1. This is an application brought by the defendant, the trustee of the estate of James Kevin McAteer, deceased insolvent (“the deceased”) seeking an order for security for costs against the second plaintiff, a limited liability company (“the company”).

2. The proceedings brought by the company relate to premises comprising a dwelling-house, outbuildings, stables and some land situate at and known as 20 Templehill Road, Newry, County Down (“the premises”) belonging to the deceased who died on 6 May 1993. The deceased’s estate was declared insolvent by order of the court on 9 January 1995 on the petition of the Inland Revenue and the defendant was appointed trustee of the estate at a meeting of creditors held on 4 April 1995.

3. By an order made on 27 May 1996 the Master (Bankruptcy) declared that Mrs Sheila McAteer, the widow of the deceased, who had taken out a grant to the estate of the deceased in July 1993, had no legal or beneficial interest in the premises and it was ordered that her right of occupation in respect of premises be terminated. That order also ordered her sons Fergus and Paul McAteer and Paul McAteer’s wife and any other persons in occupation of the premises to deliver up vacant possession. By subsequent order made on 19 November 1997 made specifically against the first plaintiff it was ordered that he deliver up possession of the premises.

4. In the action as it currently stands following the dismissal of the first plaintiff’s claim it is asserted that the company took a lease of the premises for twenty-five years commencing on 1 December 1993 from Sheila McAteer. The statement of claim alleges that Mrs McAteer executed the lease prior to the deceased insolvency of the estate of the deceased at a time when neither she nor the company had knowledge of the insolvency. The Master struck out the company’s proceedings. That part of his order was successfully appealed to this court which held that there were triable issues in the company’s proceedings. In this application the defendant now seeks an order for security for costs.

5. Article 674 of the Companies (Northern Ireland) Order 1986 (“the 1986 Order”) provides that –

6. In his uncontradicted affidavit the defendant deposes that from a search of documents in the Companies Registry it appears that the company is a dormant company. The last annual returns were filed in November 1995 and the last time accounts were filed was in 1998. Although the nominal share capital of the company is £250,000 its issued share capital is only £2.00. In the balance sheet received in the Registry on 4 March 1999 the directors Fergal and Lorraine McAteer certified that the company was dormant within the meaning of article 258 of the Companies (Northern Ireland) Order 1990 throughout the financial year ending with the date of the balance sheet. The only asset which the company claims to possess is the alleged lease which is the subject matter of the litigation. The company is not trading and has no income.

7. Under article 258 of the Companies (Northern Ireland) Order 1986 as inserted by article 16 of the Companies (Northern Ireland) Order 1990 a company is dormant during a period in which no significant accounting transaction occurs, that is no transaction which is required to be entered in the company’s accounting records.

8. It is evident that if the company’s claim is unsuccessful any order for costs made against the company will be valueless.

9. In this jurisdiction in Munchie Foods v Eagle Star Assurance [1993] 5 NIJB 34 before Carswell J and [1993] 9 NIJB 69 before the Court of Appeal the courts reviewed the authorities setting out the relevant principles to be applied in determining whether an order for security for costs should be ordered against a limited company. If it is established that the company is unable to pay the defendant’s costs the court must exercise its discretion in deciding whether to make an order for security and that discretion must be exercised on judicial lines considering all the circumstances of the case. Relevant considerations will be whether the claim is bona fide, whether the plaintiff has a reasonably good prospect of success, whether there is any admission, whether the application for security is being used oppressively so as to stifle a genuine claim and whether the company’s want of means had been brought about by any conduct on the part of the defendant such as delay in payment (see Sir Lindsay Parkinson and Co Ltd v Triplan Limited [1973] QB 273). In that case Cairns LJ in his minority judgment expressed the view that security for costs should be ordered as a matter of course against a limited company once it is shown that it is not likely to be able to pay the costs unless there are special circumstances. Although this view was attractive to the Court of Appeal in Trident International Freight Services v Manchester Ship Canal Company [1990] BCLC 263 the Court of Appeal considered that they were bound by the approach adopted in the Sir Lindsay Parkinson . Carswell J (as he then was) could see considerable force in the view expressed by Cairns LJ when one bears in mind the distinction between natural persons and limited companies and the need to provide some protection for the community against litigious abuses by artificial persons manipulated by natural persons. He considered, however, that he should follow the well-established principles set out in the English authorities such as Sir Lindsay Parkinson . In the Court of Appeal the judge’s refusal to make an order for security of cost was upheld. Nicholson J (as he then was) delivering the judgment of the court concluded that it was clear that Parliament did not intend that the discretion of the court should be fettered and considered that it was desirable that the Northern Ireland courts should follow the practice followed in England and Wales.

