Mike O'Dwyer Motors Ltd v Mazda Motor Logistics Europe NV

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 21 December 2012
• Neutral Citation: [2012] IEHC 560
• Court: High Court
• Date: 21 December 2012

[2012] IEHC 560

THE HIGH COURT

[No. 784P/2011]

Mike O'Dwyer Motors Ltd v Mazda Motors Logistics Europe NV (t/a Mazda Motor Irl)

BETWEEN

MIKE O'DWYER MOTORS LIMITED

PLAINTIFF

AND

MAZDA MOTOR LOGISTICS EUROPE NV (TRADING AS "MAZDA MOTOR IRELAND")

DEFENDANT

RSC O.29

COMPANIES ACT 1963 S390

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 3ED 2012 PARA 13.56

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 3ED 2012 PARA 13.58

COMPANIES ACT 1963 S316

TRIBUNE NEWSPAPERS (IN RECEIVERSHIP) v ASSOCIATED NEWSPAPERS IRL UNREP FINLAY GEOGHEGAN 25.3.2011 (EX TEMPORE)

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOR COURTS 3ED 2012 PARA 13.65

LISMORE HOMES LTD (IN LIQUIDATION) v BANK OF IRELAND FINANCE LTD & ORS 1999 1 IR 501 1998/23/9074

PORZELACK KG v PORZELACK (UK) LTD 1987 1 WLR 420 1987 1 AER 1074 1987 2 CMLR 333 1987 ECC 407 1987 FSR 353

EEC REG 1400/2002

MOORVIEW DEVELOPMENTS LTD v CUNNINGHAM UNREP CLARKE 5.2.2010 2010/37/9304 2010 IEHC 30

PRACTICE & PROCEDURE

Security for costs

Ability to pay costs - Prima facie defence - Onus of proof - Discretion -Whether court should address merits of case or strength of case of on interlocutory application - Whether existence of admissible evidence objectively demonstrated which if accepted would provide defence to claim - Whether threshold met by mere denial of claim - Special circumstances - Delay in bringing application - Costs incurred before bringing of application - Whether defendant knew of financial frailty but delayed bringing application -Lismore Homes Ltd (In Receivership) v Bank of Ireland Finance Ltd [1999] 1 IR 501, Moorview Developments Ltd v Cunningham [2010] IEHC 30, Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420 and Tribune Newspapers v Associated Newspapers Ireland, (Unrep, Finlay Geoghegan J, 25/3/2011), considered - Rules of the Superior Courts 1986 (SI 15/1986), O 90 - Companies Act 1963 (No 33), ss 316 and 390 - Regulation (EC) No 1400/2002 of the Council of 31/7/2002 on the application of art 8(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector - Application refused (2011/784P - Laffoy J - 21/12/2012) [2012] IEHC 560

Mike O'Dwyer Motors Ltd v Mazda Motor Logistics Europe NV (Trading As "Mazda Motor Ireland")

Facts: This application was brought by the defendant against the plaintiff for security of costs pursuant to s. 390 of the Companies Act 1963 in preparation for the hearing to be held on the 16th January 2013. It was claimed that on the 1st July 2006, the plaintiff had entered into a Mazda Dealer Agreement and a Mazda Authorised Repairer Agreement with the defendant. The former agreement was terminated on the 30th March 2010 by the defendant and the issue in the case was whether the latter agreement cancelled at the same time. It was the plaintiff's case that the Repairer Agreement was not cancelled in accordance with its terms as no written notice was given and by refusing to implement the agreement, loss and damage was incurred.

The defendant claimed that the Repairer's Agreement had been terminated at the same time as the Dealer Agreement. Alternatively, it was claimed that it was cancelled as a result of breach of the agreement by the plaintiff, mutual agreement to terminate or as a result of its right to repudiate. It was contended that the defendant's costs could amount to between €150,000 to €200,000 plus VAT though no accountant's assessment was put before the court in support of the application. It was further submitted that the plaintiff company was currently in receivership and defending summary proceedings brought by ACC Bank Plc for the sum of €1,925,463.25 and proceedings as to the validity of the appointment of the receiver pursuant to s. 316 of the Companies Act 1963. It was conceded by the plaintiff that their ability to pay the defendant's costs would be dependant on the outcome of the other proceedings.

Held by Laffoy J that it was for the defendant to demonstrate that not only did he have a prima facie defence to the plaintiff's action, but that the plaintiff would not be able to the pay costs if the defendant was successful. Even if the defendant was able to do this, the court retained discretion to refuse the application if the plaintiff was able to show special circumstances justifying to do so.

