Bionomica Ltd (in Voluntary Liquidation)
| Jurisdiction | Ireland |
| Judge | Mr. Justice Garrett Simons |
| Judgment Date | 15 June 2020 |
| Neutral Citation | [2020] IEHC 340 |
| Docket Number | 2017 No. 11546 P. |
| Court | High Court |
| Date | 15 June 2020 |
[2020] IEHC 340
Garrett Simons J.
2017 No. 11546 P.
THE HIGH COURT
Costs – Security – Further and better replies to particulars – Plaintiffs seeking costs – Whether plaintiffs were entitled to their costs
Facts: It was the plaintiffs’ case that the first plaintiff, Bionomica Ltd (in voluntary liquidation), acquired the benefit of a loan which the first defendant, Response Engineering Ltd, had advanced to the second defendant, Commissioning Services Ltd. The benefit of the loan was said to have been subsequently assigned to the second plaintiff, Ms Daly, who was the sole shareholder of the first plaintiff. Both defendants denied that they had any liability to either of the plaintiffs. The proceedings became enmeshed in a series of pre-trial applications. The position adopted by the second defendant was that the legal costs which would be incurred by it were the matter to proceed to full hearing were in the order of €400,000 (exclusive of VAT). There were three motions before the High Court. The objective of the first two motions had been to ensure that security, e.g. in the form of a bond, would be put in place to guarantee that the second defendant would be able to recover its costs against the corporate plaintiff if successful in the defence of the proceedings. Two related motions were issued in this regard. First, a motion seeking to have the second plaintiff removed from the proceedings; and, secondly, a motion seeking an order for security for costs pursuant to s. 52 of the Companies Act 2014. It was accepted that the second plaintiff was a proper party to the proceedings, and the only issue outstanding in respect of the first motion was costs. The second motion had been pursued. One of the principal issues to be determined on that motion was whether the presence of a natural person as a co-plaintiff in the proceedings represented a special circumstance such as to justify the refusal of an order for security for costs. The third motion had been brought by the plaintiffs, and sought to compel further and better replies to particulars.
Held by Simons J that the second defendant’s application for security for costs would be dismissed; the presence of a natural person, who is a good “mark” for any costs order, represented a special circumstance which obviated the necessity for requiring the corporate plaintiff to put in place security to cover the costs of the defendant if successful. Simons J allowed the plaintiffs’ application to compel the second defendant to provide further and better particulars in response to the notice for particulars served by them; an order would be made directing that the second defendant was to provide further and better particulars in response to numbered items 3; 5; 6(a); 7 and 8 of the notice for particulars served by the plaintiffs on 28 May 2019. For the purpose of identifying the “event”, Simons J held that it was appropriate to consider the motion to strike out the co-plaintiff from the proceedings and the motion for security for costs together as the two motions were inextricably linked; the proposed order was that the second defendant was to pay two-thirds of the plaintiffs’ costs of the two motions. Simons J held that this discount of one-third was intended to reflect the court’s disapproval of the plaintiffs’ conduct in (i) failing to provide a proper response to the particulars raised, and (ii) failing to file a replying affidavit in a timely manner. Simons J held that the costs of the strike out application would be confined to drafting costs, i.e. the costs award proposed would not include a separate brief fee on that motion; only one brief fee would be allowed on the two motions. Simons J held that the position in respect of the costs of the third motion, i.e. the application for further and better particulars, was more straightforward; the “event” went in favour of the plaintiffs, and they appeared to be entitled to their costs.
Simons J held that these proposed costs orders would be subject to the usual proviso that costs are to be assessed by the Office of the Chief Legal Costs Adjudicator in default of agreement, and that there was to be a stay on the execution of the costs orders pending the final determination of the High Court proceedings.
Costs orders.
The underlying dispute in these proceedings has its genesis in what is a commonplace type of commercial transaction, namely the assignment of the benefit of a loan from one company to another. In brief outline, it is the plaintiffs' case that the first named plaintiff acquired the benefit of a loan which the first named defendant had advanced to the second named defendant. The benefit of the loan is said to have been subsequently assigned to the second named plaintiff, who is the sole shareholder of the first named plaintiff. Both defendants deny that they have any liability to either of the plaintiffs.
