Mavior v Zerko Limited, [2013] IESC 15 (2013)

Docket Number:584/12
Judge:Clarke J.
 
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THE SUPREME COURT[Appeal No: 584/2012]

Denham C.J.

Clarke J.

MacMenamin J.

Between/

Mavior Plaintiff/Respondentand

Zerko LimitedDefendant/Appellant

Judgment of Mr. Justice Clarke delivered the 13th of March, 2013.

  1. Introduction

    1.1 The question of plaintiffs or appellants being required to give security for the costs of proceedings or appeals has always raised difficult questions. However, such issues come into significantly greater focus in difficult financial times. Against such a backdrop parties are understandably concerned about being exposed to expensive litigation only to find that, notwithstanding succeeding in the proceedings concerned, their opponent is unable to meet the award of costs which would normally follow. On the other side plaintiffs and appellants are understandably concerned that their ordinary right to bring and pursue proceedings or to appeal unfavourable decisions could be significantly impaired by being required to put up significant sums of money as the price for proceeding.

    1.2 This Court has recently, in Farrell v. Bank of Ireland [2012] IESC 42, had to consider the jurisdiction to award security for costs of an appeal. The judgment in that case also provides some analysis of the overall principles by reference to which security can be ordered. However, as pointed out in Farrell, at least in some respects different considerations apply as and between security for the costs of a claim as yet unresolved, on the one hand, and an appeal against an adverse finding, on the other hand. Likewise, there are differences between security awarded against limited liability companies, on the one hand, and natural persons, on the other.

    1.3 Indeed, it is the position of a corporate litigant (although not a limited company) that lies at the heart of this appeal. The plaintiff/respondent ("Mavior") is an Irish registered unlimited company. It brings these proceedings claiming sums of money said to be due from the defendant/appellant ("Zerko") either on foot of a contract, or on a quantum meruit basis, arising out of building works relating to significant repairs required to be carried out to a storm-damaged hotel premises in Dublin. The claims are strongly resisted by Zerko. Indeed, Zerko goes so far as to state that it has no contractual or legal relationship with Mavior such as would allow Mavior to maintain any claim against it. In those circumstances Zerko sought security for the costs of these proceedings against Mavior. The matter came before the High Court (Finlay Geoghegan J.) and was the subject of a judgment on the 22nd November, 2012 (Mavior v. Zerko Limited [2012] IEHC 471). In giving that judgment Finlay Geoghegan J. refused Zerko's application for security for costs. Zerko has appealed that refusal to this Court. It is appropriate to start by briefly outlining the relevant background facts.

  2. Background Facts

    2.1 In circumstances which are not material to the narrow issue which this Court now has to address, Zerko, which appears to be a special purpose vehicle established by Ulster Bank Ireland Limited for the purposes of holding ownership interests of a banking syndicate in the Ballsbridge Inns and Tower Hotels in Dublin, entered into an agreement with MJBCH Limited for the purposes of running and managing those hotels. MJBCH Limited is a company controlled by a Mr. Sean Dunne. There is a connection between MJBCH Limited and Mavior for it appears to be accepted that the entire beneficial interest in Mavior is ultimately owned by a Ms. Gayle Killilea. Ms. Killilea is married to Mr. Sean Dunne.

    2.2 As a result of storm damage it is said that an agreement was entered into between Zerko and MJBCH Limited to the effect that the latter would organise that repair and reinstatement works to be carried out. It is further claimed that MJBCH entered into an agreement with Mavior to carry out some of the works concerned. It is argued that MJBCH had authority, as agent of Zerko, to enter into an agreement with Mavior and that Zerko is, therefore, liable to Mavior for payment under that contract. Alternatively, as pointed out, Mavior claims monies said to be due to it by Zerko on a quantum meruit basis for the value of such building works said to have been carried out at Zerko's request and with Zerko's knowledge.

