Lough Neagh Explorations Ltd v Morrice

• Jurisdiction: Ireland
• Judge: O'Sullivan J.
• Judgment Date: 12 June 1998
• Neutral Citation: [1998] IEHC 92
• Court: High Court
• Date: 12 June 1998

[1998] IEHC 92

THE HIGH COURT

No. 4828 P 1997

LOUGH NEAGH EXPLORATIONS LTD v. MORRICE

BETWEEN

LOUGH NEAGH EXPLORATIONS LIMITED (FORMERLY KNOWN AS ULSTER NATURAL RESOURCES LIMITED)

PLAINTIFFS

AND

SUSAN MORRICE, S MORRICE AND ASSOCIATES LIMITED,

PRIORITY OIL AND GAS LIMITED

AND THE MINISTER FOR TRANSPORT, ENERGY AND COMMUNICATIONS

DEFENDANTS

Citations:

RSC O.27 r1

MURPHY V DONOHOE LTD 1996 1 ILRM 481

MERCANTILE CREDIT CO OF IRELAND V HEALON UNREP SUPREME 14.2.1995 1995/4/1150

BARRY V BUCKLEY 1981 IR 306

WHITE BOOK (1991) 422

SPEED UP HOLDINGS LTD V GOUGH & CO (HANDLY) LTD 1986 FSR 330

Synopsis

- [1999] 4 IR 515 - [1999] 1 ILRM 62

1 O'Sullivan J. delivered the 12th June, 1998

2 In this judgment I am dealing with two motions, one on behalf of the first two Defendants and the second on behalf of the third Defendant for an Order pursuant to Order 27 Rule 1 of the Rules of the Superior Courts striking out the Plaintiffs" case for want of prosecution by reason of the Plaintiffs" failure to deliver a Statement of Claim or, in the alternative, by reason of the Plaintiffs" failure to provide security for costs in accordance with the Orders of Miss Justice Laffoy dated the 27th August, 1997 and the Master dated the 23rd January, 1998.

3 Miss Justice Laffoy has already delivered two Judgments in these proceedings on the 8th and 27th August, 1997 respectively. In the first of these the general background and relationship between the parties is comprehensively set out and the second of these deals specifically with an application by the three Defendants aforesaid for security for costs.

4 In the first of these judgments Miss Justice Laffoy refused to grant an Interlocutory Injunction to the Plaintiffs restraining the fourth Defendant ("The Minister") from granting a petroleum prospecting licence to any of the said Defendants, an Injunction restraining the said Defendants from taking steps to obtain such a licence and also a further Injunction restraining the first Defendant from breaching her contract with the Plaintiffs. The second part of that application dealt with the Minister's application for a mandatory Interlocutory Order requiring the Plaintiffs to deliver seismic field tapes in its possession and this application was also refused. The basis for refusal of the first of these applications will have some bearing on the matter which I have to deal with in this judgment and accordingly I will return to it later.

5 It is clear from the second of the two judgments referred to that an argument was advanced on behalf of the Plaintiffs in resisting the application for security for costs that the granting of same would stifle the proceedings. In the course of dealing with that submission Miss Justice Laffoy at page 8 stated as follows:-

"There is no evidence that the consequence of an Order for security for costs would be to stifle these proceedings. As I outlined in my Judgment of the 8th August, 1997, James F. Kenny, directly and indirectly through Ulster Natural Resources Limited, is the beneficial owner of the majority of the equity of the Plaintiff and the first Defendant indirectly through Ulster Natural Resources Limited is the beneficial owner of the minority stake. In an Affidavit sworn by her on the 28th July, 1997 the first Defendant averred that Mr. Kenny, on whose sole initiative the Plaintiff has instituted the present proceedings, is a person of some substance while the Plaintiff is effectively devoid of any assets from which to satisfy an Order for costs. This averment has not been controverted".

6 From the foregoing it seems to me apparent that my learned colleague considered relevant the personal assets of Mr. Kenny in the context of the provision by the Plaintiff of funding to comply with a Security for Costs Order. In the present application Mr. Kenny has sworn that he did not in fact institute the present proceedings but accepted that he is now maintaining them in the circumstance that those shareholders in the Plaintiff (hereinafter "LNE") who did institute these proceedings have withdrawn from the company.

