The High Court adjourned a former solicitor’s application for security for costs against Greenclean Waste Management Limited, giving the company, its legal advisers and its insurer up to three months to consider the litigation. The judge said the insurer would need to give a binding assurance that it would not withdraw cover under a clause tied to the prospects of the claim.
Mr Justice Hogan’s judgment, delivered on 19 February 2013, concerned a professional negligence action over advice given in connection with a lease of industrial premises in 2001 or 2002. Greenclean alleges that its former solicitors failed to advise it about its repair obligations, a relevant limitation period and a conflict of interest. These remain allegations; the judge said he could not assess their merits at this stage.
The landlord had brought a separate action in 2006 over alleged breach of the lease covenants. That case settled for €310,000, with a contribution of about €150,000 towards costs. Greenclean later brought the present claim against Maurice Leahy, practising as Maurice Leahy & Co. Solicitors. The company entered voluntary liquidation in December 2011 and was described by the court as hopelessly insolvent.
The defendant sought security for costs under section 390 of the Companies Act 1963. The dispute was whether Greenclean’s after-the-event insurance sufficiently reduced the risk that it could not pay the defendant’s costs if successful. The policy covered an opponent’s legal expenses in specified circumstances, but allowed the insurer to end cover if, after discussion with Greenclean’s solicitor, it considered that the company was more likely than not to lose.
Justice Hogan said the uncertainty around that clause made the risk difficult to assess. The court could not examine the privileged advice Greenclean’s lawyers might give about the claim’s prospects, which could inform the insurer’s decision. The judge distinguished the policy from ordinary insurance and did not treat it as reliable security on the material then before the court.
No final decision was made on the security application. The court adjourned it for no more than three months so the company, its advisers and insurer could take final advice on the claim. At the next stage, the insurer must provide the binding assurance. If it does, the judge said he would not order security. If it does not, he said he would conclude that there was reason to believe Greenclean would be unable to meet a costs award and would direct that security be ordered. The judgment therefore set out the conditions for a later decision; it did not itself order security.