The Supreme Court has upheld orders requiring Lismore Homes Ltd to provide £200,000 security for the costs of Bank of Ireland Finance Ltd and another £200,000 for Deloitte Haskins & Sells in long-running litigation arising from a housing development at Weston Park, Newcastle, Co Dublin.
Lismore Homes owned the development lands, while related company Lismore Builders Ltd undertook construction of 422 houses. Bank of Ireland Finance provided funding secured over both companies. A receiver was appointed in September 1989 and subsequently sold the companies' main assets.
Lismore Homes and Lismore Builders later sued the bank and several professional advisers, alleging negligence and breach of contract.
It was accepted that Lismore Homes would be unable to pay the defendants' costs if its case failed. The dispute before the Supreme Court concerned how much security an insolvent company must provide under section 390 of the Companies Act 1963.
Mr Justice Francis D Murphy rejected Lismore Homes' argument that the court had a broad discretion to set a lower amount by balancing all the circumstances, including the company's financial position. He held that once security was ordered, the statutory words “sufficient security” required a reasonable estimate of the costs the successful defendant would actually be likely to recover.
The court expressly declined to follow a line of English Court of Appeal decisions which had treated the equivalent provision as allowing wider discretion over the amount.
In the High Court, Mr Justice McCracken had estimated that each defendant's costs would not tax at less than £400,000, taking account of the likely length and complexity of the trial. He ordered security of £200,000 for each defendant, apparently reflecting the fact that related proceedings by Lismore Builders would be heard alongside the Lismore Homes action.
The Supreme Court found that estimate realistic. It dismissed Lismore Homes' appeal against the amount and also dismissed the defendants' cross-appeals seeking higher security.