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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Coalport Building Company Ltd. v. Castle Contracts (Ireland) Ltd. [2004] IEHC 6 (19 January 2004) URL: http://www.bailii.org/ie/cases/IEHC/2004/6.html Cite as: [2004] IEHC 6

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Coalport Building Company Ltd. v. Castle Contracts (Ireland) Ltd. [2004] IEHC 6 (19 January 2004)

 
THE HIGH COURT

Record No 11966P/2003

BETWEEN

COALPORT BUILDING COMPANY LIMITED

PLAINTIFF

AND CASTLE CONTRACTS (IRELAND) LIMITED

DEFENDANT

Judgment of Miss Justice Laffoy delivered on 19^th January, 2004.

This is the plaintiff's application for an injunction restraining the defendant from taking any steps to advertise or otherwise publicise a petition for the purpose of seeking the winding up of the plaintiff pursuant to Section 214 of the Companies Act.

The following is the chronology of the events which immediately preceded the initiation of this application:

•    By notice dated 3^rd September 2003 from the defendant's solicitors to the plaintiff, the payment in full of the sum of €108,137.13 stated to be due by the plaintiff was formally demanded. The plaintiff was notified that, in the event of failure to pay the sum due within 21 days, the plaintiff would be deemed to be unable to pay its debts within the meaning of Section 214 of the Companies Act, 1963 (as amended) and that the defendant would be at liberty to petition for the winding up of the plaintiff pursuant to Section 213 of that Act without further notice.

•    By letter dated 10^th September 2003 to the defendant's solicitors, the plaintiff's solicitors put on the record the fact that there was a dispute between the plaintiff and the defendant in relation to the actual amount of moneys which might be due to the defendant in respect of services rendered to the plaintiff. It was stated that, in the event of a petition issuing, the letter would be relied on to inform the court that the defendant "was fully on notice as to the fact that there is a dispute between our clients in respect of any moneys allegedly due your client". It was further stated that the plaintiff was arranging to have the works quantified so as to determine the precise position between the parties and that this would be the subject of a separate letter.

•    The response of the defendant's solicitors contained in a letter 24^th September 2003 was that, having taken detailed instructions and having reviewed the supporting documentation in relation to the defendant's claim, they were satisfied that no legitimate dispute could exist in relation to the defendant's claim. A petition would issue when the 21 day period had elapsed.

•    The plaintiff's solicitors contend that they did not receive the letter 24^th September 2003 until 10^th October 2003 and this does not appear to be controverted. The plaintiff's solicitors responded by letter dated 13^th October 2003 in which they asserted that there was no question of the plaintiff being indebted to the defendant. Rather the defendant had overcharged the plaintiff in respect of removal of soil from a building site at Clondalkin. Further, invoices which had issued in respect of hired machinery were not the liability or responsibility of the plaintiff. It was stated that there was a very real dispute between the plaintiff and the defendant, of which a director of the defendant had already been advised. The plaintiff's solicitors indicated that –

(i) they had full authority to accept service of proceedings for recovery of the sum claimed, and

(ii) they were under specific instructions to apply for an injunction to prevent the defendant proceeding with the publication of any petition issued.

On 17^th October 2003 a petition (record number 2003 No. 500C) issued from this court in which the defendant sought to wind up the plaintiff on the grounds of insolvency based on non-compliance with the notice of 3^rd September 2003.

Prior to being on notice that the petition had issued, by letter dated 20^th October 2003, the plaintiff's solicitors reiterated that there was a dispute between the parties, that they were under instructions to prevent the publication of a petition which would have serious implications for the plaintiff, that the appropriate course for the defendant to adopt if they were satisfied that there were moneys properly due was to issue High Court proceedings and have the matter litigated, and that to issue a petition would be an "abuse of process".

Apparently, on 20^th October 2003, the defendant's solicitors informed the plaintiff's solicitors that the petition had issued. Subsequently, by letter dated 23^rd October 2003, the defendant's solicitors sought confirmation that the plaintiff disputed the entire debt as claimed by the defendant. It was denied that the presentation of the petition was an abuse of process or was a debt collection exercise.

