Another Challenge to Enforcement Bites the Dust – receiver v receiver and manager

Background

Many standard mortgages/charges provide for the appointment of a “receiver and manager” rather than simply the appointment of a receiver. They also generally set out quite extensive powers for such person, including powers of management.

However, some deeds of appointment of receiver simply provide for the appointment of a person to have all of the powers provided for by the mortgage and or charge and call that person the “Receiver”.

Recent case law

In McCarthy v Moroney, the defendants resisted an application by the receiver for a mandatory interlocutory injunction. They argued that the receiver was not entitled to the orders as the deed of appointment merely appointed him as receiver rather than as “receiver and manager”, the term used in the mortgage/charge.

Mr Justice McDonald was not convinced that the receiver had made out a sufficiently strong case that he had been validly appointed to grant an injunction. However, while he said that the receiver might have an uphill struggle at trial, the judge emphasised that he was doing the best he could with such arguments as had been made and such authorities to which he had been referred and made it clear that the receiver might ultimately succeed at trial.

In Charleton v Scriven, another interlocutory application, in the Supreme Court, Clarke CJ held:

“…the mortgage deeds themselves defined the persons who were to be appointed as ‘receivers and managers’ as the ‘receivers’. … it is arguable that the appointment of the Receivers in the form in which it occurred in this case was, as a matter of construction of the documents concerned, an appointment as both receivers and managers, having regard to the way in which the term ‘receiver’ was defined in the mortgage deeds themselves.”

In McCarthy v Langan, Allen J. stated:

“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.”

In Fennell v Corrigan, in the High Court, after a full plenary hearing, Pilkington J. concluded that the plaintiff was appointed as a receiver and manager pursuant to the terms of the 2007 mortgage.

Both Langan and Corrigan were appealed to the Court of Appeal. The appeal in Langan was eventually struck out.

The Court of appeal decision in Corrigan

On 5 October 2021, the Court of Appeal delivered a judgment in the Corrigan appeal. Murray J. stated:

“… 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’ …”

Comment

The Court of Appeal judgment in Corrigan is likely to be the end of the road for this particular argument. However, like claims of “reckless lending” that have been roundly rejected by the courts, it will probably resurface, from time to time.

For more information, contact a member of our Restructuring & Insolvency team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.