Security for Costs – efficient use of Courts’ time and taxpayer’s money a prominent consideration

Published 29 julio 2021

In a recent decision of the High Court in Fortberry Limited v Promontoria (Aran) Limited & Ors¹ (“Fortberry”) in relation to a security for costs application, the Court took the opportunity, in fixing the security, to consider and encourage the parties to deal with the case as efficiently and in as short a timeframe as possible. The decision is of interest in light of the current climate where there is a backlog of cases currently before the Courts and highlights the Court’s willingness to factor in the efficient progression of cases when dealing with interlocutory issues, such as security for costs applications.

Background to the claim

An application was brought by the first defendant (“Promontoria”) for security for costs against the plaintiff, Fortberry, in relation to a claim by Fortberry for damages in connection with the sale of a property by the second and third defendants (the “Receivers”). The property in question is Dowth Castle, a medieval castle located in Co Meath (the “Castle”), which is adjacent to a Victorian manor house known as Netterville Manor. Fortberry brought an action against the defendants claiming that they had acted unlawfully and in bad faith in relation to the appointment of the Receivers and the sale of the Castle, in circumstances where Fortberry argue that the sale was unnecessary as it had an agreement to sell the Castle at a greater price (€2.2 million) compared to that achieved by the Receivers (€1.95 million).

Test in relation to Security for Costs

The basis for seeking an order for security for costs against a company is section 52 of the Companies Act 2014. The Court noted that the law applicable to the grant of security for costs has been confirmed in the two recent Supreme Court decisions of Quinn² and Protégé³. A defendant seeking security for costs must show the Court that: (i) it has a prima facie defence to the claim; and (ii) there is reason to believe that the plaintiff will be unable to pay its costs if the plaintiff loses the case.

In Fortberry, the Court considered that both limbs of the test had been satisfied by Promontoria in circumstances where the Court: (i) noted that “the evidence to support the plaintiff’s claim is weak” and (ii) said it would "have little hesitation" in concluding that Fortberry would not be able to pay Promontoria’s legal costs if it loses in circumstances where Fortberry had last filed company returns in 2012 with a balance sheet deficit of €3.6 million.

Amount of Security

The Court was provided with the opinion of legal costs accountants on behalf of Fortberry that the likely costs of the proceedings would come to €112,500 excluding VAT. This was based on a hearing of three days. Legal costs accountants on behalf of the Defendants provided an opinion that the likely costs would be €197,350 excluding VAT, based on a hearing lasting eight days.

The Court was of the view that the matter could be heard within four days. In considering the appropriate amount of security for costs to grant, the Court gave great weight to the matter being progressed as efficiently as possible. In this regard the Court noted that “from the perspective of encouraging the parties to be as efficient as possible with the use of taxpayers’ funds (i.e. the time of registrars and other court facilities) and with the added benefit of seeking to reduce court lists (by encouraging the shortening of cases), it is this Court’s view that, in considering the appropriate amount of security for costs, both parties should be encouraged to have this dispute dealt with as quickly and as efficiently as possible.”

Further, the Court felt that if Promontoria “knows that it has security for costs for ‘only’ four days of hearing, it will be incentivised to be as efficient as possible in its use of court time.”

On this basis, the Court increased Fortberry’s estimate for three days by a notional one day (i.e. €16,970) to come up with the sum of €129,470, excluding VAT, as the security for costs to be provided by Fortberry.

Conclusion

In circumstances where the current pandemic continues to provide the Courts Service and the Judiciary with a number of challenges in relation to the smooth and efficient running of the Court's system, it will be very interesting to see to what extent the Courts continue to emphasise and adopt as a part of their decision making process, factors which go to the efficient running of cases both from a time and costs perspective. A copy of the full judgment is available here.

¹[2021] IEHC 500
²Quinn Insurance Ltd (Under Administration) v. PricewaterhouseCoopers (A Firm) [2021] IESC 15
³Protégé International Group (Cyprus) Limited v. Irish Distillers Limited [2021] IESC 16