Harrington v Gulland Article

RECENT HIGH COURT DECISION ON REQUIREMENT FOR REGISTRATION OF SECURITY TRANSFER

Ms Justice Baker delivered a judgment in the case of Harrington v Gulland Property Finance Limited on the 29 July 2016 which should be of interest and of concern to conveyancers, purchasers of loan portfolios and security and insolvency practitioners. The Court held that the Plaintiffs, the Harringtons, had made out an arguable case that the receiver was not validly appointed because the Defendant Gulland, the party purporting to make the appointment having acquired the loans and related charge from IBRC, was not yet registered as owner of that charge in the Land Registry.

In short the background to the case was that Gulland acquired the interest of IBRC in the Harringtons’ loans and security in February 2015. In February 2016 Gulland sought to appoint a receiver over the Harringtons’ properties. The Harringtons made an application to the High Court seeking an interim injunction restraining the receiver from acting, which injunction was granted. A further hearing was then held on whether the injunction should remain in place until a full trial of the case. Ms Justice Baker’s judgment was given after that hearing.

The Harringtons raised the primary argument that due to the fact that the instrument, by which the charge was transferred from IBRC to Gulland, had not been registered in the Land Registry, no interest in the charge had become vested in Gulland. As a consequence, Gulland did not, at the date of the appointment of the receiver, have power, whether contractual or statutory, to effect that appointment.

The Court was referred to the provisions of Section 64(2) of the Registration of Title Act 1964 which provides that:

There shall be executed on the transfer of a charge an instrument of transfer in the prescribed form, or in such other form as may appear to the Registrar to be sufficient to transfer the charge, but until the transferee is registered as owner of the charge, that instrument shall not confer on the transferee any interest in the charge.

The Court held that the terms of Section 64(2) are unambiguous and, while it is not necessary that the interest of the mortgagee be transferred by means of a transfer in the prescribed form, the instrument of assignment does not confer on the transferee any interest in the charge until the transferee is registered as owner of the charge.

Accordingly, the Court held that the plaintiffs had made out an arguable case that in the absence of registration, or some other means by which the interest in the charge had been transmitted or was deemed by statute not to require registration, the contractual interest in the charge had not become transferred and therefore Gulland could not, in pursuance of the contractual power contained in that mortgage or charge, appoint a receiver.

The judgment appears to adopt a much broader interpretation of Section 64(2) than previously understood. It is limited to charges over registered land, and appears to be further limited in its application to cases where charges have been transferred, so that the position of charge holders who originated the relevant security should not be affected. A distinction is also made in the judgment in respect of charges transferred by statute – such as schemes under Part III of the Central Bank Act 1971, and Cross-Border Mergers – rather than simple contractual assignments.

As the judgment was given in the context of an interlocutory injunction application, it is possible that the Court may come to a different conclusion at full hearing. However for the present it is of persuasive authority as to the current position under Irish law and should be considered carefully by all practitioners involved in transactions which may be affected by this decision.

For further information please contact:

Harrington v Gulland Article

John Sheehan
Partner

Phone: +353 21 7300200
Email: jsheehan@jwod.ie

Loans to and from Directors and Connected Persons

The Companies Act 2014 (the “Act”) retains the restrictions in place under the previous companies legislation regarding loans to directors and persons connected with directors and introduces a new concept of presumptions about undocumented loans to or from directors and persons connected with directors. Care should be taken:

  • To ensure that where a company advances a loan to, or gives security for a loan to one of its directors, or to a person connected with one of its directors, that the arrangement complies with the provisions of the Act; and
  • To document all loans to or from directors and persons connected with directors are properly documented, so that the presumptions against the director or person connects with the director do not apply.

General prohibition on loans by companies to directors or connected persons

The general rule of the Act with regards to loans, quasi-loans, credit transactions and the provision of security for loans in favour of directors of a company or of its holding company or persons connected to such directors, is that such transactions are prohibited except under the following circumstances:

  • the value of the arrangement is less than 10% of the company’s relevant assets;
  • the relevant Summary Approval Procedure with regard to permitting loans to directors is followed;
  • the arrangement is with a group company (i.e. holding company, subsidiary or sister company);
  • the arrangement is where the company enters into the transaction in the ordinary course of business and the value of the transaction is not greater than that which the company would offer to an ordinary person, taking out the same loan.

Any transaction which breaches the prohibition is voidable at the instance of the Company.

Presumptions regarding loans between directors or connected persons and a company or its holding company

The Act introduces certain presumptions regarding loans to or by directors or connected persons. The presumptions are given effect during relevant proceedings i.e. civil proceedings in which it is claimed a loan has been made.

Loans made by directors or connected persons to a company or holding company:

The Act provides that if it is claimed that a director of the company or the company’s holding company (or a person connected with a director) has entered an arrangement that constitutes a loan to that company or its holding company, and the terms of the transaction either:

  • are not in writing, or
  • are in writing, or partially in writing, but are ambiguous as to whether the transaction or arrangement constitutes a loan or not,

then it shall be presumed, until the contrary is proved that the arrangement does not constitute a loan to the company or its holding company. The Act does not specify what the arrangement is if it is not a loan. It is thought however that the arrangement would be treated as a gift or a capital contribution to the company. This could have unforeseen tax implications for the director in question.

