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Acting consistently on injunctive relief
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
A recent case on injunctive relief usefully restated the principles applicable to the grant of such relief as a matter of Irish law and reflected how practical considerations can impact on the court's determination. Swinburne v Geary(1) involved an application by a receiver appointed on foot of a mortgage who sought to prevent the defendants from trespassing on a holiday home in County Cork. The plaintiff receiver had secured a buyer for the property and was required to answer a completion notice, therefore needing vacant possession.
The defendants consented to a judgment of €1,227,047.98 in summary proceedings brought by a bank in respect of moneys borrowed from it to buy properties, including the holiday home involved in these proceedings. Since it was not intended to place the holiday home on the market until Spring 2013, the receiver did not object to the defendants using the holiday home during Winter 2012. However, in May 2013 the defendants engaged an individual to advise them about certain alleged overcharging by an unidentified financial institution.
The receiver found a purchaser for the property, and on July 11 2013 requested the removal of contents from the holiday home. The individual engaged by the defendants left a voicemail message warning against any "illegal eviction", in response to which the receiver advised the defendants that they were not entitled to be in possession of the property. Subsequently, the first defendant contended that the mortgage on foot of which the receiver was appointed had been forged – an allegation which the court felt "could scarcely be more serious".
In considering that allegation, the court observed that although the signing page of the mortgage was blank, an indenture supplemental to it had been executed by the defendants. Moreover, Judge Mac Eochaidh noted that it explicitly provided that "in all other respects, the beneficiary hereby confirms and ratifies the within indenture of mortgage/charge". He also observed that the original debt proceedings brought by the bank had been before the master of the High Court on five occasions and no such complaint had ever been made about the mortgage.
The judge also noted that as part of this application in response to a query as to why – leaving questions of validity aside – the defendants objected to the sale of the holiday home by the receiver, he was told that the defendants were convinced that they could get a better price. However, the court found that there was no evidence that the defendants had attempted to sell the property or investigate the market. In response to a further question as to what would happen if the defendants did sell the property, the court was advised that the sale proceeds would be made available to the bank to which the mortgage debt was owed. Flowing from that concession, the judge concluded that the defendants acknowledged not only their indebtedness to the bank, but also that the holiday home constituted security for the loans, thereby effectively accepting the validity of the charge. He also observed that even without the concession, he accepted that the mortgage was binding on the defendants.
In terms of the injunctive relief sought by the receiver, the court observed that the plaintiff had presented a serious issue to be tried in respect of the rights of the receiver and the trespass of the defendants. Thus, the first limb of the test had been satisfied.
The next limb was to inquire as to whether damages were an adequate remedy. In this regard, the court had to consider whether damages would be an adequate remedy for the plaintiff if successful at the trial of the action, and conversely whether the defendant would be adequately compensated by damages for having suffered the wrongful grant of an interlocutory injunction if the defendant were ultimately successful at the trial. In reviewing various authorities, the judge felt persuaded that the plaintiff's argument must prevail. He cited from Metro International SA v Independent News and Media,(2) in which the court had observed that:
"The mere fact that a property right (or indeed a diminution in such a right) can be valued in monetary terms does not of itself mean that damages for an infringement of that property right can necessarily be said to be an adequate remedy."
Given that the receiver was being thwarted in its entitlement to sell the property, the judge felt that there was:
"much to be said for proposition that the defendants could not adequately compensate the receiver in damages if he was to be unfairly restrained from acting as he now wishes. He wishes to sell the property now. If he is prevented from so doing, and he succeeds in the proceedings, his legitimate objective will have been unfairly thwarted…The receiver sues to promote and protect his legal obligations. It is hard to see how a sum of money could match his being temporarily restricted."
The judge also relied on Savill v Byrne(3) in support of the proposition that where a party is entitled to possession of property and to use it as it sees fit, it "could not adequately be compensated by an award of damages".(4)
Another consideration was also relevant here to the question of adequacy of damages. This was the ability of the defendants to pay any award of damages, particularly given that it was clear that their financial situation was not healthy.
In conclusion on this limb of the test, the judge found that damages would not be an adequate remedy for the receiver, but conversely, damages would compensate the defendants should they ultimately succeed at trial. He felt that those damages would be quantified by reference to the difference between the price secured by the receiver and the price which the defendants could secure.
The third and final limb of the test for injunctive relief is the question of where the balance of convenience lies. Although this is usually only invoked where damages do not adequately compensate either party, here the judge observed that, of the competing conveniences in this instance, the balance clearly lay in the plaintiff's favour, noting that "the stark failure by the defendants to produce any evidence in support of this speculation has the effect of easily tipping the balance in favour of the receiver". Accordingly, the injunction in the terms sought by the plaintiff receiver was awarded.
Although this case makes no new law, it is a useful reminder of the tests applicable to the granting of injunctive relief under Irish law. It also helpfully shows how positions adopted (or not adopted) in other proceedings, and practical steps not pursued in support of a party's contentions in a case, can be viewed negatively by a court and bear on the ultimate decision on injunctive relief. From that perspective, a party should think carefully about whether the steps that it has taken are consistent with arguments that it wishes to advance and, if necessary and possible, take steps to correct the position.
(1)  IEHC 412.
(2)  1 ILRM 414.
(3)  IEHC 415.
(4) Ibid, para 5(2), per Laffoy J.
This article was first published by International Law Office on 15 October 2013