Demeray Ltd v O'Grady p/a O'Grady Solicitors

JurisdictionIreland
JudgeMs. Justice Ní Raifeartaigh
Judgment Date22 March 2018
Neutral Citation[2018] IEHC 800
CourtHigh Court
Docket Number[2010 No. 7981 P]
Date22 March 2018

[2018] IEHC 800

THE HIGH COURT

Ní Raifeartaigh J.

[2010 No. 7981 P]

BETWEEN
DEMERAY LIMITED
APPLICANT
AND
WILLIAM F.O'GRADY, KIRBY TARRANT, STEPHEN T. NOONAN, JENNIFER FAY

AND

ELIZABETH BURKE

Practicing Under the Style and Title of

‘O'Grady Solicitors’
RESPONDENT

Costs – Negligence – Property and Conveyancing – Defendants seeking security for costs in proceedings brought against them by an insolvent company – Whether the defendant could establish that there was a prima facie defence and that the plaintiff would not be able to pay costs if such defence was successful

Facts: The defendant solicitor firm sought security for costs in an action brought against them alleging negligence in relation to the conveyancing of premises. The plaintiff company was insolvent, but did not plead in the substantive case against the defendant that the company had failed, directly or indirectly, as a result of this particular loss. The plaintiff argued in relation to the defendant’s application that security for costs should not be granted as (i) the defendant’s actions resulted in the plaintiff losing its relationship of trust with Bank of Ireland and ultimately the company’s failure, and (ii) that there was delay on the part of the defendant in bringing the application.

Held by Ní Raifeartiagh J that there is an onus on the defendant to establish that he has a prima facie defence and that the plaintiff will not be able to pay the defendant’s costs if he is successful in his defence. The order should then be made unless it can be shown that there are specific circumstances which would cause the court to exercise its discretion not to make the order. Such circumstances would include a delay on the part of the moving party and/or the plaintiff’s inability to pay costs resulting from a wrongdoing on the part of the defendant.

Ní Raifeartiagh J held that the defendant in this case did establish a bona fide defence. With respect of the plaintiff’s argument that their impecuniosity was a result of the defendant’s wrongdoing, Ní Raifeartiagh J held that this was specifically not pleaded in the initial statement of claim and she was not convinced that this causal connection was made out. Ní Raifeartiagh J was also not persuaded that there had been a delay on the part of the defendant that would cause the court to exercise its discretion not to grant the order.

Relief granted.

JUDGMENT of Ms. Justice Ní Raifeartaigh delivered on the 22nd day of March, 2018
Nature of the application
1

This is an application for security for costs in the context of proceedings brought by an insolvent company against a firm of solicitors. In the substantive proceedings it is alleged that the solicitors were negligent while acting on behalf of the plaintiff company in relation to the conveyancing of premises arising out of a construction project engaged in by the plaintiff.

Chronology of the Pleadings/Events Leading to the Present Application
2

A plenary summons issued on the 31st October, 2012 claiming damages for breach of contract, negligence and breach of duty to include statutory and fiduciary duties. The events underlying this claim took place during the period 2006-2008.

3

An appearance was entered on the 5th November, 2013 and a statement of claim was delivered on the 20th February, 2015. The statement of claim indicated that the company had been in receivership at the time that the proceedings commenced. Complaints have been made on affidavit, on behalf of the defendants, to the effect that there should have been an amendment to the title of the proceedings to reflect this fact, but this issue was not canvassed at the hearing before me.

4

A notice of intention to proceed was served on the 13th November, 2015. On the 28th January, 2016 the plaintiff's solicitor wrote a letter threatening to issue a motion for judgment in default of defence. A motion to this effect was served on the 4th March, 2016. On the 1st April, 2016 the solicitors for the defendant wrote that it was their intention to bring a motion to dismiss the claim and requested an adjournment of the motion or judgment in default of defence. On the 4th April, 2016 the motion for judgment came before the Court. The Court rejected the defendant's request for an adjournment and extended the time for delivery of defence for a period of 4 weeks.

5

The defendant issued a motion on the 27th April, 2016 seeking an order dismissing the action on the ground that it disclosed no reasonable cause of action and/or that it was frivolous and vexatious and/or an abuse of process. This was grounded on an affidavit of Mr. William F. O'Grady, partner in the firm of O'Grady Solicitors, sworn on the 28th April 2016.

