West Donegal Land League Ltd v Udaras Na Gaeltachta

• Jurisdiction: Ireland
• Judge: Mr. Justice Geoghegan,Denham J.
• Judgment Date: 15 May 2006
• Neutral Citation: [2006] IESC 29
• Court: Supreme Court
• Date: 15 May 2006

WEST DONEGAL LAND LEAGUE LTD v UDARAS NA GAELTACHTA & ORS

BETWEEN/

THE WEST DONEGAL LAND LEAGUE LIMITED

Plaintiff/Appellant

and

UDARAS NA GAELTACHTA AND JOSEPH HAMILTON BOYD AND DANIEL HARLEY, AND TOGAIL DHUN NA NGALL TEORANTA AND AERPHORT IDIRNAISIUNTA DHUN NA NGALL TEORANTA

Defendants/Respondents

[2006] IESC 29

Denham J.

Geoghegan J.

Macken J.

No. 082/2004

THE SUPREME COURT

PRACTICE AND PROCEDURE:

Security for costs

Sufficient security - Trial judge's discretion in relation to costs - Consideration of trial judge's discretion at time of application for security - Whether defendant would benefit from ordinary rule that costs follow event - Whether costs order would be made against successful defendant - Refusal of order for security - Discretion of court - Special circumstances - Whether special circumstances disentitled defendant to security - Merits of case - Whether conduct of defendant relevant to grant of security for costs - Lismore Homes Ltd v Bank of Ireland Finance Ltd (No 3) [2001] 3 IR 536 considered; SEE Co v Public Lighting Service [1987] ILRM 255 followed - Companies Act 1963 (No 33), s 390 - Security based on 4 day trial ordered (82/2004 - SC - 15/5/2006)[2006] IESC 29, [2007] 1 ILRM 1 West Donegal Land League Ltd v Údarás naGaeltachta

COMPANIES ACT 1963 S390

PERRY v STRATHAM LTD 1928 IR 580

FALLON v BORD PLEANALA 1992 2 IR 380

MALAHIDE COMMUNITY COUNCIL LTD v FINGAL CO COUNCIL 1997 3 IR 383

HOUSTON v UDARAS NA GAELTACHTA & ORS UNREP HIGH COURT SMYTH 4.7.1988 (6395P/1988)

THALLE v SOARES 1957 IR 182

COMPANIES (CONSOLIDATION) ACT 1908 S278

RULES OF THE SUPREME COURT (IRL)

FRAMUS LTD & ORS v CRH PLC & ORS 2004 2 IR 20 2004 2 ILRM 439

SEE CO LTD v PUBLIC LIGHTING SERVICES 1987 ILRM 255

IRISH PRESS PUBLIC LTD CO v EM WARBURG PINCUS & CO INTERNATIONAL LTD 1997 2 ILRM 263

COURTNEY LAW OF PRIVATE COMPANIES 2ED 2002 281

COMPANIES ACT 1963 PART II

COMPANIES ACT 1963 S16

LISMORE HOMES LTD v BANK OF IRELAND FINANCE LTD & ORS 2001 3 IR 536 2002 1 ILRM 541

DELANY & MCGRATH CIVIL PROCEDURE IN THE SUPERIOUR COURTS 2ED 2005

HIDDEN IRELAND HERITAGE HOLIDAYS LTD T/A THE HIDDEN IRELAND ASSOCIATION v INDIGO SERVICES LTD & ORS 2005 2 ILRM 498

STATUTE OF LIMITATIONS ACT 1957

LAND ACTS

LAND REGISTRATION RULES 1972

LAND ACT 1923

LAND ACT 1931 S15

BLAND LAW OF EASEMENTS & PROFITS A PRENDRE 1997 156

1 JUDGMENT of Mr. Justice Geoghegan delivered the 15th day of May 2006

INTRODUCTORY

2 This is an appeal brought by the above-named plaintiff/appellant against an order of the High Court (Smyth J.) directing, pursuant to section 390 of the Companies Act, 1963, that the appellant do furnish security for the second-named respondent's costs in this action and that in default thereof proceedings herein be stayed as against that respondent.

3 Before I consider dealing with the substantive issues on the appeal there are two procedural issues raised in the grounds of appeal to which I must first refer.

4 It is part of the appellant's case that this application came up for hearing before Smyth J. in an ordinary Monday motion list and that counsel for the plaintiff/appellant had indicated to the court that if the court took the view the company was not solvent, he would want the issue of whether there were special circumstances which might preclude an order for security for costs to be dealt with on another day, if necessary on oral evidence, but that the judge, although he did give a reserved judgment, did not refer to and still less did not accede to this request.

