The High Court has ordered PDC (Moate) Ltd., which is in official liquidation, to provide security for Allied Irish Banks plc’s costs of a trial over competing interests in lands in Westmeath. The trial proceedings against AIB are stayed until security is given. The order does not itself stay the company’s claim against Liam Conroy.
The ruling was made by Ms Justice Finlay Geoghegan on AIB’s application under section 390 of the Companies Act 1963. The court directed that the security application be treated on the basis of a proceeding commenced by the High Court’s November 2007 order, which set issues for trial with the company as plaintiff and AIB and Conroy as defendants.
The underlying dispute concerns whether the company has an interest in the lands, acquired in Conroy’s name, and whether that interest takes priority over interests claimed by AIB and Desmond Mills. Mills later said he was not asserting an interest with priority over the company’s and was removed from the proceedings in March 2008. The judgment did not decide the underlying land or priority dispute.
AIB argued that the company, which is insolvent, would probably be unable to pay its costs if it succeeded in its defence. The company’s liquidator pointed to €115,926.47 in the liquidation account. The judge accepted AIB’s submission that the account was subject to statutory and court rules governing winding-up payments, with no mandatory requirement that costs in these proceedings be paid ahead of other liabilities.
AIB also had to show a prima facie defence. It argued that Conroy had granted it an equitable mortgage and later a first legal mortgage over the lands before the liquidator’s appointment. Although the legal mortgage was registered after winding up began, AIB contended it had no notice of the equitable interest the company now claims. The company did not dispute that AIB had made out a prima facie defence.
The judge rejected the company’s arguments that delay and special circumstances justified refusing security. She said the interests of creditors in this liquidation were private interests, and the liquidator had not argued that security would prevent the proceedings from being pursued. She did not determine whether the directors’ inclusion of the lands as a company asset in a statement of affairs amounted to a special circumstance.
Conroy did not apply for security. The order does not stay the claim against him, but the judge said the claims were intended to be heard together and that, in practical terms, the claim against him could not progress under the existing order while the security issue remained unresolved. The liquidator must consider whether to provide security within a reasonable time; if none is provided, the November 2007 order will have to be reconsidered.