Fabri-Clad Engineering Ltd v Stuart t/a Stuart Steele Fabrications & anor

Factual and Procedural Background

This opinion concerns an application brought by the second named defendant (the applicant) to set aside a default judgment obtained against him and the first named defendant by the plaintiff on 9th May 2017 in the sum of €98,252. The judgment was obtained due to the defendants' failure to appear. On the same date, a FiFa (Financial Institution Funds Attachment) issued directing seizure of the defendants' goods to satisfy the judgment.

The second named defendant’s motion to set aside the judgment was issued approximately eight months after the judgment date and was initially made without legal representation. Prior to the motion, solicitors acting for the applicant wrote to the plaintiff’s solicitors proposing payments towards the judgment debt, referencing income expected from a quarry owned by the applicant.

The background to the dispute is that the second named defendant provided a guarantee on 22nd January 2014 for the liabilities of the first named defendant, his son, to the plaintiff. This guarantee was drafted by the applicant’s solicitor and executed in his presence. The plaintiff contended that without this guarantee it would not have continued supplying goods to the first named defendant. The guarantee was for the amount then due (€98,252), whereas the first named defendant’s indebtedness as of October 2015 was €120,314.24. The plaintiff demanded payment from the first named defendant, and upon non-payment, called on the guarantee provided by the second named defendant.

The guarantee acknowledged the debt owed by the first named defendant and obligated the second named defendant to make two annual payments of €5,000 until the debt was fully redeemed. It also provided for interest and permitted the plaintiff to initiate proceedings against both defendants in case of default. The guarantee was signed by the plaintiff’s representative and the second named defendant, witnessed by the applicant’s solicitor.

Legal Issues Presented

1. Whether the second named defendant was properly served with the proceedings.
2. Whether the plaintiff was a party to the guarantee.
3. Whether the applicant has a valid defence and/or counterclaim sufficient to set aside the default judgment.
4. Whether the guarantee requires execution under seal to be enforceable due to lack of consideration.
5. Whether the consideration for the guarantee was past consideration, affecting its enforceability.
6. Whether the delay in bringing the application and the applicant’s conduct bar the setting aside of the judgment.
7. Whether special circumstances exist to justify setting aside the default judgment pursuant to procedural rules.

Arguments of the Parties

Applicant's Arguments

• The applicant contended he was not properly served with the proceedings, justifying failure to enter an appearance.
• The applicant argued the plaintiff was not a party to the guarantee.
• The applicant claimed to have a full defence and counterclaim arising from steel erection work performed for the plaintiff’s directors, amounting to approximately €100,000.
• Legal arguments were advanced that the guarantee lacked consideration and therefore required execution under seal to be enforceable.
• The applicant argued the consideration for the guarantee was past consideration and thus insufficient to support the guarantee's validity.

Plaintiff's Arguments

• The plaintiff maintained that the applicant was properly served, supported by an affidavit of personal service and subsequent correspondence from the applicant’s solicitors referencing the summons.
• The plaintiff asserted that it was a party to the guarantee under its former name.
• It was argued that the guarantee was executed in accordance with s. 64 of the Conveyancing and Law Reform Act 2009, which abolished the requirement for a deed to be under seal, provided it was signed in the presence of a witness.
• The plaintiff contended there was valid consideration for the guarantee in the form of continued supply of goods to the first named defendant.
• The plaintiff relied on the applicant’s delay in bringing the application and the applicant’s solicitors’ letter proposing payment of the debt as evidence of acceptance of the debt and justification to refuse the application.
• The plaintiff argued no special circumstances existed to justify setting aside the judgment under the relevant procedural rules.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
O'Donovan Dairy Services Ltd v. Cashin [2016] IEHC 476	Test for setting aside default judgment: defendant must show a real or reasonable prospect of success.	The court applied this test and found the applicant had a reasonable prospect of success on the issue of past consideration affecting the guarantee.
McGuinn v. Commissioner of An Garda Síochána & Ors [2011] IESC 33	Requirement to establish special circumstances to set aside default judgment and consideration of delay.	The court noted that even with significant delay, special circumstances justified setting aside judgment; used as guidance in assessing this application.
McGrath v. Godfrey [2016] IECA 178	Onus on defendant to demonstrate real prospect of success and special circumstances to justify setting aside judgment.	The court emphasized the need to prove a real chance of success and special circumstances; the present court followed this framework.

Court's Reasoning and Analysis

The court first addressed the applicant’s claim of improper service, finding it unsupported by the affidavit of service and subsequent conduct, including correspondence referencing the summons. This argument was not pursued at hearing.

The court rejected the applicant’s assertion that the plaintiff was not a party to the guarantee, confirming the plaintiff’s status under its former name.

Regarding the guarantee’s validity, the court found it was executed in compliance with s. 64(2) of the Conveyancing and Law Reform Act 2009, which abolished the need for a deed to be under seal if signed in the presence of a witness. The applicant’s signature was witnessed by his solicitor, satisfying this requirement.

However, the court acknowledged the applicant’s reasonable argument that the guarantee may be unenforceable due to past consideration, as the deed did not specify any fresh consideration supporting the guarantee. The rule against past consideration is well established in Irish law, and the court considered the applicant had a reasonable prospect of success on this point if the matter proceeded to trial.

The court then considered the discretionary nature of setting aside a default judgment. It noted the applicant’s delay in bringing the application and the fact that the applicant, through solicitors, had acknowledged the debt and proposed payment, indicating acceptance of liability. These factors weighed against granting relief.

While the plaintiff did not demonstrate specific prejudice from delay, the court balanced the risk of injustice to the applicant if not allowed to defend against the risk to the plaintiff of delayed recovery. Ultimately, the court found the applicant’s delay and conduct, including acceptance of the debt, to be significant factors.

The court reviewed the relevant procedural rules (Orders 13 and 27 of the Rules of the Superior Courts) requiring the existence of special circumstances to justify setting aside default judgment. The applicant failed to establish any special circumstances explaining the default.

In sum, despite the applicant’s reasonable prospect of success on the defence of past consideration, the absence of special circumstances, the delay, and the applicant’s conduct in acknowledging the debt outweighed the merits of his defence. Accordingly, the court refused the application to set aside the judgment.

Holding and Implications

The court REFUSED the application to set aside the default judgment obtained against the defendants.

The direct effect of this decision is that the judgment for €98,252 against the defendants remains enforceable and the applicant cannot proceed to trial on the basis of the alleged defence of past consideration. The court did not establish any new precedent but applied established principles relating to setting aside default judgments, emphasizing the importance of timely applications, special circumstances, and conduct indicating acceptance of debt.