The Supreme Court has dismissed Quinn Insurance Limited’s appeal against an order requiring it to provide security for PricewaterhouseCoopers’ costs in its negligence and breach of contract proceedings against the audit firm.
In a judgment delivered on 22 March 2021, Chief Justice Frank Clarke said the Court of Appeal was correct to order security, although the Supreme Court reached that result for somewhat different reasons. The appeal concerned security for costs only. The underlying claims about PwC’s audits and Quinn Insurance’s collapse were not decided.
The parties accepted that PwC had a bona fide defence and that Quinn Insurance would be unable to pay PwC’s costs if it lost. Quinn Insurance argued that two special circumstances justified refusing security: that its inability to pay arose from PwC’s alleged wrongdoing, and that the proceedings raised issues of public interest.
Quinn Insurance claimed PwC failed to identify alleged understatements in technical provisions and concerns about guarantees in its audits for 2005 to 2008. It said timely reporting could have led the company or the regulator to act and could have prevented its insolvency. Those remain allegations in the underlying case.
The Supreme Court found the evidence insufficient to establish, even on a prima facie basis, that the alleged wrongdoing explained Quinn Insurance’s inability to meet a costs order. The company’s pleaded losses were estimated at up to €900 million, while its shortfall owed to the Insurance Compensation Fund was stated to be €1.1 billion. The court said Quinn Insurance had not adequately explained how other sums it relied on, including payments under guarantees and gifts to related companies, could be counted in the counterfactual financial position when those sums were not claimed as damages and the supporting evidence was limited. The court described the explanations as “very much at the speculative end of the spectrum.”
The judgment also said a court considering security may examine whether an order is likely to stifle proceedings and weigh that risk when assessing the least risk of injustice. Here, the court was not satisfied that the proceedings would be stifled. It noted that funding had been available for Quinn Insurance’s own legal costs to date and that the High Court President could, if considered appropriate, authorise funding for security. The judgment did not find that such funding would necessarily be provided.
On public interest, the court did not decide whether the threshold had been met. It held that Quinn Insurance had not shown the proceedings were likely to be stifled, so any public interest in the case going ahead would not be defeated by a security order.
The Court of Appeal’s order was affirmed. The Supreme Court did not set the amount or form of security; it observed that security could potentially be ordered in stages, linked to case milestones such as discovery.