Litigation & Crime
Cases Representation
Allied Irish Banks Plc -v- Aqua Fresh Fish Limited
[2015] IEHC 184 Keane J. wrote
“The fons et origo of the modern jurisprudence on the first question is the decision of the Supreme Court in Battle v. Irish Art Promotion Centre Ltd. [1968] 1 I.R. 252. In his ruling of the 14th May 2013 on Mr. Flynn’s ex parte application, Peart J. cited, and relied upon, the following passage from the judgment of Ó Dálaigh C.J. (with whom Haugh and Walsh JJ. concurred) in that case (at 254):
“…in the absence of statutory exception, a limited company cannot be represented in court proceedings by its managing director or other officer or servant. This is an infirmity of the company which derives from its own very nature. The creation of the company is the act of its subscribers; the subscribers, in discarding their own personae for the persona of the company doubtless did so for the advantages which incorporation offers to traders. In seeking incorporation they thereby lose the right of audience which they would have as individuals; but the choice has been their own. One sympathises with the purpose which the appellant has in mind, to wit, to safeguard his business reputation; but, as the law stands, he cannot as major shareholder and managing director now substitute his persona for that of the company. The only practical course open to him would, it appears, be for him personally to put the company in funds for the purpose of presenting its defence.”
26. Mr Flynn did not cite the subsequent decision of the Supreme Court in Abbey Films v. The Attorney General [1981] I.R. 158, a case that involved a constitutional challenge to s. 15 of the Restrictive Practices Act 1972. In delivering judgment for the Court in that case, Kenny J. stated (at p. 172 of the report):
“It was argued that s. 15 of the Act of 1972 was repugnant to the Constitution because its operation requires a company to retain a solicitor to act for it in proceedings under the section, while a citizen may appear in person. It was contended that this was in breach of the principle of equality before the law (Article 40, s.1). Even if Artice 40, s. 1, were to be held to be applicable to a company (which the Court refrains from deciding), the nature of a company, and its difference of capacity from that of an individual are such as would justify the implied requirement in the section that it should retain a solicitor to act for it.”
30. In the recent case of Coffey, NO2GM Ltd & Ors [2013] IESC 11, the Supreme Court was presented with an application on the part of various personal litigants and the company NO2GM Ltd for permission to have another lay person represent each of them in the role of advocate without restriction, whether in the guise of “McKenzie friend” or otherwise.
31. In giving judgment for the Court, Fennelly J. considered that the representation of companies may well present a particular aspect of the question of whether a lay person should be permitted to exercise a right of audience in respect of another person before the courts. Having considered the extract from the judgment of Ó Dálaigh C.J. in Battle already quoted above, Fennelly J stated:
“33. In the course of his judgment, the Chief Justice cited with approval the statement of Viscount Simon L.C. in his speech in Tritonia Ltd. v. Equity and Law Life Assurance Society [1943] 1 A.C. 584, where he said at p. 586 of the report:- “In the case of a corporation, inasmuch as the artifical entity cannot attend and argue personally the right of audience is necessarily limited to counsel instructed on the corporation’s behalf.”
34. This ruling proceeds from the fact that the incorporated company is, as a strict matter of law, a legal person separate from its members and from its directors and management. Nonetheless, in practice, the courts have to deal on a daily basis with difficult cases involving unrepresented companies, frequently because there are simply no funds to provide for legal representation. The company, being a purely legal or notional person, cannot speak except through a representative of some kind. If it has no legal representation, it will not be represented at all. Although that is far from ideal, it represents the present law.”
33. In a lengthy earlier passage in the judgment (at paragraphs 23 to 30), Fennelly J. had explained, and set out the rationale underpinning, the fundamental rule that the only persons who enjoy a right of audience before our courts are the parties themselves (when not legally represented), a solicitor duly and properly instructed by a party, and counsel duly instructed by a solicitor to appear for a party. Without reproducing that passage in its entirety, the pertinent propositions that I distill from it include the following:
(i) The rule does not exist for the purpose of protecting a monopoly of the legal profession, but rather is designed to serve the interests of the administration of justice and thus the public interest.
(ii) The right of audience is regulated by law in respect of professional advocates.
(iii) The right of a party to appear for him or herself and to plead his or her own case is a matter of necessity as well as of right. That it is sometimes unavoidable is not to say that it is desirable. The courts are better able to administer justice fairly and efficiently when parties are represented.
(iv) Professional advocates are required to be familiar with the rules of procedure and practice which must be observed if the business of the courts is to be disposed of in as expeditious and economic a manner as is reconcilable with the requirements of justice. That is not necessarily the case with lay litigants.
(v) Professional advocates are expected to approach cases with a degree of professional detachment which assists in their expeditious and economic disposition. The same cannot be expected of lay litigants.
(vi) The conduct of litigation in terms of presenting the contentions of the parties in a concise and logical form, deploying and testing the evidence and examining the relevant law demands professional skills of a high order. The absence of such skills will inevitably extend the process of litigation, and in particular the duration of a trial, thereby adversely affecting other members of the public who seek access to justice in a world of finite judicial resources, adding to the cost of litigation, and – in a worst case scenario – increasing the risk that a court may reach the wrong decision.
(vii) To grant unqualified persons the same rights of audience and representation as are granted to qualified professional advocates would be inimical to the integrity of the justice system, in which the public interest requires that judges should have absolute trust in the general standard of probity and high professional standards of the advocates appearing before them.
(viii) Professional advocates undergo an extended and rigorous period of legal and professional training and are bound by extensive and detailed codes of professional conduct, subject to an active system of professional discipline. The grant of parallel rights of audience in the courts to unqualified persons would defeat the purpose of implementing these standards.
36. The most recent case that I have been invited to consider, is the concise though very thorough decision of Gilligan J. in McDonald v. McCaughey [2014] IEHC 455. In that case, Gilligan J. considered all of the key authorities I have already mentioned but, in addition, noted the decision of the High Court in Dublin City Council v. Marble & Granite Tiles Ltd [2009] IEHC 455, in which Laffoy J. held that a company director could not represent that company in those proceedings, observing:
“The legal position, accordingly, is that Mr. O’Gara is not, as a matter of law, entitled to represent the company in these proceedings. However, as frequently happens on the hearing of a winding up petition when a director or a member of the company appears in court without legal representation, he was listened to, to ensure that no injustice would be perpetrated.”
37. Gilligan J. went on to consider the position in England and Wales; Scotland, Northern Ireland; and in a range of other common law jurisdictions. In a significant passage towards the end of that judgment, he expressed the following view:
“This Court has a degree of sympathy with the position in which both defendants find themselves and in the absence of available funding, it may not be possible to retain the services of a legal team and thus, in the absence of the second named defendant representing the first named defendant in his capacity as a director and majority shareholder, the first named defendant company’s challenge to the appointment of the liquidator may never be considered by a court which may result in an injustice. The reality of the situation is that clarity is needed in respect of the particular circumstances that arise herein, because due to the collapse of the property market and of so many limited liability companies involved in all aspects of the construction/property industry, there are a large number of ongoing claims by the banking industry against defaulting companies and guarantors. It may be that the situation can be resolved whereby in certain exceptional circumstances a company director and significant shareholder on a valid bona fide arguable point at the discretion of the court could be allowed to represent the company’s interests, provided that the court was satisfied that the point was at least arguable on the known facts and the applicable law.” (emphasis added)
38. Nevertheless, Gilligan J. ultimately applied the conventional rule set out in Battle and reaffirmed in Coffey, NO2GM Ltd & Ors, with due regard to the residual discretion identified in Coffey v. Tara Mines Limited, in refusing the application of the majority shareholder and director of the company concerned to represent the company in that case.
Conclusion
53. The final matter I have to consider is whether, on the evidence before me, Mr Flynn’s application to represent the company comes within that category of rare and exceptional circumstances that warrants the Court, in the exercise of its inherent jurisidiction, making a departure from the rule in Battle.
54. ……. Nevertheless, I am prepared to accept for the purpose of argument, that neither the company nor any of its directors or shareholders has the funds to retain legal representation on the company’s behalf.
55. However, corporate and personal impecuniosity has never been rare and, sadly, is at present very common.
56. Moreover, in accepting the impecuniosity of the company and of Mr Flynn, I must also take into account the implications for others of the privilege he seeks, that of mounting a defence on behalf of the company as a lay advocate. Since Mr Flynn is not himself a defendant to the action, he would have no potential exposure in costs, regardless of the manner in which the defence may be conducted. Similarly, Mr. Flynn would not be subject to professional oversight or discipline in relation to his conduct of the defence. The bank, on the other hand, faces every prospect of incurring irrecoverable costs in meeting any such defence, should it be successful in doing so.
63. I therefore conclude that this case does not come within the category of rare and exceptional circumstances that would warrant a departure from the rule in Battle. Accordingly, the application must be refused.”
Allied Irish Banks Plc -v- Aqua Fresh Fish Ltd CA
[2017] IECA 77 (02 March 2017)
Ryan P.
McKechnie J.
Hogan J.
Between /
ALLIED IRISH BANKS PLC.
Plaintiff/Respondent
– and –
AQUA FRESH FISH LIMITED
Defendant/Appellant
JUDGMENT of Mr. Justice William M. McKechnie delivered on the 8th day of February, 2017
Introduction
1. Arising out of their relationship as banker and customer, the plaintiff advanced certain monies to the defendant company, which as security therefor created a first legal mortgage dated the 17th February, 2010, in favour of the Bank over certain lands set forth and described in Folio 30443F County Louth. It is alleged that the company has defaulted in its contractual obligation to repay the loan in the manner agreed, thereby giving rise to an entitlement on the Bank’s part to enforce the security so given. As part of that process it has instituted the within proceedings in which it seeks, inter alia, an Order for Possession and, if necessary, an Order for the Sale of such lands.
2. After the service of these proceedings, Mr. Adrian Flynn, who is the Managing Director, Chairman and Secretary of the defendant company, and also its principal shareholder, made an application seeking permission for him to both enter an appearance to the originating summons and to represent and defend the company in these proceedings. He was unsuccessful in the High Court, but on an appeal, in respect of which very little is known, the Supreme Court granted him the first relief but remitted the issue of representation to the High Court. On the 19th February, 2014, Mr. Flynn entered what he described as a “conditional appearance”. Nothing turns on the conditionality of such entry.
3. On a subsequent application moved on notice, Mr. Flynn sought approval to act as an advocate on behalf of the company: the High Court, in applying well-established jurisprudence, refused to permit him to so do. It is his appeal from that Order which is addressed in this judgment.
4. Mr. Flynn, in a detailed and extensive submission which runs to over 100 pages of script involving a mixture of evidence and legal argument, says, first, that the company does not have sufficient assets to engage legal representation; second, that it has a good defence to the claim as made; and, third, that his application raises multiple issues of far-reaching importance. In short, however, Mr. Flynn, who is a non-lawyer, wishes to represent the company. Faced with authority which prohibits such a step, he seeks to challenge the rule expressed in Battle v. Irish Art Promotion Centre Ltd [1968] I.R. 252 (“Battle”), which is that a company can only be represented in court proceedings by a solicitor or duly instructed counsel. No officer of the company can do so.
