Collins v Gharion

• Jurisdiction: Ireland
• Judge: Mr. Justice Birmingham
• Judgment Date: 09 July 2013
• Neutral Citation: [2013] IEHC 316
• Court: High Court
• Docket Number: [10065 P/2012
• Date: 09 July 2013

Collins v Gharion

BETWEEN

EUGENE F. COLLINS

PLAINTIFF

AND

GHARION

DEFENDANT

[2013] IEHC 316

[10065 P/2012

THE HIGH COURT

PRACTICE AND PROCEDURE

Costs

Solicitor and client - Plaintiff acted for defendant in proceedings which were compromised - Dispute in relation to amount of fees due - Defendant claiming agreement reached on fees due - Plaintiff submitted bill of costs for larger sum - Interlocutory application - Plaintiff seeking to restrain defendant from reducing bank balance below particular figure - Plaintiff seeking declaration of entitlement to charge upon funds - Mareva injunction - Applicable tests for injunction - Whether disposal of assets for purpose of preventing plaintiff from recovering damages and frustrating possible future court orders - Whether proposed transfer would render defendant judgment-proof - Balance of convenience - Conduct of defendant - Necessity of fees being due for making of declaration sought - Whether appropriate to make declaration sought at interlocutory stage in light of significant factual dispute - Implications of order sought for third parties - O'Mahony v Horgan [1995] 2 IR 411 applied - Bennett Enterprises v Lipton [1999] 2 IR 221 followed - Aerospares Ltd v Thompson (Unrep, Kearns J, 13/1/1999); Lister & Co v Stubbs (1890) 45 Ch D 1; McGowan Roofing Contractors Ltd v Manley Construction Ltd [2011] IEHC 317, (Unrep, Laffoy J, 23/7/2011) and Mount Kennett Investment Co v O'Meara [2012] IEHC 167, (Unrep, Clarke J, 29/3/2012) considered - Legal Practitioners (Ireland) Act 1876 (39 & 40 Vict), s 3 - Arbitration Act 2010 (No 1), s 21(7) - Reliefs refused (2012/10065P - Birmingham J - 9/7/2013) [2013] IEHC 316

Collins v Gharion

Facts: The plaintiff, a Dublin law firm, represented the defendant in relation to High Court proceedings and related arbitration. The actions saw the defendant receive €5,350,000. The plaintiff submitted a fee for the services of €463,935.99. The defendant contended that an agreement was reached whereby the fee should have been €335,000. The plaintiff claimed that €253,047.77 was still due. The defendant intended to transfer its funds to another unlimited company known as College Protein.

The plaintiff sought two reliefs: a Mareva injunction preventing the defendant from ‘reducing the cash balance in a bank account below a particular figure’ - that is, €253,047.77; alternatively a declaration under s. 3 of the Legal Practitioners (Ireland) Act 1876 that the plaintiff was entitled to a charge in relation to the outstanding fees.

The court decided that the key issue in this case was whether was the transfer to the unlimited company was a device to avoid paying the alleged debt. The court, finding that there was ‘…nothing untoward, or…nefarious about the proposed transfer’, held that the plaintiff failed to establish intention on behalf of the defendant to put the assets beyond the plaintiff”s reach. Concerning the declaration sought under s. 3 of the Legal Practitioners (Ireland) Act 1876, the court found that it must be established that there are ‘some fees due’. However, as there remained disagreements on whether the fees were due, the order sought was refused.

LEGAL PRACTITIONERS (IRL) ACT 1876 S3

ARBITRATION ACT 2010 S21(7)

