KC Capital Property Group Ltd v Keegan Quarries Ltd
| Jurisdiction | Ireland |
| Judge | Mr Justice Max Barrett |
| Judgment Date | 26 April 2024 |
| Neutral Citation | [2024] IEHC 257 |
| Court | High Court |
| Docket Number | [2023 No. 3154 P] |
[2024] IEHC 257
[2023 No. 3154 P]
THE HIGH COURT
In this judgment I explain why I will accede to an application for security for costs.
JUDGMENT of Mr Justice Max Barrett delivered on 26 th April 2024 .
. By notice of motion of 20 th November 2023, Keegan Quarries Ltd (KQL) has come seeking: (1) an order pursuant to O.29, r.1 RSC and/or s.52 of the Companies Act 2014 to furnish security for the costs to be incurred by KQL in defending the within proceedings; (ii) an order fixing the amount of security for costs to be incurred by KQL in defending the within proceedings together with an order directing the manner in which that security shall be given; (iii) an order pursuant to.s.52 of the Act of 2014 placing a stay upon the within proceedings as against KQL until any of the directions referred to at (ii) have been complied with in full, (iv) all necessary accounts and inquiries to determine the appropriate level of security for costs to be incurred by KQL in defending the within proceedings, (v) such further order/s as seem appropriate.
. KQL is in the business of, among other matters, quarrying and the supply of sand, gravel, ready-mix concrete and pre-cast concrete. KC Capital (KC) is the owner of a site at 45–47 Cuffe Street, Dublin 2, on which it intends to erect a nine-storey commercial office building to be known as the Greenside Building. It has engaged a design team that includes Mahoney Architecture (the Architect) and GK Consulting Engineers (the Engineer).
. Initially KC contracted with Grant Fit Out Ltd as its contractor to construct the Greenside Building. Grant Fit Out contracted in turn with KQL to supply ready-mix concrete as a part of the construction of the Greenside. There is, it seems, no contractual relationship between KC and KQL. Instead, KC claims that KQL owed it a duty of care in the supply of ready-made concrete.
. KC claims that the Engineer initially specified the compressive strength of the concrete to be used in the construction of the Greenside as C35/45N for structural concrete and C40/50N for structural columns. KC claims that KQL issued a design mix (T/B 1034) to the Engineer for the C35/45N concrete and the design mix (T/B 1034) was approved by the Engineer. KC claims that in May 2022 the Engineer increased the specified compressive strength for concrete to be used in the basement walls of the Greenside to C40/50N. In this regard, KC claims that KQL issued a new design mix (T/B 1036) to the Engineer and which was approved by the Engineer.
. In June 2022, KC claims that the concrete for the basement walls, ground floor columns and ground floor slab was delivered by KQL and poured. KC claims that the concrete delivered by KQL did not achieve the requisite compressive strengths as specified by the Engineer for the ground floor slab (C35/45N) or for the basement walls and columns (C40/50N). KC therefore claims that the concrete was understrength and, as a result, was not fit for purpose and was defective.
. In October 2022, the Architect issued a formal notice to Grant Fit Out requiring it to remove the allegedly under-strength concrete, and issued a further formal notice requiring Grant Fit-Out to provide an improved programme for the works. KC claims that Grant Fit Out did not comply with these requirements and, as a consequence, the Architect issued a notice of default and KC terminated its contract with Grant Fit Out. KQL engaged with Grant Fit Out in September 2022 in respect of concrete cube test results and so was generally aware of the issue. However, it appears that KC did not notify KQL of any asserted claims against KQL until March 2023.
. In April 2023, KC entered into a contractual relationship with a new contractor, Townlink Construction Ltd to carry out the works and Townlink took occupation of the Site thereafter. Upon the issuing of the within proceedings Townlink was in the process of demolishing and removing the subject-matter of the within proceedings.
. As a result of the foregoing, KC claims to have suffered loss and damage by reason of the delay in the completion of the Greenside and additional costs in so doing. KC claims that its total loss and damage is estimated at in excess of €13m. It has also reserved its position as to any loss in value in the Greenside.
. KQL has delivered a full defence to KC's claim.
