Harlequin Property (SVG) Ltd & Harlequin Hotels & Resources Ltd v O'Halloran

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 19 January 2012
• Neutral Citation: [2012] IEHC 13
• Court: High Court
• Date: 19 January 2012

Harlequin Property (SVG) Ltd & Harlequin Hotels & Resources Ltd v O'Halloran

COMMERCIAL

BETWEEN

HARLEQUIN PROPERTY (SVG) LIMITED

AND

HARLEQUIN HOTELS AND RESOURCES LIMITED

PLAINTIFFS

AND

PADRAIG O'HALLORAN AND DONAL O'HALLORAN

DEFENDANTS

[2012] IEHC 13

[No. 6443 P/2010]

THE HIGH COURT

PRACTICE & PROCEDURE

Security for costs

Amount of security - Foreign companies - Practice of directing one third total amount of estimated costs - Costs already incurred - VAT - Whether VAT recoverable or irrecoverable - Discretion to depart from practice - Distinction between proper approach under O 29 and under Companies Act 1963, s 390 - Foundation of two jurisdictions - Nature of limited liability - Jurisdictional difficulty of recovering costs where foreign plaintiff - Established weakness of case - Operative time for determining pre-application and post-application costs - Quantum of costs - Whether justice required departure from practice of making single and early estimate of total costs - Windmaster Developments Ltd v Airogen Ltd (Unrep, McCracken J, 10/7/2000); Thalle v Soares [1957] IR 182; Guion v Heffernan [1929] IR 487; Fallon v An Bord Pleanala [1992] 2 IR 380; Procon (Great Britain) Ltd v Provincial Building Company Ltd [1984] 1 WLR 557; Lismore Homes Ltd v Bank of Ireland Finance Limited [2001] 3 IR 536; Proetta v Neil [1996] 1 IR 1000; Pitt v Bolger [1996] IR 108; Salthill Properties Ltd v Royal Bank of Scotland [2010] IEHC 31, (Unrep, Clarke J, 5/2/2010); Brocklebank v Kings Lynn Steamship Company [1878] 3 CPD 365; Massey v Allen [1879] 12 CHD 807; Al-Koronky v Timelife Entertainment Group Ltd [2005] EWHC 1688; Penny v Penny [1996] 1 WLR 1204 and Hidden Ireland Heritage Holidays Ltd v Indigo Services Ltd [2005] 2 IR 115 considered - Rules of the Superior Courts 1986 (SI 15/1986), O 29 - Companies Act 1963 (No 33), s 390 - Partial security ordered with balance of security to be assessed at directions stage (2010/6443P- Clarke J - 19/1/2012) [2012] IEHC 13

Harlequin Property (SVG) Ltd v O'Halloran

RSC O.29

COMPANIES ACT 1963 S390

WINDMASTER DEVELOPMENTS LTD v AIROGEN LTD & KELLY UNREP MCCRACKEN 10.7.2000 2000/18/6796

RSC O.99 r1(6)

THALLE v SOARES & ORS 1957 IR 182

FALLON v BORD PLEANALA & BURKE 1992 2 IR 380 1991 ILRM 799

RSC O.58 r16

PROCON (GB) LTD v PROVINCIAL BUILDING CO LTD & ANOR 1984 1 WLR 557 1984 2 AER 368

LISMORE HOMES LTD v BANK OF IRELAND FINANCE LTD & ORS 2001 3 IR 536 2002 1 ILRM 541 2001/14/3907

EEC REG 44/2001

PROETTA v NEIL 1996 1 IR 100 1995/21/5422

PITT v BOLGER & BARRY 1996 1 IR 108 1996 2 ILRM 68 1996/7/2208

SALTHILL PROPERTIES LTD & CUNNINGHAM v ROYAL BANK OF SCOTLAND PLC & ORS UNREP CLARKE 5.2.2010 2010/46/11557 2010 IEHC 31

GUION v HEFFERNAN & ORS 1929 IR 487

CHAN v OSSEOUS LTD 1992 1 IR 425 1991/10/2412

THE SUPREME COURT PRACTICE 1988 (WHITE BOOK)

BROCKLEBANK & CO v KINGS LYNN STEAMSHIP CO 1877-78 3 CPD 365

MASSEY v ALLEN 1879 12 CH D 807

AL-KORONKY & MOHAMMED v TIME LIFE ENTERTAINMENT GROUP LTD & LEWIS UNREP 29.7.2005 2005 EWHC 1688 (QB)

PENNY v PENNY 1996 1 WLR 1204 1996 2 AER 329 1997 1 FCR 126

HIDDEN IRELAND HERITAGE HOLIDAYS LTD T/A THE HIDDEN IRELAND ASSOCIATION v INDIGO SERVICES LTD & ORS 2005 2 IR 115 2005 2 ILRM 498 2005/30/6159 2005 IESC 38

RSC O.29 r1

BUTTIMORE SECURITY FOR COSTS 1999 74

1 Mr. Justice Clarke delivered the 19th January, 2012

1. Introduction

2 2 1.1 These proceedings were admitted into the commercial list by order of Kelly J. on the 6 ^th July, 2010, the day on which the plenary summons issued. The plaintiffs ("Harlequin" and individually "SVG" and "Hotels" respectively) make serious allegations, including fraud, against the defendants arising out of a significant construction contract entered into between Harlequin and a number of companies incorporated in the Caribbean region by the first named defendant ("Mr. O'Halloran"). It is said that monies paid by Harlequin to those companies was misapplied by Mr. O'Halloran. The second named defendant ("Mr. O'Halloran Snr") is the father of Mr. O'Halloran. The claim against him is narrower in that it is said that a limited amount of those monies was inappropriately paid out of the relevant companies in favour of Mr. O'Halloran Snr in circumstances where it is claimed that Harlequin is entitled to trace or follow those monies into the hands of Mr. O'Halloran Snr.

