Jabaar Ltd v Townlink Construction Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 18 February 2011
• Neutral Citation: [2011] IEHC 111
• Court: High Court
• Date: 18 February 2011

[2011] IEHC 111

THE HIGH COURT

[No. 259 MCA/2010]

Jabaar Ltd v Townlink Construction Ltd

BETWEEN

JABAAR LIMITED

PLAINTIFF

AND

TOWNLINK CONSTRUCTION LIMITED

DEFENDANT

ARBITRATION ACT 1954

COMPANIES ACT 1963 S390

RSC O.99 r7

O'CALLAGHAN LAW OF SOLICITORS IN IRELAND PAR 4.20 BUTTERWORTHS 2000

SIMMONS v LIBERAL OPINION LTD 1911 1 KB 966

INDUSTRIAL & PROVIDENT SOCIETIES ACT 1893

YONGE v TOYNBEE 1910 1 KB 215

FERNEE v GORLITZ 1915 1 CH 177

NELSON v NELSON 1997 1 WLR 233

KENNEDY v KILEEN CORRUGATED PRODUCTS LTD 2007 2 IR 561

J (O) & J (T) (MINORS) v REFUGEE APPLICATIONS COMMISSIONER & ORS UNREP COOKE 29.04.2010 2010 IEHC 176

PROFESSIONS

Solicitor

Agency - Apparent authority - Costs - Whether solicitor bringing an action warrants his client's existence - Whether solicitor liable for breach of warranty to defendant where action brought on behalf of non-existent plaintiff - Fernée v Gorlitz [1915] 1 Ch 177, Kennedy v Killeen Corrugated Products Ltd [2006] IEHC 385, [2007] 2 IR 561, Nelson v Nelson [1997] 1 WLR 233 and Yonge v Toynbee [1910] 1 KB 215 considered; Simmons v Liberal Opinion Ltd [1911] 1 KB 966 followed - Rules of the Superior Courts 1986 (SI 15/1986), O 99, r 7 - Costs awarded against solicitor personally (2010/259MCA - Laffoy J - 18/2/2011) [2011] IEHC 111

Jabaar Ltd v Townlink Construction Ltd

PRACTICE AND PROCEDURE

Costs

Non-existent plaintiff - Dissolved company -Whether solicitor personally liable for costs of defence- Whether award of costs under inherent jurisdiction of court - Whether award of costs improperly or without reasonable cause incurred - Whether discretion of the court should be exercised in favour of solicitor for the plaintiff where solicitor not aware company was dissolved ab initio - Fernée v Gorlitz [1915] 1 Ch 177, Kennedy v Killeen Corrugated Products Ltd [2006] IEHC 385, [2007] 2 IR 561, Nelson v Nelson [1997] 1 WLR 233 and Yonge v Toynbee [1910] 1 KB 215 considered; Simmons v Liberal Opinion Ltd [1911] 1 KB 966 followed - Rules of the Superior Courts 1986 (SI 15/1986), O 99, r 7 - Costs awarded against solicitor personally (2010/259MCA - Laffoy J - 18/2/2011) [2011] IEHC 111

Jabaar Ltd v Townlink Construction Ltd

Facts The defendant herein sought an order directing the plaintiff's solicitors to pay the defendant's costs of the proceedings. The proceedings herein were initiated by way of notice of motion issued on behalf of the plaintiff by its solicitors on 7 October 2010 seeking an order setting aside the award of the arbitrator and various other reliefs under the Arbitration Act, 1954. On 19 November 2010, the defendant issued a motion seeking an order striking out the plaintiff's claim on the basis that the plaintiff had been dissolved and was no longer on the register of companies. The plaintiff subsequently withdrew its motion and consequently the defendant's application was rendered unnecessary. The plaintiff was dissolved on 20 August 2010 for failure to file annual returns in the Companies Registration Office. However, the proceedings were served on the defendant in October 2010. The day after proceedings were served the defendant's solicitors advised the plaintiff's solicitors in writing that the plaintiff company had been dissolved. In an affidavit sworn by a solicitor in the firm representing the plaintiff, it was stated the solicitor was not aware that the plaintiff had been dissolved at the time of serving proceedings and was later advised that the plaintiff would be reinstated. When the solicitor was instructed to withdraw the proceedings he immediately contacted the defendant's solicitors. It was submitted on behalf of the defendant that the plaintiff's solicitors could be directed to pay its costs under either the Court's inherent jurisdiction over solicitors or under Order 99, rule 7 of the Rules of the Superior Courts, 1986.

