High Court of Ireland Decisions

1. Three motions seeking security for costs in these proceedings have been brought against the Plaintiff by the first and second Defendants, the third Defendant and the fourth Defendant. For convenience the three motions have been heard together.

2. The various parties to these proceedings are all involved in the financing, producing and promotion of a film known as “When the Sky Falls”. The first Defendant was set up as the film production company, and also as a vehicle whereby small investors could invest in the film and take advantage of the relevant tax reliefs. The second Defendant is an agent of the first Defendant. The third Defendant is the film distributor which would in effect sell the film, the fourth Defendant is a company which furnished a completion guarantee in respect of the film and the fifth Defendant was originally the producer of the film, although its functions appear to have been taken over by the Plaintiff and the fifth Defendant appears to have little or no part to play in these proceedings, and has not sought security for costs. The Plaintiff is a company registered in the Isle of Man.

3. The scheme as set up was that the private investors would invest their money in the first defendant, but that the Plaintiff would lodge an equivalent amount of money with Anglo Irish Bank Corporation, (Isle of Man) plc., and that on production of a certificate of completion and delivery from the third Defendant, or in certain circumstances from the fourth Defendant, the bank would then release these monies to the first Defendant. The Plaintiff would then be reimbursed from the income from the film, that is in reality from the third Defendant, but the Plaintiff also covered its position by insuring against the receipts from the film falling below a certain figure. The Plaintiff did in fact lodge the sum of £2,300,911.00, being the amount of the private investments, the source of these monies being a loan to the Plaintiff from a well known businessman, Mr. Dermot Desmond.

4. In due course the film was completed, and two certificates of completion and delivery were furnished, one by the third Defendant on 28th June, 2000 and the other by the fourth Defendant on 7th July, 2000. The insurance company has now alleged that it has no liability under the policy, as the certificates of completion and delivery were issued out of time and are not in the correct form. The Plaintiff has issued proceedings in the United Kingdom against the insurers in which they claim that the certificates of completion and delivery are valid, and that the insurance company is legally bound to maintain cover.

5. In these proceedings the Plaintiff has taken the contrary position. While no statement of claim has been delivered, it is quite clear from interlocutory proceedings which have taken place and from their general endorsement of claim on the plenary summons that they are claiming that the issuance by the third and fourth Defendants of the delivery and completion certificates is void and that the Defendants are in breach of contract, and further that the Plaintiff has no obligation to effect payment or authorise the bank to effect payment of the monies lodged in the bank. Thus one has the strange position that in the United Kingdom proceedings the Plaintiffs are maintaining the validity of the certificates, while in these proceedings their claim was based on an alleged invalidity of the same certificates.

6. The above is only a very brief outline of the background to these proceedings, and the relationship between the parties was based on a series of complex agreements which I do not intend to examine in detail, although I will refer to a couple of the salient points at a later stage.

7. The plenary summons herein was issued on 28th July, 2000, and an interim injunction was granted to the Plaintiff on the same day restraining the first and second Defendants from purporting to call on the bank to make or effect payments to them of the monies lodged. Interlocutory proceedings were subsequently heard and on 8th September 2000 Ó Caoimh J. ordered that on payment of the monies in the bank into a trust account in the name of the second Defendant, the first and second Defendants were restrained from disposing or dealing with the said monies pending the hearing of this action, and further that the proceeds of the film were to be paid into a bank account to be agreed between the parties. No order was made against the third and fourth Defendants. In those proceedings the Plaintiff gave an undertaking as to damages and a further undertaking was given by Counsel on behalf of Mr. Dermot Desmond to the effect that any monies payable on foot of the undertaking as to damages would take priority to the repayment of the monies by the Plaintiff to Mr. Desmond.

8. This motion for security for costs, which also challenged jurisdiction, on behalf of the first and second Defendants was issued on 30th August 2000, a motion for security for costs on behalf of the fourth Defendant was issued on 1st September 2000, and a similar motion on behalf of the third Defendant was issued in December 2000. These motions were grounded on short and fairly formal affidavits. In response, Mr. Frank Keane, a partner in the Plaintiffs solicitors firm filed a short Affidavit in which he averred, inter alia:-

9. This Affidavit did not say that the Plaintiffs inability to pay costs should they lose the proceedings was due to the actions of some or all of the Defendants. The reason for this was quite clear, namely that at the same time an Affidavit on behalf of the Plaintiff by Mr. Michael Walsh was filed in which it was sought to show that the Plaintiff would in fact be in a position to discharge the costs. As a result of this allegation there were further exchanges of Affidavits in which the Defendants challenged the ability of the Plaintiff to pay the costs, and indeed produced statement of affairs and estimates from legal cost accountants as to the costs involved. These appeared to show that the Plaintiff would be unable to meet any order for costs, but it was not until an Affidavit of 27th February, 2001 that the Plaintiff further addressed the situation. This Affidavit exhibits a further schedule relating to costs, together with a letter of advise from legal cost accountants, which in fact appear to show that the Plaintiff would be unable to meet the costs, but nowhere in the Affidavit is that fact stated or acknowledged, and on the contrary the Affidavit still continues to question some of the figures put forward on behalf of the Defendants, and it does not in any way comment on matters referred to in the Defendants Affidavits showing that the Defendants have a stateable or arguable defence. Quite incredibly, it was only after Counsel for the first and second Defendants had completed his submissions that the Plaintiff acknowledged in its replying submissions to the Court that it would be unable to meet the costs, and it was only in those replying submissions that any indication was given that this motion was being met with the argument that the Defendants had no defence to the proceedings, that the Defendants actions had led to the situation where the Plaintiff was unable to pay and that the Court in its discretion should refuse to make the order. Also it was not until that stage that the Plaintiff disclosed, although not on Affidavit, that it had in fact very recently charged its assets in favour of Mr. Desmond to secure its debt to him. This, of course had the effect that, should costs be awarded in favour of the Defendants, they would not even rank pari passu with Mr. Desmond. I have no way of knowing the validity of this purported charge, as that would be a matter of Isle of Man Law. However, as this was an apparently deliberate act on the part of the Plaintiff, I would assume its validity for the purpose of this application. Thus it is quite clear that the Plaintiff would be unable to meet any award for costs made against it should it prove unsuccessful in these proceedings, and therefore on the authorities, the onus shifts to the Plaintiff to show that there are some exceptional circumstances by reason of which I ought not to make the order sought. This is quite clear from the judgment of the Supreme Court in Jack O’Toole Limited -v- MacEoin Kelly Associates and Another (1987) I.L.R.M.269.

