THE HIGH COURT
1989 No. 7315P
Between:
Superwood Holdings Plc., Superwood Limited, Superwood Exports Limited,
Superchip Limited, Superwood International Limited, And Superwood (U.K.) Limited.

Plaintiffs
And
Sun Alliance and London Insurance Plc Trading as Sun Alliance Insurance Group,
Prudential Assurance Company Limited, Church and General Insurance Company Limited,
and
Raymond P. McGovern as Lloyds Underwriters Sole General Representative Republic of Ireland.

Defendants

JUDGMENT of Mr Justice Michael Peart delivered the 26th day of March 2003:

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By order dated the 12th April 2002, the Supreme Court ordered that the plaintiffs in these proceedings do provide security for costs in relation to their pending appeal to the Supreme Court, the amount of such security to be fixed by the Master of the High Court. The appeal is stayed pending the lodgement of such security.

Efforts were made by the defendants, by correspondence with the plaintiffs' solicitors, to agree an amount of such security but these efforts were unsuccessful.

In due course, the defendants' solicitors issued a Notice of Motion on the 20th June 2002 in order to bring the matter of assessment of security for costs before the Master of the High Court. The motion was grounded on an affidavit of Mr Ivan Durcan, solicitor, sworn the 19th June 2002 and its exhibits, and came before the Master first on the 23rd of July 2002. A Replying Affidavit was sworn by the Plaintiffs' solicitor on the 22nd July 2002 to which there are exhibits A, B and C. Mr Burke swore an additional replying affidavit on the 23rd October 2002.

The Master, having considered the affidavits filed and oral evidence given by the defendants' Legal Costs Accountant, Mr Brendan Cooke, and made an order on 30th October 2002 in which he fixed the amount of security for costs in the sum of €1,592,102.56, and made the usual order in respect of the lodgement of this sum, or in the alternative, the provision of a bond in the said sum with an approved guarantee surety. I should just note at this stage that no evidence, oral or otherwise was proferred to the Master on behalf of the plaintiffs besides the affidavits of Mr Burke already mentioned.

It is against this order that the plaintiffs have appealed to this court. In addition to the abovementioned affidavits, the plaintiffs have filed one further affidavit, namely an affidavit of Mr Burke sworn the 12th November 2002.

This Court, in addition to these affidavits, has had the benefit of the oral testimony of the plaintiffs' Legal Costs Accountant, Mr Stephen Daly, and the defendants' Legal Costs

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Accountant, Mr Brendan Cooke. They are in disagreement in a number of respects regarding the likely costs of the appeal in question, but, as I shall come to, there are reasons which explain that.

Background:

It is unnecessary for me for present purposes to set out in every detail the nature and history of these proceedings. But they arise out of a fire that occurred at the factory premises of the plaintiffs in 1987, now almost 16 years ago. Following this fire the plaintiffs sought to recover their losses, including arising from the interruption of the plaintiffs' business, under policies of insurance held with the defendants.

These proceedings were commenced in 1989 at a time when the plaintiffs' claim was in the order of about £2 million pounds. The trial commenced in June 1989, by which time, according to the affidavit of Mr Ivan Durcan, the claim had risen in value to £5 million pounds. The trial lasted some 116 days, and by the time the trial had concluded in July 1990, this amount had again risen to a figure of £8 million.

By High Court Order dated 12th November 1991, the plaintiffs' claims were dismissed.

The plaintiffs appealed to the Supreme Court. The appeal was heard over a period of 16 days, and by order dated the 27th June 1995, the Supreme Court allowed the plaintiffs' appeal and the matter was remitted to the High Court for an assessment of the plaintiffs' losses, as well as "such other matters as are relevant and in issue".

The matter came back to the High Court for assessment, towards the end of 1996. It is averred by Mr Durcan in his affidavit that by this time the plaintiffs' claim had again increased from the figure of £8 million pounds to a sum of £92 million pounds.

This hearing in turn lasted 281 days over a period of about 5 years, and according to the affidavit of Mr Durcan, generated about 41,000 pages of transcript. Judgment given by

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Mr Justice Smyth took 4 days to read and comprises 872 pages, together with a book of annexed exhibits comprising 1525 documents. There were also about 170 files of discovered documents.