7 In these circumstances even if I accept that Mr. Kenny did not himself institute the present proceedings, I consider that he is maintaining them and that such maintenance of the proceedings is as relevant to the question whether the Order for security is stifling same as would have been his institution thereof from the beginning. I note also that not only has the averment not been controverted as stated by Miss Justice Laffoy but neither of her two judgments of August 1997 have been appealed nor has the subsequent Order of the Master limiting the amount and time within which such amount shall be furnished as security.

8 The Plaintiff has not furnished the security directed. Instead he says that the first named Defendant has frustrated his ability so to do. This argument is made in the following circumstances.

9 The shareholding in LNE is 10% owned by the Plaintiff and 90% owned by Ulster Natural Resources (hereinafter "UNR") the company referred to in the extract from the second of the judgments of Miss Justice Laffoy referred to above. The shareholding in UNR is, in turn, owned 50% by Mr. Kenny and 50% by the first Defendant.

10 In dealing with the allegation made on behalf of the first two Defendants that the Plaintiff was guilty of gross and wilful delay in the prosecution of the proceedings the Defendant in his Affidavit sworn on the 24th April, 1998 sets out the following steps to show that the Plaintiff has made what he describes as vigorous efforts to comply with the Master's Order (limiting the amount and time for provision of security) dated the 23rd January, 1998.

11 1. On the 10th February, 1998 an agenda for an LNE Board Meeting and share offer document were circulated.

12 2. A meeting was held on the 18th February but was adjourned because Ms. Morrice was not present.

13 3. On the 25th February, 1998 the meeting went ahead again in the absence of Ms. Morrice but in compliance with the Company's Articles.

14 4. At this meeting it was resolved that the company should proceed to raise funds to meet the Security for Costs Order by way of an offer to be made to shareholders in accordance with the share offer document.

15 5. This meeting also decided to hold an Extraordinary General Meeting of the Plaintiff on the 12th March, 1998 for the purpose of passing a resolution authorising the directors to allot shares on the terms set out.

16 6. Ms. Morrice resigned from her position as director of both LNE and UNR and this was accepted on the 27th February, 1998. On the 28th February, 1998 the directors of LNE approved the share offer.

17 7. On the 6th March, 1998 the Plaintiff's solicitors received from the Defendants" solicitors a letter indicating that the first named Defendant was prepared to hand over to the Plaintiff and to UNR any documents to which they were lawfully entitled. On the 12th March, 1998 the EGM of LNE authorised the directors to allot shares under the approved document.

18 8. On the 14th March 1998 a notice was given of a meeting of directors of UNR to be held on the 30th March, 1998 and on the same date Mr. Kenny sent a fax to Ms. Morrice in connection with the UNR share offer. On the 23rd March, 1998 Ms. Morrice's solicitors wrote seeking further information about the proposed EGM and making a number of complaints and this was followed by further communication between the respective solicitors.

19 9. A subsequent fax was sent to Ms. Morrice clarifying a later date for the EGM.

20 10. On the 31st March, 1998 the proposed day of the EGM the first named Defendant's solicitors wrote to say that she would not attend the EGM because of the Plaintiff's failure to address issues raised in their earlier letter. The EGM of UNR went ahead but because of Ms. Morrice's failure to attend it was inquorate and could not proceed and the financial proposals could not be considered. The matter is under review.

21 The non-attendance of Ms. Morrice at the EGM of UNR was, as stated, because of the Plaintiff's failure to address certain queries raised by her solicitors. These queries relate to Ms. Morrice's apprehension that Ms. Kenny was seeking to inject funds into UNR which would subsequently be subscribed for shares in LNE thus providing LNE with funds to comply with the Order for Security for Costs. As she was a 50% shareholder of UNR this would constitute a dilution of her interests therein and give Mr. Kenny control of the company because clearly she would not subscribe to a rights issue for the purpose of raising security to enable the Plaintiff to continue to sue her. Furthermore in her solicitor's letter of the 21st March, 1998 she maintains that if Mr. Kenny as sole director constituted himself as chairman of UNR he could then exercise a casting vote in the event of a 50/50 deadlock. All of this would be able to happen if the EGM of UNR became quorate by reason of Ms. Morrice's attendance thereat. Her solicitors in the letter of the 21st March, 1998 make the point that such a course of conduct on behalf of Mr. Kenny would be in breach of the agreement between Mr. Kenny and Ms. Morrice of the 19th November, 1992 and moreover would inter alia constitute...