The resolution of this dispute should have been relatively straightforward. Yet, the proceedings have instead become enmeshed in a series of pre-trial applications. These applications could have been avoided had the moving parties engaged sensibly with requests for further particulars raised by the other side, and if the plaintiffs had filed replying affidavits promptly setting out the precise nature of their claim.
All the time, the legal costs incurred are increasing. The position now adopted by the second named defendant is that the legal costs which would be incurred by it were the matter to proceed to full hearing are in the order of €400,000 (exclusive of VAT). This is so notwithstanding that the value of the disputed loan is only €300,000.
There are three motions before the court. The objective of the first two motions had been to ensure that security, e.g. in the form of a bond, would be put in place to guarantee that the second named defendant will be able to recover its costs against the corporate plaintiff if successful in the defence of the proceedings. Two related motions were issued in this regard. First, a motion seeking to have the second named plaintiff removed from the proceedings; and, secondly, a motion seeking an order for security for costs pursuant to section 52 of the Companies Act 2014.
It is now accepted that the second named plaintiff is a proper party to the proceedings, and the only issue outstanding in respect of the first motion is costs. The second motion has been pursued. One of the principal issues to be determined on that motion is whether the presence of a natural person as a co-plaintiff in the proceedings represents a special circumstance such as to justify the refusal of an order for security for costs.
The third motion has been brought by the plaintiffs, and seeks to compel further and better replies to particulars.
The plaintiffs' claim can be summarised as follows. (It should be emphasised that what follows is merely an overview of the claim as advanced by the plaintiffs: this court has, obviously, made no findings of fact in relation to any of these issues at this interlocutory stage of the proceedings).
A loan of €300,000 had been advanced by Response Engineering Ltd to Commissioning Services Ltd in the latter part of 2007. Thereafter, in or about June 2012, Response Engineering Ltd agreed to sell and transfer the loan to Bionomica Ltd. It is pleaded that the transaction was for “consideration received and acknowledged”.
It had been intended to give effect to the transfer of the loan by way of an instrument described as a “deed of transfer and novation”. This instrument appears to have been executed on 13 June 2012. For reasons which are not fully explained, however, the original borrower is incorrectly described in the instrument as “CSL Commissioning Services Ltd” rather than “Commissioning Services Ltd”. Much of the dispute between the parties centres on what the legal consequences of this seemingly botched transaction were.
The plaintiffs' position is that the instrument was not effective to transfer the legal title of the loan to Bionomica Ltd, but it is said that that company nevertheless obtained beneficial ownership of the loan in consequence of the consideration received and acknowledged by Response Engineering Ltd.
(The position adopted by Response Engineering Ltd in its defence to the proceedings is that insofar as any failure to accurately reduce that agreement to writing has had the effect of preventing Bionomica Ltd from managing and pursuing the recovery of the loan, which is not admitted, that failure was caused by Mr Maurice Daly, who was then a director of Commissioning Services Ltd. Mr Daly has been joined as a third party to the proceedings).
The plaintiffs say that the beneficial ownership of the loan was subsequently transferred from Bionomica Ltd to Mrs Gretta Daly as part of the solvent winding up of that company. (Mrs Daly is the wife of the third party, Mr Maurice Daly). A deed of assignment dated 22 February 2018 has been exhibited by Mrs Daly. It is explained that Mrs Daly had been the sole shareholder of the company, and that the purpose of the solvent winding up was that all of Bionomica Ltd's surplus assets, including the loan and all related claims, were to be distributed to Mrs Daly as the sole shareholder.
Much of the detail of the plaintiffs' claim, as summarised above, is not to be found in the statement of claim delivered in the proceedings on 27 February 2018. Rather, it has been set out, for the first time, in an affidavit dated 28 May 2020 filed by Mrs Daly shortly before the hearing of these pre-trial applications. Counsel on behalf of...
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