Ochre Ridge v Cork Bonded

• Jurisdiction: Ireland
• Judge: O'Neill J.
• Judgment Date: 20 December 2000
• Neutral Citation: [2000] IEHC 96
• Court: High Court
• Docket Number: No. 9333p/2000
• Date: 20 December 2000

[2000] IEHC 96

THE HIGH COURT

No. 9333p/2000

OCHRE RIDGE LTD v. CORK BONDED WAREHOUSES LTD & PORT OF CORK CO LTD

BETWEEN

OCHRE RIDGE LIMITED

PLAINTIFF

AND

CORK BONDED WAREHOUSES LIMITED AND PORT OF CORK COMPANY LIMITED

DEFENDANTS

Citations:

COMPANIES ACT 1963 S390

RSC O.29

JACK O'TOOLE LTD V MCKEON KELLY ASSOCIATES 1986 IR 277

SEE CO LTD T/A SOUTH EAST ELECTRIC CO V PUBLIC SERVICES LTD 1987 ILRM 255

BULA LTD V TARA MINES LTD 1987 IR 494

LISMORE HOMES LTD V BANK OF IRELAND LTD 1992 2 IR 57 & 1999 1 IR 501

LOUGH NEAGH EXPLORATION LTD V MORRICE 1998 1 ILRM 205

PEPPARD & CO LTD V BOGOFF 1962 IR 180

CONHLUCHT PAIPEAR RIOMHAIREACHTA TEO V UDARAS NA GAELTACHTA 1990 1 IR 320

Synopsis:

Practice and Procedure

Practice and procedure; security for costs; plaintiff had commenced proceedings against defendant seeking specific performance of a contract for assignment of a lease; proceedings had arisen from failure to conclude negotiations regarding the development of premises by a certain date and subsequent forfeiture of deposit; whether the first named defendant has discharged the onus of proving insolvency or otherwise inability to pay at the appropriate time; whether the appropriate time in respect of which the Court must determine inability to pay is the point in time where the defendant seeking security has been successful in his defence; whether defendants have a stateable defence to plaintiff's claim; whether plaintiffs have demonstrated special circumstances which would move the Court to exercise its discretion against ordering the security for costs sought; s.390, Companies Act, 1963.

Held: Application refused.

Ochre Ridge Limited v. Cork Bonded Warehouses Limited - High Court: O'Neill J. - 20/12/2000

The main proceedings concerned the breakdown of an agreement to purchase a leasehold interest. The plaintiff as prospective purchaser sought a decree of specific performance against the first named defendant. The first named defendant sought an order for security for costs against the plaintiff alleging that the plaintiff was a “shelf company” and had no assets. This assertion was disputed by the plaintiff. O’Neill J held that it had been proved on the balance of probabilities that the plaintiff would be unable to meet the costs of the defendants if unsuccessful. However the plaintiff had demonstrated a connection between its impecuniosity and the actions of the defendants. This was a special circumstance which would act as a bar to refusing the order for security for costs sought by the first named defendant.

JUDGMENT of

O'Neill J.

1 delivered the 20th day of December, 2000.

2 By its Notice of Motion dated the 6th November, 2000 the first named Defendant in these proceedings seeks an Order pursuant to Section 390 of the Companies Act1963and/or pursuant to Order 29 of the Rules of the Superior Courts directing the Plaintiffs' to furnish security for the costs of these proceedings.

3 The Plaintiff and the first named Defendant entered into a contract on the 8th October, 1999 whereby the Plaintiffs' agreed to purchase for the sum of £775,000.00 the Defendants' interests as lessee in the premises known as ALL THAT the warehouse premises situate at Custom House Quay, Cork being the property comprised in Indenture of Lease dated 27th March, 1918 made between the Cork Harbour Commissioners of the one part and William Thomas Green and John George Green of the other part. The second named Defendants are the successors in title of the lessors under the said lease.

4 Amongst the special conditions attached to the said contract, special conditions numbers 9 (a) and (b) appear to be particularly germane to these proceedings and read as follows

"This agreement is conditional on the purchaser concluding negotiations to its satisfaction with the landlord, Port of Cork Company, regarding the development of the premises. Subject to this, the completion date shall be the 10th of April, 2000, provided however that the purchaser shall have the right to complete earlier than that date, on giving to the vendor seven days notice in writing. Any notice under this condition shall be given by the Solicitor for the purchaser to the Solicitor for the vendor by facsimile or post. In the event of service by facsimile, the same shall be deemed to have been given on the date of transmission and, if served by post, shall be deemed to have been given 24 hours following the date of posting.