5. Mr. Flynn argues that this rule has not survived – or at least requires substantive revision by reason of – various developments since 1968, including, inter alia, Ireland’s becoming a member of the EEC, the enactment of the European Convention on Human Rights Act 2003 (“the 2003 Act”), the passing of the Lisbon Treaty and the coming into force of the Charter of Fundamental Rights of the European Union (“the Charter). A further strand to this argument is that the rule interferes with his constitutional and Convention rights to fair procedures and access to the courts (see paras. 49-51, infra). In addition, he claims that even if Battle continues to apply, subsequent case law has modified its strict rigidity and has carved out an exception which can be invoked in “rare and exceptional circumstances”, an example of which, he says, are the circumstances of the instant case (see para. 52 et seq., infra).
The Rule in Battle:
6. Mr. Mordechai Romas was the Managing Director and beneficial owner of virtually all of the issued share capital in the defendant company, which was being sued for commission allegedly earned by the plaintiffs in the sale of its products. Mr. Romas asserted in his grounding affidavit that the company had a good defence to the claim but that it did not have sufficient assets to engage either solicitor or counsel to act on its behalf. He further said that if decreed by default, the same would reflect badly on his business reputation. Accordingly, he applied to the High Court for permission to represent the company in the proceedings. Having been unsuccessful in this regard, he appealed that decision to this Court.
7. In his judgment, with which Haugh J. and Walsh J. agreed, Ó Dálaigh C.J. referred to a number of UK authorities in which courts at various levels had refused similar applications. One such was Tritonia Ltd v. Equity & Law Life Assurance Ltd [1943] A.C. 584, where Viscount Simon L.C. said the following at p. 586:-
“In the case of a corporation, in as much as the artificial entity cannot attend and argue personally, the right of audience is necessarily limited to counsel instructed on the corporation’s behalf.”
Even though Tritonia was the most informative of the cases cited, it seems clear that that there had been little debate, as such, about the basis or foundation for the rule or about what its parameters might be, and certainly there was no discussion about possible exceptions to it.
8. Be that as it may, Ó Dalaigh C.J. at p. 254 of the report said:-
“This survey of the cases indicates clearly that the law is, as we apprehended it to be when this application was first made to us, viz. that, in the absence of statutory exception, a limited company cannot be represented in court proceedings by its managing director or other officer or servant. This is an infirmity of the company which derives from its own very nature. The creation of the company is the act of its subscribers; the subscribers, in discarding their own personae for the persona of the company, doubtless did so for the advantages which incorporation offers to traders. In seeking incorporation they thereby lose the right of audience which they would have as individuals; but the choice has been their own. One sympathises with the purpose which the appellant has in mind, to wit, to safeguard his business reputation; but, as the law stands, he cannot as major shareholder and managing director now substitute his persona for that of the company. The only practical course open to him would, it appears, be for him personally to put the company in funds for the purpose of presenting its defence. The Court in my judgment should refuse this application.”
9. As is evident from this passage, the essence of the rule was firmly anchored in the legal personality of a company as a separate and distinct entity from its members, subscribers, office holders and indeed from all others. Very much the same reason explains why the statutory provision in question in Abbey Films v. The Attorney General [1981] 1 I.R. 158 did not fall foul of the equality provision of Article 40.1 of the Constitution (p. 172 of the Report). As the incorporation of such an entity is a decision of choice, those who regulate their business activities in such a manner had also to accept the consequences of this characterisation. Such was the logical consequence of the House of Lord’s decision in Salomon v. Salomon & Co. Ltd [1897] AC 22, in respect of which see para. 31, infra.
Development of the Rule:
10. This fundamental rule and its development since Battle can best be outlined by differentiating the position of human persons from those entities which have their own separate legal persona. Whilst this distinction cannot be rigidly maintained and although this case is ultimately concerned with the latter, nonetheless the manner in which the law relating to humans has developed is highly relevant to what the current law is regarding companies.
Personal Litigants:
11. A human person, who otherwise has legal capacity, can represent him/herself in court proceedings. This is a right both of necessity and practicality, and was originally founded in the common law many centuries ago. In addition, however, as an adjunct, inter alia, to the right of access to the courts and the right to a fair hearing, the same also now has a constitutional/ECHR setting. Indeed, it seems so fundamental that it must also be regarded as a personal right under Article 40 of the Constitution. That such a right exists has never been doubted and would appear to be recognised in virtually every society which espouses equality, fundamental rights and inclusiveness, and in many others which subscribe even to a lesser degree to such traditions and values.
12. Where one exercises this right, it is self-evidently the case that the presiding judge will not have the benefit of a trained lawyer acting on behalf of that party, and as a result particular challenges may arise for all concerned. For example, difficulties may be encountered (i) for the lay person when drafting, sorting or indexing documents, when articulating the precise point being argued for or relied upon, when tendering evidence or chasing the cross examination of witnesses, and, of course, given the increasing complexity of law, when drafting or making legal submissions; (ii) for the represented party, who may suffer from a lack of clarity in understanding the case he has to meet, or be required to supply or supplement core documentation, or to address unstateable points of law, all at additional cost and inconvenience; and (iii) for the judge and the justice system – such issues may include delay, the filing of voluminous but often irrelevant documentation, the making of ill-founded assertions, the moving of unmeritorious applications or the lodging of wholly unrelated case law, which is then used to advance baseless legal argument. Such are but examples of practical problems faced on an ongoing basis by our adversarial system of law, which in large measure depends for its efficiency on those before the courts having the necessary skill, competence, objectivity and self-restraint to facilitate the effective dispatch of its business on a daily basis.
13. It is of interest to note, and impossible to disagree with, the observations made by the trial judge, Keane J., in the instant case, where, having encountered some of these very problems, the learned judge at para. 39 of his judgment said:-
“Mr. Flynn made extensive legal submissions to the court, citing decisions from a large number of jurisdictions, both national and supranational, and quoting extensively from them, as well as from a wide range of legal materials. While those submissions were testament to his indefatigable zeal and industry in pursuing the company’s interests, I do not mean to be unkind in suggesting that they fell significantly short of the standards of concision and logical presentation, and of examination of the relevant case law, expected of an appropriately skilled advocate, which, in itself, illustrates the point that was made by Sir John Donaldson M.R. in Abse & Ors v. Smith [1986] 2 W.L.R. 322 (at 326-7), and quoted with approval by Fennelly J.at paragraph 27 of his judgment in Coffey, No2GM Ltd & Ors v. The Environmental Protection Agency.”
As difficult as this situation may be, however, and whilst fully acknowledging the real problems inherent in lay litigation, particularly in any case of a complex nature, nonetheless, given that the right is firmly entrenched in our legal system, so also is the entitlement to exercise it.
14. This dilemma and the consequences of self-representation have long been recognised by our courts; for example, Keane C.J. noted in R.B. v. A.S. (Nullity: domicile) [2002] 2 IR 428 at pp. 446-447 that:-
“Parties to litigation in our courts, whether it is civil or criminal, are entitled as a matter of constitutional right to fair procedures. They are also entitled, again as a matter of constitutional right, to access to the courts and it is a necessary corollary of that right that they may conduct litigation with or without legal representation as they choose. Save in special circumstances, which do not arise in these proceedings, the court has no function in relation to the representation of parties appearing before them … The trial of cases involving lay litigants thus requires patience and understanding on the part of trial judges. They have to ensure, as best they can, that justice is not put at risk by the absence of expert legal representation on one side of the case. At the same time, they have to bear constantly in mind that the party with legal representation is not to be unfairly penalised because he or she is so represented. It can be difficult to achieve the balance which justice requires and the problem is generally at its most acute in family law cases, such as the present.”
The challenge both for the judiciary and the legal system is not so much in recognising the problem but in how best to deal with it, so that justice can be served to all.
Exception Created:
15. Prior to the decision in P.M.L.B. v. P.H.J. (Unreported, High Court, Budd J., 5th May, 1992) (“P.M.L.B.”), there was very little discussion on whether some form of exception could be grafted onto the self-representation rule and, if so, on what legal basis could such be founded. Each point was addressed in that case and also in the subsequent judgment of O’Neill J. in Gabriel Coffey v. Tara Mines [2008] 1 IR 436 (“Tara Mines”).
16. Both judges were particularly impressed by the approach articulated by Somers J. in Re G.J. Mannix Ltd [1984] 1 N.Z.L.R. 309 (“G.J. Mannix”), even if that was a corporate case, where the learned judge said:-
“But I consider the superior Courts to have a residual discretion in this matter arising from the inherent power to regulate their own proceedings. Cases will arise where the due administration of justice may require some relaxation of the general rule. Their occurrence is likely to be rare, their circumstances exceptional or at least unusual, and their content modest. Such cases can confidently be left to the good sense of the Judges.”
As it happened, Budd J. was satisfied that the circumstances in P.M.L.B. came nowhere near qualifying as an exception, whereas justification for the opposite conclusion can readily be seen from the facts in the Tara Mines case.
17. Mr. Coffey, the plaintiff in that litigation, had two personal injury actions against his employer, Tara Mines, one of which was an assessment only. Unfortunately, circumstances truly conspired against him; these included the fact that:-
• The relationship which he once had with the solicitors originally on record for him completely and irreversibly broke down;
• None of the 22 law firms subsequently asked to become involved would do so; it was no excuse that although said to be on a pro bono basis, it was in reality on the very common “no win, no fee” basis;
• His request for legal aid went unanswered by the Legal Aid Board;
• His health deteriorated in such a way that he could not speak and his mobility was seriously impaired;
• As a result, the trial judge found as a fact that he was wholly incapable of representing himself.
He therefore sought to have his wife act for him in this litigation.
18. The application was opposed by Tara Mines, which, in the words of the trial judge, invoked the well settled principle that only parties themselves or duly qualified lawyers, who enjoy a right of audience under statute or via the common law, can appear as advocates in court. In that regard the company submitted that Battle applied and that the High Court was bound by such decision.
19. It is of some interest to note that the Attorney General, who was invited by the court to act as amicus curiae, did not support the objection so made. His position was that the court had an inherent jurisdiction to control and manage its own proceedings and that, in very rare and exceptional circumstances, it could in its discretion permit third party representation by an unqualified advocate.
20. O’Neill J., in relying on the earlier decision of P.M.L.B. and in adopting the above passage from the judgment of Somers J. in G.J. Mannix, admitted of an exception to the self-representation rule in the circumstances of the case before him, which he described as “so exceptional or rare as to probably be unique”. Further, in agreeing with the submission of the Attorney General, the judge was satisfied that the inherent jurisdiction argument was well founded, and that an exception could be made as part of the court’s intrinsic authority to manage its own affairs. As the ‘rare and exceptional circumstances’ argument had not been raised in Battle, it followed as a matter of course that neither was the basis upon which it might rest; accordingly, the decision of Ó Dalaigh C.J., which founded the rule exclusively on the separate legal nature of a company, did not foreclose on what O’Neill J. proposed or on his rationale for so doing. Consequently, the learned judge was of the view that he was not bound by that decision and proceeded to the conclusion as outlined.
21. In so doing, the question of what conditions might be imposed on the third party individual who was afforded such a right was not discussed. Matters such as knowledge, competence or ability to contribute, efforts to obtain legal representation or legal aid, the arguability of the issue(s), and the terms of the third party’s authorisation to act, are but some that come to mind. In light of my conclusions in this case, it is unnecessary to further discuss these matters.
