Student Marketing Network Ltd v KBC Bank Ireland PLC (Approved)

Factual and Procedural Background

The Plaintiff, Company A, provided marketing services aimed at encouraging students at various campuses within the State to open bank accounts with the Defendant, Company B. The dispute arose when Company B allegedly wrongfully terminated a three-year extension of its supply agreement with Company A around April 2018 and engaged a third party to provide student marketing services thereafter. Company B applied to the court to dismiss or strike out Company A’s claims on the basis that no reasonable cause of action was disclosed or that the claim was frivolous or vexatious, pursuant to Order 19, Rule 28 of the Rules of the Superior Courts 1986 and the court’s inherent jurisdiction. Additionally, Company B sought an order requiring Company A to furnish security for costs under section 52 of the Companies Act 2014 and related rules.

Company A issued a plenary summons in May 2020, to which Company B entered an appearance in July 2020. Company A delivered a Statement of Claim in October 2020. Company B raised particulars in February 2021, with Company A replying in June 2021. Expert financial reports were prepared for both parties in 2022 and 2023 to assist with the security for costs application. The court heard submissions from counsel representing both parties, which helped to narrow the issues before the court.

Legal Issues Presented

1. Whether Company A’s Statement of Claim discloses a reasonable cause of action or whether the claim should be dismissed or struck out as frivolous or vexatious under Order 19, Rule 28 of the Rules of the Superior Courts 1986 and the court’s inherent jurisdiction.
2. Whether Company B is entitled to an order requiring Company A to provide security for costs pursuant to section 52 of the Companies Act 2014, Order 29 of the Rules of the Superior Courts 1986, and/or the court’s inherent jurisdiction.
3. What is the proper construction of the contractual relationship between the parties, particularly whether the contract comprises solely the Contract Order Form and oral agreements or includes the General Terms and Conditions document appended to the Contract Order Form.
4. Whether Company A has established special circumstances sufficient to refuse an order for security for costs.

Arguments of the Parties

Defendant's Arguments

• Company B contended that the contractual relationship was governed by the Contract Order Form together with the General Terms and Conditions document, which was appended to the Contract Order Form and constituted the entire agreement.
• Company B argued that Company A’s reliance on pre-contractual emails and oral representations was precluded by the “Entire Agreement” clause in the General Terms and Conditions.
• Company B submitted that Company A’s claim was untenable, frivolous, and bound to fail, justifying dismissal or striking out the claim.
• Company B asserted that Company A was unable to pay costs if ordered to do so, based on expert financial reports, and that Company A had failed to provide sufficient evidence of actionable wrongdoing or causation linking Company B’s conduct to Company A’s impecuniosity.
• Company B challenged the credibility and assumptions underlying Company A’s financial expert report, emphasizing that Company A’s net assets and profit margins were insufficient to meet potential costs.
• Company B relied on documentary evidence, including email exchanges and contract documents, to support its position that no binding three-year exclusive contract existed beyond the Contract Order Form and that no new contract was issued after a requested review of Company A’s accounts.

Plaintiff's Arguments

• Company A maintained that the contract was governed by the Contract Order Form together with various oral agreements and emails, not including the General Terms and Conditions document.
• Company A asserted that Company B wrongfully terminated the contract in or around April 2018, breaching the agreement and causing significant financial loss.
• Company A argued that factual disputes existed regarding the receipt and applicability of the General Terms and Conditions document, which required resolution at trial rather than on a summary application.
• Company A accepted, for the purpose of the security for costs motion only, that Company B had a prima facie defence and that Company A could not meet the estimated legal costs but contended that special circumstances existed because the impecuniosity was caused by Company B’s alleged wrongdoing.
• Company A relied on expert financial evidence to establish a prima facie causal connection between Company B’s alleged breach and Company A’s inability to pay costs, asserting that but for the breach, it would have generated sufficient profits to meet costs.
• Company A submitted that the court should refuse the security for costs application to avoid stifling a bona fide claim and to uphold the constitutional right of access to justice.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering the application to strike out or dismiss the Plaintiff’s claims under Order 19, Rule 28 of the Rules of the Superior Courts 1986 and the court’s inherent jurisdiction. It recognized that the threshold for dismissal is high, requiring that the claim discloses no reasonable cause of action or is frivolous or vexatious, or bound to fail. The court noted that where factual disputes exist, particularly concerning contract interpretation and the applicability of documents, dismissal is generally inappropriate because it risks injustice.

In this case, there was a fundamental factual dispute between the parties as to whether the contract was governed solely by the Contract Order Form and oral agreements, as contended by the Plaintiff, or included the General Terms and Conditions document, as contended by the Defendant. The Plaintiff disputed having received the General Terms and Conditions and relied on oral agreements and emails, while the Defendant relied on the combined effect of the Contract Order Form and the appended General Terms and Conditions, including an entire agreement clause excluding prior representations.

The court found that these disputes could not be resolved on the current application without the risk of injustice to the Plaintiff and that the issues were more appropriately addressed at trial with full pleadings and oral evidence. Accordingly, the court refused the application to strike out or dismiss.

Turning to the security for costs application, the court applied the principles set out in Connaughton Road Construction Ltd., requiring the Plaintiff to establish on a prima facie basis that (1) there was actionable wrongdoing by the Defendant; (2) a causal connection between that wrongdoing and the Plaintiff’s inability to pay costs; (3) that the loss was legally recoverable and not too remote; and (4) that the loss was sufficient to explain the Plaintiff’s impecuniosity.

The Defendant challenged the Plaintiff’s evidence as mere assertions lacking credible support, relying on expert financial reports that questioned the Plaintiff’s assumptions and financial position. The Plaintiff relied on its expert’s report and pleaded facts showing a significant loss of turnover and profits due to the alleged breach, which would have enabled the Plaintiff to meet costs if the contract had continued.

The court emphasized that the standard at this interlocutory stage is prima facie, a lower threshold than the balance of probabilities, requiring only sufficient evidence to call for an answer. Considering the evidence and submissions, the court found that the Plaintiff had established a prima facie case of actionable wrongdoing and causation, that the loss was not too remote, and that the loss was sufficient to explain the inability to pay costs.

Accordingly, the court exercised its discretion in the interests of justice and refused the security for costs application, noting the constitutional right of access to the courts and the risk of stifling a bona fide claim.

Holding and Implications

The court REFUSED the Defendant’s application to strike out or dismiss the Plaintiff’s Statement of Claim, finding that factual disputes concerning the contractual relationship and receipt of terms prevented summary determination without risk of injustice.

The court also REFUSED the Defendant’s application for security for costs, holding that the Plaintiff had established on a prima facie basis actionable wrongdoing by the Defendant causing the Plaintiff’s inability to pay costs, and that the interests of justice favored allowing the claim to proceed without the burden of security for costs.

The immediate effect is that the Plaintiff’s claim will proceed to trial, and the Defendant’s motions are dismissed without prejudice to further proceedings. The court reserved the question of costs for both applications. No new legal precedent was established, and the decision affirms established principles on the high threshold for dismissal and the discretionary nature of security for costs orders in the context of alleged wrongdoing causing impecuniosity.