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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Comcost International Holdings Incorporated & ors -v- Minister for Public Enterprise & ors [2014] IEHC 18 (24 January 2014)
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Cite as: [2014] IEHC 18
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Judgment Title: Comcost International Holdings Incorporated & ors -v- Minister for Public Enterprise & ors Neutral Citation: [2014] IEHC 18 High Court Record Number: 2011 9288P / 2011 15119P Date of Delivery: 24/01/2014 Court: High Court Composition of Court: Judgment by: Ryan J. Status of Judgment: Approved |
Neutral Citation: [2014] IEHC 18 THE HIGH COURT [2001 No. 9288 P.]
[2001 No. 15119 P.] BETWEEN COMCAST INTERNATIONAL HOLDINGS INCORPORATED, DECLAN GANLEY, GANLEY INTERNATIONAL LIMITED AND GCI LIMITED PLAINTIFFS AND
THE MINISTER FOR PUBLIC ENTERPRISE, MICHAEL LOWRY, ESAT TELECOMMUNICATIONS LIMITED, DENIS O’BRIEN, IRELAND THE ATTORNEY GENERAL DEFENDANTS JUDGMENT of Mr Justice Ryan delivered the 24th January, 2014 This is an application by the fourth defendant, Denis O’Brien, pursuant to Order 29 of the Rules of the Superior Courts. He seeks orders that the first plaintiff, Comcast International Holdings Inc, and the third plaintiff, Ganley International Ltd, furnish security for his costs in these actions. The fourth plaintiff, GCI Limited, is no longer in existence, having been dissolved on the 18th September, 2003 and it is agreed that it may be struck out of the action without further order. Mr O’Brien does not seek an order for security for costs against Mr Ganley. The basis of the application is that these two companies are out of the jurisdiction, have no assets and will not be able to meet any order for costs in favour of Mr O’Brien if he wins the case. Order 29 is as follows.
2. A defendant shall not be entitled to an order for security for costs solely on the ground that the plaintiff resides in Northern Ireland. 3. No defendant shall be entitled to an order for security for costs by reason of any plaintiff being resident out of the jurisdiction of the Court, unless upon a satisfactory affidavit that such defendant has a defence upon the merits. There are two sets of proceedings that are in very similar terms except that No. 9288 P seeks “a declaration that the decision of the 16th June, 1995, whereby the deadline of the 23rd June, 1995, for the receipt of tenders for the award of the second GSM Mobile Telephone Licence was extended, is null and void and of no effect”. It goes on to claim damages. In proceedings No. 15119 P, the first claim is for “a declaration that the decision, announced on the 25th October, 1995, to award the second GSM Mobile Telephony Licence to ESAT Digifone Limited is unlawful, null and void and to no effect”. That summons also proceeds to claim damages. The plaintiffs’ complaint is expressed as follows at para. 15 of the statements of claim:-
The plaintiffs claim to have suffered loss and damage in amounts to be ascertained in respect of loss of opportunity to have been awarded the licence, loss of profits in respect of the operation of the licence, tender costs and miscellaneous. The plenary summons in No. 9288 P. was issued on the 15th June, 2001, and in No. 15119 P. on the 10th October, 2001. Appearances were entered, but there was a long delay before statements of claim were delivered on the 3rd June, 2005. The procedural history may be briefly summarised but nothing turns on it in this application except to a limited degree in respect of a point made by the plaintiff against Mr. O’Brien that he delayed in bringing his motion for security for costs. The proceedings lay dormant for a period of years pending the publication of the report of the Tribunal to inquire into certain payments to politicians (the Moriarty Tribunal). When the plaintiffs served notice of intention to proceed and followed with statements of claim, the defendants moved to strike out the proceedings on the grounds of delay. By order of this Court, the defendants’ applications were successful and the actions were ordered to be struck out but on appeal to the Supreme Court, by order of the 17th July, 2012 (the reasons for which were given in judgments of the 17th October, 2012) the decision of this Court was reversed and the actions were permitted to proceed. Mr. O’Brien’s claim as presented by Mr. Jim O’Callaghan S.C. can be summarised as follows:
2. The first plaintiff is a company incorporated in the USA and the third plaintiff is a company incorporated in the United Kingdom. 3. Each of these companies has very little assets: the first plaintiff appears to be a $100 company which is part of a large and asset rich network of corporations, but the first plaintiff is the poor relation, having no apparent activity and no existence except for its function as plaintiff in this case and as part of the application that was made for the GSM licence. In the affidavit of Mr. Block, General Counsel and secretary of the Group of which the first plaintiff is a small part, he says at para. 15 that funds will be made available to the first plaintiff to enable it to prosecute the action. But Mr. O’Callaghan points out that such an undertaking if reliable is of no value to his client in the event that the defendants succeed and are awarded costs. There is no undertaking to put money into the first plaintiff in order to meet a liability for costs that is imposed by this court. 