22. The provision in the Aarhus Convention whereunder an intended litigant in environmental or related matters can seek from the court, on an ex parte basis, a “not prohibitively expensive costs order”, gave rise to the Supreme Court decision in Stella Coffey, No2GM. Ltd & Ors v. The Environmental Protection Agency [2014] 2 I.R. 125 (“Stella Coffey”). There were in all twelve personal applicants and one by a company, No2GM, all of whom wished to challenge the legality of a particular decision made by the EPA. As such applications were made at various times, the same were heard by three different High Court judges, each of whom refused the orders sought.
23. On the opening of the appeal a Mr. Percy Podger, a non-party and a non-lawyer, sought an unconditional right to act as an advocate on behalf of each applicant and to present their individual appeals without restriction. As Mr. Podger had expressly disavowed any interest in acting as a McKenzie friend, the Court, following a brief discussion on the difficulties which he faced, adjourned for a short period so as to ascertain whether any one or more of the applicants would move his or their application in person. Such a step was available to all, even if simply to adopt what any one or more of the others had said. On the resumption no party indicated any willingness to do so.
24. Fennelly J., with whom the other members of the Court agreed, conducted a wide ranging review of the justification for restricting the rule of representation to qualified lawyers. He referred to G.J. Mannix with apparent approval, and acknowledged that the decision of Somers J. had created what he described as a “slight modification” of the strict rule regarding companies. The learned judge then referred to the view of O’Neill J. that as the rule could also be founded within the inherent jurisdiction of the court to regulate its own affairs, the Battle case did not prevent that judge from creating the exception which he did in Tara Mines.
25. Fennelly J. then summarised the position as applying to personal litigants. At para. 38 of the judgment he said:-
“38. In conclusion, the general rule is clear. Only a qualified barrister or solicitor has the right, if duly instructed, to represent a litigant before the courts. The courts have, on rare occasions, permitted exceptions to the strict application of that rule, where it would work particular injustice. The present case comes nowhere near justifying considering the making of an exception …”
Accordingly, Mr. Podger was not permitted to represent the personal litigants in their application. The position of the corporate applicant, No2GM, is dealt with at paras. 35 et seq., infra.
A Point to Note:
26. A point which arises from the above case law is worth noting. It is whether there must exist both rare and exceptional circumstances, howsoever defined, before an exception to the rule can be countenanced. I do not believe that such is the case, nor do I feel this is either necessary or justified. Such a requirement is not evident from the judgment of Somers J. in G.J. Mannix, nor has O’Neill J. asserted it. In fact his concluding line, namely, that the combination of circumstances in Tara Mines were “so exceptional or rare as to be probably unique” (emphasis added), suggests the contrary. The Stella Coffey decision if anything supports the latter viewpoint, as Fennelly J, when addressing the lay individuals, referred to “rare occasions” in which exceptions have been permitted and when referring to No2GM stated that the company had not demonstrated “any exceptional circumstances” to justify allowing Mr. Podger to represent it. These observations therefore apply to all litigants. Accordingly, it seems to me that the focus of any modification to the rule is adequately captured by the reference to “exceptional” circumstances, and that the inclusion of the word “rare” is apt to confuse. This is because it seems to call for an examination of extraneous matters which may not be material to the issue before the Court. In this regard I agree with the views of the Company Law Reform Group which are later referred to.
Collateral Support: McKenzie Friend:
27. Although an altogether distinct facility, but one nonetheless created in aid of personal litigants, it is worth noting that an individual may be able to avail of the services of a McKenzie friend, so called after the title of the action clarifying the role of such a person (McKenzie v. McKenzie [1970] 3 W.L.R. 472). In his judgment in that case, Davies L.J. adopted the following statement made as far back as Collier v. Hicks (1831) 2 B. & Ad. 663 at 699:-
“Any person, whether he be a professional man or not, may attend as a friend of either party, may take notes, may quietly make suggestions, and give advice; but no one can demand to take part in the proceedings as an advocate, contrary to the regulations of the court as settled by the discretion of the justices.”
That such a statement correctly represents the law was first confirmed in this jurisdiction in R.D. v. McGuinness [1999] 2 IR 411, and was latterly reaffirmed in Stella Coffey.
28. Although having its more recent origin in family law proceedings, it has never been doubted but that such an entitlement extends to all matters civil. As legal aid is available in criminal cases to anyone who cannot afford to underwrite his costs, I know of no case where an accused person has sought the assistance of such a friend instead of, or for that matter in addition to, legal representation.
29. A McKenzie friend can offer much assistance in a variety of ways to the party with whom he/she is associated; this includes giving advice, prompting new lines of thought, making suggestions, having available relevant documentation, preparing for what is anticipated and identifying what is next required, to give but some examples. However, such person has no right of audience and cannot act as an advocate. The party himself must articulate the case which he is asserting. The McKenzie friend must perform his function in a manner consistent with accepted court practice and procedure, and must show due respect for acknowledged court decorum; further, he must remain fully detached from the opposing parties, their witnesses and all persons present in support of them. Overall he is expected to behave in such a manner as reflects the mutuality of respect essential for all players participating in the administration of justice.
30. Permission to be assisted by such a friend can only result from a successful application to that end. This will always be a matter of discretion for the judge in charge, who may decline or accede to such request, either unconditionally or subject to such conditions as the circumstances may require, an example of which could perhaps be the preservation of the in camera rule. Such permission may be withdrawn at any time. The requesting party must demonstrate that the application is bona fide and genuinely made: if there is evidence to the contrary at that time, the request should be refused ab initio; moreover, if subsequent events should establish such evidence, or if an ulterior motive should become apparent, any such permission previously granted should be immediately terminated.
Company Litigants:
Salomon v. Salomon
31. In order to fully explain and therefore fully understand both the genesis and essence of the rule precluding companies from being represented by anyone other than solicitor or counsel, it is necessary to have some basic understanding of their separate legal personality. Such principle, that a company is an artificial legal entity, separate and distinct from the members of which it is composed, was first unequivocally stated by the House of Lords in Salomon v. Salomon & Co Ltd [1897] AC 22 (“Salomon v. Salomon”). The facts, whilst interesting in themselves, need not detain us save to note that in all courts other than the final appellate court, Mr. Salomon and his company were identified as one for liability purposes in circumstances where the company was unable to pay its debts.
32. In his judgment, Lord Halsbury said:-
“[I]t seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself …
… the Act appears to me to give a company a legal existence with, as I have said, rights and liabilities of its own, whatever may have been the ideas or schemes of those who brought it into existence.”
Lord Macnaghten, described as that “great Irish judge” (Keane on Company Law, 5th Ed., para. 11.04), stated that:-
“When the memorandum is duly signed and registered, though there be only seven shares taken, the subscribers are a body corporate ‘capable forthwith,’ to use the words of the enactment, ‘of exercising all the functions of an incorporated company.’ … The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act.”
33. The basic principle has applied thus ever since, meaning that a company is not the agent of its subscribers, irrespective of the degree of control or shareholding which they may have, nor does it act as their trustee. Likewise, such shareholders, no matter how much influence they exercise or equity they hold, will not be regarded as one with the company.
34. However, many exceptions to this rule have been created over the years at both legislative and judicial level, almost all under the rubric of that enigmatic phrase, “lifting the corporate veil”, but none of these have any direct effect on the rule in issue in the instant case. Notwithstanding such intervention, Salomon v. Salomon remains, in essence, the authoritative statement of the fundamental principle of separate legal personality to this day. It is from this characterisation that the inherent disability, or “infirmity”, as described in Battle, flows.
Stella Coffey:
35. As explained above, there were both personal applicants and a corporate applicant in the Stella Coffey case (para. 22, supra). In the context of the company, No2GM Ltd, Fennelly J., referring to Battle, said the following at para. 35 of the judgment:-
“35. This ruling proceeds from the fact that the incorporated company is, as a strict matter of law, a legal person separate from its members and from its directors and management. Nonetheless, in practice, the courts have to deal on a daily basis with difficult cases involving unrepresented companies, frequently because there are simply no funds to provide for legal representation. The company, being a purely legal or notional person, cannot speak except through a representative of some kind. If it has no legal representation, it will not be represented at all. Although this is far from ideal, it represents the present law.”
36. As noted above, the learned judge cited from the judgment of Somers J. in G.J. Mannix Ltd, itself a corporate case, and endorsed what he described as “a slight modification” of the strict rule regarding companies thereby created. Fennelly J. then continued:-
“39. Nor do I think that the attempt to represent the company No2GM Limited gives rise to any exception. Mr. Podger has not demonstrated any exceptional circumstances which would justify permitting him to speak as the representative of the company. It was patent that Mr. Podger availed of the opportunity provided by the court’s brief adjournment of the hearing to defeat the effect of its ruling by devising the stratagem of making himself a member of the company. It was a device and was without merit.”
37. Two important points emerge from Stella Coffey: the first is the Court’s endorsement of the exception to the strict rule which O’Neill J., in relying on G.J. Mannix, applied in Tara Mines, and also of that exception applying to a corporate entity in this jurisdiction. In so doing, the Court could hardly have intended that its judgment should apply only to a shareholder of a company, thereby leaving open the position of officers or directors. Such would be a very narrow construction of its overall perspective. The second is an acknowledgement that the basis for the Court establishing such an exception is found within its inherent jurisdiction to manage, control and regulate its own affairs. Such is the case whenever it is sought to apply the exception at either a personal or non-personal level.
38. It therefore seems to me that the law from the Supreme Court in this regard is no longer simply that as outlined in Battle, but also now includes the judgment in Stella Coffey. I regard the latter case as complimentary to Battle, and certainly not in any way inconsistent with it. In fact, no suggestion to that end as such has been made by either party in this appeal. Accordingly, I regard both as representing the law from that Court, which of course I am and remain bound by.
Further Domestic Developments:
Section 868 of the Companies Act 2014:
39. The modification based on exceptional circumstances, as above discussed, has of course been created judicially; the Oireachtas has also taken an interest, however, but only in a restricted sense, confining its intervention to situations where a company is prosecuted on indictment. Even then, as s. 868 of the Companies Act 2014 shows, the relaxation is modest, as the duly appointed person has a limited representative function. Such person may answer any question required to be put to the company (s. 868(2)), exercise any right of objection or election on the company’s behalf (s. 868(3)) or enter a plea in writing to the offence as charged (s. 868(4)). However, the representative cannot go further. Similar exceptions were contained in the corresponding subsections of s. 382 of the Companies Act 1963, which provision was first enacted to deal with the problems identified in The State (Batchelor & Co (Ireland) Ltd.) v. Ó Leannáin [1957] I.R. 1.
40. The real relevance of these provisions, however, is not in the limited exception they have created in respect of criminal offences, or even in the severe restrictions imposed within that exception, but rather in what they do not permit a representative to do on behalf of a company. Section 868(6) of the 2014 Act provides that the appointment of such a person under the section does not qualify that person to “act on behalf of the company before any court for any other purpose”. Strikingly, s. 382(5) of the 1963 Act likewise provided. As is clear, this exception in its original setting pre-dates even Battle and evidently it was open to the legislature in drafting the 2014 Act, or at any time in the preceding fifty years, to broaden its scope so as to permit company representation by non-lawyers in other circumstances. This it has not done, instead retaining the narrow exception for indictable matters and continuing the express prohibition that a person so appointed shall not be qualified to act other than for the purposes of the section.
