Bula Ltd v Tara Mines Ltd (No. 3)

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 17 July 1987
• Neutral Citation: 1987 WJSC-HC 1305
• Docket Number: [1986 No. 10898P],Record No. 10898P/1987
• Court: High Court
• Date: 17 July 1987

1987 WJSC-HC 1305

THE HIGH COURT

Record No. 10898P/1987

BULA LTD v. TARA MINES

BETWEEN

(BULA LIMITED (IN RECEIVERSHIP), BULA HOLDINGS LIMITED, THOMAS C ROCHE, THOMAS J ROCHE, RICHARD WOOD AND MICHAEL WYMES

PLAINTIFFS

AND

TARA MINES LIMITED AND OTHERS

DEFENDANTS

Citations:

COMPANIES ACT 1963 S390

PEPPARD & CO LTD V BOGOFF 1962 IR 180, 97 ILTR 12

SEE LTD V PUBLIC LIGHTING SERVICES LTD 1987 ILRM 255

JACK O'TOOLE LTD V MACEOIN KELLY ASSOCIATES 1987 ILRM 269

PARKINSON V TRIPLAN LTD 1973 QBD 609

PEARSON V NAYDLER 1977 1 WLR 899, 1977 3 AER 531

Synopsis:

PRACTICE

Costs

Security - Company - Insolvency - Defendants" application for security - Application dismissed - Plaintiff mining company was insolvent - Plaintiff company owned a substantial body of ore - Section 390 of the Act of 1963 states that a judge may require sufficient security to be given for a defendant's costs of an action brought by a plaintiff company if it appears by credible testimony that there is reason to believe that, if the defendant should be successful, the company will be unable to pay the costs of the defendant - The defendants" application was resisted by the plaintiff company on the grounds (a) that the value of its ore body ~in situ~ exceeded the #40m owed by the company to its creditors, (b) that its insolvency had been caused by the acts and defaults of the defendants which were the basis of the plaintiffs" claims against the defendants in the action and (c) that the company's co-plaintiffs were individuals who could maintain the action in any event - Held that the plaintiff company had admitted that it was unable to pay its debts as they fell due and that, accordingly, there was prima facie reason to believe that the plaintiff company would be unable to pay the costs of the defendants if their defence should be successful - Held that the plaintiff company must establish the existence of special circumstances if the defendants" application were not to be successful - Held that the existence of co-plaintiffs who were individuals was not a major factor, and certainly not a decisive one, in determining whether or not the court should exercise its jurisdiction under s.390 of the Act of 1963 - Held that the existence of the ore body and the contentions of the plaintiff company in regard to its value suggested that the company was in a position to raise further money on the security of that asset - Held that the plaintiff company had not merely relied on a bald statement alleging that its insolvency had been caused by the defendants but had established, in the affidavits filed on its behalf, an arguable case in support of its contention that the defendants had prevented the plaintiff company from exploiting the ore body to the best advantage and had thus caused the company's financial difficulties - Held that the plaintiff company had discharged the onus of establishing special circumstances and that, accordingly, the defendants" application would be dismissed - ~Peppard & Co. Ltd. v. Bogoff~ [1962] IR 180 and ~Jack O'Toole Ltd. v. MacEoin Kelly~ [1986] IR 279; [1987] ILRM 269 considered - Companies Act, 1963, s.390 - (1986/10898 P - Murphy J. - 17/7/87) [1987] IR 494

|Bula Ltd. v. Tara Mines Ltd.|

1 Judgment of Mr. Justice Murphy delivered the 17th day of July 1987 .

2 This is an application by all of the Defendants other than the Minister for Energy for an Order pursuant to Section 390 of the Companies Act 1963that the first named Plaintiff do provide security for the costs of the Applicant Defendants and for an Order staying all proceedings by the first named Plaintiff until such security is given. Section 390 of the Companies Act 1963provides 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".

3 That section and the corresponding section in the Companies (Consolidation) Act of 1908 and the comparable sections in the U.K. Companies Acts from time to time have been considered in numerous decided cases. In the application before me reference was made to three Irish cases, namely, Peppard and Boqoff 1962 I.R. 180., S.E.E. Limited and Public Lighting Services Limited 1987 I.L.R.M. 255 and Jack O'Toole Limited and MacEoin Kelly Associates 1987 I.L.R.M. 269 and to the English cases of Parkinson and Triplan Limited1973 Q.B.D. 609 and Pearson and Naydler 1977 1 W.L.R. 899.

4 It is clear beyond debate that Section 390 aforesaid may impose a serious handicap on an impecunious limited liability company where a lack of funds would not create the same problem for an individual litigant. Again it is clear, even without recourse to the helpful authorities, that the power requiring security to be given is discretionary. This follows from the use of the word "may" in the third line of the section. However, the manner in which the discretion should be exercised and the way in which the burden of proof is distributed between the parties has been authoritatively laid down in this country by the Supreme Court in the judgment of the Chief Justice in the Jack O'Toole case (above) at page 271 as follows:-

"It is clear that the making of an order under section 390 is a matter of discretion to be exercised having regard to all the relevant circumstances of the case, and the appropriate approach has recently been laid down by this Court in the judgment of McCarthy J in S.E.E. & Company Ltd .v. Public Lighting Services Ltd [1987] I.L.R.M. 255 and it is unnecessary for me to repeat it here.

It is clear that there is no presumption, either in favour of the making of an order for security for costs not against it, but I am satisfied that where it is established or conceded, as arises in this case, that a limited liability company who is a plaintiff would be unable to meet the costs of a successful defendant, that if the plaintiff company seeks to avoid an order for security for costs that it must, as a matter of onus of proof, establish to the satisfaction of the judge the special circumstances which would justify the refusal of an order".

5 The Chief Justice went on (at the top of page 273) to indicate what would not be sufficient to discharge the onus of proof insofar as it lay on a Plaintiff resisting the application for an Order for security:-

"Having regard to these circumstances, it does not seem to me a sufficient discharge of the onus of proof which I deem to be on a company against whom an application is made under section 390, to make a mere bald statement of the fact that the insolvency of the company has been caused by the wrong the subject matter of the claim".

6 In seeking to discharge the onus that lies on them the Applicant/ Defendants refer to the undisputed and undisputable facts that Bula Limited is and has been in receivership since the 8th...