Pembroke Equity Partners Ltd v Corrigan

• Jurisdiction: Ireland
• Judge: Mr Justice Maurice Collins
• Judgment Date: 24 June 2022
• Neutral Citation: [2022] IECA 142
• Court: Court of Appeal (Ireland)
• Docket Number: Court of Appeal Record No. 2022/40

Between

Pembroke Equity Partners Limited

Plaintiff/Appellant

and

Eileen Corrigan and James Patrick Galligan

Defendants/Respondents

[2022] IECA 142

Donnelly J

Faherty J

Collins J

Court of Appeal Record No. 2022/40

COURT OF APPEAL

CIVIL

Summary judgment – Security for costs – Costs – Appellant appealing from an order which awarded the respondents the costs of a motion for security for costs they had brought against the appellant – Whether the provisions of s. 169(1) of the Legal Services Regulation Act 2015 applied to the costs determination

Facts: The plaintiff/appellant, Pembroke Equity Partners Ltd (the Company), in May 2012, claimed summary judgment in a total sum of €409,304.12. That sum was said to be the balance due by the defendants/respondents, Ms Corrigan and Mr Galligan, inclusive of interest, arising from a loan of €300,000 advanced by the Company in May 2006. The Company applied for liberty to enter final judgment (in an increased amount, due to the accrual of further interest). That application was opposed by the defendants and on 24 July 2014 an order was made by consent adjourning the proceedings for plenary hearing and directing the delivery of pleadings in the ordinary way. The Company delivered its Statement of Claim in July 2015. As of the delivery of the Statement of Claim, the sum being claimed by the Company had increased to €556,068.99. The Company appealed to the Court of Appeal from an order of the High Court (Meenan J) made on 23 November 2021 which awarded the defendants the costs of a motion for security for costs they had brought against the Company. The first question identified by the Company was whether the provisions of s. 169(1) of the Legal Services Regulation Act 2015 applied to the costs determination. The Company submitted that this provision applies only to the substantive determination of civil proceedings and has no application to the costs of an interlocutory application. Accordingly, it said, the Judge erred in having regard to s. 169. It was said that the Judge erred in taking the view that the defendants had been “entirely successful”. The Company said that the Judge failed to exercise his discretion properly.

Held by Collins J that, assuming that the Judge was correct to consider that the defendants had been “entirely successful” in the motion for security, he was entitled to take the view that the defendants were presumptively entitled to their costs and that did not involve any improper limitation on his discretion. In the circumstances, Collins J held that the Judge was entitled to take the view that the defendants had been “entirely successful” in the motion for security and that there was no basis for discounting or reducing their costs by reference to the fact that the amount belatedly offered by the Company and which they had accepted was less than their own estimate. Collins J held that the Judge exercised his discretion properly.

Collins J dismissed the appeal.

Appeal dismissed.

Unapproved

No redactions needed

JUDGEMENT of Mr Justice Maurice Collins delivered on 24 June 2022

Background

1 The Plaintiff/Appellant, Pembroke Equity Partners Limited (“ the Company”) appeals from an order of the High Court (Meenan J) made on 23 November 2021 which awarded the Defendants/Respondents (“ the Defendants”) the costs of a motion for security for costs they had brought against the Company (“ the motion for security”).

2 Before addressing the motion for security further, it is necessary to say something more about the underlying proceedings.

3 Those proceedings began life in May 2012 as a claim for summary judgment in a total sum of €409,304.12. That sum was said to be the balance due by the Defendants, inclusive of interest, arising from a loan of €300,000 advanced by the Company in May 2006. In due course, the Company applied to the Master for liberty to enter final judgment (in an increased amount, due to the accrual of further interest). However, that application was opposed by the Defendants and on 24 July 2014 the Master made an order by consent adjourning the proceedings for plenary hearing and directing the delivery of pleadings in the ordinary way.

4 The Company delivered its Statement of Claim in July 2015. It pleads the terms of the loan facility and says that the loan was provided for the purposes of funding the acquisition by the Defendants of a pharmacy on Dame Street called the City Pharmacy. As of the delivery of the Statement of Claim, the sum being claimed by the Company had increased to €556,068.99.