41. In coming to this conclusion I acknowledge an alternative approach to a provision such as that created by s. 868 of the 2014 Act. It is that such a measure could be regarded as being in the nature of a lex specialis designed to deal with a specific issue in a specific context, and that no wider implication should be drawn from it. The reason why I believe that the former view is more correct is the legislative context in which the section was enacted. Such involved the most major reassessment, review and consolidation of company law, in all its aspects, in more than 50 years. If the situation had been more specific, and in particular if the provision had been adopted in a criminal statute, then perhaps the latter view might be more appropriate. This is not what occurred, however. Accordingly, the broader interpretation is thus justified in this case.
Reports:
42. The Law Reform Commission, in its Report on the Consolidation and Reform of the Courts Acts (LRC 97 – 2010), did not recommend altering the current position. In its discussion of what categories of person should have a right of audience, it stated that “[t]hese would obviously include practising barristers and solicitors, and litigants in person, though not a representative of a body corporate” (para. 2-98; the footnote to that section refers to Battle).
43. The rule in Battle was also considered by the Company Law Review Group (“C.L.R.G.”) as recently as March, 2016. It concluded that “[g]iven the stated policy of the Irish Courts to work around the rule where the requirements of justice dictate, and the unique position of the courts to be able to measure the need for such exceptions, the Company Law Review Group remains to be convinced of the need for wider reform of the rule” (C.L.R.G., Report on the Representation of Companies in Court, March 2016, at p. 5). It further recognised that “the Courts retain the discretion to hear from non-lawyers where justice requires and are best placed to determine whether justice so requires in the case of companies who are party to court proceedings” (p. 12).
Judicial Pragmatism:
44. As the C.L.R.G. has identified, the courts in this jurisdiction have consistently shown a high level of pragmatism when faced with the Battle issue. The following are but examples which come to mind as illustrating the point:-
(1) In Re Marble & Granite Tiles Ltd [2009] IEHC 455, Laffoy J., when dealing with a winding-up petition, allowed a director of a contributory company to make submissions to the court. The learned judge stated that:-
“The legal position, accordingly, is that Mr. O’Gara is not, as a matter of law, entitled to represent the company in these proceedings. However, as frequently happens on the hearing of a winding-up petition when a director or a member of the company appears in Court without legal representation, he was listened to, to ensure that no injustice would be perpetrated.”
(2)(i) In McDonald v. McCaughey Developments Ltd and Martin McCaughey [2014] IEHC 455, the trial judge, following Battle and Stella Coffey, held that the personal defendant, who was the Managing Director of and one of three shareholders in the company, could not act on its behalf in proceedings where both defendants wished to challenge the validity of the Deed by which the plaintiff was appointed as receiver over the company’s assets.
(ii) The Court of Appeal, in a judgment by Kelly J. ([2015] IECA 159), held that the Battle issue did not as such arise as Mr. McCawley in his own right was named as a co-defendant in the proceedings. Accordingly, he was in a position to assert any point, make any argument and adduce any evidence pertinent to the issues. Any material so advanced would “… inure for the benefit of the company”, a viewpoint not dissented from by the receiver.
(3)(i) The third case to which reference can be made is an example on the personal side: Kennedy v. Harrahill (High Court, 11th June, 2010). This involved a bitter family quarrel between the executor of an estate and Mr. Kennedy, who claimed that he had purchased certain lands from his deceased brother in 1972, and so that such lands did not form part of the residue to which his sister was entitled. This dispute gave rise to multiple actions in both the Circuit Court and the High Court, virtually all of which, even at appellate level, Mr. Kennedy lost.
(ii) In the action above referenced, Mr. Kennedy sought ownership of these lands, which of course was at the root of the basic issue. As it happened, I was the trial judge. At each of the several pre-trial hearings, Mr. Kennedy made very serious allegations against the executors both surviving and dead, their solicitors and the different solicitors who once appeared for him, as well as a great number of other people, most of whom were standing on the periphery. More importantly, however, he also made an allegation against every judge who was involved at Circuit, High and Supreme Court level, this to the effect that he had never been given a fair or full hearing by any one of them. This sense of injustice was ingrained at a deep and intense level, and was forcibly agitated by Mr. Kennedy.
(iii) Though highly dubious of these assertions, nevertheless, as the dispute had been ongoing for at least a decade or more, and as the plaintiff had spent many months incarcerated for refusing to vacate the lands, the court decided, without objection, to re-examine the core issue of land ownership and to do so without reference to any of the decisions previously made.
(iv) At the hearing I permitted Mr. Kennedy’s son, an accountant by occupation, to effectively present the case on his father’s behalf. I was totally satisfied that such a step was essential to try and bring finality to this very damaging litigation. Admirable as his son’s efforts were, Mr. Kennedy could not establish title; unfortunately, far from that being the end of the matter, the litigation, in one form or another, has continued long thereafter.
(v) As a postscript: Mr. Kennedy in fact remains a regular visitor to the Four Courts to this very day.
Summary:
45. To conclude on this limited survey of the domestic position regarding natural persons, the related McKenzie situation, and the rule in Battle, can I summarise as follows:-
Human Persons:
(i) A human person who otherwise has legal capacity is entitled as of right to represent him or herself in court proceedings. Such a right, which has existed at common law for centuries, has a direct association with various constitutional rights, such as the right of access to the courts and the right to fair procedures, and with the European Convention on Human Rights, particularly with the provisions of Article 6 thereof.
(ii) In exceptional circumstances a third party may be permitted to represent another individual where a refusal to so allow would be destructive of justice.
McKenzie Friends:
(iii) An individual may avail of the services of a McKenzie friend to assist him or her by prompting, taking notes, and quietly giving advice; however, this entitlement is in no way analogous to the exception mentioned above, as the party in question must still present the case himself; the friend, having no right of audience whatsoever, may not in any way advocate on his behalf.
Companies:
(iv) A company, or any other artificial or fictitious person with a distinct legal persona, can be represented only by a lawyer duly accredited with a right of audience in our courts.
(v) There is no right for a secretary, director, shareholder or any other officer to appear in court proceedings on behalf of a company.
(vi) However, this rule does not interfere with the court’s undoubted discretion to permit an individual person to act on behalf of the company where justice so demands.
(vii) The manner in which this might be done will reflect the presenting circumstances of each particular case, with the courts generally adopting a pragmatic approach to such relaxation on both the personal and corporate side.
(viii) The existence of such judicial flexibility when the rule might defeat the interests of justice, which is evident in the case law, is not an insignificant factor when the very existence of the rule is under challenge.
Edges of the Rule/Exception:
46. From the above discussion on the rule and the exception, a number of specific matters arise for consideration in the instant case. Before addressing these, however, could I refer back for a moment to the valuable contribution which the Report of the C.L.R.G., published in March, 2016, has made to this issue. In essence, the Report does not favour any substantive change to the primacy of the basic rule, or to the exception as presently framed. In coming to this conclusion it views the absence of any definition regarding ‘exceptionality’ as a considerable strength in itself, in that it allows the presiding judge to exercise what it calls “discretionary pragmatism” whenever the dictates of justice so demand.
47. In general terms I agree with these views, and in particular with the point last mentioned. The discretion available to the trial judge, which is of considerable significance in the context of any argument pertaining to the constitutional right of access to the courts or to rights under Article 6 of the Convention, should, I feel, be maintained, certainly in the absence of any comprehensive review giving rise, perhaps, to new statutory provisions or rules of court. I therefore feel, as matters presently stand, that it seems unnecessary and most probably unwise to have the rule ring fenced in any formalistic way.
48. Having said that, however, it must be acknowledged that certain events and circumstances would appear to have a decisive influence on whether, in any given situation, its consequences should be mitigated or neutralised. As Mr. Flynn wishes to challenge the correctness of this situation, it becomes necessary to give consideration to some of the more obvious matters in this respect. In so doing, I neither wish nor intend to be overtly prescriptive with anything I say, remaining, as I do, fully conscious of the principle of stare decisis.
The Challenge of Mr. Flynn:
49. Mr. Flynn has argued in the first instance that the rule in Battle no longer applies, or at least requires to be substantially reconsidered, by virtue of various developments that have occurred since that case was decided in 1968. He points in particular to Ireland joining the EEC, now the EU; the enactment of the 2003 Act; the passing of the Lisbon Treaty; and the giving of effect to the Charter. The thrust of his argument is that these issues self-evidently were not considered in Battle and as a result the rule now requires modification to take these developments into account. Mr. Flynn asserts that Irish law is failing to progress with the rest of modern society and that it is stuck in the past on this issue. He therefore submits that the underlying principle is no longer good law, that the Battle decision need not necessarily be afforded full respect under the doctrine of stare decisis, and, accordingly, that he should not be prevented from representing his company.
50. Very much these same arguments were considered by the learned High Court Judge at paragraphs 40-51 of his judgment in this case. I agree with his analysis and conclusion. The Battle judgment remains binding upon this Court (subject to the exception above discussed) and none of the developments referred to by Mr. Flynn affect the authority of that decision. Moreover, not one of these issues touches upon the fundamental basis for the rule, that being the separate legal personality of the company. This is a case concerning domestic law exclusively and does not involve the implementation of EU law. Therefore our membership of the Union, the passing of the Lisbon Treaty and the coming into force of the Charter cannot avail Mr. Flynn.
51. In addition, even if this Court were minded to reconsider the rule in the context of the modern understanding of the interlocking constitutional guarantees regarding the administration of justice and access to the courts (Articles 34.1 and 40.3) and fair procedures (Article 40.3), as well as any submission based on Article 6 of the Convention, the position remains that the Battle decision itself is binding on this Court as it was on the High Court judge. Thus the critical issue is whether there exist any “exceptional circumstances” such as to persuade this Court to exercise its inherent discretion to depart from the rule, as discussed above.
Exceptional Circumstances
52. Mr. Flynn submits that even if the rule in Battle survives, the facts of his case bring it within this exception, which was recognised in Stella Coffey as applying to companies. In so doing he points, first, to the unique, exceptional and rare nature of the company itself, which was attempting to farm fish in an environmentally friendly way in land-based systems. It was apparently the only company in Ireland conducting that type of operation. Second, he says that it took nine and a half years before the company could commence business, this because of administrative and other impediments outside of the company’s control. This, he claims, is an exceptional circumstance. Third, Mr. Flynn submits that he himself was the controlling mind of the company and that he now owns 100% of it. Finally, he submits that the company is impecunious. The company and its shareholders are entitled to have access to the courts, but the company will not be able to take a further step in the proceedings unless he is permitted to represent it.
53. None of these circumstances are “exceptional” and they do not warrant this Court departing from the fundamental rule. The nature of the company, even if it is unique in the sense of the business it conducts, is not a rare or exceptional circumstance for the purposes of invoking the Court’s inherent jurisdiction to permit a company to be represented by a director. It is not the distinguishing features or characteristics of the company itself which fall to be considered in this regard, but rather the circumstances of the case. If it were otherwise then the rule would very swiftly suffer considerable erosion. Nor is the time that it took to establish the company germane to this question.
