High Court dismissed appeal allowing new plaintiff to substitute in possession proceedings without granting leave to execute.

[2019] IEHC 217

THE HIGH COURT

CIRCUIT APPEALS

2018 No. 240 C.A.

BETWEEN

IRISH NATIONWIDE BUILDING SOCIETY

PLAINTIFF

AND

ORLA McNULTY

MICHAEL IGOE

DEFENDANTS

JUDGMENT of Mr. Justice Garrett Simons delivered on 11 April 2019.

INTRODUCTION

1. This matter comes before the High Court by way of an appeal from the Circuit Court. The legal effect of the order under appeal

was to substitute Mars Capital Ireland Ltd. for Irish Nationwide Building Society as the plaintiff in the title of the proceedings.

2. The order under appeal is dated 19 June 2018, and was made pursuant to Order 22, rule 4 of the Rules of the Circuit Court. The

order was made pursuant to a Notice of Motion issued on 22 March 2017. The reliefs sought in the Notice of Motion are, in fact, wider

than those ultimately granted by the Circuit Court. First, the Notice of Motion sought to reflect the fact that Mars Capital Ireland Ltd.

has been re-registered as a designated activity company or “DAC”. It seems from the terms of the Circuit Court order, however, that

the certificate of re-registration had not been exhibited in the grounding affidavit. This relief was accordingly refused by the Circuit

Court.

3. The grounding affidavit had also made reference to the need to seek the leave of the Circuit Court to issue execution in

circumstances where more than six years have now elapsed since the date on which the order for possession was first made. This

relief was not sought in the Notice of Motion, and does not form part of this appeal.

4. I reference these matters because it appears that the Defendants’ appeal is largely informed by a misunderstanding of the limited

effect of the Circuit Court order. More particularly, the gravamen of the Defendants’ appeal is that—given the history of the

proceedings and, in particular, various negotiated settlements between the parties—it would be unfair to allow the order for

possession to be pursued at this stage by a new party. As explained presently, these are matters which can be raised if and when

the Plaintiff makes an application to extend time. They are not matters which arise at the stage of an application to add a party to

the proceedings.

PROCEDURAL HISTORY

5. The within proceedings were issued on 28 September 2006. An order for possession was made against the Defendants by the

County Registrar of the County of Longford on 5 November 2008. This order was then appealed by the Defendants to a Judge of the

Circuit Court. It seems, however, that an agreement was subsequently reached between the parties whereby the Defendants would

consent to an order for possession subject to a stay of six months. By order dated 10 November 2009, the Circuit Court (His Honour

Judge Kennedy) struck out the appeal.

6. The next significant step which occurred in the proceedings was the issuing of a Notice of Motion by the Plaintiff on 22 March

2017. The principal relief sought was as follows.

“An Order pursuant to Order 22 Rule 4 of the Rules of the Circuit Court substituting Mars Capital Ireland Designated

Activity Company as Plaintiff in the within proceedings by reason of the legal assignment of the interest of the said

Plaintiff to Mars Capital Ireland Designated Activity Company over and in respect of the facilities and other obligations the

subject of the within proceedings.”

7. The application was grounded on an affidavit of a director of Mars Capital Ireland DAC, Mr. Morgan Sheehy, dated 25 September

2016. The affidavit sets out the series of transactions through which the loan facility and related security, the subject-matter of the

proceedings, were transferred from Irish Nationwide Building Society to Anglo Irish Bank Corporation Ltd. (subsequently Irish Bank

Resolution Corporation Ltd.), and, ultimately, by way of a loan sale deed dated 31 March 2014, to Sandalphon Mortgages Ltd. Mr.

Sheehy also explains that the Register of Title at the Land Registry was amended so as to reflect that Mars Capital Ireland Ltd. is the

holder of the charge in respect of the folio. The Form 56 (transfer of charge) has been exhibited, as has Folio 11497. It is stated

thereon that on 26 June 2014, Mars Capital Ireland Ltd. is the owner of the charge registered at No. 4.

