Quinn Insurance Ltd v PriceWaterhouseCoopers

CourtCourt of Appeal (Ireland)
JudgeMs Justice Baker
Judgment Date21 April 2020
Neutral Citation[2020] IECA 109
Docket NumberAppeal No.: 2018/70
Date21 April 2020

[2020] IECA 109

Baker J.

Costello J.

McCarthy J.

Appeal No.: 2018/70


Security for costs – Damages – Breach of contract– Appellant seeking security for costs – Whether exceptional circumstances existed which justified the refusal of the making of an order for security for costs

Facts: The plaintiff/respondent, Quinn Insurance Ltd (Quinn), claimed damages for alleged breach of contract, for negligence and breach of duty arising from the manner in which the defendant/appellant, PricewaterhouseCoopers (PwC), conducted its audits of certain aspects of the Quinn business and its meeting of certain regulatory requirements. PwC appealed to the Court of Appeal from the decision of the High Court (Haughton J), of 13 February 2018, refusing the application of PwC that Quinn provide security for its costs pursuant to s. 52 of the Companies Act 2014. Haughton J had concluded that exceptional circumstances existed which justified the refusal of the making of an order for security for costs.

Held by Baker J that, primarily because the interests pursued in this litigation were wholly commercial, she did not consider that the trial judge was correct to treat this litigation as a public interest litigation of sufficient importance to justify a departure from the requirement that security for costs be provided.

Baker J held that the appeal would be allowed and that the amount and mode of security was a matter for determination by the High Court.

Appeal allowed.

JUDGMENT of Ms Justice Baker delivered on the 21 st day of April, 2020

The plaintiff company, Quinn Insurance Limited, is a company incorporated in 1995 and was part of the Quinn group, a group of companies incorporated in and operating in the State and in Northern Ireland. It had underwriting business of over €1 billion in the financial year ended 31 December 2013. It was placed under administration by order of the High Court on 30 March 2010 and joint administrators were appointed. The plaintiff company is insolvent and reliant to satisfy claims and to wind down its business on funding from the Insurance Compensation Fund (“ICF”) established under the Insurance Act 1964, maintained and administered under the control of the Central Bank of Ireland, and funded through contributions from non-life insurance up to an aggregate of 2% of gross premia purchased in the State.


Much of the business of the company has now been sold off.


For convenience I will refer to the plaintiff company as “Quinn”.


PricewaterhouseCoopers (“PwC”) is an international firm of auditors and accountants and the firm sued in this litigation is the partnership operating in the State which, at all material times, acted as auditors to the Quinn group.


These proceedings commenced by plenary summons on 15 February 2012 and Quinn claims damages for alleged breach of contract, for negligence and breach of duty arising from the manner in which PwC conducted its audits of certain aspects of the Quinn business and its meeting of certain regulatory requirements. The proceedings were admitted into the Commercial Court on 24 July 2013. The grounding affidavit of Michael McAteer, one of the joint administrators, avers that the action will be “very large and very complex,” involving a pool of some 40 million documents.


That the litigation is likely to be lengthy, costly, and complex is not doubted. By way of illustration of the likely complexity of the litigation, the pleaded claim of 24 September 2013 runs to 133 paragraphs and the amended defence delivered on 31 July 2019, to 196 paragraphs. The litigation has been extensively case-managed and has reached the point where the pleadings have closed, and extensive particulars answered.


It should be said at the outset that the report of the independent cost accountant of PwC estimates the costs of defending the proceedings at somewhat more than €30 million exclusive of VAT. That estimate is not seriously in contention. Whether it has any consequence for the exercise of the discretion to refuse to make an order for security will be considered later in this judgment.


This appeal is from the decision of Haughton J. who, on 13 February 2018, refused the application of PwC that Quinn provide security for its costs pursuant to s. 52 of the Companies Act 2014 (“the Companies Act”).


