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Role of the Receiver The ordinary function of a receiver is to take possession of the assets subject to a debenture-holder’s charge. The receiver will often also be given the power to act as a manager, which simply means that the receiver has the ability to trade with the assets over which he has been appointed. Interestingly, the remedy of appointing a receiver is unique to common law jurisdictions and has given rise to a wealth of nuanced case law in the Irish courts which will be considered further below. Appointment of a Receiver In the normal course, a receiver is appointed pursuant to a contractual right of a secured debenture holder, which automatically comes into force once there is a default on the payment of the underlying loan. It is noteworthy that a body corporate cannot be a Receiver. Typically, a receiver may be appointed under the terms of a debenture, where the debts of a company become payable, whenever a resolution is passed to wind-up the company or whenever the company acts in such a way as to endanger or jeopardise the security created by the debenture. In some instances, a receiver may also be appointed by the court under a specific statutory power such as that contained within the Conveyancing Act 1881, now replaced by the Land and Conveyancing Law Reform Act 2009 or the NAMA Act 2009. A receiver may also be appointed by the court under its historical equitable jurisdiction arising from the Supreme Court of Judicature Act (Ireland) 1877. This is a distinct and separate power which does not stem from a contractual right. This largely hinges on the courts discretion and may be explored where it is just and convenient to do so, such as where it is necessary to protect a creditor’s interest, or to ensure their security does not fall into jeopardy. Where a receiver is appointed by a court, they are considered officers of the court and take their instructions from the court. In such circumstances it has been held that a receiver cannot concern themselves solely with the interests of the creditor who applied for their appointment. Rather the receiver is bound to consider the interests of all creditors and they are not deemed to be an agent of any particular person. Notification of Appointment While ordinarily the appointment of Receiver under a debenture will be the exercise of a private right and not require publication, section 436 of the Companies Act 2014 provides that where a Receiver is appointed over a company, the Registrar of Companies must be notified within 7 days and furthermore that the notice of appointment must be published in Iris Oifigiuil. Effect of Appointment on Board There is often confusion regarding the powers of directors once a receiver has been appointed. While technically the appointment of a receiver has no effect on the operation of the board, the director’s powers will ordinarily be curtailed to the extent and scope of the charging document under which the receiver is appointed. In reality, this often means that the board remain largely deprived of any power. Effect of Appointment on Liquidators The appointment of a receiver in no way inhibits the concurrent appointment of a liquidator. Conversely, the appointment of a liquidator similarly does not impede the appointment of a receiver. Both parties may operate in tandem in carrying out their distinct functions although in the case of receiver managers, in reality this often means that the receiver will continue to have control of the business. Effect of Examinership on Appointment of Receiver Under section 520(4)(b) of the Companies Act 2014 a receiver cannot be appointed while the company is under the protection of the court. However, the court is precluded from presenting a petition for court protection under section 512(4) of the Companies Act 2014 where a receiver has been appointed for a continuous period of three days prior to the presentation of such petition for protection under section 512(4). Effect of Appointment on Company Receivership does not affect the legal status of a company by any means. However, section 429 of the Companies Act 2014 requires that every invoice, order for goods, business letter, and company website must contain a statement that a receiver has been appointed. Additionally, the appointment of a receiver must be notified to the company, the registrar, the court (if they were so appointed) and any debenture holders as dictated by section 430 of the Companies Act 2014. Furthermore, section 430 states that where the receiver is appointed on foot of a floating charge, then company directors must present the receiver(s) with a detailed statement of affairs within 14 days of their appointment. This statement must contain particulars of the company’s assets, debts and liabilities in addition to the securities held by the company. Notably, if a receiver has been appointed on foot of a debenture, the statement of affairs has to be verified by statutory declaration. Receiver as Agent of Secured Creditor It is well established in Irish jurisprudence that a receiver, once appointed on foot of a debenture, while technically the agent of the Company, acts for the secured creditor. This peculiar paradox has led to countless parties brining actions before the courts based upon the literal interpretation that the receiver is exclusively the agent of the company, however for over a century, the courts position has been clear. As first stated in Gomba Holdings UK Ltd. v. Homan [1986] 3 All ER 94 the agency of a receiver is a special agency: “Although nominally the agent of the company, his primary duty is to realise the assets in the interests of the debenture holder and his powers of management are really ancillary to that duty”. Liability of Receiver While it has been held that receivers act in furtherance of the interest of a debenture holder, ordinarily they cannot be held personally liable for contracts entered into on behalf of the company prior to their appointment. This position may be contrasted with contracts entered into by the receiver post