IBB Internet Services Ltd and Others v Motorola Ltd

• Jurisdiction: Ireland
• Court: Supreme Court
• Judge: Mr. Justice Clarke
• Judgment Date: 27 November 2013
• Neutral Citation: [2013] IESC 53
• Date: 27 November 2013

IBB Internet Services Ltd & Ors v Motorola Ltd

Between/

IBB Internet Services Limited, Irish Broadband Internet Services Limited (both trading as Imagine Networks) and Imagine Communications Group Limited

Plaintiffs/Respondents

and

Motorola Limited

Defendants/Appellants

[2013] IESC 53

McKechnie J.

Clarke J.

MacMenamin J.

[Appeal No: 63/2013]

THE SUPREME COURT

PRACTICE AND PROCEDURE

Security for costs

Appeal of refusal of application for security for costs - Claim for damages for breach of contract - Establishment of prima facie defence to claim and plaintiff's inability to pay costs of unsuccessful proceedings - Special circumstances - âÇÿReason to believe' - Credible testimony - Examination of evidence - Absence of cross-examination - Balance of probabilities - Weight attaching to evidence - Impecuniosity - Assessment of risk - Future uncertain or hypothetical events - Company accounts - Standard of proof - Reference in note in accounts to inability to pay liabilities - Role of cross-examination in interlocutory matters - Usefulness of earnings before interest, taxes, depreciation and amortisation - Whether âÇÿreason to believe' differed from matter being established on âÇÿbalance of probabilities' - Whether reason to believe plaintiff would be unable to pay costs if it lost - IBB Internet Services Ltd v Motorola Ltd [2011] IEHC 253, (Unrep, Kelly J, 6/7/2011); IBB Internet Services Ltd v Motorola Ltd [2011] IEHC 504, (Unrep, Clarke J, 9/11/2011); IBB Internet Services Ltd v Motorola Ltd [2012] IEHC 567, (Unrep, McGovern, 2/10/2012); Usk & District Residents Association Ltd v EPA [2006] IESC 1, [2007] 4 IR 157; Inter finance Group Limited v KPMG Peat Marwick (Unrep, Morris J, 29/6/1998); IIB Internet Services Ltd v Motorola Ltd [2013] IEHC 48, (Unrep, McGovern J, 7/2/2013); Jirehouse Capital v Beller [2008] EWCA Civ 908, [2009] 1 WLR 751; Phillips v Eversheds [2002] EWCA Civ 486, (Unrep, COA, 18/4/2002); Philip v Ryan [2004] 4 IR 241; Boliden Tara Mines v Cosgrove [2010] IESC 62, (Unrep, SC, 21/12/2010) and In re McInerney Homes Limited (No2) [2011] IEHC 4, (Unrep, Clarke J, 10/1/2011) considered - Companies Act 1963 (No 33), s 390 - Appeal dismissed (63/2013 - SC - 27/11/2013) [2013] IESC 53

IBB Internet Services Limited v Motorola Limited

Facts: The proceedings involved a claim for damages for breach of contracts arising out of agreements to provide broadband. The Court considered an application for security for costs and whether the High Court was correct in concluding that Motorola had failed to establish an inability to pay costs. The High Court had found inter alia that it was not satisfied that the defendants had met the first test required of s. 390 Companies Act 1963, namely that the plaintiff was unable to pay the costs of the defendant if successful in its defence. Motorola contended on appeal that the trial judge had erred in outlining the test so as to establish inability to pay costs, the treatment of the group accounts and the effect of the valuation of spectrum assets. The Court considered the nature of credible testimony and what was required to be proven. No contrary evidence as to the value of the broadband spectrum was tendered on behalf of Motorola.

Held by the Supreme Court per Clarke J. (McKechnie, MacMenamin JJ. concurring), that the trial judge was correct to conclude that it had not been established that Imagine would be unable to pay costs if it lost its case. There was nothing in the new accounts which would have lead to a different conclusion being reached than on the basis of the accounts before the High Court. A significant portion of the trading losses which Motorola had drawn attention to were of the non-cash variety.

IBB INTERNET SERVICES LTD & ORS v MOTOROLA LTD 2011 2 ILRM 321 2011/26/7043 2011 IEHC 253

IBB INTERNET SERVICES LTD & ORS v MOTOROLA LTD UNREP CLARKE 9.11.2011 2011/26/7057 2011 IEHC 504

IBB INTERNET SERVICES LTD & ORS v MOTOROLA LTD UNREP MCGOVERN 2.10.2012 2012/18/5059 2012 IEHC 567

COMPANIES ACT 1963 S390

USK DISTRICT RESIDENTS ASSOCIATION LTD v ENVIRONMENTAL PROTECTION AGENCY 2006 1 ILRM 363 2006/56/12022 2006 IESC 1

INTER FINANCE GROUP LTD v KPMG PEAT MARWICK T/A KPMG MANAGAMENT CONSULTING UNREP HIGH COURT MORRIS 29.6.1998 2000/11/4104

