Irish Court Of Appeal Considers Whether The Existence Of An ATE Policy Defeated An Application For Security For Costs

Introductory remarks

The Irish Court of Appeal has recently held in Greenclean Waste Management Ltd -v- Leahy p/a Maurice Leahy Wade & Company Solicitors [2015] IECA 97 that the existence of an After The Event (ATE) policy is a matter which may be taken into consideration when a Court exercises its discretion as to whether or not to make an order in favour of a Defendant for security for its costs. In certain circumstances an ATE policy may justify a Court's refusal to make such an order against the Plaintiff, albeit this will be heavily dependent on the policy terms. If those terms allow the insurers various ways in which to terminate the Plaintiff's coverage for any liability the Plaintiff might have for the Defendant's costs, it is likely that the Courts will continue to grant Defendant applications that an ATE-protected Plaintiff should still provide security in the conventional way.

Factual background

The liquidator of an insolvent company in liquidation, Greenclean Waste Management Limited (In liquidation), brought a claim alleging that the company's former solicitors, Maurice Leahy & Co ("the Solicitors"), gave negligent advice to Greenclean regarding its obligations in relation to a commercial lease, causing it to pay EUR 460,000 to its former landlord on account of its failure to comply with those obligations. The Solicitors applied to the High Court for security for costs given that the Plaintiff was insolvent and unlikely to meet any award for costs should its claim fail. The Plaintiff had ATE insurance and it fell to the High Court to determine whether the existence of that cover provided sufficient security such that the Court did not have to grant the application and order the Plaintiff to provide security for costs.

Given the Plaintiff's insolvency, the Court was conscious that ordering the Plaintiff to provide security would probably force the Plaintiff into giving up its claim and bring an end to the litigation.

The High Court reviewed the terms of the ATE policy in question, focusing its attention on the "prospects clause" in the agreement which, in essence, provided that the insurer had the option of ending cover at any time that it was of the opinion that it was more likely than not that the insured Plaintiff would lose its claim. In light of this clause, the Court concluded that the policy did not provide sufficient security for costs unless the insurer was prepared to provide a binding commitment that it would not...