Sean Fay v Tegral Pipes Ltd and Others

• Jurisdiction: Ireland
• Judgment Date: 27 May 2005
• Date: 27 May 2005
• Docket Number: [S.C. No. 136 of 2004]
• Court: High Court

[2005] IESC 34

Supreme Court

[S.C. No. 136 of 2004]

Fay v. Tegral Pipes Ltd.

Sean Fay

Plaintiff

and

Tegral Pipes Limited, Brian Burnside Taylor, Michael Joseph McDonnell, William Samuel Goodwin, Liam Patrick Hughes, Maurice Lammerant and Jean Beeckman

Defendants

Cases mentioned in this report:-

Anns v. Merton London Borough [1978] AC 728; [1977] 2 W.L.R. 1024; [1977] 2 All E.R. 492.

Barry v. Buckley [1981] IR 306.

Purtill v. Athlone U.D.C. [1968] I.R. 205.

Shinkwin v. Quin-Con Ltd. [2001] 1 IR 514; [2001] 2 I.L.R.M. 154.

Practice and procedure - Dismissal of action - Principles to be applied - Inherent jurisdiction - Frivolous and vexatious - Abuse of process - Purpose of jurisdiction to dismiss proceedings - Access to courts - Rules of the Superior Courts 1986 (S.I. No. 15), O. 19, r. 28.

Company law - Separate legal personality - Personal liability of directors - Declaration of solvency - Contingent debt - Whether legitimate for parent company to wind-up an insolvent subsidiary - Whether director of company could be personally liable to third party when company also liable - Whether action for negligence could lie against director for signing declaration of solvency - Whether company in liquidation must make provision for future claims which might be made against it - Companies Act 1963 (No. 33 ), s. 256.

Appeal from the High Court

The facts are summarised in the headnote and are more fully set out in the judgment of McCracken J., infra.

By notice of appeal dated the 25th March, 2004, the defendants appealed against the decision of the High Court (Quirke J.) not to grant the reliefs sought in the motion on notice dated the 26th June, 2002. The appeal was heard by the Supreme Court (Denham, Geoghegan and McCracken JJ.) on the 15th February, 2005.

The plaintiff was employed by a company (Oldco). Oldco was wound up voluntarily by its members. Newco, an associated company changed its name to that of Oldco.

During the course of his employment, the plaintiff was exposed to asbestos fibres and six years after the winding-up he was advised that there was a real risk that he might develop either of the two cancers associated with asbestos exposure.

The plaintiff issued a plenary summons claiming damages for personal injuries against Newco and six named directors of Oldco.

The High Court (Quirke J.) refused the defendants' application to have the plaintiff's claim dismissed pursuant to the inherent jurisdiction of the court and/or pursuant to O. 19, r. 28 of the Rules of the Superior Courts 1986. The defendants appealed to the Supreme Court.

Held by the Supreme Court (Denham, Geoghegan and McCracken JJ.), in allowing the appeal, 1, that, while the phrase "frivolous and vexatious" was used in the context of applications to dismiss proceedings, the real purpose of the jurisdiction was to ensure that there was no abuse of the process of the courts.

2. That the privilege of access to the courts was only to be used for the resolution of genuine disputes and not as a forum for lost causes.

3. That the jurisdiction to dismiss proceedings ensured that litigants were not asked to defend a claim which could not succeed.

4. That it was perfectly legitimate for a parent company to wind-up a subsidiary which had been trading at a loss when there was a considerable financial benefit to the parent company to do so.

5. That there were circumstances in which a director or another employee of a company might be personally liable to an injured third party even though the employer was also liable.

Shinkwin v. Quin-Con Ltd. [2001] 1 I.R. 514 approved.

6. That a director or employee of a company would not have a personal liability for wrongful acts of the company merely because he was a director or employee. To incur liability there must be a duty of care owed by the individual in his own right and such duty will only arise if, as an individual, he was in a position of proximity sufficient to give rise to personal liability.

Purtill v. Athlone U.D.C. [1968] I.R. 205 considered.

7. That, in the absence of fraud, it was questionable whether any action for negligence could lie against a director for his part in signing a declaration of solvency.

8. That for a contingent debt to exist there must be a relationship between the company and a specific creditor in relation to a specific debt which might or might not become due depending upon the happening of some event.

9. That there must be certainty in a winding-up and it was ridiculous that a company in liquidation must make provision in case at some future date a claim might be made against it by one or more of a class of claimants.

Cur. adv vult.

Denham J. 27th May, 2005

1 I agree with the judgment about to be delivered by McCracken J.

Geoghegan J.

2 I also agree with the judgment of McCracken J.

McCracken J.

The relief claimed

3 This is an appeal from a decision of the High Court (Quirke J.) refusing the following reliefs sought by the defendants:-

"1. An order pursuant to the inherent jurisdiction of this honourable court striking out the plaintiff's action herein as against the defendants or, in the alternative, dismissing the said action or staying all further proceedings therein on one or more of the grounds following:-

• (i) the plaintiff's action is clearly unsustainable;

• (ii) the plaintiff's action is bound to fail;

• (iii) the plaintiff's action is frivolous and/or vexatious;

• (iv) the plaintiff's action is an abuse of the process of the court.

  • 2. Further, or in the alternative, an order pursuant to the provisions of O. 19, r. 28 of the Rules of the Superior Court 1986, striking out the plaintiff's summons and statement of claim herein or, in the alternative, dismissing the plaintiff's action or staying all further proceedings therein on the ground that the same disclose no reasonable cause of action against the defendant and, further, that the plaintiff's action is frivolous or vexatious."

The plaintiff's claim

4 The plaintiff was employed by a company called Tegral Pipes Ltd. (hereinafter referred to as"Oldco") from July, 1965 until June, 1989, when he was made redundant. During that...