The High Court has directed Frank McGrath Construction Limited to provide security for One Pery Square Hotel Limited’s costs in an arbitration over the renovation and extension of buildings for a hotel in Limerick. The court left the amount of security to a vacation judge.
In a judgment delivered on 9 September 2010, Miss Justice Laffoy ruled on the hotel company’s application under section 390 of the Companies Act 1963. The arbitration had begun in September 2009, before the Arbitration Act 2010 came into force, and the judge said the earlier arbitration law applied.
The construction company’s arbitration claim was for €2,180,105.89. The hotel company denied liability and counterclaimed for €400,936.17. The judge found that the hotel company had a prima facie defence to the claim, including by way of set-off, and a prima facie contractual counterclaim. She stressed that the court was not deciding the merits of the parties’ underlying dispute.
The application came against the background of the construction company’s separate proposal for a compromise or arrangement with creditors under section 201. Its financial statements showed projected assets that depended substantially on collecting disputed or outstanding debts. The judge found that the company would be unable to pay the hotel company’s costs if the hotel company succeeded in the arbitration.
The construction company argued that its financial difficulty flowed from the hotel company’s alleged wrongdoing. The judge rejected that argument for this application: even if the company recovered its full arbitration claim, it would still need to collect substantial sums from other debtors to meet its liabilities. She said there was not enough evidence to assess the prospects of collecting those debts.
The judge also rejected the argument that the hotel company had waited too long to seek security. She accepted that it had not learned of the proposed creditor arrangement until July 2010 and found it would be unfair to refuse security because the formal application was not made until 3 August.
Other points raised by the construction company did not change the result. The judge declined to speculate about how alleged non-participation in conciliation might affect costs in the arbitration. She also said the court could not determine whether sums the hotel company had withheld under the building agreement made an order for security unjust.
The order required security for the hotel company’s arbitration costs, with the amount to be fixed separately. The hotel company had estimated those costs at €745,200; the construction company disputed that estimate. The judgment did not set the amount.