4. As to the third plaintiff, it has been dormant for many years and such accounts as were filed, before the relief of not having to file returns because of dormancy, was invoked were entirely pro forma and precisely the same year on year. 5. Since these companies are located outside of the State, the defendant Mr. O’Brien is prima facie entitled to an order for security of costs. They are at best impecunious and at worst either insolvent or close to that condition. Either way, there is no way that they would be in a position to meet an award of costs of the kind likely to result from the unsuccessful prosecution of this action. Then Mr. O’Moore refers to special circumstances as recognised by the authorities which operate to defeat a claim for security that would otherwise be ordered and which are considered in sequence below. The issues that arise for consideration fall into two categories;
(b) If so, are there present in the case some special circumstances that deprive the applicant of security as a matter of the balance of justice between the parties? The grounding affidavit is dated 4th December, 2006 and sworn by Mr Colman Candy, a solicitor in the firm of Meagher Solicitors who are on record for the fourth defendant. Mr. Candy sets out the background to the claim which was the award of the GSM II phone licence on the 16th May, 1996 which award followed a competitive application process conducted in 1995. The fourth defendant, Denis O’Brien was chairman of ESAT Digifone Limited, which was granted the exclusive right to negotiate for the licence. The Cellstar application, in which the first and third plaintiffs participated, came last of the six applicants. Mr. Candy says that Comcast International Holdings Incorporated “is of very limited solvency, and is incorporated in the US”, in which circumstances he seeks an order providing security for costs. In respect of Ganley International Limited, Mr. Candy deposes that it was incorporated as a shelf company called Acegrind Limited in the UK on the 1st February, 1994 with an issued share capital of £100 of which two shares were taken up. He gives a history of this company, asserting that it is in significant financial difficulty. He states that the directors made an application for voluntary strike off on the 31st October, 2000 but that did not go ahead. On 7th May, 2002 the company was struck off the register and dissolved because it had failed to make annual returns. The company was restored on the 18th March, 2004 but he asserts that it is dormant and in obvious penury as shown from the abbreviated accounts and its history and it has sought and obtained leave to provide limited information based on its non-trading condition. In his replying affidavit sworn on 25th February, 2013 Mr Block says that the first plaintiff is a wholly-owned subsidiary of Comcast but ownership and control of the first plaintiff is not held by Comcast directly but rather through another wholly owned subsidiary. Mr. Block says, at para. 12 of his affidavit:-
(b) The applicant, Mr. O’Brien, has delayed, (c) Mr. Declan Ganley, the second plaintiff, is a citizen and resident of Ireland, (d) It is a matter of public concern that the issues in contention in the action should be determined. Mr Paul Meagher, the principal of the firm acting for Mr O’Brien, in his affidavit sworn on 13th March, 2013 addresses the affidavit of Mr. Block and says that he does not make an averment that finance will actually be forthcoming from the other entities that Mr. Block mentions. He states simply as to the four points that Mr. Block makes that they are without merit and foundation, and are more properly a matter for legal submission. In another affidavit, sworn on the 13th March, 2013, Mr. Meagher responds to Mr. Ganley’s affidavit and the points that he lists. He deposes that the fourth defendant does have a good defence on the merits and that Ganley International is aware of that defence. He says that the amount of security for costs only arises at a later stage. He repeats his comments about the four points. Mr. Denis O’Brien, the fourth defendant, in his affidavit of the 20th March, 2013, says: - “I say and believe and am advised, that I have a good defence on the merits in this action and that this defence is set out in detail in the Defence and Counterclaim dated 15th May, 2006.” In another affidavit dated 20th March, 2013 Mr. Meagher deals with the fact that there are two actions in being, explaining that the plaintiffs issued separate proceedings by way of two summons and he seeks that the affidavits in the motion should be treated as applying to both cases. The issues are as follows:- A. (1) Are the plaintiff companies impecunious?
(2) Is the fourth defendant disentitled to security by reason of delay? (3) Is the personal co-plaintiff Mr. Ganley’s availability as a mark for damages a reason for refusing the order? (4) Is there a public interest in the litigation that the corporate plaintiffs can invoke to resist the application? (5) Does the fourth defendant’s counterclaim disentitle him from getting security? “From these decisions the following principles of law appear to arise.