54. As to the third and fourth issues raised, neither is in any respect exceptional; indeed, as has been pointed out elsewhere, impecuniosity is a regrettably common state of affairs. These issues do, however, require some further consideration.
One Man Company:
55. In the G.J. Mannix case, which was cited with approval in P.M.L.B., Tara Mines and Stella Coffey, and which established the basis which led to the exception recognised in those cases, McMullin J., at p. 315 of the report, suggested that the situation of so called “one-man companies” may fall within the exception. In essence, the rationale for this view was based on knowledge: that is, that senior officers can be expected to have as much knowledge of a company’s business and financial affairs as an individual has of his own. In particular, the learned judge stated that:
“[I]t may seem somewhat unrealistic and illogical to allow a private person a right of audience in a superior Court as a party to proceedings but deny it to him when he is the governing or managing director of a small ‘one-man’ company which is no more than his business alias.”
56. McMullin J. further reasoned that the director of such a company would be “as well acquainted with the facts of a dispute involving his company as he would be if a party to it personally.” In addition, the learned judge considered that the principle in Salomon v. Salomon would suffer “no erosion” if the director was given the right to represent such a company. A similar exception for small corporate entities was discussed, in almost identical terms, by Ponnan JA of the Supreme Court of Appeal of South Africa in Manong & Associates (Pty) Ltd v. Minister of Public Works & Anor (518/2008) [2009] ZASCA 110.
57. I would, with great respect, differ from this view. Not only does such encroach upon the principle that a company is an individual, separate from all others, it also in fact entirely overlooks the basic distinction between fictitious or artificial personae, on the one hand, and physical persons, on the other, albeit for a limited purpose. This very point is also an answer, one of many, to the alleged comparator with the right of audience which human persons necessarily have.
58. Although the Battle principle can undoubtedly raise difficulties in a variety of ways, including for the type of company in question, it must be remembered that this is not the intention of the rule, nor does it seek to discriminate against or work an unfairness on a small, medium or indeed any type of company. Any adverse consequences which flow from the rule are merely the logical corollary of the Salomon principle which, it must be remembered, allows persons to greatly benefit and profit from conducting their business through this form of legal entity without the risk of being liable for any losses. If individual and company can be fused on the basis of knowledge, and in effect become one and the same for the purpose of legal representation, why should not the same basis also permit a creditor to stand down the legal personality of that company? If that should happen, it would of course undo at the most basic level the strict separation that Mr. Salomon fought for in the first place so many years ago. In my view, therefore, “knowledge” alone could not support any such step, particularly when the consequences could be far reaching. In addition, the information which one man has can be imparted to another quickly and most often easily, as advocates can testify on a daily basis. Accordingly, I am not attracted to the underlying reasoning within which this possible exception has been judicially discussed.
Impecuniosity: a Pre-Condition:
59. I have no doubt whatsoever but that a company which is acting in the normal course of business or has available adequate funds – or sufficient means of obtaining such funds – to engage solicitor and/or counsel should not be permitted to deviate from the general rule. To do otherwise would be to seriously erode the fundamental principle of not permitting unlicensed operators to act as legal representatives or as advocates on behalf of others. Such a step would be entirely destructive of the legal process, and in my view should be not countenanced. A much more problematic issue, however, is the following.
Impecuniosity, of itself, not sufficient:
60. Impecuniosity of a company, on its own and without more, will rarely if ever justify an exemption. In virtually every comparable jurisdiction such is the prevailing situation. As has been said numerous times, the lack of funds in the first instance is neither rare nor exceptional. From time to time, however, one finds an occasional judgment in which a company’s inability to pay for representation is considered as a significant factor in the exercise of the court’s discretion. One such case is Arbuthnot Leasing International Ltd v. Havelet Leasing Ltd [1990] B.C.C. 627, in which Scott J., having espoused such view, continued to contextualise his position by adding:-
“…I see no reason why an individual should be forced to incur the horrendous costs of commercial litigation if he is willing to appear in person…”
Shortly thereafter, however, the more traditional position was reasserted in Radford v. Freeway Classics [1994] 1 B.C.L.C 445 and Floods of Queensferry Ltd v. Shand Construction Ltd & Ors [1997] 81 B.L.R. 49. This apparent conflict ceased to have any importance in England and Wales after the implementation of civil procedural reforms in those jurisdictions in the late 1990s (see para. 71 infra).
61. There are of course legitimate views on both sides of this debate. Some of these have been expressed elsewhere in the judgment, but could I add two further observations, one of which falls on the side of sustaining the rule, with the other being more challenging to its continuation.
62. The first is this: to permit directors or other officers to represent companies and so pursue potentially hopeless causes without fear of personal risk or of an adverse personal costs order, would be to impose a considerable burden not only on the other party to the action, who would surely incur costs that they had no hope of recovering, but also on the scarce and limited resources of the courts. Moreover, such persons are not ethically restrained and apart from the contempt process are otherwise free of judicial control. In many respects, therefore, such persons can freewheel through the system.
63. The second point, whether discussed in the context of the Irish constitution or the Convention, is one which is not free of concern. In a great number of cases, the lack of resources is the pivotal reason for non-legal representation. Where that arises, it may create a real problem for the company and for its subscribers, investors and many others. Unless some solution is found, its voice will not be heard, a situation described by Fennelly J. in Stella Coffey as being “far from ideal”, but nonetheless one which represents the present law (para. 35, supra). Whilst I understand why this is so, what is not so obvious is why, in a terminal situation, impecuniosity largely counts for nothing. Take a case such as this, which is not as directly on point as many others are. If there is an arguable point to be made regarding the validity of the receiver’s appointment, and if such cannot be articulated, then almost certainly the receiver’s pathway will follow the normal course, namely, that the assets will be realised and, if any shortfall should result, Mr. Flynn, who is a personal guarantor, will become individually liable. Furthermore, the company may or may not be liquidated or indeed dissolved. In such circumstances, where its very survival might be in issue, it might be thought that such is a situation where the exception could apply. Having raised these issues, however, it is unnecessary to go further with this debate for the following reasons.
Decisive Issue:
64. The key point in Battle was the lack of funds so as to engage legal representation. The Supreme Court did not consider such a state of affairs as being sufficient to step down the rule. Even though the “exceptional circumstances” point was not discussed, nonetheless, even if I were now so minded to utilise that avenue in favour of Mr. Flynn, I could not do so, as such a step would be acting clearly in the teeth of Battle. Whilst the application of Mr. Ramos could have been rejected on the basis that the purpose of representing the company was to safeguard his personal business reputation rather than any asset of the company itself, that was not the actual basis of the Court’s decision. The ratio decidendi, in my view, was centrally focused on poverty. As the issue of funding did not arise in Stella Coffey, that particular point was not further discussed. As a result, I am satisfied that I am bound by the Battle decision and accordingly, on that basis, I would dismiss this appeal.
Other Jurisdictions:
65. In maintaining this rule, Ireland is not out of line with other jurisdictions regarding the issue of representation. In this respect, it can be said that the rule or principle set out in Battle remains the default position across much of the common law world. It is applied, albeit with greater or lesser stringency, in the United States, New Zealand, Scotland, South Africa, and Hong Kong. The situation in England, Northern Ireland and Australia is set out at paras. 71 to 73 below.
66. The rule is followed in the United States. Justice Souter, delivering the opinion of the majority of the US Supreme Court in Rowland v. California Men’s Colony, 506 U.S. 194 (1993), stated at 201-203 that:
“It has been the law for the better part of two centuries, for example, that a corporation may appear in the federal courts only through licensed counsel. Osborn v. President of Bank of United States, 9 Wheat. 738, 829 (1824); see Turner v. American Bar Assn., 407 F. Supp. 451, 476 (ND Tex. 1975) (citing the ‘long line of cases’ from 1824 to the present holding that a corporation may only be represented by licensed counsel) (“Turner”)… As the courts have recognized, the rationale for that rule applies equally to all artificial entities. Thus, save in a few aberrant cases, the lower courts have uniformly held that 28 U. S. C. § 1654, providing that ‘parties may plead and conduct their own cases personally or by counsel,’ does not allow corporations, partnerships, or associations to appear in federal court otherwise than through a licensed attorney. See, e. g. … Jones v. Niagara Frontier Transportation Authority, 722 F. 2d 20, 22 (CA2 1983) (corporation); Richdel, Inc. v. Sunspool Corp., 699 F. 2d 1366 (CA Fed. 1983) (per curiam) (corporation) …”
67. In Turner, the U.S. District Court for the Southern District of Alabama stated that:
“Corporations and partnerships, both of which are fictional legal persons, obviously cannot appear for themselves personally. With regard to these two types of business associations, the long standing and consistent court interpretation of § 1654 is that they must be represented by licensed counsel. … [T]here is a long line of cases starting with Osborn v. Bank of United States, 9 Wheat. (22 U.S. 738), 6 L.Ed. 204, and continuing through… Flora Construction Company v. Fireman’s Fund Insurance Company, 307 F.2d 413 (C.A.10, 1962), which have held that under 28 U.S.C.A. § 1654 and its predecessor statutes a corporation may only be represented by licensed counsel. Several of these cases, particularly Nightingale, Hearst and White Lamps, have emphasized the importance of the Centuries-old concept of a Court having a lawyer before it who has been qualified to practice, and who is subject to the Court’s control … Corporations and partnerships, by their very nature, are unable to represent themselves and the consistent interpretation of § 1654 is that the only proper representative of a corporation or a partnership is a licensed attorney, not an unlicensed layman regardless of how close his association with the partnership or corporation.” (p. 476).
This position largely prevails at state level also, albeit with exceptions recognised in some lower courts and small claims courts.
68. In New Zealand, the general position at High Court level is that set out in the G.J. Mannix case, discussed above. That decision was applied by the Court of Appeal in New Zealand Cards Ltd v. Ramsay [2012] N.Z.C.A. 285 and Dreamtech Designs and Production Pty. Ltd v. Clown Fish Entertainment Ltd [2015] N.Z.C.A. 491, and as recently as 2016 by the High Court in Sovereign Books Limited v Commissioner of Inland Revenue [2016] N.Z.H.C. 1313, with Asher J affirming that the general rule will only be departed from in exceptional circumstances, which did not present in that case. Although there is an exception in New Zealand whereby an officer can represent the company in cases before the District Court (section 57(2) of the District Courts Act 1947), there is no equivalent provision in the New Zealand High Court Rules. However, in Commissioner of Inland Revenue v. Chesterfields Preschools Ltd [2009] N.Z.C.A. 334 the Court of Appeal was willing to exercise its discretion to permit a director to represent an impecunious company in circumstances where the director in question was also a named defendant in the proceedings and had received legal training, the appeal was being prosecuted by an experienced Crown counsel and there was no other prospect of representation for the respondent companies. Similarly, the High Court has allowed a director to represent the company where the issues raised in the case were not complex (Para Ltd v. David Ellis Productions Ltd (1992) 6 N.Z.C.L.C. 67), but has not extended such permission where the case was technical and involved complex legal issues (Gold Metal Hortech Ltd v. Edwards & Williams Greenhouses Ltd (2001) 9 N.Z.C.L.C. 262).
