Greenclean Waste Management Ltd v Leahy (t/a Maurice Leahy Wade & Company Solicitors)

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 08 May 2015
• Neutral Citation: [2015] IECA 97
• Court: Court of Appeal (Ireland)
• Docket Number: [C.A. No. 857 of 2014]
• Date: 08 May 2015

Greenclean Waste Management Limited v Leahy (t/a Maurice Leahy Wade & Company Solicitors)

Article 64 Transfer

Between

Greenclean Waste Management Limited

Plaintiff/Respondent

and

Maurice Leahy practising under the style and title of Maurice Leahy Wade and Company Solicitors

Defendant/Appellant

[2015] IECA 97

Kelly J.

Peart J.

Irvine J.

CA: 857/2014

239/13

THE COURT OF APPEAL

Insurance – Security for costs – Professional negligence – Appellant seeking to appeal against the judgment of the High Court – Whether defendant has demonstrated a prima facie defence

Facts: The defendant, Mr Leahy, allegedly took over the practice of a Mr Wade in August 2001. The plaintiff, Greenclean Waste Management Ltd, alleged that in July 1999, it retained Mr Wade to act as its solicitor. Acting on Mr Wade"s advice, the plaintiff, in June 2000, accepted a lease of premises for a term of two years from January 2000. The plaintiff complained that the solicitor failed to advise it of the extent of its obligations under the repairing covenants of the lease. The lease expired in January 2002, but the plaintiff remained in possession of the premises. In 2005 the lessor commenced proceedings for ejectment which resulted in an order for possession being made in July 2005. In January 2006, the lessor commenced proceedings against the plaintiff claiming damages for breach of covenant arising from the plaintiff"s failure to comply with the repairing covenants. In 2009, under the terms of settlement, the plaintiff paid a sum of €310,000 in respect of the lessor"s claim, €50,000 of which was attributable to mesne rates. It also paid €150,000 in respect of the lessor"s costs. In August 2009, the plaintiff sought damages for professional negligence against Mr Leahy, contending that there were independent acts of breach of contract and professional negligence by Mr Leahy in failing to advise that it had a cause of action against Mr Wade. It was alleged that there was a failure to disclose a material conflict of interest and a failure to advise on the relevant limitation period in respect of a claim against Mr Wade. The High Court declined to require the plaintiff to provide security for the costs of the litigation; were it not for the existence of the 'after the event' (ATE) insurance policy, the High Court would have made the order sought pursuant to the provisions of s. 390 of the Companies Act 1963. The defendant appealed to the Court of Appeal claiming that the trial judge was incorrect in declining the order sought. The plaintiff contended that the trial judge was wrong to conclude that a prima facie defence had been demonstrated, thus he ought to have dismissed the application on that basis. The defendant asserted that the plaintiff did not give any instructions on the question of whether it had a possible cause of action and therefore there was no obligation to offer any advice on that topic.

Held by Kelly J that, having applied Tribune Newspapers v Associated Newspaper Ireland (25th March, 2011), he would affirm the view of the trial judge that the defendant had demonstrated a prima facie defence. Kelly J held that the judge was not entitled to have regard to the existence of the policy in the context of making an assessment of the plaintiff company"s ability to discharge costs. He was satisfied on the basis of the information put before the Court in respect of the instant policy that a court would not be justified in refusing an order for security for costs. In doing so in this case, Kelly J was of opinion that the trial judge was in error. In the absence of the no-win no-fee agreement and its compliance with s. 68 of the Solicitors Act (Amendment) 1994, Kelly J held that it could not be said that there was sufficient evidence before the High Court to demonstrate the existence of an effective ATE policy. The ATE policy did not, in Kelly J"s view, raise a sufficient inference of an ability to discharge the defendant"s costs to justify the refusal of the s. 390 order; it fell far short of providing as good a security as a payment into court or a bank or insurance bond.

Kelly J held that he was satisfied that the judge was in error in coming to his conclusion and, accordingly, the appeal was allowed.

Appeal allowed.

Introduction

1 1. This is the first occasion upon which this court has been called upon to consider the effect of the existence of a policy of "after the event" (ATE) insurance on an application for security for costs.