By Order dated 7th April 2001, the High Court assessed damages in the sum of £314,940.00, but reduced the award to nil having regard to the provisions of Section 17(2) of the Civil Liability Act 1961 since the defendants were entitled to the credit of the lodgement of £1,600,000 made by the fourth named defendant which the plaintiff received in settlement of their claims against the fourth defendant. Other of the plaintiffs' claims were also dismissed and the costs of the proceedings were awarded to the first, second and third named defendants.

Against the said order of Mr Justice Smyth, the plaintiffs have lodged a Notice of Appeal dated 14th May 2001. This Notice runs to 80 pages and comprises some 336 grounds of appeal. It is in respect of the hearing of this appeal that the Supreme Court has directed security for costs, and which the Master has assessed in the sum of €1,592,102.56.

I have set out these facts and statistics in some detail, as it puts in some sort of context, the level of professional fees for Counsel and solicitor, said by the defendants to be the appropriate sum to be assessed for security for costs, and which was assessed by the Master of the High Court. Without this context, the sums involved appear extraordinary, and verging on the unbelievable. The fact of the matter is that this case, both in terms of the value of the claim as made by the plaintiffs (£92,000,000), and in terms of length of trial to date (397 days in the High Court, and 16 days in the Supreme Court), is the largest piece of litigation to come before the courts here in the history of the State.

The law:

It is appropriate that before summarising the evidence which I heard, I deal with the law relating to the appropriate basis for the assessment of security for costs in an application

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being brought under Section 390 of the Companies Act, 1963. That section provides 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 if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given.” (my emphasis)

The Supreme Court in its judgment dated 12th April 2002 whereby it ordered that security be provided, expressed itself as satisfied that the plaintiffs will not be in a position to meet in full the defendants' costs of defending this appeal. That being the case, Section 390 requires that "sufficient security be given for those costs”. In her judgment on the application for security for costs, which she delivered on the 12th April 2002, Mrs Justice Denham states on page 8 of the unreported judgment:

“ In the final analysis the reality of this matter is that the plaintiffs are limited liability companies who are pursuing - as they are entitled to pursue - expensive litigation which exposes the defendants to a very substantial financial burden. The particular and specific purpose of s.390 aforesaid was to protect defendants from litigation by corporate bodies who are not a mark for the costs of such litigation.”

The question that inevitably follows is what is meant by the term "sufficient security" as stated in the section. This is a question which was the subject of judicial scrutiny in Lismore Homes Limited v. Bank of Ireland Finance Limited and others (2001) 3 I.R. 536. That reported judgment is of the Supreme Court which upheld the judgment of Mr Justice McCracken in the High Court. In his judgment in the High Court, Mr Justice

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McCracken addressed the question of what constitutes "sufficient security" in the following way when he said:

“The question can be posed: sufficient for what?. I think that question is answered in the section by saying ‘for those costs'; that is the costs of the defendant if successful in his defence. This seems to me to be the only logical construction of the section. Where the court orders security for costs to be given in other circumstances such as where the plaintiff is out of the jurisdiction, it is customary to require security of approximately one third of the probable costs. I do not see how under any circumstances this could be called "sufficient security", and I think the section can only mean that the security required must approximate to the probable costs of the defendant should he succeed.”

Having carefully analysed relevant English authorities, Mr Justice Murphy found himself in disagreement with the line of authorities in England dealing with an identical provision to s.390. In his view the meaning of s.390 was clear. At page 546, he states as follows:

“If it transpired that the party and party costs of a successful defendant amounted to £100,000, could it be suggested that a sum of £50, 000 was sufficient security for those costs? 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 - as it might have done - 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 ... ... ... It applies only to limited liability companies who are shown to be insolvent.”

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Estimates of Costs:

The evidence given on behalf of the plaintiffs, and that given on behalf of the defendants, as to the likely costs to be incurred by the defendants in defending this appeal, differs enormously. In matters of this kind there will always be some disparity, but where legal costs accountants are giving evidence to the court, as expert witnesses, the court would not normally encounter such an enormous disparity. As the evidence developed it became clear that Mr Stephen Daly, for the plaintiffs, did not have the benefit, as Mr Brendan Cooke on behalf of the defendants had, of being fully and properly briefed in relation to the documentation involved in this appeal, and neither had he had an opportunity of seeing the grounds of appeal, or the index to the Books of Appeal, which apparently show about 3000 documents forming the contents of those Books. Mr Daly accepted under cross-examination, that it would have been helpful to have seen this documentation before giving his estimate of the likely costs of the appeal.

