A company has been ordered to lodge €200,000 security for the legal costs of its insurers’ defence to proceedings relating to structural defects at a development at Artane, Dublin.
The case relates to an alleged failure to indemnify the firm for costs of remedying defects in buildings at “Timber Mills”, a mixed residential and commercial development at Kilmore Road, Artane.
Werdna Ltd is suing MD Insurance Services Ltd, trading as “Premier Guarantee”, and Liberty Syndicate 4472 At Lloyd’s. MD Insurance Services is the scheme administrator of the “Premier Guarantee” structural warranty and, at the material times, acted as agent of the second defendant, part of the Lloyd’s syndicate.
Werdna, which has spent more than €220,000 on remediation works to date, initiated the case in 2013.
After Lloyd’s agreed to indemnify MD Insurance Services in respect of the claim, both defendants applied for security for costs should they successfully defend the case. The defence costs were initially estimated at €540,000, later reduced to about €330,000, plus VAT.
The defendants argued there was an issue about the plaintiffs ability to meet a costs order on grounds including its audited accounts for 2012 to 2016 showed its net liabilities had increased in each financial year.
Werdna argued its financial position has improved as a result of factors including an increase in the value of its property portfolio and a compromise of proceedings taken by it against the management company for the Timber Mills development. It argued the Timber Mills units now have a combined “recommendation guide price” of €7.9 million set out in a valuation report of October 2017 described as an “informal estimation” of likely sale prices.
In her ruling, Ms Justice Marie Baker said that valuation report was based on an assumption the Timber Mills apartments and common areas are compliant with building regulations, in good structural repair and condition and available for vacant possession. The report made clear it was not based on an inspection of the individual units.
Werdna’s property, she noted, also included development lands at Marsh Road, Drogheda, valued at €1.18 million; 3.5 acres at Station Road, Portarlington, Co Laois, valued at €430,000; and property at Newport, Co Tipperary, valued by Werdna at €120,000 but without independent evidence.
The defendants disputed the €7.9 million valuation for the Timber Mills units and proposed a valuation of €6.6 million, she said. Because she could not resolve the conflict in that regard, it was difficult to accept without reservation Werdna’s argument its asset base is considerably better than shown on the filed accounts.
The company’s assets are also held as security concerning a number of registered charges, including a Bank of Ireland loan for €6.9 million, she noted. The secured liabilities, especially of Bank of Ireland, could entirely absorb the assets of the company unless its valuation evidence was accepted.
While Werdna argued it is now in a positive solvent net asset position of about €734,000, the defendants argued the up to date figures suggested net liabilities of about the same amount, she said. An existing Bank of Ireland loan would almost wipe out entirely the net assets contended for and Werdna also continues to trade at a small loss of €45,841.
The judge ruled she was not satisfied, even if the value of Werdna’s asets has increased, the evidence points to sufficient ability to meet the defence costs claim. In the circumstances, she would order Werdna to provide security for costs in the sum of €200,000.