Held by Laffoy J. in ordering that the plaintiff's solicitors pay the defendant's costs of the proceedings when taxed and ascertained: That the judgment of Finnegan P. in Kennedy v. Killeen Corrugated Products Ltd. [2007] 2 I.R. 561 recognised, albeit obiter, the existence of the inherent jurisdiction of the Court to impose personal liability for costs on a solicitor in circumstances where the party for whom the solicitor represented he was acting by either commencing, or entering an appearance to defend, the proceedings did not exist. Although it was accepted that the plaintiff's solicitors were not aware that the plaintiff had been dissolved, they must be held personally liable for the loss, which the defendant incurred in defending these proceedings under the Court's inherent jurisdiction. The defendant's solicitors had informed the solicitors for the plaintiff before most, if not all of the costs were incurred, that the plaintiff had been dissolved. Order 99, rule 7 had no application to this case as neither of the outcomes contemplated by that order could be applied in this case in circumstances where the plaintiff did not exist when the proceedings were instituted and did not exist at the time of the application herein.

Reporter: L.O'S.

1. The applications

2 2 1.1 These proceedings were initiated by an originating notice of motion issued on behalf of the plaintiff (Jabaar) by its solicitors, O'Sullivan & Associates (Jabaar's solicitors) on 7 ^th October, 2010. The motion, which was returnable for 22 ^nd November, 2010 sought various reliefs under the Arbitration Act 1954, the primary relief being an order setting aside the award of an arbitrator. The award arose out of a reference to arbitration on foot of a building contract. After a hearing in July 2010 the arbitrator, Kevin Brady, issued a corrected interim award on 26 ^th August, 2010 directing that Jabaar should pay to the defendant (Townlink) the sum of €441,654.84 and Townlink's costs of the reference.

3 3 1.2 On 19 ^th November, 2010 Townlink issued a notice of motion in these proceedings returnable for 6 ^th December, 2010 seeking an order striking out the claim of Jabaar on the basis that it had been dissolved and was no longer on the register of companies or, in the alternative, an order for security for costs pursuant to s. 390 of the Companies Act 1963 against Jabaar.

4 4 1.3 After both motions had been listed for hearing, the Court was told that Jabaar was withdrawing its application, which has rendered Townlink's application unnecessary. The issue which has arisen between the parties is that Townlink contends that, having regard to the dissolution of Jabaar and its non-existence when the proceedings were issued, Jabaar's solicitors should be directed to pay Townlink's costs of the proceedings. The sequence of events, which is of importance, will be outlined next.

2. The chronology

2 2 2.1 Jabaar, which had been incorporated in 2003, was dissolved with effect from 20 ^th August, 2010, as I understand it, for failure to file annual returns in the Companies Registration Office (CRO) in accordance with its statutory obligations. According to the CRO printout which has been exhibited, the company's last annual return filed was for the year to 30 ^th September, 2008.

3 3 2.2 Jabaar's originating notice of motion was grounded on an affidavit which was sworn by a solicitor in Jabaar's solicitors' firm on 7 ^th October, 2010. The proceedings were served on Townlink by service on its solicitors on 7 ^th October, 2010. Having carried out a company's office search against Jabaar, and having discovered that it was dissolved, on the following day, 8 ^th October, 2010, Townlink's solicitors wrote to Jabaar's solicitors pointing out that Jabaar had been dissolved with effect from 20 ^th August, 2010 and querying how it was in a position to give instructions to Jabaar's solicitors to issue and serve the proceedings and how Townlink's costs would be dealt with. Further, the proposals of Jabaar's solicitors for security for costs were sought. There was no response to that letter. Townlink's solicitors sent a reminder on 12 ^th October, 2010 seeking a response and referring to "consequences which may result from the issue of proceedings on behalf of a client who does not exist". Mr. Cathal O'Sullivan, a solicitor in Jabaar's solicitors' firm, in an affidavit sworn by him on 10 ^th February, 2011, averred that until he received the letter of 12 ^th October, 2010 and spoke to the member of Townlink's solicitors' firm who wrote it, he was unaware that Jabaar had been struck off the register. He immediately contacted his "instructing client", John O'Connor. Mr. O'Connor is registered in the CRO as a director of Jabaar. Mr. O'Sullivan has averred that Mr. O'Connor's initial reaction was that he was unaware of the striking off and that he would instruct Jabaar's accountants to reinstate the company.

4 4 2.3 Chronologically, the next step taken in the proceedings was the issue of Townlink's notice of motion on 19 ^th November, 2010. That motion was grounded on an affidavit sworn by the solicitor in Townlink's solicitors' firm dealing with the matter. In paragraph six of that affidavit, which was sworn on 19 ^th November, 2010 and filed on the same day, it was averred:

"I say that as [Jabaar] is dissolved and was so at the time of issue of the within proceedings, the proceedings ought to be struck out as [Jabaar] no longer exists. I further say that in such circumstances [Townlink] should be entitled to its costs as against [Jabaar's solicitors], who commenced proceedings on behalf of a company that is dissolved."

In addition to addressing the ground on which Townlink sought to have the proceedings struck out, other matters were addressed in the affidavit: the alleged inability of Jabaar to pay costs, which was illustrated by reference to the last set of accounts of Jabaar which had been filed in the CRO in...