The Supreme Court has dismissed Motorola Limited’s appeal against the refusal to require three Imagine companies to provide security for costs in their contract dispute. It affirmed the High Court order refusing security; it did not decide the underlying claim for damages.
Imagine says Motorola breached agreements to provide facilities for its broadband business, causing losses it puts at well over €100 million. Those allegations remain to be determined. Motorola accepted that it had a prima facie defence, but argued that Imagine would be unable to pay its costs if it won the case.
The appeal concerned an application under section 390 of the Companies Act 1963. The Supreme Court said the test was whether the evidence gave “reason to believe” the companies would be unable to pay costs after losing—not whether that outcome was more likely than not. The court must consider all material evidence and assess likely future circumstances; a mere risk of non-payment is insufficient.
Motorola relied on Imagine’s 2011 accounts, including a note warning that the outcome of the litigation could significantly affect the group’s long-term future and ability to meet liabilities. It also cited an auditor’s warning about material uncertainty over the group’s ability to continue as a going concern. Imagine relied on the value of its wireless broadband spectrum, which its expert valued at €50 million to €120 million. Motorola provided no contrary expert valuation.
The Court assessed the evidence, including Imagine’s 2012 accounts, which it admitted after the appeal hearing with both parties’ agreement. Using the lower spectrum valuation and the 2011 accounts, it found that the spectrum alone exceeded the group’s total liabilities by more than €10 million. Even allowing for possible losses and trial costs, the Court considered it highly likely Imagine would have enough funds to meet a costs award of up to €4.5 million, Motorola’s estimate.
The Court therefore agreed that Motorola had not established good reason to believe Imagine would be unable to pay costs if it lost. Because that threshold was not met, it did not decide whether special circumstances would independently justify refusing security. It dismissed the appeal and affirmed the High Court’s order.