Hidden Ireland Heritage Holidays Ltd v Indigo Services Ltd

• Jurisdiction: Ireland
• Judge: MR JUSTICE FENNELLY
• Judgment Date: 07 June 2005
• Neutral Citation: [2005] IESC 38
• Docket Number: [S.C. No. 252 of 2003]
• Court: Supreme Court
• Date: 07 June 2005

[2005] IESC 38

THE SUPREME COURT

Geoghegan J.

Fennelly J.

Kearns J.

Appeal No. 2003/252

HIDDEN IRELAND HERITAGE HOLIDAYS LTD T/A THE HIDDEN IRELAND ASSOCIATION v INDIGO SERVICES LTD & ORS

BETWEEN

HIDDEN IRELAND HERITAGE HOLIDAYS LIMITED (Trading as THE HIDDEN IRELAND ASSOCIATION)

Plaintiff/Appellant

and

INDIGO SERVICES LIMITED

First Named Defendant

JOHN COLCLOUGH and ALEXANDRA GARDNER

Second and Third Named Defendants/Respondents

COMPANIES ACT 1963 S390

COMPANIES ACT 1983 S40RSC O.20 r3

PEPPARD & CO LTD v BOGOFF 1962 IR 180

SEE CO LTD v PUBLIC LIGHTING SERVICES 1987 ILRM 255

JACK O'TOOLE LTD v MACEOIN KELLY ASSOCIATES 1986 IR 277

BEAUROSS LTD v KENNEDY UNREP MORRIS 18.10.1995 1995/15/3854

CROFT LEISURE LTD v GRAVESTOCK & OWEN 1993 BCLC 1273J

ANRED PROPERTIES LTD v ENTE NAZIONALE ITALIANO PER IL TURISMO 1989 2AER 444

PRACTICE AND PROCEDURE

Security for costs

Plaintiff company unable to meet any order for costs - Prima facie defence - Special circumstances - Delay - Whether defendants required to establish prima facie defence to claim - Whether special circumstances disentitled defendants to security for costs - Whether defendants' delay constituted special circumstances - SEE Co v Public Lighting Services [1987] ILRM 255; Beaucross Ltd v Kennedy (Unrep, Morris J., 18/10/1995) and Janred Properties Ltd v Ente Nazionale Italiano per il Turismo (Unrep, Court of Appeal, 8/10/1985) approved - Companies Act 1963 (No 33), s 390 (252/2003 - Supreme Court - 7/6/2005) [2005] IESC 38 - [2005] 2 ILRM 498

Hidden Ireland Heritage Holidays Ltd v Indigo Services Ltd

Facts: The plaintiff company claimed damages for loss suffered as a result of an alleged breach of agreement by the second named defendant and the use by the second and third named defendants of confidential information and their commission of a number of economic torts. The plaintiff appealed from an order of Murphy J in the High Court granting an order pursuant to s. 390 of the Act of 1963 requiring the plaintiff to provide security for the costs of the second and third named defendants on the basis that those defendants delayed unduly in bringing their application for security for costs.

Held by the Supreme Court (Geoghegan, Fennelly, Kearns JJ) in allowing the appeal and substituting an order dismissing the application:

1. That the learned trial judge made no reference in his decision to the issue of delay upon which the plaintiff had specifically relied. Consequently, his discretion was exercised without advertence to a key element in the case and it fell to this court to exercise its discretion de novo.

2. That the second and third named defendants delayed to such an extent and otherwise behaved in the conduct of the litigation so as to deprive themselves of the entitlement to ask the Court to exercise its discretion to grant an order for security for costs in their favour.

Reporter: L.O'S.

1 JUDGMENT of MR JUSTICE FENNELLY delivered on the 7th day of June, 2005.

2 This is an appeal from the order of Murphy J in the High Court that the Plaintiff/Appellant provide security for the costs of the second and third named Defendants/Respondents.

3 The application was made pursuant to section 390 of the Companies Act, 1963, which provides:

"Where a limited company is plaintiff in any action or other legal proceeding, 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."

4 The plaintiff is a company limited by guarantee. Its members provide accommodation for paying guests in historic country houses under the description "Hidden Ireland." The plaintiff takes bookings for its members, for which it receives a commission. To that end, it has set up a number of e-mail addresses containing, in various forms, the expression "hidden Ireland."

