Connaughton Road Construction Ltd v Laing O'Rourke Ireland Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 16 January 2009
• Neutral Citation: [2009] IEHC 7
• Court: High Court
• Date: 16 January 2009

Connaughton Road Construction Ltd v Laing O'Rourke Ireland Ltd

COMMERICAL

BETWEEN

CONNAUGHTON ROAD CONSTRUCTION LIMITED

PLAINTIFFS

AND

LAING O'ROURKE IRELAND LIMITED

DEFENDANTS

[2009] IEHC 7

2007 No. 7114 P/2007

THE HIGH COURT

PRACTICE AND PROCEDURE

Security for costs

Onus on moving party - Prima facie defence to claim - Inability of plaintiff to pay costs if defendant successful - Discretion - Onus on resisting party to establish special circumstances - Whether inability to discharge costs stemmed from wrongdoing of defendant - Whether actionable wrongdoing - Whether causal connection between wrongdoing and consequences for plaintiff - Whether consequence gave rise to specific loss recoverable in law - Whether loss sufficient to make difference between ability and inability to meet costs - Quantum - Special purpose company set up solely for single transaction - Approach to third party document assessing likely profits - Estimate of legal costs - Usk and District Residents Ass Ltd v EPA [2006] IEHC 1 (Unrep, SC, 13/1/2006) and Interfinance Group Ltd v KPMG Peat Marwick (Unrep, Morris P, 29/6/1998) applied; Jack O'Toole Ltd v McEoin Kelly Associates [1986] IR 277, Irish Conservation and Cleaning Ltd v International Cleaners Ltd (Unrep, SC, 19/7/2001), Framus Ltd v CRH plc [2004] 2 IR 21, Cork County Council v Shackleton [2007] IEHC 241, Glenkerrin Homes v Dun Laoghaire Rathdown County Council [2007] IEHC 241 (Unrep, Clarke J, 19/7/2007) and Lough Neagh Exploration Ltd v Morrice (Unrep, Laffoy J, 27/8/1992) considered - Companies Act 1963 (No 33), s 390 - Security for costs ordered (2007/7114P - Clarke J - 16/1/2009) [2009] IEHC 7

Connaughton Road Construction Ltd v Laing O'Rourke Ireland Ltd

Facts: the plaintiff instituted proceedings seeking damages from the defendant in relation to an alleged breach of a construction contract. The defendant denied the allegations made by the plaintiff in its pleadings and brought an application for security for costs pursuant to section 390 of the Companies Act 1963 against the plaintiff.

Held by Mr Justice Clarke in directing that the defendant pay security for costs that (1) In order to succeed in obtaining security for costs an initial onus rested upon the moving party to establish:

(a) That he had a prima facie defence to the plaintiff’s claim, and

(b) that the plaintiff would 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 could be shown that there were specific circumstances in the case with ought to cause the court to exercise its discretion not the make the order sought.

(3) That the court retained a discretion not to order security for costs where the plaintiff could establish, on a prima facie basis, that his inability to pay the costs of the defendant was due to the wrongdoing of the defendant which he asserted in his proceedings. That in order for a plaintiff to be correct in his assertion that his inability to pay stemmed from the wrongdoing asserted, four propositions must necessarily be true:-

(I) That there was actionable wrongdoing on the part of the defendant (for example a breach of contract or tort);

(II) that there was a causal connection between that actionable wrongdoing and a practical consequence or consequences for the plaintiff;

(III) that the consequence(s) referred to in (2) had given rise to some specific level of loss in the hands of the plaintiff which loss was recoverable as a matter of law (for example by not being too remote); and

(IV) that the loss concerned was 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.

Reporter: P.C.