their appointment and naturally therefore receivers should exercise considerable caution in entering such contracts. Under section 438(5) of the Companies Act 2014 the Receiver is entitled to be indemnified out of the secured assets of the company in relation to liabilities arising from contracts entered into during the course of the receivership. In the case of contracts entered into prior to their appointment as Receiver, the Receiver may disclaim or novate such contracts. It is noteworthy in this regard that the counter party to such contracts only has a cause of action the company, which may in most instances be cold comfort. The Remuneration of a Receiver The remuneration of a Receiver is ordinarily dealt with within the debenture itself and will detail the Receiver’s remuneration, costs, charges and expenses. Section 444(2) of the Companies Act 2014 sets out that the High Court may fix the remuneration of the Receiver, notwithstanding that it may have already been set out by instrument. A liquidator, creditor or member has authority to make such an application. The Powers of a Receiver The powers of receivers are found in both the contractual documentation leading to their appointment and statute. The powers of receivers are a constant breeding ground of litigation and the courts have repeatedly highlighted that when determining the powers of a receiver, focus should be placed on whether the language of the Deed of Appointment reflects the actual wording contained in the debenture providing for such appointment. Any gulf in interpretation between these two will often leading to a finding against the receiver’s actions. The Companies Acts have largely confirmed the common law powers of receivers and clarified their remit. Notably section 437(1) of the Companies Act 2014 states that receivers may act in the interest of assets in the state but also elsewhere, allowing for potential international assets to be realised in satisfaction of security. Section 437 (3) lists the first function of a receiver as entering into possession and taking control of property of the company according to the terms of the order or instrument giving rise to such appointment. The general jurisprudence in this area indicates that a receiver can take possession of charged property by way of interlocutory injunction. It is important to note that in such contested cases the court will apply the more stringent “strong and clear case” test to the granting of such an application as opposed to the usual standard for the grant of injunctions being the “balance of convenience” test. This higher threshold of proof is the same as that applied to other mandatory interlocutory injunction applications and reflects the harsh consequences of repossessing a company’s property. Section 437 further empowers the receiver to lease, let on hire or dispose of property of the company in lieu of an outright sale. Additionally under this section a receiver may also “carry on any business of a company”. This was an important adaptation of the statutory role of receivers as previously only receiver managers, as appointed by the relevant instrument, had such powers. This section also highlights a clear and important distinction between receivers appointed over company and personal assets. Section 24(3) of the Conveyancing Act 1881 and section 108(3) of the Land and Conveyancing Law Reform Act 2009 grant receivers the power to “demand and recover all the income to which the appointment relates, by action or otherwise, in the name either of the mortgagor or the mortgagee, to the fully extent of the estate or interest which the mortgagor could dispose of”. Notably these provisions, which deal with personal property, do not give the receiver the statutory right to take possession of charged property, to sell such charged property or to carry on the business of the chargor. Application for Directions Section 438 gives a very useful statutory power to receivers to apply to the court for directions in relation to any matter in connection with the performance or otherwise, by the receiver, of his functions. Common examples of such applications involve disputes as to whether a receiver is entitled to take possession of charged property or clarification surrounding retention of title clauses. In Re Salthill Properties Ltd [2006] IESC 35, McCracken J. summarised the general nature of the jurisdiction granted under this section as follows: “The purpose of the procedures…is to permit a person who has been effectively put in control of a company…by a specific creditor…to control the affairs of the company and obtain the advises of the court in as efficient and speedy a manner as possible”. Duties of Receiver when selling property A common concern of a receiver in exercising their primary task of sale is what duties are owed by them and to whom are such duties owed? The case law in this area is interesting in how it reflects the unusual legal position of a receiver as contrasted with liquidators or administrators in the UK. Obligation to obtain best price reasonably attainable A common dispute that arises upon receiver sales with borrowers surrounds the sale price of the property. This is understandable as very often such sale may crystallise a residual debt without the benefit of an underlying asset. Murphy J. has stated In Re Bula Ltd [2002] 2 ILRM 513 that the receiver in selling the property of the company, “must exercise all reasonable care to obtain the best price reasonably obtainable for the property at the time of sale”. This common law duty is largely captured in section 439(1) of the Companies Act 2014 which states that a receiver must “exercise all reasonable care” in disposing of company property and is obliged to “obtain the highest price reasonably obtainable for the property at the time of sale”. There are no predetermined rules as to how such a sale should take place and it will be left to the Receiver as to how this process should be conducted. It is worth noting that the general jurisprudence in this area would suggest that the duty of care in section 439 