Commercial Court Orders Security for Costs Against Plaintiffs and Defendant

Delivering judgment on 12th November 2021 in the proceedings entitled “Airscape Limited and By Order of the Court Dated 17th May 2021 Clarksville Limited -v- Instant Upright Limited The High Court Record No. 2020/5003P”, Mr Justice Twomey said that “the right to have litigation fairly conducted is not restricted to appellate litigation but also applies to first-instance litigation, as in this case”.

Background

The Landlord had issued plenary proceedings claiming damages for breach of contract, wrongful termination of a lease, deceit and fraudulent misrepresentation/misstatement. The case was admitted into the Commercial Court List.

The Defendant company (“the Tenant”) brought a counterclaim comprising three claims being, a claim relating to the alleged failure of the Landlord to reinstate the Premises, a claim for damages alleged to have arisen from the grant of an ex parte mareva injunction in July 2020 which was obtained by the Landlord against the Tenant, and a claim that the Tenant suffered loss and damage arising from alleged failures of the Landlord in the design and construction of the subject premises in 2000 and 2001 which was before the Tenant signed the underlying lease.  

Both the Landlord and the Tenant brought applications for security for costs against one another, which applications, were heard together for one day before the Commercial Court.

The Landlord’s claim for security for costs against the Tenant was for the sum of €200,000 and it related to the third above mentioned aspect of the Tenant’s counterclaim. In parallel, the Tenant, who had in its underlying Motion sought security for costs against the Landlord in the sum of €350,000, had, during the course of the exchange of Affidavits in the application, sought inflated security in the sum of €1,011,403 for its defence of the entire proceedings brought by the Landlord. 

The Landlord confirmed that it would pay the security for costs initially sought by the Tenant.

Security for the Landlord in Defending the Tenant’s Counterclaim

The Court cited the leading case in determining security for costs applications as “Usk and District Residents Association Limited v. The Environmental Protection Agencies [2006] IESC 1” which states security for costs will be granted if the applicant establishes it has a prima facie defence to the claim and establishes that the claimant will not be able to pay its costs if the applicant is successful.

The Court acknowledged that “this security for costs application was unusual in the sense that normally the company resisting having to put up the security for costs seeks to claim that it will easily be able to pay the other side’s costs in the event that the company loses the litigation, and so there no need for it to provide security”.

However, in this case, the Tenant’s Financial Officer had put on oath that it did not have the money to pay the Landlord’s request for security for legal costs, but rather, it projected it would be in a position to pay same by 2023/2024.

The Tenant argued that the Court should take into account its prospective financial solvency when the Action would likely conclude rather than its current financial position.

It its findings, the Court recognised that the Tenant was “crystal clear” it could not currently pay the Landlord’s costs. To conclude that the Tenant would be able to pay the Landlord’s costs at the conclusion of the Action, “cogent evidence” of its ability to pay was required. Such evidence was not provided by the Tenant. The only evidence provided by the Tenant in this respect was a single page forecast prepared by the Tenant itself to which the Court found did not give it sufficient “reason to believe” that there would be change in the Tenant’s financial future position. Furthermore, the Court noted that the financial projections prepared by the Tenant were based on the assumption that it would succeed in its defence of the Action and therefore, not have to pay the Landlord’s costs. No consideration was given by the Tenant to it not succeeding in its defence of the Action. 

Conclusion

On the Tenant’s application for security for costs, the Court found that, particularly where the sum of €350,000 was initially suggested by Tenant to be paid by Landlord as the appropriate level of security for costs, and where the Landlord had paid this sum to its solicitors, in escrow, this was the appropriate sum to be paid by the Landlord. As the Landlord had paid over the said sum in advance of the hearing, the Court made a subsequent Order limiting the costs awarded to the Tenant for its security for costs application to the date at which the Landlord had confirmed on oath that the sum had been paid over to its solicitors.   

On the Landlord’s application for security for costs, the Court held that it was reasonable to fix the security to be provided by the Tenant in the sum of €200,000 which had been suggested by the Landlord and it awarded the Landlord all of its costs in the application against the Tenant.

A link to the Court’s judgment can be found here:
https://www.courts.ie/acc/alfresco/af6c0d72-4fe3-4739-95fb-048a119df67d/2021_IEHC_706.pdf/pdf#view=fitH

This Article is not intended as legal advice. For further information on security for costs applications, the Commercial Court practice and procedure, landlord and tenant disputes and all general matters relating to legal advice in the context of contentious disputes, please contact our Hugh Kane or David Walsh, details as below. 

AUTHOR

Hugh Kane, Partner  
E:  hkane@kanetuohy.ie 

David Walsh, Senior Associate  
E:  dwalsh@kanetuohy.ie