Security for costs applications involve a plaintiff being required to put up security for costs as a condition of being allowed proceed with the litigation. The objective is to give some protection to the defendant in the event they succeed in obtaining a costs order in their favour at trial. This type of security is generally only available against individuals who are resident in a jurisdiction where enforcing costs orders is not straightforward.[1]
The essential test[2] to be met when seeking security for costs against an individual plaintiff is to show that:
- The plaintiff is resident outside the jurisdiction, or outside of another EU or Lugano Convention State - namely Norway, Iceland and Switzerland as well as the EU Member States, and
- The defendant has a defence on the merits.
If the defendant meets those requirements, the burden then shifts to the plaintiff. To avoid an order for security for costs, the plaintiff must then show that there are circumstances which justify refusing the order.
Background
We previously addressed a High Court decision for security for costs against Michael Flatley, the well-known entertainer/entrepreneur. That arose out of high-profile litigation concerning alleged defects in remediation works at his mansion at Castlehyde. The High Court found that Mr Flatley was a personal plaintiff ordinarily resident in Monaco, and therefore not in the EU or a Lugano Convention State. He had also not satisfied the Court that he had sufficient assets in the jurisdiction against which any adverse costs orders obtained might be enforced. The High Court also ruled on a number of special circumstances which Mr Flatley relied on to avoid being required to provide security. Ultimately, the Court found that none of those circumstances had been made out and security for costs was ordered.
Mr Flatley appealed on three grounds, none of which challenged the finding that he was ordinarily resident in Monaco. The High Court had quantified the security to be paid in the amount of €1.1 million. This was also appealed on the basis that the quantum of security ordered was more than one third of the anticipated potential costs exposure which was the usual extent of security ordered against individual plaintiffs.[3]
The appeal
The appeal[4] concerning the obligation to give security for costs was focused on three grounds.
- Delay: Mr Flatley contended that the High Court was wrong to find that delay was not a special circumstance warranting refusal of the relief. Although there was a delay in bringing the security for costs motion, there had been engagement between the parties regarding the available assets within the jurisdiction. While the High Court had found that the delay had been sufficiently explained, the Court of Appeal ruled that there was simply no delay as the defendants had explained and justified why they did not move sooner. The Court of Appeal found that Mr Flatley had been on notice from the outset that the defendants would apply for security if he did not provide satisfactory evidence of his assets. It also found that the defendants had issued their motions as soon as reasonably possible after the grounds first became known.
- Assets within the jurisdiction: Mr Flatley had relied on claimed assets within the jurisdiction arising from his Lord of the Dance show, his Flatley Whiskey business and equity in his mansion at Castlehyde. He therefore asserted that the High Court was wrong to consider them insufficient. The Court relied on affidavit evidence on the Lord of the Dance show which tied it so closely to Mr Flatley that its value was located wherever he was. Since he had been found to be ordinarily resident in Monaco, any value in the show was outside the jurisdiction. Both the High Court and Court of Appeal were not satisfied that the evidence regarding Flatley Whiskey demonstrated assets within the jurisdiction. Certain key information concerning valuation, trading, profitability or dividends was not provided, while product and production details were scant. Filings for the relevant corporate entities also failed to show formal ownership by Mr Flatley. Finally, the High Court had also found that Mr Flatley’s net equity in Castlehyde would not be enough to meet an adverse costs order. Valuations of the property varied and were disputed, and the debt secured on it appeared to be increasing. Ultimately, since the High Court judge had carefully considered the evidence and gave detailed reasons for the conclusion reached, the Court of Appeal determined there was no error.
- Access to the courts: The third ground relied on by Mr Flatley was that the High Court had erred in not properly considering whether the order for security for costs would stifle his access to the courts. The High Court judge had indicated that she was alive to the risk that security for costs could stifle a claim, but she ultimately found it was not a factor in the circumstances. As a result, the Court of Appeal concluded that Mr Flatley’s contention that the High Court judge had ‘clearly dismissed’ his rights in that regard was “not only demonstrably incorrect but unfair”. The question of stifling Mr Flately’s claim did not arise because of Mr Flatley’s own evidence that he was a man of means who was in a position to discharge any costs order made.
Finally, concerning the appeal of the quantum of the security to be put up by Mr Flatley, he argued that it should have been fixed at precisely one third of the estimated costs. This he said was because the so-called ‘one-third rule’ applied in a case where a plaintiff such as he was able to pay the costs. The High Court had proceeded from estimated costs of €2.86 million to award security in the amount of €1.1 million which Mr Flatley said, on a strict one-third division, should have yielded a figure of some €900,000. The High Court accepted that the figure ordered was more than one third. However, the judge noted that, when added to the evidence of Mr Flatley’s available assets, it came to slightly less than the total estimated costs. In the High Court’s view, this struck a balance between Mr Flatley’s ability to pay the full costs or the security, and the overall level of assets available. The Court of Appeal considered that the departure from the one third starting point was not significant. In any event, the case law was clear that one third was never a ‘rule’ and was, at most, a practice. The figure ordered was also still about one third. In addition, even if the High Court had departed from the one third starting point, it was with the objective of balancing the positions of both sides, which the Court of Appeal considered was:
abundant justification for the departure.”
Comment
The decision is important for several reasons. It left the core test for security for costs against an individual plaintiff unchanged. The essential test remains that the plaintiff must be resident outside an EU / EFTA State, and the defendant must be able to show a defence on the merits. Once those are established, the onus is on the plaintiff to show special circumstances which justify not granting the relief.
Although the special circumstances are not closed, the decision shows that appeal courts will be slow to overrule the exercise of discretion by the initial court. It also demonstrates that where the initial ruling explains findings made by reference to the facts, succeeding on appeal will be challenging. Finally, on the amount of security a plaintiff must provide, the decision confirms that the one-third ‘rule’ is not hard and fast. Some flexibility may be justifiable, especially where the court adequately explains its departure from that practice. It also appears that, so long as the security awarded is in the region of, even if not precisely, one-third of the estimated costs, the amount of the security for costs awarded is unlikely to be revisited.
For more information and expert advice, contact a member of our Commercial Disputes team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
[1] Security for costs may be ordered as against a company – see Section 52, Companies Act 2014.
[2] As summarised in Tahboub v The Joint Arab-Irish Chamber of Commerce CLG [2024] IEHC 616
[3] Based on the practice recognised in the decision of Thalle v Soares [1957] IR 182
[4] Flatley v Austin Newport Group Ltd & Others [2026] IECA 192, per Allen J.