also extends to the guarantors of a company’s liability. While generally a receiver cannot rely on expert evidence alone to discharge their duty under this section, in Re Harcourt Life Assurance Co. Ltd. [2016] IEHC 238, McGovern J. found that such duty was satisfied by obtaining expert valuations and demonstrating that the price achieved was within the upper range of valuations, even if not necessarily the highest. No obligation to delay sale for potentially superior price There is often a common misconception by borrowers who may not wish to see their charged assets immediately sold, that the receiver is bound to wait for a return to a better market or other positive event before sale. In Cuckmere Brick Co Ltd. v. Mutual Finance Ltd [1971] Ch 949, the court concluded that there is no obligation on the receiver to delay a sale in order to receive a potentially superior price. It is worthwhile noting that this position potentially contrasts with that of a liquidator who has no interest of his own to which he may give priority and must therefore take reasonable care in choosing the time at which to sell the property. In the Supreme Court Denham J. confirmed this approach in the case of Re Bula Ltd [2003] 2 IR 431 and adopted the following illuminating passage from the case of in Re Charnley Davies Ltd (No 2): “A mortgagee is bound to have regard to the interests of the mortgage, but he is entitled to give priority to his own interests, and may insist on an immediate sale whether or not that is calculated to realise the best price”. Preferential Payments when Receiver is appointed under a Floating Charge  Section 440 of the Companies Act 2014 obliges a receiver appointed to a company on foot of a floating charge to pay preferential creditors (such as the Revenue Commissioners) out of any assets coming into the hands of the receiver in priority to any claim for principal or interest in respect of the debentures. The Caw Law – Challenges to Appointments Not unsurprisingly, there has been a long line of consistent challenges to the appointment of receivers by borrowers. These challenges have borne a host of technical arguments which are regularly repeated in case before the courts. Due to the regularity with which the same cases were presented and relied upon by practitioners before the courts, High Court Practice Direction 97 (updated in December 2022) compiled a core booklet of authorities for a number of areas including challenges to the appointment of receivers. The following is a synopsis of the all of the cases listed in the core court booklet of authorities as per High Court Practice Direction 97 : McEnery v. Sheahan [2012] IEHC 331 The repeal of the Conveyancing Act 1881 and the implementation of the Land and Conveyancing Reform Act 2009 spurned a host of technical legal challenges to the appointment of receivers. In particular, in the Start Mortgages case Dunne J. held that the procedural right of a mortgagee to apply for possession of registered land in a summary manner, under section 62(7) of the Registration of Title Act 1964, had not been acquired prior to the repeal of section 62(7) by the 2009 Act, as no demand had been made prior to the date of repeal (ie 1 December 2009) and therefore could not be exercised after such date. In the McEnery case Feeney J. distinguished Start Mortgages and held that a mortgagee, pursuant to a mortgage by deed created before 1 December 2009, acquired the substantive right under the Conveyancing Act 1881 to appoint a receiver "at the time the mortgage was created", and that such right survived the repeal of the 1881 Act. Thus Feeney J. created a clear distinction between applying for possession of registered land in a summary manner (as was the case in Start Mortgages) which was a procedural right; and the entitlement to appoint a receiver by reference to the 1881 Act (as was claimed in the case of McEnery) which was a substantive right. Upon appeal, Dunne J. in the Supreme Court similarly concluded that the repeal of the 1881 Act did not have the effect of removing the power to appoint a receiver for such mortgages. Re Elektron Holdings Ltd: McCann v. Halpin [2013] IEHC 495 The central issue in this cases was the correct interpretation of the phrase “close of business” in the context of a demand letter severed prior to the appointment of a Receiver. The bank issued a demand letter in the following terms: “In the event that payment is not received by close of business on 17 February 2012, we are entitled to and reserve the right to enforce any security given to us to secure the facilities made available … to take all such actions as are permitted under the said security (including, without limitation, the appointment of a receiver)….” (underlining added). It was contended by the borrower that as the receiver was appointed at 4pm, this deprived him of his opportunity to pay off the debt by traditional close of business hours, being 5pm or 5.30pm. Peart J. in dismissing this argument concluded as follows: “Where a letter of demand requires repayment forthwith, and threatens that if the funds are not received on a particular day by "close of business", that must be interpreted as meaning the end of the banking business day .” The end of “the banking business day” was considered to be 4pm. The Supreme Court later upheld this reasoning. The Merrow Limited v. Bank of Scotland & Anor. [2013] IEHC 130 In this case the company operated a well-known pub on Baggot Street, Foley’s Bar, and had borrowings with Bank of Scotland of approximately 4m euro. Following default, a receiver was appointed under a Deed of Appointment by an authorised officer of Bank of Scotland Plc however the Deed of Appointment was not executed under the bank’s seal as was required by the terms of the debenture. The bank argued that its Memorandum and Articles of Association did not require it to have a seal and therefore it was not possible for the bank to have executed the Deed of Appointment under seal. This argument was rejected by Gilligan J. and he reaffirmed the principle of the necessity for a strict