Irish Bank Resolution Corporation Ltd v DTZ Debenham Tie Leung Ltd

Security for costs requires more than uncertainty about a company’s ability to pay. The applicant must show a real reason to believe that the claimant will be unable to satisfy an adverse costs order. Liquidation is a strong starting point, but the court must examine the applicable insolvency regime and the evidence concerning priority payment of litigation costs. A special statutory liquidation does not become a compulsory winding up merely because legislation gives it the same effect for specified purposes. Speculative arguments about the liquidation’s novelty, floating-charge priorities or possible future litigation do not satisfy the threshold.

Irish Bank Resolution Corporation Ltd brought a professional-negligence claim concerning the valuation of a development site. DTZ Debenham Tie Leung Ltd applied for security for costs before trial.

The application followed the claimant’s entry into a special liquidation under the Irish Bank Resolution Corporation Act 2013. The defendant argued that the unusual statutory regime created doubt about whether litigation costs would be paid in priority, including in relation to pre-liquidation costs and a floating charge. The central issue was whether there was reason to believe that the claimant would be unable to satisfy an adverse costs order.

1. Application dismissed. The defendant failed to establish a reason to believe that the claimant would be unable to meet a costs order if unsuccessful.
2. The principles summarised in Phaestos Ltd v Ho [2012] EWHC 662, derived from Northampton Coal, Iron, and Waggon Co v Midland Waggon Company (1878) 7 Ch D 500, were applied. Liquidation is a good starting point, but mere doubt or concern about future ability to pay is insufficient. Evidence must establish inability to pay.
3. The special liquidation was not thereby a compulsory liquidation. Section 6(5) of the Irish Bank Resolution Corporation Act 2013 provided a deeming rule for specified legal purposes. The character of the liquidation still depended on the provisions made applicable by the Act.
4. Section 10 of the 2013 Act applied, amended or preserved relevant provisions of the Companies Act 1963. The amended section 280 permitted applications concerning questions arising in the winding up. Section 281 gave properly incurred winding-up costs priority over other claims, and section 285 concerned preferential payments. Those provisions covered costs for which a liquidator became liable in an action adopted by the liquidator, including costs incurred before liquidation which had not accrued due before liquidation.
5. The evidence showed sufficient assets to meet priority debts. The possibility that a floating-charge holder might assert priority did not establish a real risk. Irish law presently followed Re Barleycorn Enterprises Ltd [1972] All ER 155. The possible relevance of Re Leyland Daf Ltd [2004] 1 BCLC 281 was speculative and was not decided.
6. The application for security for costs was dismissed.