Ryconlou Limited v Conlon

[2026] IEHC 152 THE HIGH COURT [2025/270 CA] BETWEEN: RYCONLOU LIMITED PLAINTIFF AND THOMAS CONLON DEFENDANT JUDGMENT of Mr. Justice Barry O’Donnell delivered on the 10th day of March, 2026 INTRODUCTION 1. This is an appeal by the plaintiff from an order made on the 6 November 2025 in the Circuit Court, Midlands Circuit, by Her Honour Judge Karen Fergus, in which the learned Judge directed the plaintiff to furnish security for costs to the defendant. 2. The application for security was made in the context of landlord and tenant proceedings concerning a licensed premises in Athlone, Co. Westmeath. The parties had entered into a lease dated the 17 June 2019 for an annual rent of €85,580 plus VAT. The lease expired on the 31 March 2025, and the plaintiff tenant remained in occupation. The plaintiff issued a Landlord and Tenant Civil Bill on the 15 May 2025 seeking relief pursuant to Part II of the Landlord and Tenant (Amendment) Act, 1980. There is a claim to a new tenancy and alternatively a claim for compensation for improvements pursuant to Part IV of the same Act and for disturbance. The defendant landlord entered an appearance on the 20 May 2025 and issued a notice of motion seeking security for costs on the 12 August 2025. 3. Before considering the evidence adduced and the arguments made it is necessary to set out the legal principles to be applied. The parties were largely in agreement as to the principles but differed in terms of the application of the principles and the emphasis to be placed on certain elements of the principles. APPLICABLE PRINCIPLES 4. The statutory basis for this application is provided for in section 52 of the Companies Act 2014, which provides as follows:- “Where a company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his or her defence, require security to be given for those costs and may stay all proceedings until the security is given.” 5. The test in section 52 of the 2014 replicates with certain modifications the test in section 390 of the Companies Act, 1963. The modifications are not material to this application and therefore the caselaw relating to section 390 of the 1963 Act remains apposite. 6. The proper test for deciding whether security for costs should be awarded under the statutory test has been repeated on many occasions and is that set out by Clarke J. in the Supreme Court Usk District Residents Association v. Environmental Protection Agency [2006] IESC 1, at para 6.2:- “In order to succeed in obtaining security for costs an initial onus rests upon the moving party to establish:- a) that he has a prima facie defence to the plaintiff's claim, and b) that the plaintiff will not be able to pay the moving party's costs if the moving party be successful; 2. In the event that the above two facts are established then security ought to be required unless it can be shown that there are specific circumstances in the case which ought to cause the court to exercise its discretion not to make the order sought. In this regard the onus vests upon the party resisting the order.” 7. Helpfully and solely for the purposes of this application, the plaintiff was willing to accept that the defendant had a prima facie defence. Hence the threshold question was whether the defendant has established that there is reason to believe that the plaintiff will be unable to pay the costs of the defendant in the event that he is successful in defending the proceedings. 8. I am satisfied that the proper approach to this issue is set out in the judgment of Barniville J. (as he then was) in Coolbrook Developments Ltd v. Lington Development Ltd and Davy Target Investments plc [2018] IEHC 634 (Coolbrook). 9. In that case there was a dispute in relation to the costs estimates provided to the court, and a dispute as to whether the plaintiff would be able to discharge costs in the event that the defendants succeeded in defending the proceedings, with the plaintiff contending that it would be able to discharge the costs by reference to either estimate. 10. For the purposes of the matters in issue in this application, Barniville J. engaged in a comprehensive review of the authorities and noted a number of important matters. First, the applicant for security must show that there is 'reason to believe' that the company will be unable to pay the costs of the applicant if successful in its defence of the proceedings, and that this must be done by ' credible testimony'. The Supreme Court had analysed the same language in the test under s. 390 of the 1963 Act in IBB Internet Services Ltd v. Motorola Ltd [2013] IESC 53 ('IBB'). 11. Barniville J. noted that the Supreme Court had found that the words “credible testimony” did not add anything to the section, as the court can only form a view on the basis of testimony that it found to be credible. Hence the real question was 'what must appear to the court to be the case as a result of that credible testimony'? 