O’Donnell v Saltan Properties Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Costello |
| Judgment Date | 06 August 2020 |
| Neutral Citation | [2020] IECA 226 |
| Docket Number | Court of Appeal Record No. 2020/79 |
| Date | 2020 |
| Court | Court of Appeal (Ireland) |
AND
[2020] IECA 226
Costello J.
Court of Appeal Record No. 2020/79
THE COURT OF APPEAL
Security for costs – Companies Act 2014 s. 52 – Rules of the Superior Courts O. 86, r. 9 – Respondent seeking an order requiring the appellant to provide security for costs of its appeal – Whether the respondent had demonstrated a risk of added and unnecessary injustice in the bringing of the appeal
Facts: The plaintiff/respondent, Ms O’Donnell, issued a notice of motion seeking an order requiring the defendant/appellant, Saltan Properties Ltd, to provide security for costs of its appeal of the orders of the High Court refusing discovery sought by the appellant and ordering the appellant to make discovery to the plaintiff. The application was brought pursuant to s. 52 of the Companies Act 2014 and O. 86, r. 9 of the Rules of the Superior Courts (RSC). The plaintiff asked the Court of Appeal to determine the form and amount of such security, to stay the appeal until the security was provided and to strike out the appeal if the security was not provided within a period as may be specified by the court.
Held by Costello J that the plaintiff had not demonstrated a risk of added and unnecessary injustice in the bringing of the appeal. Accordingly, Costello J refused the application for security for costs brought pursuant to O. 86, r. 9 RSC. In her judgment, s. 52 of the 2014 Act does not apply to an appeal by a defendant, as it cannot be regarded as a plaintiff and thus, it is outside the scope of the section.
Costello J refused the reliefs sought in the notice of motion under both s. 52 of the 2014 Act and O. 86, r. 9 RSC.
Reliefs refused.
The plaintiff respondent (“the plaintiff) issued a notice of motion seeking an order requiring the appellant to provide security for costs of its appeal of the orders of the High Court refusing discovery sought by the appellant and ordering the appellant to make discovery to the plaintiff. The application is brought pursuant to s.52 of the Companies Act 2014 (“the Act of 2014”) and Order 86. rule 9 of the Rules of the Superior Courts (“RSC”). The plaintiff asks the court to determine the form and amount of such security, to stay the appeal until the security is provided and to strike out the appeal if the security is not provided within a period as may be specified by the court.
The plaintiff is the owner of an apartment at Riverwalk Court in Ratoath, County Meath It is situated in a development which was constructed in or around 2003/2004. The appellant was the developer of the development. The other defendants are contractors and professional advisors who were involved in the development.
A series of defects presented in structural and other elements of the development as constructed. Part of the cost of remeding these defects and the damage occasioned was covered by latent defects insurance held by the plaintiff, but considerable damage was not covered by the policy. As a result of the defects throughout the development, twenty-six sets of proceedings (one for each apartment) were issued in 2012 on a subrogated basis against the appellant and the other defendants involved in the construction of the development. Three of these proceedings, including this action, are been pursued as master claims pursuant to case management directions of the High Court and the agreement of the parties.
On 6 and 20 November 2019, the judge in charge of the case management of the proceedings heard motions for discovery which the parties had issued against each other, and a reserved judgment was delivered on 18 December 2019. The trial judge in large measure refused the categories of discovery sought by the appellant against the plaintiff and conversely awarded the plaintiff the discovery she sought against appellant. The discovery was to be made by 30 April 2020. The appellant has appealed those orders.
The appellant is grossly insolvent on a balance sheet basis and unable to meet its debts. Unaudited abridged financial statements filed in the CRO on 28 September 2019 show total net liabilities in the sum of€32,375,318. Net current liabilities are €2,632,556 and liabilities due after more than one year in the sum of €29,742,762. In a replying affidavit sworn on behalf of the appellant, its solicitor, Mr. Michael Nugent, accepted that it is insolvent and as such will be unable to pay the plaintiff's cost of the appeal if an order for costs is made against it. It was in these circumstances that the plaintiff brought the motion seeking security for costs.
