Quinn Insurance Ltd (Under Administration) v PricewaterhouseCoopers (A Firm)

• Jurisdiction: Ireland
• Court: Supreme Court
• Judge: Mr. Justice Clarke,Mr. Justice John MacMenamin,Mr. Justice O'Donnell
• Judgment Date: 22 March 2021
• Neutral Citation: [2021] IESC 15
• Date: 22 March 2021
• Docket Number: [Appeal No: 72/2020] S:AP:IE:2020:000072,[S.C. No. 72 of 2020]

Between/

Quinn Insurance Limited (Under Administration)

Applicant/Appellant

and

PricewaterhouseCoopers (A Firm)

Defendant/Respondent

Between:

Quinn Insurance Limited

Appellant

and

Price Waterhouse Cooper

Respondent

Between/

Quinn Insurance Limited (Under Administration)

Applicant/Appellant

and

Price Waterhouse Cooper (A Firm)

Defendant/Respondent

[2021] IESC 15

Clarke C.J.

O'Donnell J.,

MacMenamin J.,

Dunne J.,

O'Malley J.

[Appeal No: 72/2020]

[Appeal No. 148/19]

S:AP:IE:2020:000072

THE SUPREME COURT

Security for costs – Public interest – Companies Act 2014 s. 52 – Respondent seeking security for costs – Whether the Court of Appeal erred in principle in ordering security for costs

Facts: The plaintiff/appellant, Quinn Insurance Ltd (QIL), collapsed, leading to it being placed in administration. QIL contended that the defendant/respondent, PricewaterhouseCoopers (PwC), was in breach of contract and negligent in the manner in which it gave unqualified assurances in relation to financial statements and regulatory returns in respect of four financial years ending on 31 December 2005, 2006, 2007 and 2008. An application was brought by PwC seeking security for costs. The High Court (Haughton J) refused the application: [2018] IEHC 16. PwC appealed to the Court of Appeal, which court allowed the appeal and ordered that QIL provide security: [2020] IECA 109. From that decision QIL sought leave to appeal to the Supreme Court. By determination dated 28th July 2020 ([2020] IESCDET 92), the Supreme Court granted QIL leave to appeal the decision of the Court of Appeal on the following basis: “The questions raised include, but are not confined to, whether, in deciding as it did, the Court of Appeal, although making a discretionary order, erred in principle in ordering security for costs in this case. However, viewed, this application has considerable significance. In the view of the Court, the matters raised are of general public importance in generally identifying the appropriate test for security for costs, and also having regard to the public interest principle in s. 52 of the [Companies Act 2014]. It is in the interests of justice that leave should be granted. The issues to be determined will be fixed following case management. The Court, therefore, grants leave to appeal.”

Held by Clarke CJ that the Court of Appeal was correct to hold that QIL should be required to put up security for costs. He reiterated the views which he expressed in Connaughton Road Construction Ltd v Laing O’Rourke Ireland Ltd [2009] IEHC 7 concerning the proper approach to be adopted in a case where it is said that security should not be ordered because there is a prima facie basis for suggesting that the impecuniosity of the relevant plaintiff is due to the wrongdoing alleged. However, he suggested that there may be a second stage to the consideration which the Court should give in such cases even where the test identified in Connaughton Road is not met. He held that the Court should consider whether it is likely that the proceedings will be stifled and take the result of that consideration into account in assessing which course of action runs the least risk of injustice. He was not satisfied that QIL had met the Connaughton Road test. In addition, he did not consider that it had been established that there was any likelihood that the proceedings would be stifled. He therefore proposed that the “impecuniosity due to alleged wrongdoing” basis for establishing a special circumstance should be rejected. In addition, he did not consider that the public interest special circumstance had been established on the facts of this case. He found that it had not been shown that the proceedings would be stifled should security be ordered and that, therefore, any possible public interest in the proceedings going ahead would not be impaired. He also offered some general observations on the way in which security may be provided in appropriate cases including, in complex cases, a staggered approach and, in appropriate cases, the possibility that a guarantee from the natural persons who might ultimately hope to benefit from a successful conclusion of the proceedings may be considered appropriate irrespective of the extent to which those individuals might or might not be in a position to meet the full extent of the guarantee should it be called on.

Clarke CJ proposed that the appeal be dismissed and the order of the Court of Appeal affirmed.

Appeal dismissed.