observation of the terms of the debenture when appointing a receiver. The judge concluded as follows: “Since a receiver’s authority is derived from the instrument under which he is appointed, an appointment is not valid unless it is made in accordance with the terms of that instrument.” As a result, the court granted a declaration that the purported appointment of the receiver was invalid arising from non-compliance with the set terms of the mortgage deed. McCleary v. McPhillips [2015] IEHC 591 Following the economic crash and the wave of receiver appointments by various lending institutions, several borrowers raised arguments based on the improper execution of mortgage documentation. In the aforementioned case, Cregan J. accepted that there had been a failure to appointment the Receiver correctly as the deeds of appointment had been executed under hand rather than under seal as was required by the mortgage deed. The judge considered that this inconsistency invalidated the appointment of the Receiver. Cregan J. concluded: If the instrument provides that the appointment is required to be by deed, or under seal, that formality must be observed; and If the instrument requires that the appointment is to be made in writing under hand, that formality must also be observed. Harrington v. Gulland Property Finance Limited & Anor. [2016] IEHC 447 This case concerned an injunction application seeking to halt the appointment of a receiver. The defendant had acquired its loan under which it purported to appoint a receiver from IBRC (formerly Anglo Bank). The argument raised in this case has become a common theme by challengers to such appointments and centred on the claim that the relevant interest in the charge had not been properly transferred to the alleged charge holder and thus they had no authority to make an appointment of a receiver. Up until this case it was generally thought that that a charge holder could appoint a receiver if the relevant power was contained in the mortgage documents, but could not convey good title to the purchaser until the transfer of the charge had been registered. Notably the court felt that section 64(2) of the Registration of Title Act 1964 should be interpreted to mean that until the relevant Form 56 had been lodged in the Land Registry registering the transfer of the charge, the transferee of the charge has no interest in such charge. As a result no contractual rights under such charge could be conferred on the transferee. Baker J. concluded as follows: “Accordingly, it seems to me that the plaintiffs have made out an arguable case that in the absence of registration, or some other means by which the interest in the charge has been transmitted or is deemed by statute not to require registration, that the contractual interest in the charge has not become transferred and therefore [the respondent] may not, in pursuance of the contractual power contained in that mortgage or charge appoint a receiver.” This decision prompted lenders to register transfer of ownership before seeking the appointment of a Receiver. This decision however was somewhat ameloriated by the later decision in Woods v. Ulster Bank Ireland & Anor . more fully discussed below. English v. Promontoria (Aran) Limited [2016] IEHC 662 The transfer of loan books to other lending institutions and various funds has created a wealth of case law. In particular there has been much debate about the evidentiary standards of such transfers and the proofs required to demonstrate that such a loan has been validly assigned. In this case the Court held that the plaintiff being a mortgagor was entitled to insist on the proof of transfer and ownership of the mortgage before he was made to comply with the demand for payment by the assignee. The court acknowledged that a borrower is not entitled to know certain information such as the consideration paid for the transfer or details of other mortgages transferred under the same deed. However, the Court did require certain necessary elements of the transfer to be made available to Mr. English. Murphy J. therefore granted a stay on the appointment of receiver, stating; “If, as in this case, [the chargholder] purports to exercise that right of transfer, then a complete stranger with whom the plaintiff has no connection can come knocking on his door claiming an entitlement to possession of his property. It appears to the Court that before ceding possession of his property, the plaintiff is entitled to insist that the stranger prove its entitlement to possession by showing that it duly acquired the interest of the bank in his loans and the security underpinning those loans, in particular, the mortgage on the property”. The Court rejected the proposal that the documents could be submitted to the Court for inspection and emphasised that it was not the role of the Court to assure Mr English that the mortgage was properly transferred. Significantly however Murphy J. recognised the conclusiveness of the register by stating: “Where the land in issue is registered land, proof of ownership is straightforward in that the register is conclusive as to title. If the stranger is registered as owner of the first legal charge then he has all the rights and entitlements that flow from the charge.” The matter came back before Murphy J. in May 2017 and having provided copies of the additional documentation showing the chain of title from Ulster Bank to the Defendant, Murphy J. lifted the stay on the appointment of a receiver. Woods v. Ulster Bank Ireland & Anor. [2017] IEHC 155 This case concerned a challenge to the appointment of a receiver primarily on the following grounds: whether the power to appoint a receiver is dependent upon the continuation in force at the date of appointment of the relevant provisions of the Conveyancing and Law of Property Act 1881 (which have now been repealed) and; whether the bank was entitled to appoint a receiver before it was registered as owner of the charge. Baker J., following Feeney J. in McEnery (see above), determined that the bank had a contractual power to appoint a receiver (by