Mavior v Zerko Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 22 November 2012
• Neutral Citation: [2012] IEHC 471
• Court: High Court
• Date: 22 November 2012

Mavior v Zerko Ltd

COMMERCIAL

BETWEEN

MAVIOR

PLAINTIFF

AND

ZERKO LIMITED

DEFENDANT

[2012] IEHC 471

[No. 3956 P/2012]

[85 COM/2012]

THE HIGH COURT

PRACTICE AND PROCEDURE

Security for costs

Application for security for costs - Unlimited company resident in jurisdiction - Building agreement to carry out repair and reinstatement works to hotels - Claim that sums due and owing - Submission that bona fide defence and plaintiff would be unable to meet order for costs - Jurisdiction to make order in relation to person suing as nominal plaintiff on grounds of insolvency - Inherent jurisdiction to prevent abuse in proceedings - Whether plaintiff nominal plaintiff - Legal person with cause of action - Goode Concrete v CRH [2012] IEHC 116, (Unrep, Cooke J, 21/3/2012); ABM Construction v Habbingley Ltd [2012] IEHC 61, (Unrep, Laffoy J, 15/2/2012); Salthill Properties Ltd v Royal Bank of Scotland [2010] IEHC 31, [2011] 2 IR 441; Pitt v Bolger [1996] 1 IR 108; GMcG v DW (No 2) [2000] 4 IR 1; Proetta v Neil [1996] 1 IR 100; Kenealy v Keane [1901] 2 IR 640 and Barry v Buckley [1981] IR 306 considered - Rules of the Superior Courts 1986 (SI 15/1986), O29 - Application refused (2012/3956P - Finlay Geoghegan J - 22/11/2012) [2012] IEHC 471

Mavior v Zerko Ltd

The plaintiff was an unlimited company registered in Ireland. The defendant was a limited company that was used by Ulster Bank Ireland Ltd to hold the legal and beneficial interest of two hotels. In October 2011, the hotels were flooded and it was agreed that the management company (MJBCH Ltd) would organise repairs. MJBCH Ltd, acting in its capacity as agent of the defendant, contracted the plaintiff to carry out said repairs. It was the plaintiff's contention that the repairs were carried out and three payments were made by the defendant in respect of same but that there was still an outstanding balance of €1 million owed. The defendant disputed the contracts it held with MJBCH Ltd and the plaintiff whilst also alleging that the work performed was to a substandard level nullifying the debt claimed.

The defendant brought a motion seeking an order for the plaintiff to provide security of costs under Order 29 of the Rules of the Superior Court on the basis that there was a bona fide defence and that if the defendant was successful, it was unlikely the plaintiff would be able to pay the defendant's costs which were estimated to be €500,000 to €600,000 plus VAT due to the precarious financial position the company was in. The plaintiff submitted that the court did not have jurisdiction to make such an order simply because of their financial position as they were resident to the jurisdiction.

Held by Finlay Geoghegan J that it was a long standing principle that the court had no jurisdiction pursuant to Order 29 of the Rules of the Superior Court or its inherent jurisdiction to order security for costs against a plaintiff that is resident in the jurisdiction on the grounds of insolvency. There was nothing submitted by the defendant to suggest that the definition of 'plaintiff' in this principle was confined to a natural person. A limited company that is registered in Ireland could be subjected to an order for costs under s. 390 of the Companies Act 1963 but this was of no consequence to the plaintiff as an unlimited company.

It was further held that there was an exception to the principle where an order for costs could be made against a nominal plaintiff on grounds of insolvency. This was held not to apply to the plaintiff as it could not be described as nominal. The plaintiff's cause of action was for work carried out by them and it was being brought by them. As such, it was not acting as a nominee for someone else.

Application refused.

