Savanne Ltd v Irish Bank Resolution Corporation (in Special Liquidation) (Formerly Irish Nationwide Building Society) and Michael Fingleton
| Jurisdiction | Ireland |
| Judge | Mr. Justice Barr |
| Judgment Date | 29 July 2021 |
| Neutral Citation | [2021] IEHC 535 |
| Court | High Court |
| Docket Number | [Record No. 2009/3035 P] |
[2021] IEHC 535
[Record No. 2009/3035 P]
THE HIGH COURT
Security for costs – Breach of agreement – Delay – First defendant seeking an order directing that the plaintiff should provide security for costs – Whether the delay of approximately five years by the first defendant in seeking security for costs from the plaintiff was sufficient to disentitle the first defendant to the reliefs sought in the application
Facts: The plaintiff, Savanne Ltd, claimed that: (a) in breach of agreement, the first defendant, Irish Bank Resolution Corporation (in special liquidation), or more particularly Irish Nationwide Building Society, did not maintain the Carraig Rua Hotel or Molly’s Bar, both in Dunfanaghy, Co. Donegal, and allowed them to become dilapidated; and (b) the bank sold the two premises at a gross undervalue. The first defendant applied to the High Court for an order directing that the plaintiff should provide security for costs, in respect of the its costs between 12th June, 2018 and the hearing of the action, in the sum of €162,996. It had not been seriously disputed by the plaintiff that the first defendant had established (i) that the plaintiff company would be unable to pay costs if unsuccessful at the trial of the action, and (ii) that the first defendant had a prima facie defence to the plaintiff’s action against it. The plaintiff alleged that the delay of approximately five years by the defendant in seeking security for costs from it, was sufficient to disentitle the first defendant to the reliefs sought in the application. In the alternative, the plaintiff argued that its inability to pay costs was due to the wrongdoing on the part of the first defendant, which was the subject matter of the proceedings. It was submitted that in those circumstances the court should lean against directing that security for costs be provided.
Held by Barr J that, having looked at the application in the context of the overall progress of the litigation, the court was not satisfied that such delay as there was on the part of the first defendant, was such as to justify the refusal of an order for costs in its favour. The court was not satisfied that the plaintiff had established, even on a prima facie basis, that its inability to pay costs was due to the wrongdoing on the part of the first defendant; furthermore, even if the plaintiff was totally successful in the action and recovered damages of approximately €1.6m, it would still be insolvent, having regard to the level of loans outstanding to the investors, as disclosed in its accounts and thus would still be unable to pay any award of costs. Barr J was not satisfied that the plaintiff had established that ground as a special circumstance which would justify the court in refusing to make an order for security for costs in favour of the first defendant. The court was satisfied that it should make such an order in favour of the first defendant.
Barr J held that the estimate of the costs likely to be incurred by the first defendant had not been disputed by the plaintiff and the court was satisfied that given the complexity of the claim, such costs could be incurred in defending the action, from the date of the first request for security for costs to the trial of the action. Accordingly, the court proposed making an order staying the action pending lodgement of €162,996 by the plaintiff as security for costs, such security to be lodged within eight weeks of perfection of the final order of the court.
Application granted.
JUDGMENT of Mr. Justice Barr delivered electronically on the 29th day of July, 2021
This is an application by the first named defendant for an order directing that the plaintiff should provide security for costs, in respect of the its costs between 12th June, 2018 and the hearing of the action, in the sum of €162,996.
It has not been seriously disputed by the plaintiff that the first defendant has established (i) that the plaintiff company would be unable to pay costs if unsuccessful at the trial of the action, and (ii) that the first defendant has a prima facie defence to the plaintiff's action against it.
The essential issue for the court is whether the plaintiff has established special circumstances which would persuade the court that the order for security for costs should not be made. In particular, the plaintiff alleges that the delay of approximately five years by the defendant in seeking security for costs from it, is sufficient to disentitle the first defendant to the reliefs sought in this application.
In the alternative, the plaintiff argues that its inability to pay costs was due to the wrongdoing on the part of the first defendant, which is the subject matter of the proceedings herein. It is submitted that in these circumstances the court should lean against directing that security for costs be provided.