10. The first matter put forward by the Plaintiff as being a special circumstance in this regard is the assertion that the Plaintiffs inability to pay costs is by reason of the wrong alleged to have been committed by one or more of the Defendants. In Jack O’Toole Limited -v- MacEoin Kelly Associates Finlay C.J., said at p.272:-

11. In the present case there is not even such a bald statement made on behalf of the Plaintiff. The nearest the Plaintiff comes to such a statement is in the Affidavit of Frank Keane sworn on 23rd October, 2000 where he says:-

12. It does not in fact refer at all to the Plaintiff’s inability to pay the costs, which perhaps is understandable as at that stage the Plaintiff was making the case that it would be able to meet the costs. However, the Affidavit of Michael Walsh of 22nd February 2001, from which it can at least be inferred that the Plaintiff would be unable to meet the costs, does not make any allegation that this is due to the default of the Defendants or any of them. Mr. Fitzsimons SC for the Plaintiff has argued that the Plaintiff’s inability to pay arises from the refusal of the insurance company to accept any liability under the policy, which refusal he argues was due to the invalidity of the certificates of completion and delivery, and that that invalidity is due to the default of the Defendants. He bases these arguments, not on any averments in the Affidavits sworn in this motion, but on the Affidavits sworn in the interlocutory injunction proceedings, and of course nowhere in those proceedings was it ever averred that any inability by the Plaintiff to pay costs was caused by actions of the Defendant, as that was not an issue in those proceedings.

13. The principle argued for on behalf of the Plaintiff goes back to the case of Dermot Peppard and Company Limited and Another -v- Bogoff and Others (1962) I.R. 180 in which Kingsmill Moore J., said at p.187:-

14. This passage has been approved and followed in a number of cases since, and I accept it as a clear statement of the general principles. But in applying these principles, it must be borne in mind that the onus is on the Plaintiff to bring itself within these principles. In the present case, even if the Plaintiff is correct in its allegations, could it be said that the Defendants or any of them have “wrongfully and deliberately” produced the Plaintiffs impecuniosity? The direct cause of the Plaintiffs financial problems is the refusal by the insurance company to pay, and this refusal is based on the wording of the policy itself. None of the Defendants were parties to the policy. There is no doubt that all of the Defendants were aware that there was an insurance policy covering the Plaintiff’s possible losses, but there is no evidence that any of the Defendants every saw the exact terms of the policy, and in particular ever knew that payment under the policy was dependent on the certificates being furnished at a certain time and in a certain form. In the absence of any such evidence, and in the light of the failure of the Plaintiff to make its case in its Affidavits on these motions, in my view the Plaintiff has not discharged the onus of proof on it to bring itself within these principles.

15. The other point taken by the Plaintiff is that the Defendants do not in fact have any defence to the claim in these proceedings. Mr. Fitzsimons SC spent a great deal of time analysing the various agreements between the parties and is in effect, asking me to determine the outcome of the case, when not even a statement of claim has been delivered. Certainly there has been considerable evidence in the interlocutory proceedings, as a result of which the learned judge determined that there was a fair issue to be tried. I can do no more than consider the same point looking at it from the viewpoint of the Defendants, namely whether the Defendants Affidavits raise fair issues to be tried in their defence. In considering this I am entitled to have regard to the way in which the Plaintiff has met these applications. Nowhere in any of the Affidavits filed on behalf of the Plaintiff is it alleged that any of the Defendants do not have a stateable defence to these proceedings. This is notwithstanding that in the grounding Affidavits of each of the Defendants it is sworn that each Defendant has a good defence to the Plaintiffs claim. Indeed, in the grounding Affidavit of Ian Moore on behalf of the third Defendant the defence is dealt with in some detail. Nowhere in the replying Affidavit is it suggested that these matters do not constitute at least a stateable defence.

16. It must be said that the Affidavits on behalf of the first and second Defendants and on behalf of the fourth Defendant do only contain fairly bald statements, namely that they have “a good defence” and “a complete defence” respectively. However, as those averments were not denied in the replying Affidavits, and the question of the adequacy of the defence was never raised, I do not think there was any obligation on the Defendants to expand on the nature of their defence.

17. I also must have regard to the fact that the Plaintiff has issued proceedings in the United Kingdom against the insurance company, in which the Plaintiff is alleging the validity of these certificates. Either those proceedings are an abuse of the process of the Court in the United Kingdom, which I assume they are not, or there is at least a stateable case that the certificates are valid. If that is a stateable case when made by the Plaintiff in the United Kingdom, it must be a stateable case when made by the Defendants in these proceedings.

18. Accordingly, I am satisfied that the Plaintiff would be unable to meet the costs of the Defendants if unsuccessful, and I am also satisfied that the Plaintiff has failed to show any special circumstances as to why I should in my discretion refuse to make an order.

19. Accordingly, I would order that the Plaintiff provide security for costs for all Defendants, in such sum as may be determined by the Master of the High Court, and I will stay all further proceedings pending the giving of such security.