incorporating section 19 of the Conveyancing Act 1881 into its terms) and that the exercise of that contractual power was not dependent on the continuation in force of the provisions of the Conveyancing Act of 1881 (which was repealed in 2009). Significantly Baker J. further found that the contractual power to appoint a receiver was not dependent on registration of the Bank as owner of the charge in respect of the registered land. The Plaintiff had argued that as the Receivers had been appointed prior to the registration of the Bank as owner of the charge, the appointments were invalid. It was held that in accordance with Rule 63 of the Land Registration Rules 1972, registration is deemed to be completed on the day on which the application is received for registration. Furthermore, the joint receivers were appointed under a contractual power. As such, the Bank did not have to be registered as owner of the charge at the time they sought to exercise the power to appoint a receiver, as that power was not dependent on it being registered as owner of the charge. This decision affirmed the position in Kavanagh & Bank of Scotland plc v McLaughlin & McLaughlin [2015] IESC 27 and it resolved some of the confusion that had arisen from the decision in Harrington v Gulland Property Finance Limited (see above). In that case the High Court had found that the debtor had made an arguable case that the receiver was not validly appointed on the basis that the purchaser of the loans and the relevant charge was not yet registered as owner of that charge in the Land Registry. McCarthy v. Moroney & Anor. [2018] IEHC 379 In this case the Defendant’s financed several building projects through loans. In 2011, when loan repayments ceased a receiver was appointed and a dispute arose as to the validity of such appointment. In particular, Mr. Moroney relied upon the judgment of Gilligan J. in Merrow (see above) where emphasis was placed upon the strict compliance of the wording in the charge documentation for the appointment of a receiver. McDonald J held that in reviewing the language of the Deed of Appointment, the Receiver was merely purported to be appointed as “receiver” (as opposed to a “receiver and manager” as listed in the mortgage documentation). McDonald J. expressed the view that this divergence of definition between the Deed of Appointment and the mortgage document was most likely fatal to the receiver’s appointment, although as this was an application for interlocutory relief, he did not have to determine the substantive issue. McDonald J did however express the view that the receiver would: “face an uphill struggle in persuading a court at the trial that he had been validly appointed.” This view would subsequently be relied upon in a number of cases detailed below. McCarthy v Langan [2019] [IEHC] 651 Following on from the decision in McCarthy v. Moroney (see above), Mr Langan sought injunctions to stop the sale of two properties over which a receiver had been appointed. The loans were subsequently transferred from ACC to Rabobank and the Receiver’s appointments were novated. Both properties had been sold by Rabobank, selling as mortgagee in possession, prior to the hearing of the action. Despite these sales, Allen J. concluded that the case was not moot as if the appointments were invalid, there may be a case for loss suffered. Mr. Langan argued that the Receiver was not entitled to the orders sought against him as the Deed of Appointment merely appointed him as “receiver” rather than as “receiver and manager”, which was the term used in the charge documentation. Allen J. accepted that it is well established that a power to appoint a receiver and manager cannot be used to appoint a receiver who is not a manager, and vice versa. However Allen J in deciding the appointment of the receiver was valid determined that: “The crucial question is not how he is described, but what he was”. Allen J. considered the observations of McDonald J. in McCarthy v Moroney (see above) but placed less emphasis on the actual description of the powers conferred on the Receiver by the Deed of Appointment and more on their substance. He found that the deeds of appointment in this case referred to the plaintiff as “the Receiver”, which was the description applied by the underlying security documents to a “receiver and manager”. In finding that the receiver was validly appointed as a receiver and manager Allen J. concluded: “The power invoked by the deeds of appointment is the power conferred by the relevant deed of charge. That is a power to appoint a receiver and manager, and does not permit the appointment of a mere receiver…If the appointee is invested with all of the powers conferred by the deed of charge, he has power to manage as well as to receive income and so he is a receiver and manager”. Charleton & Anor. v. Scriven [2019] IESC 28 This leading case was concenred with the applicable tests to be applied in injunction applications concerning Receivers. The issue of whether a receiver who was defined as a “receiver and manager” in the mortgage documentation but merely as a “receiver” in the deed of appointment came before the Supreme Court in this case. The court carefully considered McDonald J.s observations in McCarthy v. Moroney (see above) in the context of determining whether to grant injunctive relief. Clarke CJ. appears to have taken a different view to McDonald J and accepted that it was arguable that the appointment of the receiver was valid on the basis that the term “receiver” as defined in the mortgage deeds themselves, referred to a “receiver and manager”. While not ruling on the validity of such an appointment as this was merely an interlocutory application, the court drew a distinction between interlocutory relief that would compel the continuation of payment of rents to the bank pending trial and an order for possession where the receiver intends to sell the property. The court appeared mindful that a sale of the property could ultimately determine the case whereas the collection of rents simply held financial consequences for the