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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Superwood Holdings Plc & Ors v. Sun Alliance and London Insurance Plc t/a Sun Alliance Insurance Group & Ors [2004] IESC 19 (15 March 2004) URL: http://www.bailii.org/ie/cases/IESC/2004/19.html Cite as: [2004] IESC 19, [2004] 2 ILRM 124

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THE SUPREME COURT

Keane C.J.

Murray J.

Hardiman J.

140/01

BETWEEN

SUPERWOOD HOLDINGS PLC, SUPERWOOD LIMITED, SUPERWOOD EXPORTS LIMITED, SUPERWOOD INTERNATIONAL LIMITED, SUPERCHIP LIMITED AND SUPERWOOD (U.K.) LIMITED

APPELLANTS / 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. M^CGOVERN as LLOYDS UNDERWRITERS SOLE GENERAL REPRESENTATIVE REPUBLIC OF IRELAND

RESPONDENTS / DEFENDANTS

JUDGMENT delivered the 15^th day of March 2004 by Keane C.J. [Nem Diss]

This is an application on behalf of the first, second and third defendants / respondents for an order dismissing or, in the alternative, striking out the appeal of the plaintiffs pursuant to the inherent jurisdiction of the court, the plaintiffs having failed to furnish the security for costs directed by an order of the court.

In an application of this nature, where the result, if it were granted, would be to preclude the plaintiffs from exhausting their final remedy in the proceedings by way of an appeal to this court without any disposition of the appeal on its merits and in law, the court must be satisfied, not merely that it has jurisdiction to make the order sought where that jurisdiction is challenged as it is in the present case, but also that it is an appropriate case in which to grant relief of an admittedly drastic nature and that any necessary preconditions to the exercise by the court of its jurisdiction, presuming it to exist, have been met.

In order to appreciate the context in which the present application is made, the course of the proceedings to date must be summarised, however briefly. They arose out of a fire at a premises in Bray, Co. Wicklow, belonging to the plaintiffs nearly seventeen years ago. The defendants, with whom the premises where insured under policies of insurance, repudiated liability for a claim of consequential loss of over IR£2 million submitted pursuant to the policies on the ground that the claim had been so grossly over stated and exaggerated as to be fraudulent. They also refused the plaintiffs' request to have their claim submitted to arbitration.

These proceedings were then instituted on the 28^th June, 1989 in which the plaintiffs claimed damages for what they alleged was the wrongful repudiation of the policy by the defendants. The defendants pleaded that the policies were void or voidable pursuant to condition 5 of the policies on the ground that the plaintiffs had made a fraudulent claim: it was also pleaded that it had been a condition precedent of the policies that the plaintiffs should give all such information as might reasonably be required by the defendants for the purpose of investigating and verifying the claim and that the plaintiffs were in breach of that condition.

When the case had been at hearing for some time in the High Court, the trial judge directed that the issue of liability should be determined first and the issue of quantum deferred until it had been determined. In a lengthy reserved judgment, the trial judge concluded that there had been breaches of condition 4 of the policy which inter alia required the insured to deliver to the insurers particulars of their claim. The trial judge further concluded that the findings in respect of those breaches led "inexorably to a finding of fraud" and that the plaintiffs claim should also be dismissed for breach of condition 5 of the policy under which any benefits under the policy were to be forfeited in the event of the insured advancing a fraudulent claim thereunder.

An appeal was then brought to this court. The court (Hamilton C.J., Denham J. and Blayney J.) allowed the appeal unanimously on the ground that the trial judge had erred in law in concluding that the evidence at the trial supported a finding that the claim of the plaintiffs was fraudulent and was further in error in holding that the defendants were entitled to rely, in the circumstances of the case, on condition 4 of the policy. The case was accordingly remitted to the High Court to determine what the losses were arising out of the fire and what percentage of those losses were attributable to the fire "and such other matters as are relevant and in issue". The decision of the court is reported in (1995) 3 IR at p 303.

The retrial, in which the damages to which the plaintiffs were entitled were assessed, was heard in the High Court by Smyth J. An application having been made to the trial judge to extend the time within which lodgments could be made under O. 28 of the Rules of the Superior Courts and that application having been granted, lodgments were made on behalf of the first, second and third named defendants of IR£3,152,761.00 and by the fourth named defendants of IR£1,650,000.

