The High Court has ordered C.M.C. Medical Operations Limited, which is in liquidation, to provide security for the Voluntary Health Insurance Board’s costs in a competition action. The court was not satisfied, at this interlocutory stage, that the company had shown a prima facie causal connection between VHI’s alleged refusal to approve its Cork hospital and the losses that led to its closure.
The order followed VHI’s application under section 390 of the Companies Act 1963. VHI also sought a stay, financial and project information, and disclosure of those funding the litigation. The court dealt first with security for costs and deferred consideration of the other requested relief until after that issue was resolved.
The company’s action alleges that VHI, as a dominant undertaking, infringed the Competition Act 2002 and Article 102 TFEU by refusing to approve the hospital for treatment of VHI members. It claims that the refusal caused losses and insolvency. For the security application, the company accepted that VHI could establish a prima facie defence and that the company could not pay an adverse costs award. It relied on the alleged wrongdoing as a special circumstance for refusing security.
Justice Cooke said the evidence did not establish, on a prima facie basis, that VHI’s alleged conduct caused the company’s inability to meet costs. The liquidator’s evidence was limited, the judgment said, and the company had not provided direct evidence from the project’s directors or another person closely involved in its dealings with VHI, nor detailed financial information about its funding and working capital.
The hospital opened in October 2010 and ceased operating before the company was wound up in May 2011. The court noted that VHI had warned well before opening that it doubted the need for additional hospital capacity in Cork. A February 2011 letter from a promoter said the project was losing more than €500,000 a month and that banks and investors would not commit further funds until VHI approval was obtained. The judge said the evidence also raised questions about the promoters’ expectations for approval, patient numbers, consultant participation and the funding available to sustain the hospital.
The court did not decide the underlying competition claim or determine whether VHI had abused a dominant position. It said those issues remained for trial. It ordered security for costs and invited further submissions on the basis of the order, including whether security should be provided before or after directions intended to limit the issues and cost of the litigation.