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Windmaster Developments Ltd. v. Airogen Ltd. [2000] IEHC 59 (10th July, 2000)

THE HIGH COURT

1999 No. 3614P

BETWEEN

WINDMASTER DEVELOPMENTS LIMITED

PLAINTIFF

AND

AIROGEN LIMITED AND JIMMY KELLY

DEFENDANTS

Judgment of Mr. Justice McCracken delivered the 10th day of July, 2000

1. The basis of this action is a dispute concerning an alleged agreement for the development of a wind farm. By Notice of Motion dated 22nd December, 1999 the Defendants sought an order pursuant to Section 390 of the Companies Act, 1963 that the Plaintiff should provide security for the Defendants' costs of these proceedings, an order staying all further proceedings pending the giving of such security and an order fixing the amount of the security to be given by the Plaintiff.

2. On 28th March, 2000 I heard this application, which was opposed by the Plaintiff, and I ruled that on the evidence before me the Plaintiff was clearly insolvent and that the Defendant had shown a statable defence. Accordingly, I made an order declaring the Defendants to be entitled to security for costs pursuant to Section 390 of the Companies Act, 1963.

3. The matter has come before me again for the purpose of assessing the amount of the security for costs. In the course of his submissions, Counsel for the Defendants stated that the Plaintiff is a company registered in England, and not in Ireland, and as such is not a company within the meaning of the Companies Acts in this country. He says that, accordingly, Section 390 should not apply.

4. I have already made an order that Section 390 does apply, which order was made on the evidence before me and the arguments submitted by Counsel at the time. It was never suggested in the course of the previous hearing that the Plaintiff was an English company, nor was any argument put forward to the effect that the Companies Acts did not apply. I am told that the order I made on that occasion has not yet been perfected, but never-the-less I am of the view that I have completed the determination of that part of the motion before me, and it is not permissible for the Plaintiff to seek to have me alter my decision on the basis of a completely new argument. In any event, there is no evidence before me now, nor was there at the time of the earlier hearing, that the Plaintiff is in fact an English company, although it is stated to be so in the Statement of Claim which has been delivered. None of the affidavits filed on behalf of the Plaintiff either on the original application or in relation to the quantum of the security for costs avers that this is an English company, nor is a Certificate of Incorporation exhibited. Under those circumstances, I am of the view that in any event it is not open to me to consider this matter anew, both in the absence of any evidence to support the Plaintiff's claim and in the light of the fact that at the relevant hearing the Plaintiff did not raise this issue, and in fact submitted both evidence and arguments to the effect that the order ought not to be made, primarily because the Defendants had not shown a prima facie defence.

5. In relation to the quantum of costs, evidence has been filed by way of affidavits from two well known legal cost accountants, who are, of course, far more experienced in the matter of assessing costs than I am. However, as in all cases of this nature, their assessments are based on certain assumptions made no doubt on the instructions of their clients, but at a stage in the proceedings where no defence has been filed, and therefore the real issues between the parties have not yet crystallised.

6. Before dealing with the figures, I should comment on another matter put forward on behalf of the Plaintiff, namely that it might be possible effectively to determine this action on the basis of a preliminary issue, which would only last for two or three days. It is suggested that I could make an order giving security in relation to the preliminary issue, with liberty to the Defendants to re-enter the motion if the preliminary issue should not determine the action. In my view this is impractical. Firstly, I do not know whether the pleadings will ultimately disclose a dispute suitable for being treated as a preliminary issue, but secondly, and perhaps more important from a practical point of view, if the Defendants did in fact come back looking for further security for costs, this whole motion would have to be reheard, the legal cost accountants would have to re-examine the position afresh in the light of the judgment on the preliminary issue, and the Plaintiff would undoubtedly have to be given time to find the additional monies. This would add considerably to the costs of this motion, but also would involve considerable delays while the question of the quantum of the security for costs was relitigated. Accordingly, I propose to assess the amount of security based on a full trial of the action.

In Lismore Homes Limited. (in receivership) -v- Bank of Ireland Finance Limited and Others I gave judgment on 24th March, 2000, and held that the words "sufficient security" in Section 390 meant that the security required was to approximate to the probable costs of the Defendant should they succeed.