In response, by letter 27^th October 2003 it was confirmed that both elements of the defendant's claim were disputed and it was contended that the defendant had actually been overpaid. Again, it was asserted that the publication of a petition would be an abuse of process. The plaintiff's solicitors reiterated that they had authority to accept service of proceedings.

These proceedings were initiated on 30^th October 2003. On that day, on foot of an ex-parte application made by the plaintiff, this court, (White J.) made an order restraining the defendant until 3^rd November 2003 or until further order from taking any steps to advertise or otherwise publicise the petition.

The application for an interim injunction was grounded on the affidavit of Thomas McFeely, the Managing Director of the plaintiff, which was sworn on 30^th October 2003. Subsequently, seven affidavits were filed on behalf of the defendant, three sworn on 7^th November 2003 and four sworn on 9^th December 2003. Three further affidavits were filed on behalf of the plaintiff, two sworn on 27^th November 2003 and one on 15^th December 2003. The evidence on affidavit is replete with conflicts, which it is not the function of the court to resolve on this application.

What emerges from the evidence on affidavit is that the contractual relationship between the plaintiff and defendant was not documented. It was based on an oral agreement made in March 2003. There is consensus that under the agreement the defendant was to remove soil and other materials from the site being developed by the plaintiff at Clondalkin, Dublin and that the payment for this service was to be on the basis of €150 per load plus VAT. There is a conflict as to whether payment was to be on foot of documents signed by nominated employees of the plaintiff, as contended by the plaintiff. There is also a conflict as to whether there was a separate agreement under which the defendant was required to do additional works, including breaking out concrete bunkers which were on the site, on the basis that the plaintiff would discharge plant hire costs in connection with the execution of those works, as contended by the defendant.

What is not in dispute is that between April and the end of July 2003 the defendant submitted invoices aggregating €486,915 on foot of the soil removal contract. The plaintiff discharged, remarkably promptly it must be said, invoices aggregating €425,625, leaving a balance outstanding of €61,290. This balance represents one element of the defendant's claim and is made up of three invoices dated respectively 5^th June 2003 (€34,050), 10^th July 2003 (€18,727.50) and 31^st July 2003 (€8,512.50). In relation to this element of the defendant's claim the plaintiff's defence, as outlined in the affidavit sworn by Mr. McFeely on 30^th October 2003, is that 393 dockets presented by the defendant on foot of which payment has been claimed, "were not signed by any party who was authorised on site to confirm that a proper load had in fact left the site". The plaintiff contends that the defendant is not entitled to payment on foot of these dockets (representing claims aggregating €66,908.25) and that, in fact, the defendant has been overpaid.

The second element of the defendant's claim is for plant hire and arises out of the oral agreement alleged to have been made in May 2003. It is based on two invoices, which aggregate €46,847.13, which were dated respectively 10^th July 2003 (€40,667.05) and 31^st July 2003 (€6,180.08). The plaintiff's defence to this claim is that there was no agreement between the plaintiff and the defendant that the plaintiff would be liable in respect of the cost of plant hire.

The principles applicable where it is sought to restrain the presentation of a winding up petition are well settled and were set out by Keane J., as he then was, in Truck and Machinery Sales Limited v. Marubeni Komatzo Limited [1996] 1 I.R. 12. The fundamental principle, as stated by Keane J. at p. 24, is as follows:

"It is clear that where a company in good faith and on substantial grounds, disputes any liability in respect of the alleged debt, the petition will be dismissed, or if the matter is brought before the court before the petition is issued, its presentation will in normal circumstances be restrained. This is on the ground that a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed."

That is the factual position which applies in this matter: the plaintiff disputes any liability in respect of the sum claimed by the defendant. The issue which arises is whether the plaintiff is acting in good faith in, and has substantial grounds for, disputing the alleged debt.