6

The defendants failed to deliver a defence within the 4 weeks that had been provided for by the court order and the plaintiff's solicitors served a second motion for judgment in default of defence, returnable for the 13th June, 2016. A defence was subsequently delivered on the 10th June, 2016.

7

The motion to strike out the proceedings was listed for hearing on the 1st December, 2016.

8

A notice of motion seeking security for costs issued on the 23rd November, 2016, grounded on a further affidavit of Mr. O'Grady, sworn on the 21st November 2016, together with an affidavit of Mr. Paul Conlon.

9

Mr. Paul Walsh, director and shareholder of the plaintiff company, swore an affidavit dated the 14th December, 2016 in response to the motion to strike out.

10

A further affidavit was sworn by Mr. Walsh, dated the 8th February, 2017, in response to the motion for security for costs. A further affidavit on behalf of the plaintiff was sworn by Mr. Manus Quinn, accountant, on the 14th December, 2016.

11

A further affidavit on behalf of the defendant was sworn by Mr. Kirby Tarrant, a partner in the defendant firm, on the 4th October, 2017.

The Substantive Case as Pleaded
12

The statement of claim indicates that the plaintiff's claim is essentially as follows. The plaintiff was involved in the business of construction and property development and in February 2006 acquired lands in Bray, County Wicklow with a view to constructing a residential and commercial development to be known as ‘Aubrey Court’. The development consisted of 34 apartments and 3 commercial units, and building commenced on the 8th January, 2007. In November 2006 the plaintiff instructed the defendants to act as its solicitors in connection with the sale and conveyancing of these apartments and commercial units. On the 16th November, 2006, the plaintiff negotiated the sale of apartment number 20 to a couple, by the name of Flynn, at a price of €485,000. The defendants furnished to the solicitors acting on behalf of the Flynns a Combined Building Agreement/Contract for Sale which contained a clause stating that they had no authority to bind their client contractually and that ‘ no Contract shall be deemed to be in existence until such time as Contracts have been executed by both parties and exchanged and a full deposit paid’. On the 12th December, 2006, the solicitors for the purchasers returned the Combined Building Agreement/Contract for Sale as executed by their clients together with a cheque for a deposit in the sum of €15,000. At no time did the defendants return the part of the contract duly executed by the plaintiff necessitated to satisfy the condition precedent. By letter dated the 23rd May, 2008, the purchasers” solicitors asked for its return, stating inter aliaIn your letter you said that you were returning the Building Agreement/Contract for Sale…we do not appear to have same on file and we would be grateful if you would let us have one part of such Contract and in view of the fact that same is required by our client's lending agency…’, By letter dated the 17th July, 2008 the defendants stated inter alia that they had no authority to ‘bind our client contractually and no Contract shall be deemed to be in existence until such time as Contracts have been executed by both parties and exchanged and a full deposit paid.’ In August 2008 the purchasers sought to withdraw from the purchase and the sale ultimately fell through. In 2012, the receiver subsequently negotiated the sale of this apartment for approximately €93,000, representing a loss of approximately €391,000 for the plaintiff.

13

A similar sequence of events took place with regard to apartment number 34. The purchasers were the same as for apartment number 20 and the agreed price was €545,000. The receiver ultimately negotiated a sale in 2012 for a price of approximately €94,000, representing a loss of approximately €450,000.

14

A similar sequence of events took place with regard apartment number 33, where the proposed purchasers were a couple by the name of McGovern. The agreed sale price had been €565,000 and the receiver ultimately negotiated the sale for a sum of €109,000, representing a loss of approximately €455,000.

15

A similar sequence of events took place with regard to apartment number 25, where the purchaser was a Ms. Edge. The agreed sale price was €420,000 and the receiver sold the apartment for approximately €89,000, representing a loss of approximately €395,000.

16

The substance of the plaintiff's case, set out in the statement of claim, is to the effect that the relevant proposed purchasers of these particular 4 apartments were able to reconsider their decisions to purchase the apartments and to successfully withdraw their offers at a time when property prices were falling, owing to the defendant's failure to ensure that binding contracts were in place. The plaintiff contends that the defendants failed to inform them that the sales were vulnerable to withdrawal, thereby denying them the opportunity to bring about the timely execution of contractual documentation or, failing that, the abandonment of the proposed transaction and the conclusion of a transaction with...

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