Demeray Ltd ((in Receivership)) v William F. O'Grady Kirby Tarrant and Stephen T. Noonan Practising Under the Style and Title of “O'Gradys Solicitors”
| Jurisdiction | Ireland |
| Judge | Ms. Justice Máire Whelan |
| Judgment Date | 25 January 2022 |
| Neutral Citation | [2022] IECA 12 |
| Court | Court of Appeal (Ireland) |
| Docket Number | Appeal Number: 2018/354 |
[2022] IECA 12
Whelan J.
Binchy J.
Pilkington J.
Appeal Number: 2018/354
THE COURT OF APPEAL
Security for costs – Impecuniosity – Delay – Appellant appealing against an order for security for costs – Whether the appellant’s inability to pay the respondents’ costs was caused by the respondents’ own wrongdoing
Facts: The appellant, Demeray Ltd, an insolvent company, brought proceedings against the respondents, Mr O’Grady, Mr Tarrant and Mr Noonan, a firm of solicitors. The appellant alleged that the respondents were negligent while acting on its behalf in relation to the conveyancing of four apartments within the appellant’s construction project at Aubrey Court, Bray, Co. Wicklow. The High Court (Ní Raifeartaigh J) made an order on 22 June 2018, perfected on 13 August 2018, following the judgment delivered on 22 March 2018 (revised on 27 April 2018), wherein the appellant was directed to furnish security for two-thirds of the respondents’ costs pursuant to s. 52 of the Companies Act 2014, fixed at €112,334. In default thereof, the proceedings would be stayed. The appellant was further ordered to lodge in court to the credit of the action the said sum or, in the alternative, to enter into security by bond in the said sum with an approved guarantee society. The appellant appealed to the Court of Appeal against that order. It was argued that the trial judge was incorrect to make an order for security for costs in circumstances where, the appellant contended, its inability to pay the respondents’ costs was caused by the respondents’ own wrongdoing, and in light of the respondents’ delay in bringing the motion for security for costs.
Held by Whelan J that, having applied the Connaughton Road approach (Connaughton Road Construction Ltd v Laing O’Rourke Ireland Ltd [2009] IEHC 7) to the claim as pleaded and given that prima facie that claim disclosed actionable wrongdoing on the part of the respondents and supported a causal connection between the actionable wrongdoing and the practical consequences pleaded and claimed by the appellant, parts 1, 2 and 3 of the test could thereby be considered to have been potentially met. However, having taken the pleaded claim at its height, it was evident to Whelan J that the sums claimed, even if recoverable in full, would have been insufficient to reverse the parlous financial state of the company as was disclosed in the evidence. Whelan J differed with the trial judge’s assessment and determination that in taking into account the four matters set out by Clarke J in Connaughton Road the court was confined to doing so exclusively within the parameters of the case as pleaded by the appellant; that approach was unduly narrow. However, Whelan J held that that did not ultimately alter the outcome. Whelan J held that the special circumstance of delay was not established as the trial judge correctly found. Whelan J held that such a determination would have been inconsistent with the balance of justice on the facts of the case. Whelan J held that the justice of the case required that the appellant furnish security for the costs of the respondents.
Whelan J dismissed the appeal and upheld the order of the High Court, albeit for reasons somewhat different to those identified by the trial judge. Whelan J held that no basis had been identified to interfere with the quantum of security for costs as fixed by the High Court; the approach adopted by the judge gave rise to the least risk of injustice in all the circumstances and having regard to the evidence. The respondents having been wholly successful in opposing the appeal, Whelan J’s preliminary view was that an order for costs should follow in the respondents’ favour. Whelan J held that there should be a stay on the execution of the order for costs pending conclusion of the proceedings.
Appeal dismissed.
Judgment of Ms. Justice Máire Whelan delivered on the 25 th day of January 2022
. This is an appeal against the order of the High Court (Ní Raifeartaigh J.) made on 22 June 2018, perfected on 13 August 2018, following the judgment delivered on 22 March 2018 (revised on 27 April 2018), wherein the appellant was directed to furnish security for two-thirds of the respondents' costs pursuant to s. 52 of the Companies Act 2014, fixed at €112,334. In default thereof, the proceedings herein would be stayed. The appellant was further ordered to lodge in court to the credit of the action the said sum or, in the alternative, to enter into security by bond in the said sum with an approved guarantee society.
