High Court of Ireland Decisions

1. This is an Application by the Defendants in the above entitled actions, which have earlier been consolidated by Orders of this Court, for an Order pursuant to Section 390 of the Companies Act, 1963 that the Plaintiff, Irish Press Plc, do provide security for the costs of the Applicant Defendants and for an Order staying all proceedings by the Plaintiff until such security is given. The Notice of Motion has been issued under the title of the first two sets of proceedings and presumably on behalf of the Defendants in these two actions, which were consolidated by Order of this Court made the 22nd day of May, 1995. Counsel for the Applicant Defendants informed the Court that it had been intended to include as an Applicant Barbara Manfrey, who is a Defendant in the third action, and wished to amend the Notice of Motion accordingly. It appears to me that there is no real difficulty in so amending the pleadings and Counsel for the Plaintiff did not specifically oppose such amendment. The issues which fall to be decided on the hearing of the Notice of Motion are not substantially altered by the addition of the individual Defendants in the third action as Applicants and I will, therefore, amend the Notice of Motion accordingly.

2. The law in regard to Section 390 has been clearly set out in the judgment of the learned Murphy J. in the case of Bula Limited (In receivership) -v- Tara Mines Limited [1987] I.R. 494 at 496:-

3. As was said by the learned Murphy J. the application of Section 390 has been considered in a large number of cases. In the present application I was referred in particular to Peppard & Company Limited -v- Bogoff [1962] I.R. 180, Jack O'Toole Limited -v- MacEoin Kelly Associates [1986] I.R. 277, S.E.E. Company Limited -v- Public Lighting Services Limited [1987] I.L.R.M. 255, Bula Limited (In Receivership) -v- Tara Mines Limited [1987] I.R. 494, Comhlucht Páipéar Riomhaireachta Teo -v- Údarás Na Gaeltachta [1987] I.R. 684 and [1990] 1 I.R. 320, Fallon -v- An Bord Pleanála [1992] 2 I.R. 380, Lismore Homes Limited (In Receivership) -v- Bank of Ireland Finance Limited [1992] 2 I.R. 57, Irish Press Plc. -v- Ingersoll Irish Publications Limited [1995] 1 I.L.R.M. 117, Trevor Ivory Limited -v- Anderson [1992] 2 N.Z.L.R. 517 (New Zealand Court of Appeal), Campbell Seafoods Limited & Another -v- Brodrene Gram A/S (Unreported) Costello J. 21st July, 1994 and In the Matter of Blakeston Limited ; Beauross Limited -v- Paul Kennedy (Unreported) Morris J. 18th October, 1995.

4. In connection with the history of the factual background to the proceedings I was also referred to the judgment of Barron J. delivered on the 15th December, 1993 (Unreported) which dealt with the substantive issues in the prolonged litigation between Irish Press Public Limited Company and Messrs. Ingersoll Irish Publication Limited.

5. In the present Application both Counsel referred at some length to the nature of the Plaintiff's claim and the strength or otherwise of the defence, about which they not unexpectedly took diametrically opposing views. It does not appear to me, however, that it is any part of my function to assess the weight of either side's case in any detail. As was said by Murphy J. in Bula Limited -v- Tara Mines Limited (Supra) at p.501:-

6. In the present Application, the Plaintiff's claim is one of negligent misrepresentation. The Defendants are a merchant banking firm which were engaged in joint ventures with Ingersoll Publications who were the Defendants in the former lengthy Companies Act litigation carried out by the Plaintiff. Counsel for the Defendants, Mr. Collins, accepts in the context of the present Application that the Plaintiff has an arguable case. It is also clear, despite the view set out in the Affidavits filed on behalf of the Plaintiff, that the Plaintiff's case is not so strong as to show that the Defendants have no real defence.

7. Accordingly, I need go no further into the merits of the substantive litigation.

8. On the authorities, therefore, I should firstly deal with the question of the Plaintiff's ability to pay the costs of the Defendants if they are successful in the action, and subsequently, if I find that there is inability to meet the costs, I should consider whether there exist special circumstances which would justify the refusal of an Order for security for costs. It is for the Defendants/Applicants to establish that the Plaintiff company would be unable to meet the costs, and for the Plaintiff/Respondent to establish the existence of the necessary special circumstances. The Plaintiff company strenuously asserts that it is by no means insolvent and will in fact be able to meet the costs in the event of the Defendants succeeding in their defence. However, they also claim that, if they fail in this aspect of the application, the impecuniosity from which they suffer has been caused by the wrongful acts of the Defendants.

9. In by far the majority of the cases to which I was referred by Counsel the impecunious position of the Plaintiff company is either accepted or obvious; many of the companies were in liquidation at the time of the proceedings. The issues which were dealt with in those cases, therefore, were in regard to the existence of special circumstances which would justify the refusal of an Order.

