High Court of Ireland Decisions

1. This application arises under two motions brought by the First Defendant and Second Defendant respectively which, although worded somewhat differently, both seek to dismiss the Plaintiffs’ claim under the inherent jurisdiction of the court on the basis that the claim has no reasonable prospect of success, or alternatively for want of prosecution. In addition, the motion brought by the Second Defendant seeks to dismiss the Plaintiffs’ claim under Order 19 Rule 28 of the Superior Court Rules on the grounds that the claim is frivolous and vexatious, but I am quite satisfied that there is no basis for this proposition and I do not propose to consider it further.

2. The Second and Third Plaintiffs, both of whom have died since the issue of these proceedings, were husband and wife, and were the owners of the entire share capital in the First Plaintiff and were it’s sole directors. The First Plaintiff is not a trading company, but is in effect a vehicle for holding an investment property on behalf of the Second and Third Plaintiffs. The sole asset of the First Plaintiff was a premises known as “Austinville” situate at No. 1 Station Road, Sutton in the City of Dublin and it adjoins a supermarket premises owned and operated by the Second Defendant.

3. The Second and Third Plaintiffs were indebted to I.C.C. Bank (hereinafter called “the Bank”) and by a document described as a collateral mortgage debenture dated the 3rd day of August 1990 the First Plaintiff charged the premises in favour of the Bank to secure all monies due or to become due or owing by the Second and Third Plaintiffs to the Bank. All such monies were also secured by a mortgage of a certain other property owned by the Second and Third Plaintiff, which was in fact their family home. The Second and Third Plaintiffs made default in payments to the Bank and by order dated the 21st day of February 1994 possession of the family home was granted to the Bank and on the 12th day of October 1994 the Bank took possession of such premises.

4. On the previous day, namely the 11th day of October 1994, the Bank served a notice on the First Plaintiff demanding payment of the sum of £287,161.13 within 7 days and on the 20th day of October 1994 the Bank appointed the First Defendant (hereafter called “the Receiver”) to be Receiver over the property of the First Plaintiff.

5. In November 1994 the Bank sold the Second and Third Plaintiffs’ property for the sum of £305,000.00. Subsequent to the said sale, the Bank maintained that there was a sum of £15,554.08 remaining due to them after crediting the Second and Third Plaintiffs with the proceeds of the sale of their house and which, the Bank contended, remained due by the First Plaintiff and subject to the receivership. After some considerable correspondence, which I will deal with later, the Receiver, sold the property to the Second Defendant for the sum of £102,500.00 by a conveyance dated the 28th day of April 1995.

6. In the amended statement of claim delivered by the Plaintiffs on the 31st day of July 1997 the following reliefs were claimed:-

7. Both Defendants seek to have these proceedings struck out, inter alia , on the grounds of the Plaintiffs’ delay in progressing the action, and in particular, on the grounds of the failure to reconstitute the action following the deaths of the Second and Third named Plaintiffs. I have already indicated that I am not prepared to accede to this, and I will very briefly state my reasons. It is well settled that proceedings will only be struck out for want of prosecution if the delay involved is both inordinate and inexcusable, and even then the court must exercise a judgment as to whether, on the facts, the balance of justice favours dismissing the claim. See the judgment of the Chief Justice in Primor plc -v- Stokes, Kennedy Crowley (1996) 2 I.R.459. In the present case, the defence of the Receiver was delivered on the 24th day of November 1997 and that of the Second Defendant was delivered on the 26th day of November 1997. There could be no question of delay on the part of the Plaintiffs before that date. The Second Plaintiff died in April 1997, before the delivery of the defences, and the Third Plaintiff died in May 1998. Both died intestate, and no representation was raised to either estate until within the last few weeks. As they were in effect the sole beneficial owners of the First Plaintiff, and were it’s sole directors, the First Plaintiff ceased to be in a position to take steps in the action on the death of the Third Plaintiff. In my view, the period of eighteen months from the death of the Third Plaintiff, and a period of two years from the delivery of the defences, is not an inordinate delay, and even if it were to be considered inordinate, it is certainly excusable by the fact that it was necessary to take out representation to two persons, not only to ensure the action could proceed on their behalf, but also that it would proceed on behalf of the First Plaintiff. In my view, therefore, the delay was neither inordinate nor inexcusable.