Judgment of Mr. Justice Clarke, Chief Justice, delivered the 22 ^nd March, 2021.

1. Introduction

1.1 These proceedings arise out of the collapse of the plaintiff/appellant (“QIL”) leading to it being placed in administration. QIL contends that the defendant/respondent (“PwC”) was in breach of contract and negligent in the manner in which it gave unqualified assurances in relation to financial statements and regulatory returns in respect of four financial years ending on 31 December 2005, 2006, 2007 and 2008.

1.2 The particular issue with which this Court is now concerned centres on an application brought by PwC seeking security for costs. The High Court (Haughton J.) refused the application (see- Quinn Insurance Ltd. (Under Administration) v. PricewaterhouseCoopers [2018] IEHC 16). PwC appealed to the Court of Appeal, which court allowed the appeal and ordered that QIL provide security (see the judgment of Baker J., speaking for the Court in Quinn Insurance Ltd. v. PricewaterhouseCoopers [2020] IECA 109). From that decision QIL sought leave to appeal to this Court.

2. The Grant of Leave to Appeal

2.1 By determination dated 28th July 2020 (See- Quinn Insurance Ltd. (Under Administration) v. PricewaterhouseCoopers (A Firm) [2020] IESCDET 92), this Court granted QIL leave to appeal the decision of the Court of Appeal on the following basis:-

“18. The questions raised include, but are not confined to, whether, in deciding as it did, the Court of Appeal, although making a discretionary order, erred in principle in ordering security for costs in this case. However viewed, this application has considerable significance. In the view of the Court, the matters raised are of general public importance in generally identifying the appropriate test for security for costs, and also having regard to the public interest principle in s.52 of the 2014 Act. It is in the interests of justice that leave should be granted. The issues to be determined will be fixed following case management. The Court, therefore, grants leave to appeal.”

2.2 Shortly after leave to appeal was granted in this case, the Court also gave leave to appeal in another case involving security for costs arising in a corporate context (see – Protégé International Group (Cyprus) Ltd. v. Irish Distillers Ltd. [2020] IESCDET 106) (“ Protégé”).

3. Protégé

3.1 While the precise issues which required to be decided in the respective cases differed materially, both appeals arose from at least the same general legal background. As will be commented later in this judgment, the essential regime concerning the grant or refusal of security for costs in a corporate context is well settled. For example, the judgment of this Court in Usk District Residents Association Ltd. v. Environmental Protection Agency [2006] IESC 1 makes clear that an initial onus rests on a defendant seeking security for costs to establish that it has a bona fide defence to the proceedings and also that the plaintiff concerned would not be in a position to meet the costs of the proceedings were it to lose and costs be awarded against it. Where both of those matters are established by the defendant to the satisfaction of the Court, then security will ordinarily be ordered unless there is a sufficient countervailing factor (or a “special circumstance” as that term is used in the jurisprudence) which tilts the balance of justice against the making of an order. In both these proceedings and in Protégé it had come to be accepted that the respective defendants had met the onus of proof which lay on them to establish a bona fide defence and the inability of the respective plaintiffs to meet an order for costs should one be made against them. Thus, at least in general terms, both cases were concerned with whether special circumstances had been established by the respective plaintiffs. Both appeals, therefore, turned, at least in very general terms, on the proper identification and application of the special circumstance jurisprudence not least that aspect of that jurisprudence which is concerned with a contention that, prima facie, the inability of the plaintiff concerned to meet any costs order which might be made is due to the wrongdoing alleged against the defendant. Both cases also involved what has come to be known as the public interest special circumstance. For those reasons it was arranged that both appeals would be heard by the same panel of this Court and in relatively close proximity one to the other, for it was clear that there might well be at least some issues of general principle which would be common to both proceedings.

3.2 Be that as it may, it is appropriate to turn first to the specific issues which arise in the context of this appeal. In order to understand those issues more fully it seems to me to be appropriate to start by an analysis of what transpired in both the High Court and the Court of Appeal.

4. The Judgments of the Lower Courts

4.1 As noted earlier, it was at all times accepted that QIL would be unable to meet the costs of PwC, should such costs be awarded against QIL at the end of the proceedings. It was also accepted that PwC had established that it had a bona fide defence to the proceedings. Thus the issue of the grant, or otherwise, of an order requiring security for costs turned on whether there were special circumstances which might justify a refusal to award security for costs...