Mary and Joseph O'Brien Developments Ltd ((in Liquidation)) v Sobol

JurisdictionIreland
JudgeMs. Justice Irvine
Judgment Date09 May 2016
Neutral Citation[2016] IECA 133
Date09 May 2016
CourtCourt of Appeal (Ireland)
Docket NumberRecord No. 2014/889 [Article 64 Transfer]

Irvine J.

Sheehan J.

Mahon J.

Mary and Joseph O'Brien Developments Limited (In Liquidation)
Plaintiff/Appellant
- and -
Robert Sobol

and

Mary O'Brien Sobol
1st and 2nd Defendants/Respondents
- and -
Anthony Allen
3rd Named Defendant/Respondent

[2016] IECA 133

Record No. 2014/889

[Article 64 Transfer]

THE COURT OF APPEAL

Security for costs – Prima facie?defence – Judgment mortgage – Respondent seeking security for costs – Whether respondent demonstrated that he had a?prima facie?defence to the proceedings

Facts: The appellant, Mary and Joseph O'Brien Developments Ltd, was a property development company that was placed in voluntary liquidation on 12th April, 2012. The first and second respondents, Mr and Mrs Sobol, were directors and shareholders of the company. The third respondent, Mr Allen, had earlier been an employee of the company and in 2009 had instituted proceedings against his employer and the first and second respondents in respect of the alleged non–payment of certain wages and bonus payments. By order of the High Court of 28th February, 2012 Mr Allen obtained a joint and several judgment against the company and the first and second respondents for a sum of ?200,000 together with his costs, the same to be taxed in default of agreement. Notwithstanding repeated demands for payment, the said sum remained outstanding. It later came to Mr Allen?s attention that the first and second respondents were the registered owners of two apparently unencumbered properties. As a result, he registered his judgment as a mortgage against those lands on 21st March, 2012, and thereafter commenced proceedings seeking to have his judgment mortgage declared well charged thereon. On 20th April, 2012, the company?s liquidator advised Mr Allen that the properties were properly the property of the company as the company had advanced to the first and second respondents the sum of ?492,500 towards the purchase of the properties on the company?s behalf. On 9th August, 2012, the company commenced proceedings for the purposes of obtaining a declaration that Mr Allen?s judgment mortgage was subject to the company?s prior unregistered burden on the folios. Mr Allen issued a motion on 14th November, 2012, seeking security for his costs of defending the company?s proceedings. On 17th December, 2012, the High Court made an order that the company provide security for the costs to be incurred by Mr Allen in defending these proceedings, in default of which the same would be stayed. Later, by order dated 16th May, 2014, the High Court measured the said security in the sum of ?74,800 inclusive of VAT. The company appealed to the Court of Appeal against that order. The company submitted that the High Court judge erred in law in concluding that Mr Allen had demonstrated the existence of a?prima facie?defence to the company?s claim. It was submitted that in circumstances where the first and second respondents had agreed to consent to the relief sought in the plenary summons, it was inevitable that any defence that Mr Allen may seek to advance must fail. It was maintained that Mr Allen had not satisfied the burden of proof required of a defendant seeking security for costs, in that he had not referred to any evidence upon which he might rely at the trial to defend the company?s claim to a prior unregistered burden on the properties. It was submitted that a number of the matters relied upon by Mr Allen in support of his application were irrelevant. Mr Allen submitted that the High Court was correct to conclude that Mr Allen had demonstrated that the company was hopelessly insolvent and unlikely to be in a position to discharge his costs should he successfully defend the proceedings. Likewise, he submitted that the High Court judge rightly concluded that he had done nothing wrong; he had obtained a judgment and lawfully registered it as a mortgage against the properties. He submitted that the High Court judge did not err in law in concluding that he had established a?prima facie?defence to the proceedings.

Held by Irvine J that the High Court judge fell into error in failing to dismiss the third respondent?s application for security for costs on the basis that he had failed to discharge the burden of advancing evidence so as to demonstrate that he had a?prima facie?defence to the claim.

Irvine J held that she would allow the appeal.

Appeal allowed.

Judgment of Ms. Justice Irvine delivered on the 9th day of May 2016
1

Core to this appeal are the circumstances in which a judge having jurisdiction in a matter ought to make an order pursuant to s. 390 of the Companies Act 1963 requiring a company that is a plaintiff in litigation to provide security for the costs of a defendant in that action.

2

Section 390 provides that:-

?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 security is given.?

