The Court of Appeal allowed an appeal by CMC Medical Operations Limited (In Liquidation), trading as Cork Medical Centre, and refused an application by the Voluntary Health Insurance Board for security for costs under section 390 of the Companies Act 1963.
In a judgment delivered on 27 March 2015, Mr Justice Gerard Hogan said he agreed with the reasons Mahon J. was about to set out. Hogan added separate comments on how the statutory power should be applied, focusing on companies’ access to the courts and the risk that security requirements could prevent a genuine claim from proceeding.
He said security for costs serves a legitimate purpose by protecting defendants from the risk that a limited company might not pay their costs. But the power must also be exercised consistently with constitutional principles, including access to justice. In Hogan J.’s view, the power should not be used where requiring security would be oppressive or would stifle a genuine claim.
Hogan J. also questioned whether the approach suggested in Connaughton Road Construction Ltd. v. Laing O’Rourke Ireland should be revisited. That approach concerned an impecunious company that had no significant net assets before the alleged wrongdoing and whether it could show it would otherwise have had enough assets to meet the defendant’s costs. Hogan J. said applying that test could require such a company to show likely damages exceeding both its deficit and the estimated costs, even where it had a good cause of action. He raised this as a concern for consideration in light of the constitutional issues; the source does not say that the court formally overruled or replaced the test.
The court’s operative decision was to allow the appeal and refuse the Board’s security-for-costs application. Hogan J. stated that this result followed from his comments and the reasons Mahon J. would give. The supplied judgment excerpt does not include Mahon J.’s reasons or explain the underlying dispute between the parties.