The retrial in the High Court lasted 281 days. During the course of the trial, the action was compromised as between the plaintiffs and the fourth named defendants, the settlement involving the payment by those defendants to the plaintiffs of a sum of £1,235,753.80 (the equivalent of IR£1,422,031.30) in addition to the release to the plaintiffs of the monies lodged in court by those defendants, i.e. IR£1,650.000.00. In the judgment of the court on an application for an order requiring the plaintiffs to furnish security for costs, it is stated that, while the claim originally formulated by the plaintiffs was for IR£2 million, subsequently to the order of this court allowing the appeal and remitting the claim to the High Court for damages, it had increased to IR£92 million.

Judgment was given by the trial judge on the retrial on the 4^th, 5^th and 6^th April, 2001. The effect of the judgment, as reflected in the order of the High Court the 7^th April, 2001 was to find that the first, second and third named defendants (hereafter "the respondents") were liable to the second and third named plaintiffs in the sum of IR£97,210.00 and IR£58,326.00 respectively together with interest thereon in amounts specified in the order. It was further ordered pursuant to s. 17(2) of the Civil Liability Act, 1961 that the sums should be reduced by the amount of monies received by the plaintiffs from the fourth named defendants by virtue of the compromise already referred to and that the amount of the damages and any interest to be awarded to the second and third named plaintiffs should accordingly be reduced to nil. It was further ordered that the plaintiffs' claim for damages for negligence and breach of contract should be dismissed. The trial judge found the second and third named plaintiffs entitled to their costs of the retrial up to the date of lodgment and the respondents to be entitled to their costs from the time of the lodgment, including reserved costs. The court granted a stay on the order of costs for 21 days and directed that, in the event of the plaintiffs serving notice of appeal within that period, the respondents should lodge in court the sum of IR£314,940.20, being the total of the sums awarded to the second and third named plaintiffs together with interest.

A notice of appeal was served on the 16^th May, 2001 containing 336 separate grounds of appeal. The respondents applied to this court for an order directing the plaintiffs to furnish security for costs in respect of the appeal. That motion was brought pursuant to s. 390 of the Companies Act, 1963 which provides that

"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."

In a reserved judgment delivered on the 12^th April, 2002, the court (Denham J., Murphy J. and Murray J.) concluded that the respondents were entitled to the order sought. Giving the judgment of the court, Denham J. referred to a number of authorities dealing with the factors which might arise in determining whether such an order should be made, including

(1) whether a prima facie case has been made to the effect that the inability identified by the section flows from the wrong allegedly committed by the party seeking security;

(2) whether there is an arguable case stated in the notice of appeal;

(3) whether there has been any undue delay by the moving party;

(4) the fact that the impecunious company has lost the case in the High Court and is now an appellant.

It also appears from the judgment that the maximum sum available at that time to the plaintiffs was an amount not exceeding IR£145,655.21, which did not take into account the respondents' costs of the proceedings in the High Court. It was also clear that, on any view, the costs of the appeal would significantly exceed that amount.

Having found that there had been no undue delay in making the application and having noted that the issue between the parties in the High Court was quantum, not liability, and that an arguable right of appeal existed as to the quantum, Denham J. summed up the conclusion of the court as follows:

"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 time has come when the defendants may properly ask the court to direct and the court in its discretion direct that security should be given by the plaintiffs for the costs of further litigation in pursuance of the enormous claim which has already involved such protracted and expensive litigation in which the plaintiffs' claim to substantial damages was rejected."

The court accordingly ordered that the plaintiffs furnish security for the costs of the respondents in such amount as should be determined by the Master of the High Court and that in the meantime all further proceedings in respect of the appeal should be stayed.

The amount of security for costs was determined by the Master to be €1,592,102.56. The plaintiffs appealed from that determination to a judge of the High Court (Peart J.), which appeal was dismissed. They then appealed from that determination of the High Court to this court which, on the 17^th October, 2003, unanimously dismissed the appeal. The order of the court provided that the amount was to be furnished within three months. On the 16^th January, 2004 an application was made to this court on behalf of the plaintiffs for, inter alia, orders extending the time for furnishing the security for costs, directing that the appeal should be heard in two stages and allowing the plaintiffs to substitute for the existing notice of appeal another notice of appeal in a shorter form. These applications were unanimously rejected by the court. A further application was made on the 23^rd January, 2004, again to substitute a new notice of appeal for the existing notice of appeal. That application was again unanimously dismissed by the court.

The respondents thereupon brought the present motion in which they seek to have the plaintiffs' appeal dismissed or struck out, the plaintiffs having failed to furnish the security for costs directed by the court. In support of the application, Mr. Foley S.C. relied on the decision of the High Court and this court in Lough Neagh Exploration Ltd. –v- Morrice & Ors [1999] 4 IR 515 to the effect that, in circumstances in which there is no reasonable prospect that the security is going to be given, the court has an inherent jurisdiction to make an order dismissing the proceedings.

