Paulson Investments Ltd v Jons Civil Engineering Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Birmingham
• Judgment Date: 02 November 2012
• Neutral Citation: [2012] IEHC 541
• Docket Number: [No. 3623P/2005]
• Court: High Court
• Date: 02 November 2012

[2012] IEHC 541

THE HIGH COURT

[No. 3623P/2005]

Paulson Investments Ltd & Albert Enterprises Ltd v Jons Civil Engineering Ltd & PJ Edwards & Co Ltd

BETWEEN

PAULSON INVESTMENTS LIMITED AND ALBERT ENTERPRISES LIMITED

PLAINTIFFS

AND

JONS CIVIL ENGINEERING LIMITED AND P.J. EDWARDS & COMPANY LIMITED

DEFENDANTS

COMPANIES ACT 1963 S390

HIDDEN IRELAND HERITAGE HOLIDAYS LTD (T/A THE HIDDEN IRELAND ASSOCIATION) v INDIGO SERVICES LTD & ORS 2005 2 IR 115

TRIBUNE NEWSPAPERS v ASSOCIATED NEWSPAPERS IRELAND (T/A THE IRISH MAIL) UNREP FINLAY GEOGHEGAN 25.3.2011 [TRANSCRIPT NOT AVAILABLE]

DELANY & MCGRATH CIVIL PROCEDURE 3ED PARA 13-70

COMHLUCHT PAIPEAR RIOMHAIREACHTA TEO v UDARAS NA GAELTACHTA & ORS 1990 1 IR 320

LISMORE HOMES LTD (IN RECEIVERSHIP) v BANK OF IRELAND FINANCE LTD 1999 1 IR 501

NORTA WALLPAPERS IRELAND LTD v JOHN SISK & SONS LTD 1978 IR 114

ROBINSON v PE JONES (CONTRACTORS) LTD 2011 3 WLR 815

KEATING BUILDING CONTRACTS 9ED PARA 7.003

PAROLEN LTD v DOHERTY & LINDAT LTD UNREP CLARKE 12.3.2010 2010/43/10857 2010 IEHC 71

SEE COMPANY LTD v PUBLIC LIGHTING SERVICES LTD 1987 ILRM 255

DUBLIN INTERNATIONAL ARENA LTD v CAMPUS & STADIUM IRELAND DEVELOPMENT LTD & ORS 2008 1 ILRM 496

MURPHY v J DONOGHUE LTD & ORS 1996 1 IR 123

RSC O.31

MERCANTILE CREDIT v HEELAN 1998 1 IR 81

DUNNES STORES (ILAC CENTRE) LTD v IRISH LIFE ASSURANCE PLC 2010 4 IR 1

PRACTICE AND PROCEDURE

Security for costs

Discovery - Principles to be applied regarding security for costs- Whether prima facie defence - Whether special circumstances to refuse order - Discovery agreement - Whether complied with - Whether strike out of defence appropriate - Hidden Ireland Heritage Holidays Ltd v Indigo Services Ltd [2005] IESC 38, [2005] 2 IR 115; Lismore Homes Ltd (In receivership) v Bank of Ireland Finance Ltd [1999] 1 IR 501; Norta Wallpapers v John Sisk Ltd [1978] IR 114; SEE Company Ltd v Public Lighting Services Ltd [1987] ILRM 255; Dublin International Arena Limited v Campus and Stadium Ireland Development Limited [2007] IESC 48, [2008] 1 ILRM 496; Comhlucht Páipéar Ríomhaireachta Teo v Údarás na Gaeltachta [1990] 1 IR 320; Murphy v J. Donoghue Ltd [1996] 1 IR 123 and Mercantile Credit Company of Ireland Ltd v Heelan [1998] 1 IR 81 applied - Tribune Newspapers v Associated Newspapers Ireland t/a The Irish Mail on Sunday (Unrep, Finlay Geoghegan J, 25/3/2011); Phillip Harrington Daly and Company (Dublin) Ltd v JVC (UK) Ltd (Unrep, O'Hanlon J, 16/3/1995); Robinson v PE Jones (Contractors) Limited [2011] 3 WLR 815; Parolen Limited v Doherty [2010] IEHC 71, (Unrep, Clarke J 12/3/2010); Dunnes Stores (Ilac Centre) Ltd v Irish Life Assurance plc [2008] IEHC 114, [2010] 4 IR 1 and Bula Ltd (In Receivership) v Tara Mines Ltd [1987] IR 494 approved - Rules of the Superior Courts 1986 (SI 15/1986), O 31 - Companies Act 1963 (No 33), s 390 - Security for costs ordered; application to strike out defence refused (2005/3623P - Birmingham J - 02/11/2012) [2012] IEHC 541

Paulson Investments Ltd v Jons Civil Engineering Ltd

Facts: The defendants in the case, a civil engineering company and a piling contractor, were conducting work for the plaintiff on his development site. The piling operations on the site ceased as the ground conditions proved to be unsuitable. The plaintiff made a claim against both the defendants for damages in contract and tort. In this part of the case the defendants presented a motion pursuant to s.390 of the Companies Act 1963 requiring the plaintiffs to provide security for costs and the plaintiff presented a motion to strike out the defence of the first plaintiff for failure to comply with an agreement to make discovery.

