Transparency and Security for Costs

The Irish High Court recently ruled on a security for costs application, highlighting the need for defendants to substantiate their claims. The defendant failed to provide sufficient proof of a valid defence, leading to the rejection of their security for costs application. Our Commercial Disputes team examines the decision which underscores the importance of transparency and evidential disclosure for successful security for costs applications.

The High Court has recently addressed a case where the defendant brought a security for costs application against the plaintiff.[1] If granted, it would have required the plaintiff to put up some form of security for the defendant’s costs in the event the plaintiff did not succeed at trial. Security for costs orders are not lightly granted. In addition to other requirements[2] a defendant applying for the order must be able to show that they have a valid defence of the claim at issue.

In this particular case, however, the defendant had failed to satisfy the court that it had a sound defence on the merits to the plaintiff’s case. The court was critical of the defendant, especially for its failure to provide contemporaneous documentation relevant to the matters in issue. The application was therefore refused. This demonstrates the need to ensure transparency in security for costs applications and especially highlights the importance of parties exercising care when withholding information for tactical reasons.

Background

The plaintiff, Mr Tahboub, was a Jordan resident businessman. He had served as a board member of the defendant, an Irish company established to promote relations between Arab countries and Ireland, since 2014. Mr Tahboub brought proceedings in 2023 arising out of what he alleged was his removal from the board of the defendant in October 2022. The defendant disputed this and asserted that it involved a retirement scenario. Having written seeking security for costs in November and December 2023, the defendant issued the motion in January 2024. Following exchanges of affidavits, the motion was heard by Ms Justice Cahill in October 2024.

Order 29 of the Rules of the Superior Courts, Rule 3 stipulates that a defendant seeking security for costs against an out-of-jurisdiction plaintiff must provide “a satisfactory affidavit” demonstrating a defence on the merits of the case. This procedural requirement ensures that defendants substantiate their request by showing a credible basis for contesting the case. It was acknowledged that the first condition under Order 29 Rule 3 was satisfied, as Mr Tahboub resided in Jordan, placing him outside the EU and Lugano Convention States. The court therefore focused its analysis on the second condition, which required a demonstration of the merits of the defendant’s defence. If both conditions were met, the granting of an order for security for costs “is squarely within the discretion of the court” and will “typically be granted unless special circumstances require a different outcome.”

Decision

The Court began by outlining the principles applicable to the obligation to make out a prima facie defence. This, noted Ms Justice Cahill, involved demonstrating the existence of a bona fide defence on the merits to the claim made[3] which must be:

“in sufficient detail to enable the Court… to scrutinise the extent to which [it] has truly been established.”[4] Ms Justice Cahill further stated that if facts are being relied on to demonstrate a bona fide defence, the defendant “must objectively demonstrate the existence of evidence upon which he will rely to establish those facts. Mere assertions will not suffice…”[5]

Consequently, the judge observed that:

“the obligation imposed on a defendant when seeking an order for security for costs may be an onerous one and requires the early disclosure of the intended defence and the evidence to be relied upon in some detail.”

Turning to the position set out on behalf of the defendant here, Ms Justice Cahill noted that no person with knowledge of the relevant facts had put on affidavit that there was a prima facie or bona fide defence. This she described as a “substantive weakness”. There was also a “notable failure” to exhibit documentary evidence. That included contemporaneous materials such as communications between relevant third-party bodies, records of an apparent decision regarding the choice of nominees and records of the meetings in October 2022 at which Mr Tahboub’s alleged removal from the board occurred. She observed:

“Given the evidential deficits in this case, there is a lack of contemporaneous material or explanations by anyone with means of knowledge within the Defendant about the decisions and steps taken by the Defendant between May 2022 and October 2022. The Defendant alone could have supplied such evidence and material for the purpose of this motion but did not do so.”

All of this, said Ms Justice Cahill, left “an important evidential and legal gap in the defence being relied on to grant this motion.” Consequently, “the material which has been presented for the purpose of this motion falls short of what is required to obtain an order for security for costs under Order 29”. She went on:

“…a decision as to whether there is a prima facie defence must be based on evidence, not bare assertion. The obligation to put forward that evidence is a price that must be paid by an applicant for security for costs. When, as here, the Defendant has chosen not to present potentially relevant evidence, the result is that there is not a sufficient evidential premise on which to decide whether there is a prima facie defence. The onus is on the Defendant and is not discharged when there is such a deficiency.”

Ultimately, the judge concluded that a defendant applying for a security for costs order should disclose sufficiently the material and law which the defendant believes will lead it to prevail over the plaintiff at trial. Although the defendant may prefer to keep their cards close to their chest, if they do not give the court enough to demonstrate a genuine defence, that choice may cause their application to fail. That was the case here and the application for security for costs was refused.

Conclusion

The decision usefully confirms that a defendant seeking security for costs must demonstrate that they have a bona fide defence and that mere assertion will not be enough to convince the Court. The decision highlights that defendants seeking security for costs must present evidential material early in the proceedings, potentially revealing details they might prefer to withhold for tactical reasons. However, the Court emphasised the trade-off between securing costs and disclosing the nature of the defence on its merits. A defendant applicant cannot have it both ways. If the objective is to obtain security for costs, broader tactical considerations may have to take second place. If not, and the evidential basis for a claimed genuine defence is not put before the Court, the application may fail.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Tahboub v. The Joint Arab-Irish Chamber of Commerce CLG [2024] IEHC 616

[2] Security for costs is most typically ordered against corporate plaintiffs and it can only be sought against personal litigants where they are not resident in the EU or a Lugano Convention State.

[3] Goode Concrete v CRH plc [2012] IEHC 116

[4] Quinn Insurance Ltd v PwC (a Firm) [2021] 2 IR 70

[5] Tribune Newspapers v Associated Newspapers Ireland (Unreported High Court, 25 March 2011, Finlay Geoghegan J.)