69. In Scotland, the Second Division of the Inner House of the Court of Session affirmed the general position in Secretary of State for Business, Enterprise and Regulatory Reform v. UK Bankruptcy Limited [2010] CSIH 80, with Lord Justice Clerk stating that:
“[41] This court cannot foresee all the wider implications of an ad hoc judicial decision to relax the present rule; nor the practical difficulties that might follow from it. However, certain practical problems at once come to mind. In a company liquidation or in a compulsory winding up of the kind with which this case is concerned, I can think of good reasons why a company should not be represented by a director whose own actings may have caused the litigation.”
Lord Clarke made the observation in his Opinion that there may be force in the observation that the strict application of the general rule, in particular where a company is genuinely unable to pay for representation and has a prima facie valid claim or defence which cannot be vindicated, could be incompatible with Article 6 ECHR; however, those circumstances did not present in that case.
70. The rule has also been applied by the Supreme Court of South Africa in Manong & Associates PTY v. Minister of Public Works and anor [2009] ZASCA 110, where Ponnan JA recognised the residual discretion of the Court to relax the general rule where the administration of justice so requires. The rule is strictly applied in Hong Kong: in Wing Hang Bank Limited v. Kit Choy Development Limited & Choy Bing Wing [2005] HKCA 287, the court was unwilling to allow a director to represent the company even though he was also personally named as a defendant (cf. the approach of Kelly J in McDonald v. McCaughey Developments Limited [2015] IECA 159).
71. The strict implementation of the rule has been relaxed to a certain extent in England in light of wider civil procedure reforms. Rule 39.6 of the Civil Procedure Rules provides that:
“A company or other corporation may be represented at trial by an employee if –
(a) the employee has been authorised by the company or corporation to appear at trial on its behalf; and
(b) the court gives permission.”
The accompanying Practice Direction PD 39A provides that:
“5.3. Rule 39.6 is intended to enable a company or other corporation to represent itself as a litigant in person. Permission under rule 39.6(b) should therefore be given by the court unless there is some particular and sufficient reason why it should be withheld. In considering whether to grant permission the matters to be taken into account include the complexity of the issues and the experience and position in the company or corporation of the proposed representative.”
However, certain cases applying this Rule suggest that it is not as permissive as the Practice Direction suggests. In Shared Network Services Limited v. Nextira One UK Limited [2011] EWHC 3845 (Comm), Flaux J gave permission for a director to represent a company under Rule 39.6 whilst noting that “at least before the Commercial Court, that is the exception rather than the rule.” In Pall Mall Investments Ltd v. Leeds City Council [2013] EWHC 3307 (Admin), His Honour Judge Roger Kaye QC stated that “[w]hile the CPR envisage and make provision for a company to represent itself, this is not an indulgence still less unlimited.”
72. A similar position pertains in Northern Ireland (see the Rules of the Court of Judicature in Northern Ireland: Order 5, Rule 6(2), laying down the general rule that a body corporate may not begin or carry on any such proceedings otherwise than by a solicitor, and 6(3), providing for permission to be given in the same manner as under the English Civil Procedure Rules). In Ulster Weavers Home Fashions Limited v. Waterfall NI Limited [2013] NIMaster 2, a director was permitted to represent the company in circumstances where the company could not afford legal representation and where it was alleged that there was a strong defence and counterclaim which would otherwise not be advanced before the Court.
73. In Australia, the approach to this issue varies from State to State. In Victoria, Order 1.17(1) of the Supreme Court (General Civil Procedure) Rules 2015 provides that “[e]xcept where otherwise provided by or under any Act or these Rules, a corporation, whether or not a party, shall not take any step in a proceeding save by a solicitor.” In New South Wales, on the other hand, a corporation may appear in any court by a solicitor or by a director of the company.
74. As the above demonstrates, the preservation of the rule in this jurisdiction is not in any way fundamentally at variance with what applies elsewhere in the common law world. That would suggest that the existing system does not demand immediate remedial measures of any significance.
Conclusion:
75. In conclusion, I am satisfied, first, that the rule in Battle still survives and that it applies to the presenting circumstances in this case. Secondly, there are no exceptional circumstances which would justify any departure from the rule. Accordingly, I would dismiss the appeal.
Battle v Irish Arts Promotion Centre Limited
[1968] IR 252
EDGAR W. BATTLE and MILLEY BATTLE Plaintiffs v. IRISH ART PROMOTION CENTRE LIMITED, DefendantApplication of Mordechai Romas (1)
[1963. No. 595]
Supreme Court. 26 Nov. 1965
21 Dec. 1965
O’DALAIGHC.J. :
21 Dec.
This is an appeal by Mordechai Romas, managing director of the defendant company, from an order of the President of the High Court dated the 19th November, 1965, refusing his application for liberty to conduct the defence of the action on behalf of the company. The plaintiffs’ claim is for commission alleged to have been earned on the sale of the company products which were reproductions of the old masters.
The defendant company is a private company. A copy of the memorandum of association which was handed in by the appellant shows that the share capital of the company is 5,000 shares of £1the subscribers being Jean St. Leger, described as “secretary,” and the appellant, each of whom is shown as having taken one share each. These subscribers, the Court has been told, are the directors of the company.
[1968]
1 I.R. Battle v. Irish Art Promotion Centre Ltd.
O’DalaighC.J. 253
Supreme Court.
The Court has not got any precise information as to the number of shares which have been issued, but the appellant assures the Court that he is virtually the owner of the company.
The appellant says the company has not now sufficient assets to permit of solicitor and counsel being engaged to present the company’s defence; he also says that the company has a good defence to the action and that if, in the absence of solicitor and counsel to conduct the defence, the company were to be decreed, it would be a reflection on the appellant’s reputation and standing as a business man. It would appear that the appellant is now managing director of another company of which he is also the major shareholder. The appellant was unable to refer the Court to any authorities touching on his application; and in these circumstances the Court allowed the application to stand over in order that it might have an opportunity of examining the law.
I have not found any reported Irish case which bears on the Court’s problem; but there are at least three English decisions. The first, Scriven v. Jescott Leeds Ltd. (1) is reported as a note. The managing director sought a right of audience to represent the company. Bray J. is reported as having held that a company can only be represented by attorney and that it is not in the same position as a litigant in person. In London County Council and London Tramways Company (2) the objection was taken but not ruled. The point arose again in Frinton and Walton U.D.C. v. Walton and District Sand and Mineral Co. Ltd. (3) and it was again ruled in the same sense by Morton J. who said:”the points to which my attention has been drawn are sufficient to satisfy me that a company cannot appear in person.”Lastly, the matter was the subject of a ruling in Tritonia Ltd. v. Equity and Law Life Assurance Society (4). Viscount Simon L. C. in his speech (with which all his brethren concurred) said at p. 586 of the report: “In the case of a corporation, inasmuch as the artificial entity cannot attend and argue personally the right of audience is necessarily limited to counsel instructed on the corporation’s behalf.”Having referred to an apparent exception in the case of the Appeal Committee (whose practice it was to hear agents in incidental petitions and other matters dealt with by the committee, but not in argument on the substantial appeal), he said that this “cannot be held to constitute a real exception to the long established rule that an appeal cannot be argued on behalf of a party by any one except the party himself (if not a corporation) or by counsel.”
[1968]
1 I.R. Battle v. Irish Art Promotion Centre Ltd.
O’DalaighC.J.; Haugh J.; Walsh J. 254
Supreme Court.
I should also advert to the case of Charles P. Kinnell & Co.v. Harding, Wace & Co. (1) where it was held that in the English County Court a limited company may lawfully employ an agent who is not a solicitor to institute proceedings and file the necessary praecipe on its behalf and, with the leave of the judge, represent it in Court. The proceedings were to set aside a judgment which had been entered on default of appearance at the hearing by the defendant. The plaintiff company had, for the purpose of filing the necessarypraecipe and affidavit, employed one of their own clerks instead of a solicitor. This was relied upon by the defendants as an irregularity such as to entitle them to have the judgment set aside. The Court of Appeal, hearing an appeal from a divisional court which refused the motion, examined the wider question of the right of a limited company to appear in the county court by its officer or agent, and the judges found warrant for their view that it could in the express provision of s. 72 of the County Courts Act, 1888.
This survey of the cases indicates clearly that the law is, as we apprehended it to be when this application was first made to us, viz. that, in the absence of statutory exception, a limited company cannot be represented in court proceedings by its managing director or other officer or servant. This is an infirmity of the company which derives from its own very nature. The creation of the company is the act of its subscribers; the subscribers, in discarding their ownpersonae for the persona of the company, doubtless did so for the advantages which incorporation offers to traders. In seeking incorporation they thereby lose the right of audience which they would have as individuals; but the choice has been their own. One sympathises with the purpose which the appellant has in mind, to wit, to safeguard his business reputation; but, as the law stands, he cannot as major shareholder and managing director now substitute his persona for that of the company. The only practical course open to him would, it appears, be for him personally to put the company in funds for the purpose of presenting its defence. The Court in my judgment should refuse this application.
HAUGH J. :
I agree.
WALSH J. :
I agree.
Cases Security for Costs
Charles Kelly Ltd. v Ulster Bank Ireland Ltd.
[2019] IEHC 120 (13 February 2019)
JUDGMENT of Ms. Justice Reynolds delivered on the 13th day of February, 2019
Background
1. This is an application for an order pursuant to O. 29, r. 1 of the Rules of the Superior Court, 1986 and/or s. 52 of the Companies Act, 2014, directing the plaintiff to furnish security for costs to be incurred by the defendant in defending the within proceedings.
2. The within proceedings succeed separate proceedings commenced in 2008 between the then Directors and shareholders of the plaintiff company. Those proceedings were substantially determined by the High Court (Ms. Justice Laffoy) in four separate reserved judgments delivered between February, 2010 and July, 2012.
3. In the within proceedings, the plaintiff seeks damages for negligence, breach of duty, breach of statutory duty, and/or breach of fiduciary duty arising from various complaints made against the defendant, which can be summarised as follows:
(a) An allegation that the defendant honoured payments drawn on the accounts of the plaintiff which were not validly submitted;
(b) An allegation that the defendant wrongfully permitted the plaintiff to exceed its overdraft limit of €1,600,000;
(c) An allegation that the defendant wrongfully refused to transfer the liabilities of the plaintiff from its overdraft facility to one or more term loan facilities.
4. The defendant asserts that it is a full defence to the matters complained of and, therefore, seeks security to be given for costs to be incurred in defending the proceedings in circumstances where it contends that the plaintiff company will be unable to meet its costs, if successful.
5. The estimate of the likely costs provided to this Court is €180,000 approximately.
Security for Costs
6. The jurisdiction to require that security be provided by a corporate plaintiff is governed by s. 52 of the Companies Act 2014, which 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.”