COMPANIES ACT 1963 S390

RSC O.29

GOODE CONCRETE v CRH PLC ROADSTONE WOOD LTD & ORS UNREP COOKE 21.3.2012 2012/16/4718 2012 IEHC 116

ABM CONSTRUCTION v HABBINGLEY LTD UNREP LAFFOY 15.2.2012 2012/1/143 2012 IEHC 61

SALTHILL PROPERTIES LTD & ANOR v ROYAL BANK OF SCOTLAND PLC & ORS 2011 2 IR 441

ARBITRATION ACT 1954 S22

RSC O.29 r1

PITT v BOLGER 1996 1 IR 108

MCG (G) v W (D)(NO.2) 2011 2 IR 441

COMPETITION ACT 2002 S4

COMPETITION ACT 2002 S5

TREATY OF THE FUNCTIONING OF THE EUROPEAN UNION ART 101

TREATY OF THE FUNCTIONING OF THE EUROPEAN UNION ART 103

PROETTA v NEIL 1996 1 IR 100

COMMON LAW PROCEDURE AMENDMENT ACT (IRELAND) 1853 S52

SUPREME COURT OF JUDICATURE ACT (IRELAND) 1877 O.55

RULES OF THE SUPREME COURT (IRELAND) ACT 1891 O.29

RULES OF THE SUPREME COURT (IRELAND) ACT 1805 RULES O.29

RSC O.29 r5

KENEALY v KEANE 1901 2 IR 640

MUNICIPAL CORPORATIONS (IRELAND) ACT 1840 S89

RSC O.58 r17

BARRY v BUCKLEY 1981 IR 306

1 1. The defendant in the motion sought an order that the plaintiff give security for costs pursuant to s. 390 of the Companies Act 1963 (as amended), or, in the alternative, pursuant to O. 29 of the Rules of the Superior Courts.

2 2. The plaintiff is an unlimited company registered in Ireland and with a registered address in Dublin. The plaintiff, formerly a limited company, Mountbrook Homes Limited, changed its name and was re-registered as an unlimited company prior to the events giving rise to these proceedings.

3 3. The defendant, a limited company, is stated to be a "Special Purpose Vehicle", established by Ulster Bank Ireland Ltd. for the purpose of holding the legal and beneficial interest in the Ballsbridge Inns and Tower Hotels (the "Hotels") on behalf of Ulster Bank Ireland Ltd., in its capacity as facility agent and security trustee for a syndicate of banks.

4 4. The factual background to the plaintiff's claim in these proceedings and the defendant's application for costs, in summary, is as follows.

5 5. In 2011, MJBCH Limited, a company stated to be part of a group of companies controlled by Mr. Sean Dunne, was engaged in running and managing the Hotels pursuant to an agreement with the defendant. On 24 ^th October, 2011, the Hotels were flooded as a result of heavy rainfall and extensive damage was done to the hotel buildings and their contents. The plaintiff pleads that following the flood damage, it was agreed between the defendant and MJBCH Ltd. that the latter would organise repair and reinstatement works to be carried out so as to render the hotel buildings safe and minimise the disruption to the Hotels. It further pleads and contends that MJBCH Ltd., acting at all material times as an agent of the defendant, entered into a building agreement with the plaintiff pursuant to which it was agreed that the plaintiff would carry out the necessary repair and reinstatement works.

6 6. The plaintiff contends that it carried out the repair and reinstatement work pursuant to the alleged agreement; that the defendant made to it three separate payments in respect of such works and that there is a balance in excess of €1m now due and owing, certified by the architects as due in respect of the works. In the alternative, it claims monies due to it by the defendant for the works carried out at its request on a quantum meruit basis.

7 7. The defendant disputes the terms of the alleged contracts, both between it and MJBCH Ltd. and the existence of any contract between it and the plaintiff. The defendant does not dispute that the plaintiff carried out works on the Hotels from which it now benefits; further, it does not dispute that it paid the plaintiff monies for work done. The defendant alleges that the works carried out by the plaintiff were substandard and denies that it now owes any monies to the plaintiff.

8 8. The defendant brings the application for security for costs upon the basis that it has a bona fide defence to the plaintiff's claim, and that, as a matter of probability, the plaintiff would be unable to meet an order for costs of the proceedings if the defendant were to be successful. The defendant obtained advice from Cyril O'Neill & Company, legal costs accountants, that the cost of defending the plaintiff's claim is likely to be in the order of €500,000 to €600,000 plus VAT.

9 9. On the affidavits in this application, there is dispute as to certain of the facts relating to the solvency of the plaintiff and its ability to meet any award of costs in favour of the defendant. Since its conversion from a limited to an unlimited company on 9 ^th June, 2009, it has not been under a statutory obligation to file accounts or make public its financial statements. The defendant exhibits the last set of filed financial statements for the year ended 31 ^st October, 2007, showing a loss on the profit and loss account of €453,859.00. The defendant also refers to other facts including the appointment of a receiver to part of the plaintiff's properties, registered charges and the behaviour of the plaintiff in relation to the ownership of fixtures and fittings in the Hotels arising out of prior commercial dealings between the plaintiff and the defendant.

10 10. The plaintiff, through a series of companies, some of which are non-resident, is stated to be ultimately owned by Ms. Gayle Killilea, the wife of Mr. Sean Dunne. Ms. Killilea and Mr. Ross Connolly are the two directors of the plaintiff.

Issues

11 11. The defendant did not pursue its application under s. 390 of the Companies Act 1963 for an order for security for costs. It only pursued the application pursuant to O. 29 of the Rules of the Superior Courts and the inherent jurisdiction of the court. It accepts that the plaintiff is to be treated as a person resident in this jurisdiction for the purposes of the application. It contends that the plaintiff is insolvent, or, as alternatively put, as a matter of probability would be unable to meet an order for costs against it if the defendant were successful. Counsel on its behalf invite me to follow the decision...