Fanplex Ltd v Bandan Properties Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Brian O'Moore |
| Judgment Date | 07 November 2022 |
| Neutral Citation | [2022] IEHC 739 |
| Court | High Court |
| Docket Number | Record No. 2021/3551 P |
[2022] IEHC 739
Record No. 2021/3551 P
THE HIGH COURT
Security for costs – Bona fide defence – Special circumstances – Defendant seeking security for costs against the plaintiff – Whether the defendant had a bona fide defence to the claim
Facts: The defendant, Bandan Properties Ltd (Bandan), brought a motion seeking security for costs against the plaintiff, Fanplex Ltd (Fanplex). The parties had entered into a Joint Venture Development Agreement on the 28th of May 2018. It was for Bandan to secure the significant loan required to buy the site which the parties intended to develop, and to fund the necessary planning application. Bandan's position was that it served a valid notice under Clause 18.1, that the agreement thereby came to an end, and that Clause 19 extinguished any liability to make further payments to Fanplex. This represented a coherent defence to Fanplex's claim. Counsel for Fanplex disputed that this amounted to a bona fide defence for three reasons. Firstly, it was submitted that the bona fide defence claimed by Bandan amounted to mere assertion. Secondly, it was submitted on behalf of Fanplex that, in terminating the agreement pursuant to Clause 18, Bandan must act reasonably. Thirdly, counsel for Fanplex argued that a bona fide defence was not established because no documents were exhibited by the Bandan deponents setting out the attempts to obtain finance or the nature of the facilities offered. Fanplex relied upon a number of arguments to the effect that Bandan’s wrongdoing was the reason why it was not in a position to meet any award of costs (at least at anything like the level suggested by Bandan). It also said that the open offer contained in a letter of the 10th of August 2020 gave rise to a special circumstance which justified the refusal of the motion.
Held by the High Court (O’Moore J) that Bandan had given detailed and plausible evidence that described a defence to Fanplex’s claim. O’Moore J held that the dispute about whether or not the acceptability of the finance to Bandan must be assessed objectively gave rise to a question which Bandan could certainly credibly argue. O’Moore J held that a sufficiently full description of the facts can establish that a bona fide defence exists, even if documents are not deployed to support it. O’Moore J therefore found that Bandan had established a bona fide defence to the extent that it was required to do so. Having considered each of the alleged special circumstances, O’Moore J decided that neither individually nor collectively did they amount to reason to refuse the application.
O’Moore J decided to direct Fanplex to provide security in respect of Bandan’s costs in the litigation. In order to avoid Bandan being left with an order for costs which was inefficacious, either in whole or in part, O’Moore J held that the security to be provided was to be for the full amount of €670,269.34. Had there been submissions made, or evidence provided, to the effect that Fanplex could provide security in a lesser sum O’Moore J would have considered fixing the security in such a sum (provided it gave reasonable protection to Bandan) in order to accommodate Fanplex’s right of access to the courts; however, no such representation was made notwithstanding an invitation to that effect by counsel for Bandan in opening the motion.
Application granted.
JUDGMENT of Mr. Justice Brian O'Moore delivered the 7 th day of November 2022
This is my judgment on the motion brought by the Defendant (“Bandan”) seeking security for costs against the Plaintiff (“Fanplex”). It is arranged in the following sections;
A. Does Bandan have a Bona Fide Defence to the claim?
B. Has Fanplex established Special Circumstances to justify refusal of the motion?
C. Outstanding Issues.
It follows from the structure of the judgment that there are certain matters which are not in dispute. For example, it is not denied that Fanplex is impecunious and unable to pay costs awarded in Bandan's favour if these are in the amount put forward by Bandan or any similar amount. There is also a consensus about the principles to be applied in deciding the motion. As the application is one made under section 52 of the Companies Act 2014, this is not surprising. The onus of establishing the existence of a bona fide defence is on Bandan. If this is done, and if impecuniosity on the part of Fanplex is established, the onus shifts to it to show that there are special circumstances which “justify the Court not ordering security” (paragraph 2.9 of the Fanplex written submissions). It is agreed that mere assertion that there is a defence is not sufficient. It is also agreed that, in seeking to establish “special circumstances” the requirements set out by Clarke J in Connaughton Road Construction Limited v Laing O'Rourke Ireland Limited [2009] IEHC must be met by Fanplex. Finally, it is not disputed that the potential stifling of these proceedings, together with the associated right of access to the Courts, must be taken into account in determining where the least risk of injustice lies.