12. The Supreme Court agreed with the approach articulated by the Corut of Appeal of England and Wales in Jirehouse Capital & anor. v. Beller & anor. [2009] 1 WLR 751 (' Jirehouse'), where Arden L.J. had held that “reason to believe” should not be elevated to a test on the balance of probabilities. The Supreme Court noted that what was required involved a prediction of future uncertain events. In that regard, Clarke J. stated at para 5.16, (with my emphasis added): “As was pointed out in Jirehouse the fact that there must be reason to believe that the company ‘will’ be unable to pay necessarily implies that what must be established is something a lot stronger than a mere risk. The phrase ‘reason to believe’ should not be further defined, again for the reasons set out in Jirehouse, to avoid the risk of changing the test. While it does not require the court to assess the matter on the balance of probabilities, it does require the court to consider all material evidence and reach an assessment of the range of likely eventualities and thereby determine whether there truly is ‘reason to believe’ that the company ‘will’ be unable to pay costs should it lose. That requires that the evidence satisfy the court that there is something significantly greater than a mere risk of such an eventuality occurring.” 13. As they were relied on by the plaintiff, I also have considered the views expressed by Hogan J. in Greenclean Waste Management Limited v. Leahy [2013] IEHC 74, at paras 10 and 11 where he stated in relation to section 390 of the 1963 Act: “10. The section does not in terms say that the party seeking security must establish as a matter of probability the likelihood of the company's inability to pay the costs. Yet it is nonetheless clear that the risks of this occurring must be significant, appreciable and weighty. The Oireachtas, after all, stipulated that these risks must be established by “credible testimony”. Furthermore, the fact the section makes reference to the existence of a “reason to believe”, strongly suggests that the risks must be objectively evaluated and weighed dispassionately, even if they are incapable of precise measurement. 11. At the same time, the section provides that the court must have reason to believe “that the company will be unable to pay the costs of the defendant” (emphasis supplied). It will not suffice that the Court should think that the company might not be in a position to discharge these costs.” 14. Hogan J. went on to summarise at para 14, that “the Court must be satisfied following an evaluation of all the relevant evidence that there are weighty and objectively reasonable grounds to believe that this event will happen.” 15. The judgment in Greenclean was delivered prior to the delivery of the judgment in IBB. Hence, insofar as Greenclean might be understood as suggesting that the applicant must reach a higher standard of proof than that explained in IBB, the approach of the Supreme Court must be followed. Nonetheless, I accept that the risk of an inability to pay costs – being “a lot stronger than mere risk” – seems aptly described as “appreciable”. 16. It can also be noted, as referred to in Coolbrook, that the Court of Appeal in Flannery and Lexington Services Ltd v. Walters & Ors [2015] IECA 147, concluded that the High Court had erred in basing its conclusion that there was no reason to believe that the plaintiff would be able to pay costs based on the fact that the relevant company's financial statements showed a positive net asset position and had expressed the view that that was the most relevant consideration in assessing the company's ability to meet a costs order. In that appeal, Finlay Geoghegan J. held that, even in the absence of expert evidence, the company's financial statements required explanation and there were uncertainties in those statements relating to the company's ability to meet the defendants’ costs. She concluded that without further explanation the financial statements disclosed a significant risk that the company would not be able to meet such costs. 17. At para 59 of Coolbrook the Court also noted an additional principle of law which must be applied in this analysis: “Where the evidence available to the court discloses circumstances in relation to the financial position of the company which calls for an explanation and where the company does not put that explanation and evidence supporting it before the court, the court should not resolve the uncertainty or fill the gap in favour of the company which could have provided the relevant explanation. This principle emerges from the decisions of Clarke J. in the High Court in Parolen Ltd v. Doherty & Anor [2010] IEHC 71 (' Parolen') and James Elliott Construction Ltd v. Irish Asphalt Ltd [2010] IEHC 234 (' James Elliott').” 18. In light of the review of the case law conducted by Barniville J. in which he set out the applicable elements of the test, the underlying principles can be summarised as follows: a. The onus rests on the applicant for security for costs to persuade the court that there is ' reason to believe' that the company – the subject of the application – will be unable to pay the costs of the defendant, if successful in its defence. b. The standard by which this inability has to be established is not the balance of probabilities. As the requirement is to establish that there is reason to believe that the company 'will' be unable to meet a costs order in favour of the defendant, something a lot stronger than a 'mere risk' of this event happening must be established. c. The court must consider the issue on the basis of all of the material evidence and such evidence may emanate from both sides of the application. The evidence must be credible. d. While the accounts or financial statements of the company are very relevant to the issue which the court has to determine and may afford a basis for deciding the application one way or the other, they are not necessarily determinative of the application. The accounts may disclose a positive net asset position and yet may raise other questions or issues requiring an explanation from the company. Depending on how those questions are explained or answered, the court may conclude that the true financial position of the company is very different to the financial position as it may appear in the accounts or financial statements. e. Where there are gaps or uncertainties in the accounts or in the evidence available to the court which could be filled or answered by the company resisting the application and where the company does not fill those gaps or answer those uncertainties, the court will lean against filling the unexplained gaps or resolving the uncertainties in a manner favourable to the company. 