Jones v Gunn

JurisdictionIreland
JudgeMrs Justice McGuinness
Judgment Date14 February 1997
Neutral Citation[1997] IEHC 27
CourtHigh Court
Docket Number[1994 No. 893P]
Date14 February 1997

[1997] IEHC 27

HIGH COURT

No. 893P/1994
JONES v. GUNN & E TYPE PROPERTIES LTD

BETWEEN

NIGEL JONES AND RAYMOND TARLETON (PRACTISING UNDER THE STYLE AND TITLE OF McDONNELL AND DIXON)
PLAINTIFFS

AND

CHARLES GUNN, E TYPE PROPERTIES LIMITED AND XJS INVESTMENTS LIMITED
DEFENDANTS

Citations:

COMPANIES ACT 1963 S297A

COMPANIES ACT 1963 S298

COMPANIES ACT 1963 S251

DEBTORS (IRL) ACT 1872

COMPANIES ACT 1990 S251

COMPANIES ACT 1990 S251(1)(a)

HEFFERON KEARNS LTD (NO 1), IN RE 1993 3 IR 177

COMPANIES (AMDT) ACT 1990 S33(1)(a)

COMPANIES (AMDT) ACT 1990 S33

COMPANIES ACT 1990 S297A(1)(a)

COMPANIES ACT 1990 S297A(1)(b)

ALBA RADIO V HALTONE 1995 2 IR 170

COMPANIES ACT 1963 S245

COMPANIES ACT 1990 S126

HAMILTON V HAMILTON 1982 ILRM 290

FAMILY HOME PROTECTION ACT 1976

ATHLUMNEY, IN RE 1898 2 QB 551

O'H V O'H 1991 ILRM 108

JUDICIAL SEPARATION & FAMILY LAW REFORM ACT 1989 S29

RAISON, IN RE 1891 63 LT 709

CRAIES ON STATUTE LAW

COMPANIES ACT 1963 S298

KEANE ON COMPANY LAW 2ED PARA 29.23

PERCIVAL V WRIGHT 1902 2 CH 421

USSHER ON COMPANY LAW 202

WINKWORTH V EDWARD BARON DEVELOPMENT CO LTD 1987 1 AER 114

WEST MERCIA SAFETY WEAR (IN LIQUIDATION) V DODD

FREDERICK INNS (IN LIQUIDATION), IN RE 1991 ILRM 582

FREDERICK INNS (IN LIQUIDATION), IN RE 1994 1 ILRM 387

KINSELA V RUSSELL KINSELA PROPERTY LTD (IN LIQUIDATION) 1986 4 NSWLR 722

WEST MERCIA SAFETY WEAR (IN LIQUIDATION) V DODD 1988 BCLC 250

Synopsis:

Company Law

Plaintiffs not paid by defendants for work done; judgment obtained in default against third defendant; third defendant insolvent; all assets paid to second defendant in discharge of a debt; events occurred prior to commencement of Companies Act 1990; retrospective application of ss.297A, 298 of 1963 Act as amended, s.251 of 1990 Act considered; whether directors owed fiduciary duty to creditors not to dissipate assets once insolvency arose - Held: Claim under ss.297A, 298 dismissed; fiduciary duty could exist; court to proceed to hear evidence - (High Court: McGuinness J - 14/02/1997) [1997] 3 IR 1- [1997] 2 ILRM 245

|Jones and Tarleton v. Gunn & ors.|

1

Judgment of Mrs Justice McGuinness delivered on the 14th day of February, 1997.

2

In these proceedings the Plaintiffs who are a firm of Architects seek a number of reliefs against the three Defendants. A number of the reliefs sought are pursuant to the Companies Acts, 1963(as amended by the Companies Act, 1990), in particular pursuant to Sections 297A and 298 as extended by Section 251. Other reliefs sought include a declaration that in the conduct of its affairs the third-named Defendant at all material times acted for and on behalf of and as agent for the second-named Defendant, a declaration that by reason of the economic and commercial realities of the situation it is just and equitable that the second and third-named Defendants be treated as a single entity so that the business and liabilities of the third-named Defendant are to be regarded as the business and liabilities of the second-named Defendant and an Order directing the second-named Defendant to repay sums of £83,130 and £1,790 to the third-named Defendant and to pay all or part thereof to the Plaintiffs.

3

The reliefs sought may conveniently be divided into, firstly, reliefs whether pursuant to the Companies Act, 1963or otherwise against the first-named Defendant in his capacity as director of the second-named and third-named Defendant and, secondly, other general reliefs sought against the second and third-named Defendant companies.

4

At the beginning of the hearing before this Court Senior Counsel for the first and second-named Defendants, Mr McGovern, submitted that a preliminary issue arose which should be decided prior to the Court's embarking on the hearing of evidence, especially as in the nature of the case the evidence would be fairly lengthy. This issue, in the submission of Mr McGovern, was as to whether it was open to the Plaintiff to seek any relief against the first-named Defendant pursuant to Sections 297A and 298 of the Companies Act, 1963(as amended by the Companies Act, 1990), given that the matters alleged against the Defendants took place prior to the coming into force of the Companies Act, 1990. It was agreed by all parties that the commencement date of the said Act was 1st August, 1991.

