The High Court has refused an application by defendants for security for costs against the two plaintiffs in a commercial case, but directed Catharsis Technologies Ltd (CTL) to provide security for costs arising from a counterclaim. The court left the amount of that security for a later hearing.
In a judgment delivered on 22 July 2014, Mr Justice Brian J. McGovern considered whether there was credible evidence that Lexington Services Ltd, a Malta-registered company, would be unable to pay the defendants’ costs if they succeeded in defending the action. The plaintiffs had submitted financial statements and an auditor’s letter indicating the company could meet debts falling due over the following year and had about €5 million in equity. The defendants pointed to losses of about €10 million and questioned whether the evidence accounted for the potential costs of the proceedings or showed that the company’s assets could be realised.
The judge found that the statements showed positive net assets, the most relevant consideration for meeting a costs order. He noted evidence that Lexington held about €4.5 million in assets and that the defence costs were estimated at €325,918.40; that evidence had not been significantly challenged. The applicants had not met the required test, so security was refused against Lexington. As the defendants accepted that James Patrick Flannery’s position was irrelevant if no order was made against Lexington, the application was refused against both plaintiffs.
The judge also addressed the plaintiffs’ objection that the application had been brought late. Although it was unnecessary to decide the objection, he said the three-month interval was not undue or substantial delay and found no delay in bringing the application.
The counterclaim defendants separately sought security from CTL, alleging it was insolvent and could not meet a costs order. CTL disputed that claim. The judge found the counterclaim raised a new conspiracy claim for damages, involved additional parties and raised legal and factual issues beyond a defence to the original claim. He was also satisfied that the counterclaim defendants had produced credible evidence giving reason to believe CTL would be unable to pay their costs if they succeeded.
The court therefore directed the defendant and counterclaimant to furnish security for costs on the counterclaim issues. It did not set the amount in this judgment and said it would hear counsel on that question.