SALTHILL PROPERTIES Ltd v ROYAL BANK of SCOTLAND Plc

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 05 February 2010
• Neutral Citation: [2010] IEHC 31
• Court: High Court
• Docket Number: [2008 No. 8540P]
• Date: 05 February 2010

Salthill Properties Ltd & Cunningham v Royal Bank of Scotland & Ors

COMMERCIAL

BETWEEN

SALTHILL PROPERTIES LIMITED AND BRIAN CUNNINGHAM

PLAINTIFFS

AND

ROYAL BANK OF SCOTLAND PLC, FIRST ACTIVE PLC AND BERNARD DUFFY

DEFENDANTS

[2010] IEHC 31

[No. 8540 P/2008]

THE HIGH COURT

PRACTICE & PROCEDURE

Security for costs

Corporate plaintiff and individual plaintiff - Criteria for order against corporate plaintiff - Criteria for order against individual plaintiff - Order against corporate plaintiff structured in two stages - Whether orders for security for costs to be made - Whether special circumstances existed to prevent order against corporate plaintiff - Whether existence of individual plaintiff material to question of order for security for costs against corporate plaintiff - Inter Finance Group Ltd v KPMG Peat Marwick [1998] IEHC 217, (Unrep, Morris J, 29/6/1998), Bula Ltd v Tara Mines Ltd (No 3) [1987] IR 494 and Lismore Homes Ltd (in receivership) v Bank of Ireland Finance Ltd [1992] 2 IR 57 followed; Jack O'Toole Ltd v MacEoin Kelly Associates [1986] IR 277 applied; Comhlucht Páipéar Ríomhaireachta Teo v Udarás na Gaeltachta [1990] 1 IR 320, Pearson v Naydler [1977] 1 WLR 899 and Moore v AG (No2) [1929] IR 544 considered; Pitt v Bolger [1996] 1 IR 108, Maher v Phelan [1996] 1 IR 95, Proetta v Neil [1996] 1 IR 100, European Fashion Products Ltd v Eenkhoorn [2001] IEHC 181, (Unrep, Barr J, 21/12/2001) and Collins v Doyle [1982] ILRM 495 followed; Malone v Brown Thomas & Co Ltd [1995] 1 ILRM 369 considered - Rules of the Superior Courts 1986 (SI 15/1986), O 29 - Companies Act 1963 (No 33), s 390 - Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1968 (Brussels Convention) - Council Regulation (EC) No. 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Brussels I) - Structured order made against corporate plaintiff, no order against individual (2008/8540P - Clarke J - 5/2/2010) [2010] IEHC 31

Salthill Properties Ltd v Royal Bank of Scotland plc

Facts: The defendant Banks sought security for costs against both plaintiffs. The proceedings arose out of a re-financing agreement as to a property between the second and third defendants, as to which the plaintiffs alleged that the Banks had agreed to take a secret profit. The second plaintiff sought a declaration that he was entitled to an assessment of any guarantee liability that he might have to the second defendant taking into account the profit share alleged by the plaintiffs. The proceedings related to a long running set of proceedings, as to which the Court had given judgment: Moorview Developments Limited v. First Active Plc [2009] IEHC 214 and Salthill Properties Ltd. v. Royal Bank of Scotland [2009] IEHC 207. The banks now sought security for costs from the plaintiffs pursuant to s. 390 Companies Act 1963 and Order 29 of the Rules of the Superior Courts.

Held by Clarke J. that the banks had established the two matters which it was for he Banks to demonstrate as to the Salthill application. On the evidence it was clear that Salthill would not be in a position to meet the costs of the Banks in the event that the Banks successfully defend the proceedings. The Banks had established a prima facie defence. Salthill had not established any special circumstances that ought to lead to a departure from the normal position where impecuniosity and a bona fide defence had been established. Salthill would have to pay security for costs

Reporter: E.F.

MOORVIEW DEVELOPMENTS LTD & ORS v FIRST ACTIVE PLC & ORS UNREP CLARKE 6.3.2009 2009 IEHC 214

SALTHILL PROPERTIES LTD & CUNNINGHAM v ROYAL BANK OF SCOTLAND PLC & ORS UNREP CLARKE 30.4.2009 2009 IEHC 207

COMPANIES ACT 1963 S390

RSC O.29

INTER FINANCE GROUP LTD v KPMG PEAT MARWICK (T/A KPMG MANAGEMENT CONSULTING) UNREP MORRIS 29.6.1998 2000/11/4104

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

BULA LTD & ORS v TARA MINES LTD & ORS (NO 3) 1987 IR 494 1987/5/1305

LISMORE HOMES LTD (IN RECEIVERSHIP) v BANK OF IRELAND FINANCE LTD 1992 2 IR 57 1992 ILRM 798 1992/3/687

COMHLUCHT PAIPEAR RIOMHAIREACHTA TEO v UDARAS NA GAELTACHTA 1990 1 IR 320 1990 ILRM 266 1989/4/1106

COLLINS v DOYLE 1982 ILRM 495 1982/10/1849

MALONE v BROWN THOMAS & CO LTD & FEDERAL SECURITY SERVICES LTD 1995 1 ILRM 369 1994/11/3491

HIDDEN IRELAND HERITAGE HOLIDAYS LTD (T/A THE HIDDEN IRELAND ASSOCIATION) v INDIGO SERVICES LTD & ORS 2005 2 IR 115 2005 2 ILRM 498 2005/30/6159 2005 IESC 38