Where it is proved that the transaction does in fact constitute a loan but the terms as to interest or security are ambiguous then, depending on which terms are ambiguous:

  • the loan is deemed to bear no interest;
  • the loan is presumed to not be secured; or
  • where it is proved to be secured but the terms are ambiguous with regards to its priority, then it is deemed to be subordinate to all other debts of the company.

Loans by a company or holding company to its directors or connected persons:

The Act provides that if a company has made a loan to a director of the company, a director of its holding company or a person connected with such director that:

  • the terms of the loan are not in writing; or
  • the terms of the loan are in writing but are ambiguous as to the time at which, or the circumstances under which, the loan is repayable or whether, or the extent to which, the loan bears interest,

then it is presumed in favour of the company, until it is proved to the contrary, that the loan is repayable on demand that until such time as the loan is repaid, it has borne interest at the appropriate rate (5% per annum or such other rate as is set by the Minister).

For further information please contact:

Loans to and from Directors and Connected Persons

 

 

 

 

John Fuller
Solicitor

Phone: +353 21 7300200
Email: jfuller@jwod.ie

Fishing Companies and the ‘A typical Working Scheme’

If you are an owner of commercial fishing vessel or a Non-EEA fisherman working on a boat in Ireland, then you need to consider whether the Atypical Working Scheme applies to you and if it does take the necessary steps to make sure you can comply before the deadline date of the 15th May 2016 passes.

 

What is the Scheme?

The Atypical Working Scheme allows nationals from outside the European Economic Area (EEA) to apply to work under short term contracts in Ireland. Where successful, the non-EEA national will be granted a permit to work here.

The Irish fishing industry has been given a short window of opportunity to organise its affairs so that from the 15th of February to the 15th of May 2016, non-EEA fishermen and women working in Ireland can apply under the scheme while in Ireland. After this period, applications will only be accepted from outside the State.

This is an important consideration for employers of these non-EEA nationals working in the Irish fishing industry as there will be consequences for employing such an individual following the passing of the deadline.

How to Apply under the Scheme

This is a three stage process:

1. The first stage involves the pre-approval of the application. Here, a solicitor acting for the employer fishing company must certify that the proposed contract of employment satisfies all Irish and EU employment law. Additionally, the solicitor must certify that the proposed employer is the owner of the vessel or vessels in question. Confirmation must also be given in respect of safety training and numbers of EU Member State nationals who are also employed.

2. The second stage is the application for the Atypical Working Permit itself. Here an application form needs to be filled out. However, this can only be done following the completion of the pre-approval stage, with the aid of a solicitor.

3. The third stage only applies to those workers who require a visa to work in Ireland. This can only be started after approval has been obtained from the previous step.

The Deadline Dates

The key date to keep in mind is the 15th of May 2016. Following this, applications under the Atypical Working Scheme will not be accepted from within Ireland. This period has been offered to allow non-EEA nationals who already work in Ireland to make an application without the need to first leave the State.

Possible Effects of Non-Compliance

Failure to make an application under the Atypical Working Scheme before the 15th of May 2016 will result in the illegal employment of a Non-EEA national in Ireland. This could result in the employer of the illegal worker being found guilty of a criminal charge.

Next Steps

The deadline for applications is fast approaching and there is a pre-approval stage which must first be completed before the application itself can be made. We would urge all registered licence holders of sea-fishing boats to carefully review the terms of the Scheme and the individuals they have working for them and contact us without delay should they need assistance in completing applications.

For further information please contact:

Fishing Companies and the ‘A typical Working Scheme’

John Sheehan
Partner

Phone: +353 21 7300200
Email: jsheehan@jwod.ie

Residential Tenancies (Amendment) Act 2015

 

What it aims to do:

The Residential Tenancies (Amendment) Act (the “2015 Act”) was signed into law on the 4th December 2015. Its aim was to amend and extend the Residential Tenancies Act 2004 (“the Principal Act”) (as amended) by inserting a number of provisions into the 2015 Act which would aim to do this.

When coming into force:

There are only a number of provisions which have been commenced to date; Part 4 relating to the transfer of the functions of the Rent Tribunal to the Private Residential Tenancies Board has been enacted and provisions providing for a more streamlined mediation service to provide for faster and more efficient resolution of disputes, the separation of the quasi-judicial and governance powers of the Board of the Private Residential Tenancies Board (“PRTB”) and changes to the registration procedures have been implemented. Among other things, the provisions also provide for the repeal of section 126 of the Principal Act which made it an offence to fail to comply with a determination order made by the PRTB under the Principal Act.

Changes for Landlord:

(i) Restriction of rent reviews:
This provision provided there has been an extension of the temporary restriction of the entitlement of a landlord to conduct a rent review to once every two years (previously once every year). This restriction applies until 31st December 2009 when rent reviews can once again be conducted every 12 months.
This extension is retrospective, applying to both new and existing tenancies. For existing tenancies, the two year period for first rent review is counted from the later of (i) the commencement of the tenancy (where no rent review has taken place prior to 4 December 2015) and (ii) the most recent rent review date. The reprieve will depend on when the tenancy was entered into and the date of the most recent rent review.

