The Potential for Security for Costs Against Individual Plaintiffs
Overview
The case of Brian McDonagh and Maurice McDonagh v Fane Investments Limited, Quanta Capital Investments Limited, Mel Sutcliffe and Ulster Bank Ireland DAC, which saw judgment being delivered on 25 April 2024, provided the most recent judgment in an ongoing series of cases involving Brian and Maurice McDonagh.The McDonaghs are indebted to Ulster Bank Ireland DAC in the sum of approximately €19 million and have been involved in almost a decade of litigation in respect of this debt.
Commentary of Mr Justice Twomey
The provision of a mechanism for access to justice has long been both recognised and protected in the Irish legal system. However, in his recent judgment, Mr Justice Twomey explores how this right affects the bona fide defendant.
As Twomey J points out, much emphasis is often placed on the rights of a plaintiff in both having access to the courts and on the right to damages where appropriate, without the same attention being afforded to defendants in protecting their access to justice and property rights.
This, in particular, can raise issues in circumstances where plaintiffs are unsuccessful in their actions and have insufficient resources to discharge a defendant’s legal costs. In such situations, a plaintiff has nothing to lose – they can bring repeated frivolous and unmeritorious claims on a whim and without real adverse consequence. The defendant is however not as fortunate. In the words of Twomey J, the case at hand “raises the question of whether the property rights of defendants are adequately protected by permitting plaintiffs with unmeritorious/misguided claims, to inflict significant and irrecoverable financial loss at will, often on multiple occasions, on any third party they choose to sue.”.
A defendant has no choice in respect of litigation - they find themselves in a situation where they are faced with proceedings, in some cases vengeful proceedings, that must be defended. To successfully defend these proceedings, they must engage the services of legal professionals and face the significant costs associated with these. At best, if successful, they can hope for an order for costs in their favour, but this too comes with its own set of problems.
No Consequences for Private Individual Plaintiffs
Twomey J draws attention to the fact that in circumstances where these unmeritorious claims are brought by companies, there are mechanisms through which a defendant is entitled to seek security for their costs from any such plaintiff company in advance of them proceeding with their claim. Twomey J explains how this provides a more level-playing field, and results in a defendant being less likely to still face a financial loss in circumstances of a legal win. Incidentally, in previous proceedings brought by a company fronting for Brian McDonagh, it was required to lodge €250,000 by way of security for costs which the defendant ultimately recovered.
In contrast, with proceedings initiated by a private individual this mechanism for obtaining security for costs is unavailable. This creates a situation whereby a successful defendant, while potentially given the benefit of a costs order, may be left with legal costs and expenses and no prospect of recovery from the unsuccessful and insufficiently resourced plaintiff.
The Need to Disincentivise
Twomey J in his judgment refers to the case of W.L. Construction Limited v Chawke [2019] IESC 74. In his judgment, O’Malley J stated that there is a “need to prevent persons litigating on a consequence-free basis”.
Mr Justice Twomey suggests that a small amount of money as security for costs would create a situation whereby a plaintiff is not litigating on this ‘consequence-free’ basis, especially in circumstances where it would appear that this obstacle has acted as a deterrent against companies taking these frivolous claims.
Conclusion
The commentary of Mr Justice Twomey in his judgment clearly draws attention to an area which has not received extensive reform or development in recent times. Clearly, as he demonstrates, there is a startling difference in respect of the protection of the access to justice for plaintiffs as against those protections afforded to defendants, and perhaps his suggestion of a limited form of security for costs as against individual plaintiffs could be a future development to level the playing field.
For further information please contact Jerry Burke (Partner) or your usual AMOSS contact.