FARES v WILEY 1994 2 IR 379 1994 1 ILRM 465 1994/10/2808

HEANEY v MALOCCA 1958 IR 111 1958 92 ILTR 117

RSC O.29 r7

THALLE v SOARES & ORS 1957 IR 182

FALLON v BORD PLEANALA & BURKE 1992 2 IR 380

PITT v BOLGER & BARRY 1996 1 IR 108 1996 2 ILRM 68 1996/7/2208

MAHER v PHELAN 1996 1 IR 95 1996 1 ILRM 359 1996/6/1780

PROETTA v NEIL 1996 1 IR 100 1995/21/5422

EUROPEAN FASHION PRODUCTS LTD & MURA v EENKHOORN & ORS UNREP BARR 21.12.2001 2001/9/2343

PEARSON & ANOR v NAYDER & ORS 1977 1 WLR 899 1977 3 AER 531

MOORE & ORS v AG & ORS (NO 2) 1929 IR 544

1 Mr. Justice Clarke delivered on the 5th of February, 2010

1. Introduction

2 2 1.1 In this application, the first and second named defendants (hereinafter individually "RBS" and "First Active" respectively and collectively "the Banks") seek security for costs against both plaintiffs ("Salthill" and "Mr. Cunningham" respectively). The proceedings arise out of a re-financing agreement entered into on the 22 ^nd April, 2008 between First Active and the third defendant, Mr. Duffy, in relation to the sale of a property at Baily Point, Salthill, County Galway (the "Property") by First Active, as mortgagee in possession, to the third named defendant, Mr. Duffy.

3 3 1.2 Salthill and Mr. Cunningham assert that the Banks agreed to take a secret profit out of the re-financing agreement concerned and are seeking to set aside the sale of the Property together with damages and an account. In addition, Mr. Cunningham seeks a declaration that he is entitled to an assessment of any guarantee liability which he might have to First Active taking into account the profit share alleged by the plaintiffs, Mr. Cunningham having provided a limited personal guarantee in respect of the debts of Salthill.

4 4 1.3 This is a further set of proceedings arising out of the long running dispute between companies associated with Mr. Cunningham ("the Cunningham Group") and its bankers, First Active. There has already been a trial of the main issues ("the main trial") arising between these parties generally, which is the subject of judgment in Moorview Developments Limited & Ors v. First Active Plc & Ors [2009] IEHC 214 ("the main judgment"), where the majority of the Cunningham Group's claims were the subject of a non-suit. The background to the relationship between the parties generally and the issues which arose subsequent to the appointment of a receiver over significant assets of the Cunningham Group are fully set out in that judgment, and it is unnecessary to repeat them here.

5 5 1.4 An attempt by the Banks in April of this year to strike out these proceedings failed. In a judgment of 30 ^th April, 2009, I held that, while Salthill and Mr. Cunningham had not established a prima facie case at that time, it was not appropriate to then dismiss the proceedings, see Salthill Properties Ltd & Anor v. Royal Bank of Scotland & Ors [2009] IEHC 207 ("the dismiss judgment").

6 6 1.5 The Banks now seek security for costs from both Salthill and Mr. Cunningham, that is to say, the lodgment of a bond or other from of security by the plaintiffs as a guarantee that the costs, or an agreed proportion thereof, will be paid. In this regard the Banks rely on s. 390 of the Companies Act 1963 (as against Salthill), O. 29 of the Rules of the Superior Courts (as against Mr. Cunningham) and the inherent jurisdiction of this Court (as against both Salthill and Mr. Cunningham personally).

2. Factual Background

7 2 2.1 The factual background to these proceedings has been set out in the main judgment and in my decision last year in the dismiss judgment and it is unnecessary to repeat same here.

8 3 2.2 As mentioned earlier, these proceedings arise out of a refinancing agreement entered into on the 22nd April, 2008, between First Active and Mr. Duffy. Salthill and Mr. Cunningham allege that the Banks and Mr Duffy arranged a secret profit in the following way:-

9 (a) First Active would take a share in Mr. Duffy's profits on the residential portion of the Property by way of an arrangement fee on a new facility dated 22 ^nd April, 2008;

10 (b) First Active would repay Mr. Duffy's deposit on the commercial units of the Property to Mr. Duffy; and

11 (c) First Active would take a share in the profits on the sale of the commercial units of the Property without accounting to Salthill for same.

12 4 2.3 At the date of the appointment of a receiver to Salthill, the Cunningham Group's total indebtedness to First Active amounted to €31,583,561,€26,307,692.54 of which related to the indebtedness of Salthill. The current level of indebtness of Salthill to First Active is set at €25,192,196.40, according to the receiver's abstract filed with the Companies Registration Office on 4 ^th June, 2009. As such Salthill's insolvency is not a matter of dispute between the parties.

13 5 2.4 On 11 ^th February, 2008, solicitors for First Active, Arthur Cox, wrote to the solicitors for the Cunningham Group, before the commencement of the main trial, and requested details of the funders of that litigation. No reply was received. Essentially the only admittance that this litigation generally has been funded by Mr Cunningham is a statement made by counsel for the Cunningham Group during...