The Supreme Court has overturned an order requiring Hidden Ireland Heritage Holidays Limited to provide security for the legal costs of two defendants if they won their defence. The court dismissed the defendants’ application for security, finding that their delay and conduct in the litigation amounted to special circumstances.
The company, which trades as the Hidden Ireland Association, had sued Indigo Services Limited, John Colclough and Alexandra Gardner. It alleged that emails intended for the company were diverted between 1996 and 1998, and that Colclough and Gardner used information about potential customers for their own benefit, with Indigo’s assistance. The defendants disputed the claims.
The company also alleged that Colclough breached a 1997 agreement not to use the “Hidden Ireland” name or interfere with enquiries intended for either party. Its claims included misuse of confidential information, passing off and interference with business arrangements. The Supreme Court made no ruling on the merits of those claims.
The case before the Supreme Court concerned an order made by the High Court under section 390 of the Companies Act 1963. That provision allows a court to require a limited company bringing proceedings to provide security for a defendant’s costs where there is reason to believe the company could not pay them if the defendant succeeded. The company accepted that its financial records met that threshold, though it argued its financial position had been caused or worsened by the alleged wrongdoing.
Justice Fennelly said the defendants had to show at least a prima facie defence. He considered Gardner’s affidavit sufficient for that purpose. He found Colclough’s denial incomplete and equivocal because it did not directly address whether emails had been forwarded to his own email address. The judge stressed that this was a matter relevant to the security application and did not decide the underlying allegation.
The defendants sought security about a year after the proceedings began. During that period, the company delivered replies to an extensive request for particulars and pursued voluntary discovery after Colclough offered access to his records. In March 2002, Colclough also sent a fax to a company member containing abusive language and comments about the litigation and potential costs.
The Supreme Court said the High Court judge had not addressed delay, a key argument, so it exercised its discretion afresh. It concluded that the defendants had allowed the case to proceed despite knowing of the company’s financial weakness, and that their delay and conduct deprived them of entitlement to the order. The appeal was allowed and the security application dismissed. The judgment did not determine liability or the outcome of the underlying action.