3 3 1.2 Amongst other things and application for a Mareva injunction against Mr. O'Halloran was brought by Harlequin but was refused by Finlay Geoghegan J. by order of the 10 ^th September, 2010, a similar application as against Mr. O'Halloran Snr having been abandoned. The basis for that refusal was that Finlay Geoghegan J. was not satisfied, on the evidence placed before her, that Harlequin had made out a sufficient prima facie or arguable case.

4 4 1.3 Thereafter the pleadings were largely completed in the latter part of 2010. A request by both defendants (collectively "the O'Hallorans") for security for costs was made on the 7 ^th December, 2010. An application for security for costs (which issued on the 3 ^rd March, 2011) then came before the court and was first heard by me in June, 2011. In an ex-tempore judgment delivered by me on the 23 ^rd June, 2011, and for the reasons set out in that judgment, I ruled as follows:-

5 a A. That, by virtue of the fact that the Companies Act 1963 ("the 1963 Act") did not apply to either of the plaintiff companies (both being foreign companies), the application fell to be considered under O. 29 of the Rules of the Superior Courts ("Order 29").

6 b B. That the parties agreed that, in all the circumstances of the case, the question of whether Harlequin should be required to provide security for costs under Order 29 fell to be considered by reference to the same principles as would, in fact, apply in an application for security for costs under s. 390 of the 1963 Act;

7 c C. That, on that basis, and it being accepted on behalf of Harlequin that the O'Hallorans had established a prima facie defence and that there were no special circumstances, it followed that the question of whether or not Harlequin should be required to provide for security for costs turned on whether there was evidence that Harlequin would be unable to pay the O'Hallorans' costs if the O'Hallorans were to be successful.

8 d D. That, on the basis of the evidence then currently available, and having regard to an analysis conducted of that evidence in the course of the relevant ex-tempore judgment, I was not persuaded that Harlequin could meet an order for costs in favour of the O'Hallorans in the event that the O'Hallorans could succeed but that, lest an injustice be done, I felt it appropriate to give Harlequin an opportunity to put further evidence before the court or, in the alternative, to consider whether it was possible to put in place a legally enforceable agreement between Harlequin and the ultimate UK parent company of Harlequin, which would have the effect of giving the O'Hallorans priority to the indebtedness of Harlequin to its UK parent in the event that costs were awarded in favour of the O'Hallorans.

9 As matters transpired, it did not prove possible for Harlequin to put forward any relevant additional evidence or to put in place arrangements of the type described and it followed that, on the 22 ^nd November, 2011, I ordered Harlequin to provide security for costs and directed that the amount of that security be, in accordance with the practice in the commercial list, fixed by the court rather than the Master.

10 5 1.4 It is of some relevance to also note that the O'Hallorans sought, at the same time as bringing an application for security for costs, in the alternative, an order that Harlequin's proceedings be dismissed as being bound to fail. That application was not ultimately pursued.

11 6 1.5 However, a number of issues of principle arose between the parties as to the proper method to be adopted in the calculation of the amount of security to be provided. Against the background the issue of the quantum of security was listed for further hearing which took place before me in Cork on the 12 ^th January last. This judgment is directed to the issues which arose. In that context it is appropriate to start by setting out the separate issues which were the subject of dispute between the parties.

2. The Issues

12 2 2.1 In the course of written submissions filed by both sides three issues were identified. Furthermore, in the course of argument a fourth issue arose although it is also fair to say that one of the three issues originally identified was largely resolved.

13 3 2.2 The three issues identified in the written submissions can be briefly stated in the following terms:-

14 a A. Whether, given that the order for security for costs made was under Order 29 rather than under s. 390 of the 1963 Act, it is appropriate to follow the common practice in orders made under Order 29 to direct security at one third of the total amount of costs estimated as being likely to arise;

15 b B. Whether, and if so to what extent, in estimating the costs in respect of which security is to be ordered, it is appropriate to have regard to costs already incurred; and

16 c C. Whether, in estimating the costs in respect of which security is to be ordered, it is appropriate to have regard to Value Added Tax ("VAT").

17 4 2.3 It is fair to say that the VAT issue was, while not conceded, not vigorously pursued on behalf of Harlequin. On the other hand there did emerge in the course of argument a difference between the parties as to the scale (and thus the likely costs) of the litigation, both as to the amounts at stake, the likely evidence (most particularly expert evidence) likely to have to be called, the likely length of the proceedings and...