In relation to the plaintiff's ability to pay costs, it was held that the defendant had successfully established the plaintiff's inability to guarantee payment of costs in light of its concession that it would depend very much on the outcome of the other proceedings it was engaged in.

In relation to the defendant's defence, it was held that it was not for the court to determine the strengths and merits on an interlocutory application such as this. However, it was necessary that the defendant demonstrate the existence of admissible evidence which in tandem with legal argument, would provide a prima facie defence. Concerning the plaintiff contention that the Repairer's Agreement didn't cancel along with the Dealer's Agreement, it was held that the defendant had simply claimed the plaintiff's assertion was incorrect without demonstrating evidentially why. The defendant had therefore failed to show a prima facie defence at this stage and so the application was rejected. It was finally held that even if the defendant had been successful, the fact the plaintiff had incurred considerable costs up to this point and in light of the lateness of the defendant's application, special circumstances had arisen whereby the application would likely have been refused anyway.

Application for security of costs refused.

1 Judgment of Ms. Justice Laffoy delivered on 21st day of December, 2012.

The application

2 1. On this application, which was initiated as recently as 29 ^th November, 2012, the defendant seeks an order for security for costs against the plaintiff. While the defendant has also invoked Order 29 of the Rules of the Superior Courts, in reality, the application was moved under s. 390 of the Companies Act 1963, which provides as follows:

"Where a limited company is plaintiff in any action … any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."

3 The application was heard on 18 ^th December, 2012. The urgency of the matter is that these proceedings have been listed for hearing on 16 ^th January, 2013 and, by agreement of the parties which was given effect to by an order of the Court made on 26 ^th January, 2012, other proceedings entitled Mazda Motor Logistics Europe NV (trading as Mazda Motor Ireland) and Mazda Motor Corporation v. Mike O'Dwyer Motors Ltd. (Record No. 2011/ 10673P) (the related proceedings) have been linked to, and listed for hearing together with, these proceedings. Both matters are listed for hearing for three days.

4 5. Four affidavits have been filed in support of, and in response to, the application, namely:

5 (a) two affidavits of Steve Jellis, the Director of Market Support of the defendant, one being the grounding affidavit, which was sworn on 4 ^th December, 2012, and the other being a second affidavit, which was sworn on 12 ^th December, 2012; and

6 (b) two affidavits sworn by Mike O'Dwyer, the Managing Director of the plaintiff, the first, in response to the grounding affidavit, having been sworn on 11 ^th December, 2012, and the second, in response to Mr. Jellis's second affidavit, having been sworn on 17 ^th December, 2012.

The law

7 3. As the analysis of s. 390 contained in Delany and McGrath on Civil Procedure in the Superior Courts (3 ^rd Ed.) at para. 13-56 sets out clearly, s. 390 requires a defendant to establish two separate matters, namely:

8 (a) that he has a prima facie defence to the plaintiff's claim; and

9 (b) that the plaintiff will not be able to pay the defendant's costs if successful in his defence.

10 The authors make it clear (at para. 13-58) that s. 390 does not make it mandatory to order security for costs in every case where the plaintiff company appears to be unable to pay the costs of a successful defendant and that the Court retains a discretion which may be exercised in special circumstances. As to where the onus of proof lies, it lies on the defendant to establish a. prima facie defence and that there is reason to believe that the plaintiff would be unable to pay the defendant's costs if the defendant is successful, whereas the onus lies on the plaintiff to establish "special circumstances" which may justify the Court in refusing to order security.

11 4. I propose considering each of the components of the application as outlined in the previous paragraph in turn, but before doing so I propose summarising the plaintiff', as pleaded, and the defendant'er to it, as pleaded.

The plaintiff's case as pleaded and the defendant's response to it as pleaded

12 5. The statement of claim, which was delivered on 5 ^th December, 2011, discloses that the plaintiff entered into two agreements with the defendant on 1 ^st July, 2006, one being a Mazda Dealer Agreement (the Dealer Agreement), and the other being a Mazda Authorised Repairer Agreement (the Repairer Agreement). The Dealer Agreement was terminated by the defendant by letter dated 30 ^th March, 2010 and such termination is not challenged by the plaintiff. The issues in these proceedings arise from the contention of the defendant that it has terminated the Repairer Agreement. In the statement of claim the plaintiff has pleaded that the assertion by the defendant in a letter dated 9 ^th April, 2010 that the...