USK DISTRICT RESIDENTS ASSOCIATION LTD v ENVIRONMENTAL PROTECTION AGENCY UNREP SUPREME 13.1.2006 2006 IESC 1

INTERFINANCE GROUP LTD v KPMG UNREP MORRIS 29.6.1998 2000/11/4104

JACK O'TOOLE LTD v MACEOIN KELLY ASSOCIATES & WICKLOW CO COUNCIL 1986 IR 277 1986/3/989

IRISH CONSERVATION & CLEANING LTD v INTERNATIONAL CLEANERS LTD UNREP SUPREME 19.7.2001 2001/12/3351

FRAMUS LTD & ORS v CRH PLC & ORS 2004 2 IR 20 2004 2 ILRM 439 2004/18/4116 2004 IESC 25

CORK CO COUNCIL v SHACKELTON UNREP CLARKE 19.7.2007 2007/11/2182 2007 IEHC 241

DUN LAOGHAIRE-RATHDOWN CO COUNCIL v GLENKERRIN HOMES UNREP CLARKE 19.7.2007 2007/11/2182 2007 IEHC 241

LOUGH NEAGH EXPLORATION LTD v MORRICE & ORS 1998 1 ILRM 205 1998/23/9195

1 JUDGMENT of Mr. Justice Clarke delivered on the 16th January, 2009

1. Introduction

2 2 1.1 The plaintiff company ("Connaughton Road") was involved in a development at Connaughton Road in Sligo. The principal of Connaughton Road is a John Molloy ("Mr. Molloy"). Mr. Molloy owned the lands in question and proposed a scheme whereby the lands would be developed by the construction of both residential and retail elements. The intention was that the construction would be carried out by Connaughton Road, but the ownership of the land in question would remain in the hands of Mr. Molloy. When sold, the purchase price would be divided between Mr. Molloy (in respect of the land) and Connaughton Road (in respect of construction). There is no doubt but that the defendants ("Laing O'Rourke") were engaged in relation to the development. The precise extent of that engagement is one of the matters in dispute between the parties.

3 3 1.2 In any event, Connaughton Road has brought these proceedings claiming that Laing O'Rourke failed in a number of respects in relation to its obligations relating to the design and construction of the development. The claim is strenuously denied, both as to the extent of Laing O'Rourke's obligations (and in particular whether Laing O'Rourke had any obligation in respect of design), the contract price (whether it was a fixed sum or otherwise), and whether there was culpable delay on the part of Laing O'Rourke in completing the construction of the development in question.

4 4 1.3 Laing O'Rourke have brought an application under s. 390 of the Companies Act 1963, seeking security for costs and other consequential orders. This judgment is concerned with that application.

5 5 1.4 Subject to some matters concerning the precise application of the relevant principles, the legal basis on which the court should consider an application for security for costs in a case such as that with which I am concerned were not in dispute between the parties, and in those circumstances it seems appropriate to deal with those principles first. I, therefore, turn to the relevant legal principles.

2. The Legal Principles

6 2 2.1 In Usk and District Residents Association Limited v. The Environmental Protection Agency (Unreported, Supreme Court, Clarke J., 13 ^th January, 2006,) the Supreme Court approved what was described as a helpful summary of the law by Morris P. in Interfinance Group Limited v. K.P.M.G. Pete Marwick (Unreported, High Court, Morris P., 29 ^th June, 1998,). As adapted by the Supreme Court in Uskthe test set out by Morris P. in Interfinanceis in the following terms:-

7 2 "(1) In order to succeed in obtaining security for costs an initial onus rests upon the moving party to establish:

8 (a) that he has a prima facie defence to the plaintiff's claim, and

9 (b) that the plaintiff will not be able to pay the moving party's costs if the moving party be successful.

10 (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 with ought to cause the court to exercise its discretion not the make the order sought.

11 In this regard the onus rests upon the party resisting the order. The most common examples of such special circumstances include cases where a plaintiff's liability to discharge the defendant's costs of successfully defending the action concerned flow from the wrong allegedly committed by the moving party or where there has been delay by the moving party in seeking the order sought.

12 The list of special circumstances referred to is not of course, exhaustive."

13 3 2.2 Neither counsel disagreed that the principles are correctly summarised in the passage which I have just cited. It should also be noted that counsel for Connaughton Road helpfully and properly accepted that the evidence before the court established both of the matters set out at paras. (1)(a) and (1)(b) above. Thus, the two matters which Laing O'Rourke were required to establish are accepted as having been so established.

14 4 2.3 It follows that security ought to be required unless Connaughton Road can show that there are special circumstances which ought to cause the court to exercise its discretion not to make the orders sought. The special circumstances asserted in this case are, perhaps, the most common category of such circumstances where it is asserted that the plaintiff's inability to discharge the defendant's costs of successfully defending the action flow from the wrong allegedly committed by the moving party. It is common case, and clear from the authorities, that the onus of establishing that fact rests on Connaughton Road. It is also common case, and clear from the authorities (see for example the comments of Finlay C.J. in Jack O'Toole Ltd v. McEoin Kelly Associates [1986] I.R. 277 at pp 284 and 285) that the obligation of Connaughton Road, in those circumstances, is to establish a prima faciecase to the effect that its inability to pay the costs of the defendant, in the event that the defendant were successful, stems from the wrongdoing alleged in these proceedings. I will shortly turn to an assessment of that issue on the...