8. Mr. Sheehy further avers that on 10 April 2014, Sandalphon Mortgages Ltd. changed its name to Mars Capital Ireland Ltd. A

Certificate of Incorporation on Change of Name dated 10 April 2014 has been exhibited as part of Mr. Sheehy’s affidavit. Reference is

also made to the fact that Mars Capital Ireland Ltd., a private company limited by shares, was then in the process of converting to a

designated activity company. No Certificate of Incorporation on Conversion to a Designated Activity Company has been exhibited.

9. The application to the Circuit Court had been opposed by the Defendants. In this regard, an affidavit was sworn before the Circuit

Court by Michael Igoe, the second named defendant, on 15 November 2016. In brief, Mr. Igoe relates the history of the property the

subject of the loan facility and underlying security. In particular, Mr. Igoe recites the difficulties that arose in regard to boundaries,

sewerage services, damage to property and consequential losses. Mr. Igoe also avers to certain planning law difficulties. Mr. Igoe

explains that there are separate High Court proceedings seeking damages in respect of the property.

10. The grounds of opposition are summarised as follows in the final paragraph of Mr. Igoe’s affidavit.

“12. As a speculative investor the caveat of the buyer beware must apply to Mars Capital. A well documented case

history pre existed their acquisition of our distressed mortgage with Irish Nationwide Building Society and they must be

deemed to have had full knowledge of our particulars and unique circumstances of the financials involved. In view of the

impending High Court litigation ref 2010/7795P and the contingencies involved I say Mars Capital must reconstitute

proceedings in their entirety and recommence their action. A current valuation report undertaken by Sherry FitzGerald

reflects the status that an agricultural value only applies to this property until substantial matters are determined by the

High Court in February 2017. In recognition of the foregoing material facts Irish Nationwide Building Society did not

execute their Order for Possession and I say it would be unfair and unjust to allow Mars Capital to pick up in a seamless

transition and expedite execution of a lapsed order.

I request on equitable grounds that the Court opposes and rejects the Orders and relief under this motion.”

11. Having been adjourned from time to time, the Circuit Court (Her Honour Judge Flanagan) made the following orders on 19 June

2018.

“THE COURT DOTH ORDER

1. That Mars Capital Ireland Limited be substituted for Irish Nationwide Building Society as Plaintiff in the title of the

proceedings.

2. That the Plaintiff be at liberty to re-serve the proceedings with the substitutions thereon on the Defendants

within a period of 14 days of today’s date.

3. That there be no Order as to costs.”

12. The Defendants lodged an appeal against the order on 25 June 2018. The appeal came on for hearing before me on Tuesday, 2

April 2019. The Plaintiff was represented by Mr. Rudi Neuman, B.L. The Defendants appeared as litigants in person.

13. It seems that shortly before the appeal came on for hearing, the Defendants had—on 29 March 2019—purported to issue a Notice

of Motion seeking discovery in support of the appeal from the Circuit Court. The motion had been made returnable for 29 April 2019.

Counsel on behalf of the Plaintiff submitted that the appeal should not be adjourned pending the determination of the motion for

discovery, and suggested that the issuing of same was a delaying tactic on the part of the Defendants. Counsel explained that the

appeal had, in fact, previously been listed for hearing in February 2019 but had not been reached on that occasion. The appeal was

next listed for hearing on 12 March 2019, but the matter was then adjourned to 2 April 2019. The Notice of Motion seeking discovery

was only issued prior to the third of these hearing dates.

14. Rather than delay the hearing of the appeal, I asked both parties whether they were in a position to deal with the application for

discovery as part of the hearing of the appeal. Both sides indicated that they were. Having heard submissions from both sides, I then

refused the application for discovery for the following reasons.

15. These proceedings had come before the High Court by way of an appeal from the Circuit Court. The hearing before the Circuit

Court had been on the basis of affidavit evidence only. Accordingly, the appeal is governed by section 37 of the Courts of Justice Act

1936 as follows.

“37.(1) An appeal shall lie to the High Court sitting in Dublin from every judgment given or order made (other than

judgments and orders in respect of which it is declared by this Part of this Act that no appeal shall lie therefrom) by the

Circuit Court in any civil action or matter at the hearing or for the determination of which no oral evidence was given.