10. Having regard to the incorporation of the Convention into domestic law by the Human Rights Act 1998 it is necessary to re-consider the proper approach to security for cost applications in such circumstances as those prevailing in this instance in the light of the Convention, in particular article 6(1) thereof.

11. As pointed out in Starmer on European Human Rights Law at page 363 an order that one party to civil litigation must pay a sum into court as security for the other party’s costs has an obvious impact on the right of access to a court. Unless individuals have access to a court the right to a fair trial is meaningless. The European Court of Human Rights (“the ECHR”) has developed a “right of access” principle out of article 6(1). The right appears to have been first enunciated in Golder v UK [1979 – 80] 1 EHRR 524 in which the court held that the right of access must not only exist but must also be effective. Thus in that case the applicant, a prisoner, was prevented by prison rules from consulting a solicitor in relation to defamation proceedings which he wished to bring against a prison officer. The ECHR considered that he was wrongfully deprived of an effective right of access to a court.

12. It is to be noted that prior to the incorporation of the Convention into domestic law by the Human Rights Act 1998 the courts had recognised that the common law provided “no lesser protection of the rights of access to the Queen’s Courts than might be indicated in Strasbourg” (per Laws J in R v Lord Chancellor ex parte Witham [1998] QB 575 at 585). Laws J put the position thus –

13. Lord Diplock in Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Limited [1981] AC 909 at 977 said –

14. As appears from the domestic authorities the power to require a plaintiff to provide security for costs is one of those powers designed to enable the court to control its own procedure to prevent it being used to achieve injustice. The approach to security for cost applications in relation to limited companies exemplified by the Court of Appeal judgment in Sir Linday Parkinson & Co Ltd proceeded on the basis that the imposition of a security for costs order could be justified in appropriate circumstances even if as a consequence a plaintiff company would be unable to take the claim further forward until security was provided.

15. It is necessary to consider to what extent the ECHR jurisprudence qualifies the domestic court’s approach to such an application in the present circumstances.

16. The Commission considered the issue of security for costs in its 1979 decision in the X v Sweden [1997] DR at 74. In that case a foreigner in Sweden brought proceedings against a bank claiming damages. Under Swedish law an alien, whether he lived in Sweden or not, could be ordered to pay security for costs in order to be able to sue in a Swedish court. Although the foreigner declared himself unable to furnish the security in view of the losses he had incurred the Swedish court nevertheless ordered him to produce security. Sometime later the bank withdrew its request for security and the case was settled. The Swedish Government informed the Commission that it intended to modify the relevant legislation. The Commission concluded that it would appear to depend on an examination of the application of the Swedish Act in a concrete case as to whether or not a demand for security could be considered to amount to a denial of access to the court contrary to the Convention. In the circumstances it declared the application inadmissible.

17. In a later 1990 decision, Grepne v UK [1990] 66 DR 268 in a case where the Court of Appeal had imposed an order for security for costs the Commission was of opinion that it was not improper to require the applicant to pay into the Appeal Court security for the other party’s costs. The applicant’s access to court had been partially fettered in order to protect the rights of the other party to the litigation. He did not find that this balancing of the conflicting rights of the litigants over their legal costs at the appeal stage constituted an arbitrary denial of the applicant’s access to court.