In addition Mr Daly had been instructed by the plaintiffs' solicitor to consider an estimate of the likely costs on the basis of a ten day appeal hearing, whereas Mr Cooke, while he himself thought that the appeal might take forty days given the enormous amount of documentation and issues in the appeal, was instructed to make an assumption of a twenty day appeal hearing.

This difference in the estimate as to the length certainly explains the disparity to some extent, but not entirely. On all aspects of the likely costs, Mr Daly and Mr Cooke differ hugely.

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Plaintiffs' Estimate		Defendants'	Estimate	
Number of Days	10		20	
Senior Counsel	1		2	
Junior Counsel	1		1	
Brief Fee - Senior	£100,000		£175,000 x 2	
Brief - Junior	£ 66,000		£116,666	
Refreshers - Senior Counsel (included in brief fee)	£59,000 x 2	
Junior Counsel (included in brief fee)	£39900	
Fee for submissions				
- Senior	£30,000		£60,000 x 2	
Fee for submissions -				
junior	£20,000		£40,000	
Solicitors fees	£100,000		£250,000	

In addition to these fees, there would also be Vat payable which on the defendants figures would add over an additional £215,000 approximately. The above table represents roughly the position of the two opposing legal costs accountants. As I have already said, Mr Daly was asked to assume a ten day appeal, whereas Mr Cooke based his estimate on a twenty day appeal. That difference explains some of the difference in level of fees

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estimated, but cannot explain everything. I should therefore set out what appears to be the underlying difference in approach between Mr Daly and Mr Cooke.

Mr Daly gave his evidence based very much on the outcome of the taxation of the plaintiffs' costs after their successful first appeal against the judgment of Mr Justice O'Hanlon back in 1995. That appeal before the Supreme Court had lasted some sixteen days. The costs were taxed and certain allowances were made by the Taxing Master on that occasion and Mr Daly said that he took account of these when estimating the costs likely on this second appeal. He felt that the appeals were comparable and therefore it would be reasonable to base his current estimate on what had happened in the first taxation.

It appears that on the previous taxation, the Taxing Master had allowed Senior Counsels' fees in the sum of £75,000. Unusually, however, this sum also included 15 days' refreshers. It was a single fee to include refreshers. The reason for this appears to have been because the Taxing Master was satisfied that in the very unusual circumstances of this case, Mr Bunyon, one of the directors of the plaintiff companies and the main driving force behind the litigation, did an enormous amount of the preparatory work for the appeal himself, thereby reducing the amount of time actually required to be done by Senior Counsel. This factor also influenced the Taxing Master in the allowance of £30,000 for legal submissions, since Mr Bunyon had also contributed greatly to their preparation. This factor also influenced the Taxing Master's attitude to the solicitors instruction fee on the first appeal, which he allowed in the sum of £70,000 since again Mr Bunyon had provided an enormous amount of secretarial and other assistance to his solicitors.

These are important factors to be aware of, because Mr Daly has based his estimate of the likely costs for the upcoming appeal on these same figures. But of course, it is the defendants' costs which are involved now, and since the Taxing Master discounted the plaintiffs' costs on the last occasion due to the enormous input by Mr Bunyon, into the work of both solicitor and Counsel, it cannot therefore in my view be appropriate to take

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those figures as the appropriate yardstick for estimating the costs of the defendants in the present appeal, which may not occur until perhaps the year 2004 or even 2005. Therein lies the main reason for the great disparity in the estimates of Mr Daly and Mr Cooke.

This difference manifests itself in relation to refreshers first of all. It is entirely reasonable that the defendants would be allowed 19 refreshers for each Senior Counsel and junior Counsel in a 20 day hearing. Mr Daly had referred to the fact that on the previous taxation of costs, the Taxing Master had allowed a rolled-up fee to include the brief fee and refreshers, and that it was likely he would adopt the same approach on the next occasion. I cannot agree that this is a fair and reasonable assumption to make, since it appears to have been in the unusual circumstances of the assistance provided by Mr Bunyon to Counsel, that the single fee approach was taken on that occasion. I must assume that the Taxing Master would adopt the normal approach, and would allow a brief fee, and refreshers from the second day of hearing to its conclusion.

