ABM Construction v Habbingley Ltd

• Jurisdiction: Ireland
• Judge: Miss. Justice Laffoy
• Judgment Date: 15 February 2012
• Neutral Citation: [2012] IEHC 61
• Court: High Court
• Date: 15 February 2012

ABM Construction v Habbingley Ltd

IN THE MATTER OF THE ARBITRATION ACTS 1954 - 1998

AND

IN THE MATTER OF ORDER 56, RULE 7 OF THE RULES OF THE SUPERIOR COURTS

AND

IN THE MATTER OF AN ARBITRATION

BETWEEN

ABM CONSTRUCTION

CLAIMANT

AND

HABBINGLEY LIMITED

RESPONDENT

[2012] IEHC 61

[No.255 MCA/2011]

THE HIGH COURT

COMPANY LAW

Practice & procedure

Security for costs - Unlimited company - Jurisdiction - Whether statutory power to order security for costs confined to limited companies - Whether rules of court for security for costs confined to persons resident outside jurisdiction - Whether central control and management of company actually abided and was exercised overseas - Whether court could order security for costs against unlimited company pursuant to inherent jurisdiction - Whether policy considerations - Separation of powers - Whether extension of jurisdiction by court would be to usurp legislative function - Whether reason to believe company would not be able to furnish security for costs if ordered - Jirehouse Capital v Beller [2008] EWCA Civ 908, [2009] 1 WLR 751 considered - Pitt v Bolger [1996] 1 IR 108 and Salthill Properties Ltd v Royal Bank of Scotland plc [2010] IEHC 31 [2011] 2 IR 441 followed - In re Little Olympian Each Ways Ltd [1995] 1 WLR 560 approved - G McG v DW (No 2) (Joinder of Attorney General) [2000] 4 IR 1 applied - Braithwaite Sons Ltd Anley Maritime Agencies Ltd [1990] NI 63 and R v Bothwell [2006] NICA 35, [2007] NI 58 distinguished - Companies Act 1963 (No 33), s 390 - Rules of the Superior Courts 1986 (SI 15/1986), O29 - Application refused (2011/255MCA - Laffoy J - 15/2/2012) [2012] IEHC 61

ABM Construction v Habbingley Ltd

ARBITRATION ACT 1954 S22

COMPANIES ACT 1963 S390

RSC O.29

JIREHOUSE CAPITAL & ANOR v BELLER & ANOR 2009 1 WLR 751 2009 BUS LR 404 2008 CP REP 44 2008 BCC 636

COMPANIES ACT 1862

PITT v BOLGER & BARRY 1996 1 IR 108 1996 2 ILRM 68 1996/7/2208

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 2ED 2005 PARA 12.05

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 2ED 2005 PARA 12.55

EUROPEAN FASHION PRODUCTS LTD & MURA v EENKHOORN & ORS UNREP BARR 21.12.2001 2001/9/2343

RSC O.29 r2

RSC O.29 r4

COURTNEY THE LAW OF PRIVATE COMPANIES 2ED 2002 PARA 6.029

LITTLE OLYMPIAN EACH WAYS LTD (NO 2), IN RE 1995 1 WLR 560 1994 4 AER 561 1994 BCC 959 1995 1 BCLC 48

COMPANIES ACT 1963 S128(6B)

DODD & CUSH STATUTORY INTERPRETATION IN IRELAND 2008 PARA 5.89

MCG (G) v W (D) (NO 2) 2000 4 IR 1 2000 2 ILRM 451 1999/17/5236

BRAITHWAITE & SONS LTD v ANLEY MARITIME AGENCIES LTD 1990 NI 63

PRIMOR PLC v STOKES KENNEDY CROWLEY & OLIVER FREANEY & CO 1996 2 IR 459 1995/20/5287

R v BOTHWELL 2007 NI 58 2006 NICA 35

SALTHILL PROPERTIES LTD & CUNNINGHAM v ROYAL BANK OF SCOTLAND PLC & ORS UNREP CLARKE 5.2.2010 2010/46/11557 2010 IEHC 31

1. The application and its context

2 2 1.1 On this application the respondent seeks an order pursuant to s. 22 of the Arbitration Act 1954 (the Act of 1954), as amended, directing the claimant to furnish security for costs to the respondent and ancillary orders. A very sensible approach was adopted by both sides on the hearing of the application, in that certain concessions were made for the purposes of the application, but not for any other purpose, which I will record later.