19. I am satisfied that these are the correct principles to be applied to this appeal. THE EVIDENCE BEFORE THE COURT 20. As discussed in more detail below, the evidence adduced in this application presented a number of difficulties. In particular, while each side exhibited letters from accountants that addressed the question of the plaintiff’s finances, these were short and did not engage in any detailed or substantial analysis of what was disclosed in the available financial statements. Unhelpfully, it was apparent that neither accountant engaged with what had been said by the other, with the result that potential areas of dispute were unexplored or left hanging. 21. On the 12 August 2025, the defendant, Thomas Conlon, swore an affidavit grounding the application. Mr. Conlon stated that he had been advised by Hughes Flynn Legal Costs Accountants that the estimated cost of defending the proceedings was €55,100 (inclusive of VAT). In addressing the ability of the plaintiff to meet those costs if the defence was successful, he relied on the advice from his accountant. In that regard he exhibited a letter dated the 5 August 2025 from Thomas Ganley & Co., Chartered Accountants. The letter is short and can be set out in full: “I refer to your recent request that I take a critical look over the most recently filed abridged financial statements for Ryconlou Limited and advise you of my conclusions with regard to financial performance and standing. The most recently filed abridged financial statements for Ryconlou Limited are for year ended 30th April 2024. There is a liquidity problem with this company as at the 30th April 2024 because the current liabilities €428,383 exceed the current assets €394,801 giving rise to a negative working capital amounting to €33,582. On the face of it a negative working capital would suggest that the company will have difficulty meeting its financial commitments. It appears that the liquidity situation deteriorated by approximately €560 per week in the last accounting year as the negative working capital at 30th April 2023 was just €4,443. Furthermore, over the last accounting year, the company reported losses of €51,593 notwithstanding a reduction of €115,000 in director's pension costs, which would be consistent with the deteriorating working capital position. The combination of sustained losses, deteriorating liquidity and a debt of €67,753 owed by related parties, in my view, points towards a looming financial crisis for Ryconlou Limited.” 22. As can be seen, the letter was somewhat terse and informal and did not append the reports that were considered. Nevertheless, the letter was prepared by a chartered accountant who identified and considered the most recent financial statements filed by the company. While the analysis is limited, and it would have been far better had Mr. Ganly appended the reports that he considered and set them out in greater detail, the letter sets out a bare but credible basis for the defendant’s contention that there was reason to believe that the plaintiff company will be unable to pay the defendant’s costs. In that sense, the plaintiff was required to explain and respond to the matters identified by Mr. Ganley. 23. On the 3 October 2025, Ryan Leneghan, a director of the plaintiff and the holder of 100% of the issued share capital, swore a replying affidavit. In terms of the issue of the plaintiff’s ability to meet an order for costs, Mr. Leneghan disputed the potential quantum of costs and stated that the company had been advised that the likely costs would be €24,535 (exclusive of VAT). Mr. Leneghan averred that the company was in a healthy financial position and could pay the defendant’s costs. 24. In addition to referring to accounting evidence (which I will address later), Mr. Leneghan referred to a property valuation report from Power Property. On its own terms, the report was directed to providing a market rental valuation. The report notes that the sources of information relief upon included “Trading Information from 2018 to 2024” and “Forecast Trading Figures 2025 & 2026”. 25. Those matters are addressed in section 15 of the report, and a table is produced which was described as based on figures provided by the plaintiff “stripped from the Audited Accounts, Management Accounts and Forecast Figures which relate to the subject property only.” The report notes a positive trend, taking into account pre and post Covid turnover figures. The forecasted turnover for 2025 was estimated at circa €1.9mil., with a forecast turnover of circa €2.1mil. for 2026. The report notes three extraordinary items: (a) in 2019, there was a debt forgiveness of €220,000 relating to intercompany loan balances; (b) in 2023, the directors extracted €130,000 in the form of pension contributions; and (c) in 2024, a payment of €110,000 was made in settlement of a claim by a member of staff. The report states that taking those matters into account and excluding the Covid interrupted years, the average stabilised EBIDTA is in the region of €270,000 for the period 2023 to 2026. 