High Court dismisses security for costs application where defendant failed to prove a prima facie defence.

Neutral Citation: [2013] IEHC 525

THE HIGH COURT

[2010 No. 758 P]

BETWEEN

MARCHBURY PROPERTIES LIMITED

PLAINTIFF

AND

MURPHY CONCRETE (MANUFACTURING) LIMITED

DEFENDANT

JUDGMENT of Mr. Justice Gilligan delivered on the 12th day of November, 2013

1. In these proceedings, the plaintiff claims that the defendant company, a quarry supplier of concrete, stone, sand, gravel and

related products, was negligent and in breach of contract to the plaintiff by supplying stone, described, inter alia, as “Clause 804”,

which allegedly contained pyrite and which the plaintiff alleges was used in the plaintiff’s developments of various properties at New

Haven, Balbriggan, County Dublin. Some houses in the development have since been affected by the alleged presence of pyrite in the

building material used during their construction. The plaintiff is seeking an indemnity and damages from the defendant in respect of

the alleged pyrite induced damage.

2. In this particular application, the defendant seeks security for costs as against the plaintiff pursuant to s. 390 of the Companies

Act 1963, which provides:-

“where a limited company is plaintiff in any action or other legal proceedings, 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.”

And further, pursuant to O. 29, r. 1 of the Rules of the Superior Courts, 1986 as amended, which provides that:-

“When a party shall require security for costs from another party, he shall be at liberty to apply by notice to the party for

such security; and in case the latter shall not, within forty-eight hours after service thereof, undertake by notice to

comply therewith, the party requiring the security shall be at liberty to apply to the Court for an order that the said party

do furnish such security.”

3. The central elements in an application of this nature in respect of security for costs is that there is an onus on the applicant, being

the defendant herein, to show that it has a prima facie defence to the respondent’s claim and secondly, the court has to be satisfied

that the respondent would be unable to pay the applicant’s costs in the event of the defendant successfully defending the

proceedings. In such instances, unless the plaintiff can prove the existence of some special circumstance that would justify a refusal,

security for costs will normally be granted.

4. In the particular circumstances of this case the plaintiff openly admits that it would be unable to pay the applicants costs of

successfully defending these proceedings and thus, the second issue to be decided is as to whether or not the applicant satisfies this

Court that it has a prima facie defence to the plaintiff’s claim.

5. In extensive affidavits and accompanying exhibits as sworn by Seamus Murphy on behalf of the defendant company, he denies

liability and sets out several grounds of defence denying that the defendant company made any representations or warranties, that it

at all times exercised reasonable care and skill and the plaintiff’s claim is for pure economic loss and is misconceived, that the Liability

of Defective Products Act 1991, has no application, that all or part of the plaintiff’s claim is statute barred, that the plaintiff company

has failed to identify what loss or damage it alleges has been suffered and that even if the defendant company is found in breach of

contract or in breach of duty, both of which are denied, a significant issue in respect of whether the plaintiff is liable for any alleged

defects will arise. However, I have given careful consideration to the affidavit of Thomas Durkan, and in particular, to the aspect of

the defendant satisfying this Court that it has a prima facie defence. The content of the affidavit of Mr. Durkan is impressive in that

it meticulously deals with the various aspects as set out on the defendant’s behalf and the basis on which they are disputed on the

plaintiff’s behalf.

6. The nature of the prima facie defence that has to be considered by the court in an application such as is being made herein, was

considered extensively by this Court (Finlay Geoghegan J.) in Tribune Newspapers (in receivership) v. Associated Newspapers Ireland

(Unreported, High Court, 25th March, 2011). In her judgment Finlay Geoghegan J. analysed the nature of what had been considered

to be a prima facie defence in prior case law and concludes as follows:-

“...both the Supreme and High Courts have used slightly different terminology to describe the nature of the defence which

must be established on an application for security for costs. Whilst there is generic use of prima facie defence there is it

appears also references, apparently in the alternative, to good defence, real defence or even to the plaintiff's case as

being required to be unanswerable, with the consequential impact on the defendant's defence. What appears from the

judgments, in a manner similar to the judgments in relation to summary judgement [cases], is that a defendant seeking to

establish a prima facie defence which is based on fact must objectively demonstrate the existence of evidence upon

which he will rely to establish these facts. Mere assertion will not suffice. This appears to me also to follow from the

reference in the Superior Court Rules to a defence on the merits. If such evidence is adduced then the defendant is

entitled to have the court determine whether or not it has established a prima facie defence upon an assumption that

such evidence will be accepted at trial. Further, the defendant must establish an arguable legal basis for the inferences or

conclusions which it submits the court may arrive at based upon such evidence. In so far as the plaintiff is admitting that

the appropriate test includes an assessment by this Court on the application for security for costs as to whether the

defence contended for is likely to succeed at the full hearing or even has a good prospect of succeeding, I reject that

submission. Such an exercise would inevitably require the Court at the interlocutory stage of the application for security

for costs to assess the strength and weaknesses of the respective parties' contentions and cases. The decisions of the

Supreme Court already referred to appear to me to clearly rule out such an approach. Accordingly, in my judgment, what

is required for a defendant seeking to establish a prima facie defence is to objectively demonstrate the existence of

admissible evidence and relevant arguable legal submissions applicable thereto which, if accepted by the trial judge,

provide a defence to the plaintiffs claim. I propose applying this test. Further, it appears to me that such a test is

supported by s. 390 as enacted by the Oireachtas, which I am applying in this application for security for costs. The

section as enacted contains no express reference to the establishment of a prima facie defence. The application of the

prima facie defence test is applicable for the purposes of this section, in the sense that the section requires the company

to provide security where it would be unable to pay the costs of the defendant if successful in its defence. It is therefore

relevant to consider that, or whether or not, a defendant has a prima facie defence in the sense that he might succeed

but [this jurisdiction] does not warrant the imposition of a higher threshold. Unless the defendant has a prima facie

defence the purpose of this section would not come into play.”

7. I agree entirely with Finlay Geoghegan J. that this Court has no role to play as to whether or not the defence contended for is

likely to succeed at the full hearing or even has a good prospect of succeeding. In essence, I find the content of the affidavit of Mr.

Thomas Durkan more compelling than the contents of the two affidavits and accompanying exhibits as sworn by Seamus Murphy. I

note, in particular, that the plaintiff currently relies on tests carried out in relation to No. 51, Newhaven Bay, only, but it does appear

that, in fact, the defendant has not actually inspected any of the properties. It is clear that no remedial works were carried out to

any of the properties and accordingly the defendant does not, in my view, objectively demonstrate the evidence upon which it would

rely to establish that it has a prima facie defence to the plaintiff’s claim. In my view, the content of the affidavits as sworn on the

defendant’s behalf are matters of assertion and I am of the view that at this point in time, in order to set out a prima facie defence,

it would be necessary to at least carry out an inspection with the relevant necessary experts to give credence to, if it be the case,

the defendant’s assertions.

8. I am not satisfied to maintain that a prima facie defence has been set out on the defendant’s behalf, and in these circumstances,

the second essential proof in respect of this Court making an order for security has not been met and the application on behalf of the

defendant accordingly fails.