Insolvent insurer Quinn Insurance Limited (QIL) has been dealt a blow after the Irish Supreme Court ruled in favour of PricewaterhouseCoopers (PwC) in a dispute over security for agreed legal costs worth €30 million.
QIL – which contends that PwC was in breach of contract and negligent in the manner in which the accounting giant gave “unqualified assurances” in relation to financial statements and regulatory returns in respect of financial years 2005 to 2008 – has a pending case against PwC, for which the latter had sought security for costs.
PwC’s application for security was first denied by the High Court. It was then elevated to the Court of Appeal, which ordered QIL to provide security, before the under-administration insurer went to the Supreme Court.
At the Court of Appeal, it was previously ruled that, given that the agreed estimate of the likely costs stood at €30 million, it would be “unduly onerous” to expect PwC to bear the risk of having to meet costs of that magnitude.
Now, in the 61-page Supreme Court ruling seen by Insurance Business, the Chief Justice stated: “For the reasons set out in this judgement I have, therefore, concluded that the Court of Appeal was correct to hold that QIL should be required to put up security for costs. In reaching that conclusion I have set out in some detail my views as to the proper approach to an application for security for costs in a case such as this.
“In particular I have reiterated the views which I expressed in Connaughton Road concerning the proper approach to be adopted in a case where it is said that security should not be ordered because there is a prima facie basis for suggesting that the impecuniosity of the relevant plaintiff is due to the wrongdoing alleged.”
According to Mr Justice Frank Clarke, he is not satisfied that QIL has met the Connaughton Road test.
The Chief Justice added that it should also be considered whether it is likely that the proceedings will be stifled, and that the result of that consideration must be taken into account in assessing which course of action runs the least risk of injustice.
“I have indicated the reasons why I do not consider that it has been established that there is any likelihood that the proceedings will be stifled,” he said. “I have, therefore, proposed that the ‘impecuniosity due to alleged wrongdoing’ basis for establishing a special circumstance should be rejected.”
Meanwhile it’s the High Court that will decide how much security should be provided. As for the pending case, a hearing date is yet to be set.