(b) time shall be of the essence in relation to the completion date. Completion shall take place at 10 a.m. at the offices of the vendor Solicitor. It was agreed that if, for whatever reason, the purchaser fails to complete on the completion date this contract shall automatically be at an end and the purchasers deposit less the non refundable element (herein defined), shall be returned to the vendors Solicitor in exchange for all copy title documents furnished in connection with agreement."

5 The first named Defendant, on the grounds that the Plaintiff had not concluded negotiations to its satisfaction with the second named Defendant regarding the development of the premises before the closing date of the 10th April 2000 and hence not having closed the sale by that date, treated the contract as at an end and forfeited the non refundable part of the deposit namely £25,000.00 and returned the balance. The Plaintiff, being aggrieved by this, commenced proceedings in this Court by way of a Plenary Summons issued on the 11th day of August, 2000 which,inter alia as against the first named Defendant, seeks an Order of Specific Performance of the said agreement, a declaration that the first named Defendant failed to use its best endeavours in order to procure the consent of the second named Defendant to the assignment of the said lease the subject matter of the said sale, a declaration that the purported recision of the said contract by the first named Defendant was invalid, and a declaration that the consent of the second named Defendant to the assignment of the said lease was no longer necessary. As against the second named Defendant, the Plaintiffs in the said Plenary Summons seeks a declaration that the second named Defendant has unreasonably withheld its consent to the said agreement and a declaration that the first named Defendant is entitled to assign the said leasehold interest without the consent of the second named Defendant. An appearance was entered to that summons by the first named Defendant and before any further proceedings took place, the Motion which is now before me was brought.

6 This Motion is grounded on the Affidavit of Richard Martin Esq., a partner in the firm of Ronan Daly Jermyn who are the Solicitors on record for the first named Defendant. In this he deposes to the making of the aforesaid contract, and to its termination on the grounds that the Plaintiff had failed to comply with clause 9 (a) and (b) of the special conditions attached to the said contract.

7 Mr. Martin goes on to deal with the Plaintiffs financial position and he deposes to the fact that the Plaintiff was incorporated on the 18th of August, 1999 less than two months prior to the contract being entered into. He avers that the company is a "shelf company" and he expresses the belief that it was incorporated or activated by the Plaintiff for the sole purpose of purchasing the premises described in the Contract for Sale. He further deposes to the fact that the issued share capital of the Plaintiff company consists of 100,000.00 ordinary shares of 1 Euro each of which only two have been allotted thus resulting in the paid up capital of the company being only 2 Euros. He further deposes to the fact that no annual returns or accounts had been filed with the companies office and that there did not appear to be any assets in the company and he concludes by saying that because the Plaintiff was a mere "shelf company" that it is appropriate that the order for security for costs should be granted by this Court.

8 In opposing the application an Affidavit is sworn by Tim Tallent for the Plaintiffs. In this Affidavit, Mr. Tallent disputes the contention of the first named Defendant that they have a defence to these proceedings and he refers to the Statement of Claim yet to be filed. In his Affidavit, Mr. Tallent makes the case that the contract which was entered into between the Plaintiff and first named Defendant was the culmination of negotiations that commenced in September of 1998 with both Defendants'. These negotiations involved the Plaintiffs strategy for a comprehensive redevelopment of the property, the subject matter of the contract. The Plaintiffs proposal for the redevelopment of this property were contained in a confidential document which was furnished to the second named Defendant on the 23rd November 1998 and that subsequent to these proposals there were discussions with the Chief Executive of the second named Defendant company and subsequently with the directors of the first named Defendant, and that during the course of these discussions the Plaintiffs were encouraged to contract officials from the planning department of Cork Corporation with a view to establishing the feasibility of the development, and that as a result of these contacts Mr. Tallent was of the view that the planning officials appeared to be satisfied with the plans proposed. Mr. Tallent deposed to the fact that the preparation of all of these plans and proposals resulted in the expenditure of a sum of £127,000.00 by the Plaintiffs.

9 Mr. Tallent further deposes, that in his view he had secured the full support of the second named Defendant prior to proceeding to contract with the first named Defendant and that because of that he was prepared to enter into a contract which was a conditional and that provided for the payment of a non refundable deposit and also provided that time was of the essence in...