Murphy Concrete (Manufacturing) Ltd v Newlyn Developments Ltd

• Jurisdiction: Ireland
• Judge: Peart J.,Finlay Geoghegan J.
• Judgment Date: 21 December 2015
• Neutral Citation: [2015] IECA 294
• Date: 21 December 2015
• Court: Court of Appeal (Ireland)
• Docket Number: [2014 No. 903] [2014 No. 1053]

Between

Newlyn Developments Limited

Marchbury Properties Limited

Respondents

and

Murphy Concrete (Manufacturing) Limited

Trd Developments and Construction Limited

Appellants

[2015] IECA 294

The President

Finlay Geoghegan J.

Peart J.

[2014 No. 903]

[2014 No. 1053]

THE COURT OF APPEAL

Costs – Security – Special circumstances – Contracts – Construction – Pyrite – s. 390 of the Companies Act 1963

Facts:

Murphy Concrete (Manufacturing) Ltd (MCM) brought two appeals against an order refusing security for costs in relation to two High Court proceedings brought by the respondents, Newlyn and Marchbury. Under s. 390 of the Companies Act 1963 a defendant applicant for security of costs must show; i) that the plaintiff is unable to pay the costs if the defendant is successful and ii) that it has a prima facie defence to the plaintiff’s claim. If the defendant satisfies both tests it is then up to the plaintiff to show that special circumstances exist for the court to refuse to grant the order. Newlyn and Marchbury were builders and developers of housing estates in Dublin and MCM supplied the aggregate infill used to construct the houses, outbuildings and concrete surfaces. A number of householders complained about structural defects in their houses because they allege the infill material contained pyrite.

Held by Ryan P:

In relation to the Newlyn application the High Court judge Kearns P found that special circumstances existed that justified his refusal to make an order for security for costs. The circumstances related to the multiplicity of house owners affected and the range and scope of the claim. In addition, a point of law of exceptional public importance arose that transcended the interests of the parties concerning the extensive problems caused by Pyrite. The court agreed with Kearns P and determined that it would not be in the interests of justice to order security for costs. The High Court judge Gillligan J determined in relation to Marchbury that a prima facie defence had not been made out. The defendant is required to establish a realistic defence not merely deny the claim. The position in Marchbury was different to Newlyn in that Marchbury had a contract with the quarry supplier for the infill material that allegedly contained pyrite. MCM did not have a prima facie defence in relation to liability in tort for pure economic loss. It had therefore failed to establish one of the two essential requirements for a costs order. The appeals were dismissed.

JUDGMENT of the President delivered on 21st December 2015

Introduction

1 These are two appeals brought by Murphy Concrete (Manufacturing) Ltd. against orders made by the High Court refusing security for costs in respect of two High Court proceedings brought respectively by Newlyn and Marchbury. In the Newlyn case, the application for security was refused by Kearns P. in an ex tempore judgment of 7th June 2013. In the Marchbury case, the decision was by Gilligan J. on 12th November 2013. The cases were heard together on appeal in this Court because of the overlapping issues that arise, although there are some differences which will require to be considered.

2 A defendant applicant for security for costs against a plaintiff company under s. 390 of the Companies Act 1963 as amended is required to show:

(i) That the plaintiff will be unable to pay the costs if the defendant is successful;

(ii) that it has a prima facie defence to the plaintiff's claim, was, something more than a mere denial of the case pleaded.

If these two tests are satisfied by the defendant, then the burden shifts to the plaintiff to show that there are special circumstances to justify the court in refusing to grant the order. The court has a discretion in this evaluation. The questions that arise on the appeal are whether MCM has satisfied the prima facie defence test in the Marchbury case, and if so, whether there are special circumstances militating against ordering security for costs and this latter question also arises in the Newlyn appeal.

3 The cases as pleaded may be briefly summarised as follows. Newlyn and Marchbury were the builders and developers of housing estates in Balbriggan, County Dublin in respect of which Murphy Concrete (Manufacturing) Ltd. was the supplier of aggregate infill that was used in the construction of the houses, outbuildings and concrete surfaces. Newlyn built the estate at Moylaragh, comprising 559 properties between 2002 and 2005. Marchbury built the Newhaven estate between April 2003 and December 2007, comprising 234 houses and related infrastructure. A substantial number of householders in these estates have complained about structural defects in their houses and appurtenant concrete areas because, as they allege, of the presence of Pyrite in the infill material. Some have instituted proceedings against either Newlyn or Marchbury. In other cases, the Pyrite Resolution Board has issued proceedings on behalf of householders. A further cohort of plaintiff claims by householders is anticipated in respect of each of Newlyn and Marchbury.