2 2. In the High Court, Hogan J. declined to require the plaintiff to provide security for the costs of this litigation. It is clear from his judgment that, were it not for the existence of such a policy of insurance, he would have made the order sought pursuant to the provisions of s. 390 of the Companies Act 1963.

3 3. The question that arises on this appeal is whether the trial judge was correct in declining the order sought.

The litigation

4 4. This action commenced on the 17 ^th August, 2009. The plaintiff seeks damages for professional negligence against the defendant (Mr. Leahy) who was its former solicitor.

5 5. Mr. Leahy is alleged to have taken over the practice of a Mr. Declan Wade solicitor, in August 2001.

6 6. The plaintiff alleges that in July 1999, it retained Mr. Wade to act as its solicitor, to advise, assist and represent it in respect of negotiations for and acceptance of a lease of industrial premises in Cloghran, Co. Dublin. Acting on Mr. Wade's advice, the plaintiff, in June 2000, accepted a lease of the premises for a term of two years from the 6 ^th January, 2000. The plaintiff contends that the premises were in a very bad condition and had effectively reached the end of their economic life and required total refurbishment. The plaintiff complains that the solicitor failed to advise it of the extent of its obligations under the repairing covenants of the lease.

7 7. The lease expired in January 2002, but the plaintiff remained in possession of the premises.

8 8. In 2005 the lessor commenced proceedings for ejectment which resulted in an order for possession being made in July 2005.

9 9. In January 2006, the lessor commenced proceedings against the plaintiff claiming damages for breach of covenant arising from the plaintiff's failure to comply with the repairing covenants. Those proceedings were settled in 2009. Under the terms of settlement the plaintiff of had to pay a sum of €310,000 in respect of the lessor's claim, €50,000 of which was attributable to mesne rates. It also had to pay €150,000 in respect of the lessor's costs of those proceedings.

10 10. The plaintiff contends that there were further independent acts of breach of contract and professional negligencr by Mr. Leahy in failing to advise that it had a cause of action against Mr. Wade the former principal of the firm. Mr. Wade allegedly gave the original advice in relation to the lease. It is alleged that there was a failure to disclose a material conflict of interest on the part of Mr. Leahy in this regard and also a failure to advise on the relevant limitation period in respect of a claim against Mr. Wade.

11 11. A draft defence was placed before the High Court which took full issue with the pleas contained in the plaintiff's statement of claim. The trial judge said that, following a review of that draft, he could not possibly form any view of the underlying merits, save to observe that the terms of the draft defence, if duly established, would afford a prima facie defence to the action. The plaintiff does not agree with the judge's views on this topic and I will address this aspect of the case later in this judgment.

12 12. The plaintiff went into liquidation in December 2011 and the trial judge described it is as "hopelessly insolvent". He was undoubtedly correct in that and neither party seeks to suggest otherwise.

13 13. In view of his finding of insolvency on the part of the plaintiff and the existence of a prima facie defence to the action, the judge concluded that there was an entitlement on the part of the defendant to an order for security for costs, unless it could be shown that the plaintiffs ATE insurance sufficiently mitigated the risk that the plaintiff would be unable to discharge the defendants costs. He took the view that such insurance did sufficiently mitigate such risk and therefore declined to make the order.

Section 390 of the Companies Act 1963

14 14. Insofar as it is material, this section provides that:-

"...any judge having jurisdiction in the matter, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."

15 15. The section requires an applicant for security for costs to establish that:

(a) there is reason to believe that the plaintiff will be unable to pay the defendant's costs if the defendant is successful in his defence; and (b) the existence of a prima facie defence to the claim. The mere establishment of those two matters does not necessarily result in an order being made under the section. The reason for this is clear. Both the wording of the section and the voluminous jurisprudence which it has generated, make it clear that the jurisdiction conferred by the section is a discretionary one. The court retains a discretion which may be exercised in special circumstances. It is neither possible or wise to exhaustively list such special circumstances. The case law has identified a number of them, eg. delay, the existence of a point of exceptional public importance, or the fact that the wrongful acts of defendant for which it is being sued are the cause of...