Rayan Restaurant Ltd v Julies Company Restaurant Ltd and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Declan Budd
• Judgment Date: 18 April 2005
• Neutral Citation: [2005] IEHC 137
• Court: High Court
• Docket Number: [Record No. 44CA/2005]
• Date: 18 April 2005

[2005] IEHC 137

THE HIGH COURT

[Record No. 44CA/2005]

RAYAN RESTAURANT LTD v JULIES COMPANY RESTAURANT LTD & ORS

CIRCUIT COURT APPEAL

MIDLAND CIRCUIT COUNTY OF WESTMEATH

BETWEEN

RAYAN RESTAURANT LIMITED

PLAINTIFF

AND

JULIES COMPANY RESTAURANT LIMITED AND CLAUDIA PASCAU AND BY ORDER CATHERINE MURPHY-FLYNN

DEFENDANTS

AND

JAMEL MENNAD

THIRD PARTY

COMPANIES ACT 1963 S390

JACK O'TOOLE LTD v MACEOIN KELLY ASSOCIATES & WICKLOW CO COUNCIL 1986 IR 277

SEE CO LTD v PUBLIC LIGHTING SERVICES 1987 ILRM 255

CAMPBELL SEAFOODS LTD & ANOR v BRODRENE GRAM A/S UNREP HIGH 21.7.1994 1991/8/2243

LISMORE HOMES LTD v BANK OF IRELAND FINANCE LTD 2001 3 IR 536 2002 1 ILRM 541

COMPANY LAW:

Practice and procedure

Security for costs - Limited liability company - Insolvency caused by defendant's wrongdoing - Campbell Seafoods Ltd v Brodrene Gram (Unreported, High Court, Costello J, 21st July, 1994) and SEE Company Ltd v Public Lighting Services Ltd [1987] ILRM 255 distinguished; Lismore Homes Ltd v Bank of Ireland Finance Ltd [2001] 3 IR 536 followed - Companies Act 1963 (No 33), s 390 - Order for security for costs granted - (2005/44CA - Budd J - 18/4/2005) [2005] IEHC 137

Rayan Restaurant Ltd v Julies Company Restaurant Ltd

Facts: the plaintiff failed in its action in the Circuit Court and appealed to the High Court. The second and third defendants then applied for an order for security of costs against the plaintiff on the basis that it could not pay any future award of costs which would be probably be made in relation to the appeal and that it had not produced evidence of any special circumstances which would persuade the court to exercise its discretion not to so order. The plaintiff resisted the application, asserting that the parlous financial situation of the company was attributable to the alleged wrongful activity of the defendants’.

Held by Mr Justice Budd in finding that the second and third defendants were entitled to an order for security for costs that there was, prima facie, an arguable case on the part of the defendants and there was no evidence, other than a bald assertion, to show that the parlous financial situation of the plaintiff was due to any activity of the defendants, which would allow the court to exercise its discretion to refuse the order for security for costs sought.

Reporter: P.C.

Mr. Justice Declan Budd

1 This matter comes before the High Court by way of two motions for security for costs against the plaintiff company as part of preliminary applications to the hearing of the plaintiff's and third party's appeal from the whole of the judgment of the Circuit Court given on 17th November, 2004. The background to the two applications for security for costs is that there was a hearing of equity proceedings in the Circuit Court in Mullingar on 16th and 17th November, 2004. Premises at High Street, Athlone, which were owned by the late Barra Flynn, were leased by him to his wife, the third defendant, Catherine Murphy-Flynn. These had then been demised by her to the plaintiff company by assignment dated 1st August, 2002 for the purpose of running a restaurant there. The plaintiff company was beneficially owned by Jamel Mennad and his wife Fatma-Zohra Azizi. There was a contemplated agreement between the third party and the second named defendant Claudia Pascau that a second company, namely the first defendant Julies Company Restaurant Limited, would be the vehicle for managing the restaurant which, it was envisaged, would be carried on there by the third party and the second defendant. Apparently, there were unhappy differences between the third party and the second defendant and on 23rd July, 2003, Mr. Flynn re-entered the premises allegedly for failure to pay the rent. It would seem that the third defendant alleges that this brought the term under Lease and Assignment to an end. Apparently, the second defendant has since been in physical occupation of the restaurant premises as caretaker for the third defendant, subsequent to the reoccupation on the alleged grounds of the failure to pay the rent. The plaintiff company contests the lawfulness of the entry and occupation of the premises by the defendants and in an amended equity civil bill sought the relief of a declaration that the plaintiff is the lawful tenant pursuant to the assignment and lease and also sought possession of the premises, an injunction and damages. The nub of the third defendant's defence would appear to have been that the assigned term under the lease was determined on or about 23rd July, 2003 upon the re-entry by the third defendant's predecessor in title, Barra Flynn, on the demised premises, allegedly in accordance with the terms of the lease and in consequence of the rent therein reserved being unpaid for 21 days or more having become payable. The third named defendant counterclaimed on the basis of lawful determination of the term under the lease and sought a declaration that the predecessor of the third named defendant had lawfully determined the lease of 19th April, 1996. The third named defendant had also been joined by order of Judge Reynolds on 16th November, 2004, as the personal representative of the late Barra Flynn.