18. In that case the applicant had had a full hearing on the merits.

19. The ECHR reiterated that the right of access to the courts secured by Article 6 had to be real and effective. It took the view that as a measure designed to protect a successful party to the appeal from irrecoverable costs the order was legitimate in principle. It scrutinised the order to determine whether it is proportionate and concluded that it was having regard to the fact that the applicant had enjoyed full access to the court of first instance, that the sum fixed for security was a reasonable estimate of his opponents likely costs of the appeal, that there was no evidence that the applicant could not raise the sum given time, that in making its decision the Court of Appeal had satisfied itself that the making of the order would not amount to a denial of justice and that the applicant’s appeal had no reasonable prospect of success and that if there had been a reasonable prospect of success it was unlikely that the order would have been made. By implication an order for security for costs against the party who could not raise the sum in question and who has a reasonable prospect of success might breach article 6(1). Starmer at page 364 suggests that an order for security for costs at first instance before any of the evidence is tested may be more difficult to reconcile with article 6(1) than an order for security in respect of an appeal where the applicant has already had a full hearing on the merits.

20. A limited company is a creature of statute which has limited liability for its debts. Its incorporators and directors are shielded from personal liability unless the court imposes personal liability against individuals under provisions of the relevant insolvency legislation, for example, in cases of wrongful or fraudulent trading. It may be argued, although it has not yet been determined, that the directors of a company who undertake and pursue speculative litigation knowing that the company cannot meet an order for costs if the litigation is unsuccessful are guilty of wrongful trading and may be directed to personally pay debts represented by the judgment for costs in the event of subsequent insolvency. The legislature has recognised the evil that on occasion can occur when companies without means pursue litigation which involves all party’s who have to incur not inconsiderable expenditure in resisting claims which ultimately turn out to be invalid. In appropriate cases the imposition of an order for security for costs is necessary to prevent the court’s process being used to achieve injustice. As a general proposition a provision enabling another party to proceedings to seek an order for security against a limited company with no apparent means pursues a legitimate purpose. A requirement to provide security for a fair assessment of the reasonable likely costs of the parties seeking security would prima facie be a proportionate response to the need to fulfil the legitimate purpose.

21. However, where the company is without resources an order for security for costs would appear at first sight to be incapable of fulfilment with the consequence that the company would be unable to pursue its claim and thus its right of access to the court might well be considered illusory. I say “at first sight” because on further investigation it may become apparent that those behind or financially backing the company will be in a position to ensure compliance with an order for security. If that is so then an order for security would not in fact deprive the company of its right of access to the court. When faced with an application for security for costs against a limited company the court is enjoined by the authorities to examine the application in the concrete circumstances of the case. In the context of a limited company without apparent means in the examination of the circumstances of the case the court in appropriate cases would be justified in looking behind the corporate veil at the economic reality of the situation.

22. In the course of submissions in this case it became apparent that the company is indeed being backed by an individual who would be prepared to pay off the very substantial arrears of rent which would be payable by the company if the lease is upheld. He appears also to be funding the company’s costs in pursing the proceedings against the defendant. It is implicit in Mr Coyle’s submission that if the court imposes an order for security for costs this individual will be in a position to provide the security. Thus an order for security in the present circumstances will not in effect deprive the company of its right of access to the court nor would it work an injustice.

23. In this case taking into account all the circumstances of the case including the facts that the claim is less than compelling, that the company is a dormant company without assets and that the defendant has not caused or contributed to any loss of assets on the part of the plaintiff and that the company itself would have to pay substantial arrears of rent to avoid forfeiture of the lease assuming that it is valid and taking account of the Convention case law I propose to make an order for security for costs requiring the company to pay either into court or into the joint names of the parties’ solicitors an appropriate sum as security. I calculate that the proper sum should be £7,500.00 plus VAT which I considered to be a fair and proportionate assessment of the defendant’s reasonable costs and expenses in defending the claim.

24. In view of the conclusions reached in the circumstances of this case the court does not have to resolve the question whether security for costs should be ordered in a case where no one behind the company is in a position to enable the company to provide security for costs and where the consequences of such an order would be to effectively prevent the company pursuing its claim. In such circumstances in the light of the European jurisprudence it may not be possible to justify making such an order in the absence of compelling evidence that the plaintiff’s claim is devoid of merits or that the plaintiff is otherwise abusing the process of the court.