Birmingham J decided both defendants had made out an arguable case for obtaining security for costs, it was therefore necessary to consider whether the plaintiffs had established special circumstances in which security for costs would not be provided.

Firstly, the delay of the application by the defendants was considered. This was held not to be of an 'undue and substantial kind'. The defendants were not aware of the financial position of the plaintiff and it was held refusing security for costs upon the basis of inquiries which could have been made could not be justified. Dublin International Arena Limited v Campus and Stadium Ireland Development Limited & Ors [2008] 1 ILRM 496 considered.

In relation to the agreement concerning discovery, there was no intentional wrong doing on the part of the defendant and discovery, albeit late, had taken place. Murphy v J Donohue Limited [1996] 1 IR 123 and Dunnes Stores (Ilac Centre) Limited v Irish Life Assurance Plc [2010] 4 IR 1 considered.

Mr. Justice Birmingham

1 Before the court are a number of motions - a motion dated the 24^th November, 2010, by which the plaintiffs seek to strike out the defence of the first named defendant, Jons Civil Engineering Limited ("Jons") for failure to comply with an agreement to make discovery dated the 10^th January, 2008 and the 15^th May, 2008 and motions brought by each defendant pursuant to s. 390 of the Companies Act 1963, as amended, requiring the plaintiffs to provide security for costs. The motion brought by the first named defendant was dated the 27^th April, 2011 and that brought by the second named defendant dated the 20^th May, 2011.

2 The plaintiffs are related companies involved in property development. Both companies form part of what is known as the Mirella Group and each is a wholly owned subsidiary of Mirella Investment Limited. Mr. Willie Smyth is a director and is the principal shareholder of both plaintiff companies and also of Mirella Investments Limited.

3 The first named plaintiff, Paulson Investments Limited ("Paulson") is the owner of a site at Dyer Street, Drogheda, which is bounded to the south by the River Boyne. In 2000, it was decided that the site would be developed and that the development would take place through the second named plaintiff, Albert Enterprises Limited ("AEL"). The development was intended to consist of a three storey basement, with six over ground floors offering office, retail, commercial and residential elements. The first named defendant, Jons carried on a civil engineering business, while the second named defendant, P.J. Edwards & Company Limited ("Edwards"), is a specialist piling contractor.

4 Beginning in or around 2000, Mr. Willie Smyth entered into discussions, with a view to entering into a fixed price contract with Jons to construct the three storey basement element of the development. However, it is a significant feature of the case that at no point was a written contract actually entered into by the plaintiffs or indeed by Mr. Willie Smyth with the first defendant. While, as we will see, there is some dispute about whether at particular stages, the first named defendant was dealing with the plaintiff companies or whether it was dealing with Mr. Willie Smyth personally, I will for convenience refer to the plaintiffs without regard to this controversy.

5 The plaintiffs retained consulting engineers, Hendrick Ryan and Associates ("Hendrick Ryan") to advise in relation to the construction of the development. Hendrick Ryan issued drawings, specifications and instructions for the construction of the basement and the piling and ground works associated with this. In preparing its specifications, Hendrick Ryan contemplated the use of what is known as secant piles in constructing the basement retaining wall. This is described as involving bored and case in situ piles which would be constructed using rotary bored piling techniques and, if necessary, would use support fluids to support collapsing or unstable blowing ground. In essence, the Hendrick Ryan specifications contemplated the use of conventional or traditional methods involving as it did large diameter bored cast in place piles, using temporary casing and a support fluid to maintain the stability of the bore if necessary.

6 The tendered documentation was furnished to Edwards, which responded and ultimately took on the task of piling. It is a matter of some controversy as to who actually engaged Edwards to carry out the pile driving. The plaintiffs allege and it is their case that the second named defendant, Edwards was engaged by the first named defendant, Jons, to carry out the piling works. However, this is disputed by the first named defendant who contends that the second named defendant was nominated by the plaintiffs and/or by Mr. Willie Smyth.

7 Of note is that Edwards had worked previously in Drogheda and indeed had worked in very close proximity to the proposed Dyer Street site. On that occasion they had not used the traditional secant pile method of piling but an alternative method which has the capacity to be quicker and more economical known as "Continuous Flight Auger" ("CFA"). In broad terms CFA piling is a replacement piling technique where the boring operation removes matter and replaces it with concrete.

8 By tender dated the 15^th July, 2000, accompanied by a letter dated the 17^th July, 2000, Edwards tendered for the piling aspect of the contract at a price of €1,082,700 plus VAT. This tender was based upon using the CFA piling method. Edwards qualified its tender in the following manner:-

"We have based our tender on being able to use CFA bored piles which has never been a problem in Drogheda where we have worked literally less than 50 metres from the site. However, we do note the very long chiselling times recorded below 11 metres which would cast some doubt on the use of CFA methods. It would be prudent therefore to qualify our tender which would be subject to test boring, which we would carry out at our own expense."

9 Hendrick Ryan accepted the tender. In doing so, it specified that the concrete CFA secant piling should be carried out within specified...