Up to 100 receiverships in doubt

Up to 100 receiverships initiated by Bank of Scotland Ireland could be struck down by the courts following a High Court ruling.

The judgment in The Belohn Ltd versus Bank of Scotland Plc hinged on the bank’s failure to comply with its own internal practices that it inherited when it bought ICC Bank.

The case saw Sean Foley and wife Sherry Yan overturn Bank of Scotland’s application to place their pub, Foley’s on Merrion St, Dublin, into receivership.

Their counsels Ross Maguire and Jennifer Goode argued that under the legislation, property loans from ICC could only be enforced if a seal was placed on the deed of the appointment of a receiver, by the bank, something that Bank of Scotland failed to do.

Mr Justice Paul Gilligan ruled that a receiver can only be appointed in line with the terms of the loan agreement.

“Since a receiver’s authority is derived from the instrument under which he is appointed, an appointment is not valid unless it is made in accordance with the terms of that instrument. This principle has been recognised by the leading commentators in this area and accepted and applied by the courts throughout the Common Law world.”

Yesterday, Ms Justice Mary Finlay Geoghegan confirmed the appointment of the examiner in the High Court following the overturning of the receivership.

Insolvency accountant Seamus Sutcliffe, of Lansdowne Francs and Co, said that the ruling has possible wide-reaching consequences for other businesses that Bank of Scotland has moved against.

“I suppose there are about 15 or 20 cases per annum where a receiver has been appointed by the bank using ICC debentures.

“In addition, there have also been a significant number of fixed-charge receivers appointed. In total, there are probably about 100 cases,” he said.

Mr Sutcliffe said that it is clear from Mr Justice Gilligan’s judgment that where the bank failed to apply its seal, which it did not do as a matter of policy, that receiverships may be overturned.

Bank of Scotland has refused to comment about the implication that the case has on the appointment of receivers in Ireland.

Mr Sutcliffe said that receivership law is still a relatively new area of law in Ireland and that instead of sitting down with business owners, receivers were coming in and selling businesses on for a fraction of their worth.