7. The principles applicable to the grant of security for costs are well established.
8. In USK District Residence Association Limited v. Environmental Protection Agency & Ors [2006] IEHC 435, Clarke J. endorsed the approach by Morris J. in Interfinance Group Limited v. KPMG , Pete Marwick (Unreported, High Court, Morris J., 29th June, 1998) as follows:-
“1. In order to succeed in obtaining security for costs an initial onus rests upon the moving party to establish:-
(a) that he has a prima facie defence to the plaintiff’s claim, and
(b) that the plaintiff will not be able to pay the moving party’s costs if the moving party be successful;
2. In the event that the above two facts are established then security ought to be required unless it can be shown that there are specific circumstances in the case which ought to cause the court to exercise its discretion not to make the order sought. In this regard the onus vests upon the party resisting the order.
The most common examples of such special circumstances include cases where a plaintiff’s inability to discharge the defendants costs of successfully defending the action concerned flow from the wrong allegedly committed by the moving party or where there has been delay by the moving party in seeking the order sought.”
9. Clearly, therefore, the list of special circumstances as envisaged and referred to in the judgment is not exhaustive.
10. The issues, therefore, for this Court to determine are as follows:-
(i) has the defendant established a prima facie defence to the plaintiff’s claim;
(ii) if so, has the defendant satisfied the court that the plaintiff would be unable to meet its costs, if successful; and
(iii) further, and in the event that the court is so satisfied, has the plaintiff established specific or special circumstances which cause the court to exercise its discretion not to make the order.
First Issue – whether the defendant has established a prima facie defence
11. In 2006, the plaintiff executed a mandate which provided that most transactions on its current account with the defendant could be completed provided there were two authorised signatories on behalf of the plaintiff.
12. The plaintiff takes issue in the within proceedings in respect of four payments made by the defendant to a third party between October 2009 and February 2010 and alleges that these payments were not properly authorised by it and amounted to the misappropriation of funds by Mr. William Kelly, a former director of the plaintiff company.
13. The defendant accepts that it received a request from the plaintiff in September 2009, to the effect that it should not make any further payments to this third party but advised the plaintiff that a board resolution would be required to alter the existing mandate. No board resolution was forthcoming and the defendant authorised the payments.
14. There can be no dispute but that the defendant advised the plaintiff on numerous occasions of the necessity to procure a board resolution. Further, having become aware of the ongoing dispute between the directors of the company, the defendant suggested that an application be brought for the appropriate relief through the courts.
15. Indeed, proceedings were already before the courts at that stage and every opportunity was available to the plaintiff to bring the matter to the court’s attention and seek the appropriate relief.
16. The plaintiff makes further allegations against the defendant in negligence for allowing an increase in its overdraft limit. There appears to be no dispute but that this was at the plaintiff’s request and was implicitly agreed between the parties with a view to enabling the plaintiff to continue trading. In respect of the further matters pleaded as against the defendant, the plaintiff alleges that the defendant wrongfully refused to transfer the liabilities of the plaintiff from its overdraft facility to one or more loan facilities. However, it is clear that extensive efforts were made by the defendant, through meetings and correspondence, to agree facilities with the plaintiff and that the parties failed to reach agreement in this regard.
17. Indeed, in the judgment of Laffoy J. in the company proceedings ( Edward Gerry Kelly v. William Kelly & Charles Kelly Limited [2011] IEHC 349), the court commended the defendant for the constructive approach adapted by it in its dealings with the plaintiff as follows:-
“Despite what I consider to be unnecessarily belligerent correspondence from the petitioner, the Bank has maintained the company’s overdraft facility in place, notwithstanding that it has been unable to procure a properly executed acceptance on behalf of the company of the facility from the company and notwithstanding that, as with the world at large, it has not seen any audited financial statements of the company from 2006 onwards. In short, the Bank has demonstrated considerable forbearance towards the company and its directors.”
18. In determining the question of whether a defendant has established a prima facie defence, Finlay Geoghegan J. in Tribune Newspapers (In Receivership) v. Associated Newspapers (Ireland) Limited ( Ex Tempore , High Court, 25th March, 2011) stated as follows:-
“In my judgment, what is required is for a defendant seeking to establish a prima facie defence is to objectively demonstrate the existence of admissible evidence and relevant arguable legal submissions applicable thereto which, if accepted by a trial judge, provide a defence to the plaintiff’s claim.”
19. Having considered the factual evidence upon which the defendant seeks to rely in establishing a prima facie defence to the within proceedings, this Court is satisfied that the defendant has made out a reasonably sustainable defence and indeed a sound arguable legal basis for that defence.
Second Issue – has the plaintiff the ability to meet an order for costs?
20. The defendant contends that the financial position of the plaintiff company is such that it will not be in a position to meet any order for costs that the court might make in favour of the defendant should it succeed in these proceedings.
21. The defendant relies on the audited accounts of the plaintiff for the financial years ending 31st October, 2011 to 31st October, 2016, in demonstrating that the plaintiff company is insolvent and that its financial position continues to deteriorate.
22. In addition, the defendant relies upon the most recent, unaudited abridged financial statements for the financial year ended 31st October, 2017.
23. In response, the plaintiff avers to the fact that its status in the Company Registrations Office is normal and contends that it is now fully funded and continues to trade, having moved its banking portfolio to Allied Irish Banks.
24. Further, the plaintiff relies on a report dated 27th September, 2018, from Vision.net, a financial research company which provides credit information on commercial entities and private individuals. It is notable from the said report that the plaintiff company operates within a very constrained credit limit, and currently has a net worth of approximately minus €2m.
25. Having considered all of the relevant financial documentation, this Court can only conclude that the plaintiff will be unable to meet an order for costs in the event that the defendant succeeds in its defence herein.
Third Issue – are there special circumstances to justify the refusal of the relief?
26. The onus clearly rests on the plaintiff to establish “special circumstances” as to why an order for security for costs should not be made.
27. No such case has been made out by the plaintiff in the affidavits before the court save and except for an assertion that it would be unjust for the defendant to profit from its wrongdoing by attempting to erect a barrier to the plaintiff maintaining its proceedings against it.
28. Given that the court has already satisfied itself that the defendant has established a prima facie defence to the within proceedings, there can be no basis upon which the court could refuse the reliefs sought herein.
29. In all the circumstances, I will grant the relief sought in the within application.
Pebble Beach Owners Management Company Ltd v Neville & ors
[2019] IEHC 111 (18 January 2019)
JUDGMENT of Mr. Justice Noonan delivered on the 18th day of January, 2019
1. This application is brought by the first to seventh named defendants (“the Neville defendants”) for an order for security for costs against the plaintiff pursuant to s. 52 of the Companies Act, 2014.
Background Facts
2. The Neville defendants, through an associated construction company, developed a scheme of some 223 holiday homes in Tramore, County Waterford, the last of which was sold in 2003. The development was designed to take advantage of the provisions of the Finance Act, 1995 which provided tax relief for investors in holiday homes. The available tax break extended over a ten year period during which the homes were required to be available for rental to the tourist market. To achieve that objective, the owners of each property entered into a 21 year lease with the Neville defendants who collectively traded as the “Pebble Beach Holiday Homes Operator”. The leases contained a break clause after the expiry of the ten year tax relief period.
3. The plaintiff is the management company of the development, the members of which are the owners of the holiday homes. In the normal way, in a multi-unit development of this nature, the ownership of the development would be transferred to the management company on the sale of all the properties. In the present case however, it would appear that the common areas were not transferred to the management company until the 30th December, 2009.
4. Although the management company was theoretically responsible for the upkeep and maintenance of the development and its common areas prior to that time, it would appear that the Neville defendants effectively left the management company dormant and instead of the management company collecting maintenance charges directly from the owners, the Neville defendants, as the operator, collected the rents from the tourists who were renting the properties and deducted the management fees from those rents.
5. The eighth and ninth defendants (“the Doyle defendants”) were the accountants and auditors of the plaintiff and it would appear that at least up until the 31st December, 2009, the returns filed with the Companies Registration Office showed a nil figure for both income and expenditure.
6. The plaintiff’s claim in the within proceedings arises from an alleged failure on the part of the Neville defendants to maintain the common areas of the estate so that by the time of the transfer to the plaintiff management company, the common areas had fallen into a poor state of repair and there were no funds in the company to address the alleged disrepair. The plaintiff alleges that the defendants failed to operate the plaintiff company properly and intermingled the management charges with the rental income. It is alleged further that the Neville defendants failed to set up a sinking fund to provide for the sort of contingencies that have now arisen and that they failed to collect appropriate management charges on behalf of the plaintiff company over a period of time and to deal with other financial and administrative matters such as setting up a separate bank account for the plaintiff company, keeping proper books of account and making proper returns to the CRO and so forth.
7. The plaintiff alleges that it has suffered substantial losses as a result of the foregoing matters. It is not suggested by the plaintiff that the Neville defendants misappropriated any monies collected for the purpose of maintaining the estate but rather that they failed to either maintain the estate or collect adequate monies for that purpose on behalf of the plaintiff.
8. In response, the Neville defendants, in addition to denying the claim generally, argue that they spent substantial of their own funds on the maintenance of the common areas of the estate but more fundamentally, the plaintiff management company, and by proxy the owners of the individual homes in the estate, have in reality suffered no loss because they are ultimately the parties who would have to fund any want of repair in the estate in any event. The Neville defendants thus contend that the plaintiff’s complaint is merely one of the timing of when the funds for that work are required to be made available. While this is the essence of the defence, a number of other issues are raised such as inordinate and inexcusable delay in the commencement and prosecution of this action.
Legal Principles
9. The governing criteria in applications of this nature are by now well settled. Section 52 of the 2014 Act provides:
“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.”
10. Section 52 replaces s. 390 of the Companies Act, 1963 which was in its terms very similar save that the expression “sufficient security” in s. 390 has now been replaced by “security” in s.52. This appears to give the court discretion in terms of the quantum of security that may be ordered.
11. The authorities establish that for a defendant to succeed in an application for security, he must establish (a) that he has a prima facie defence to the plaintiff’s claim and (b) that the plaintiff would be unable to pay the defendant’s costs if the defendant is successful. Once those criteria are established, security will in general be ordered unless there are special circumstances which would require the court to exercise its discretion against ordering security. The onus of establishing such special circumstances rests upon the party opposing the giving of security.
12. A prima facie defence must be more than a merely arguable defence but one which is reasonably sustainable. It has been said that it is necessary for the party seeking security to demonstrate by objective means the existence of admissible evidence, supported by relevant arguable legal submissions, which if accepted by a trial judge, would provide a defence to the claim – see Tribune Newspapers v. Associated Newspapers Ireland Unreported, High Court, March 25 2011 and Mike O’Dwyer Motors Ltd v. Mazda Motor Logistics Europe N.V. [2012] IEHC 560. Apart from the availability of such evidence, a party seeking security may satisfy the test by demonstrating that on undisputed facts, the applicable legal principles ought to result in the dismissal of the claim.
Discussion
13. I am satisfied by reference to these principles that the Neville defendants have demonstrated a prima facie defence. In the affidavit grounding this application, these defendants go considerably further than merely denying the claim. They suggest as a matter of law that the claim is unsustainable for the reasons I have already referred to, quite apart from the fact that there is a significant factual dispute between the parties as to the extent to which there is or was disrepair to the common areas of the estate and whether that amounts to an actionable wrong.