2 A defence to this counterclaim was delivered by the plaintiff which was essentially a denial of the lease having been lawfully determined. The matter was heard over two days in the Circuit Court in Mullingar and the plaintiff's claim as against the defendants was dismissed with costs to include reserved costs against the second named defendant with an order over against the third party. A declaration was also made in terms of para. (a) of the reliefs sought in the third named defendant's counterclaim and an order for costs of the third named defendant's counterclaim against the second named defendant with an order over against the third party. A sum of money had been lodged in court by the plaintiff in the course of a motion for summary judgment brought by the third defendant on foot of her counterclaim in respect of arrears of rent. A sum of about €11,250 remains lodged in court pending the determination of the proposed proceedings by the second named defendant with liberty to apply. An order was also made refusing the plaintiff's application for a stay on the orders made by the Circuit Court. It would seem that there is a dispute between the second defendant and the plaintiff as to who is entitled to the sum lodged and it is probable that the third named defendant would probably be involved in this contest too.

3 I have set out the background story to these two motions for security for costs, which motions relate to the plaintiff's appeal in the High Court only and not in respect of the costs previously incurred in the Circuit Court proceedings. One would have expected this case to have remained on the Midland Circuit but the case was transferred from the Midland Circuit to the Dublin Circuit and hence the two motions in respect of security of costs came before the High Court sitting in Dublin. It is important to note that the matter comes before this court on the basis of the motions and affidavits filed. This court is not dealing with the substantive issues between the parties in respect of the terms of the lease and assignment nor the dealings between the parties in respect of the payment of rent, letting out of the premises or indeed the alleged non-payment of rent or the alleged forfeiture or whether there was any notice given of the intention to effect a re-entry and forfeiture for non-payment of rent, or what transactions occurred between the parties and whether estoppel should apply. I emphasise that these two motions are being dealt with on the basis of such evidence as the parties have chosen to put before this court on affidavit and on the basis that the question of whether there was a formal demand for rent or whether there was an exemption for this contained in the lease are not matters before this court at present. This court must take cognisance of the existing order of the Circuit Court and the fact that both the plaintiff and the third party have appealed the order of the Circuit Court so that one could expect a full hearing in the High Court in due course and that it is on this basis that these two motions for security of costs have now been brought by the second and third defendants. Counsel for the third defendant says that the plaintiff company would not be in a position to meet the costs of the appeal if the plaintiff again loses the main action. Accordingly, the third defendant seeks security for costs of the appeal. She relies on the affidavit of Declan O'Flaherty, the third defendant's solicitor, which was sworn on 8th February, 2005. He refers to the proceedings before the learned Circuit Court Judge on 16th and 17th November, 2004 and the order made. This included an order dismissing the plaintiff's claim against the defendants with costs to include reserved costs and an order making a declaration in the terms of para. (a) of the reliefs sought in the third named defendant's counterclaim which was a declaration that the third named defendant had lawfully determined the lease of 19th April, 1996. He then indicated that the third defendant was concerned that the plaintiff was not in a position to meet any order as to costs that may be made if the plaintiff's appeal were unsuccessful. He stated that the plaintiff was a limited liability company with no assets whatsoever. He also said that he had requested Behan & Associates, Legal Cost Accountants, to provide an estimate of the party and party costs for the third defendant in respect of the proposed appeal and that the cost accountants having considered the full index of pleadings, counsel's advice on proofs and the order of the learned Circuit Court Judge, concluded that the estimate of the...