5

Counsel for the Plaintiffs, Mr McCann, did not wholeheartedly oppose the hearing of the preliminary issue but submitted that there were other claims against the first and second-named Defendants, and in particular against the first-named Defendant in his capacity as director of the second and third-named Defendants, which arose in equity and with regard to the fiduciary duties of the first-named Defendant to the creditors of the third-named Defendant, which would require the hearing of very similar evidence. Counsel for the Defendants indicated that he would be strenuously opposing any argument that the first-named Defendant owed any duty to the Plaintiffs outside the realm of the Companies Acts.

6

It appeared to me that it would be helpful, and might well shorten the proceedings, to deal in the first place with the issue raised by Mr McGovern and to consider also whether the first-named Defendant as a director of the second and third-named Defendant companies could owe any duties to the Plaintiffs apart from claims under the Companies Acts.

7

At this point I should say that Mr McGovern very openly acknowledged that at this stage of the proceedings he saw himself as dealing principally, and perhaps solely, with any personal liability that might be attributed to the first-named Defendant rather than with the general liability of the second-named Defendant. The third-named Defendant had not entered an appearance or taken any other step to defend the proceedings.

8

In order to enable the Court to appreciate the background of the proceedings, Counsel for the Plaintiffs then opened the case generally to the Court. In setting out here the matters alleged in the opening of the case, it must at all times be accepted that many of these matters are strenuously at issue between the parties and that no decision on the facts can be made by this Court prior to hearing the full evidence.

9

In summary, the facts alleged by the Plaintiffs are as follows:

10

The Plaintiffs are a firm of Architects. In or about mid-October 1981, Mr Nigel Jones, the first-named Plaintiff, was approached by Mr Noel Smyth, Solicitor, who was then acting for a builder named John Moore, in regard to a possible residential development at Killiney Hill, Co Dublin. On 18th November, 1981 at a subsequent meeting Mr Smyth asked Mr Jones to act for his client in an application for planning permission for the said residential development. At this point it appeared that the relevant land was owned by a Mr Joseph Kelly, but at an early stage the ownership was transferred to the third-named Defendant, XJS Investments Limited.

11

Early in February 1982 there was a further meeting between Mr Kelly, Mr Smyth and Mr Jones, and on the 23rd February 1982 Mr Smyth wrote to Mr Jones asking him to prepare preliminary drawings for the purpose of the planning application to the relevant local authority, the then Dun Laoghaire Corporation. It was agreed that this work was to be done on a "no foal, no fee" basis. On the 14th May, 1982 the plans were presented as part of the planning application which was now being made by the third-named Defendant XJS Investments Limited. It appears that this company was owned by the first-named Defendant Mr Gunn, Mr Thomas Murphy, Mr Noel Smyth, Solicitor and Mr Vincent Barrett as shareholders. In 1982 the registered directors were Mr Kelly and Mr Smyth, but from 1983 onwards the registered directors became Mr Gunn and Mr Murphy.

12

In September 1982 more detailed plans were prepared and in November 1982 there was a discussion in regard to the fees to be paid to the Plaintiffs. A figure of £50,000 was agreed but on a "no foal, no fee" basis. The application for planning permission was pursued and the first-named Plaintiff acted as Architect throughout the process. Permission was refused by Dun Laoghaire Corporation on the 19th January, 1983 and the matter was appealed to An Bord Plean??#x3B2??la. The Plaintiffs allege that at this stage and at all stages thereafter it was clearly acknowledged that the "no foal, no fee" basis meant that Mr. Jones" fees would be paid if either (1) planning permission was obtained or (2) the owners of the land were paid compensation by the local authority in the event of planning permission being refused. The appeal was heard by An Bord Plean??#x3B2??la on the 5th July, 1983 and permission was refused, but on grounds that enabled the third-named Defendant to claim compensation from the local authority, which was done. Following considerable litigation it was held that compensation was payable and subsequently there was a process of arbitration between the developer and the local authority as to the quantum of compensation. The first-named Plaintiff acted for the third-named Defendant in the arbitration and was paid for this aspect of his work.

13

In July 1987 the sum of £150,000 was agreed as compensation to be paid to the third-named Defendant. Around that time Mr Jones met Mr Gunn and was asked and agreed to prepare maps for the sale of the Killiney land without planning permission. The first-named Plaintiff alleges that at this stage he was assured that all his fees would be paid. On the 19th May, 1988 he sent an invoice for £34,226.13 for the fees then due and owing. In September he was again assured that these fees would be paid. Mr. Jones then alleges that in January 1989 he was informed by Mr Gunn that the concept of "no foal" did not include payment if compensation was received rather than planning permission being obtained. Correspondence from the Plaintiffs and...

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