5 I am of opinion that the matter should not be remitted to the High Court on this account. It would be very unusual to send back a motion for rehearing. Without special permission of the court, oral evidence is not appropriate on such a motion. In exceptional circumstances, oral evidence may be permitted in a motion for security for costs as for instance where there are serious conflicts of fact relevant to security for costs arising from each party's affidavits. But what the appellant and his legal advisers were not entitled to do was to avoid putting their full case in favour of the "special circumstances" argument on affidavit in advance of the motion coming on for hearing. What was impressive in this case was that the trial judge reserved judgment. If he had given judgment there and then at the motion list there might have been some legitimate grievance but in the event there was none in my view. The judgment indicates an understanding and careful consideration of the issues.

6 The appellant has also raised an issue of apparent bias in that it is stated that the learned trial judge as senior counsel signed High Court pleadings on or about the 4th July, 1988 in an action Cissie Houston v. Udaras na Gaeltachta and Others which action is connected with the claims in this action. I am quite certain that if this issue had been raised, which it was not, before the learned trial judge, he would have recused himself. I am equally certain that he had no recollection of the earlier case at all. No reasonable observer of the scene would have had any other view than that which I have expressed. The case has now been fully considered by three judges of the Supreme Court. What is at stake is not the action itself but a motion within the action. I am satisfied that there is no necessity to make an order directing a rehearing in the High Court. Indeed the written reserved judgment of Mr. Justice Smyth clearly indicates his careful attention to the salient points.

7 I turn now to deal with the substantive appeal.

8 Section 390 of the Companies Act, 1963 reads as follows:

"Where a limited 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 is successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."

9 The appellant is a company limited by guarantee. It is clear beyond doubt, in my view, that the expression "limited company" in section 390 includes a company limited by guarantee. This seems obvious from the wording of all the earlier sections in Part II of the Act. The scheme of the Act (see section 16) is that there are four kinds of companies which may be formed, three of them limited and one of them unlimited. The limited companies are companies limited by shares, companies limited by guarantee and not having a share capital, and companies limited by guarantee and having a share capital.

10 The case law under section 390 establishes that notwithstanding the insertion of the word "may" the court in the absence of special circumstances and as a matter of appropriate exercise of its discretion will in a given case order security for costs in the circumstances provided for by the section. The "special circumstances" would seem to be limited and I will return to them in detail in due course.

11 Before doing so, I think it appropriate to signpost what could in this case give rise to a problem but for which I believe there is a solution. In Lismore Homes Limited v. Bank of Ireland Finance Limited (No. 3) [2001] 3 I.R. 536 this court, in a judgment delivered by Murphy J. and with which the four other members of the court concurred held, contrary to the views of the English Court of Appeal in interpreting an equivalent section in the relevant English Companies Act, that "sufficient security" was not open to any interpretation other than that involving making "a reasonable estimate or assessment of the actual costs which it is anticipated that the defendant will have to meet." Paragraph 4 of the head note is misleading in as much as it baldly states "that any injustice caused by the operation of section 390 could be avoided by granting or withholding the order for security." That is not a correct summary of what was stated in the judgment of Murphy J. What he said was somewhat different and it is worth quoting:

"The word “sufficient”, in its plain meaning, signifies adequate or enough and it is directly related in the section to the defendant's costs. The section does not provide for û as it might have û a sufficient sum “to meet the justice of the case” or some such phrase as would give a general discretion to the court. Harsh though it may be, I am convinced that “sufficient security” involves making a reasonable estimate or assessment of the actual costs which it is anticipated that the defendant will have to meet. Much of the injustice which may be anticipated by the operation of the section can be avoided by the application of the established principles in granting or withholding the order for security. In so far as the quantum of the security may be oppressive in a case where security is in fact ordered, this must be seen in the context in which it arises. It applies only to limited liability companies who are shown to be insolvent. Legislation has conferred many benefits on limited liability companies including, in particular, that very limitation and it is not surprising to find that some burdens are likewise cast by the legislature on companies which enjoy those advantages "

12 That passage from the judgment of Murphy J. must, I think, be read in the context of an assumption that as a matter of probability the defendant, if successful in the action, would enjoy the benefit of the ordinary rule that costs follow the event. I have very little doubt that, Murphy J. was thinking in terms of commercial litigation and in particular, of money claims. This action is very different for reasons which will emerge when I outline its...