(2) Every appeal under this section to the High Court shall be heard and determined by one judge of the High Court sitting

in Dublin and shall be so heard by way of rehearing of the action or matter in which the judgment or order the subject of

such appeal was given or made, but no evidence which was not given and received in the Circuit Court shall be given or

received on the hearing of such appeal without the special leave of the judge hearing such appeal.”

16. It is clear from the terms of the application for discovery that the Defendants seek to conduct some sort of enquiry into the

taxation status and residency of each corporate entity comprised in Mars Capital Ireland Ltd. Group. The Defendants also seek

documentation in respect of the alleged deregistration and withdrawal of the charitable status by the Charities Regulator. The

application for discovery is, in effect, a precursor to an application to adduce new evidence on the appeal.

17. I rejected this application for the following three reasons. First, the documentation sought by way of discovery is irrelevant to the

issue now before the court. As discussed in more detail presently, the legal test to be applied by the court in an application of this

type is whether there is a prima facie basis for substituting the new plaintiff on the basis of the transfer or assignment of assets. See

Irish Bank Resolution Corporation v. Comer [2014] IEHC 671 (Kelly J.). The documents sought by way of discovery go well beyond

anything that could be relevant to that legal test.

18. Secondly, and in any event, if the Defendants had wished to pursue an objection along the lines now mooted, then they should

have done so at the time of the initial hearing before the Circuit Court. This is not evidence that is “new” or that could not have been

discovered or disclosed at the relevant time.

19. Thirdly, it is clear from the affidavit filed on behalf of the Defendants by Mr. Igoe (summarised above) that the ground of

objection being pursued before the Circuit Court related to the fairness or otherwise of allowing Mars Capital Ireland Ltd. to take over

and enforce the order for possession in circumstances where the development of the property has, on the Defendants’ version, been

beset with difficulties which explain the inability to make payments pursuant to the loan facility. There was no suggestion at the time

of the hearing before the Circuit Court that there was any reason that Mars Capital Ireland Ltd. was an unsuitable successor.

20. In circumstances where I have refused the application for discovery and refused the implied application to adduce new evidence,

the case falls to be determined by reference to the materials before the Circuit Court.

APPLICATION TO SUBSTITUTE MARS CAPITAL IRELAND AS PLAINTIFF

21. The application before the Circuit Court was made pursuant to Order 22, rule 4 of the Circuit Court Rules as follows.

“4. Where, by reason of the death, or bankruptcy, or any other event* occurring after the commencement of an action,

proceeding or matter, and causing a change or transmission of interest or liability,* or by reason of any person interested

coming into existence after the commencement of the action, proceeding, or matter, it becomes necessary or desirable

that any person not already a party should be made a party, or that any person already a party should be made a party

in another capacity, an order that the proceedings shall be carried on between the continuing parties, and such new

party or parties, may be obtained ex parte on application to the Court upon an allegation of such change or transmission

of interest or liability, or of such person interested having come into existence.”

*Emphasis (italics) added.

22. Order 22, rule 4 is broadly similar to Order 17, rule 4 of the Rules of the Superior Courts. As explained by the learned authors of

Delany and McGrath on Civil Procedure (Round Hall, Dublin, 4th ed., 2018), an application pursuant to Order 17, rule 4 is the

appropriate procedure to adopt following the assignment of a loan or chose of action. See page 351/52 as follows (footnotes

omitted).

“6–111 However, it would seem that the assignment of a loan or chose in action is an “event” within the meaning of Order

17, rule 4. This was the view of Peart J in Irish Bank Resolution Corporation v O’Driscoll, who commented that “[t]he

event is clearly the purchase by it of the loan book referred to”. In Irish Bank Resolution Corporation v Lavelle, Baker J

accepted the submission that the purpose and effect of Order 15, rule 14, is to fix the time at which an application to

add, strike out or substitute a party may be made and said that it is not an empowering provision. She further held that

Order 17, rule 4 permits an application to be made to add or substitute a party who has taken a legal assignment of a

loan book from the original plaintiff. On the basis that there had been a change or transmission of the interests of the

plaintiff in loan facilities, she made an order in that case pursuant to Order 17, rule 4, instead of Order 15, rule 14.

