Blue Pool Hotel Ltd v Colum Peters, Teresa Peters, Roufis Ltd and The Wilton Pub Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 06 May 2022
• Neutral Citation: [2022] IEHC 262
• Court: High Court
• Docket Number: [2021 No. 5835 P]

Between

Blue Pool Hotel Limited

Plaintiff

and

Colum Peters, Teresa Peters, Roufis Limited and The Wilton Pub Limited

Defendants

[2022] IEHC 262

[2021 No. 5835 P]

THE HIGH COURT

COMMERCIAL

Security for costs – Conditions – Companies Act 2014 s. 52 – Defendants seeking security for their costs of the proceedings – Whether sufficiently strong reasons were advanced to revisit the judgment requiring the plaintiff to provide security for the defendants’ costs

Facts: The defendants, Mr Peters, Ms Peters, Roufis Ltd and the Wilton Pub Ltd, applied to the High Court for the court to revisit an ex tempore judgment delivered on 21st December 2021 on their application for an order under s. 52 of the Companies Act 2014 requiring the plaintiff, Blue Pool Hotel Ltd, to furnish security for their costs of the proceedings. On that occasion, McDonald J indicated that, subject to certain conditions, he was prepared to make an order requiring the plaintiff to provide security for the defendants’ costs. The defendants were unhappy with the conditions imposed by him and they submitted that the conditions should be vacated.

Held by McDonald J that this was a case where it would be possible to revisit the judgment if sufficiently strong reasons could be advanced to support the application. He could not accept that the “strong reasons” standard was met. McDonald J was not satisfied that this was a case which merited revisiting the decision made by him in December 2021. Accordingly, he would not interfere with the order proposed by him.

McDonald J held that the defendants would have to make up their mind as to whether they wished to obtain security for costs on the terms set out in his judgment; if not, the application for security for costs would stand refused.

Application refused.

JUDGMENT of Mr. Justice Denis McDonald delivered on 6 ^th May 2022

1 . This judgment addresses an application by the defendants that the court should revisit an ex tempore judgment delivered on 21 ^st December 2021 on their application for an order under s. 52 of the Companies Act, 2014 (“ the 2014 Act”) requiring the plaintiff to furnish security for their costs of these proceedings. On that occasion, for reasons which I explained at the time, I indicated that, subject to certain conditions described below, I was prepared to make an order requiring the plaintiff to provide security for the defendants' costs. The defendants subsequently brought the present application. They are unhappy with the conditions imposed by me and they have submitted that the conditions should be vacated. In order to understand how this application arises, it is necessary, in the first instance, to briefly describe the nature of the proceedings before the court and to thereafter describe the nature of the debate which took place on 21 ^st December 2021 and the order made by me on that occasion. In addition, it will be necessary to consider the relevant authorities on the power of a court to revisit a judgment and also the case law dealing with applications for security for costs by a defendant who is also a counterclaimant.

Background

2 . The fourth named defendant is the owner of a public house known as the Wilton Pub situate at Cardinal Way, off Sarsfield Road, Wilton, in the City of Cork. By a contract of sale made between the fourth named defendant of the one part and the plaintiff of the other part on 4 ^th November 2019, the fourth named defendant agreed to sell and the plaintiff agreed to purchase the public house for €2,745,000. On the same day, the fourth named defendant agreed to sell certain business assets relating to the pub to the plaintiff for €565,000.

3 . The closing date for both the contract of sale and the asset purchase agreement was initially 12 ^th December 2019. That closing date was subsequently extended on a number of occasions up to and including 11 ^th March 2020. Pursuant to the contract of sale, the plaintiff paid a deposit of €331,000. The deposit was held by the solicitor for the fourth named defendant pending completion of the contract.