3 3 1.2 It is common case that the arbitration between the claimant and the respondent commenced prior to the coming into force of the Arbitration Act 2010. Accordingly, it is common case that the Court has the same power of making an order in respect of security for costs as it has for the purpose of, or in relation to, an action or matter in the Court pursuant to s. 22 of the Act of 1954. However, it is the claimant's contention that, having regard to the legal personality and the factual circumstances of the claimant, the Court has no jurisdiction to make an order for security for costs.

4 4 1.3 It is clear from the evidence that the claimant was originally incorporated as a company limited by shares in 1994. However, in 2007 it was re-registered as an unlimited company. The issued share capital of the company is €100 divided into 100 shares of €1 each. As regards ownership of those issued shares, an unlimited company incorporated in the Isle of Man, ABM Ventures, is the owner of one ordinary share and a limited company registered in the Isle of Man, ABM International Limited, is the owner of the remaining ninety nine ordinary shares. The claimant's registered office is in Swords, County Dublin. All its directors and its secretary reside in Ireland. The claimant is a construction company and the evidence is that it is involved in substantial construction projects in the State.

5 5 1.4 The dispute between the parties which is the subject of the arbitration has arisen out of the engagement by the respondent of the claimant to carry out construction work, including renovation and extension of existing buildings, at Mullingar Retail Centre under a contract based on the standard RIAI articles of agreement entered into in 2004. The claimant's claim is for a sum in excess of €1.6m (exclusive of VAT) and the claimant also claims interest and damages for breach of contract. For the purposes of this application, but for no other purpose, it is acknowledged by the claimant that the respondent has a prima facie defence to the claimant's claim. The respondent is pursuing a counterclaim against the claimant for liquidated and ascertained damages and for counter charges in excess of €4.8m. As I understand it, the arbitration is ready for hearing but has been held up because this application, which was initiated in August 2011, was pending. For the purposes of facilitating the Court's task in determining whether an order for security for costs should be made, but for no other purpose, the parties have agreed the estimated costs of the respondent defending the claimant's claim at arbitration at €450,000 (exclusive of VAT).

2. The issues

2 2 2.1 The application raises an issue which, apparently, has not previously been determined by an Irish court, namely, whether the Court has jurisdiction to make an order for security for costs in favour of a party to litigation age that the other party which is an unlimited company which is registered in the State. If the Court has such jurisdiction, a further issue which arises is the identification of the principles which the Court should apply in determining whether to make an order for security for costs.

3 3 2.2 The Court has had the benefit of comprehensive and helpful written legal submissions from both sides on those issues. Insofar as is necessary, I will outline the points raised in the written submissions and on the oral submissions.

4 4 2.3 There are two well established sources of the Court's jurisdiction to make an order for security for costs in litigation: s. 390 of the Companies Act 1963 (the Act of 1963); and Order 29 of the Rules of the Superior Courts 1986 (the Rules). While it was conceded on behalf of the respondent that the jurisdiction conferred by s. 390 of the Act of 1963 does not apply to the respondent's application for an order for security against the claimant, I propose considering s. 390 first. Counsel for the respondent invoked the jurisdiction conferred by Order 29 and he also invoked the Court's inherent jurisdiction. The position of the claimant was that the Court does not have jurisdiction either under Order 29 or under its inherent jurisdiction to make the order sought. I will consider each invoked source of jurisdiction in turn.

3. Section 390

2 2 3.1 Section 390 of the Act of 1963 provides as follows:

"Where a limited company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."

As the claimant is not "a limited company", the respondent properly conceded that s. 390 does not apply to it. As was pointed out by Arden L.J. in her judgment in Jirehouse Capital v. Beller [2009] 1 WLR 751, s. 726 of the Companies Act 1985, which was in force in England and Wales at the relevant time and the wording of which was almost precisely the same as s. 390, in its original form predated even the Companies Act 1862. Therefore, in the legislation in relation to companies, the power to make an order for security for costs against a company has been confined to limited companies for over one hundred and fifty years. One must assume that the approach which has been adopted over such a long time span represents deliberate legislative policy.

4. Order 29

2 2 4.1 Order 29 provides, inter alia, as follows:

2 "1. When a party shall require security for costs from another party, he shall be at liberty to apply by notice to the party for such security; and in case the latter shall not, within forty-eight hours after service thereof, undertake by notice to comply therewith, the party requiring the security shall be at liberty to apply to the Court for an order that the said party do furnish such security.

2 A defendant shall not be entitled to an order for security for costs solely on the ground that the plaintiff resides in Northern Ireland.

3 No defendant shall be entitled to an order for security for costs by reason of any plaintiff being resident out of the jurisdiction of the Court, unless upon a satisfactory affidavit that such defendant has a defence upon the merits.

4 A plaintiff ordinarily resident out of the jurisdiction may be ordered to give security for costs though he may be temporarily resident within the...