parties pending trial. Clarke CJ. stated this position as follows: “….having regard to the underlying principle of attempting to fashion an order which runs the least risk of injustice, there may very well be a very important distinction to be made in receivership cases between situations where the receivers concerned simply intend to maintain the situation pending a trial and ones where the substance of the interlocutory order sought is one designed to, in practice, bring the proceedings to an end.” The court indicated that a “strong arguable case” (the Maha Lingam test) would have to be shown for any action that amounted to a mandatory injunction where a party was compelled to do something. An example of such an injunction would be enabling the Receiver to sell the property. Whereas the differing standard of a “fair issue to be tried” should be applied to any relief that was effectively prohibitory in nature (the traditional Campus Oil test). An example such an injunction would be enabling the Receiver to collect rents from the property. Finally, Clarke CJ. noted that there is an obligation on a party who obtains an injunction to have the issues determined in a timely way. Crowley v. Promontoria (Oyster) DAC [2020] IEHC 309 In this case Mr. Crowley challenged the appointment of a receiver over his property on multiple grounds. In particular, the plaintiff relied on the decision of Murphy J. in English v. Promontoria (Aran) Limited (see above), in which the court placed a stay on the appointment of a Receiver pending establishment by the defendant as a matter of law and fact of its entitlement to appoint the Receiver. Sanfey J. indicated that he felt that the evidence of transfer of loans form First Active Bank to Ulster Bank was unsatisfactory which in turn could cast the Receiver’s appointment into doubt. However, Sanfey J.’s concerns in this regard were allayed by the fact that Promontoria were the registered owners of the charge and relied upon the English v. Promontoria (Aran) Limited (see above) as precedent to state that under the Registration of Title Act 1964, registration of a party as the owner of a charge is conclusive evidence of title. Finally the court also said there was no issue in Promontoria redacting some documents which it put into evidence in order to establish its title before appointing a Receiver. Fennell v. Corrigan [2020] IEHC 79 In this case, the dispute centred on the fact that the Deed of Appointment referred to the appointment of a “receiver” (lower case “r”) rather than “Receiver” or “receiver and manager”. Pilkington J stated that the powers and duties of the receiver and manager were clearly set out in detail, despite the omission of the word “manager” in the Deed of Appointment and that the appointment could not therefore be held as invalid on this ground. In particular the court noted: “The powers and duties of the receiver and manager are clearly set out in detail and in my view, equally clearly, the deed of appointment is explicitly made referable to that 2007 mortgage and the extensive powers and duties of the person so appointed as receiver and manager.” A more nuanced argument was made that there was a failure to include full stops in the abbreviation of public limited company in accordance with the Companies Acts as the relevant banks were referred to as IIB Bank plc and KBC Bank plc rather than p.l.c. Ultimately Pilkington J. also dismissed this technical argument on the basis there was no question as to the actual identity of the banks. This decision was confirmed by the Court of Appeal with Murray J. concluding: “… there is, in my view, no ambiguity in either instrument in issue here because, when the mortgage and deed of appointment are construed by reference to each other, their meaning is clear. The deed of appointment operated to appoint a receiver who had powers of management and therefore to appoint a receiver and manager. The mortgage deed allowed only the appointment of a receiver and manager, not a receiver who lacked powers of management. There is nothing in the mortgage to support the proposition that the failure to use the word ‘manager’ in the appointment meant that an appointee did not have powers of management or otherwise meant that there had not been an appointment of a ‘receiver and manager’ …” Everyday Finance DAC & Ors. v White & Ors. [2020] IEHC 71 This case concerned an application brought by a Receiver for interlocutory injunction relief amounting to the surrender vacant possession of the premises. Sanfey J. applied the principles as set out in Charleton & Anor. v. Scriven (see above) and determined that the applicants had met the high threshold as set out by Clarke J. in determining that there was not: “an issue of any substance concerning the validity of the appointment and powers of receivers”. The court appeared to be influenced by the fact that up to 15 people resided within the property and that both of the defendants, while not residing in the property, may have been in receipt of considerable income from it. The court concluded that it should make the requested order to grant possession but following on from the reasoning in Charleton, thought there was considerable merit in putting a stay on such order so as to permit the Receivers to secure the property, regularise the rent position while also affording the defendants the opportunity to defend the substantive hearing of the issues at a full trial.