5 The second-named Defendant acted as secretary to the plaintiff from 1986 to 1996. He set up the plaintiff's web-site and e-mail addresses following negotiations with the first-named Defendant. There was a dispute between the plaintiff and the second-named Defendant, which led to the second-named Defendant leaving the service of the plaintiff. The plaintiff suspected him of operating a competing booking service. On 19th February 1997, these parties entered into an agreement in writing to compromise their differences. The second-named Defendant agreed not to use the name "hidden Ireland" or any similar name and to a number of similar terms. He also agreed "not to interfere with incoming HI enquiries on the Internet." The parties mutually agreed not to "interfere with enquiries or business whether by word of mouth, post, telephone, fax or on the internet intended for the other party."

6 The principal claim of the plaintiff in the present action is that the second and third named defendants, over a period, not yet clearly identified but generally between 1996 and 1998, diverted or caused to be diverted e-mails addressed to the plaintiff and that this was done with the assistance of the first-named Defendant.

7 In this respect, the plaintiff relies upon the contents of a letter dated 12th October 1999 from Arthur Cox, Solicitors, for the first-named Defendant. That letter refers to certain e-mail addresses, described as "aliases" containing different versions of the name "hidden Ireland." The letter says that the Hidden Ireland account was established on 29th October 1996. It also says that at some unknown date between that date and 8th September 1997 an e-mail "forward" was set up. The effect of the "forward" was to send e-mails, which had been addressed to the underlying Hidden Ireland address, to the e-mail box cht@indigo.ie. The last-named address was, according to the Arthur Cox letter, set up and created on 30th October 1996 and held by "Tourism Resources" with an address at 71 Waterloo Road, Dublin 4. This is the address of the second-named Defendant and of the third named Defendant. It is apparent from the exhibits in the present case that the address, cht@indigo.ie, is used by the second-named Defendant. There is no express evidence that the second-named defendant asked that the "forward" be set up.

8 The plaintiff alleges that the information in these e-mails (the fact of potential customers of the members of the plaintiff wishing to make bookings) was used by the second and third named defendants for their own benefit. Some importance is attached to the fact that the third named Defendant was a shareholder and director of a company, since struck off the register, called Tourism Resources Limited, through which some of this business is alleged to have been carried on.

9 The plaintiff alleges breach by the second-named Defendant of the agreement of February 1997, the use of confidential information by both these defendants, and the commission of a number of economic torts. These include passing-off and interference with the contractual arrangements between the plaintiff and its members and with the first-named Defendant. Generally, the plaintiff claims damages for loss suffered by itself and its members.

10 All of the plaintiff's claims are vigorously disputed.

11 A history of the proceedings to date is necessary for an appreciation of one of the arguments on this appeal: the suggestion that the second and third named Defendants delayed unduly in bringing their application for security for costs.

12 The Plenary Summons was issued and served on both these Defendants and they had entered appearances in the period June and July 2001. The Statement of Claim was delivered on 27th July 2001. The Defence was delivered on 20th November 2001. The solicitors for the second and third named Defendants served a very detailed notice seeking particulars on 6th November 2001. The plaintiff says that the requests for particulars necessarily required very extensive work, since the second and third named defendants had asked for details of every allegedly diverted e-mail. The reply to the notice for particulars was delivered on 1st March 2002.

13 Also on 1st March 2002, but obviously not with knowledge of the particulars supplied, the second-named Defendant wrote by fax to Mr John Madden, a member of the plaintiff in highly abusive terms. He alleged that both Mr Madden and Mr George Gossip, the director of the plaintiff principally involved in these proceedings were "out to shaft" him. He said that the litigation was "a complete waste of time and money" and that his solicitors had advised him that he had nothing to fear from it. He said that he believed the claim would fail and that "our combined costs [presumably meaning the costs of both sides] would be well over £100,000." In the "unlikely event" that the plaintiff were to win, the plaintiff would have to bankrupt him and would "end up with 12.5c in the Euro." The plaintiff alleges that this fax was circulated to eighteen of its members.

14 In that letter also, the second named Defendant said that he would "have no problem with any member of Hidden Ireland inspecting all [his] computer records, past files and bank accounts."

15 When the plaintiff took the second named Defendant up on this apparent offer, it was suggested that an application be made for voluntary discovery. Such an application was initiated on 2nd July 2002.

16 On 26th June 2002, solicitors for the second and third named Defendants wrote formally seeking security for costs. The letter stated that the financial statements of the plaintiff for the year ended 31st December 2000 showed a deficit of IR£31,733...