The motions are brought pursuant to s.52 of the Companies Act 2014 and O.86, r.9 RSC. as I have said. It is common case that the rule applies to the application, but the appellant denies that s.52 of the Act of 2014 applies in circumstances where it is an insolvent defendant, not an impecunious plaintiff. I shall consider the application first from the perspective of the Rules of the Superior Courts before, if necessary, considering the application pursuant to s.52 of the Act of 2014.
Order 86, r.9 provides as follows:-
“The Court of Appeal may under special circumstances direct that a deposit or other security in the amount fixed by the Court of Appeal be made or given for the costs to be occasioned by any appeal.”
The starting point is that any application for security for costs is an exception to the rule. In Farrell v. Bank of Ireland [2012] IESC 42, Clarke J. in the Supreme Court said at para. 4.17:-
“… the jurisprudence in relation to all of the areas where security for costs is considered … starts from a default position that, in the absence of some significant countervailing factor, the balance of justice will require that no security be given. The reasoning behind that view is that, if it were otherwise, all impecunious parties might, in substance, be shut out from bringing cases or pursuing appeals. Such a balance would be untenable and disproportionate. It is for that reason that there must be some additional factor at play before an order for security for costs can be made.“
In its terms, O.86 RSC applies to all appeals to the Court of Appeal and to all types of litigation and all parties. It, therefore, applies to appeals in respect of procedural motions, such as this appeal, and to appeals after a full hearing. It applies whether the appellant is the plaintiff or the defendant in the proceedings.
The rule requires that special circumstances be established before the court may order a party to provide security for the costs of the appeal; otherwise, there is no guidance from the rules as to the mariner in which the court should exercise its discretion
The onus is on the moving party to establish special circumstances (see Malone v. Brown Thomas & Co. Limited [1995] 1 ILRM 369).
While a plaintiff may not seek security for costs from a defendant at first instance, a successful plaintiff may obtain an order for security for the cost of an appeal from an unsuccessful defendant/appellant. In Midland Bank Limited v. Crossley-Cooke [1969] I.R. 56, at p. 62, Walsh J. held:-
“ ‘The position of a plaintiff who brings a defendant into court for the first time is quite different from that of an unsuccessful litigant who is bringing the winning party a stage further by appealing the case. … In my view the fact that the party moving for security on the appeal is the plaintiff is not a matter to be taken into consideration in ease of the appellant or defendant.”
In that case, the Supreme Court confirmed that the court will not ordinarily order security for costs where the appeal involves a point of law of public importance.
Poverty or impecuniosity of the appellant, and thus an inability to meet any award of costs which might be made in favour of the applicant for security, is a pre-requisite to an application for security for costs but it is not a sufficient basis upon which to order that security be provided (see Farrell v. Bank of Ireland and Midland Bank Ltd. v. Crossley-Cooke).
In Midland Bank at p.61 of the report Walsh J. stated:-
“It would appear that in the circumstances of any particular case the Court could have felt itself justified in making such an order [for security] when there was a combination of poverty of the appellant and any one or more of the several factors mentioned in those cases, such as a party being resident out of the jurisdiction, or there being no apparent prima facie grounds for the appeal, or the complexity of the issues, or long delays on the part of the appellant in the conduct of the litigation, or where the appellant is simply a nominal appellant; or, where there are several appellants and poverty is common to each of them, a combination of that and one or more of the other factors even if the other factors affected only one of the appellants.” (emphasis added)
He held that the court:-
“… would consider the special circumstances of each case and the effect of the combination of various grounds which might arise in each case, and that it would consider whether, in all those circumstances, the justice of the case required that the Court should exercise its discretion in favour of ordering security to be given.”
In Farrell, Clarke J. noted at para. 4.31:-
“… The overall approach, as noted by Walsh J., is that it requires some significant countervailing or special circumstance to justify the making of the order. The reason why that requires to...
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