The Court of Appeal has dismissed an appeal by Demeray Limited, a company in receivership, and upheld an order requiring it to provide €112,334 as security for the costs of solicitors defending its negligence action. The court found no basis to interfere with the amount set by the High Court.
Demeray alleges that the solicitors failed to ensure binding contracts for four apartments at its Aubrey Court development in Bray. It says purchasers withdrew as property prices fell and that the units were later sold at much lower prices. The company claimed an approximate loss of €1.69 million. The solicitors deny that Demeray suffered recoverable loss, arguing that any loss was incurred by the bank and that the company would have remained insolvent even if the sales had completed.
The High Court ordered Demeray to provide security under section 52 of the Companies Act 2014. The sum represented two-thirds of the solicitors’ estimated defence costs of €168,500. Demeray argued on appeal that the solicitors’ alleged wrongdoing had caused its inability to pay costs and that their delay in seeking security was prejudicial.
In a judgment delivered on 25 January 2022, Ms Justice Máire Whelan said the Court of Appeal could consider whether alleged wrongdoing outside the pleaded claim had caused a company’s inability to pay. However, that argument carried a significant evidential burden. The court concluded that the company’s affidavits offered little more than unsupported assertions that the solicitors’ conduct had caused the bank to appoint a receiver and the company to fail. It found no cogent independent evidence that the company would have survived or that the bank would have acted differently if the apartment sales had proceeded.
The court also rejected the argument that the pleaded loss from the four sales explained Demeray’s inability to meet a costs order. Even if the company recovered the full amount it claimed, the award would not have been enough to change its financial position, the judgment said. The court noted that no claim for the wider loss of the company’s business was pleaded.
The appeal on delay also failed. The court considered the roughly seven months between the respondents’ reliance on the company accounts and their security motion, alongside delays on both sides of the proceedings. It agreed that any costs incurred during the period could be addressed at the end of the case. The court found the High Court’s two-thirds figure reasonable and proportionate.
The Court of Appeal dismissed the appeal and upheld the security order. It did not decide whether the solicitors were negligent or whether Demeray is entitled to damages; those issues remain for the underlying proceedings. On appeal costs, the judge’s preliminary view was that costs should go to the solicitors, with execution stayed until the underlying proceedings conclude. The parties were given 21 days to submit alternative proposals, followed by a further 21 days for a response.