. As part of this application for security for costs it is necessary for KQL to demonstrate that it has a prima facie defence to KC's claim. KQL maintains that it has not only a defence but a strong defence. In summary, the defence of KQL is grounded on the following (obviously I make no prediction and have no view as to who will succeed at the substantive trial of these proceedings):
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(1) KQL has no relationship in law with KC, the Architect or the Engineer. KQL engaged only with Grant Fit Out. Accordingly KQL was not party to any agreement with the Engineer to supply concrete only in accordance with specifications specified by the Engineer.
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(2) All concrete supplied by KQL to the Site was in accordance with that which was ordered by Grant Fit Out. At the request of Grant Fit Out, KQL prepared and submitted to Grant Fit Out three different design mixes (T/B 1034, T/B 1035, and T/B 1036). However, Grant Fit Out did not always order concrete in accordance with those submitted and approved design mixes and, it now appears, Grant Fit Out did not order concrete from KQL in accordance with the specifications which the Engineer instructed Grant Fit Out to follow. As the supplier of the concrete, KQL maintains that it is not the role or function of KQL to advise on the adequacy of concrete being ordered by reference to its intended purpose. That, it claims, is a matter entirely for the person ordering the concrete.
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(3) It was Grant Fit Out that specified the mix, including compressive strength, for each batch of concrete ordered. Each batch of concrete dispatched by KQL to the Site was in accordance with the mix, including the compressive strength, as ordered by Grant Fit Out. KQL tested sample batches of concrete dispatched from its plant for supply to Grant Fit Out. Those tests were in accordance with industry standards and demonstrate that the concrete produced by KQL and dispatched to Grant Fit Out was in accordance with industry standards and was in accordance with that which was ordered by Grant Fit Out, including the requisite compressive strength. KQL takes issue with the procedures and testing methodology deployed in connection with the cube test results.
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(4) The concrete supplied by KQL met the durability requirements for each design mix that was actually ordered for delivery by Grant Fit Out.
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(5) Any diminution in quality or strength of the concrete supplied is as a consequence of acts or omissions of others after the delivery of the concrete to the Site and for which KQL is not responsible.
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(6) The real cause for the requirement to demolish the basement and ground floor slab is by reason of a defective design and /or workmanship in the construction of the basement and ground floor slab and for which KQL bears no responsibility.
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(7) Further it appears to KQL that the building is being rebuilt in a manner different to the original design.
. I should perhaps note in passing that since the commencement of these proceedings KQL has actively sought inspection of the Site and the concrete the subject-matter of the within proceedings. KQL maintains that KC has frustrated and impeded KQL and its expert witnesses in inspecting the concrete the subject-matter of these proceedings. This issue has perhaps some relevance in that while KQL considers itself to have demonstrated a prima facie defence to the claim (it has), there is still further evidence that KQL wishes to procure that, it maintains, will demonstrate further the strength of its defence to these proceedings.
. KQL's cost accountants estimate that its cost of defending these proceedings will be €771,410 (exclusive of VAT).
. A defendant is entitled to seek security for costs against a corporate plaintiff pursuant to s.52 of the Companies Act 2014. In deciding whether or not to grant security for costs, the applicable caselaw suggests a three-part test to arise. Thus the onus rests on a defendant to establish (i) that it has a prima facie defence to the plaintiff's clam, and (ii) that there is reason to believe that the plaintiff will not be able to pay the defendant's costs if so ordered. Then (iii) if the defendant succeeds in satisfying requirements (i) and (ii), security for costs may be ordered unless the plaintiff can establish special circumstances to the contrary. The Supreme Court recently endorsed this three-part test in Quinn Insurance Ltd v. PWC [2021] IESC 15 and Protégé International Group (Cyprus) Ltd v. Irish Distillers Ltd [2021] IESC 16.
. In bringing this three-part test to bear, I am tasked with finding the least risk of doing an injustice between the parties in a context which, if I might respectfully observe, was well captured by O'Donnell J in Quinn, at §12:
“ It adds insult to injury…if the defendant who…should not have been sued is not able to recover the costs of establishing that the plaintiff's claim was without foundation. A defendant considering the risk of litigation must factor into its calculations the fact that it may have to expend considerable sums in defending a claim which will not be recoverable. This can significantly alter the calculation that a defendant must make and increase the incentive to compromise a claim event if it is considered to be one without merit. A defendant forced into such a compromise is entitled to feel aggrieved. Sometimes, this may be an unavoidable consequence…. However, it reaches a different level...
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