Judgment Title: Leftbrook Ltd -v- Nicholas
Neutral Citation:  IEHC 643
High Court Record Number: 2009 8050 P
Date of Delivery: 12/12/2013
Court: High Court
Composition of Court:
Judgment by: White Michael J.
Status of Judgment: Approved
Neutral Citation:  IEHC 643
THE HIGH COURT
[2009 No. 8050 P.]
Judgment of Mr. Justice Michael White delivered on the 12th day of December, 2013
1. This matter has come before the Court by way of motion seeking an order directing the plaintiff to furnish security for costs pursuant to Order 29 of the Rules of the Superior Courts and s. 390 of the Companies Act 1963, in such amount and in such manner as may be fixed or determined by the Honourable Court.
2. The plaintiff issued a plenary summons on the 4th September, 2009. The dispute between the plaintiff and the defendant referred to a heads of agreement of the 14th February, 2007, relating to the sale of a licensed premises at Main Street Cavan. when it was agreed that the defendant would purchase shares in a new company for the sum of €3,500,000; and that the plaintiff would seek a necessary tax clearance from the Revenue Commissioners. It was envisaged the closing date would be the 17th January, 2008, and that the plaintiff would continue to operate the licensed premises for a period often months after the transfer to the new company. The statement of claim was delivered on the 29th September, 2009 and the defence filed on the 3rd February, 2010.
3. By letter of the 25th January, 2011, Mr. Garry Clarke solicitor for the defendant wrote to James Wall, solicitor for the plaintiff referring, to the company having been put into voluntary liquidation he stated:-
I say and believe that as a result of the defendant's default, the company could not pursue the rights that it had in relation to that development. I have been advised by the company's solicitors that there is little point in bringing any case against the vendor of the Stradbally project."
7. Section 390 of the Companies Act 1963 states:-
9. At para. 2.1 of the judgment, Clarke J states:-
'(1) In order to succeed in obtaining security for costs an initial onus rests upon the moving party to establish:
(a) that he has a prima facie defence to the plaintiff's claim, and
(b) that the plaintiff will not be able to pay the moving party's costs if the moving party be successful.
(2) In the event that the above two facts are established, then security ought to be required unless it can be shown that there are specific circumstances in the case which ought to cause the court to exercise its discretion not to make the order sought.
In this regard the onus rests upon the party resisting the order. The most common examples of such special circumstances include cases where a plaintiff's liability to discharge the defendant's costs of successfully defending the action concerned flow from the wrong allegedly committed by the moving party or where there has been delay by the moving party in seeking the order sought.
The list of special circumstances referred to is not of course, exhaustive."
• The special circumstances that the wrongdoing of the defendant would lead to the plaintiff's inability to discharge the defendant's costs if the defendant was successful in the plenary action.
13. The Court is satisfied that the defendant did not delay once it was established that the company was in voluntary liquidation to seek security for costs.
Alleged wrongdoing of defendant leading to the plaintiff's inability to discharge costs
15. I refer to an extract from Civil Procedure in the Superior Courts 3rd Ed., Delaney & McGrath at para. 13.74 which states:-
(1) That there was actionable wrongdoing on the part of the defendant (for example a breach of contract or tort);
(2) that there is a causal connection between that actionable wrongdoing and a practical consequence or consequences for the plaintiff;
(3) that the consequence(s) referred to in (2) have given rise to some specific level of loss in the hands of the plaintiff which loss is recoverable as a matter of law (for example by not being too remote); and
(4) that the loss concerned is sufficient to make the difference between the plaintiff being in a position to meet the costs of the defendant in the event that the defendant should succeed, and the plaintiff not being in such a position."
19. In Connaughton Road Construction Ltd v. Laing O'Rourke (Ireland) Ltd., para. 3.6 Clarke J. states:-
21. There has been no detailed analysis of the company's assets and deficit to show a causal connection between the alleged loss in respect of the future transaction, including the loss of a right to participate, and the defendant's default.
22. If one looks at the particular test, what it says is that the consequences referred to have given rise to some specific level of loss, not loss of opportunity or future profits in the hands of the plaintiff which loss is recoverable as a matter of law, for example, by not being too remote.
23. It could arise, that loss of opportunity or loss of rights to participate in a future transaction could be relied upon where there is a clear causal connection with the wrong alleged, and the subject matter of the proceedings. In this case the damage claimed is too remote.
24. The fourth part of the test states that the loss concerned is sufficient to make the difference between the plaintiff being in the position to meet the costs of the defendant, in the event that the defendant should succeed, and the plaintiff not being in such a position to discharge costs. The deficit in the plaintiff company is €5,316,000 and has not been explained to the Court. The plaintiff has not addressed the use of the €1,000,000 deposit, paid by the defendant.
25. The plaintiff is relying on special circumstances, where the defendant has established prima facie that he has a defence, and where the plaintiff will not be able to pay costs if unsuccessful. Furthermore the court is being asked to exercise its discretion in favour of the plaintiff who has been paid €1,000,000 by the defendant, which will never be repaid even if the defendant is successful in the proceedings.
26. If the defendant is successful in defending the plaintiff’s action in the substantive proceedings he will not recover the costs from the plaintiff which is in liquidation in circumstances where the plaintiff itself has acknowledged it gave incorrect information to the Revenue Commissioners.
27. This would certainly, have an impact on any exemplary damages or any damages consistent with a finding that the defendant breached the agreement. The plaintiff has not established the special circumstances which would enable this Court to refuse an order for security of costs. The Court directs the plaintiff to provide security for costs.