6–112 This conclusion was confirmed on appeal by the Court of Appeal in Stapleford Finance Ltd v Lavelle, which

accepted the view put forward by the notice party that there was “no reason in principle why an ‘event’ within the

meaning of the rule should mean an extraneous event, such as death, but not a private event, such as a contract for the

sale of the loans”. The Court of Appeal also upheld the conclusion reached by Baker J in Lavelle that the assignment of

the loan amounted to a change in interest within the meaning of Order 17, rule 4. Irvine J expressed the view that the

legislative intent of s.12 of the Irish Bank Resolution Corporation Act 2013 would be defeated if the Rules did not permit

the purchaser of the “cause of action or proceedings” to be substituted as plaintiff. She concluded that there was no

valid reason why Order 17, rule 4 should be given the narrow construction put forward by the appellant and she held that

Baker J had been correct in holding that she had power pursuant to that rule to substitute the respondents as the sole

plaintiff in the proceedings before the court.”

23. These passages appear to me to represent an accurate statement of the law in this regard.

24. The legal test governing an application to join a party to proceedings on the basis of an assignment of a loan or chose in action

has been set out by the High Court in Irish Bank Resolution Corporation v. Comer [2014] IEHC 671. The test is summarised as follows

by Kelly J. (as he then was).

“30. What I am asked to do is to consider a procedural application which, if it is granted, will have the effect of bringing

to an end the entitlement of IBRC to further prosecute these proceedings. It will substitute for that entity, Launceston,

who will take over the entitlement to prosecute the proceedings, subject to all of the imperfections that may have been

present when the action was constituted as between IBRC and the defendants and subject also to proving at trial, that

there has been a valid sale of the underlying assets, a valid assignment of the chose in action which is this action, and a

valid notice given.

31. What I do have to satisfy myself about is whether there is prima facie evidence of that having occurred. In order to

come within the relevant rule of court, there has to be evidence adduced which would justify the substitution of the

existing plaintiff by Launceston.

32. That seems to me to be the standard of proof that has to be achieved. Much of the argument which took place

concerning the deployment of material, the entitlement to redact, the reasons for redaction, the entitlement of the

defendant to see the original document in un-redacted form are all matters, which in my view, are for another day.”

25. The application in Comer had been made on the basis of Order 15, rule 14 of the Rules of the Superior Courts. Kelly J. does note,

however, that Order 17, rule 4 could also arguably be applicable. The High Court (McDermott J.) has since confirmed in Irish Bank

Resolution Corporation v. Kennedy [2016] IEHC 395 that similar principles apply to an application pursuant to Order 22, rule 4 of the

Rules of the Circuit Court.

26. I am satisfied, on the basis of the affidavit of Morgan Sheehy, that there has been a prima facie demonstration of the transfer of

the title of the loan facilities and underlying security. I attach particular weight in this regard to the fact that Mars Capital Ireland

Ltd. has now been registered as the owner of the charge on Folio 11497 County Longford.

27. I also attach weight to the fact that “hello” and “goodbye” letters have been served on the Defendants, and that this complies

with the requirement for notice in writing under section 28(6) of the Supreme Court Judicature (Ireland) Act 1877.

28. Finally, it may be worth reiterating the narrow focus of the application before the Circuit Court, and the limited effect of the order

made. The effect of the Circuit Court order—now upheld by the High Court on appeal—is simply to substitute Mars Capital Ireland Ltd.

as the plaintiff in the proceedings. This allows the proceedings to be continued in its name. Crucially, however, the order does not

constitute the grant of leave to execute the order for possession of 5 November 2008. If and insofar as Mars Capital Ireland Ltd.

wishes to enforce that order, then it will be necessary for it to apply to the Circuit Court. This application will have to be on notice to

the Defendants, and they will have an opportunity to object to same. None of this has been predetermined by the decision of the

High Court on this appeal.

29. (Counsel for the Plaintiff has indicated that an application pursuant to Order 36, rule 10 for leave to issue execution has, in fact,

already issued and is listed for hearing before the Circuit Court in May 2019).

CONCLUSION

30. For the reasons set out above, I propose to make an order dismissing the Defendants’ appeal, and affirming the order of the

Circuit Court of 19 June 2018.