4 In their separate proceedings, Newlyn and Marchbury seek a variety of reliefs including indemnity from MCM against any liability that Newlyn and Marchbury may have in respect of claims by householders arising from damage to their properties arising from the Pyrite-infected infill.

Newlyn's Statement of Claim

5 The Newlyn proceedings are brought against TRD Developments & Construction Ltd. as well as MCM. The case is that the first defendant, TRD, was the ground works contractor for the site and that MCM supplied the infill material to TRD for use on the sites of the houses. Newlyn submits that it has limited it claim for indemnity to those cases that have been instituted or which it is anticipated will be instituted.

6 Newlyn claims in tort against MCM on the basis of a breach of duty of care. Its case against TRD Developments is in contract and negligence and that defendant has served notice of indemnity and contribution on MCM.

MCM's Defence to the Newlyn Statement of Claim

7 MCM admits the plea, at para. 3 of Newlyn's statement of claim, that it is involved in the supply of infill material to the building industry. In respect of other pleas concerning the first defendant, TRD, MCM pleads that it is a stranger thereto. MCM does not admit that TRD purchased any of the aggregate allegedly used in the development from MCM, to the extent that TRD did purchase any of the aggregate by MCM pleads that it is a stranger to the use to which it was put. MCM denies that any of the quarry material was described as Clause 804 hardcore infill and/or was a standard product and/or was generally known to be used or purchased for any particular purpose, and also pleads that it was not aware of any particular purpose for which TRD purchased materials.

8 MCM denies that it knew or ought to have known of the purpose for which TRD purchased materials. It denies that MCM owed a duty of care to TRD or Newlyn or any other person. It pleads that there is no contractual or other relationship between MCM and Newlyn and without prejudice to that plea, denies that any relationship between MCM and Newlyn was such as to give rise to a duty of care or a duty in tort not to cause pure economic loss, and it is also denied that it would be just and reasonable to impose such a duty on MCM.

9 MCM denies that any materials it supplied were not fit for purpose or contained quantities of Pyrite or was not of reasonable quality or was defective. Alternatively, MCM exercised all reasonable care to be expected of a competent and prudent supplier. MCM denies that the material supplied resulted in heaving or expansion in the infill, as alleged, or at all.

10 MCM denies any negligence or breach of duty. MCM does not admit that any of the alleged claims by homeowners are in any way legitimate. It does not admit the particulars of additional loss and damage and awaits strict proof thereof. MCM denies that any liability resting on Newlyn has been caused by any wrongful acts or omissions of MCM. MCM pleads contributory negligence on the part of the plaintiff, Newlyn, and/or TRD and/or third parties involved in the design or construction of the property.

11 MCM pleads that the plaintiff's claim is one for pure economic loss and is therefore misconceived. It denies that the plaintiff is entitled to any indemnity or damages and makes no admissions. The defence denies that the declaration sought is or would be appropriate. It also pleads that Newlyn's claim is barred by the Statute of Limitations 1957 as amended. This is made on the basis that the relevant damage occurred and any cause of action in negligence accrued at the time when the material was incorporated into the buildings and/or shortly thereafter and/or in any event more than six years before the action was commenced.

12 MCM pleads that Newlyn has failed to mitigate its losses, that any such losses are not recoverable against MCM as being too remote or not being reasonably foreseeable and pleads that the plaintiff is not entitled to the relief claimed or any relief. The defence also contains a general traverse of everything pleaded except for express admissions.

13 The defence is therefore a comprehensive traverse of the pleas in the statement of claim, with the addition of specific pleas of the Statute of Limitations and that the claim represents pure economic loss that is not recoverable in law.

Affidavit of MCM in Newlyn Proceedings

14 The grounding affidavit in the Newlyn case is sworn by Mr. Seamus Murphy, director of Murphy Concrete (Manufacturing) Ltd. Mr. Murphy details his reasons for asserting the inability of Newlyn to pay MCM's costs in the event of the latter succeeding in its action. This is not a matter that is in dispute. He says that he believes that MCM has a good...