(2) This is not an absolute right and the court must exercise a discretion based on the facts of each individual case. (3) Poverty on the part of the plaintiff making it impossible for him to comply with an order for security for costs is not even when prima facie established, of itself, automatically a reason for refusing the order. (4) Amongst the matters to which a court may have regard in exercising a discretion against ordering security is if a prima facie case has been made by the plaintiff to the effect that his inability to give security flows from the wrong committed by the defendant.” The default setting is not to order security for costs so that the onus is on the applicant. As Clarke J. said in Mavior v. Zerko Limited [2013] IESC 15
The plaintiffs submit that section 390 of the Companies Act does not apply because the two companies are registered outside the State and that the discretion under Order 29 should not be exercised against a European Union company, which is the case of UK registered Ganley Intl, when there is no basis for suggesting that there is any difficulty in enforcing judgments in that jurisdiction. The applicant bases his claim to security on Order 29. On the interaction of the Act and the Rules the following decisions of Cooke J and Clarke J are helpful. In the case of Goode Concrete v. CRH Plc and Others [2012] IEHC 116, Cooke J. considered O. 29 in some detail and traced its history.
‘Any Defendant served with any Writ of Summons and Plaint in any Action shall thereupon be deemed to be in Court for the Purpose of making an Application to the Court or a Judge to compel the Plaintiff to give Security for Costs, and for other like Purposes: Provided that no Order for Security for Costs shall be made by reason of any Plaintiff being resident out of the Jurisdiction of the Court, at the Instance of any Defendant, unless upon a satisfactory Affidavit that such Defendant has a Defence on the Merits’.” Para 23 Cooke J concluded on this point at para 34: “In the judgment of the Court, therefore, neither the wording of O. 29, r.1, nor the long standing practice of the courts justify the assertion relied upon by the plaintiff namely, that it is a complete answer to an application for security for costs for a plaintiff to demonstrate that it is resident within the jurisdiction.”
These authorities and the others cited in submissions and argument, to which this brief survey does not pretend to do justice, lead to the following conclusions:
2. Security is not limited to cases where the plaintiff is out of the jurisdiction; rules 2 and 3 have specific application respectively for a plaintiff in Northern Ireland (not a reason) and otherwise outside the jurisdiction. 3. It is an unusual order: the default position is not to order security. 4. A defendant has to prove a significant level of risk that the plaintiff will not be able to pay. 5. Whatever proofs or circumstances are present, the court always has a discretion. 6. The question is whether it is fair and reasonable in balancing the interests of the parties for the court to make the order. 7. A defendant seeking security must demonstrate a defence on the merits. 8. The tests to be applied in applications under section 390 of the Companies Act and Order 29 are the same. Plaintiff companies’ finances The first plaintiff was set up for the purpose of participating in the consortium that was Cellstar. Cellstar is not an incorporated body but merely the name of a group of companies that came together to put in the bid. This Comcast Company, the first plaintiff, does not appear to have any assets or any commercial activity and its only purpose was to participate in the bid and its only continuing function is to pursue this litigation. Comcast Inc. is a subsidiary company of a successful and rich corporate conglomerate but this particular entity is not rich in assets. This company was funded by its sibling/parent corporations for the purpose of the application and is drip-fed such funds as are necessary for the purpose of this action. In those circumstances, I am led to the conclusion, first that the company has little or no assets of its own, which does not appear to be in dispute. Secondly, that there is little prospect of funds being provided to the company simply for the purpose of being paid out in costs and I frankly do not see how a parent or sibling company would conceive it to be in its own interest to provide money for that purpose. There is no evidence of any intention to do so. As to the third plaintiff, this company has been dormant for years and it would appear from its accounts and such information as we have about it that it would have no prospect of paying costs in the event that it lost the action and suffered an order for costs against it. A. 2 Satisfactory Affidavit as to Defence
The central issue in each of these cases is whether this defendant and one or more of the others behaved in the corrupt manner that the plaintiffs allege. He has spent years denying the allegations in the Moriarty tribunal. It is obvious that he will continue to do so in these proceedings. He denies the charges. The question is whether the plaintiffs can prove what they allege. That is what the case is about. It is true that the defence can be described as a simple traverse. But it is also the very issue to be resolved in the action. There is a difference between a mere assertion and a straight conflict of fundamental fact. A mere assertion is not sufficient but neither is it necessary to have proof to the civil standard. In an action where summary judgment is sought, if the defendant can establish that it might have a defence on some rational and credible basis, judged on a low threshold, the proceedings will be sent for plenary hearing and summary judgment will not