Coalport Building Company Ltd v Castle Contracts (Irl) Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 19 January 2004
• Neutral Citation: [2004] IEHC 6
• Docket Number: Record No 11966P/2003
• Court: High Court
• Date: 19 January 2004

[2004] IEHC 6

THE HIGH COURT

Record No 11966P/2003

COALPORT BUILDING CO LTD v. CASTLE CONTRACTS (IRL) LTD

BETWEEN

COALPORT BUILDING COMPANY LIMITED

PLAINTIFF

AND

CASTLE CONTRACTS (IRELAND) LIMITED

DEFENDANT

Citations:

COMPANIES ACT 1963 S214

COMPANIES ACT 1963 S213

TRUCK & MACHINERY SALES LTD V MARUBENI KOMATZO LTD 1996 1 IR 12

CAMPUS OIL LTD V MIN INDUSTRY & ENERGY (NO 2) 1983 IR 88

Synopsis:

CONTRACT

Injunction

Winding-up - Bona fide dispute - Debt - Companies Act - Whether the plaintiff was acting in good faith and had substantial grounds for disputing the alleged debt owed to the defendant (11966P/2003 - Laffoy J - 19/1/2004)

Coalport Building Co. Ltd v Castle Contracts (Ireland) Ltd

Facts: By virtue of an oral agreement made in March, 2003 the defendant agreed with the plaintiff to remove soil and other materials from the site being developed by the plaintiff. Between April and the end of July 2003 the defendant submitted invoices aggregating €486,915.00 on foot of the soil removal contract. The plaintiff discharged invoices aggregating €425,625.00, thus leaving a balance of €61,290.00. The balance was made up of three invoices. The plaintiff maintained that 393 dockets presented by the defendant on foot of which payment was claimed “were not signed by any party who was authorised on site to confirm that a proper load had in fact left the site.” Accordingly, the plaintiff contended that the defendant was not entitled to payment on foot of those dockets and that, in fact, the defendant had been overpaid. The defendant also made a claim for plant hire arising out of an oral agreement alleged to have been made in May, 2003. That was based on two invoices, which amounted to an aggregate sum of €46,847.13. The plaintiff maintained that there was no agreement between the plaintiff and the defendant that the plaintiff would be liable in respect of the cost of plant hire. By notice dated 3 September 2003 from the defendant’s solicitors to the plaintiff, the payment in full of the sum of €108,137.13 stated to be due by the plaintiff was formally demanded. The plaintiff was notified that, in the event of failure to pay the sum due within 21 days, the plaintiff would be deemed to be unable to pay its debts within the meaning of Section 214 of the Companies Act, 1963 and that the defendant would be at liberty to petition for the winding up of the plaintiff pursuant to Section 213 of that Act without further notice. In response, the plaintiff’s solicitors wrote to the defendant’s solicitors in order to put them on record that there was a dispute between the plaintiff and defendant in relation to the actual amount of money which might be due to the defendant in relation to the services rendered to the plaintiff. On the 17 October, 2003 a petition issued from the High Court in which the defendant sought to wind up the plaintiff on the grounds of insolvency based on non-compliance with the notice of 3 September 2003. The plaintiff’s solicitors informed the defendant by letter that its claim was disputed and it was asserted that the publication of the petition would be an abuse of process. Subsequently, the plaintiff applied for an injunction restraining the defendant from taking any steps to advertise or otherwise publicise a petition for the purpose of seeking the winding up of the plaintiff pursuant to Section 214 of the Companies Act.

Held by Miss Justice Laffoy in granting the injunction: 1. That in order to restrain the presentation of the petition to wind-up the plaintiff company, the plaintiff must show that it was acting in good faith in, and had substantial grounds for, disputing the alleged debt.

2. That in light of the circumstances surrounding the formation of the contractual relationship between the plaintiff and the defendant, which was based solely on oral evidence, the fact that the alleged debt was not disputed in writing prior to the issue of the formal demand was not fatal to the plaintiff’s claim. Liability for the debt was immediately disputed when the formal demand issued.

3. That the plaintiff’s contention that it had been overcharged in respect of the removal of soil and had no contractual liability in respect of the costs of the plant hire were prima facie substantial grounds. Moreover, prior to the issuing of the petition, the plaintiff had suggested an alternative remedy to the bringing of a petition to wind up the company: that the defendant could sue for the alleged debt.

4. That counsel for the defendant acknowledged that the only basis on which it was alleged that the plaintiff was insolvent was that, by virtue of Section 214 it was deemed unable to pay its debts because of non compliance with the formal demand. However, the evidence showed that the plaintiff was a substantial building company which was involved in residential building developments at four locations and its anticipated turnover for the financial year end of 31 August 2003 was in excess of €5 million net of VAT. The plaintiff’s solicitors had authority to lodge the amount of the alleged debt in court as security pending the resolution of the proceedings. In the circumstances there was a suitable alternative remedy available to the defendant and accordingly it was unnecessary to put the existence of a substantial building company and employer at risk.

Reporter: L.O’S.

Miss Justice Laffoy

1 This is the plaintiff's application for an injunction restraining the defendant from taking any steps to advertise or otherwise publicise a petition for the purpose of seeking the winding up of the plaintiff pursuant to Section 214 of the Companies Act.

2 The following is the chronology of the events which immediately preceded the initiation of this application:

3 • . By notice dated 3^rd September 2003 from the defendant's solicitors to the plaintiff, the payment in full of the sum of €108,137.13 stated to be due by the plaintiff was formally demanded. The plaintiff was notified that, in the event of failure to pay the sum due within 21 days, the plaintiff would be deemed to be unable to pay its debts within the meaning of Section 214 of the Companies Act, 1963(as amended) and that the defendant would be at liberty to petition for the winding up of the plaintiff pursuant to Section 213 of that Act without further notice.

4 • . By letter dated 10^th September 2003 to the defendant's solicitors, the plaintiff's solicitors put on the record the fact that there was a dispute between the plaintiff and the defendant in relation to the actual amount of moneys which might be due to the defendant in respect of services rendered to the plaintiff. It was stated that, in the event of a petition issuing, the letter would be relied on to inform the court that the defendant "was fully on notice as to the fact that there is a dispute between our clients in respect of any moneys allegedly due your client". It was further stated that the plaintiff was arranging to have the works quantified so as to determine the precise position between the parties and that this would be the subject of a separate letter.

5 • . The response of the defendant's solicitors contained in a letter 24^th September 2003 was that, having taken detailed instructions and having reviewed the supporting documentation in relation to the defendant's claim, they were satisfied that no legitimate dispute could exist in relation to the defendant's claim. A petition would issue when the 21 day period had elapsed.

6 • . The plaintiff's solicitors contend that they did not receive the letter 24^th September 2003 until 10^th...