8. In the amended statement of claim a declaration is sought that the purported appointment of the Receiver was invalid and of no effect. It is conceded by the Defendants that at the date of the appointment of the Receiver on the 20th day of October 1994, there were substantial monies due to the Bank, but it is alleged that because the loan terms were revised in January 1992, after the date of the debenture, in effect a new debt was created, and the debenture was void and inoperative in relation to it, notwithstanding the fact that it was expressed to be a continuing security for all monies due from the First Plaintiff to the Bank, and in particular it was alleged that it contravened the provisions of section 31(1)(c) of the Companies Act, 1990. This section provides that, subject to certain exceptions:-

9. There is no doubt in the present case that the company did enter into a guarantee and provide security in connection with loans by the Bank to the Second and Third Plaintiffs, who were it’s directors, however, this section only came into force on the 1st day of February 1991, while the guarantee and security were granted on the 3rd day of August 1990. The Defendants argued that this part of the claim cannot succeed because, at the time of the debenture, it was perfectly lawful for the company to give security for it’s directors in this way. The Plaintiffs, on the other hand, argued that the amount and terms of the loan were revised after the 1st day of February 1991, and that in reality that amounted to the giving of a new security. While I think it unlikely the Plaintiffs could succeed on this argument, it is possible that more detailed evidence of the nature of the arrangements could lead to a finding that a new security was given, which would be void. However, any issue of this nature would be an issue between the First Plaintiff and the Bank, and not between the Plaintiffs and the Defendants in these proceedings. Unless and until the transaction has been avoided as against the Bank, the debenture and the appointment of the Receiver remain valid.

10. It is acknowledged by the Plaintiffs that if the debenture is valid, then the Bank was entitled to appoint a Receiver at the time it did so, but they go on to make a further argument on the basis that the Receiver had no power to sell the property unless, at the time of the sale, there were in fact monies due to the Bank, and that the Receiver had a duty to satisfy himself that there were monies so due. The situation was that, in addition to the property at issue in these proceedings, the Bank also had a mortgage over the dwelling house of the Second and Third Plaintiffs, and that on the 11th day of October 1994 the Bank were owed some £287,161.00 on foot of the said mortgage. On the 12th day of October 1994 the Bank took possession of the said dwelling house, but they had not disposed of it on the date they appointed the Receiver. The house was ultimately sold by public auction in November 1994 for the sum of £305,000.00, a sum which the Plaintiffs say was sufficient to discharge the liability of the Second and Third Plaintiffs to the Bank, and they claim that as of that date no monies were due to the Bank on foot of the debenture. It would appear, however, that the Bank claims that further monies were due for costs and expenses, including the costs of their action for possession of the dwelling house against the Second and Third Plaintiffs, and that in fact a sum of some £15,000.00 was due to them over and above the £305,000.00 realised for the dwelling house. It would appear that the Second and Third Plaintiffs never in fact challenged this claim by the Bank, other than by an abortive attempt to have the Bank joined as a co-Defendant in these proceedings, a matter which I will deal with further. That being so, I am quite satisfied that the Receiver was entitled to treat those monies as being due on foot of the debenture, and was entitled to sell the property accordingly. Accordingly, I am quite satisfied that, unless the security in some way offended section 31 of the Companies Act, 1990, which it does not, the Plaintiffs could not succeed in setting aside the transaction or in challenging the Receiver’s right to sell.