be granted. If it is a conflict of fact, that cannot be resolved on affidavit. In light of recent history, it is obvious that the fourth defendant is going to defend this action to the end. It is vital for him that he should do so. There is no question of his determination to defend himself against these extraordinarily serious allegations. In the circumstances of the case, i.e., the background to the action and particularly the long period of public inquiry carried out by Moriarty J, it is manifest that Mr. O’Brien maintains his innocence of the allegations levelled against him in this action. There is room for concern about the baldness of the applicant’s affidavit. I think that there is validity in this criticism but ultimately it should not defeat the application. It is a matter more of form than substance. It is perhaps understandable that a defendant whose legal position is one of denial might be concerned about just how far he would have to go in setting out his defence and possible consequences at trial but that is mere speculation. In my view the essential requirement of setting up a defence is satisfied in the particular and very unusual circumstances of this dispute. In this I follow the view of Walsh J quoted above and the other authorities when understood in context. I also think that this approach is in accord with the jurisprudence of the Supreme Court on summary judgment in Aer Rianta v Ryanair [2001] 4 IR 607. Inability to pay caused by defendants’ actions
(1) That there was actionable wrongdoing on the part of the defendant (for example a breach of contract or tort); (2) that there is a causal connection between that actionable wrongdoing and a practical consequence or consequences for the plaintiff; (3) that the consequence(s) referred to in (2) have given rise to some specific level of loss in the hands of the plaintiff which loss is recoverable as a matter of law (for example by not being too remote); and (4) that the loss concerned is sufficient to make the difference between the plaintiff being in a position to meet the costs of the defendant in the event that the defendant should succeed, and the plaintiff not being in such a position. 3.5 Given that, on a motion such as this, a plaintiff is only required to establish the special circumstances, arising out of its inability to pay costs being due to the alleged wrongdoing of the defendants, on a prima facie basis, then it follows that each of the above steps must also be established on such a prima facie basis only.” Comcast claims that it was impoverished by the wrongful acts of the defendants, including the applicant Mr. O’Brien. It is a defence to an application for security for costs to say that the very things the plaintiff is complaining about in the action have put it into a position where it is unable to provide security for costs. Comcast invokes this principle as does Ganley International but the argument does not stand up in my view. The reason is not that the consortium of which the two companies were members came last out of six in the competition, which is the applicant’s point; on that it is reasonable for these plaintiffs to argue that their case is that the process was corrupt. But it cannot be assumed for the purpose of this motion that they were in a better position than other competitors in the process with a potential to be awarded the licence. It is just as illogical for them to demand that the Court assume they would have won the competition – or even more illogical – than to say that they had no chance because they came last. A person with a one in six chance cannot be considered to have lost profit based on an assumption that he would have succeeded. The fact that the companies did not suffer loss is obviously relevant. But I think that the real point is not that they suffered loss but that they did not enjoy gain. If they had been awarded the licence, they would have enjoyed a benefit and that would have reflected itself in financial terms in their balance sheets. That is a reasonable proposition as it seems to me. A person whose opportunity to win a competition has been interfered with can sue for damages for the loss of the chance. I baulk at the idea that they could establish for present purposes that they would have won. It seems to me that they will be claiming damages for the loss of the chance of winning and how good their bid was or might have been if it had been assessed by comparison with the other bids and if that had been honestly is obviously a very difficult question. I think that is essentially what the court may be asked to do in the event that the plaintiffs are able to establish the corruption that they allege. Mr. O’Callaghan says that these two companies have no more and no less assets than they ever had and there is no question of it being able to be said on their behalf that they suffered loss as a result of not getting the licence or not being part of the consortium that got the licence. He also says that neither of these plaintiffs actually applied for the licence and nor were they even part of a corporate entity that made the bid. They came together with other companies including RTE and Bord na Mona to put together a bid under the name Cellstar. I do not think that point makes any difference because if they had been granted the licence, then they would have moved to incorporate a vehicle, namely a company to carry out the next phase of the operation to exploit the licence commercially. These companies can say that they would have made profits if their consortium had won. They may complain that they spent money in participating in a process that they condemn. But those arguments do not advance a case that the companies were impoverished by the wrongs that they allege in their pleadings. Therefore, this special circumstance does not apply. Delay