    2.3 Zerko disputes the terms of the alleged agreement between it and MJBCH Limited and also the existence of any contract between it and Mavior. While Zerko does not dispute that Mavior carried out works on the hotels from which it now benefits, Zerko argues that some of the works were sub-standard. Zerko also says that the arrangements between the parties were such that, on any view, the total sums which could be paid either to MJBCH Limited or Mavior could not exceed the total sums to be paid on foot of insurance policies held in respect of the hotels concerned. It is common case that significant sums have already been paid over by Zerko in respect of building works. It is said on behalf of Zerko that the difference between the total sums actually recovered on foot of the relevant insurance policies and the sums actually paid over to date is less than the cost of dealing with what are said to have been the sub-standard elements of the work. On that basis it is argued that there could be no net sum due either to Mavior or to MJBCH Limited.

    2.4 It was against that background that Zerko sought security for costs. In that context it is appropriate to refer, briefly, to the procedural history before and decision of the High Court.

  3. Procedural History and the High Court decision

    3.1 As noted by Finlay Geoghegan J. in her judgment Zerko sought an order for security under, alternatively, s.390 of the Companies Act, 1963 (as amended) ("s.390") or Order 29 of the Rules of the Superior Courts ("O.29"). However, the application under s.390 was not pursued. The reason for that was obvious. Section 390 is clearly, by its terms, confined to "a limited company". Mavior is not such a limited company.

    3.2 In pursuing the application under O.29, Zerko sought to place reliance on the judgment of Cooke J. in Goode Concrete v. CRH plc & ors [2012] IEHC 116 for the proposition that there is jurisdiction to order that security be given by an unlimited Irish resident company. Zerko also suggested that Mavior should be considered as being a nominal plaintiff in the sense in which that term has been used in some of the jurisprudence and as was applied by Cooke J. in his judgment in Goode Concrete. I should note that it is possible that this Court will be called on to consider whether Cooke J. was correct in his decision in Goode Concrete. For that reason it is not appropriate that there be any detailed analysis of the judgment in that case for the purposes of this ruling. It is, therefore, appropriate that I refrain from expressing any further view in this judgment on Goode Concrete.

    3.3 As is also clear from the analysis of Finlay Geoghegan J., Mavior placed reliance on the judgment of Laffoy J. in ABM Construction v. Habbingley Limited [2012] IEHC 61. In that case Laffoy J. in turn placed reliance on my judgment in the High Court in Salthill Properties Limited & anor v. Royal Bank of Scotland & ors [2011] 2 I.R. 441, for the proposition that the jurisdiction to order security for costs under O.29 does not extend to natural persons resident in the jurisdiction or within the European Union. Thus a key and central issue before the High Court was as to the extent of the jurisdiction to order security for costs under O.29 against Irish or EU resident persons or entities without limited liability. As it will be necessary to consider the jurisprudence to which Finlay Geoghegan J. had regard in that context, I will return to her application of that jurisprudence later in the course of this judgment.

    3.4 It is, however, appropriate to record her conclusions. Having analysed the relevant authorities Finlay Geoghegan J. came to the view, at para.28, that there was no basis on "which this Court may distinguish the position of a plaintiff which is an unlimited company from that of a natural person in the application of the general principle". However, Finlay Geoghegan J. went on, at para.29, to note that there appeared "to have been a long-standing jurisdiction to make orders for security for costs in relation to a person suing as a nominal plaintiff on the grounds of insolvency". While noting the jurisdiction of the courts to prevent abuse of process, such as by striking out proceedings as being bound to fail (Barry v. Buckley [1981] IR 306), and in respect of vexatious litigants under the so-called "Isaac Wunder order" jurisdiction, Finlay Geoghegan J. came to the conclusion that it could not be regarded as an abuse of process for an insolvent or impecunious plaintiff to bring a claim pursuant to a recognised cause of action which was the relevant plaintiff's own cause of action and which could...

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