26. In terms of my treatment of the report from the valuer, it can be noted that it was not prepared by an accountant or auditor. To the extent that it referred to estimates based on figures provided by the company, the underlying information was not exhibited or verified in any substantial sense by Mr. Leneghan. This meant that the court and the defendant were asked to consider assertions in a report from a third party exhibited by a company officer, which assertions were grounded in representations and information made to the author of the report by the company, but where that underlying information was not made available. 27. In those premises, while accepting that this is an interlocutory matter in the Circuit Court and that the parties are not expected to turn the application into a form of mini-trial, I am concerned that the raw materials available to Power Property were not made available to the court, or, at the very least, directly addressed and verified by Mr. Leneghan in his capacity as a director of the plaintiff. This has added a level of opacity to the process and deprived the defendant of the opportunity to respond to the matters set out in the report. While I am prepared to afford some very modest weight to the matters set out in the property valuation report, I do not consider that on its own it could be relied upon in deciding on whether there is reason to believe that the company will not be able to meet an order for costs in this action. At the risk of unnecessary repetition, if the company wanted the court to rely on the figures provided to Power Property it could very easily have provided those figures by way of direct affidavit evidence and exhibits. 28. Mr. Leneghan himself went on to state that “stabilised earnings before interest, taxes, depreciation and amortization is expected to be in the region of €270,000 for the period 2023 to 2026 inclusive.” Again, Mr. Leneghan chose not to exhibit any materials supporting that assertion. While the statement was made by a director of the plaintiff, which adds some weight to what was stated, the fact is that Mr. Leneghan has access to the relevant information and management accounts and ought to have provided a far greater level of detail and supporting information. 29. This is relevant in the context of the principle mentioned above that, in effect, it is a matter for the plaintiff to fill in any informational gaps about its financial status. This is an adversarial process, and court has no independent access to the company’s financial information. Once the plaintiff joins issue with the matters raised by the defendant, the court has to consider all of the material evidence as a whole to come to a conclusion. In light of what was stated by Mr. Ganly in his letter, it was a matter for the company to provide a detailed explanation of its financial position and to address issues of concern. As matters stand, where the company did not provide any supporting information, the assertion relating to expected EBITDA must be treated as just that, as assertion. 30. Mr Leneghan also referred to and exhibited a letter dated the 16 September 2025 from Thomas McDonald of PFK Benson Lawlor, the plaintiff’s accountants. That letter is also quite terse and can be set out in full: “I confirm that PKF Benson Lawler Ltd is and has been the accountant, tax and company secretarial agent for this company since it commenced trading in 2013, twelve years ago. The company operates a leasehold “Piano Bar” in the centre of Athlone. As is common in many startups the initial trading periods in this business were difficult and losses were incurred, these losses were personally underwritten by the directors who advanced significant levels of money to the business via director's loans at that time. Over the last four years the business has been much stronger and it has generated positive profits and cashflow, €585,438 over the four year period to April 2025. Based on my discussions with the directors they are confident that the business will continue to generate further profits in the coming years. Throughout the twelve year period of the company's life it has fully paid its creditors, its staff, it's landlord and other costs, there are no arrears.” 31. The following matters can immediately be noted from Mr. McDonald’s letter: (a) it does not refer to or respond in terms to the letter from Mr. Ganly, and therefore does not engage expressly with the issues of concern raised in the earlier letter; (b) it does not append or treat in any detail the financial statements or reports filed by the company; (c) there is no reference to or corroboration of the management accounts or projections that were said to have been provided to Power Property; and (d) insofar as Mr. McDonald refers to the post April 2025 position, he relies on discussions with the directors and their confidence that the business will continue to be profitable. 32. On the more positive side, Mr. McDonald states without any caveats that the business has generated positive profits in the four years to April 2025 and that it has no arrears, having fully paid its creditors, staff, landlord and costs. 33. Finally, Mr. Leneghan exhibited Abridged Financial Statements for the company for the year ended April 2024 which were signed off by the directors on the 25 September 2024. The financial statements record total assets less current liabilities of €108,716, and total equity of the same amount. The figures presented included cash at bank and in hand of €215,632. The notes to the financial statements show that 40 persons were employed, and that there was not expected to be any tax liability for the year in question. There was a recorded loss of €51,593 for the year, but reserves of €108,616. The notes set out that the plaintiff is part of a group of companies under common control with Bar Vista Limited and Bridge House Hotel Limited. It was noted that in the period under consideration the plaintiff had made loan advances to those companies and the balances owing to the plaintiff were €57,947 and €19,685. 