Ferrotec Ltd v Myles Bramwell Executive Services Ltd t/a Slimming World
| Jurisdiction | Ireland |
| Judge | Ms. Justice Dunne |
| Judgment Date | 05 February 2009 |
| Neutral Citation | [2009] IEHC 46 |
| Docket Number | [No. 377 P/2007] |
| Court | High Court |
| Date | 05 February 2009 |
[2009] IEHC 46
THE HIGH COURT
BETWEEN
AND
COMPANIES ACT 1963 S390
PEPPARD & CO LTD v BOGOFF 1962 IR 180
COMPANIES (CONSOLIDATION) ACT 1908 S278 (UK)
HIDDEN IRELAND HERITAGE HOLIDAYS LTD 2005 2 ILRM 498
PEARSON v NAYDLER 1977 1 WLR 899
PHILLIP HARRINGTON DALY & CO v JVC (UK) LTD UNREP O'HANLON 16.3.1995 1996/7/2181
COMHLUCHT PAIPEAR RIOMHAIREACHTA TEO v UDARAS NA GAELTACHTA 1990 1 IR 320
BULA LTD v TARA MINES LTD (NO.3) 1987 IR 494
INTER FINANCE GROUP LTD v KPMG PEAT MARWICK UNREP MORRIS 29.6.1998 2000/11 4104 1998 IEHC 217
O'TOOLE LTD v MACEOIN KELLY ASSOCIATES 1986 IR 277
FRAMUS LTD & ORS v CRH PLC & ORS UNREP SUPREME 22.4.2004 2004/18/4116
RAYAN RESTAURANT LTD v JULIES COMPANY RESTAURANT LTD & ORS UNREP BUDD 18.4.2005 2005/52/10958 2005 IEHC 137
USK DISTRICT RESIDENTS ASSOCIATION v E P A UNREP SUPREME 13.1.2006 2006/56/12022
BOYLE v MCGILLOWAY UNREP CLARKE 19.1.2006 2006/7/1199 2006 IEHC 37
PRACTICE AND PROCEDURE
Security for costs
Limited liability company - Finances - Inadequacy - Cause - Applicable principles of law - Whether defendant established prima facie defence - Whether credible evidence that company unable to pay costs of defendant if successful in defence - Discretion of court - Special circumstances - Onus on plaintiff - Weak financial position of plaintiff - Whether inability to pay attributable to defendant - Causal link between impecuniosity of plaintiff and alleged wrongful acts of defendant - Plaintiff's conduct of proceedings - Delay in bringing application - Pearson v Naydler [1977] 1 WLR 899, Harrington v JVC (UK) Ltd (Unrep, O' Hanlon J, 16/3/1995), Comhlucht Paipear Riomhaireachta Teo v Udaras na Gealtachta [1991] IR 320, Bula Ltd v Tara Mines Ltd (No 3) [1997] IR 494, Inter Finance Group Ltd v KPMG Peat Marwick (Unrep, Morris J, 29/6/1998), O'Toole Ltd v MacEoin Kelly Associates [1986] IR 277, Framus Ltd v CRH plc [2004] IESC 25, [2004] 2 IR 20, Rayan Restaurant Ltd v Julies Company Restaurant Ltd [2005] IEHC 137, (Unrep, Budd J, 18/4/2005), Usk District Residents Association v Environmental Protection Agency [2006] IESC 1, [2006] ILRM 363 and Boyle v McGilloway [2006] IEHC 37, (Unrep, Clarke J, 19/1/2006) considered; Peppard and Co Ltd v Boghoff [1962] IR 180 and Hidden Ireland Heritage Holidays Ltd v Indigo Services Ltd [2005] IESC 38, [2005] 2 IR 115 applied - Companies Act 1963 (No 33), s 390 - Rules of the Superior Courts 1986 (SI 15/1986), O 29, r 3 - Security of costs granted (2007/377P - Dunne J - 5/2/2009) [2009] IEHC 46
Ferrotec Ltd v Myles Bramwell Exec Services Ltd
Facts: The plaintiff undertook to design develop, manufacture and deliver a number of data management systems for the defendant. The contract price was €3,090,000.00 and the defendant agreed to pay to the plaintiff a deposit of 10% of the total order value, which was done, as was a further payment of €300,000. The agreement was terminated by letter by the defendant in 2006 and the application before the Court was an order pursuant to s. 390 of the Companies Act 1963 requiring the plaintiff to furnish to the defendant security for costs. It was alleged that the plaintiff had misrepresented it ability to design and manufacture the systems.