11. Finally, in the context of the possibility of the security being in breach of section 31 of the Companies Act, 1990, I am quite satisfied that even if that were the case, the Plaintiffs would not have any remedy against either of the Defendants in the present case. Section 38(1) of the Companies Act, 1990 provides that:-

12. Firstly, the transaction which could be said to contravene section 31 is the transaction between the company and the Bank. As I have said, the Bank is not a party to these proceedings, and they do not seek to avoid that transaction as against the Bank. Secondly, I have no doubt whatever that the Second Defendant acquired the property bona fide and for value without actual notice of any contravention of section 31, if there has been such a contravention. Therefore, any challenge to the sale on the basis of a possible contravention of section 31 must fail.

13. The Plaintiffs allege that the Receiver sold the property at an undervalue, and was in breach of section 316A of the Companies Act, 1963, which provides:-

14. This is simply a statutory acknowledgement of the position at common law, as it has long been decided that a Receiver owes a duty of care to the company when selling it’s property. Holohan -v- Friends Provident and Century Life Office (1966) I.R.1. To consider whether this claim can succeed, it is necessary to detail some of the events leading up to the sale, and the evidence put forward by the Plaintiffs.

15. I propose to consider firstly the correspondence which took place between the Plaintiffs’ Solicitors and the Solicitors for the Receiver in the weeks leading up to the sale. While I only propose to refer to portions of this correspondence which are relevant to the question of value, I think it is necessary to refer to it at some length.

16. On the 6th day of March 1995 the Receiver’s Solicitor wrote to the Plaintiffs’ Solicitor saying:-

17. The Plaintiffs’ Solicitor replied by letter of the 9th day of March saying that his clients wished to negotiate with the Bank to discharge the amount due and asked that the sale should be put on hold until they could sort out the actual amount due and discharge it. By letter dated the 13th day of March the Receiver’s Solicitor wrote saying:-

18. By letter dated the 15th day of March , although apparently only received by the Receiver’s Solicitors on the 22nd day of March, the Defendants’ Solicitors said:-

19. By letter dated the 20th day of March the Plaintiffs’ Solicitors wrote:-

20. These two letters were replied to by the Receiver’s Solicitor by letter dated the 23rd day of March in which he said:-

21. On the 4th day of April the Receiver’s Solicitor wrote to the Defendants’ Solicitor saying:-

22. By letter dated the 11th day of April, although not received by the Receiver’s Solicitors until the 19th day of April, the Plaintiffs’ Solicitors said:-

23. On the 20th day of April the Receiver’s Solicitors wrote to the Plaintiffs’ Solicitors saying:-

24. What happened next is a matter which is somewhat in dispute. An affidavit has been filed by Mr. Hugh Miller, the Receiver’s Solicitor, in which he avers to a telephone conversation with Mr. David Turner, the Plaintiffs’ then Solicitor on 20th April, 1995. It is common case that Mr. Turner was in hospital at the time. Mr. Miller’s evidence is that he told Mr. Turner of the tender received from Superquinn and that Mr. Turner said his clients would not be raising any more difficulties regarding the sale and wanted the sale to proceed as quickly as possible. Mr. Miller then wrote to Mr. Turner on 25th April referring to the telephone conversation on 20th April and saying:-

25. It should be said that the son of the Second and third Defendants has sworn an affidavit in which he says:-

26. He then exhibits a copy of a letter from Mr. Turner, which confirms the telephone conversation, but denies that he said that his clients would not taken any further issue with the Receiver. I have to say I find it extremely strange that this has not been put on affidavit by Mr. Turner, who, it ought to be said, no longer acts for the Plaintiffs, but that the only evidence put forward is a copy of a letter written some nine months after the sale.

27. The sale was in fact completed on 28th April 1995, and the conveyance was executed both by the Receiver in his position as Receiver, and also by the Receiver as agent for the Company.

