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Company Case Law - Section 390 Companies Act 1963 – Security for costs by company 

Published: August, 2005

Submission: January, 2006

 



Hidden Ireland Heritage Holidays Ltd. (t/a The Hidden Ireland Association) v Indigo Services Ltd. and Colclough and Gardner, Supreme Court, 7th June 2005 Facts: The plaintiff’s business consisted of booking country homes for its members. The second defendant, Colcough, acted as secretary to the plaintiff from 1986 to 1996. The plaintiff’s principal claim was that the second defendant diverted business to his own competing business with the assistance of the first defendant, Indigo Services. The third defendant, Gardner, was the wife of the second defendant. Business was diverted by setting up an automatic e-mail forwarding process, i.e. the plaintiff’s incoming electronic bookings were forwarded on to the second named defendant’s own e-mail address. The second and third defendants sought security for costs under Section 390 of the Companies Act, 1963. Section 390 states that where a limited company is the plaintiff in any action, the judge may, if it appears that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs. The High Court granted the order. Issue: The issues before the Supreme Court were whether the applicant (the defendants) had established there was reason to believe that the plaintiff would not be in a position to meet the costs of the action if unsuccessful, whether the applicant had shown a prima facie defence and, assuming both these criteria were met, whether there were special circumstances which would persuade the court to refuse the order. Held: The Supreme Court held the following: 1. Section 390 orders are discretionary at the instance of the Court; 2. an applicant for an order must show a prima facie defence; 3. a court may refuse to make an order under s. 390, even where a prima facie defence and the insolvency of the plaintiff are shown, if there are special circumstances justifying that exercise of judicial discretion. The Court relied on Peppard and Company Ltd. v Bogoff [1962] IR 180 as authority for this position; 4. any delay in applying for security may be a ground for refusing security; 5. the delay in this case, amounting to approximately one year, was a material matter. The defendants had allowed and even encouraged the action to proceed; and 6. the defendants delayed to such an extent and otherwise behaved, in the conduct of the litigation, so as to deprive themselves of a Section 390 order. The Supreme Court allowed the appeal and dismissed the application for costs.

 



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