Supreme Court of Ireland Decisions

1. By the Judgment and Order of Ms Justice Laffoy given and made on the 27th August 1997, reported at [1998] 1 ILRM 205, it was ordered that the Appellant (LNE) should furnish security for the costs of the first, second and thirdly named Defendants/Respondents and in default of furnishing such security that further proceedings therein be stayed.

2. By Orders of the Master of the High Court made on the 23rd day of January 1998 the amount to he lodged to the credit of the action as security for the costs of the first, second and thirdly named Defendants was determined at a total sum of £l28,000.00. It was common case that

3. By Notices of Motions, one dated the 10th day of March 1998, and the other the 24th day of March 1998 the first, second and thirdly named Defendants/Respondents applied to the Master of the High Court pursuant to Order 27, Rule 1, of the Rules of the Superior Courts and the inherent jurisdiction of the Court for an order striking out the Plaintiff’s claim for want of prosecution or for failure to comply with the order providing for security for costs.

4. The matter subsequently came before Mr Justice O’Sullivan on the 10th of June 1998. By his judgment and the order made pursuant thereto, reported at [1999] 1 ILRM 62, it was ordered that the proceedings be struck out and that LNE should pay the first, second and thirdly named Defendants/Respondents the costs of these proceedings. It is from that judgment and order that LNE appeals to this Court.

5. LNE is a company incorporated in Northern Ireland. The issued share capital of that company was held as to 10.28% by James F Kenny and the remaining 89.72% was registered in the name of Ulster Natural Resources Limited (UNR). The share capital of (UNR) was in turn held as to 50% by the said James F Kenny and the remaining 50% by the first named Respondent/Defendant, Ms Susan Morrice. The actual share holdings, as opposed to the percentages in which they were held, were not stated in any of the affidavits sworn in these proceedings.

6. Mr Kenny is the managing director of LNE. He has sworn four affidavits in connection with the present application. It was his contention that LNE had “made vigorous efforts” to comply with the orders for security for costs and he explained the mechanism by which it was proposed to raise the necessary funds for that purpose. It appeared that LNE had authorised a rights issue of 200,000 ordinary shares at 55p each. Mr Kenny had endeavoured to procure a share issue by UNR to enable it to take up its rights in LNE. It was common case that no extraordinary general meeting of UNR has been held for that purpose. Ms Morrice had declined to attend any such meeting. It was argued by the Appellants that her failure to do so was a deliberate attempt to frustrate the Plaintiff company in raising the necessary funds and that, having so conducted herself, it was not open to her or anyone claiming through her to supply to have the proceedings dismissed.

7. The essence of the case made on behalf of the Appellant was that the only practicable method t obtaining finance was by allotting shares and that such shares would have no attraction unless they carried a controlling interest. It was suggested that it would be difficult, if not impossible, for Mr Kenny or financial interests associated with him to obtain control of LNE by means of a rights issue therein having regard to the small percentage holding held by him in that company. It was apparently on that basis that the case was made that there should be a share issue in the parent company as control. thereof - and through it the Plaintiff company -could be obtained if a majority of shares were allotted to Mr Kenny or his nominees. It was at that level that Mr Kenny felt that his legitimate claims were being frustrated by Ms Morrice.

8. The matter came before this Court on the 25th day of January 1999. At the conclusion of the hearing the Court was informed by the solicitor on behalf of Ms Morrice that her only objection was to a reorganisation of the share capital of UNR which would give control of

9. In those circumstances the Court adjourned the appeal for a period of nine weeks to facilitate he board of directors and the shareholders in restructuring the share capital of LNE and allotting new or additional shares therein to Mr Kenny or his nominees with the consent of Ms Morrice in her capacity as a shareholder in UNR.

10. The Court indicated that if at the expiration of that period LNE was in a position to provide security for costs as a result of the allotment of shares therein or otherwise the order of O’Sullivan J would be set aside and the time for lodging security extended for a period of one week from that date.

11. When the matter was re-entered on the 12th of April 1999 Counsel for the Appellant informed the Court that the share capital had been restructured with the consent and co-operation of Ms Morrice but that Mr Kenny had been unable by the allotment of shares or otherwise to raise the amount required to provide the security as determined by the order of the Master of the High Court.

12. In those circumstances Counsel on behalf of the Appellants necessarily abandoned the contention that the Defendants/Respondents were unfairly or otherwise attempting to frustrate the right of the Appellant company to raise finance by any legitimate means. Instead it was argued that in making the order dated the 10th day of June 1998 Mr Justice O’Sullivan had erred in striking out the proceedings instituted by the Plaintiffs. It was argued that the

13. Ordinarily an order requiring a party to give security for costs will merely provide that the proceedings should be stayed until such security is provided. On the other hand, Counsel for the Appellant necessarily conceded that the party in whose favour the order is made might apply to the Court at an appropriate stage to have the proceedings dismissed if, or so Counsel would argue, the party in whose favour the order was made could establish that it would be prejudiced by the stayed proceedings continuation in being. In fact in the present case, as both parties agree, the order of the Master did fix the date within which the security was to be provided. The venerable decision in Giddings v. Giddings [1847] 10 Beav. 29 is authority for the proposition where time is limited for the provision of security the proceedings may be dismissed for failure to comply with that time limit. La Grange v. McAndrew [1879] 4 QBD 210 provides authority for the proposition that proceedings may be dismissed for want of prosecution where a plaintiff fails to deliver a statement of claim by reason of the fact that a stay was imposed pending the provision of security for costs and such security was not provided. The position might be different if a defendant obtained an order for security as against a plaintiff who was not at that stage obliged to deliver any pleadings (see Duffus v. Scullin 20 LR Ir 8). In Speed Up Holdings Ltd v. Gough & Co (Handly) Ltd [1986] FSR 330 a deputy judge of the High Court, Mr Evans-Lombe, QC, considered in some detail the power of the Court to dismiss proceedings under its inherent jurisdiction where a plaintiff had not

14. Mr Justice O’Sullivan concluded that he had a discretion as to whether in all of the circumstances he would strike out the Plaintiffs claim. It does not appear from the submissions made to this Court that that conclusion was seriously disputed by the Appellant/Plaintiff. Certainly, I am satisfied he did have such a discretion. Furthermore, Mr Justice O’Sullivan went on in his judgment to review the judgments of this Court in Murphy. J Donohoe Ltd [1996] 1 IR 123 and Mercantile Credit Company of Ireland v. Heelan I 1998] 1 IR 81 where this Court considered the imposition of the sanction of dismissing or striking out actions for failure to comply with an order for discovery. The learned trial Judge rightly concluded that the effect of those judgments was that this ultimate sanction would not he available for the purpose of punishing the defaulter and where available should be exercised sparingly and then only in extreme cases. Having reached that conclusion and applied the same principles by analogy to failure to comply with an order to provide security the learned Judge made an order striking out the Plaintiffs claim herein.

15. I am satisfied that the order aforesaid represented a proper exercise by the learned Judge of the discretion vested in him. If, however, there had been any residual doubt as to the propriety of his decision this was disposed of by the adjournment granted by this Court in January last and the failure of the Plaintiff to provide the required security even after Ms Morrice had co-operated with the Plaintiff in the manner sought by them. In my view the appeal should be dismissed and the order of Mr Justice O’Sullivan affirmed.