Impecunious Plaintiffs And Security For Costs ' A New Leg To The Test

• Published date: 31 May 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: William Fry
• Author: Mr Richard Breen, Lisa Carty, Joanne Ryan and Gail Nohilly

INTRODUCTION

A successful security for costs application may be strategically beneficial for defendants. The rationale behind the regime is to provide protection to a defendant from the risk of an impecunious opponent being unable to meet a costs order if the claim against the defendant is unsuccessful. As summarised in our recent briefing here, security for costs applications are carefully scrutinised by the court because of the potential interference with the parties right of access to the courts.

The approach to corporate security for costs is well established. It is a discretionary relief which requires the defendant to establish that it has (i) a prima facie defence; and (ii) that the plaintiff will be unable to pay the defendant's costs if successful in its defence. In turn, a plaintiff, in defence of an application for security, may demonstrate "special circumstances" which could permit the court to exercise its discretion to refuse the application.

The courts will always seek to find the balance of justice between the parties and are alert to the fact that it may be used tactically to stifle a meritorious claim. The courts will consider all the circumstances of the case and will only grant an order for security for costs if it is satisfied that it is just and equitable to do so.

SPECIAL CIRCUMSTANCE - PLAINTIFF'S IMPECUNIOSITY

As outlined in our previous commentary here, a plaintiff can seek to avail of the commonly invoked special circumstance of "impecuniosity". In other words, a plaintiff must show that its admitted or established inability to pay the likely costs of the defendant arises from the alleged wrongdoing of the defendant. This test for determining the impecuniosity of a plaintiff was established in Connaughton Road Construction Ltd. v. Laing O'Rourke Ireland Ltd [2009] IEHC 7(Connaughton Road).

The Connaughton Road test was recently considered and refined in Quinn Insurance Limited (Under Administration) v PricewaterhouseCoopers (A Firm) [2021] IESC 15 (Quinn). The issue in Quinn was whether the plaintiff had established special circumstances such that security for costs should not be ordered.

THE BACKGROUND TO QUINN

The Supreme Court (Court) granted leave to appeal from the Court of Appeal (CoA) decision which granted security for costs against the plaintiff company (QIL) (see our previous commentary on the CoA judgment here). Leave was granted on the basis that the application concerned matters of general public importance in identifying the appropriate test for security for costs applications.

As noted by the Court, the proceedings have a complex...