The High Court has refused an application by Brian Cunningham seeking security for costs from Moorview Developments Limited in proceedings over alleged director's loans.
Mr Justice Clarke accepted that Moorview was insolvent and in receivership. He also accepted that Mr Cunningham had established a prima facie defence, meaning an arguable defence sufficient for this preliminary application rather than a finding that the defence would ultimately succeed.
Moorview claims that sums recorded as director's loans are due from Mr Cunningham. He disputes that characterisation. His case is that some amounts were legitimate business expenses incurred while carrying out duties for Moorview. He also says he personally paid money to potential property vendors, including deposits, for transactions intended to benefit the company and that Moorview had agreed to reimburse him.
Those matters remain for determination in the substantive proceedings.
Ordinarily, where an insolvent corporate plaintiff faces a genuine defence, the court may require it to lodge security against the defendant's potential legal costs. Moorview resisted that order on the basis of Mr Cunningham's delay in bringing the application.
The proceedings began in 2005. A defence was delivered in September 2006, discovery was made by Moorview in January 2008, but the security-for-costs motion was not issued until October 2009.
The court acknowledged that the broader linked litigation involving the Cunningham Group, First Active and other parties had been complex and had occupied substantial attention. That partly explained the delay.
However, the practical consequence for Moorview was significant. It had incurred the expense of making discovery before being told that security for costs would be sought. Mr Justice Clarke held that a plaintiff should ordinarily know about such a potential financial requirement early enough to factor it into a decision on whether continuing litigation is worthwhile.
The combination of substantial delay and resulting prejudice amounted to special circumstances. The application for security for costs was therefore refused.