5 The Defendants delivered their Defence in June 2018. It effectively traverses, or puts the Company on proof of, all material matters pleaded in the Statement of Claim. In addition, it pleads a defence of set-off in proceedings referred to as “ the City Pharmacy Proceedings”. It is necessary to say something about those proceedings as they are relevant to the motion for security. They involve claims for damages for breach of contract, negligence, breach of duty and misrepresentation brought by ( inter alia) the Second Defendant, Ms Corrigan arising from the acquisition of the City Pharmacy. The Defendants are the vendors of the pharmacy business (which was operated by a company called City Pharmacy Limited, which is one of the plaintiffs in those proceedings), the two partners in a firm of accountants who had acted as accountants for City Pharmacy Limited prior to its sale and the Company. The accountants are also shareholders in the Company. The essential claim made in those proceedings is that the purchasers were induced to pay a grossly-inflated price for the City Pharmacy by reason of inaccurate financial information and/or negligent financial advice provided to them by the accountants and the Company. The Defence delivered in these proceedings also sets out in detail the complaints of the Defendants as to the actions of the Company.

6 A Reply to this Defence was delivered in June 2019 taking issue with it.

7 It appears that the claims made in the other proceedings against the accountants has been compromised. The claim against the Company remains.

The Motion for Security

8 On 6 November 2019 the solicitors acting for the Defendants wrote to the Company's solicitors indicating an intention to seek security for costs. The letter stated that a review of the Company's “ latest accounts” indicated that it appeared to have no income, negligible assets and significant debt. On that basis, it was suggested, there was reason to believe that the Company would be unable to pay the Defendants' costs in the event that they were successful in the defence of the proceedings. The letter went on to seek confirmation that the Company would provide security and indicated that, in default of such confirmation, the solicitors anticipated instructions to issue a motion for security under Order 29 RSC and/or section 52 of the Companies Act 2014 (“ Section 52”).

9 The motion issued on 11 November 2019, before the Company had an opportunity to respond. The notice of motion sought an order pursuant to Section 52 and/or Order 29 requiring the Company to furnish security and a stay on the proceedings pending such security. No specific amount of security was sought. The motion was grounded on an affidavit sworn by the Second Defendant in which she averred that the Defendants had a good defence, making reference in that context to the fact that the Company had consented to the remittal of its summary claim to plenary hearing. As regards the financial position of the Company, she referred to its most recently filed accounts and also exhibited a review of those accounts undertaken by a firm of accountants, Blackthorn Capital, which suggested that the Company was “ grossly insolvent with excess current liabilities of €5.175m”. Ms Corrigan also addressed the issue of delay. Finally, she exhibited a report from Behan & Associates, legal costs accountants, which estimated the Defendants' costs of defending the proceedings at €194,441 (inclusive of VAT).

10 A replying affidavit was sworn by Hilary Haydon, a director of the Company, in September 2020. He asserted that the Defendants had delayed for a period of nearly eight years in bringing an application for security and said that it would be unfair if the Defendants were permitted to erect a “ further obstacle in the form of an order for security”. He explained at some length why she considered that the Defendants did not have any bona fide defence to the Company's claim and after discussing the Company's accounts, stated her belief that “on proper analysis”, there was no reason to believe that the Company would not be in a position to pay the Defendants' costs if its claim was unsuccessful. Mr Haydon exhibited a report from Cyril O' Neill & Co, legal costs accountants, estimating the Defendants' costs at €110,638 (inclusive of VAT).

11 A number of further affidavits were then exchanged, focused mainly on the financial position of the Company. Ms Corrigan put in evidence a detailed “ Security for Costs Report” prepared by Kirby Healy Chartered Accountants which concluded that there was no prospect of the Company being in a position to meet an adverse costs award. In response, Mr Haydon exhibited a report from a Mr Mark Hutch, accountant, expressing the contrary view. Issues relating to subordination of debts and the extent to which the Company had the support of its creditors were debated. For the purposes of this appeal, it is not necessary to discuss the detail of these issues. It is enough to say that there was a heated dispute as to whether a fundamental prerequisite for the making of an order for security for costs under Section 52 — “ that there is reason to believe that the company will be unable to pay the costs of the defendant” – was satisfied or not.

12 In total, 5 substantive affidavits were sworn, with exhibits running to many...