(ii) Deposit Protection Scheme:
Upon payment of a deposit at the commencement of a tenancy the deposit is to be handed over to the PRTB who will retain the deposit under the deposit protection scheme and return deposits paid by tenants to them. Any interest received from holding deposits by the PRTB is to be retained by them for their own use.

This will undoubtedly have a significant impact for landlords particularly where tenants have fallen into arrears of rent.

Changes for Tenant:

The notice period to which is tenant is entitled before a new rent can take effect has been increased from 28 days to 90 days.
The notice periods for the termination of tenancies have been expanded where there has been occupation of between 4 and 8 years. Tenants who have been in occupation for 8 years or more will now require a notice period of 224 days which has not yet been enacted.

Steps for client to watch:

Both Landlords and Tenants need to be aware of the expansion of the remit of the Residential Tenancies Board to tenancies created by not-for-profit Approved Housing Bodies involved in the provision of social housing;

Landlords will need to include in a notice for increase of rent, certain evidence that proposed rent increases are appropriate and in line with the local market rate and to inform tenants of their rights to challenge rent increases; and a requirement for landlords to include with a notice for termination of a tenancy, certain evidence of the grounds for termination.

There are new provisions governing disputes and provisions for determination orders concerning tenancy terminations to be dealt with by the District Court instead of the Circuit Court in order to reduce time and cost involved in the resolution of disputes. The monetary limit of the jurisdiction of the District Court shall not apply for these proceedings and shall be the same as the Circuit Court (currently €75,000).

Once the various provisions are enacted we will analyse the Act here.

The Workplace Relations Act 2015

The Workplace Relations Act 2015 (“the Act”) commenced on 1 October 2015. The Act has introduced considerable reform, which both employers and employees should be aware of.

The reform has resulted in the creation of an entirely new body – the Workplace Relations Commission – a single body which will deal with all employment disputes filed after 1 October 2015. The Act creates one appeal procedure to a newly reformed Labour Court.

The Act also introduces a range of new mechanisms to promote better compliance by employers with employment obligations.

Filing a claim

One of the aims of the Act is to streamline the process of filing of employment law complaints. Prior to the introduction of the Act, there were various bodies to which employment disputes were required to be brought, depending on the complaint, including the Employment Appeals Tribunal, the Equality Tribunal, the Rights Commissioner, the Labour Relations Commission and NERA. The Workplace Relations Commission integrates the roles formerly dealt with by these bodies into one body.

All complaints can now be made by the completion of one form, with uniformity of procedures for all claims to one body. The Act also introduces a streamlined appeal process.

Mediation

The Act provides for a legally binding early resolution and mediation service and provides that the Director General of the Workplace Relations Commission may refer a complaint to a mediation officer if suitable. Mediation is conducted in private and if an agreement is reached following mediation, the agreement is legally binding on the parties.

Adjudication

All other disputes will be referred to an Adjudication Officer, who will conduct an inquiry. The inquiry is conducted in private and following the hearing the Adjudication Officer will make a Decision in accordance with the relevant legislation. The Decision of the Adjudication Officer is legally binding on the parties.

Enforcement of Orders

The Act provides that the Employer has 56 days within which to carry out the decision of the Adjudication Officer and introduces a more straightforward procedure whereby, where there is failure to company with a Decision, a party may apply to the District Court for an Order directing a party to comply the decision.

Appeal Process

The Act has streamlined the appeal process and there is now one right of appeal from the Workplace Relations Commission to the Labour Court. A decision of the Labour Court may only be appealed to the High Court on a point of law.

Employer Compliance

Employers should be aware of the introduction of new enforcement mechanisms, such as the Compliance Notices and Fixed Charge Notices introduced by the Act which promote better compliance by employers with employment obligations. The Act also provides for the Director General can appoint Inspectors.

  • Compliance Notice

This is a statement setting out the grounds for the breach of employment law. The employer will be notified of the steps that need to be taken to rectify the situation and a time scale for this to be completed. Where a person fails to comply with the notice is a criminal office.

  • Fixed Charge Notice

Where the inspector is satisfied that the employer has committed an offence under a specified piece of employment legislation, a fixed charge notice may be issued of up to €2,000. Failure by the employer to pay within 42 days may result in the Workplace Relations Commission bringing the matter before the District Court.

  • Inspection Rights

The Act has given the Commission powers of inspection, which will enable the inspector to carry out inspections, examinations and investigations with the aim of examining and insuring compliance. These inspections can arise out of a complaint about the employer or can be random in nature. Therefore, employers should ensure they are in compliance with all aspects of employment law.

Please contact Karol-Ann Randles to find out more about how compliant you as an employer, or if you are an aggrieved employee and wish to enquire about bringing a complaint.

 

 

 

 

 

Karol-Ann Randles

Solicitor

Phone: +353 21 7300200
Email: krandles@jwod.ie