7. Mr. Noel Guiden, the Defendant's legal cost accountant, has estimated the probable costs on the basis of certain assumptions set out in his affidavit they are:-

1. That the Plaintiff's claim is in excess of £5 million.

2. That the case is a heavy and important one with complex issues.

3. That there will be substantial discovery of documents with the possibility of non-party discovery.

4. That the probable duration of the trial will be in the order of 10 days.

5. That there will be a number of expert witnesses engaged.

8. Based on these assumptions he has calculated the costs in a total sum of £683, 776.75. In so doing, he has taken into account the fact that one of the Defendants is registered for Value Added Tax while the other is not so registered, and has apportioned Value Added Tax equally between them. Accordingly, he has calculated it at 10.5% rather than 21%. His ultimate estimate is made up of the following figures:-

1. £375,000 + VAT as solicitor's professional fee.

2. £2,500 + VAT for postage, telephone calls and incidentals.

3. £500 for office outlays.

4. £77,100 + VAT for Senior Counsel. This is based on a brief fee of £42,000 and 9 refresher fees of £3,150 together with trimmings and a brief fee on the interlocutory injunction application.

5. £71,850 for a second Senior Counsel, on the same basis as the leading Counsel other than the brief on the interlocutory application.

6. £51,900 + VAT for Junior Counsel based on a brief fee of £28,000 and 9 refreshers of £2,100 together with trimmings and a brief on the interlocutory application.

7. £40,000 + VAT as witnesses expenses.

9. Mr. David Mack, legal cost accountant for the Plaintiff, disputes Mr. Guiden's assumptions set out above and makes the following points:-

1. The action is primarily one for specific performance, and if that order is obtained, damages may well be less than £100,000.

2. Third Party discovery will not be necessary.

3. The interlocutory application was not in fact proceeded with.

4. The trial should not take more than 5 days.

5. There will be little expert testimony required.

10. On this basis he puts forward the following figures:-

1. £183,333 as solicitor's professional fee. This is calculated on the basis of a total professional fee of £275,000 less £91,666 for work actually done before the issuing of the motion for security for costs.

2. Postage, telephone calls and sundry outlays at £1,666, on the basis that £833 would have been incurred prior to the motion.

3. Office outlay at £333, on the same basis.

4. £35,750 as fee for Senior Counsel. This is calculated as a brief fee of £25,000, 5 for refresher fees of £2,000 each and £750 for trimmings. He makes the case that only one Senior Counsel is necessary.

5. £24,083 for Junior Counsel on the basis of a brief fee of £16,666 together with 5 refreshers and trimmings of £750.

6. £1,000 as witnesses expenses.

11. He has assumed, wrongly as it turns out, that both Defendants were registered for VAT, and that therefore there should be no allowance under this heading. His total comes to £246,165.35.

12. I have carefully considered the affidavits and the Statement of Claim which has been delivered. This is clearly a complex case in which the Plaintiff is claiming both under a written agreement of 25th April, 1996, which was in the nature of a joint venture agreement under which the parties would develop a wind farm, and certain oral arrangements between the parties. It is further alleged that the Defendants entered into agreements in pursuant of the join venture agreement, and that these agreements were entered into in trust for the Plaintiff, and that the benefit of them ought to be assigned to the Plaintiff. It is also alleged that, in breach of these agreements, the Defendants have purported to proceed with the project in disregard of the Plaintiff's rights and in conjunction with a third party. I can only make assessments based on this Statement of Claim, but there is no doubt that this is a highly technical matter, and I certainly think that independent expert evidence will be necessary on both sides. I think that some of the issues are going to be quite technical, and I would be very surprised if the matter was disposed of in 5 days. I also think that it is both sufficiently lengthy and sufficiently difficult in a technical sense to warrant engaging two Senior Counsel. On the other hand, I think that some of the fees put forward by Mr. Guiden are certainly excessive and doing the best I can I would assess the figure as follows, on a VAT inclusive basis:-

1. £350,000 for solicitors professional fee.

2. £3,000 for postage, telephone calls, incidentals and office outlay.

3. £108,000, being £54,000 for each Senior Counsel based on a brief fee of £30,000 and 9 refreshers of £2,500 each and trimmings.

4. £36,000 for Junior Counsel on the same basis.

5. £20,000 for witnesses expenses.

13. Accordingly I would direct that the Plaintiff furnishes security for costs in the sum of £517,000.