Fides Capital Ltd v Alchemy Products Ltd

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 05 May 2017
• Neutral Citation: [2017] IEHC 266
• Docket Number: 2016 No. 10682P
• Court: High Court
• Date: 05 May 2017

[2017] IEHC 266

THE HIGH COURT

Barrett J.

2016 No. 10682P

Between:

FIDES CAPITAL LIMITED

Plaintiff

– and –

ALCHEMY PROJECTS LIMITED

Defendant

Company – S. 52 of the Companies Act 2014 – Security for costs – Establishment of prima facie defence – Offer of personal guarantee

Facts: The defendant sought an order for security for the defendant's costs against the plaintiff. The dispute between the parties related to the fulfilment of contractual obligations. The plaintiff contended that it was retained by the defendant for providing professional services and thus, it was entitled for the remuneration for the work done under the relevant agreement. The defendant denied the existence of the relevant agreement and argued that the relevant agreement was contingent on the completion of the proposed transaction, which did not proceed.

Mr. Justice Max Barrett directed the plaintiff to provide security for the defendant's costs. The Court observed that the amount of security would act as an indemnity against all the costs. The Court held that the defendant had established prima facie defence, which was the first requirement to decide whether to grant such an order. The Court noted that the second requirement rested upon the plaintiff to prove that it was able to meet the defendant's costs if the plaintiff was unsuccessful in the underlying litigation. The Court held that the proposed personal guarantee offered by the plaintiff was not feasible as it ran against the basic principle of a security for costs' application and put the defendant at risk of initiating separate proceedings for the recovery of money if the guarantor refused to pay the money on demand. The Court noted that the quantum of security should neither be meagre nor luxurious but sufficient enough to be able to meet the expenses of the other party.

JUDGMENT of Mr Justice Max Barrett delivered on 5th May, 2017.

I. Overview

1 This is an application for security for costs brought in the context of a case for, inter alia, specific performance or damages, pursuant to an alleged breach of contract.

2 The plaintiff and defendant are Irish-registered companies. According to its statement of claim, the plaintiff was retained by the defendant to provide professional services to Renewable Energy Dynamic Holdings Limited (“RedH”) for the benefit of RedH's shareholders, including the defendant. An argument has arisen between the parties over the remuneration owing to the plaintiff, with the plaintiff relying in particular on cl. 3.3 of a “Financial Advisory/Executive Services Agreement” dated 12th August, 2010, and signed by two individuals ostensibly acting for the plaintiff and defendant respectively. Under cl. 3.3 of that purported agreement (it is denied by the defendant that the agreement was entered into on the terms alleged or at all), remuneration falls to be calculated as a percentage of funds raised/consideration arising in the course of an anticipated funding processes. If the plaintiff is successful at trial, this arrangement has the potential to provide it with a lucrative return on such work as it claims to have done for the defendant.

3 The specific reliefs sought in the notice of motion are: (1) an order pursuant to s.52 of the Companies Act 2014 directing the plaintiff to provide security for the defendant's costs; (2) further, or in the alternative, an order pursuant to O. 29, r.1 of the Rules of the Superior Courts 1986, as amended, that the plaintiff furnish security for the defendant's costs; (3) an order measuring the security to be given by the plaintiff for the defendant's costs and the form thereof; (4) an order staying the within proceedings until such time as security for costs is provided by the plaintiff; and (5) certain ancillary reliefs.

4 By way of guiding case-law, the court proposes to rely upon Connaughton Road Construction Limited v. Laing O'Rourke Ireland Limited [2009] IEHC 7, as well as such other case-law as is referred to below. Those cases, applied in the context of the within proceedings, require the court firstly to determine whether (i) the defendant has established a prima facie defence, and (ii) the plaintiff is so financially challenged that it will not be able to pay the defendant's costs, if the defendant is successful.

II. Prima Facie Defence?

5 As to whether the defendant has established a prima facie defence, the defendant maintains, inter alia, that what it claims is but a purported agreement of 12th August, 2010, (a) was entirely contingent on the completion of a then proposed purchase of RedH by Enervest Capital Limited, and that (b) as that transaction did not proceed, cl. 3.3 is of no effect. There was what has been described in an e-mail of 6th July last written by Mr McCann (a director and, it seems, the prime mover within the plaintiff) an arrangement referred to by him as the ‘ roll-in’ arrangement which,...