. The motion for security for costs arose in the context of proceedings brought against the respondents, a firm of solicitors, by the appellant, an insolvent company. In the said proceedings, the appellant alleges that the respondents were negligent while acting on its behalf in relation to the conveyancing of four apartments within the appellant's construction project at Aubrey Court, Bray, Co. Wicklow.
. In this appeal it is argued that the trial judge was incorrect to make an order for security for costs in circumstances where, the appellant contends, its inability to pay the respondents' costs was caused by the respondents' own wrongdoing, and in light of the respondents' delay in bringing the motion for security for costs.
. From approximately 2005 to 2008, the appellant was engaged in developing lands on Parnell Road in Bray, Co. Wicklow with a view to constructing a residential and commercial development to be known as “Aubrey Court”. In November 2006 the appellant retained the respondents to act as its solicitors in connection with the sale of the 34 apartments and 3 commercial units within the development. Construction of the development commenced on 8 January 2007.
. The appellant's primary lender for the development was Bank of Scotland (Ireland) (“BOSI”). Following the collapse of the property market and the onset of the recession, the appellant encountered difficulties in discharging its liabilities. On 21 June 2011, Bank of Scotland, which by then had absorbed BOSI, appointed a receiver and manager over the assets of the appellant. The receivership ceased with effect from 14 October 2013.
. The appellant was struck off the Register of Companies on 30 July 2014 but was restored on 15 July 2015.
. The appellant issued a plenary summons on 31 October 2012 whilst in receivership, claiming damages for breach of contract, negligence and breach of duty. The respondents entered an appearance on 5 November 2013.
. On 15 December 2015, the appellant delivered a statement of claim. In brief, it claims that prospective purchasers who signed contracts to purchase apartments nos. 20, 34, 33 and 25, Aubrey Court in 2006 (each of whom had paid a deposit) were able to reconsider their decisions to purchase and successfully withdraw from the contracts at a time when property prices were falling, by reason of the respondents' failure to ensure that binding or enforceable contracts were in place. It is further claimed that the respondents failed to inform the appellant that the said sales were vulnerable to withdrawal by the purchasers, in circumstances where the contracts had not been executed and exchanged by the appellant, thereby denying the appellant the opportunity to bring about their timely execution and render the contracts specifically enforceable or, otherwise, to procure other purchasers expeditiously. After the said sales fell through, the receiver disposed of the properties at far lower prices, representing an approximate loss of €1.69M.
. A defence was delivered on 10 June 2016. The respondents deny that the appellant suffered any loss or damage. It is contended that any loss or damage were incurred by Bank of Scotland, its subsidiaries, successors and/or assigns, and are not amenable to suit by the appellant.
. At para. 14 the respondents plead, inter alia:-
“(a) According to the Plaintiff's filed Accounts, construction of the development at Aubrey Court was not sufficiently advanced by mid-2008 to allow pressure to be brought to bear on purchasers to complete or enter into binding contracts;
…
(f) Had the sales of the four apartments completed in 2008, an additional €1,925,000 (less sales costs) would have been received by the Company in that year. As the Company had net liabilities of €2,439,399 at 30 September 2008, such sales would not have rendered the Company solvent, and such an amount would have been demanded by and paid to Bank of Scotland, reducing the money owed to it to €10,401,229;
…
(j) Had the sales taken place, nothing different would have happened between 2008 and 2013, except that instead of the Company receiving the benefit of a write off of €10,529,699 worth of loans, the write off would have been €8,604,699 and the Company would be in an identical position on completion of the receivership and the full and final settlement referred to in its Accounts.”
. On 27 April 2016, the respondents issued a motion seeking to have the proceedings dismissed for disclosing no cause of action. That motion has been adjourned to the trial of the action. The motion was grounded on the affidavit of William F. O'Grady sworn on 28 April 2016. Certain averments therein are relevant to the security for costs application.
. At para. 11 of his affidavit Mr. O'Grady deposed that:-
“…while the development of the Premises was ongoing, the Company sought to sell some of the apartments from the plans. As was becoming usual by late 2006, various devices were employed to minimise stamp duty and to retain flexibility for the...
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