The hearing of the motion was conducted over four days in the High Court, following which Haughton J. delivered his detailed written judgment on 30 January 2018, Quinn Insurance Ltd (Under Administration) v. PriceWaterhouseCoopers (A Firm) [2018] IEHC 16, and concluded that exceptional circumstances existed which justified the refusal of the making of an order for security for costs.

General legal provisions

Section 52 of the Companies Act provides as follows:

“Where a 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 or her defence, require security to be given for those costs and may stay all proceedings until the security is given.”


A number of principles developed by the authorities are not controversial. The section creates what has been described as the “initial onus” on the party seeking security to establish two cumulative requirements: that it has a bona fide defence to the claim of the plaintiff and that the plaintiff will not be able to pay the defendant's costs if it is successful in defending the action.


No dispute arises in the present case regarding these threshold or gateway elements. Quinn is insolvent, is not a trading entity and, for practical purposes, its only business is the prosecution of this litigation. PwC has pleaded a bona fide defence.


As is clear from a plain reading of s. 52 of the Companies Act, once the threshold or gateway requirements are met, while the court has a discretion, security is to be ordered unless it can be shown that special circumstances justify the exercise by the court of its discretion. This arises from the language of s. 52, which creates a discretionary and not mandatory power and the elements of that discretion have been the subject matter of a number of authoritative judgments of the Superior Courts.


The exceptions identified in the case law which permit a court to refuse to order a corporate plaintiff to provide security for costs derive from the discretionary nature of the statutory power. They are illustrations of the type of concerns that might be engaged in the exercise of the discretion and have as their ultimate objective the preservation of the interests of justice. The obvious case of an unmeritorious and insolvent plaintiff suing a defendant with a complete defence to the claim is not likely to give rise to much difficulty in the application of the statutory provisions. The interests of justice would not be served where a plaintiff's impecuniosity is actually caused by the wrongdoing for which damages are claimed in the proceedings, were the order that it provide security has the practical effect of denying it the right to pursue the wrongdoer to recoup those losses, as indeed the interests of justice would not be served were a defendant, who had caused damage by such wrongdoing, to be insulated against an action merely on account of the inability of an insolvent plaintiff to pursue an action without providing security for costs.


The exceptions found in the authorities have evolved in two separate strands, one where the inability to meet the costs is alleged to have been caused by the wrongdoing sought to be redressed in the litigation, and the other where the interests of justice in the broad sense and the general public interest in the resolution of a point of general importance or interest to the public at large justify the refusal of an order for security. Each strand has evolved at common law in the light of the circumstances giving rise to the exercise of discretion and the imperative that a balance be struck in the interests of justice.


The focus of this appeal is the conclusion of the trial judge that special circumstances did exist to justify the exercise of his discretion to refuse to direct security for costs.


The appeal centres on two aspects of the reasoning of the trial judge:

1) that Quinn had made out a prima facie case that its inability to discharge costs flows from the alleged wrongdoing of PwC, and

2) that the proceedings raise issues of general public interest and exceptional public importance justifying the refusal of the application.


The first of these two exceptional grounds has been considered in a number of the leading authorities, and I propose dealing first with the elements of that ground before moving to the less commonly litigated argument that the proceedings are of general and exceptional public interest and importance.


A plaintiff who can show that its admitted or established inability to pay the likely costs of the defendant stems from the wrongdoing alleged in the proceedings finds its clearest and most quoted source in the judgment of Clarke J., as he then was, in Connaughton Road Construction Ltd v. Laing O'Rourke Ireland Ltd [2009] IEHC 7, 28 ILT 242, at para. 3.4, where he identified four elements which, logically, must be established to rely on the exception. It is convenient to quote them in full:

“In order for a plaintiff to be correct in his assertion that his inability to pay stems from the wrongdoing asserted, it seems to me that four propositions must necessarily be true:-

(1) That there was actionable wrongdoing on the part of the defendant (for example a...

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