The Court of Appeal has allowed an appeal by PricewaterhouseCoopers (PwC) and directed that Quinn Insurance Limited (Under Administration) provide security for PwC’s costs in its ongoing litigation. The High Court must determine the amount and form of that security.
The judgment, delivered by Ms Justice Baker on 21 April 2020, overturns a High Court decision refusing PwC’s application under section 52 of the Companies Act 2014. The appeal concerned security for costs only. The Court of Appeal did not decide whether PwC breached its duties as Quinn’s auditor or whether Quinn is entitled to damages.
Quinn, which is insolvent and under administration, claims damages for alleged breach of contract, negligence and breach of duty in audits of aspects of its business and its compliance with regulatory requirements. PwC has pleaded a bona fide defence. The parties did not dispute the threshold conditions for considering security: Quinn could not pay PwC’s costs if PwC successfully defended the claim, and PwC had a bona fide defence.
Quinn argued that its financial collapse flowed from PwC’s alleged wrongdoing. Its joint administrator, Michael McAteer, said that earlier identification of inter-company guarantees and understated technical provisions could have enabled Quinn to avoid or limit losses. The judgment records a pleaded claim calculated at €900 million, while noting that this figure was at least €200 million below the anticipated call on the Insurance Compensation Fund (ICF).
The Court of Appeal accepted, for the purpose of the security application, that Quinn had made a prima facie case that earlier warnings might have allowed it to halt its financial decline. That assessment was not a finding that PwC was negligent or that the alleged losses were proved. Those issues remain for trial.
The court nevertheless concluded that the balance of justice favoured requiring security. It cited the estimated defence costs of more than €30 million, Quinn’s financial backing for its own costs, and the absence of evidence that an order for security would stifle the case. The court also rejected the argument that the litigation’s public importance justified refusing security, finding that the interests pursued were wholly commercial and that the case could not resolve potential failures by the Financial Regulator or the wider regulatory system.
The appeal was allowed. The High Court is to decide the amount and mode of security; the Court of Appeal did not specify either.