On behalf of the plaintiffs, Dr. Forde S.C. submitted that the jurisdiction to make the order requiring the plaintiffs to give security for costs in this case derived solely from s. 390 of the 1963 Act which also provided that the proceedings might be stayed until the security was given. He submitted that, in the absence of any express power enabling the court to strike out the proceedings where the security had not been provided, to construe that provision as enabling the court to strike out an appeal would be in conflict with Article 34.4.3^° of the Constitution, providing that this court is to have appellate jurisdiction from all decisions of the High Court, subject only to such exceptions as are prescribed by law. He urged that the jurisprudence of this court made it clear that the constitutional right of appeal conferred by the article could only be excluded by the use of express and unambiguous language, citing A.B. –v- Minister for Justice [2002] 1 IR 297. He submitted that the decision in Lough Neagh Exploration Ltd. –v- Morrice & Ors was not an authority to the contrary, since the argument he relied on had not been advanced in that case.

Dr. Forde also urged that a number of the grounds of appeal relied on in the present case related to the manner in which the trial had been conducted in the High Court by the trial judge which, the plaintiffs submitted, had denied them the fair procedures guaranteed by Article 40 of the Constitution. He submitted that the court did not enjoy any inherent jurisdiction which would deprive a party of his constitutional right to fair procedures in the conduct of the trial which had led to the appeal.

Dr. Forde also pointed out that, in at least one other jurisdiction, it had been found necessary to confer an express power on the court to strike out proceedings because of a failure to provide security for costs, citing the Civil Procedure Rules referred to in the Canadian case of Motun (Canada) –v- Detroit Diesel-Allison ,Can.E,156 DLR (4^th) 43.

The question as to whether the High Court or this court has an inherent jurisdiction to strike out proceedings where a company has failed to comply with an order requiring security for costs to be furnished pursuant to s. 390 of the 1963 Act was considered in the case of Lough Neagh Exploration Ltd. –v- Morrice & Ors to which I have already referred. In that case, the plaintiff company had been ordered by the High Court to provide security for the costs of proceedings being maintained against the defendants, but had failed to provide the security. A motion having been brought on behalf of the defendants for an order striking out the plaintiff's proceedings, it was submitted on behalf of the plaintiff that one of the defendants had frustrated the ability of the plaintiff to furnish the security for costs by refusing to subscribe to a rights issue within the plaintiff company for the purpose of raising the security.

In the High Court, O'Sullivan J. rejected the argument that the conduct of the first named defendant in not co-operating with the rights issue justified the plaintiff company in failing to provide security for costs. He also held that he had an inherent jurisdiction to strike out the plaintiff's claim in such circumstances, although it was a jurisdiction which should be sparingly exercised and only for the purpose of ensuring that the orders of the court were complied with. He accordingly made the order sought.

An appeal having been brought to this court, the order of the High Court was affirmed. It appears that the hearing of the appeal in this court was adjourned in order to enable the board of directors and shareholders to restructure the share capital of the plaintiff company and allot new or additional shares therein as a result of which the plaintiff company might be in a position to provide the security for costs. However, when the matter was re-entered, the court was told that it had not been possible to raise the amount required to provide security. An alternative argument was now advanced, i.e. that the proceedings should not have been struck out by the High Court but should simply have been stayed unless and until the security was furnished.

In the course of his judgment, Hamilton C.J. (with whom Murphy J. and Barron J. agreed), said he was satisfied that the High Court judge had jurisdiction to make the order striking out the plaintiff's proceedings because of its failure to provide the security of costs and that his discretion to make the order had been properly exercised in the circumstances of that case. He referred to an English decision of Speed Up Holdings Ltd. –v- Gough and Co. [1986] FSR 330 in which a Deputy Judge of the High Court, Mr. Evans-Lombe Q.C. considered in some detail the power of the court to dismiss proceedings under its inherent jurisdiction where a plaintiff had not complied with an order made under the Companies Acts requiring security for costs. He pointed out that in that case it had been recognised that generally the interests of the party obtaining the order were protected by staying the further proceedings, but that the court identified a number of circumstances in which it would be appropriate under the inherent jurisdiction of the court to make an order dismissing the proceedings. One of those would be that there was no reasonable prospect that the security was going to be given.

It has not been suggested that Lough Neagh Exploration Ltd. –v- Morrice & Ors was wrongly decided, but it is urged that the arguments advanced in this case were not advanced to the court.