In February 2020, Covid-19 reached Ireland and had a devastating effect on many small businesses. In response to the threat of another financial crisis, legislation was introduced that incorporated a new restructuring tool known as the Small Companies Administrative Rescue Process (“SCARP”) in December 2021. This new process is based largely on the examinership model, but notably does not require an application to court for its commencement. The idea behind SCARP is to give companies breathing space from their creditors in order to implement a restructuring plan, which ordinarily includes the writing off of a portion of creditors debts. The biggest challenge for practitioners is identifying when this legislation can be used and how they can apply it to their clients. This will undoubtedly become a new source of work for practitioners as the likes of retail shop owners, pubs, restaurants and some construction companies struggle with rising costs and reach out to their solicitor for help. The following guide aims to enable practitioners to identify likely candidates for SCARP and consider whether a Rescue Plan under the new legislation is possible. Who can apply? The Companies (Rescue Process for Small and Micro Companies) Act 2021 is aimed at protecting “small” and “micro” companies. Small companies are defined as having an annual turnover of up to €12 million, a balance sheet of up to €6 million and up to 50 employees. Micro companies are defined as having a turnover of up to €700,000, a balance sheet not exceeding €350,000 and up to 10 employees. How does a company prepare for SCARP? The first step a company should take in considering the SCARP process is that the directors should prepare a statement of affairs in accordance with section 558B(4) of the act. The statement of affairs is accompanied by a statutory declaration that is then given to a Process Advisor. What is a Process Advisor? The Process Advisor is ordinarily an experienced insolvency practitioner who will attempt to restructure the company’s debts. It may be noted that the company’s auditor or accountant cannot act as its Process Advisor. The Process Advisor will review the company’s statement of affairs and other financial information (as set out in Section 558C(4)) and then outline their determination as to whether the company has a “reasonable prospect of survival”. It is important to note that a Process Advisor does not take executive powers and that the board of the company maintains full control. The Process Advisor’s fees are subject to super-preferential status over all other creditor claims. How does the rescue process commence? If the Process Advisor determines that the company does have a reasonable prospect of survival, then they will confirm this in writing to the directors of the company. Section 558D(2) sets out that, within seven days of receipt of such confirmation, the directors shall convene a board meeting to consider whether the appointment of a Process Advisor is appropriate. Section 558K compels the Process Advisor to notify employees, creditors and the Revenue Commissioners within five days of their appointment. Section 558O states that creditors must acknowledge receipt of such notice within seven days and further information regarding their claim within fourteen days. Can a creditor opt out of the rescue process? Section 558L provides a list of potential excludable debts. This list includes the Revenue Commissioners. Notably, the holders of such excludable debts have fourteen days to notify the Process Advisor of their intention to be excluded from the rescue plan. Such creditors must give reasons for their decision to opt out. From anecdotal evidence, it appears that the Revenue Commissioners are largely supportive of the process and generally determined to opt in. What is a Rescue Plan? Section 558Q sets out the matters that must be incorporated into any Rescue Plan. These include: - a statement of affairs. - the likely outcome for creditors on a winding-up or receivership. - the effect of the plan on each creditor. - the reasons why the plan is fair and equitable. - details of the Process Advisor’s remuneration. How is the Rescue Plan approved? Section 558T puts on onus on the Process Advisor to call a meeting of members and creditors as soon as is practicable after preparing the Rescue Plan. Section 558T(4) requires that such meetings shall be fixed for a date no later than 49 days after the date on which the Process Advisor was appointed. It is important to note that creditors must be give seven days notice of such meetings, so in reality the meetings must be convened no later than day 42. Section 558Y(4) sets out that a Rescue Plan shall be deemed to have been accepted by a meeting of members or creditors when 60 percent in number, representing a majority in value of the claims represented at that meeting, have voted in favour. Section 558Y(5) sets out that the Rescue Plan shall be binding on members and creditors where at least one class of impaired creditor accepts the plan and, furthermore, that 21 days have passed from the date of filing of the notice of approval in the relevant court office and no objection is filed in accordance with section 558ZC. Section 558Z requires that creditors are given notice of such approval within forty-eight hours. It is important to note that under section 558ZB the Rescue Plan will not become binding on members and creditors until 21 days have elapsed from the filing of the notice of approval. What does it mean for a Process Advisor to “certify” certain liabilities? Like Examinership, the Process Advisor is given the power under section 558ZAA to certify company liabilities. This certification means that such liabilities are treated as expenses of the Rescue Plan and therefore give such creditors a preferential status. This provision is often used as an incentive to encourage creditors to continue to trade with the company while a Rescue Plan is formulated. Practitioner’s checklist before entering SCARP! As can be seen from the above timelines, the timelines in SCARP are tight. It is recommended therefore that the following should be discussed with your client before entering into the process: Prepare an up-to-date Statement of Affairs of the Company. Provide a full listing of all Company’s creditors and their addresses. Provide a full list of retention of title claims and existing stock details. Consider how a Rescue Plan would be funded. Will directors introduce funds? Prepare a statement of the estimated outcome in a liquidation and compare this with a proposed Rescue Plan. The future of SCARP Considering the stark numbers of rising small business failures, particularly in the hospitality space, it is incumbent on practitioners to seek the appropriate advice from corporate restructuring specialists when consulted by companies in this quagmire of historical debt. The sooner this advice is sought and considered, the more realistic the company’s chances of survival will be. SCARP offers a vital lifeline to many struggling companies, and in the coming months, it needs to become a standard go-to option for practitioners and their clients.

