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Contractor seeks injunction to remain on site after receivers called in

29 Jun 11 A contractor has failed to obtain an injunction restraining a receiver from taking over a development it was working on. Moylist claimed it had a licence to access the site as long as the contract remained in place, and it had not been terminated.

Moylist applied for an injunction restraining the first defendant, the receiver of the development it was working on, from securing the site and preventing it from continuing with the works. The receiver was appointed by the Ulster Bank, which had demanded repayment of the €3.637m. mortgage taken out by the developer, Mr. O’Connor. Moylist alleged that the receiver and Deloitte & Touche had had unlawfully entered and secured the site, expelling it and causing it loss and damage, and that the bank had instructed or colluded in the trespass. Moylist also argued that the receivers and the bank had induced Mr. O’ Connor to breach the contract because he had unlawfully taken back the development. Moylist pleaded that its contractual licence to remain on site persisted as long as the contract was in place and the works were incomplete. The contract had not been determined. The parties’ contract was the standard Royal Institute of the Architects of Ireland (RIAI) form. Moylist argued that the bank had a duty of care to ensure that Mr. O’Connor complied with the terms and conditions of contract and had breached that duty. Moylist had suspended the works. The essence of its case was that, having invoked clause 34(a) and not having been paid by Mr. O’Connor, it could continue the suspension of the Works and remain on the development in accordance with its contractual licence indefinitely if it were not paid the sums due. Whilst the suspension continued, so did the licence to occupy the site, and it could not be determined by Mr. O’Connor under the contract.

Moylist relied upon the decision in the London Borough of Hounslow v Twickenham Garden Developments Ltd., (1970) 7 BLR 81, which the judge considered in some detail. The judge found the attempt to apply the decision in Hounslow was inappropriate as the situation was not analogous. If it were, then Mr. O’Connor would be seeking an injunction against Moylist on the basis that determination of the contractual licence had occurred. It was unreasonable to assume that Mr. O’Connor would sit back and do nothing leaving Moylist’s licence to continue indefinitely. What would happen would be that there would be a dispute between them about whether there had been a valid determination of the licence. In accordance with the terms of the contract, with Mr. O’Connor seeking to have the matter resolved either at arbitration or an interlocutory injunction. If that were to happen, the likelihood was that in accordance with the principles laid down in the American Cyanamid case [American Cyanamid Co. v Ethicon Ltd., [1975] 1 All ER 504] the Court would grant the injunction on the basis that the balance of convenience favoured that course of action. This was what had happened in Tara Civil Engineering Ltd. v. Moorfield Developments Ltd., (1989) 46 BLR 72.

If Moylist’s contractual licence did subsist so that Mr. O’Connor could not remove it from the site, then the receiver could have no greater rights against Moylist, irrespective of whether he was acting as agent for the third or fourth defendants. Moylist also maintained that the rights of the bank under the mortgage could not have priority over its own rights under the building contract even though the mortgage preceded the contract because the mortgage was not registered on the folio until after the building agreement came into existence. Moylist submitted that the issue to be tried was whether under the standard R.I.A.I. contract a receiver in the case of a charge created by a private individual, not a company, appointed as agent of the “funder” and the employer, had a right to terminate the contractual licence of the builder to remain on the site in the absence of an allegation of breach of contract against the builder.

The judge rejected the contention that the receiver was in no better position in relation to the implementation of the building agreement than Mr. O’Connor. The mortgaged property of which the receiver entered into possession as defined by the deed also included the property charged and assigned, i.e., all the undertaking and assets, machinery, book debts and goodwill. He also took over, by operation of law, the obligations of the Company under the alleged agreement.

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The receiver’s position was well settled. The first defendant, as receiver, in exercise of his powers on foot of the mortgage was entitled to enter the development and take possession of it, notwithstanding whatever rights Moylist had against Mr. O’Connor under the building agreement. The bank was not in possession of the development, but, if it were, its entitlement to take and remain in possession to the exclusion of Moylist would be the same as that of the first defendant, as receiver. In the court’s view, damages would be an adequate remedy for Moylist if it were refused the injunction sought; its goal was payment of the €332,579.32 which it alleged Mr. O’Connor owed, plus retention. There would be no difficulty in quantifying any additional damages due from Mr. O’Connor.

Considering the question of the balance of convenience, the judge considered whether any useful purpose would be served if an injunction in the terms sought were granted. The only reasonable inference which could be drawn from the facts was that Moylist had no intention of carrying out any further works on the site because he had no prospect of being paid by Mr. O’Connor for any additional work performed. That being so, it was not unreasonable to infer that Moylist’s objective in seeking to exclude the receiver from possession of the development was to put pressure on the bank to do a deal with it in relation to the sums owed by Mr. O’Connor. On the other hand, if an interlocutory injunction were granted, it would mean that the receiver would be unable to fulfil his functions for the benefit of the persons to whom he owed a duty. The judge had no doubt that the balance of convenience lay in favour of refusing the injunction.

Moylist Construction Ltd. v Doheny, Deloitte & Touche, Ulster Bank Ltd. and Tom O'Carroll, [2010] IEHC 162
 

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