Irish Bank Resolution Corporation Ltd v DTZ Debenham Tie Leung Ltd

The Defendant applied for security for costs in a professional negligence claim. The court applied established principles requiring a defendant to show reason to believe the claimant will be unable to satisfy any costs order. The central issue was whether the statutory "special liquidation" created by the Irish Bank Resolution Corporation Act 2013 altered the usual priority of costs in liquidation under the Companies Act 1963 (in particular s.280, s.281 and s.285) so as to create a real risk that successful defendants could not recover costs as priority expenses.

The judge concluded that the 2013 Act expressly preserved and applied the relevant Companies Act provisions, including the priority treatment of costs and the capacity for the special liquidator or creditors to apply to the court under the amended s.280. The speculative argument that a floating charge-holder might defeat priority costs, and the suggestion that the English decision in Re Leyland Daf Ltd might displace the Irish approach (Re Barleycorn), were insufficient to discharge the Defendant's burden. The application for security for costs was dismissed.

This was a first instance application by DTZ Debenham Tie Leung Ltd for security for costs in a professional negligence claim brought by the Irish Bank Resolution Corporation Ltd, with trial listed for June. The Defendant sought security on the basis that the claimant had been placed into a unique, parliamentary-imposed "special liquidation" under the Irish Bank Resolution Corporation Act 2013 and therefore might be unable to meet an adverse costs order.

Background and parties:

• The Claimant (Irish Bank Resolution Corporation Ltd) is in a statutory "special liquidation" under the 2013 Act.
• The Defendant (DTZ) faces a professional negligence claim concerning valuation of development land and sought security for costs.
• The Defendant intended to rely only on an expert report and not factual witnesses; the Claimant had prepared factual and expert witnesses.

Relief sought: Security for costs.

Issues framed:

• Whether the Defendant had shown reason to believe the Claimant would be unable to satisfy any costs order such as to justify security for costs.
• Whether the special liquidation under the 2013 Act should be treated as a compulsory or voluntary winding up for these purposes and whether the Companies Act 1963 provisions that give priority to liquidator costs applied.
• Whether a floating charge-holder could take priority over costs or whether the English House of Lords authority in Re Leyland Daf Ltd might undermine the established Irish approach (Re Barleycorn Enterprises Ltd).

Court's reasoning:

• The court applied established English principles (citing Phaestos Ltd v Ho and earlier authority) that a defendant must show reason to believe the claimant cannot meet any costs order; liquidation status is a strong starting point but insufficient alone.
• The 2013 Act, notably s.6(5) and s.10 and the amendments to the Companies Act provisions, expressly applied and preserved key portions of the Companies Act 1963 (including s.280, s.281 and s.285) so as to secure the priority treatment of costs and to allow the special liquidator or creditors to apply to the court under s.280.
• The court concluded on the evidence that there was not sufficient doubt that the liquidator would be unable to pay priority costs. The speculative risk that a floating charge-holder might take priority, or that Leyland Daf could displace Irish precedent (Re Barleycorn), did not meet the defendant's burden.

Result: The application for security for costs was dismissed because the Defendant failed to show a real risk that costs would be unpaid; the statutory scheme and available assets made it unlikely that a successful defendant would be unable to recover priority costs.

The application for security for costs is dismissed. The court held that the special liquidation created by the Irish Bank Resolution Corporation Act 2013 preserved the operative provisions of the Companies Act 1963 (including the priority treatment of costs under s.281 and the ability to apply to the court under amended s.280), and the Defendant did not satisfy the burden of showing reason to believe the Claimant would be unable to meet any costs order. Speculative arguments about a floating charge-holder or the possible relevance of Re Leyland Daf did not establish a real risk to priority costs.