28. There is no doubt from this correspondence that the Plaintiffs were at all times maintaining that the property should be advertised to the public both in the press and by an advertisement on the premises themselves. The Receiver’s answer to this is that he at all times acted on the advice of Messrs Jones Lang Wootten, who, it is conceded by all parties, are a well known and competent firm of estate agents. He claims that, by acting on such advice, he fully complied with the provisions of Section 361A of the Companies Act, 1963, and indeed any common law duty which he might have to the Plaintiffs.

29. The advice which the Receiver obtained has been put in evidence. He received lengthy and detailed advice from a firm of planning consultants relating to the possible development potential of the property, and it is quite clear that the advices obtained from Jones Lang Wootten were influenced to a considerable degree by this. To ascertain whether there was in fact a breach of Section 361A, it is necessary to consider the advice which was actually obtained by the Receiver. The initial advice was contained in a letter dated 14th December 1994, which included the following:-

30. On 17th January 1995 the Receiver wrote to the estate agents saying:-

31. On 24th January the Receiver wrote to the estate agents setting out five parties who had expressed an interest in the property, and on 1st February the estate agents received an offer of £60,000 from one of those parties subject to certain conditions. On 7th February Jones Lang Wootton wrote to the Receiver setting out approaches which they had made to certain parties quoting a guideline price of £80,000. The ended the letter by saying:-

32. There was then enclosed a marketing schedule detailing recommended press advertisements and advertising boards at a cost of £1,700.

33. Following this two offers were received by Jones Lang Wootton, namely, an offer from Superquinn dated 16th February of £70,000 and an offer from another party dated 17th February for £79,000. Neither of these offers were accepted, and on 24th March the estate agents advised, inter alia , as follows:-

34. It should be noted that this advice makes no mention of advertising, and indeed by implication appears to recommend that tenders only be sent to persons who have already expressed an interest. While it is not clear exactly how many people were asked to tender, in fact only one tender was received, namely, that from the Second Defendant in the sum of £102,500. When asked by the Receiver for their views as to whether this should be accepted, the estate agents advised on 18th April in the following terms:-

35. On 9th August 1995, over three months after the sale was completed, the Plaintiffs’ Solicitors obtained a valuation of the site, which has been exhibited. This valued the house as a dwelling house at £100,000, but then continued:-

36. The Plaintiffs’ case is based on this valuation, taken together with the fact that there was no advertising at all, despite the protestations of the Plaintiffs.

37. It does seem to be clearly established that the Court has an inherent jurisdiction to dismiss a claim where under certain circumstances the Court comes to the view that the action cannot succeed. The general principle was set out by Costello J. in Barry v. Buckley (1981) I.R. 306 at page 308 where he said:-

38. That case concerned an action for specific performance, and the proceedings were struck out on the basis, as set out at page 310:-

39. This case was considered by the Supreme Court in Sun Fat Chan v. Osseous Limited (1992) 1 I.R. 425. This again was a specific performance action, and the principles set out in Barry v. Buckley were not disputed before the Supreme Court. McCarthy J. went so far as to say, at page 428:-

40. He went on to say that the High Court should be slow to entertain an application of this kind and grant the relief sought. He then added at the bottom of page 428:-

41. It should be noted that in both these cases the decision to strike out was made on agreed facts or on undisputed documents. In a similar application in Ennis v. Butterly (1997) 1 ILRM 28, it was actually conceded by Counsel for the Defendant that the Court must assume that every fact pleaded by the Plaintiff in the Statement of Claim is correct and can be proved at the trial and that every fact asserted by the Plaintiff on affidavit is likewise correct and can be proved. While I think that concession may have been somewhat rash, it is quite clear that the Court can only exercise the inherent jurisdiction to strike out proceedings where there is no possibility of success. If there is a dispute on facts on affidavit which is not resolved by admitted documents, then it will be virtually impossible for a defendant to have proceedings struck out as being unsustainable. The remedy sought by the Defendant is a remedy which has the effect of shutting out a citizen’s right of access to the Courts, which is a right which is very closely guarded and protected by the Courts themselves, and by the Constitution. Therefore, if the Defendants are to succeed in this motion, they must show that on facts which either are not in dispute, or are disputed on grounds which can only be considered as frivolous of vexatious, the Court should allow the action to proceed.

