The Court of Appeal has dismissed an appeal by a solicitors’ firm and a named partner against a High Court decision refusing to order a company suing them for professional negligence to provide security for costs.
The appeal concerned the interlocutory application for security under section 52 of the Companies Act 2014. The company’s claim alleges that the solicitors failed to begin judicial review proceedings in time to secure a default planning permission for a proposed development in Kenmare, County Kerry. The defendants dispute liability. The negligence claim itself has not been decided.
The company had obtained planning permission in 1995 for 33 houses and a leisure centre, but did not develop the site before that permission lapsed. It applied again in February 2002. The judgment says the planning authority did not decide the application within the statutory period, which could have entitled the company to a default permission if the development did not materially contravene the Development Plan. The company alleges that the solicitors’ failure to seek an order of mandamus deprived it of that permission and caused substantial losses.
The defendants accepted that the company would be unable to pay their costs if it lost the negligence case. They argued, however, that its financial position was not caused by the alleged negligence, pointing to its lack of assets, its financial circumstances in 2002 and the fact that it had not proceeded with the earlier development.
The High Court refused security in September 2017. It found that the company had met the required threshold to show that its inability to pay could have resulted from the alleged wrongdoing, if negligence were ultimately established. The High Court also expressed concern about the defendants’ asserted position that the company had not instructed them to bring judicial review proceedings. That finding was not necessary to decide the appeal.
The Court of Appeal said the company had to provide more than an assertion on affidavit: it needed cogent and credible evidence supporting its account. It considered that a second affidavit from a company director, with details of the project’s financial history and supporting materials, met that prima facie threshold. The court stressed this was a lower standard than proof on the balance of probabilities.
The court therefore concluded that the defendants had not established an entitlement to security for costs and dismissed the appeal. It did not determine whether the solicitors were negligent, whether the company would ultimately prove its losses, or whether the defendants lacked good faith. The judgment said the latter question should await a case where it directly arises.