Later, at p. 27, Keane J. stated as follows:

"The undoubted power of the court to restrain proceedings which are an abuse of process is one which should not be lightly exercised. In the context of winding-up petitions, I have no doubt that it should be exercised only where the plaintiff company has established at least a prima facie case that its presentation would constitute an abuse of process. In many cases, a prima facie case would be established where the plaintiff adduces evidence which satisfies the court that the petition is bound to fail, or at the least, there is a suitable alternative remedy. It would be not appropriate to apply the principles laid down by the Supreme Court in Campus Oil Limited v. The Minister for Industry and Energy (No 2) [1983] I.R. 88 in cases of this nature where it is the creditor's right to have recourse to the courts, rather than any right of the plaintiff company, which is under threat".

It was submitted on behalf of the defendant that there is not a genuine bona fide dispute in relation to the alleged debt. Particular reliance is placed on the fact that the alleged debt was not disputed in writing prior to the issue of the formal demand on 3^rd September 2003. This overlooks the fact that there were discussions between the principals on 15^th August 2003 and in early September 2003, albeit there is a conflict as to what transpired at the meetings. However, it was submitted on behalf of the defendant that the pattern of correspondence which emanated from the plaintiff's solicitor after 3^rd September 2003 is not indicative of a dispute having existed before that date: there is no reference in the correspondence to a prior dispute nor is there reference to previous discussions. Further, it was submitted on behalf of the defendant that, in the later affidavits filed on behalf of the plaintiff, the plaintiff has shifted ground as to the basis of its defence, which it is suggested is indicative of the fact that there is no genuine or bona fide dispute between the parties.

In the light of the evidence as to how the plaintiff and the defendant entered into the contractual relationship, which, as I have stated, was characterised by total lack of documentation, I do not find it surprising that the issues which arose between the parties in August and early September 2003 were dealt with through meetings, rather than in writing. That, apparently, is the way the parties did business. Liability for the debt was immediately disputed when the formal demand issued on 3^rd September, 2003. Before the petition issued the plaintiff's solicitors had put on the record the bases of the plaintiff's defence to the claim: that the plaintiff had been overcharged in respect of removal of soil and had no contractual liability in respect of the cost of plant hire. These are, prima facie, substantial grounds. That essentially remains the plaintiff's position. Moreover, the plaintiff suggested an alternative remedy to the bringing of a petition to wind up the company: that the defendant could sue for the alleged debt.

At the hearing of the application the point was made on behalf of the defendant that the plaintiff had not offered any security for the debt. However, at the hearing, counsel for the plaintiff informed the court that the plaintiff's solicitors had authority to lodge the amount claimed in court as security.

It has been acknowledged by counsel for the defendant that the only basis on which it is alleged that the plaintiff is insolvent is that, by virtue of Section 214 (as amended), it is deemed to be unable to pay its debts because of non compliance with the formal demand. The evidence before the court is that the plaintiff is a substantial building company which is involved in residential building developments at four locations. Its anticipated turnover for the financial year end of 31^st August 2003 was in excess of €5 million net of VAT. As of 30^th October 2003, it employed five administrative staff and approximately nineteen staff on site. In addition it employed approximately fifty different sub-contractors on various sites.

The plaintiff's solicitors have authority to accept service of proceedings for recovery of the alleged debt. It has also being indicated to the court that they have authority (which I assume implies they also have the wherewithal) to lodge the amount of the alleged debt in court as security pending the resolution of the proceedings. In the circumstances it seems to me that there is a suitable alternative remedy available to the defendant and that it is unnecessary to put the existence of a substantial building company and employer at risk.

There will be an order restraining the defendant, its servants and agents from taking any steps to advertise or otherwise publicise a petition for the purpose of seeking the winding-up of the plaintiff until further order on condition that the plaintiff lodges in court to the credit of these proceedings the sum of €108,137.13 by 30^th January 2003 as security for the alleged debt.

There will be liberty to apply.