The High Court has ordered Ferrotec Limited to provide security for Slimming World’s legal costs in a dispute arising from a €3.09 million contract for 3,000 electronic data-management systems.
Ferrotec agreed in October 2005 to design, manufacture and deliver systems comprising weigh pads, printers, cables and specialised software for Myles Bramwell Executive Services Limited, trading as Slimming World. The defendant later terminated the agreement in August 2006.
Ferrotec claims €2.781 million is due under the contract. Slimming World disputes liability, alleging among other matters that Ferrotec failed to develop the required system and misrepresented its ability to do so. It also claims losses estimated at £1.7 million and intends to counterclaim. Those allegations remain disputed and were not decided in this application.
The issue before Ms Justice Dunne was whether Ferrotec should be required to provide security for costs under section 390 of the Companies Act 1963. That provision allows the court to require a limited company bringing proceedings to secure a defendant’s costs where there is credible evidence that it may be unable to pay them if it loses.
The judge found that Slimming World had established a prima facie defence. She also concluded from Ferrotec’s accounts, its financial position and other litigation involving the company that it was not in a position to meet the defendant’s costs if unsuccessful.
Ferrotec argued that any inability to pay had been caused by Slimming World’s alleged breach of contract. The court rejected that as a sufficient special circumstance. Ferrotec had already been in a weak financial position when the agreement was made, and the judge found no prima facie causal link between Slimming World’s alleged wrongdoing and Ferrotec’s continuing impecuniosity.
The court also rejected delay and Ferrotec’s use of commercial-list and mediation procedures as reasons to refuse security. Ms Justice Dunne therefore ordered security for costs, while leaving the underlying contractual dispute for trial.