receivers from entering onto or attempting to sell the property on grounds that the lease had been granted in breach of the terms of a mortgage.
The tenant applied for injunctive relief in order to
- Restrain trespass on the property by either the bank and/or the receivers
- Prevent an attempted sale of the property
The background to the tenant’s application arose when a lease was granted to the tenant by his accountant in 2008 as security for a loan of €400,000 which the tenant had made to his accountant. The tenant intended to establish a business in the premises and commenced works thereon in 2009. Once he was notified by his bank manager that the property was subject to a mortgage, the tenant left the premises and did not carry out any further works on the premises. It transpired that the property was subject to a prior mortgage granted in 2007 between the accountant and Allied Irish Bank (AIB). The terms of the mortgage in the normal course precluded any lease of the premises without the prior consent of AIB. The accountant was subsequently declared bankrupt in 2009 and the property was transferred to AIB. In 2010 the bankrupt’s assets were acquired by NAMA.
In the substantive proceedings the tenant claimed damages against AIB for breach of duty of care in failing to properly advise him, and against the receivers appointed by NAMA for various breaches of statutory duties.
Upon applying for injunctive relief the tenant claimed entitlement to possession of the property under the 2008 lease. AIB claimed no injunction could be sought against it as it was no longer in possession of the property and had no part in its attempted sale or disposal. AIB also relied on the specific terms of the mortgage. The tenant additionally raised an estoppel argument by arguing that his bank manager had promised to “sort out” the matter on two separate occasions.
Mr Justice Cross held that the tenant had not established any entitlement to the lease and failed under the “Campus Oil” principles (Campus Oil Limited –v- Minister for Industry and Energy (No.2) IR88) in establishing an entitlement to injunctive relief. He specifically noted that damages would be an adequate remedy. He also referred to the decision in Fennell-v-N17 Electrics Limited (In Liquidation) IEHC228 whereby it was held that a mortgagor and a mortgagee can decide to expressly exclude the statutory power conferred by section 18 of the Conveyancing Act 1881 permitting the mortgagor to grant a lease without the bank’s prior consent. However, he noted that this was not obtained or agreed to in the present instance. The Judge was also satisfied that the tenant’s assertion that he had relied upon his bank manager’s promise did not amount to estoppel.
The Court noted that although the tenant had not done anything legally wrong and had been grossly deceived by his accountant, the creation of the lease between the tenant and his accountant had no legal effect as against AIB as the accountant did not obtain the bank’s prior consent to the granting of the lease.
Contributed by Rosaleen Walsh
