AHC Ltd v Martin Lawlor and Eoin O’Gorman

• Jurisdiction: Ireland
• Judge: Mr. Justice Fullam
• Judgment Date: 16 January 2017
• Neutral Citation: [2017] IEHC 136
• Docket Number: [2010 No. 9682 P]
• Court: High Court
• Date: 16 January 2017

[2017] IEHC 136

THE HIGH COURT

Fullam

[2010 No. 9682 P]

BETWEEN

AHC LIMITED

PLAINTIFF

AND

MARTIN LAWLOR

AND

EOIN O’GORMAN PRACTISING UNDER THE STYLE AND TITLE OF COGHLAN KELLY SOLICITORS

DEFENDANTS

JUDGMENT of Mr. Justice Fullam delivered the 16th day of January, 2017

Introduction

1 This is the defendants’ application for Security for Costs pursuant to s. 390 of the Companies Act 1963 or alternatively pursuant to O. 29, r. 1 of the Rules of the Superior Courts (“RSC”). The defendants seek a further order, if necessary, staying the within proceedings until such time as any security for costs order is furnished. The date of the issue of the Notice of Motion is 16 ^th January, 2015.

Substantive action

2 The plaintiff is a property company incorporated in June, 1996. The defendants are partners in the firm Messrs. Coghlan Kelly solicitors, which acquired the practice of Thomas J. Kelly and Sons, who were at all material times solicitors to the plaintiff. The substantive action concerns a claim by the plaintiff for damages in the sum of €1.05 million against the defendants arising out of the failure to lodge a Notice of Appeal in an action entitled the Circuit Court South Eastern Circuit, County of Kilkenny, Record No. E24/01 Between AHC Limited, plaintiff and Michael O’Connor, defendant.

3 The Circuit Court proceedings were dismissed by Judge McMahon at Kilkenny Circuit Court on 8 ^th October, 2003. According to the affidavit of Mr. Martin Lawlor grounding this application, the plaintiff's claim in the Circuit Court proceedings was for specific performance of an agreement dated 5 ^th March, 1999 for the sale of land by Mr. O’Connor, as vendor, to AHC as purchaser and was dismissed by the Circuit Court judge on the basis that it was founded on an illegal contract. The stated consideration for the land was IR£15,000. Mr. O’Connor refused to proceed with the transaction. The consideration was in fact IR£55,000, IR£40,000 of which was paid directly to Mr. O’Connor by Michael Murphy and his wife Rita Murphy, directors of AHC. Ms. Murphy, who has died since the initiation of this motion for security for costs, was the niece of Mr. O’Connor.

4 Following dismissal of the Circuit Court action, Messrs. Thomas J. Kelly sent a Notice of Appeal to the High Court to their Dublin law agents for filing in the Central Office. The Notice of Appeal was not filed. In August, 2005 Messrs. Thomas J. Kelly merged with the firm of James P. Coghlan to become Coghlan Kelly and Company Solicitors. On the 29 ^th February, 2008 the defendants sought an enlargement of time to file the Notice of Appeal from the Master of the High Court. This was refused with costs awarded against AHC. An appeal from the Master's order was again refused by the High Court with costs against AHC. The substantive proceedings were initiated by plenary summons on 21 ^st October, 2010. On 21 ^st January, 2013 the plaintiff delivered a statement of claim. The defence delivered on 26 ^th July, 2013, apart from a denial of liability, puts the plaintiff on strict proof of the terms of the retainer of the defendants and the instructions to appeal. It is pleaded that if the defendants were negligent, such negligence was not causative of any loss to the plaintiff as an appeal would not have succeeded and that any loss caused to the plaintiff were the result of the plaintiff's own acts or omissions. It is pleaded that the plaintiff has failed to mitigate its loss.

5 In his affidavit grounding the Notice of Motion, Mr. Lawlor avers that defendant has a bona fide defence to the plaintiff's claim. In addition to the matters pleaded in the defence delivered, Mr. Lawlor suggests that insofar as Ms. Murphy was the designated purchaser, there is no evidence that she transferred her interest to the plaintiff. In this regard, it is suggested that the completion notice served on Mr. O’Connor does not identify the intended purchasers or indeed the lands the subject matter of those Circuit Court proceedings. Furthermore, it is suggested that insofar as Mr. O’Connor may have paid the IR£40,000 on his own behalf there is no evidence as to how AHC could maintain proceedings in respect of a loss sustained by Mr. O’Connor. It is suggested that there is no evidence supporting the claims for €70,000 in respect of legal costs and €980,000 as the value of the lost contract. Finally, it is alleged that the defendants have been prejudiced by the plaintiff's delay.

6 The basis for Mr. Lawlor's belief that the plaintiff will be unable to meet the defendants’ estimated costs of €110,000 if the defendant is successful is the financial position of the plaintiff as disclosed in its Abridged Financial Statements for the year ended 31 ^st December, 2013. In summary Mr. Lawlor suggests that though the plaintiff was incorporated on 13 ^th June, 1996, it does not appear to have traded, alternatively, it appears to have carried on little or no trade. The Abridged Balance Sheet shows accumulated profits of €14,568 following a loss of €1,031 in 2013. Total assets exceed current liabilities by €14,695. There was cash at bank in the sum of €1,005.

7 Mr. Murphy provided a replying affidavit on behalf of the plaintiff filed on 29 ^th May, 2015. Mr. Murphy accepts that there was delay on the part of the plaintiff in delivering the Statement of Claim in the substantive proceedings and also in not dealing with the Motion in as timely a matter as it should have. He blamed the delay on a dispute with the plaintiff's former solicitors in respect of fees. He refers to a letter from the plaintiff's current solicitors to the defendant's solicitors dated 27 ^th April, 2015 enclosing audited accounts for the year ended 31 ^st December, 2014. At paragraph 13 of his replying affidavit, Mr. Murphy says these Abridged Audited Accounts were signed on behalf of DHKN Limited by Mr. Terry Noone, a Fellow of the Institute of Chartered Accountants. The audited accounts showed a net asset position of €632,348. In the figure of €830,703 in respect for fixed assets, unencumbered freehold land and buildings were valued at €756,000.

8 Subsequently, the plaintiff's current solicitors Messrs. Kenny Stephenson Chapman (KSC) furnished the defendants’ solicitors with the audited accounts of the plaintiff for the year ended 31 ^st December, 2014. By letter dated 11 ^th May, 2015, Mr. Noone confirmed that the accounts as furnished to the defendants’ solicitors were furnished to the CRO and awaited filing and that there would be no change to the accounts furnished to KSC. It would appear that the defendants’ solicitors were also furnished with valuations for the three properties included in the fixed assets of the plaintiff's balance sheet. (These valuations are exhibited in Mr Murphy's affidavit at MM8).

9 At para. 17 of his affidavit, Mr. Murphy states that the primary asset of the company is a half interest in St. Joseph's Convent situate on six acres in Waterford City. He said that the convent had been leased for the past eighteen months or so (i.e. from circa November 2013) to the education foundation known as Educate Together, at a monthly rent of approximately €20,000. He said that he was engaged in negotiations with a State entity for a further lease for a period of three years at an annual rent of €250,000.

10 In relation to a query raised by the defendants as to the status of a charge in favour of the Waterford Credit Union Limited over company properly at Kilmacow, Co. Waterford, Mr. Murphy averred that this charge had been discharged, pursuant to a Settlement Agreement made on 23 ^rd November, 2012, and the deeds released to Mr. Murphy. The Settlement Agreement was not exhibited...