42. There is evidence in the form of a valuation given less than four months after the sale that at that time these premises were worth a sum more than 50% greater than that achieved in the sale to the Second Defendant. I am certainly not going to determine on a motion like this whether the effect of that evidence is that the actual sale that took place was or was not at an under value. It is arguable from the evidence before me that it was in fact an under value. There is a further matter which also concerns me in this regard. I have quoted at length in this judgment from correspondence between the Solicitors for the Plaintiffs and the Solicitor for the Receiver. The Receiver was at all times requested by the Plaintiffs to advertise these premises for sale. He received the same initial advice from his own estate agents, although this does appear to have altered subsequently. It must have been quite clear to the Receiver at all times that there was going to be a very considerable surplus arising on this sale, which of course would belong to the First Plaintiff, and the Receiver was in law the agent of the First Plaintiff. This is a somewhat unusual situation in that the First Plaintiff is not an insolvent company, and therefore monies received by it from the sale of these premises will be an asset of the company, and indeed if the company is wound up, of its shareholders. While I am not making any decision on the matter, as it was not argued before me, I certainly think it is open for consideration by the Court as to whether in those circumstances the Receiver has some form of obligation at least to consider representations made to him by the company as to how to conduct the sale, provided he is satisfied it will, in any event, realise enough to discharge the debenture holder in full.

43. In my view, therefore, it could not be said that this action must fail as against the Receiver insofar as it alleges a sale at an under value, but I do think that it must fail insofar as it seeks to challenge the Receiver’s right to sell the property.

44. As I have already indicated, any challenge to the validity of the appointment of the Receiver in these proceedings must fail, and the Receiver was entitled under the terms of the debenture to sell the premises. The Second Defendant was invited to make an offer by way of tender for the premises, and did so, and in due course a contract was entered into based on that offer, and the sale was ultimately completed. Even if this was a sale at an under value, or if the Receiver is in breach of Section 316A of the Companies Act, 1963, there is no suggestion that the Second Defendant in any way conspired with any other party to acquire the property at less than its full value. I have no doubt that the Second Defendant is a bona fide purchaser for value of this property, and its title cannot be challenged. The Statement of Claim also includes a claim for damages for trespass against the Second Defendant, but such a claim could only succeed if the Second Defendant has not got good title to the property, and as I have found that the Second Defendant does have title, there could be no claim for damages against it. Accordingly, I would propose to strike out all claims against the Second Defendant.

45. Mr. Hogan S.C., on behalf of the Plaintiffs, has acknowledged that the Second and Third Plaintiff were joined purely as a precaution in case the point was taken that the first Plaintiff, being in receivership, could not maintain these proceedings. That point has not in fact been taken, and in any event I am quite satisfied that a company in receivership at all times retains its legal entity, and, subject to the provisions of the debenture, retains the right to maintain proceedings such as these. Accordingly, the Second and Third Plaintiffs are not in fact necessary parties to these proceedings, but as they are not separately represented, I cannot see that their presence as Plaintiffs in any way prejudices the Defendants’ case.

46. I am aware that there was a motion brought by the Plaintiffs before the death of the Third Plaintiff to join ICC Bank Plc as a co-defendant. That motion never proceeded, but it has been intimated to me that a similar motion is still being contemplated. I would like to make it quite clear that I am refusing to strike out these proceedings on the grounds of delay expressly on the terms that no motion to add ICC Bank Plc as a defendant is brought, and the proceedings are concluded as rapidly as possible between the existing parties. It should be said that this does not in any way preclude the Plaintiffs from suing ICC Bank Plc in separate proceedings should they see fit to do so.