Relevant background facts
3

On 17th December, 2012, the High Court (Murphy J.) made an order that the plaintiff company (?the company?), the appellant in this appeal, provide security for the costs to be incurred by the third named defendant/respondent (?Mr. Allen?) in defending these proceedings, in default of which the same would be stayed. Later, by order dated 16th May, 2014, the Master of the High Court measured the said security in the sum of ?74,800 inclusive of VAT. It is as against that order that the company now appeals. In this regard it is perhaps relevant to note that the company has, pursuant to an order of the Supreme Court made on 25th July, 2015, lodged a sum of ?10,000 in court to secure Mr. Allen's costs on this appeal.

Factual background
4

The appellant was a property development company that was placed in voluntary liquidation on 12th April, 2012, following a meeting of its creditors. The first and second named defendants were directors and shareholders of the company which, from its statement of affairs of 12th April, 2012, would appear to have been wholly insolvent on that date, in that it reported a deficit of some ?2.9m.

5

Mr. Allen had earlier been an employee of the company and in 2009 had instituted proceedings against his employer and the first and second named defendants in respect of the alleged non payment of certain wages and bonus payments. Those proceedings were compromised and by order of the High Court of 28th February, 2012, (Hedigan J.) Mr. Allen obtained a joint and several judgment against the company and the first and second named defendants for a sum of ?200,000 together with his costs, the same to be taxed in default of agreement. Notwithstanding repeated demands for payment, the said sum remains outstanding.

6

It later came to Mr. Allen's attention that the first and second named defendants were the registered owners of two apparently unencumbered properties (?the properties?). The properties are those comprised in folios 92684F and 92687F for the County of Galway. As a result, he registered his judgment as a mortgage against the aforementioned lands on 21st March, 2012, and thereafter commenced proceedings seeking to have his judgment mortgage declared well charged thereon.

7

On 20th April, 2012, the company's liquidator, Mr. Conor O'Boyle, through his solicitors advised Mr. Allen that the properties against which he had registered his judgment were properly the property of the company and were not the lawful property of the first and second named defendants. The basis for his claim was advised in that letter; namely, that the company had advanced to the first and second named defendants the sum of ?492,500 towards the purchase of the properties on the company's behalf. Thus, he maintained that the company had an unregistered burden on the lands at the time Mr. Allen registered his judgment as a mortgage. Alternatively, he maintained that the properties were held by the first and second named defendants on a resulting or constructive trust for the company.

8

On 9th August, 2012, the company commenced the within proceedings for the purposes of obtaining from the Court, inter alia, a declaration that Mr. Allen's judgment mortgage dated 21st March, 2012, was subject to the company's prior unregistered burden on the said folios.

9

Following an exchange of correspondence, wherein he informally sought security for his costs of defending the company's proceedings, Mr. Allen issued a motion on 14th November, 2012, seeking a court order to that effect.

10

In his affidavit sworn on 12th November, 2012, Mr. Allen, having set out the relevant background to the proceedings, asserted that the company was hopelessly insolvent as was clear from the accounts presented to the creditors meeting of 12th April, 2012. He argued that there was no evidence to support the existence of the unregistered burden or trust contended for by the liquidator and that the proceedings were an effort to frustrate the proceedings he had instituted to have his judgment mortgage declared well charged on the properties. As a matter of law he maintained that even if the company should satisfy the Court as to the existence of an unregistered burden of the nature proposed by the liquidator, this could not oust his legal charge which has been registered in accordance with s. 6 of the Judgment Mortgage Ireland Act 1850.

11

In response, the liquidator maintained first, that the third named defendant had failed to demonstrate that the company would be unable to pay his costs in the event of him successfully defending the proceedings. Secondly, he...

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2 cases
  • Demeray Ltd v O'Grady p/a O'Grady Solicitors
    • Ireland
    • High Court
    • 22 March 2018
    ...Green Clean Waste Management Limited v. Leahy [2015] IECA 97, Mary & Joseph O'Brien Developments Ltd. (In Liquidation) v. Sobol & Allen [2016] IECA 133, and Paulson Investments Ltd. v. Jons Civil Engineering [2016] IECA 41 Further, in the Tír na nÓg case, I discussed the authorities in rela......
  • Tír na nÓg Projects (Ireland) Ltd -v- P.J. O'Driscoll and Sons and Another
    • Ireland
    • High Court
    • 6 September 2017
    ...Green Clean Waste Management Ltd. v. Leahy [2015] IECA 97; Mary and Joseph O'Brien Developments Ltd. (In Liquidation) v. Sobol and Allen [2016] IECA 133; Paulson Investments Ltd. v. Jons Civil Engineering [2016] IECA 169. 38 The defendants in the present case argue that they have a good sta......

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