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GAZETTE
JULY-AUGUST
1979
RECENT IRISH CASES
COMPANY
Receivership — Dispute as to
priorities between encumbrancers —
Order extending time for delivery of
particulars of mortgage or charge by
a company for registration —
Companies Act, 1963, Section 106
— Meaning of expression "without
prejudice to the rights of parties
acquired prior to the actual time of
such registration" in common form
of Order.
This was an application made to the
High Court under Section 316 of the
Companies Act, 1963 ("the Act") by
a receiver to determine an issue as to
priorities
between
two
encum-
brancers which arose in the course of
a receivership of a Company.
The Company, Clarets Limited
("the Company"), carried on a hotel
and restaurant business in premises
at Kenilworth Square, Dublin. The
premises had been purchased by the
Company from the first named
Defendant, Thomas G. McGann
("McGann"), leaving a substantial
part of the purchase money unpaid.
On 28 February 1975 the Company
executed a mortgage in favour of
McGann over the premises at Kenil-
worth Square to secure the unpaid
balance purchase money.
Particulars of the mortgage were
not delivered to the Registrar of
Companies for registration within 21
days of the creation of the mortgage
as required by Section 99 of the Act.
On an application by McGann to the
High Court on 29 July 1977 an
Order was made under Section 106
of the Act extending the time for
registering the mortgage and parti-
culars, in the prescribed form, were
duly registered in the Companies
Office on 23 August 1977. However,
in the period between the execution
by the Company of the mortgage to
McGann and McGann's registering
such mortgage under Section 99 of
the Act the Company had on 17
January 1977 executed a mortgage
debenture in favour of Stanchart
Bank (Ireland) Limited ("the Bank")
to secure accommodation granted by
the Bank to the Company. Parti-
culars of the mortgage debenture
were duly delivered under Section 99
of the Act. The mortgage debenture
contained a special clause providing
that the Bank's security was subject
to the rights of the prior mortgagee,
McGann.
In the course of the receivership of
the Company the premises at Kenil-
worth Square were sold by the
receiver. The Bank now contended
that its claim against the proceeds of
sale took priority to McGann's claim.
The Bank's contention was based on
the form of the Order made by the
High Court on 29 July 1977 under
Section 106 of the Act extending the
time for registering
McGann's
mortgage which included the follow-
ing statement:
" . . . but this Order to be without
prejudice to the rights of parties
acquired prior to the actual time of
such registration . . ."
The High Court (per Costello J.)
explained that this was the common
form of the Order in use since the
beginning of the century (i.e. under
the earlier Companies Acts), and
referred to
Re Joplin
Brewery
Company Limited [
1902] 1 Ch. 79.
In the present case it had been
expressly
agreed
between
the
Company and the Bank that the
Bank's mortgage debenture was
subject to McGann's first mortgage.
Thus, the Bank's rights were at all
times subject to those of the prior
encumbrancer. Therefore the right to
appoint a receiver, and enforce their
security by sale of the Company's
premises were made subject to
McGann's rights under his mortgage.
The effect of the Court's Order of 29
July 1977 under Section 106 of the
Act was that McGann's security
became a valid one when registration
(under Section 99 of the Act) was
actually effected "without prejudice
to the Bank's rights under their mort-
gage debenture". The Court was then
required to consider what
rights
the
Bank had acquired prior to the actual
registration
of
particulars
of
McGann's mortgage.
Held
(per Costello J.) that the
Bank's rights were limited or
qualified ones in that they were
subject at all times to those of
McGann under his mortgage. The
Bank were bound by the words of
their agreement and could not obtain
a priority which they had expressly
agreed they would not have.
Therefore the mortgage debenture of
17 January 1977 created by the
Company in favour of the Bank did
not rank in priority to the mortgage
of 28 February 1975 given by the
Company to McGann and that the
security which McGann obtained
under his mortgage ranked in priority
to that of the Bank.
The decision of the Court of Appeal
in
Re
Monolithic
Building
Company [
1915] 1 Ch. 643 referred
to by Kenny J. in
Interview Limited
[1975] I.R. 382 at 396 was
distinguished.
In the matter of Clarets Limited (in
Receivership) and the Companies
Act, 1963, Alex J. Spain (Receiver)
v. Thomas G. McGann
and
Stanchart Bank (Ireland) Limited.
- High Court (Costello J.) -
unreported — 22 November 1978.
EQUITY
Sale by a Cestui Que Trust to a
trustee of a remainder interest — The
duties of a trustee in such a case.
The Plaintiff was a beneficiary under
his uncle's Will of two properties in
Finglas, Dublin, one a dwellinghouse
to which he became absolutely
entitled and the other an 11 acre field
in which field the deceased gave a life
interest to his brother (the Defendant)
with the remainder interest to the
Plaintiff. It is about the sale of this
remainder interest that this case is
concerned.
In 1968, the Plaintiff, via an
intermediary,
offered
(without
success) to sell his remainder interest
in the property to the Defendant. The
Plaintiff then directly re-offered to sell
his interest to the Defendant and the
Defendant agreed to purchase the
interest for £1,500. A contract was
prepared by the one solicitor and
executed by both parties in August
1968. The transaction itself was not
completed until August 1973. The
Plaintiff sought to have the sale set
aside, firstly relying upon the equit-
able doctrine of undue influence and
secondly, on the ground that the
Defendant, being not only a life
tenant of the field but also one of the
trustees of the Will, had enfringed the
equitable principles which applied to
transactions between a cestui que
trust and a trustee and that the
bargain was an unconscionable one
and was vitiated by the equitable
rules relating to such bargains.
The Plaintiff's medical history and
financial
circumstances
were
examined. The Plaintiff's doctor gave
evidence that he was satisfied that the
Plaintiff
was
suffering
from