Aventis Solutions Ltd v Credebt Exchange Ltd (Approved)

Factual and Procedural Background

The Plaintiff, a limited liability company registered in England engaged in medical goods supply and procurement, entered into an agreement in May 2020 with the UK Department of Health and Social Care to supply 42 million facemasks for £18 million (the "Supply Agreement"). The Plaintiff also entered into a Purchase Agreement with a Chinese Supplier for the facemasks. To finance this, the Plaintiff sought a short-term trade finance facility from the Defendant, an Irish private company operating a receivables exchange platform providing sub-prime funding. The Defendant provided the trade finance facility under a written agreement whereby payments from the Department were first paid to the Defendant, who then deducted fees and paid the balance to the Plaintiff.

Disputes arose by July 2020 concerning permitted deductions, notably whether a 3% fee on monies received was payable. On or about 29 July 2020, the parties entered into a written agreement (the "Purported Settlement Agreement"), which the Plaintiff later contended was unenforceable and did not settle the dispute. Following this, on or about 31 July 2020, the Defendant transferred £3,004,283.30 to the Plaintiff, which the Plaintiff claimed was wrongfully reduced by a £528,000 fee and incorrectly calculated currency exchange deductions.

The Plaintiff initiated proceedings in December 2021 claiming £611,579.49 was still owed. The Defendant denied these claims, relying on the terms of the agreements and the Purported Settlement Agreement. The proceedings were transferred from summary summons to plenary hearing in July 2022. The Defendant subsequently applied for security for costs, asserting concerns regarding the Plaintiff’s ability to pay costs due to its financial position and its residence outside the jurisdiction and EU.

Legal Issues Presented

1. Whether the Defendant has established a prima facie defence to the Plaintiff's claim.
2. Whether there is reason to believe that the Plaintiff will be unable to pay the Defendant’s costs if successful in defending the proceedings.
3. Whether any special circumstances exist that would justify refusing an order for security for costs despite the above.
4. The appropriate quantum of security for costs to be ordered.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff denies that the Defendant was entitled to charge the additional 3% invoice finance fee, asserting no such service was requested or provided.
• The Plaintiff contends the Purported Settlement Agreement is unenforceable due to lack of consideration, economic duress, and misrepresentations regarding currency exchange losses.
• The Plaintiff alleges the Defendant incorrectly calculated currency exchange losses, which should have been a gain, thereby reducing the amount payable.
• The Plaintiff claims impecuniosity has been occasioned by the Defendant's alleged wrongdoing.
• The Plaintiff disputes the completeness and accuracy of the Defendant’s documentary evidence and challenges the Defendant’s interpretation of contractual terms.
• The Plaintiff refers to a criminal complaint and ongoing Garda investigation concerning the Defendant’s conduct, asserting public policy grounds against security for costs.
• The Plaintiff disputes the Defendant’s estimate of legal costs and provides a lower estimate.

Defendant's Arguments

• The Defendant relies on the Master Agreement, the Revolving ETR Purchase Agreement ("RPA"), and the Purported Settlement Agreement as constituting the entire agreement governing the parties’ relationship.
• The Defendant asserts it has a prima facie defence based on these agreements, including the entitlement to the 3% fees on both liabilities and receivables.
• The Defendant denies any threat or economic duress at the settlement meeting and maintains the Plaintiff agreed to the terms voluntarily.
• The Defendant denies any wrongdoing in respect of currency exchange charges, asserting these were lawfully applied and explained at the settlement meeting.
• The Defendant challenges the Plaintiff’s financial position, highlighting inconsistent and unaudited accounts showing limited liquid assets and an unexplained fixed asset investment, raising serious concerns about the Plaintiff’s ability to pay costs.
• The Defendant submits that enforcement of a costs order against the Plaintiff will be difficult and expensive due to the Plaintiff’s UK residence outside the EU.
• The Defendant provides a higher estimate of legal costs likely to be incurred.
• The Defendant contends the Plaintiff’s criminal complaint and related allegations are part of a strategy to coerce payments and constitute an abuse of process.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court first considered whether the Defendant had established a prima facie defence. Despite the Plaintiff’s serious allegations, the Defendant presented detailed documentary evidence, including the Master Agreement, RPA, and Purported Settlement Agreement, supporting its defence. The existence and terms of the July 2020 settlement meeting and agreement were undisputed, and the Court found that the settlement agreement constituted credible objective evidence of a defence on a prima facie basis. The Court emphasized that it was not to decide the ultimate merits but to assess whether admissible evidence supported the defence.

Regarding the Plaintiff’s ability to pay costs, the Court noted the absence of audited accounts and the Plaintiff’s failure to explain an intangible fixed asset recorded in its financial statements. The Plaintiff’s financial position was inconsistent, with limited liquid assets and liabilities exceeding current assets. The Court found no evidence that the Plaintiff was trading profitably post-COVID-19 pandemic and that the Plaintiff’s vague assertion about liquidating an unspecified asset did not alleviate concerns. The Court accepted the Defendant’s contention that there was a real risk the Plaintiff could not satisfy a costs order.

On special circumstances, the Court held that the Plaintiff failed to demonstrate a causal link between its impecuniosity and the Defendant’s alleged wrongdoing, noting the Plaintiff’s poor trading history and unexplained dispersal of funds. The Court also considered the Plaintiff’s argument regarding the ongoing criminal investigation. While acknowledging the investigation’s existence, the Court found insufficient evidential basis to treat this as a special circumstance warranting refusal of security for costs, particularly given concerns about the Plaintiff’s motivations and potential abuse of process.

In determining the quantum of security, the Court confronted divergent costs estimates from the parties’ legal costs accountants. The Court preferred the Defendant’s higher estimate, finding the Plaintiff’s estimate unreliable due to mistaken instructions about discovery. The Court ordered security for costs at €325,000, representing a substantial but reduced portion of the Defendant’s estimate, balancing adequate security with fairness to the Plaintiff.

Holding and Implications

The Court GRANTED the Defendant's application for security for costs and ordered the Plaintiff to provide security in the amount of €325,000. The prosecution of the proceedings was stayed pending provision of this security. The Court emphasized that the order does not preclude the ongoing criminal investigation nor the Plaintiff’s right of access to the courts but ensures that the Defendant is protected from the risk of an unenforceable costs order. No new legal precedent was established; rather, the decision applied established principles concerning security for costs against a foreign company with a disputed defence and questionable financial position.