It is beyond argument that the decision recognises that there is an inherent jurisdiction in the court to dismiss proceedings by a company which has been ordered to provide security for costs under s. 390 of the 1963 Act where the security has not been provided. It would be remarkable if the court did not enjoy such a jurisdiction, since otherwise proceedings might remain indefinitely in being contrary to the general principle of public policy that litigation must terminate sooner or later: interest rei publicae ut sit finis litium. In the case of corporate bodies, such as the respondents, the indefinite continuance in being of the litigation would mean that any contingent liability to which they might be exposed might have to be reflected in their reports and accounts year after year. It would be surprising if the courts, which have asserted a jurisdiction in the interests of justice to strike out proceedings at a relatively early stage because they are an abuse of the court's process or disclose no cause of action or to strike out a party's defence where an order for discovery has not been complied with, would not enjoy by analogy a corresponding jurisdiction to strike out proceedings where its orders in relation to security for costs have not been obeyed. The inherent jurisdiction of the courts in these areas is, in my view, necessary for the proper administration of justice and is not in any way inconsistent with the constitutional right of persons of access to the courts and – in the case of unsuccessful parties – the right to appeal from the High Court to this court in every case where the appeal is not excluded by law.

As to the argument that the plaintiffs' appeal includes an assertion that they were denied fair procedures in the High Court and that the striking out of the appeal would hence be a violation of their constitutional right to such procedures under Article 40 of the Constitution, it is sufficient to say that such an argument, if relevant, could and should have been advanced at the time this court was considering whether the plaintiffs should be required to furnish security for costs. I would entirely reject the submission by Dr. Forde that, because the plaintiffs were not represented by counsel on the hearing of that application, the court should conclude that the case was not fully and properly presented on their behalf to the court by their solicitor on that occasion.

As is clear from the decision in Lough Neagh Exploration Ltd. –v- Morrice & Ors, the order sought may be made where there is no reasonable prospect that the security is going to be given. In the present case, the original order for security for costs was made nearly two years ago. In the many affidavits that have been filed on behalf of the plaintiffs in the various motions which have come before this court since then, there has been no indication that there has at any stage been any realistic prospect that the plaintiffs would succeed in raising the sum of €1.6 million approximately which is the amount of the security. They have claimed that they should be allowed to set off against this sum the sum of IR£314,940.20, being the sum to which they were found entitled in the High Court. When it was pointed out that, in the High Court order, those sums were reduced to nil by the amount of monies received by the plaintiffs under the settlement with the fourth named defendants, it was argued on behalf of the plaintiffs that the determination by the High Court to that effect was wholly erroneous and would be set aside by this court. If there was any substance in that argument- which requires the court to determine in advance of the appeal a point at issue in the appeal - it should have been advanced at the time when the amount of the security was being fixed in the High Court, and again on appeal to this court, and cannot possibly be entertained at this stage. The plaintiffs advance an even more startling proposition at this stage, i.e. that they are entitled to set off against the amount of the security sums which they say are owing to them by the respondents on foot of the order awarding them the costs of the High Court hearing up to the date of the lodgment. Those costs have never been taxed and in any event would manifestly not be the property of the plaintiffs but of the counsel and witnesses to whom they are owed, save to the extent that they have already been discharged by the plaintiffs, as to which there was no evidence whatever before this court.

Finally, the plaintiffs seek to rely on independent proceedings which they have instituted against Ireland and the Attorney General in which they claim declarations that s. 390 of the 1963 Act is repugnant to the Constitution and invalid and is incompatible with the European Convention on Human Rights and Fundamental Freedoms. Those proceedings cannot in any way effect the outcome of the present application.

I am satisfied that the history of these proceedings since the plaintiffs were required to furnish security for costs make it clear beyond doubt that there is no reasonable prospect that the plaintiffs will furnish the sum required. If the plaintiffs had placed before the court any evidence of a realistic programme under which the necessary monies would be raised within a reasonable time, I would have been disposed to give them some further period of time within which to raise the monies before finally striking out the appeal. They have had ample time in which to bring before the court such evidence but have not done so. Instead, they have chosen to bring a number of different applications to the court in a futile attempt to re-open the matters determined in the judgment of this court of the 12^th April, 2002 requiring the provision of security or to reduce the amount of the security ordered. In these circumstances, I am satisfied that there is no alternative to striking out the plaintiffs' appeal. I would also dismiss the application by the plaintiffs for orders that they have already furnished adequate security, that they should be allowed to amend their notice of appeal and that they should be permitted an extension of time to file a new notice of appeal.