(2) 8th October, 2004 – Notice of intention to proceed (3) 15th May, 2006 – Defence and counterclaim (4) 5th December, 2006 – Application for security for costs In Moorview Developments Ltd v. Cunningham [2010] IEHC 30 Clarke J said that a plaintiff incurring costs in the period of delay ought to have been entitled to make its decision, as to whether to incur those costs, in the light of full information, including the fact that security for costs would have to be put up. The unique features of the case make it difficult to apply the ordinary delay jurisprudence so as to defeat the applicant on this ground. The plaintiffs waited for the Moriarty Tribunal to report before proceeding further with the litigation. The delay in question happened some 13 years ago. The sponsors of the corporate plaintiffs are and were in a very different position to a plaintiff who commits to substantial expense only to find confronting him an insurmountable barrier of cost. The logic is that if the person knew that security for costs would be sought, he would not have spent his money pursuing the claim and that it is unfair that he should have been lulled into a false sense of security in that regard. I do not find anything of that kind in the conduct of these plaintiffs. Moreover, the fact that there is a personal co-plaintiff, a ground of resistance to be considered below, also militates against this objection succeeding. Individual co-Plaintiff Mr Declan Ganley is a mark for damages. In Bula Ltd & Ors v. Tara Mines Ltd & Ors [1987] IR 494 at 499 Murphy J. addressed the association of a personal co-plaintiff with an impecunious company in comments that were analysed by Clarke J in a subsequent case in which he sought to draw out the implications of Murphy J’s judgment. Murphy J said
Similarly, Charleton J In Oltech (Systems) Limited said [at para 21] that “Where there is a corporation as a plaintiff and an individual as a co-plaintiff, if both are making the same factual case, and the corporation is insolvent but the individual has sufficient funds to meet an eventual costs order against him or her, then the order may be refused because the defendant, if successful, is not going to be impeded in recovering costs; see the judgment of Kingsmill Moore J. in Peppard v. Bogoff [1962] I.R. 180. There, the Supreme Court held that the situation at that time of one plaintiff being in the jurisdiction and one outside would be the same as if one plaintiff were a company and the other plaintiff an individual. At page 187, Kingsmill Moore J stated that “the same arguments would seem applicable in both cases”. The risk that is at the heart of this balancing process in an application for security for costs is that a successful defendant will be left without remedy. If that threat is removed, it adjusts the balance of interests and rights that the court has to hold equal. The principle identified by the then President of the High Court, Finlay J, is not invoked because the defendant is protected to a very substantial degree. On the face of it Mr. O’Brien appears to have a strong case suggesting that these companies have no prospect of paying costs in the event that they lose the case and he succeeds. However, the principle that disallows an application for security when there is a co-plaintiff mark applies and is decisive. If there is somebody who is able to pay the costs, that protects the impecunious co-plaintiff. Now there may appear to be some rough justice in this rule and no doubt it cannot be considered an absolute answer to every application—discretion must always be exercised. This rule, like every other rule in law, is a matter of a balance being struck between competing rights and obligations. There may therefore be occasions when a plaintiff or a number of plaintiffs will not be permitted to cling to the coat-tails of the only plaintiff who has money but that is not a case that arises here or that has been made by Mr O’Brien. Accordingly, this application cannot succeed because Mr Ganley is a co-plaintiff who is apparently a mark for costs. I say apparently not to indicate any uncertainty about the matter or any decision on it one way or the other but merely to indicate that it is sufficiently established in my view for the purpose of this application. In this regard, I note that Clarke J adopted the view of Murphy J that the presence in the case of a personal litigant was a matter that could be taken into account in an application for security for costs against a limited company. It follows from this logic that the situation would change if Mr Ganley were to cease to be a plaintiff, in which case it would be possible to renew the application. On this point, I find myself persuaded by the plaintiffs’ argument and that is fatal to the applicant’s motion for security. Public Interest In the judgments in the Supreme Court holding that these proceedings should not be struck out for delay, Comcast International Holdings Incorporated v. Minister for Public Enterprise [2012] IESC 50, the judges highlighted the gravity of the issues. Denham CJ referred to the:
On this ground also, I propose to exercise the court’s discretion in refusing the order sought. B. 5 Counterclaim Charleton J said that “In recent similar cases before the High Court, an undertaking has been sought and given by a defendant that its counterclaim on the same subject matter as plaintiff’s claim would not be pursued. This principle is persuasively established in case law from the neighbouring kingdom.” I would follow this policy and if ordering security would require an undertaking from the fourth defendant not to pursue the counterclaim against a party that was unable to make its claim by reason of inability to put up security for costs. Conclusion |