4 . According to the statement of claim, the first named defendant, acting on behalf of all of the defendants, approached Mr. Patrick Sexton, director of the plaintiff company, prior to the closing date and orally requested that, in lieu of the plaintiff acquiring the pub and the business assets and undertakings by means of the contract for sale and asset purchase agreement, the plaintiff would agree to acquire the pub and the assets through a share purchase arrangement under which it would acquire all of the shares in the fourth named defendant. It is alleged, in para. 14 of the statement of claim, that the plaintiff was already willing and able to complete the contracts as of 12 ^th December 2019 but agreed to proceed by way of a share purchase transaction in the manner requested by the defendants. It is further alleged that, in order to allow completion of all reasonable and necessary due diligence enquiries by the plaintiff's accountants into the assets, liabilities and business of the fourth named defendant, it was necessary to extend the closing date to 11 ^th March 2020.

5 . In para. 17 of the statement of claim, it is alleged that there was substantial delay in the completion of the share purchase transaction. On 24 ^th June 2021, the fourth named defendant caused a completion notice to be served pursuant to general condition 36 of the original contract of sale making time of the essence for completion and affording the plaintiff 28 days to complete the purchase. The purchase was not completed by 21 ^st July 2021 and the fourth named defendant thereafter called upon its solicitor to release the deposit to it pursuant to the provisions of clause 37(a) of the contract of sale. Subsequently, on 19 ^th August 2021, the fourth named defendant's solicitor released the deposit to the fourth named defendant.

6 . In the statement of claim, the plaintiff pleads that the completion notice is invalid and of no effect and that the fourth named defendant was not entitled to forfeit the deposit. The plaintiff contends that, at the time the completion notice was served, the contract for sale was at an end and had been replaced by an agreement to purchase the shares in the fourth named defendant. In the statement of claim, the plaintiff seeks a declaration that it is entitled to acquire the pub through the purchase of the shares in the fourth named defendant. It also seeks a declaration that the defendants are estopped from denying the plaintiff's entitlement to acquire the property. In the alternative, the plaintiff seeks a declaration that the fourth named defendant is not entitled to forfeit the deposit.

7 . In the defence and counterclaim, the defendants accept that, subsequent to the execution of the contract of sale and asset purchase agreement, there were discussions between the fourth named defendant and the plaintiff in relation to the acquisition of the business by means of a possible share transaction rather than by means of the existing contract. However, the defendants contend that no concluded or binding agreement was ever reached in relation to a share purchase. In those circumstances, the fourth named defendant contends that it was entitled to serve a completion notice under the existing contracts and to forfeit the deposit of €331,000. As part of the relief claimed in the counterclaim, the fourth named defendant seeks a declaration that it was “lawfully entitled to forfeit the deposit paid by the Plaintiff pursuant to the said Contract of Sale…”. For reasons which are explained in more detail below, this plea is of particular relevance to the conditions imposed by me in my judgment on the application for security for costs in December 2021.

8 . On 15 ^th November 2021, the defendant brought an application pursuant to s. 52 of the 2014 Act requiring the plaintiff to furnish security for its costs on the grounds that the plaintiff company has no more than €100 in assets and that it will, therefore, not be in a position to meet an award of costs in the defendants' favour in the event that they are successful in their defence of the proceedings. In their grounding affidavit and in the submissions made on their behalf at the hearing of the application for security for costs on 21 ^st December 2021, the defendants also called into question the validity of the plaintiff's claim but there is no application to dismiss the proceedings on the grounds that they are bound to fail and, for that reason, I do not believe that this element of the defendants' submissions are germane to the issue of security for costs.

9 . Furthermore, at the hearing on 21 ^st December 2021, there was no dispute between the parties that, on an application for security for costs, the following issues require to be addressed:-

• (a) In the first place, the court has to consider whether there is evidence before it that the plaintiff will not be in a position to meet an award of costs. Insofar as this element of the test is concerned, the plaintiff, very properly, concedes that there is such evidence here;

• (b) The court must next consider whether the defendants have established on affidavit that they have a defence to the claim. Again, the plaintiff has very properly conceded that this condition has been met;

• (c) Where it is established (or conceded) that the plaintiff will not be in a position to meet an award of costs in favour of the defendant and that the defendant has established on affidavit that it has a defence to the claim, the third element of the test to be applied requires the court to consider whether there are special circumstances that exist that would induce the court, in the exercise of its discretion, to refuse to order security. This is where the debate in this case occurred in December 2021. It was accepted by the parties that, insofar as this element is...