Friday, December 16, 2011

Legal Update ¦ Security for Costs ¦ Prima Facie Defence

Maulbawn Ltd [in receivership] -v- Haulbowline Industry Ltd

[2011] IEHC 394 (Laffoy J.)

I read this case twice and am still a little confused. Haulbowline Industries Limited was to be purchased by Maulbawn Holdings Limited, and as part of the transaction Haulbowline Industries Limited changed its name to Maulbawn Limited. Funding was obtained from Anglo Irish Bank Corporation plc., now (in the judgment) Anglo Irish Bank Corporation Limited (though by now probably something else entirely). Anglo appointed a receiver in respect of the mortgage given by Maulbawn Limited to Anglo, and then appointed the same receiver in respect of a debenture given by Maulbawn Holdings Limited to Anglo. (This is approximately where my brain starts to overheat.) ANYWAY, the case concerned security for costs in circumstances where the Defendant alleged that the Plaintiff would be unable to pay the Defendant’s costs if the Defendant successfully defended the action. The Plaintiff accepted that it was insolvent.

Laffoy J. held that the Defendant was not entitled to security for costs in circumstances where it had not established that it had a prima facie defence to the Plaintiff’s claim. The case is useful in that it reviews and consolidates recent authorities on security for costs, in the following terms:-

“The legal authorities […] are well settled. It is convenient to set them out by reference to the recent judgment of this Court (Clarke J.) in Connnaughton Road Construction Ltd. v. Laing O’Rourke Ireland Ltd. [2009] IEHC 7. In his judgment (at para. 2.1) Clarke J. quoted the test for determination of an application for security for costs set out by Morris P. in Interfinance Group Ltd. v. KPMG Peat Marwick, which was approved by the Supreme Court in Usk and District Residents Association v. Environmental Protection Agency [2006] 1 ILRM 363, in the following terms:

‘(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 with ought to cause the court to exercise its discretion not the 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.’

On the issue whether delay by a defendant seeking security for costs constitutes a reason for refusing to grant security, the relevant authorities were reviewed by the Supreme Court in Hidden Ireland Heritage Holidays v. Indigo Services Ltd. & Ors. [2005] IESC 38. In his judgment, Fennelly J. stated (at p. 122):

‘A review of the authorities shows that delay in applying for security may, depending on the circumstances, be a ground for refusing security. The Court will look at the facts of the particular case, the impact of the delay, other surrounding circumstances, and, in the end, will seek a fair balance.’”

Link to judgment on

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