There is also a great difference in the fees for legal submissions. These figures are indeed extraordinarily high on the basis of Mr Cooke's figures. But in his evidence he explained that in his opinion both Senior Counsel as well as junior Counsel would need to set aside 20 days for the preparation of these legal submissions. This length of time was required, in his view, because of the enormity of the task involved in the preparation of these submissions bearing in mind that there are 336 grounds of appeal, over 3000 documents in the Index to the Books of Appeal, and Transcripts covering each of 286 days. It was quite simply the longest case in the history of the State, with the largest volume of documentation, and involving the largest value of claim he had ever seen. He was satisfied that it was not unreasonable to expect that the Taxing Master would allow each of the 20 days he estimated would be required for the submissions on the basis of a refresher for both senior Counsel and for junior Counsel, since they would be fully occupied with the submissions for those days. On that basis, while he agreed the fee was very high, he felt the Taxing Master was likely to allow it.

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As far as the solicitors instruction fee estimated at £100,000 by Mr Daly is concerned, Mr Cooke felt that such a figure was entirely unreasonable, especially when one considered that this appeal may not be heard until 2004 or even 2005. He did not consider his estimate of £250,000 to be unrealistic in the unusual circumstances of this case, and given the volume of documentation and number of grounds of appeal.

Regarding Mr Daly's contention that the matter could be dealt with by one Senior Counsel and one Junior Counsel, Mr Cooke said this was not realistic. In fact he thought that given the size of the case, it is one of that rare type of case where even a third Senior Counsel would be allowed by the Taxing Master. But he was confining his estimate to two Senior Counsel nonetheless.

I am satisfied that the entire basis of Mr Daly's evidence is flawed for the purposes of the task which I have, namely to find what is a "sufficient sum" to be lodged or provided for by way of security for costs, and for the purposes of s.390 of the Companies Act, 1963, as interpreted in the Lismore Homes case earlier referred to. In fairness to Mr Daly he was instructed to base his estimates on a ten day hearing. But it is also the case that there is no reason why the same deductions as the Taxing Master made from the costs of the Plaintiffs in the first Appeal, would be made from the defendants' costs in this appeal. It simply is not comparing like with like. Completely different considerations will determine the defendants' costs should they be successful in that appeal.

I have given very careful consideration to the evidence of Mr Cooke, because at first glance his figures certainly are extraordinarily high, and it is important that the "sufficient sum" required to be assessed ought not to be any higher than would be reasonable to expect that the Taxing Master might allow. I cannot but be affected by the sheer volume of the documentation and number of grounds of appeal in this case. I would be of the view, having had some experience of lengthy appeals, that it is quite likely that, unless some reduction is made in the breadth of this appeal, it would take well in excess of the estimated 20 days. However, confining my assessment to that period of 20 days, I do not think it would be fair to the defendants for me to assume that the Taxing Master would

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make significant deductions from the estimate of fees made by Mr Cooke. He might, but it cannot be assumed, since having heard Mr Cooke and bearing in mind that it may be a couple more years by the time this appeal is heard, I can see how and why the fees he has estimated could come to pass. In fact they might be exceeded if the appeal were to last beyond the twenty day estimate.

I therefore conclude that in order to arrive at a sufficient sum for the purpose of s.390 of the Companies Act, 1963, I must use the figures estimated by Mr Cooke, rather than the much lower estimates of Mr Daly, since the latter are based on unrealistic and inappropriate assumptions which would be entirely unfair to the defendants in the circumstances of this litigation.

I therefore refuse the application of the plaintiffs to set aside the Order of the Master, and in addition I order that the plaintiffs do lodge the said sum of €1,592,102.56, or in the alternative provide a bond in the said sum with an approved guarantee surety within a period of twenty one days from the date of perfection of the order herein, and also order that any application which the plaintiffs may decide to make to the Supreme Court to reduce the extent and scope of their Appeal shall be made also within the said period of twenty one days from the date of perfection of this order.

I award the costs of this application to the defendants, and I certify for 2 senior Counsel.