The High Court has ordered Charles Kelly Limited to provide security for Ulster Bank Ireland Limited’s costs of defending the company’s proceedings. The order was made at an interlocutory application; it did not decide the underlying claims against the bank.
The company seeks damages alleging negligence, breach of duty, breach of statutory duty and breach of fiduciary duty. Its complaints concern four payments to a third party that it says were not properly authorised, an alleged wrongful increase in its €1.6 million overdraft limit, and the bank’s alleged refusal to transfer overdraft liabilities to term loans. The judgment describes the payments as allegedly involving misappropriation by a former company director, William Kelly.
The bank sought security under the Rules of the Superior Courts and/or section 52 of the Companies Act 2014. It argued that it had a defence and that the company could not meet an adverse costs order. Its estimated defence costs were approximately €180,000.
Justice Reynolds found that the bank had shown a “reasonably sustainable defence” and a sound arguable legal basis. The judgment records that the company’s 2006 account mandate generally required two authorised signatories, and that the bank had told the company a board resolution was needed to change the mandate after a request to stop further payments. No resolution was provided. On the overdraft and proposed loan facilities, the court noted evidence that the increase was requested to allow the company to continue trading and that efforts to agree replacement facilities had not succeeded.
On ability to pay, the bank relied on audited accounts from 2011 to 2016 and unaudited statements for 2017. The company said it was trading, fully funded and had moved its banking to Allied Irish Banks. A September 2018 credit report cited by the company put its net worth at approximately minus €2 million. The court concluded that the company would be unable to meet an order for costs if the bank succeeded.
The court found no special circumstances warranting refusal of security. It granted the application. The judgment does not specify the amount or form of security ordered, or set out a stay or deadline for providing it.