Dunne firm not obliged to meet costs of action

The Supreme Court has ruled a private company owned by businessman Sean Dunne 's wife, Gayle Killilea, is not obliged to lodge up to €600,000 to meet costs of a forthcoming legal action.

Last November, the High Court refused to direct Ms Killilea 's company, Mavior, to provide security for costs for its action against another company over an alleged outstanding bill of €1 million for repair works to two hotels damaged by flooding. Both hotels are run by MJBCH, a company controlled by Mr Dunne.

Mavior is suing Zrko Ltd, a special purpose vehicle set up by Ulster Bank to hold the legal and beneficial interest in the Tower Hotel and Ballsbridge Inn which were flooded in a storm in 2011. MJBCH had an agreement with Zrko to run and manage the hotels.

Ulster Bank is taking separate bankruptcy proceedings against Mr Dunne over an alleged €164 million debt arising from guarantees of loans for the redevelopment of the Jurys Hotel site, also in Ballsbridge.

Following the flood damage to the Tower and Ballsbridge Inn in October 2011, Mavior claims it was agreed between Zrko and MJBCH MJBCH would organise the repair and reinstatement works.

Under an alleged agreement with MJBCH, Mavior claims it carried out the works.

Zrko made three separate payments for the works but Mavior claims there is a balance due of more than €1 million.

Zrko disputes the terms of the alleged contracts, both between it and MJBCH, as well as the actual existence of any contract between it and Mavior.

Mavior, unlimited and registered in Ireland, was formerly a limited company called Mountbrook Homes. It was re-registered as unlimited prior to carrying out repair works on the hotels.

While Mavior does not have to file public accounts, the last accounts of Mountbrook showed it had a loss of about €453,000, Zrko said. It says it has paid for repairs to the hotels but claims the works were sub-standard and no further money is owed.

After Ms Killilea’s company sued for the alleged outstanding €1 million, Zrko asked the High Court to order Mavior provide security for costs claiming her company may be insolvent and unable to meet the legal bill should it lose the action.

Ms Justice Mary Finlay Geoghegan ruled last November Mavior was not obliged to provide security of between €500,000 and €600,000.

Zrko appealed but the Supreme Court yesterday upheld Ms Justice Finlay Geoghegan’s rulilng.

Mr Justice Frank Clarke, on behalf of the three-judge court, said the High Court judge was "completely correct" in her analysis and conclusions including that Mavior was not a nominal entity or plaintiff as had been argued by Zrko.

Zrko had put forward a number of arguments to back up this claim, including the affairs of Mavior were conducted in a way which suggested “little more than a formal distinction” between it and Mr Dunne and/or Ms Killilea, the judge said.

The affairs of many companies which have only one shareholder of substance are conducted in that way, he observed.

It may well be the “ultimate winner”, if Mavior’s action succeeds, will be Ms Killilea but that was because of independent obligations which the company owes to her in her capacity as a shareholder or creditor of the company, he said.