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Ryconlou Ltd v Conlon (Approved)
Factual and Procedural Background
This is an appeal by the Plaintiff from a Circuit Court order dated 6 November 2025 (Circuit Court, Midlands Circuit) in which Judge Fergus directed the Plaintiff to furnish security for costs to the Defendant. The appeal judgment was delivered by Judge O'Donnell on 10 March 2026.
The dispute arises from landlord and tenant proceedings concerning licensed premises in The City. The parties entered into a lease dated 17 June 2019 for an annual rent of €85,580 plus VAT. The lease expired on 31 March 2025 and the Plaintiff (the tenant) remained in occupation. The Plaintiff issued a Landlord and Tenant Civil Bill on 15 May 2025 seeking relief under Part II of the Landlord and Tenant (Amendment) Act 1980, with an alternative claim for compensation for improvements under Part IV and for disturbance. The Defendant (the landlord) entered an appearance on 20 May 2025 and sought security for costs by notice of motion dated 12 August 2025. The Circuit Court ordered security for costs; the Plaintiff appealed.
Legal Issues Presented
- Whether security for costs should be ordered against a company-plaintiff under section 52 of the Companies Act 2014 (replicating the s.390 test of the 1963 Act).
- Whether there is "reason to believe" that the Plaintiff company will be unable to pay the Defendant's costs if the Defendant succeeds in defending the proceedings, on the material before the court.
Arguments of the Parties
Defendant's Arguments
- The Defendant relied on an estimate of defending costs of €55,100 (inclusive of VAT) and on a letter from the Defendant's accountant which identified negative working capital, sustained losses, intercompany debts and described a "looming financial crisis," asserting these matters gave reason to believe the Plaintiff would be unable to pay costs.
- The Defendant contended that the accountant's analysis satisfied the statutory threshold such that security ought to be ordered.
Plaintiff's Arguments
- The Plaintiff disputed the quantum of likely defending costs (referencing an alternative estimate of €24,535 exclusive of VAT) and relied on its abridged financial statements showing positive equity and cash at bank, a director assertion of stabilised EBITDA forecasts and a property valuation report projecting positive trading figures.
- The Plaintiff argued that the financial statements and other material did not support a conclusion that it "will" be unable to pay costs.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Usk District Residents Association v. Environmental Protection Agency [2006] IESC 1 | Sets out the two-stage test for security for costs: (a) prima facie defence; (b) reason to believe the plaintiff will be unable to pay; if established, security should be required unless there are special circumstances. | The court applied the Usk test and noted the Plaintiff accepted the Defendant had a prima facie defence, leaving the "reason to believe" threshold as the central issue. |
| IBB Internet Services Ltd v. Motorola Ltd [2013] IESC 53 | Interprets "credible testimony" and the standard required under the Companies Act provision; guides how to assess evidence without elevating to balance of probabilities. | The court relied on IBB's explanation that the court must assess all material evidence and reach an evaluation of likely eventualities; the required showing is stronger than a mere risk but not proof on the balance of probabilities. |
| Jirehouse Capital & anor. v. Beller & anor. [2009] 1 WLR 751 | Explains that "reason to believe" should not be equated with balance of probabilities and requires assessment of future uncertainties. | The court adopted the Jirehouse approach (via IBB) to avoid treating the statutory test as a balance of probabilities inquiry. |
| Greenclean Waste Management Limited v. Leahy [2013] IEHC 74 | Describes that risks of inability to pay must be significant, appreciable and weighty; requires objective evaluation of evidence. | The court considered Greenclean but followed IBB/Supreme Court guidance; it treated the concept of "appreciable" risk as apt but applied the IBB standard. |
| Coolbrook Developments Ltd v. Lington Development Ltd and Davy Target Investments plc [2018] IEHC 634 | Reviews authorities on evidentiary approach, emphasizes that evidence may disclose gaps which a company must explain and that accounts can raise questions requiring explanation. | The court followed Coolbrook's articulation that gaps or uncertainties in financial evidence should not be resolved in favour of the company and that an explanation is required from the company resisting security. |
| Lexington Services Ltd v. Walters & Ors [2015] IECA 147 (Flannery) | Warns that a positive net asset position in accounts is not necessarily determinative and that accounts may require explanation; financial statements without explanation can disclose a significant risk of inability to pay. | The court applied the principle that accounts which raise uncertainties require explanation and are not dispositive in the absence of such explanation. |
| Parolen Ltd v. Doherty & Anor [2010] IEHC 71 | Supports the principle that where evidence discloses matters requiring explanation, the company must provide that explanation. | The court invoked this principle (via Coolbrook) to require the Plaintiff to fill gaps in its financial evidence. |
| James Elliott Construction Ltd v. Irish Asphalt Ltd [2010] IEHC 234 | Same as Parolen: a company resisting security must supply explanatory evidence where gaps exist. | The court relied on this principle in assessing the available financial material and the absence of detailed explanatory evidence from the Plaintiff. |
Court's Reasoning and Analysis
The court began by identifying the statutory basis (section 52, Companies Act 2014) and reiterated established caselaw setting the test for security for costs (the two-stage Usk test and subsequent refinements in IBB, Jirehouse and Coolbrook). The Plaintiff accepted the Defendant had a prima facie defence, so the decisive question was whether there was "reason to believe" the Plaintiff company "will" be unable to pay the Defendant's costs.
The court reviewed the evidentiary materials: a brief letter from the Defendant's accountant opining negative working capital, sustained losses and related-party debts and describing a "looming financial crisis"; the Plaintiff's director's affidavit asserting healthy finances and forecasts (without exhibits of underlying management accounts); a property valuation report containing forecasts derived from figures provided by the Plaintiff but without supporting exhibits; a short letter from the Plaintiff's accountants asserting aggregate profits/cashflow over recent years and no arrears; and abridged financial statements for year ended 30 April 2024 showing positive equity, cash at bank and a recorded loss for the year.
The court applied Coolbrook and related authorities to the evidence: accounts are relevant but not dispositive; where accounts or other financial material disclose questions or uncertainties the company resisting security must explain them; the court will not resolve unexplained gaps in favour of the company. The court criticised the limited, terse nature of the accountant letters, the failure of the experts/accountants to engage with one another's analyses, and the Plaintiff director's omission to exhibit management accounts or the underlying figures relied upon by the valuer.
Weighing the evidence as a whole, the court found the Defendant's evidence (principally the brief accountant's letter) did not, in light of the Plaintiff's responses (financial statements showing positive equity and cash, the accountants' letter and forecasts), establish the stronger-than-a-merely-risk showing required. The court was not persuaded there was reason to believe the Plaintiff "will" be unable to pay costs.
Holding and Implications
APPEAL ALLOWED; DEFENDANT'S APPLICATION FOR SECURITY FOR COSTS REFUSED
Direct effect: the Circuit Court order requiring security for costs is set aside and the Plaintiff is not required to furnish security. The court indicated the Plaintiff should be entitled to the costs of the security application on appeal and below, but ordered those costs stayed pending determination of the substantive proceedings; the parties were invited to indicate within 14 days whether a different final order should be argued. The opinion does not purport to establish a new legal precedent; it applies existing authority to the facts and records that the outcome turned on the court's assessment of the limited evidence and the Plaintiff's positive equity and cash position.
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