Held by Dunne J. that on the facts of the case the plaintiff had not succeeded in making out a prima facie casual link between the impecuniosities of the plaintiff and the alleged wrongful acts of the defendant. The defendant had established a prima facie defence. The plaintiff was not in a position to pay the costs of the defendant if it was successful in its defence and counterclaim. The Court had no option but to make an order for the security of costs. The weak position of the plaintiff at the time of entering the contract was not such a special circumstance as to warrant the court exercising tis discretion in favour of the plaintiff. The delay here was not such as to warrant the court refusing the application for security of costs.
Reporter: E.F.
These proceedings arise out of an agreement entered by the plaintiff and the defendant on or about the 6th October, 2005, whereby the plaintiff undertook to design develop and manufacture and deliver a number of data management systems complete with specialised software for the defendant consisting of weigh pads, printers and cables. The contract price for the delivery of 3,000 systems was €3,090,000.00. On foot of this agreement, the defendant issued a purchase order No. PR3295 on the 26th January, 2006, for 3,000 systems. At the time of entering into the agreement it was agreed that the defendant would pay to the plaintiff a deposit of 10% of the total order value and this was done by payments on the 4th November, 2005, the 29th November, 2005 and the 2nd of February, 2006. A further payment of €300,000.00 was made by the defendant to the plaintiff on the 6th July, 2006. There is some dispute between the parties as to the circumstances in which that payment came to be made. The agreement between the parties was terminated by the defendant by letter dated the 18th August, 2006.
The application before the court is an application for an order pursuant to s. 390 of the Companies Act1963 requiring the plaintiff to furnish to the defendant herein security for costs in respect of this action. Section 390 of the Companies Act 1963 provides as follows:-
"Where a limited company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."
I propose to refer to a number of the affidavit sworn herein in respect of this application. The grounding affidavit is an affidavit of David Rathbone sworn herein on the 30th November, 2007. Having set out details of the agreement, he referred to the defendant's defence to these proceedings, namely, inter alia, denying that the money as claimed by the plaintiff herein in the sum of €2,781,000.00 is due; that the defendant lawfully terminated the agreement; that the plaintiff misrepresented its ability to design and manufacture the systems required by the defendant and tried to sell the defendant a pre-existing system which it had developed for a competitor of the defendant without making the necessary or any software changes to reflect the rules and terminology used by the defendant. A number other issues of contention are set out in the affidavit and it is claimed that the inability of the plaintiff to develop the required system has led to losses on the part of the defendant due to the failure of the plaintiff to provide the system as ordered and the significant delay suffered by the defendant in the completion and incorporation of appropriate systems in its ongoing operations. These are calculated in the amount of St£1,700,000.00. On that basis the defendant seeks to set off any monies due and owing to the plaintiff against those losses should any sum be found to be due. It is also claimed that the sum of €609,000.00 already paid is adequate to discharge any claim that the plaintiff may have against the defendant. Thus, Mr. Rathbone makes it clear that not only will the defendant be defending these proceedings, there will be a substantial counterclaim.
Mr. Rathbone then goes on to deal with the assets of the plaintiff. In that regard he has referred to copies of the financial statements of the plaintiff for the years ending the 31st July, 2005, and the 31st July, 2006. Those accounts have been reviewed by Mazars Ireland on behalf of the defendant herein and it is the conclusion of Mazars that the plaintiff would not be in a position to pay any costs of the defendant if successful in defending the present proceedings. Mr. Rathbone further pointed out that there is no up to date information in relation to the financial status of the plaintiff.
Mr. Rathbone also indicated that he has been advised by Behan and Associates, Legal Costs Accountants, by letter dated the 27th November, 2007, that the hearing of these proceedings will involve significant expense for all the parties. Behan and Associates have advised that the approximate costs of the defendant in defending the proceedings would be a sum of €362,333.32 (excluding VAT). By letter dated the 21st November, 2007, the defendant's solicitors sought confirmation from the plaintiff's solicitors that the plaintiff would provide security for the costs that may be incurred in these proceedings. A response dated the 28th November, 2007, was received from the plaintiff's solicitors, but the letter did not provide security for costs although it indicated that the plaintiff has always been able to meet its liabilities. Given that response, this application was commenced.
John Ferrie is the Managing Director of the plaintiff company. In his replying affidavit, he dealt comprehensively with the meeting that gave rise to the agreement between the parties. He exhibited in his affidavit the pleadings herein together with the defendant's request for particulars and the plaintiff's replies to those particulars. The replies to particulars are extensive and were accompanied by twenty books of correspondence and e-mails passing between the plaintiff and the defendant during the course of the agreement. The twenty books of documents are set out in such a way as to deal with specific items and issues that arose between the parties over the course of the...
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