The Court of Appeal has allowed Pagnell Ltd.’s appeal and set aside an order requiring it to provide €140,000 security for O.C.E. Ireland Ltd.’s costs. The court decided the appeal on whether security for costs should be ordered; it did not determine the underlying breach of contract claim.
Pagnell, which traded as Snap Printing, had contracted with O.C.E. Ireland to operate Allied Irish Banks’ central facilities printing service at the bank’s Ballsbridge headquarters for five years. O.C.E. terminated the arrangement in August 2003. Pagnell later sued, alleging premature and unlawful termination. O.C.E. denied liability and advanced defences including implied contractual terms permitting termination, alleged shortcomings in the service and failure to mitigate loss.
The High Court ordered security under section 390 of the Companies Act 1963 after finding that O.C.E. had put forward sufficient arguments for a bona fide defence. Pagnell appealed. It was common ground that Pagnell would be unable to pay O.C.E.’s costs if O.C.E. succeeded in defending the action.
In a judgment delivered by Mr Justice Gerard Hogan, the Court of Appeal held that a defendant seeking security had to provide objective evidence supporting a prima facie defence; assertion alone was insufficient. It found O.C.E. had not supplied adequate evidence that a reasonable notice term could be implied, that AIB was dissatisfied with Pagnell’s performance or that such dissatisfaction led to termination. A March 2003 letter raising concerns about staff attitude and pricing did not, by itself, establish a fundamental breach. O.C.E. also produced no evidence that another printing contract was available to Pagnell after termination, so its mitigation argument did not establish a prima facie defence.
The court separately considered O.C.E.’s €50,000 open lodgement, made before security for costs was raised. It said a lodgement does not invariably undermine a defence, but in these circumstances it showed the claim had substance and amounted to a special circumstance against ordering security.
The appeal was allowed and the security order set aside. The court made no ruling on whether O.C.E. breached the contract or on any damages payable; those matters remained for the underlying proceedings.