In response to those assertions, the first defendant argues (i) that when one looks at the history of the litigation to date, there was no undue delay by it in seeking the order for security for costs; (ii) even if the court were to hold that there was some delay on the part of the defendant, that of itself should not prevent the order being made, because no additional costs of any substance were incurred by the plaintiff between the time when the first defendant delivered its defence and the first request that security for costs be provided by the plaintiff, which request was made by letter dated 12th June, 2018; (iii) it is submitted that the plaintiff company's accounts clearly show that the company is insolvent, with a number of judgments registered against it. The main creditors of the company are the investors, who had lent sums to the company, which sums appear as loans owing by the company in its accounts. It was submitted that there is no evidence that the company's impecuniosity, or its inability to provide security for costs, was due to any alleged wrongdoing on the part of the first defendant.
Thus, the two issues for determination on this application are; (a) whether delay on the part of the defendant in bringing this application should prevent an order for security for costs being made and (b) whether the plaintiff has established on a prima facie basis that its inability to meet any order for costs that may be made against it, was due to the wrongdoing of the defendant, such that it would be unjust that an order for security for costs should be made.
It is only necessary to give a very brief summary of the background to the substantive proceedings. The plaintiff company was originally owned and controlled by a Mr. & Mrs. Desmond. The company had a number of loan facilities with Irish National Building Society (hereinafter ‘INBS’). These loans were secured by mortgages over three properties: Ramelton Fisherty in Ramelton, Co. Donegal; the Carraig Rua Hotel; and Molly's Bar, both in Dunfanaghy, Co. Donegal.
When the company could not meet its obligations under the loan agreements, it surrendered the hotel and bar premises to the bank by separate deeds of surrender dated 15th November, 2004.
The hotel and Molly's Bar were listed for sale at auction on 13th December, 2005. However, the previous owners of the plaintiff company, Mr. & Mrs. Desmond, secured an injunction from the High Court preventing the sale, on the basis of an allegation that the deeds of surrender had been executed without the benefit of legal advice. That injunction was subsequently lifted. On 24th January, 2007 the hotel was sold for €2,250,000. Molly's Bar was sold for €710,000 on 23rd November, 2007.
On 6th July, 2006, the bank had appointed a receiver over Ramelton Fishery. On 2nd February, 2007, the plaintiff made an offer of €2,579,203 to INBS to redeem the security at Ramelton Fishery. That offer was accepted by INBS. Upon payment of that sum by the plaintiff to INBS, the secured property was released back to the plaintiff.
In these proceedings, the plaintiff claims the following: (a) that in breach of agreement, the first defendant, or more particularly INBS, did not maintain the hotel or Molly's Bar and allowed them to become dilapidated; (b) that the bank sold the two premises at a gross undervalue. It is not exactly clear from the pleadings what case the plaintiff is making about the fishery. It is not clear if the plaintiff is alleging that the receiver appointed by INBS, in some way mismanaged the fishery in the period before the loan was redeemed by the plaintiff.
There are a number of ancillary claims pleaded in the statement of claim concerning the provision of redemption figures for the loans. They do not appear to be the main elements in the plaintiff's action against the first defendant. There was also a claim in respect of the alleged wrongful withholding of a sum of approximately €65,000 by the first named defendant, but that allegation has been withdrawn.
In its statement of claim, the plaintiff alleges that there was an undervaluation of the hotel of approximately €1.5m and an undervaluation of Molly's Bar of €100,000.
In its defence, the first defendant denies that it mismanaged the properties, or allowed them to fall into disrepair. The first defendant further denies that it sold either of the two properties at a gross undervaluation, or at any undervalue. They plead that the properties were put on the market and sold at values that had been advised to the first defendant by an independent firm of estate agents. The first defendant denies that there was any wrongdoing by it in relation to the provision of information in respect of redemption figures in respect of the loans.
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Sweeney and Another v The Voluntary Health Insurance Board and Others
...are or should be closed before seeking security for costs. In a similar vein, Barr J. observes in Savanne Ltd v. IBRC and Fingleton [2021] IEHC 535, §73, that delay in that case fell to be calculated from the moment when the defence was filed. The particular usefulness of using the filing o......