IIB INTERNET SERVICES LTD & ORS v MOTOROLA LTD UNREP MCGOVERN 7.2.2013 2013 IEHC 48

JIREHOUSE CAPITAL & ANOR v BELLER & ANOR 2009 1 WLR 751 2009 BUS LR 404 2008 CP REP 44 2008 BCC 636 2008 EWCA CIV 908

CIVIL PROCEDURE RULES SI 3132/1998 RULE 25(13)(2)(C) (UK)

PHILLIPS & HARLAND v MESSRS EVERSHEDS (A FIRM) & ORS UNREP BUXTON 18.3.2002 2002 EWCA CIV 486

PHILP v RYAN & ORS 2004 4 IR 241 2004/42/9677 2004 IESC 105

BOLIDEN TARA MINES LTD v COSGROVE & ORS UNREP SUPREME 21.12.2010 2010/4/935 2010 IESC 62

MCINERNEY HOMES LTD & ORS, IN RE (NO 2) UNREP CLARKE 10.1.2011 2011/32/8999 2011 IEHC 4

1 Judgment of Mr. Justice Clarke delivered the 27th November, 2013.

2 JUDGMENT DELIVERED BY CLARKE J. [nem diss]

1. Introduction

3 2 1.1 This Court is yet again called on to deal with questions arising out of an application for security for costs. However, the principal issue which arises on this appeal is less common than the questions which more typically arise when either the High Court or this Court is asked to deal with the question of security. These proceedings generally involve a very significant claim for damages for breach of contract arising out of agreements entered into by the defendants/appellants ("Motorola") to provide facilities connected with the broadband business of the plaintiffs/respondents (collectively "Imagine"). Imagine asserts that Motorola was in significant default in providing the facilities contracted for such that, it is said, losses well in excess of €100 million were occasioned. On that basis, Imagine sues for damages for breach of contract.

4 3 1.2 The proceedings before the High Court have had a difficult procedural history and are already the subject of a number of written judgments. The first such written judgment (IBB Internet Services Ltd & Ors -v- Imagine Communications Group Ltd [2011] IEHC 253), was delivered by Kelly J. on the 6 ^th July, 2011. That judgment addressed issues arising from Imagine's first amended Statement of Claim which had been amended following a threatened motion to strike out the original Statement of Claim for the shortcomings allegedly contained therein. However, this amended Statement of Claim gave rise to criticisms from Motorola to the effect that it was still not possible to properly understand the case being made against it. This contention was accepted by Kelly J. He stated that, "it is not possible to ascertain with the degree of certainty that is required the precise case which the plaintiffs wish to makein respect of this claim for a large sum of damages" and granted leave for the delivery of a "re-amended Statement of Claim".

5 4 1.3 A third attempt at a Statement of Claim was delivered on the 29 ^th July, 2011. Motorola contended that this version was not in accordance with the terms of the order made by Kelly J. on the 6 July, 2011, that it contained amendments which were not authorised by that order and that it was such that it would delay or prejudice a fair trial or the action. As a result of these complaints, Motorola brought a motion seeking to strike out this "re-amended Statement of Claim". Having examined this version against the order of Kelly J., I concluded, at para. 6.1 of my judgment on that application, that "The re-amended statement of claim has failed to meet the standard imposed by that order and it seems to me that I am left with no option but to make the order sought on behalf of Motorola which is to strike out the statement of claim." I then went on to identify a number of areas which needed rectification in any further Statement of Claim to be delivered by Imagine (see IBB Internet Services Ltd & Ors -v- Motorola Ltd [2011] IEHC 504, delivered on the 9 ^th November, 2011).

6 5 1.4 The issue of the compliance of the then fourth Statement of Claim, delivered on the 30 ^th November, 2011, with my order of the 9 ^th November, 2011 , was the subject of a judgment by McGovern J. on the 2 ^nd October, 2012, (IBB Internet Services Ltd & Ors -v- Motorola Ltd [2012] IEHC 567). On this occasion, Motorola claimed that Imagine had failed to properly address difficulties previously identified relating to the loss claimed, and separately sought an order dismissing the proceedings for being an abuse of process or for being bound to fail. Despite describing the fourth Statement of Claim as evidence of "a scatter gun approach by the plaintiffs in connection with their claim", McGovern J. held that it did meet the requirements as set out in my earlier order. McGovera J. also refused to strike out the claim as being bound to fail holding that the issues raised were properly to be tested at a full hearing.

7 6 1.5 However, the application which gives rise to this appeal was an application brought by Motorola seeking an order for security for costs under s. 390 of the Companies Act, 1963 (as amended) ("s. 390"). While it will be necessary to turn to the jurisprudence in respect of such applications in early course, it is well established and not contested on this appeal that an initial onus rests on a party seeking security for costs under s. 390 to establish a prima facie defence to the claim and to establish an inability on the part of the relevant plaintiff to pay costs in the event that the proceedings are unsuccessful and costs awarded. Thereafter, of course, the question of special circumstances arises. There is no longer any issue but that Motorola has established a prima facie defence. That leg of the test is accepted, therefore, as having been met....