Irish Press Plc v Warburg Pincus Company International Ltd

• Jurisdiction: Ireland
• Judge: Lynch,LYNCH J.
• Judgment Date: 29 July 1998
• Neutral Citation: [1998] IESC 21
• Court: Supreme Court
• Date: 29 July 1998

[1998] IESC 21

THE SUPREME COURT

O'Flaherty J.

Murphy J.

Lynch J.

141/97

IRISH PRESS PUBLIC LTD COMPANY v. EM WARBURG PINCUS

BETWEEN/

IRISH PRESS PUBLIC LIMITED COMPANY

Plaintiff/Respondent

AND

E.M. WARBURG PINCUS AND CO. INTERNATIONAL LIMITED

WARBURG PINCUS AND CO., E.M. WARBURG PINCUS AND CO. INC., WARBURG PINCUS PARTNERS L.P., WARBURG PINCUS COMPANY L.P., IPL (1991) LIMITED, GORDON BRUNTON, RALPH INGERSOLL, JOHN ROGER NICHOLSON AND BARBARA MANFREY

Defendants/Appellants

Citations:

COMPANIES ACT 1963 S390

COMPANIES ACT 1963 S205

Synopsis

Practice and Procedure

Security for costs; joint venture; alleged negligent advice, misrepresentation and breach of fiduciary duty; whether respondents have a stateable case against appellants; whether appellants have a stateable defence to respondents claim; whether there are special circumstances to justify not making an order for security for costs; whether appellant discharged onus of proof of respondents inability to meet potential costs; ss. 205 & 390, Companies Act ,1963 Held : Appeal dismissed; appellants did not establish sufficient evidence of respondents inability to pay the costs of the appellants if and when so ordered (Supreme Court : O'Flaherty J., Murphy J., Lynch J. 29/07/1998)

Irish Press PLC v. E.M. Warburg, Pincus & Co. Int. Ltd.

There was sufficient evidence to support the finding of the High Court (McGuinness J). There was no doubt but that the financial position of the respondent on the accounts for the year ending 31 March 1996, which were the latest accounts available to the High Court, showed a borderline financial position so far as ability to pay the appellants’ costs if successful, was concerned. But since the High Court hearing the accounts for the year ending 31 March 1997 and draft accounts for the year ending 31 March 1998 had become available. The latter showed total assets after deduction of all liabilities, current and long-term, in the sum of £2,206,000 which seemed more than adequate to enable the respondent to pay the appellants’ costs if and when the appellants were successful in their defence. The appellants had not established by credible testimony that there was reason to believe that the respondents would be unable to pay their costs if successful in their defence. The Supreme Court so held in dismissing the appeal.

1 JUDGMENT delivered the 29th day of July 1998 by Lynch [NEM. DISS.]

Lynch LYNCH J.

2 This is an appeal from a judgment and order of the High Court (McGuinness J.) given on the 12th day of March 1997 whereby she refused an application by the defendants/appellants for an order pursuant to s. 390 of the Companies Act,1963directing the plaintiffs/respondents to give sufficient security for the costs of the appellants in these proceedings and staying the further prosecution of the proceedings until the said security be given.

THE FACTUAL BACKGROUND

3 The respondents” claim against the appellants is for damages for alleged negligent advice, misrepresentation and breach of fiduciary duty as a result of which the respondents say that they entered into a joint venture arrangement with the appellant Ralph Ingersoll and companies controlled by him: this joint venture turned out to be a disastrous venture for the respondents and they allege that at the time when the appellants advised the respondents and represented to them that the Ingersoll companies were a financially sound and thriving business they were in fact in serious financial difficulties and losing many millions of U.S. dollars per year. The respondents further allege that their losses were established in the High Court in proceedings against the Ingersoll companies and others pursuant to s. 205 of the Companies Act,1963at over £6m., although the High Court award of such sums was set aside by the Supreme Court on the basis that damages were not a remedy available in proceedings under s. 205 of the 1963 Act. (See 1995 2nd I.R. p. 175).

4 The respondents allege that those damages were caused to them by the negligent advice, misrepresentation and breach of fiduciary duty of the appellants, especially in writing to them on the 20th December 1988 as follows:

"At the suggestion of Sir Gordon Brunton and Roger Nicholson, I ant writing to you regarding the financial resources of Ingersoll Publications Limited, with which I understand you are currently discussing a potential collaboration. The Ingersoll group of companies is not quoted. Accordingly, I hope that the following information, taken with the information from the corporate brochure, will give you a feeling for the scale and the growing strength of the group.

My firm, E.M. Warburg, Pincus and Co. Inc., has been actively involved with Ralph Ingersoll since 1983 when we created our first joint venture, Ingersoll Newspapers Inc. in which Ralph Ingersoll and his talented team provided management expertise and Warburg, Pincus provided the required equity capital. This highly successful venture was followed by two additional and equally promising joint ventures, Community Newspapers Inc. and Ingersoll Publications Limited both of which were established in 1987.

Warburg, Pincus, a specialised financial services firm whose primary activity is venture banking, manages through a small number of funds a total venture capital portfolio in excess of 1.5 billion dollars. Through these funds, Warburg, Pincus has provided approximately 200m. dollars of equity capital to the three Ingersoll entities to assist them in their acquisition programmes over the past five years.

Warburg, Pincus has indicated its willingness to continue funding attractive acquisition candidates identified by the Ingersoll Group in the United Kingdom and elsewhere in the world.

Ingersoll Publications Limited, the entity through which the Ingersoll organisation is undertaking its European activities, has substantial paid in capital, and since inception has generated earnings and cash flow which have exceeded...