High Court of Ireland Decisions

1. The first relief claimed by the Defendants, who are the moving parties, on this Motion, is an Order under Section 222 of the Companies Act, 1963 giving them leave to counterclaim against the Plaintiff in these proceedings.

2. In his Statement of Claim the Plaintiff seeks against the first Defendant only repayment of two sums, £104,784 and £129,714.58, which, in broad terms, it is alleged that the Plaintiff is entitled to recover on behalf of Greendale Developments Limited (the Company) on a quasi-contractual basis. The sum of £129,714.58 is alleged to represent monies paid by the Company in respect of the purchase of the premises known as "Springfield", 12A Upper Churchtown Road in the City of Dublin (the Premises) the title to which is vested in the Defendants jointly. As against both Defendants the Plaintiff claims declaratory relief to the effect that, in broad terms, the Company has a beneficial interest in the Premises commensurate with its payment of £129,714.58 and ancillary relief for the purpose of securing and realising that beneficial interest. As regards the second Defendant, it is pleaded in the Statement of Claim that the Plaintiff has already obtained a monetary judgment against him in respect of the said sum of £129,714.58 as part of an Order of 12th March, 1996 made by Costello P. In the Matter of Greendale Developments (In Liquidation) and In the Matter of the Companies Acts 1963-1990 (The High Court 1995 Record No. 133 Cos.). An appeal against the said Order of Costello P. was dismissed by the Supreme Court on 20th February, 1997.

3. The Defendants have produced a form of Defence and Counterclaim which they seek leave to deliver.

4. The position proposed to be adopted by the second Defendant in the Defence and Counterclaim is that the Order of Costello P. was obtained by fraud and that proceedings have been instituted between the second Defendant and the Plaintiff (Record No. 1997 No. 2296P) to have that judgment set aside. Further, it is proposed to plead that the Company is indebted to the second Defendant in the sum of £207,263 plus interest and that any liability of the second Defendant to the Plaintiff is subject to his right of set-off and that he is entitled to judgment against the Company for the said sums for which he proposes counterclaiming.

5. The Order made by Costello P. on 12th March, 1996 and affirmed by the Supreme Court on 20th February, 1997 directing repayment by the second Defendant to the Company of the sum of £129,714.58 was made pursuant to the provisions of Section 298(2) of the Companies Act, 1963, as amended. In those proceedings, the second Defendant had claimed that he was entitled to set-off against monies claimed by the Plaintiff against him, including the said sum of £129,714.58, sums which he, the second Defendant, alleged were due by the Company to him. Apropos of the claim to be entitled to set-off, Keane J., delivering the judgment of the Supreme Court, said:-

6. The basis of the proposed counterclaim of the second Defendant is that the sums which he alleges he is entitled to recover from the Company are recoverable by him either in contract or quasi-contract. Leaving aside the fact that the Company's alleged indebtedness to the second Defendant in respect of the bulk of the monies for which he proposes to counterclaim has been already canvassed in the proceedings which led to the Order of this Court dated 12th March, 1996 and its affirmation by the Supreme Court, even if the second Defendant could establish that any sums are recoverable by him against the Company, the decision of the Supreme Court has determined that the second Defendant cannot set off such sums against his indebtedness to the Company in respect of the sum of £129,714.58 on foot of the said Order. Given that the second Defendant cannot establish a right to set-off, in my view, it would be inappropriate to grant him leave to pursue the proposed counterclaim. The proper course for him to adopt, as was pointed out in the judgment of the Supreme Court which I quoted above, is to prove as an unsecured creditor in the winding-up.

7. The relief claimed in the proceedings under Section 298 of the Companies Act, 1963, as amended, was originally claimed against the first Defendant as well as the second Defendant. However, Costello P. made no Order against the first Defendant holding that since she was not an officer of the Company within the meaning of Section 298, no Order could be made against her under that section.

8. In the Defence and Counterclaim which she seeks leave to deliver, the first Defendant proposes to plead that the Company is indebted to her in the sum of £378,000 and that any liability she has to the Company is subject to her right of set-off. Further, she proposes counterclaiming for judgment for £378,000.

9. The first Defendant proposes to particularise her counterclaim as follows:-

10. As pleaded in the proposed Defence and Counterclaim, the first Defendant's counterclaim in respect of the sum referred to at (d) above would appear to be founded in quasi-contract. However, in a grounding Affidavit sworn on 26th June, 1997 in support of the motion, the first Defendant averred that she had been advised by Counsel that "under the principles of subrogation, I am in an equivalent status to that of a secured creditor in respect of those monies and interest thereon" . As I understood the submission made by Dr. Forde on behalf of the first Defendant, it was to the effect that AIB bank had security from the Company for the Company's indebtedness to it and that the first Defendant is entitled to be subrogated to that security. I would make two points about that submission. First, the relevant facts are not reflected in the Affidavit sworn on 26th June, 1997: the reference in paragraph (2) of that Affidavit is to security furnished by the first Defendant to the bank. Secondly, the subrogation claim is not pleaded in the proposed Defence and Counterclaim produced.

11. In my view, as no Order was made in the proceedings under Section 298 of the Companies Act, 1963, as amended, against the first Defendan, there has been no adjudication by this Court of the entitlement of the first Defendant to set off any monies in fact due by the Company to her against monies due by her to the Company. Moreover, although it would appear from reading the judgment of the Supreme Court that substantially all of the sums which the first Defendant proposes to counterclaim for against the Company were in controversy in the proceedings under Section 298, the controversy was not resolved by those proceedings as between the Company and the first Defendant.

12. It seems to me that, in determining whether leave to counterclaim should be granted to the first Defendant, the issue I should address is whether the first Defendant has shown that she has a stateable case for relief of greater value to her than merely proving as an unsecured creditor in the winding-up, without expressing any view whatever on the strength or weakness of her case. She has not sworn an Affidavit in support of this motion averring that the monies which she proposes counterclaiming in respect of are due by the Company to her. Moreover, as I have already indicated, the Affidavit she has sworn does not factually support her claim for relief by way of subrogation. However, if the first Defendant's application had been properly supported by Affidavit evidence, I would be of the view that she has established a stateable case to such relief and that leave should be granted to her to counterclaim subject, however, to the normal condition on which such leave is granted, namely, that there should be no execution against the assets of the Company without further order. I propose adjourning this aspect of the matter to give her an opportunity, as it were, to " mend her hand ".

13. The second relief claimed on the Notice of Motion is an interlocutory injunction restraining the Plaintiff from reducing the surplus assets in the liquidation to under £250,000. The winding-up of the Company is a winding-up by the Court. The Liquidator's power to deal with the assets of the Company other than with the sanction of the Court or of the Committee of Inspection are extremely circumscribed by the Companies Acts, 1963 to 1990. As I understand the position, the Defendants are represented on the Committee of Inspection. Given these facts, I think this is a preposterous application and I refuse it.

14. The Defendants also seek directions regarding the trial of the action. This is a matter which would more properly be directed to the Court which has seisin of the trial.