10. In the judgment of the learned McCarthy J. there is no detailed survey of the finances of the plaintiff company (which was then in liquidation) but at p.325 of the report it is stated that:-

11. It appears that the Supreme Court accepted that this sum of £361,992.00 would be sufficient to meet both the possible costs of the three defendants in the case and the costs of the liquidator.

12. In the present case, of course, the Plaintiff company is not in liquidation and therefore the situation of priority for the Defendants' costs does not arise in the same way as in the Comhlucht Páipéar case.

13. The main case in which the plaintiff company, as in the present case, asserted an ability to meet costs and there is full discussion of this issue is the case of Bula Limited (In Receivership) -v- Tara Mines Limited [1987] I.R. 494.

14. Before turning to consider that case I should refer to the parameters of the costs which are at issue. The Defendants submit that I ought to take into consideration not only the possible costs in the present action in this Court but also the possible costs of an Appeal to the Supreme Court which might be heard at a later stage in the future. It is my view that I am here dealing only with an action in this Court and the costs that may arise therefrom. It is too uncertain a matter to look into the future to try to assess the Plaintiff's ability to meet the costs of a putative appeal to the Supreme Court which may not in fact take place. If there is such an appeal, any appropriate application in regard to costs may be brought to the Supreme Court itself, as has been done in previous cases.

15. An estimate of the possible costs of the Defendants was not provided until a comparatively late stage in the present Application. In his Affidavit sworn on the 10th February, 1997, Noel Guiden, Legal Costs Accountant, estimates the Defendants' costs of a possible six week trial in this Court at some £517,000.00. To this he adds the costs of taxation but I am not prepared to take these extra costs into consideration at this stage. On behalf of the Plaintiff, Mr. Hugh Garvey, Solicitor, in an Affidavit sworn on the 14th February, 1997 does not seriously challenge this estimate but suggests that if the issue of the actual liability of the Defendants were to be tried as a preliminary issue, either on the application of one of the parties or by direction of the trial Judge, the length of the trial and therefore the costs could be considerably reduced. This is a possibility but no more than a possibility and I do not feel that it is one that can confidently be relied on. However, when looking at the question of security for costs I must also bear in mind the dictum of Fitzgibbon J. in Perry -v- Straitham [1928] I.R. 580 at 583:-

16. I now turn to a consideration of the learned Murphy J.'s analysis of the requirements of Section 390 and their application in the case of Bula Limited -v- Tara Mines Limited [1987] I.R. 494.

17. Mr. Collins for the defendant relies strongly on the learned Murphy J.'s interpretation of the wording of Section 390 at p.498 of his judgment in the Bula case:-

18. Counsel for the plaintiff, Mr. Gardiner, highlights the phrase " would be unable to pay the costs" and stresses that this goes further than a determination that a company may be unable to pay the costs.

19. In the event, however, both the various Affidavits and the submissions of Counsel in the present Application dealt in very considerable detail with the financial position of the Plaintiff company and its connected companies and although I completely accept the dictum of Murphy J., it is necessary, at least, to outline the financial situation of the Plaintiff. The evidence before the Court in regard to the financial position of the Plaintiff is in the main contained in the Affidavits of Patrick McSwiney, Chartered Accountant sworn on 17th June, 1996 and 10th February, 1997 on behalf of the Defendants and the Affidavits of Eanna McHugh, Chartered Accountant sworn on 11th October, 1996 and 14th February, 1997 on behalf of the Plaintiff. The financial position of the Plaintiff company is also dealt with in the final section of the replying Affidavit of Eamon de Valera, Managing Director of the Plaintiff company sworn on 19th September, 1996. The major part of Mr. de Valera's replying Affidavit is taken up with establishing the merits of the Plaintiff's case and as I have said earlier I have accepted that the Plaintiff has an arguable case. The financial situation of the Plaintiff as at 31st March, 1996 is also addressed in some detail in the second Affidavit of Eamon de Valera sworn the 14th day of February, 1997.

20. The Plaintiff is a public company with seven subsidiary companies. The history of the various companies is somewhat complex and is intertwined with the unfortunate history of the relationship between the Irish Press Companies and the Ingersoll Companies. There is no need to go into that background here: it is fully set out in the judgment of the learned Barron J. in Irish Press Plc -v- Ingersoll (Ireland) Limited (Unreported) 15th December, 1993.

21. Of the seven subsidiary companies, two are 75.1% owned by the Plaintiff. These are Irish Press Newspaper Limited, the company which actually published the three newspapers in the Irish Press Group, and Irish Press Publications Limited, the company which owes the titles of the three newspapers.

22. It is clear that Irish Press Newspaper Limited is insolvent and a liquidator has been appointed. While that company is of no asset value to the Plaintiff, it is also clear that the Plaintiff is not responsible for that company's debts. In particular, a sum of £1,000,000 is owed by Irish Press Newspaper Limited to Independent Newspapers. There was lengthy discussion of this debt and its effect on the balance sheets of the Plaintiff and the Irish Press Group, both in the Affidavit evidence and in Counsel's submissions, but from a practical point of view it seems to me that the important factor relevant to this application is that this debt will not fall to be paid by the Plaintiff company.