34. Mr. Conlon swore a further affidavit on the 29 October 2025. The purpose of the affidavit was to exhibit the plaintiff’s abridged financial statements for the years ending the 30 April 2020, 2022, 2023, and 2024. In addition, Mr. Conlon exhibited the abridged financial statements for year ended the 30 April 2024 for Bar Vista Limited and Bridge House Hotel Limited. ARGUMENTS AND DISCUSSION 35. The defendant contended that on the basis of Mr. Ganly’s letter there was sufficient evidence to permit the court to conclude for the purposes of an application of this type that the company will not be able to pay the defendant’s costs, and that the assertion of a “looming financial crisis” constitutes something more than the identification of a “mere risk” of an inability to pay costs. Inasmuch as the plaintiff in submissions made a number of very strongly worded criticisms of the approach adopted by Mr. Ganly, the defendant observes, correctly in my view, that the plaintiff did not in fact adduce any evidence in the form of a contrary professional opinion that expressed any direct criticism of Mr. Ganly. It is fully open to a company to take issue with and dispute the views expressed by a witness such as Mr. Ganly, however Mr. McDonald’s letter did not address or take issue with Mr. Ganly’s professionalism. In that sense, other than in relation the treatment of Mr. Ganly’s overall view on the company’s finances, I consider that the criticism directed to his professionalism was unwarranted. 36. In terms of the financial information, the defendant notes that the company owed more money to creditors than the cash in hand available, and that the abridged financial statements clearly identify that the company returned a loss of €51,593 for the year ending April 2024. However, there was no evidence or analysis from either side of the due dates of any debts and it can be noted that, in 2024, the directors signed off on the company as a going concern. 37. The plaintiff company as noted above highlighted that Mr. Ganly ignored or failed to refer to the reserves of €108,716 set out in the financial statements, and that the company had cash in hand of €215,632. The plaintiff also highlighted that the company had paid down its director’s loans, which was said to reflect the rude financial health of the company, and that this payment was a once off non-recurring payment. Finally the plaintiff highlighted that the financial statements show that debts were reducing with creditors repaid over €100,000. 38. As noted above, to succeed in this application the defendant has to satisfy the court that a consideration of all the material evidence leads to the conclusion that there is reason to believe that company will (and not might) be unable to pay the costs if it succeeds in its defence. I have considered all the material evidence, and I am not so satisfied. I reach that conclusion with a measure of frustration at the manner in which each side presented the evidence. The evidence from the accountants was very limited and avoided a detailed engagement with each other’s analysis. There was no proper expert analysis of the abridged financial statements. I was concerned that Mr. Lenaghan chose not to put the information provided to Power Property before the court. 39. Nevertheless and on balance I do not consider that the letter from Mr. Ganly – which in reality was the only substantial analysis from the defendant’ side – when considered in light of the response from the plaintiff, met the necessary threshold. It does not establish by any thorough analysis a risk that could be described as appreciable or a lot stronger than mere risk that the company will be unable to pay costs. It was open to the defendant to seek to have Mr. Ganly respond to what was put in evidence by the plaintiff and to identify whether and if so why he remained of the view that there was a “looming financial crisis”, but this did not occur. Given the positive equity position identified by the plaintiff and to a far lesser extent the limited evidence in the form of forecasts I am not persuaded that the company will be unable to pay costs when this action is concluded. 40. In the premises, I propose to allow the appeal and refuse the defendant’s application for security for costs. As the defendant has failed to persuade the court that he is entitled to an award of security for costs, my preliminary view is that the plaintiff should be entitled to the costs of the application on appeal and before the Circuit Court, but that there should be a stay on those costs pending the determination of the substantive proceedings in the Circuit Court. I am anxious to avoid the parties incurring further costs unnecessarily and further delaying the progress of the underlying action, so I will require the parties to inform the court by writing to the Registrar within 14 days of the date of delivery of this judgment as to whether or not either of them wishes to argue for a different final order. If there is such a request, the court will fix a date and time for that hearing. If there is no need for a hearing, the court’s order will stand as proposed.