14. Turning now to the issue of inability to pay costs, the Doyle defendants previously brought a similar application for security for costs in these proceedings and a judgment was delivered by this court (Baker J.) on the 29th July, 2016 at [2016] IEHC 446. In the course of her judgment in that application, Baker J. concluded that the Doyle defendants had in fact demonstrated an inability on the part of the plaintiff company to meet any order for costs which might ultimately be given against it. The judge noted (at p. 10):
“The plaintiff company’s accounts show difficulties in collecting service and management charges, and that there has been some disimprovement in the level of collection between 2013 and 2014. The 2014 figures show 69% of owners had either not paid their charge, or had not paid on time. The plaintiff company is described by its solicitor as suffering from ‘current relative impecuniosity’ but she says that it could opt to levy a special charge on owners to meet the costs of the litigation should this be necessary. The proposition that a special levy could be made is one that has some attraction, but no evidence has been furnished by the plaintiff of any resolution passed at a meeting of a company that a special levy should be pursued, and no agreement has been exhibited by which the owners, the members of the company, have agreed to meet such a levy were one to be imposed. Having regard to the level of arrears, it seems unlikely in the present circumstances that the collection of the levy would be straightforward. In that regard, the management company admits that legal proceedings have been commenced against 13% of owners of the units in respect of the 2014 charges, and this fact alone would suggest that it might be difficult to collect an additional levy, and the absence of a resolution, or an agreement suggest an unwarranted degree of optimism on the part of the company that the imposition of an additional levy would readily meet the costs.”
15. The court was therefore satisfied that the Doyle defendants had a prima facie defence and had established the plaintiff’s inability to meet an order for costs. Baker J. then went on to consider the special circumstance raised in that application by the plaintiff, namely that the cause of its impecuniosity was the wrongdoing of the Doyle defendants. That seemed to stem from the argument that the failure to put in place a sinking fund deprived the plaintiff company of its ability to pay costs and it was a matter for which the Doyle defendants were liable.
16. That argument was however rejected by the court essentially on the basis that a sinking fund even if it had been put in place was not for the purpose of the litigation costs and the plaintiff was not entitled to make a profit from the management fees which might otherwise have enabled it to pay such costs. Accordingly the special circumstance had not been established. The question of delay was also raised by the plaintiff but the court concluded that it was not sufficient to defeat the application, security having been sought by the Doyle defendants within about nine months of the delivery of the statement of claim. Accordingly, she granted an order for security.
17. In the present application, broadly speaking the same evidence was put before the court as to the plaintiff’s financial position. The Neville defendants’ evidence is that its likely costs in these proceedings will amount to some €244,461.50 as appears from the affidavit of its cost drawer. No countervailing evidence has been led by the plaintiff. Accounts for the plaintiff are now available up to March 2017 but in my view do not advance the position significantly beyond that alluded to by Baker J. in her judgment. These accounts suggest that there is still a level of unpaid service charges of in or around €140,000. For the reasons given by Baker J., there must be considerable doubt as to when, or indeed if at all, these charges will be collected.
18. Furthermore, it is clear that in terms of tangible assets, being the common areas of the development, these in themselves have no realisable value on the open market. The plaintiff’s cash position indicates that it has something less than €8,000 in its bank account and overall, I am of the view that the reality is that as matters currently stand, the plaintiff will be unable to pay the costs if the Neville defendants succeed in their defence.
19. Further, as alluded to by Baker J., the prospect of a special levy is also unrealistic. Given the difficulty currently and historically encountered by the plaintiff in recovering service charges from the owners, it is not hard to imagine that such difficulty would be compounded even further by seeking to levy the owners for the costs of a failed action.
Special Circumstances – Relevant Chronology
20. In the present case, the plaintiff relies on two special circumstances which it claims should persuade the court to exercise its discretion against the grant of security. The first is delay and the second is described as “inducement and reasonable expectation”. Notably, the plaintiff does not argue, as in the Doyle defendants’ application, that its inability to pay costs, which in any event it disputes, arises from the alleged wrongdoing of the Neville defendants. In relation to the two special circumstances relied upon by the plaintiff, it is relevant to refer to the course that these proceedings have to date followed:
29th May, 2014 – The plaintiff’s solicitors wrote an opening letter to the Neville defendants outlining in general terms the basis for the claim. There was no reply to this correspondence.
14th August, 2014 – The plenary summons was issued. The Neville defendants declined to nominate solicitors to accept service. No response was received. It was not until the 28th January, 2015 that solicitors for the Neville defendants confirmed authority to accept service.
18th February, 2014 – The summons was served on the solicitors.
27th March, 2015 – An appearance was entered.
9th April, 2015 – The statement of claim was delivered setting out detailed and comprehensive particulars of the plaintiff’s claim. No steps of any kind were taken by the Neville defendants to engage with this document thereafter by way of notice for particulars or otherwise. The proceedings were issued in the name of Cyclegrove Limited, the plaintiff’s previous name before it was changed.
12th November, 2015 – A motion for judgment in default of defence was issued after warning correspondence.
30th November, 2015 – This was responded to by the Neville defendants’ solicitors that the title of the plaintiff company was incorrect, and they would apply to strike out the motion on this ground.
7th December, 2015 – The matter came on for hearing before this court when the title was amended and the defendants were given eight weeks to deliver their defence.
1st February, 2016 – The defence was delivered on the last day permitted by the order.
25th April, 2016 – A notice for particulars was raised for the first time by the Neville defendants.
16th May, 2016 – Replies to particulars were delivered by the plaintiff.
13th May, 2016 – The plaintiffs sought voluntary discovery from the Neville defendants. No reply was received.
29th July, 2016 – Baker J. gave judgment in the Doyle defendants’ application for security.
20th October, 2016 – The plaintiff discontinued its action against the Doyle defendants.
25th November, 2016 – The plaintiffs issued a motion for discovery.
23rd March, 2017 – The motion was heard and by consent an order for discovery was made which was to be complied with by the 22nd June, 2017. The Neville defendants failed to comply.
6th July, 2017 – The Neville defendants for the first time sought security for costs.
24th July, 2017 – The Neville defendants’ affidavit of discovery was delivered.
29th August, 2017 – The within motion issued.
21. As can be seen from the foregoing chronology, a period of almost two and a half years elapsed between the service of the statement of claim and the bringing of the application for security. Although the Neville defendants argue that they had no obligation to engage with a statement of claim delivered under the wrong name, I do not think there is much merit in this technical objection and clearly the court hearing the motion for judgment came to the same conclusion as they were directed to deliver a defence.
22. It is also clear from the foregoing chronology that the approach of the Neville defendants to this litigation has been, at best, dilatory. No real excuse has been forthcoming for this delay. The within application for security appears to have been precipitated by the order made in favour of the Doyle defendants but even then, a further year was allowed to elapse before the application was brought. The best explanation advanced by the Neville defendants for this delay was that they hoped the case might go away after being discontinued against the other defendants.
23. There is no requirement under s. 52 for an application for security for costs to be made at any particular stage in the proceedings. Delay however is a significant factor that has been recognised in a number of cases to be a special circumstance which would justify the court in refusing security – see for example Oltech (Systems) v. Olivetti UK Ltd [2012] IEHC 512, Euro Safety and Training Services Ltd v. An Foras Aiseanna Saothair [2016] IEHC 161 and Pagnell Ltd (T/A Snap Printing) v. OCE Ireland Ltd [2015] IECA 40.
24. Delay without more is not in general a sufficient circumstance to warrant refusal of security but it is the prejudice arising as a result of such delay that may give rise to the exercise of the discretion. The issue to be considered is, as noted by Dunne J. in Ferrotec Ltd v. Myles Brownwell Executive Services Ltd T/A Slimming World [2009] IEHC 46, whether the delay has had any impact on the plaintiff’s position.
25. From the time of delivery of the statement of claim, there seems to be no good reason why the Neville defendants could not have sought security for costs. The claim was fully and comprehensively pleaded against them and they had the benefit of solicitor’s advice for at least several months at that stage. That advice must have been predicated on the content of the plaintiff’s solicitors opening correspondence which gave an outline of the case.
26. To that extent therefore, those defendants should have been in a position to seek security within a reasonably short period after a receipt of the statement of claim. Instead, the plaintiff was permitted to engage in the pursuit of the case and the incurring of significant costs over a period in excess of two years. The question thus arises as to whether it would now be just to compel the plaintiff to furnish security in such circumstances.
27. It is clear by any objective measure that the plaintiff is struggling under significant financial constraints. That much is evident from the judgment of Baker J. and the up to date accounts of the company. One might be forgiven for wondering therefore whether the making of an order for security would in reality bring an end to this case, as it commonly does.
28. Counsel for the Neville defendants suggests that the effect of any delay could be mitigated by confining the quantum of the security to future costs only. However, I think it has to be recognised that if the likely effect of making an order for security is to prevent a case proceeding, the cost, time and effort that have been expended by the plaintiff in getting to the point where security is ordered will likely be lost. That is a prejudice which cannot be compensated for by limiting the amount of security to the defendants’ likely costs to be incurred from hereon in. It is a prejudice which stems directly from the delay in making this application and in my view, militates against the making of an order.
29. It seems to me that it must follow that where the likely effect of making an order for security for costs is to bring the proceedings to an end, there is an onus on the moving party to make the application as soon as is reasonably possible. It is not obvious to me why such an application could not have been made in this case at a much earlier juncture, and certainly at least two years before it was in fact made.
30. The plaintiff here argues that the defendants’ approach to the litigation was such as to lead them to believe that security was not being sought and they were in effect induced to continue. That is an important factor in the exercise of the court’s discretion, even in circumstances where, as here, there is no clear evidence that the making of an order for security will in fact terminate the proceedings. In that latter regard, it seems to me that the dicta of Clarke J. (as he then was) in Mooreview Developments Ltd v. Cunningha m [2010] IEHC 30 are apposite (at p. 3.7 ):
“In my view, the rationale behind the delay special circumstance jurisprudence is that a party is entitled (where security is to be ordered) to be able to include that factor in its judgment as to whether to progress the proceedings from as early a time as is reasonably practicable. The test is not as to whether the relevant plaintiff might not nonetheless have gone ahead with the proceedings even had security been ordered earlier and, thus, would have incurred any costs arising in the intervening period in any event. Rather it is that the plaintiff incurring costs in the intervening period ought to have been entitled to make its decision, as to whether to incur those costs, in the light of full information, including the fact that security for costs would have to be put up.”
31. That seems to me to accurately encapsulate the issue which arises in this case. The plaintiff was in my opinion entitled to pursue these proceedings, informed by the knowledge that security for costs was not being sought. Had such an indication been given by the Neville defendants in a timely manner, it is perfectly possible that the plaintiff may have come to a different view about progressing the case.
32. Accordingly, for these reasons, I propose to refuse this application.
Superwood Holdings Plc & Ors v. Sun Alliance and London Insurance Plc t/a Sun Alliance Insurance Group & Ors
[2004] IESC 19 (15 March 2004)
THE SUPREME COURT
Keane C.J.
Murray J.
Hardiman J.
JUDGMENT delivered the 15th 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 28th 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 4th, 5th and 6th April, 2001. The effect of the judgment, as reflected in the order of the High Court the 7th 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 16th 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 12th 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 17th October, 2003, unanimously dismissed the appeal. The order of the court provided that the amount was to be furnished within three months. On the 16th 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 23rd 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 (4th) 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 12th 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.