23. As far as Irish Press Publications Limited is concerned, Mr. McSwiney in his first affidavit devoted considerable space to establishing - to his satisfaction at any rate - that the newspaper titles were no longer of any commercial value. In point of fact it appears from the Affidavits of Dr. De Valera and Mr. McHugh, Accountant, that the Plaintiff does not attribute any value in its balance sheets to the titles held by Irish Press Publications Limited. They are therefore not an asset of value to the Plaintiff.

24. The remaining subsidiary companies are wholly owned by the Plaintiff. They are as follows:-

25. In their Affidavits and submissions the Defendants highlight the fact that the Plaintiff company is no longer trading and is unlikely to trade in the near future, while it has continuing substantial costs. The Defendants expressed the fear that the Plaintiff's assets are diminishing and that by the time the proceedings in this Court are complete, the Plaintiff's will be unable to meet the costs. The Defendants also complain that the major assets of the Plaintiff are held in the Jersey company and that there may well be difficulties in recovering any costs from this Company.

26. Counsel for the Plaintiff submits that the subsidiary companies, including the Jersey company, are completely under the control of the Plaintiff and that in the event of costs being ordered against the Plaintiff, there would be no difficulty in using the assets of the subsidiary companies to meet the costs. While I would not, perhaps, take quite so sanguine a view of the matter as does Counsel for the Plaintiff, I do not feel that the fact that the Plaintiff's assets are held through wholly owned subsidiary companies will create as much difficulty as is anticipated by the Defendants.

27. I accept that the Plaintiff is no longer trading and has no trading income. However, it continues to have some investment income and its future costs apart from the remuneration of directors should not be large, given that it appears to have abandoned its attempt to re-launch the newspapers. While mention is made in the accounts of possible claims by an ex-employee and the pension fund trustees, these claims have not been pursued other than by one letter in each case. Any possible claim would seem to be well behind the claims of the Defendants' costs since the present proceedings are well under way.

28. In considering the position of the Plaintiff in the context of the test under Section 390 as set out by Murphy J. in the Bula case referred to above, I feel I should bear in mind the facts of that case and the reasons why the learned Judge held in that case that there was reason to believe that Bula Limited would be unable to pay the costs of the Defendant. Bula had claimed that despite their financial difficulties they had the valuable asset of the ore body which greatly exceeded the company's indebtedness of £40,000,000 to its Banks. Bula made various claims as to the value of the ore body but in fact when it was offered for sale by the Receiver "the only bid received was in a sum of which was a small fraction of the value for which the Plaintiffs contend" (page 498). The general position of Bula Limited is set out at page 497-8 of the Report as follows:-

29. This goes very far beyond the position of the Plaintiff/Respondent in the present application. While Irish Press Plc. is not in a particularly happy position and while its assets appear to be diminishing, it is not insolvent and continues to hold reasonably substantial assets through its subsidiary companies. I must also take account of the fact that Mr. McHugh, a partner in the firm of Messrs. Deloitte and Touche, who is not a director or member of the Plaintiff company but the audit partner with overall responsibility for the Plaintiff's audit, is prepared as a professional accountant with full knowledge of the Plaintiff's financial affairs to aver that in his opinion the assets of the Plaintiff will be sufficient to discharge the costs of the Defendants.

30. On reading all the helpful authorities to which Counsel have referred me, I also gain the impression that on balance the Courts have tended to lean against the making of Orders for security for costs. In his judgment in the Supreme Court in the case of S.E.E. Company -v- Public Lighting Services , [1987] I.L.R.M. 255 at 258, the learned McCarthy J. said:-

31. The learned McCarthy J. in the same judgment also referred to the "David and Goliath scenario that seems to mark applications under the section of the Companies Act." While I accept, as was submitted by Counsel for the Defendants in this case, that the constitutional right of access to the Courts is primarily available to natural persons and that the Courts must be careful not to render Section 390 nugatory, it seems to me that in his judgment the learned McCarthy J. is expressing the general tenor of judgments in this Court and in the Supreme Court in regard to security for costs under Section 390 of the Companies Act, 1963.

32. On the balance of the evidence available, I feel that the Plaintiff has sufficient resources to meet the Defendants' costs in the proceedings in this Court, should such costs be awarded against the Plaintiff. It does not seem to me that the liabilities of the Plaintiff company itself are such as to materially alter this position and I would anticipate that the outgoings of the Plaintiff in the fairly immediate future should not be extraordinarily heavy. On the balance of the evidence, therefore, I will refuse the Order sought.

33. Since I have decided the matter on this ground, I do not need to consider the alternative submission of the Plaintiff that any impecuniosity of the Plaintiff is due to the Defendants wrongful acts and I express no opinion on this ground.