Be Spoke Capital AG v Altum Capital Management LLC

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian O'Moore
• Judgment Date: 28 July 2022
• Neutral Citation: [2022] IEHC 524
• Year: 2022
• Court: High Court
• Docket Number: [2021 5165P]

Between

Be Spoke Capital AG

Plaintiffs

and

Altum Capital Management LLC

Defendants

[2022] IEHC 524

[2021 5165P]

THE HIGH COURT

Security for costs – Bona fide defence – Special circumstances – Defendant seeking an order that the plaintiff provide it with security for costs – Whether impecuniosity was enough to justify the order sought

Facts: The defendant, Altum Capital Management LLC (Altum), sought an order that the plaintiff, Be-Spoke Capital AG (Be-Spoke), provide it with security for costs. Be-Spoke accepted that it was impecunious, in that it could not pay Altum's costs in the event that the proceedings were successfully defended and in the event that Altum was awarded its costs of the action. Everything else was in dispute. This included the question as to what principles the High Court is to apply when security for costs is sought under Order 29 of the Rules of the Superior Courts against a foreign limited liability company. Altum submitted that, in those circumstances, the Court should decide the application by reference to the criteria which govern an application under s. 52 of the Companies Act 2014. Be-Spoke submitted that it should be treated in the same way as would an individual plaintiff resident outside the jurisdiction, and that mere impecuniosity was therefore not enough to justify the order sought. O’Moore J was assisted by the evidence of two expert costs accountants. The first of these, Mr Raftery, advising Altum, said that the likely costs amount to €833,451.67. The second, Mr Galligan, advising Be-Spoke, said that the costs will be €477,850.

Held by O’Moore J that inasmuch as the claim was reliant on implied terms, Altum had shown that it had a prima facie defence. He held that this was a case where an expert valuation of the warrants was open to Be-Spoke, but instead it chose to rely on what its own counsel described as a "cut and paste" from the Nagoh (an Altum managed fund) accounts and what its own major shareholder then said was the value of the asset lost to it by Altum's alleged wrongdoing. He held that this was not a satisfactory way of establishing that the asserted special circumstance existed. He held that the relevant point of law would be decided within the narrow confines of the facts of the case and would apply only to the parties in the case. He concluded that the security which he proposed to order would not stifle the action. While ordinarily it may not be essential for a plaintiff to establish the chilling effect of an order for security for costs, he held that in this case the indications were that the case would proceed. Even if the alleged special circumstance existed, he held that it did not represent a reason to refuse security as this was not likely to bring the action to an end. He noted that Be-Spoke was a company with no meaningful assets and if full security was not provided, any award of costs in its favour would be inadequate and potentially meaningless; if such an award of costs was made, this meant that Altum would (in all likelihood) have successfully defended Be-Spoke's claims. In those circumstances, he held that it would be unfair for a court order to be rendered less than fully effective, and Altum to be left out of pocket, because full security was not provided. He came to the view that Mr Galligan understated the intricacies and demands of the case and the legal services required in its defence. Having said that, O’Moore J found that some of the figures suggested by Mr Raftery seemed on the high side; for example, on a party and party basis a brief fee of €80,000 may be ambitious, though O’Moore J thought that Mr Galligan's proposed figure was far too low. In the round, O’Moore J preferred Mr Raftery's figures.

O’Moore J was conscious of the fact that it is a rare bill of costs which is adjudicated without deduction no matter how experienced or gifted the costs accountant. He therefore reduced by 10% the figure put forward by Mr Raftery and fixed the security accordingly. O’Moore J held that the claim was not in the league of cases where a staggered costs order should be made.

Order granted.

JUDGMENT ofMr. Justice Brian O'Mooredelivered on the 28 ^th day of July, 2022

1 . Even by the standards of the Commercial Court, which is often the home of particularly intense disputes, these proceedings appear to be unusually hard fought. In this motion, by which the Defendant (Altum) seeks an order that the Plaintiff (Be-Spoke) provide it with security for costs, only one relevant issue has been agreed. Be-Spoke accepts that it is impecunious, in that it could not pay Altum's costs in the event that the proceedings are successfully defended and in the event that Altum is awarded its costs of the action. Everything else is in dispute. This includes the interesting question as to what principles the Court is to apply when security for costs is sought under Order 29 of the Rules of the Superior Courts against a foreign limited liability company.