The parties entered into a Joint Venture Development Agreement on the 28 th of May 2018. Much stress is laid by Fanplex on the recitals to that agreement, which read;
“BACKGROUND
(A) The parties have come together with the intention of acquiring the Site, obtaining Planning Permission and developing out the Site by building a minimum of 80 housing units, in order to share in the profit.
(B) Bandan will make an offer to acquire the Site for an amount up to but not (without the agreement of both parties) to exceed 2,700,000 euro.
(C) Bandan will secure a loan of up to 3,000,000 euro to fund the acquisition of the Site and the planning application.
(D) The parties may decide to sell the Site following the receipt of Planning Permission or proceed to develop the Site.
(E) In the event that the parties agree to develop the Site, Bandan has agreed to appoint the Developer to procure the carrying out of the Development upon the terms set out in this Agreement.”
Given the emphasis placed on this wording by Fanplex, it must be remembered that these are merely recitals which, on their face, set out the background to the contract. They are subject to the detailed operative terms of the agreement, which follow them.
As is clear from the recitals themselves, however, it was for Bandan to secure the significant loan required to buy the site which the parties intended to develop, and to fund the necessary planning application. Perhaps reflective of this obligation on Bandan, that company was entitled — under Clause 18 .1 (c) to terminate the agreement with immediate effect by giving notice that it could not secure financing for the development “on terms acceptable to Bandan.” In October 2020, Bandan purported to exercise this right and so notified Fanplex. At the same time, Bandan stated that it would pay to Fanplex a 35% share of profit (after recovering all costs) from the sale of the site in Bettystown which the parties had intended to develop. Counsel for Fanplex described this offer as both an acceptance that Fanplex remains entitled to 35% of the net profits (notwithstanding the service of the notice of termination) and as “extraordinary and dishonest…In fact, this stated position appears to be more a tactical attempt by Bandan to stave off troublesome litigation rather than a concession as to the meaning of the contract. It was also carefully calculated, as is examined later in this judgment when the assertion of special circumstances is considered.
In the event that a valid notice is served under Clause 18.1, Clause 19 (b) provides;
“Bandan shall not be liable to make any further payments to the Developer under the terms of this Agreement except Bandan shall within 10 Working Days pay to the Developer the costs of all construction works completed and carried out and provided pursuant to this Agreement as certified by the Architect.”
As it happens, no construction works were carried out on the site
Bandan's position, therefore, is that it served a valid notice under Clause 18.1, that the agreement thereby comes to an end, and that Clause 19 extinguishes any liability to make further payments to Fanplex. This represents a coherent defence to Fanplex's claim. Counsel for Fanplex disputes that this amounts to a bona fide defence for three reasons.
Firstly, it is submitted that the bona fide defence claimed by Bandan amounts to mere assertion. That is not so. In his final affidavit, Paul Doody (one of Bandan's deponents) sets out in detail his evidence as to the efforts to obtain financing, the engagement with a number of different potential financiers, the terms available (when they were available) and the reasons why any available terms were not acceptable to Bandan. While Mr. Meade (Fanplex's deponent) disputes much of Mr. Doody's evidence, it is not appropriate at this stage to determine on the differences between the witnesses. It is enough that Bandan has given detailed and plausible evidence that describes a defence to Fanplex's claim.
Secondly, it is submitted on behalf of Fanplex that, in terminating the agreement pursuant to Clause 18, Bandan must act reasonably. In that regard, reliance is placed on Clause 3.2 which reads;
“All decisions as to borrowing and creation of security will be made by Bandan (acting reasonably) in accordance with the terms of this Agreement.”
Even if this means that Bandan must act reasonably in deciding whether or not an offer of finance is acceptable to it, which is by no means a sure proposition given the terms of the agreement, the evidence of Mr. Doody meets this standard (albeit on a prima facie level). Even if it did not, I would have concluded that the dispute about...
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