The Law Society of Ireland has published the provisional results of its 2024 Council election. Fiona McNulty, Rosemarie Loftus, Áine Hynes SC, Martin Lawlor, Maura Derivan, Brian McMullin, Stuart Gilhooly SC, Tony O’Sullivan, Graham Kenny, Garry Clarke, Cristina Stamatescu, Peter Doyle, Imran Khurshid and Thomas Coughlan have been deemed elected in the national election. Senior vice-president Eamon Harrington was automatically elected under the Society’s bye-laws. Sonya Lanigan was deemed provisionally elected in the Leinster provincial election. The results will be confirmed at the Law Society’s 2024 AGM on Thursday 7 November 2024. 

Last month, a seven-judge Supreme Court unanimously held that the current law that denied John O’Meara a widow’s contributory pension was unconstitutional. Mr O’Meara had been in a relationship for 20 years and had three children before his partner developed breast cancer and died in 2021. When he applied for the pension he was denied on the basis that he did not satisfy the definition of a widower or a civil partner.  The legislation will now be sent back to the Oireachtas for review. One of the fascinating features of this case lies buried within its lengthy judgments. While the court was unanimous, it was split 5-2 on the rationale for its decision. The majority, lead by Chief Justice O’Donnell, based their decision on Article 40.1 which is an equality guarantee for all citizens. However the minority judgments of Justices Hogan and Woulfe relied upon Article 41, relating to the constitutional protection of the family. In particular, they attempted to overrule a previous Supreme Court decision known as Nicolaou. A distraught ghost of Ireland’s Catholic past lurks within their pages. The anodyne analysis of the judgment’s text belies the tragedy of a forgotten family that our laws did not protect. In the 1950s, Leon Nicolaou, a Cypriot immigrant, lived in London and ran a small coffee shop. A young Kathleen Donnelly travelled from Ireland and soon took up a job in the cafe as a waitress. Leon was 20 years Kathleen’s senior but the pair soon became romantically involved. In time, Kathleen returned home to Ireland only to discover that she was pregnant. This was considered a scandalous event and so Leon offered to remedy matters by marrying her. Kathleen’s parents approved of the marriage on the condition that Leon become a Catholic. The marriage was therefore delayed to allow for this conversion. Events overtook the couple, however, when in February 1960 Kathleen gave birth to a baby girl, Mary Carmel, in a north London hospital. In complete distress, Kathleen and her new baby returned to Ireland and were admitted to St Patrick’s Mother and Baby Home which had a reputation for exceptional harshness. The nuns at St Pat’s sent more than 250 children to the US from the 1940s to the 1970s. Kathleen gave Mary Carmel up for adoption to the nuns and quietly returned to her native Galway. That would have been an end to the story, but Leon arrived unannounced to Kathleen’s front door. When he was informed what had occurred, he immediately instructed solicitors to challenge the adoption. Kathleen became so upset that she was admitted to Ballinasloe Mental Hospital and stopped all contact with Leon. But in time the romantic embers between the two were rekindled and they embarked on writing voluminous love letters to each other. Neither knew that these letters would later serve as evidence in a Supreme Court case. Two young barristers, John Cassidy and Donal Barrington, agreed to take a case for Leon and attempt to stop the adoption, but they suffered a humiliating defeat at the hands of a hostile three-judge High Court. Undeterred, Leon’s legal team appealed. In November 1965, the case opened before the Supreme Court at a time when the heating system in the courtroom had broken down and members of the judiciary sat with blankets wrapped around themselves. What followed was one of the most debated and controversial decisions ever to come from the Irish Supreme Court. Delivering the judgment on behalf of the Court, Justice Walsh noted that an “illegitimate child may be begotten” by a number of means including “rape, by callous seduction or by an act of casual commerce”. In considering these instances, the court ruled that the “family” under Article 41 of Constitution was strictly confined to a married couple and did not extend to an unmarried parent. It further held that a natural father was not necessarily entitled to be heard prior to the making of an adoption order. The decision meant that Leon had finally lost his daughter forever. Interestingly by 1996, Leon’s former barrister Donal Barrington had himself ascended to the Supreme Court bench and once again had to consider the Nicolaou decision in the case of WO’R v EH. Like the O’Meara case this week, the occasion offered the court the opportunity to overrule the Nicolaou decision completely. Justice Barrington took the opportunity to describe the reasoning of Nicolaou as “fundamentally flawed”. No other judge on the court agreed, however, and Justice Barrington dissented alone. Nicolaou is a dark decision of its time that has remained hidden in plain sight for almost 60 years. Last month, two judges of the Supreme Court took the bold step of attempting to overrule it and extend the meaning of the “family” within the Constitution. As they were in the minority, the Nicolaou decision remains the law in Ireland and only married couples can claim special protection. In the face of the upcoming referendum on the meaning of the family in the Irish Constitution, Nicolaou’s story is a salutary tale that should not be forgotten.