The Court of Appeal has allowed an appeal by Charles Kelly Limited against an order requiring it to provide €220,000 as security for Ulster Bank Ireland Limited’s legal costs. The order had also stayed the proceedings until the security was provided. The appeal court held that the bank had not established a prima facie defence to one aspect of the company’s claim on the pleadings and evidence before the High Court.
The company’s proceedings, issued in 2015, allege that the bank acted without proper authority in handling its banking facilities and failed to follow its instructions. Among other claims, it says the bank wrongfully honoured four payments to Gibson & Associates, totalling €180,000, between October 2009 and February 2010. The company also challenged the operation of an overdraft facility of €2.5 million. These remain allegations in the underlying case; the appeal concerned security for costs, not whether the bank was liable.
The bank sought security under section 52 of the Companies Act 2014. The High Court granted its application in March 2019. On appeal, the company argued that the bank had not shown a prima facie defence, that the company would be unable to pay the bank’s costs if it won, and that the security was set at the full amount of the bank’s estimated costs.
The Court of Appeal focused on the bank’s defence to the claim about the four payments. The judgment said the bank’s filed defence did not plead that it was obliged to honour the payments under the account mandate, or that doing so provided a defence to the claim. The affidavit supporting the bank’s application relied on account records and correspondence, but the appeal court found that this did not supply the missing pleaded defence. It also noted that the bank’s correspondence had taken inconsistent positions about its authority to change the mandate or refuse payments.
The court stressed that it was not deciding that the bank could never have a defence to the claim. It held only that, on the pleadings and evidence then before the High Court, the bank had not advanced a prima facie defence to one aspect of the company’s case. It therefore found that the High Court judge had erred in ordering security for costs and allowed the appeal. Because of that conclusion, the court did not consider the separate challenge to the amount of security.