The High Court has refused Motorola Limited’s application to require three Imagine companies to provide security for its costs in proceedings over alleged losses from the purchase and delivery of WiMax wireless internet technology.
The plaintiffs— IIB Internet Services Limited, Irish Broadband and Internet Services Limited, trading as Imagine Networks, and Imagine Communications Group Limited—claim damages exceeding €138 million. The court was considering only Motorola’s application under section 390 of the Companies Act 1963, not the underlying claim.
Mr Justice Brian J. McGovern said the plaintiffs accepted that Motorola had a prima facie defence. The disputed question was whether the companies would be unable to pay Motorola’s costs if it succeeded in defending the case. The judge said the court had to weigh the evidence from both sides, rather than decide the application solely by asking whether Motorola’s evidence appeared credible on its face.
Motorola relied on the group’s losses, accumulated losses, cash position and a warning in its audited accounts about uncertainty over its ability to continue as a going concern. Its accountant gave an opinion that the plaintiffs would be unable to meet a costs award. The judge noted that the report contained errors, including an overstatement of historic losses and an unchallenged correction concerning whether the group’s spectrum assets had been charged to another company.
The plaintiffs pointed to a surplus of assets over liabilities in the 2011 accounts, funding available to the group, improved cash flow and a valuation of its spectrum assets between €50 million and €120 million. They also disputed Motorola’s assessment of likely legal costs. Motorola estimated party-and-party costs at about €4.58 million; the plaintiffs’ estimate was about €758,000. Motorola said it was sufficient for its application to rely on the lower figure.
The group’s auditor said costs of €1.5 million could be met from cash reserves and that a €4.5 million award could be met through a combination of reserves and asset sales. Weighing the evidence, the judge was not satisfied that Motorola had established the required basis for an order. He therefore did not go on to decide whether special circumstances would independently justify refusing security.
The judge added that, if the matter proceeded further, evidence that asset write-downs resulted directly from the alleged breaches in the case could support a discretionary refusal of security for costs. That was a provisional observation, not a finding on the underlying allegations. He found that Motorola had moved with reasonable speed and that the complained-of delay would not, by itself, have justified refusing relief. The application was refused; the underlying proceedings remained unresolved in this judgment.