AIB secures charges over Zoe rents

ALLIED IRISH Bank has secured orders from the Commercial Court appointing a receiver over a large number of properties owned by companies in the insolvent Zoe Developments group as part of its effort to recover loans of more than €550 million made to the companies.

Receiver William G O’Riordan will have the power effectively to act as a landlord of the properties, manage the companies’ interest in them, receive rents and enter leases, Mr Justice Peter Kelly directed. The receiver was not entitled, at this stage, to enter into possession of or to sell the properties, he added.

AIB had already, in his view “wisely”, said it would not be seeking to sell properties given the current “wretched” state of the property market, he noted.

The judge appointed the receiver after making orders the €550 million loans are “well-charged” (well-secured) over the various properties via equitable mortgages created on the basis of undertakings by solicitors for the Zoe companies to hold the title deeds of the properties in trust for AIB. All title deeds have been lodged with the bank.

While this was “an unusual security given the extraordinary amount of money loaned”, it was additional to other securities, the judge said. There had been an intention to create legal mortgages which had not proven possible, he noted.

However, the bank was prepared to make the loans available under this arrangement which, while less satisfactory than a legal mortgage, was not devoid of legal effect provided the title to the properties was good. The letters of undertaking had charged the companies’ title to the properties in favour of the bank and, in all the circumstances, AIB was entitled to the well-charging orders, the judge ruled.

He also rejected suggestions by the official liquidator of two other companies in the Zoe group, Vantive Holdings and Morsten Investments, that the receiver is not entitled to receive rents purely for the benfit of AIB alone.

He directed that issues relating to an Ulster Bank charge over a property owned by Fabrizia be clarified in an affidavit. Denis McDonald SC, for AIB, said he undertsood that charge did not relate to the properties over which AIB held security but would provide an affidavit in that regard.

AIB had brought its action against five Zoe companies — Danninger, Eppo Developments, Fabrizia Developments, Oze Construction and North Quay Investments Ltd. Bernard Dunleavy, for the companies, indicated they would not be opposing the orders or the appointment of a receiver.

Declan McGrath, for the official liquidator of Vantive and Morsten, who are owed €244 million and €84 million respectively by Danninger, had said the liquidator wanted to consider whether he should become involved in the proceedings.

Yesterday, the judge was told the liquidator was not seeking to be joined as a third party to the bank’s application but had asked that the court be made aware of issues he had raised with AIB, including the view of his solicitors an AIB receiver could not receive rents just for the benefit of AIB rather than all creditors.

Mr McDonald submitted that represented a mistaken understanding of the law and the receiver was entitled to collect rents for the benefit of AIB alone. AIB had the benefit of title deeds to the various properties and, when a receiver is appointed, rents and profits are from that moment held for the benefit of the mortgagee, he submitted.