Security For Costs ' The Proper Approach To Assessing A Plaintiff's Ability To Pay Costs

Published date17 August 2022
Subject MatterCorporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law
Law FirmWilliam Fry
AuthorMs Lisa Carty and Hilary Rogers

Introduction

Atin Investments Limited v Remcoll Capital Limited and Garlin Investments ICAV [2022] IEHC 357 involved a dispute relating to the termination of a service level agreement between the plaintiff (Atin) and the first named defendant (Remcoll). Remcoll had entered the agreement in its capacity as an investment advisor to the second named defendant (Garlin). Remcoll unilaterally terminated the contract with Atin. Atin instituted proceedings claiming breach of contract against Remcoll and Garlin arising from the termination of the contract, and a claim against Garlin for the tort of inducement of breach of contract (Proceedings).

The Security for Costs Application

Garlin brought a security for costs application under section 52 of the Companies Act 2014 (Section 52 Application) on the basis that Atin's financial position was such that it would be unable to meet Garlin's costs, if it successfully defended the claim.

Applicable Legal Principles

The High Court (Court) noted that the principles applicable to Section 52 Applications are well established. The Court, citing Clarke CJ in Quinn Insurance Ltd (Under Administration) v PricewaterhouseCoopers (A Firm) [2021] IESC 15 (Quinn), referred to three key considerations, namely a bona fide defence, plaintiff's ability to pay the defendant's costs and the existence of special circumstances.

  • Bona Fide Defence
    Having regard to existing caselaw, the Court found that it was not required to form a view as to the likelihood of a particular defence succeeding at trial but that a defendant must go beyond a mere assertion of a defence. In this case, the Court was satisfied that Garlin had raised a bona fide defence to the claims made in the Proceedings.
  • Atin's ability to pay Garlin's costs if unsuccessful
    In security for costs applications, a defendant bears the onus of demonstrating a plaintiff's inability to pay its costs Garlin produced evidence, by way of a legal costs accountant's report, that its likely costs to defend the Proceedings would be ?161,445.

    In its defence to the Section 52 Application, Atin had sought to include the sums claimed by it in the Proceedings, to show that it had sufficient assets. Atin had placed considerable reliance on the fact that the contract recorded an agreed payment of ?150,000 to be made to Atin and that no evidence had been advanced by Remcoll to dispute that this sum was owing, notwithstanding the traverse denial of that element of the claim in Remcoll's defence....

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