Jack O'Toole Ltd v MacEoin Kelly Associates

• Jurisdiction: Ireland
• Court: Supreme Court
• Judgment Date: 01 January 1987
• Docket Number: [1984 No. 6051P]
• Date: 01 January 1987

High Court

Supreme Court

[1984 No. 6051P]

Jack O'Toole Ltd. v. MacEoin Kelly Associates

Jack O'Toole Limited

Plaintiff

and

MacEoin Kelly Associates and The County Council of the County of Wicklow, Defendants

Cases mentioned in this report:—

Heaney v. Malocca [1958] I.R. 111; (1957) 92 I.L.T.R. 117.

Peppard and Co. Ltd. v. Bogoff [1962] I.R. 180; (1957) 97 I.L.T.R. 12.

Personal Service Laundry Ltd. v. National Bank Ltd. [1964] I.R. 49; (1960) 99 I.L.T.R. 175.

Cohane v. Cohane [1968] I.R. 176.

Collins v. Doyle [1982] I.L.R.M. 495.

Parkinson & Co. v. Triplan Ltd. [1973] Q.B. 609; [1973] 2 W.L.R. 632; [1973] 2 All E.R. 273.

S.E.E. Company Ltd. v. Public Lighting Services Ltd. (Unreported, Supreme Court, 12th May, 1986).

Pearson v. Naydler [1977] 1 W.L.R. 899; [1977] 3 All E.R. 531.

The State (Browne) v. Feran [1967] I.R. 147.

In bonis Morelli; Vella v. Morelli [1968] I.R. 11.

Mannix v. Pluck [1975] I.R. 169.

Practice - Costs - Security - Application by one defendant for security for costs in pending action - Plaintiff company unable to meet any order for costs - Whether plaintiff's impecunious state caused by wrong the subject matter of claim - Onus of proof on plaintiff - Standard of proof - Prima facie case - Discharge of onus - Whether bald statement sufficient - Supreme Court - Jurisdiction - Review of High Court discretion - Whether Supreme Court jurisdiction limited - Companies Act, 1963 (No. 33), s. 390.

Motion on Notice.

The facts and arguments are summarised in the headnote and are fully set out in the judgments, infra.

Paragraph 6 of the affidavit of Jack O'Toole, sworn on the 20th January, 1986, for the purposes of the High Court application and referred to in the judgment of McCarthy J., stated as follows:—

"In these circumstances a decision by this Honourable Court to grant the order requested would pre-empt the trial of the issues and would be a denial of justice in assisting the defendants to profit from their individual and joint actions which gave rise to the instant proceedings without allowing the plaintiff the opportunity to establish the validity of the plaintiff's claim."

The application of the first defendant was heard by Barr J. on the 20th January, 1986.

The first defendant appealed to the Supreme Court against the refusal of the High Court to order security for costs. The appeal was heard on the 24th June, 1986.

Section 390 of the Companies Act, 1963 provides:—

"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."

The plaintiff, a building company formed for the purpose of contracting with the second defendant to build a large number of houses, commenced proceedings for damages for breach of contract against both the first defendant, the firm of architects appointed by the second defendant under the contract, and the second defendant. In its statement of claim the plaintiff alleged, inter alia, that the first defendant, knowing the plaintiff's weak financial situation, had failed and neglected to measure, quantify and adjudicate on amounts of claims submitted by the plaintiff under the contract, thereby causing the plaintiff damage and loss.

On the application of the first defendant for security for costs under s. 390 of the Companies Act, 1963, it was conceded on behalf of the plaintiff that it would be unable to pay the defendants' costs should they succeed in their defences. It was further stated in an affidavit filed on behalf of the plaintiff that because of the second defendant's actions the plaintiff "had to suspend its principal activity of contractor for public works." The High Court (Barr J.) refused the application, saying that the plaintiff had established a prima facie case that it had been put out of business by the wrong-doing of both defendants and that its inability to give security for costs was a consequence of that wrong-doing.

On appeal by the first defendant against the refusal it was contended, inter alia, on behalf of the plaintiff that, in the absence of an error in principle on the part of the High Court in the exercise of the discretion under s. 390, the Supreme Court should not interfere with the exercise of that discretion, even where it would have exercised the discretion differently.

Held by the Supreme Court (Finlay C.J., Henchy, Griffin, Hederman and McCarthy JJ.) in allowing the appeal and making the order sought, 1, that no such qualification lay upon the appellate jurisdiction of the Court. The Court had a right and an obligation to substitute its discretion for that of the High Court, if it was satisfied it should do so.

In bonis Morelli; Vella v. Morelli [1968] I.R. 11 applied.

2. That a plaintiff company which is unable to meet the costs of a successful defendant and which seeks to avoid an order for security for costs must, as a matter of onus of proof, establish a prima facie case that it was made insolvent and incapable of satisfying an order for costs by the wrong the subject-matter of the claim.

3. (McCarthy J. dissenting) That it was not a sufficient discharge of that onus for a plaintiff company to make as in the instant case a mere bald statement of fact that its insolvency had been caused by the wrong complained of and that in the absence of further evidence, such as financial accounts or records, the plaintiff had failed to discharge the onus of establishing such a prima facie case.

• S.E.E. Company Ltd. v. Public Lighting Services Ltd. (Unreported, Supreme Court, 12th May, 1986), applied.

Cur. adv. vult.

Barr J.

The Facts

The plaintiff is a limited liability company which has not been trading for several years but which previously carried on the business of building contractor. The first defendant is a firm of architects and the second defendant is a local authority. The plaintiff's claim against Murray O'Brien and Partners, who were joined as defendants originally, has been struck out. On 22nd March, 1976, the plaintiff entered into a substantial building contract with the second defendant which in turn employed the first defendant as its architect to supervise the contract and, in particular, to measure and evaluate the works to be performed by the plaintiff and its agents thereunder. This action relates to a dispute which has arisen regarding the amount of the final payment properly due and payable by the second defendant to the plaintiff after completion of the contract works. A claim for damages is also made against each defendant. It appears that the combined value of the plaintiff's claims exceeds £200,000. An amended statement of claim has been delivered and two affidavits have been sworn by Mr. Jack O'Toole, a director of the plaintiff company, on its behalf. One of these relates to the present motion and the other concerns an earlier motion brought by the original first and second defendants which resulted in Murray O'Brien and Partners being struck out of the action on the ground that at all material times they were acting merely as agent for the first defendant These documents disclose, inter alia, that in essence the plaintiff's claim against the first defendant (the architects) is that:—

• (i) they deliberately failed to deal with the accounts and supporting records furnished on behalf of the plaintiff in connection with the final payment due to them by the second defendant;

• (ii) they failed to have measured and to certify a proper sum in satisfaction of the plaintiff's final account and

• (iii) their motives for so behaving were—

  • (a) to create a serious financial crisis for the plaintiff which, as they were aware, urgently required funds in connection with other unrelated contract works on which they were then engaged;

  • (b) to use a financial crisis thus induced to coerce the plaintiff into accepting a lesser sum in purported settlement of their final account with the second defendant than ought to have been paid and

  • (c) to promote their professional interest with the second defendant by assisting in bringing about a settlement of the plaintiff's final account for much less than the amount which ought...