COMPANIES ACT 1963 S205

KIRWAN INJUNCTIONS LAW & PRACTICE 2008 PARA 8.31

O'MAHONY v HORGAN 1995 2 IR 411 1996 1 ILRM 161 1995/20/5202

BENNETT ENTERPRISES INC & ORS v LIPTON & ORS 1999 2 IR 221 1999 1 ILRM 81 1998/11/3448

AEROSPARES LTD v THOMPSON & ORS UNREP KEARNS 13.1.1999 1999/1/22 1999 IEHC 76

COURTNEY MAREVA INJUNCTIONS & RELATED INTERLOCUTORY ORDERS 1998 PARA 1.15

LISTER & CO v STUBBS 1890 45 CH D 1

MCGOWAN ROOFING CONTRACTORS LTD v MANLEY CONSTRUCTION LTD UNREP LAFFOY 25.7.2011 2011/27/7323 2011 IEHC 317

MOUNT KENNETT INVESTMENT CO v O'MEARA UNREP CLARKE 29.3.2012 2012/29/8517 2012 IEHC 167

1 JUDGMENT of Mr. Justice Birmingham delivered the day of 9/7 2013

2 1. In the application before the court the plaintiff is seeking two reliefs, on an alternative basis, namely a Mareva type injunction restraining the defendant from reducing the cash balance in a bank account below a particular figure and a declaration, pursuant to s. 3 of the Legal Practitioners (Ireland) Act 1876 and s. 21(7) of the Arbitration Act 2010 which extended the 1876 Act to arbitration, that the plaintiff is entitled to a charge upon the funds held by the defendant in respect of an unpaid balance of costs claimed to be due by the defendant to the plaintiff.

3 2. The background to these applications is that the plaintiff, the well known Dublin law firm, acted on behalf of the defendant an unlimited company, in relation to High Court proceedings, a petition under s.205 of the Companies Act, and also linked arbitration proceedings. The arbitration proceedings and the petition were compromised on terms which saw the defendant Gharion receive the sum of €5,350,000.00 in return for disposing of a shareholding.

4 3. While the defendant has made some criticisms of certain aspects of the service it received and in particular has been critical of certain tactical decisions taken by the plaintiff, it is not disputed that the plaintiff is entitled to be paid professional fees in respect of the services it provided. The plaintiff submitted a bill of costs in the amount of €463,935.99. However, on behalf of the defendant it is contended -and it appears this will be the key issue at trial -that it, through Mr. John Gilroy, director and shareholder of the defendant, reached an agreement with Mr. Terry Legget, partner in the plaintiff that the fees payable should be €335,000.

5 4. When regard is had to interim payments made during the course of the proceedings and to a payment made by the defendant following the issue and service of the notice of motion, the plaintiff is claiming that the sum of €253,047.77 is due to it in respect of fees and the orders sought now are in respect of that sum.

6 5. At this stage, it may be noted that Gharion, which I have pointed out is an unlimited company, acquired a 40% shareholding in Carton Group Holding in 2004. Gharion was described as a "Special Purpose Vehicle", incorporated to hold the shares in Carton Group Holding. Under the settlement agreement which was arrived at, Gharion was required to sell its shareholding in the group to the other parties to the proceedings, the Carton shareholders. Its role subsequent to the settlement was to receive the proceeds of the settlement. It is not in dispute that Gharion intends to transfer the funds it has received unless restrained by order of this Court. Specifically, it intends to transfer the funds to a company called College Protein, also an unlimited company. It may be noted that the sole shareholders in Gharion are John Gilroy and his brother Martin Gilroy, with Mr. John Gilroy holding 99 shares and Mr. Martin Gilroy one share. The shares are held in trust for College Protein. College Protein it may be noted is engaged in and has for many years been engaged in the waste disposal business from its premises at Nobber, County Meath. It is a substantial undertaking. It has assets of approximately €44.6M and its turnover for 2012 was in the region of €19M. It employs 85 people.

7 6. So far as the Mareva injunction is concerned, where the plaintiff is seeking injunctive relief restraining the defendant from reducing the amount in its bank account below €253,047.77, the applicable tests for a Mareva injunction have been summarised in Kirwan, Injunction Law and Practice (2008) as follows (at 8.30):-

"Derived from case law, there a number of key tests which will have to be satisfied before the Mareva injunction will be granted:"

8 · First, the applicant for such an order must demonstrate that he has a substantive cause of action.

9 · Secondly, he must show that has a good arguable case (which means that an apparently higher threshold is applied to Mareva injunctions, rather than the bona fide/serious question test used in other interim and interlocutory applications).

10 · Thirdly he must show that the defendant has assets. He must also show that the anticipated disposal of the defendant's assets is for the purpose of preventing the plaintiff from recovering damages and not merely for the purpose of carrying on a business or discharging...