The High Court has refused Irish Asphalt Limited’s application for security for costs against James Elliott Construction Limited, finding that the alleged losses at the Ballymun Youth Facility amounted to special circumstances.
The application arose after Elliott Construction’s counsel told the court in February and March 2010 that the company’s financial position was precarious. Irish Asphalt then sought security under section 390 of the Companies Act 1963. The underlying proceedings, which were listed for trial, concern Elliott Construction’s allegation that pyrite in infill material supplied by Irish Asphalt caused defects at the facility. Irish Asphalt contests that allegation. The judgment did not decide whether pyrite caused the defects or who was responsible.
The court considered Elliott Construction’s published accounts to January 2009, which showed retained profits of nearly €5 million. The company had made a provision of about €2.2 million for remedial work connected to the Ballymun project. The court also considered counsel’s statements that the company had spent €2.3 million since May 2008 on investigation, remediation and trial preparation, had taken on no new contracts and depended on the action proceeding to survive. Elliott Construction provided no more recent detailed financial accounts.
Irish Asphalt’s cost estimate put the full cost of defending the proceedings at about €2.7 million, with less than €700,000 still to be incurred. The judge found credible evidence that Elliott Construction’s financial position had deteriorated and that it could not meet the full costs if Irish Asphalt won. He also found that the company remained solvent, in the sense that it could meet debts as they fell due.
The court then considered whether the inability to pay arose from the wrongdoing alleged in the proceedings. It concluded that, if the alleged wrongdoing were established, the company’s position would be about €2.2 million better without the losses attributed to the project. The judge also took account of fixed assets and legal and expert costs already incurred in pursuing the claim. On that basis, he found that Elliott Construction had established special circumstances and refused the application.
The ruling concerned security for costs only. The underlying claim and Irish Asphalt’s defence remained unresolved. The court did not make an order requiring Elliott Construction to provide security.