2 . The parties fundamentally disagree about this basic issue. Altum submits that, in these circumstances, the Court should decide the application by reference to the criteria which govern an application under section 52 of the Companies Act 2014; this section deals with applications that an Irish limited liability company incorporated under domestic legislation provide security for costs. Be-Spoke submits that it should be treated in the same way as would an individual plaintiff resident outside the jurisdiction, and that mere impecuniosity is therefore not enough to justify the order sought.

3 . I will structure the judgment in this way;

1. Order 29.

2. Bona Fide Defence.

3. Special Circumstances — has Altum caused Be-Spoke's impecuniosity?

4. Special Circumstances — a point of law of exceptional public importance?

5. The Amount of any Security.

6. Staggered Security.

Order 29.

4 . Order 29 reads;

“1. When a party shall require security for costs from another party, he shall be at liberty to apply by notice to the party for such security; and in case the latter shall not, within forty-eight hours after service thereof, undertake by notice to comply therewith, the party requiring the security shall be at liberty to apply to the Court for an order that the said party do furnish such security.

2. A defendant shall not be entitled to an order for security for costs solely on the ground that the plaintiff resides in Northern Ireland.

3. No defendant shall be entitled to an order for security for costs by reason of any plaintiff being resident out of the jurisdiction of the Court, unless upon a satisfactory affidavit that such defendant has a defence upon the merits.

4. A plaintiff ordinarily resident out of the jurisdiction may be ordered to give security for costs though he may be temporarily resident within the jurisdiction.

5. If a person brings an action for the recovery of land after a prior action for the recovery of the same has been brought by such person or by any person through or under whom he claims, against the same defendant, or against any person through or under whom he defends, the Court may at any time order that the plaintiff shall give to the defendant security for the defendant's costs, whether the prior action has been disposed of by discontinuance or by non-suit or by judgment for the defendant.

6. Where the Court shall have made an order that a party do furnish security for costs, the amount of such security and the time or times at which, and the manner and form in which, and the person or persons to whom, the same shall be given shall, subject to rule 7, be determined by the Master in every case.

7. Where a bond is to be given as security for costs, it shall, unless the Master shall otherwise direct, be given to the party or person requiring the security, and not to an officer of the Court. Provided that in any matrimonial cause or matter where security for costs is to be given by bond the bond shall be given to the Master.

8. No defendant shall be entitled to an order for security for costs in proceedings for the enforcement of a judgment under Chapter III of Regulation No. 1215/2012, Chapter III of Regulation No. 2201/2003, Title III of the Lugano Convention, or Title III of the 1968 Convention solely on the ground that the plaintiff is a foreign national or that he or she is not domiciled or resident in the State in which enforcement is sought.

9. For the purposes of rule 8, “domicile” is to be determined, as the case may be, in accordance with the provisions of:

Article 2 of Regulation 2201/2003,

Articles 62 and 63 of Regulation No. 1215/2012,

Articles 59 and 60 of the Lugano Convention, or

section 15 and the Ninth Schedule of the 1998 Act.”

By contrast, section 52 of the 2014 Act reads;

“52. Where a company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his or her defence, require security to be given for those costs and may stay all proceedings until the security is given.”

5 . The scope of Order 29 has been described in the following way by O'Neill J in Ditt v Krohne[2012] 3 I.R. 120 at paragraphs 15 and 16;

“15. If residence outside the jurisdiction and impecuniosity are not of themselves the factors which entitle a defendant or respondent to an order for security for costs but are merely matters to be taken into account by the court in exercising its discretion, what then is the decisive or determinative factor which establishes a threshold or test which will lead the court to exercise its discretion in favour of the granting or refusing of the order.

16. In my opinion, this can only be the impossibility of enforcement of a costs order against the plaintiff in question; or...