McAteer & Anor v Guram & Anor

Factual and Procedural Background

The plaintiffs and defendants entered into an agreement whereby the plaintiffs sold licensed premises known as the Roebuck Inn to the defendants for £500,000. The defendants agreed to lease the premises back to the plaintiffs for five years at an annual rent of £50,000, with the plaintiffs having an option to repurchase the premises for £500,000 within that period or being bound to repurchase on the fifth anniversary of completion. The conveyance and leaseback were executed on 16 November 2001, with payment and associated costs duly discharged by the plaintiffs.

On 26 February 2003, the plaintiffs issued a writ seeking rescission of the transaction, alleging they were induced to enter the contract by undue influence exerted by the defendants, specifically alleging negligence and breach of fiduciary duty by the first defendant. The trial judge found in favour of the plaintiffs, concluding that undue influence by the first defendant induced the plaintiffs into the agreement and that the defendant was not a truthful witness. The defendants appealed the judgment and order of Deputy Judge Smith QC, prompting the plaintiffs to apply for security for costs in relation to the appeal.

Legal Issues Presented

1. Whether the court should exercise its discretion to order security for costs under Order 59 Rule 10(5) in the context of an appeal.
2. Whether the impecuniosity of the appellants constitutes a special circumstance justifying an order for security for costs.
3. The extent to which the merits of the appeal affect the court's discretion to order security for costs.
4. Whether any de facto security exists for the respondents in the form of set-off against sums payable to effect rescission.
5. Whether the appellants' impecuniosity was caused or contributed to by the respondents, affecting the equity of ordering security for costs.

Arguments of the Parties

Plaintiffs' Arguments

• The plaintiffs contended that the court should order security for costs under Order 59 Rule 10(5) due to the impecuniosity of the first defendant, which is a recognized special circumstance.
• They argued that there was clear evidence from which it could be inferred that the first defendant would be unable to pay the plaintiffs' costs if unsuccessful on appeal.
• It was submitted that the defendant had not rebutted the allegation of inability to pay costs.
• The plaintiffs denied causing the defendant's impecuniosity.
• The plaintiffs contended that the defendant must show a reasonable prospect of success to avoid security for costs, which was not demonstrated given the strength of the trial judge’s findings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Farrar v Lacey Hartland & Co [1885] 28 Ch Div 482	Establishing inability to pay costs by inference.	Supported the proposition that impecuniosity can be inferred from evidence, justifying security for costs.
Foecke v University of Bristol (30 July 1996, unreported)	Requirement that grounds for appeal must be real and substantial to avoid security for costs.	Applied to assess whether the appellant had a reasonable prospect of success in the appeal.
Humberclyde Finance v McFarland [1997] BNIL 105	Impecuniosity as a special circumstance for ordering security for costs.	Referenced to confirm the court’s power to order security where appellant is unable to pay costs if unsuccessful.
Re SOS (NI) Limited [2002] NIJB 252	Security for costs ordered where appellant unable to pay costs due to impecuniosity.	Emphasized the court’s discretion and wider jurisdiction at the appeal stage regarding security for costs.
E G Hall v Snowden, Howard & Co [1899] 1 QB 593	Practice of ordering security for costs where appellant is unable through poverty to pay costs.	Supported the longstanding practice underpinning the court’s jurisdiction in such matters.
Fallon v An Bord Pleanala [1992] 2 IR 380	Guidance on limiting security for costs to approximately one-third of estimated costs.	Influenced the court’s assessment of the appropriate amount of security to be ordered.

Court's Reasoning and Analysis

The court recognized that impecuniosity of the appellant may constitute a special circumstance warranting security for costs under Order 59 Rule 10(5). It noted that the appellant carries a heavy burden to overturn the trial judge's findings of fact, particularly where the judge had the advantage of assessing witness credibility firsthand. The court observed that the appeal lacked strong prospects of success, which weighed in favour of ordering security for costs.

The evidence indicated that the defendants would likely be unable to satisfy a costs order if unsuccessful, given their financial circumstances and history of liabilities. The court considered whether the plaintiffs had a de facto security by way of set-off against sums payable for rescission but found this to be uncertain and insufficient to negate the need for security.

The court also examined whether the defendants’ impecuniosity was caused or contributed to by the plaintiffs, which might make ordering security inequitable. It was not persuaded that the plaintiffs' actions caused the defendants' financial difficulties, which were found to be multifactorial.

In assessing the appropriate amount, the court referred to Irish authority suggesting security should rarely exceed one-third of the estimated costs and applied this principle, arriving at a figure of £15,000 as reasonable security for costs.

Accordingly, the court exercised its discretion to order security for costs, stayed the appeal pending provision of security, and set a 28-day deadline for compliance, with dismissal of the appeal in default.

Holding and Implications

The court ORDERED security for costs in the sum of £15,000 to be provided by the appellants within 28 days. The appeal was stayed pending compliance, with dismissal of the appeal with costs if security was not furnished.

The direct effect of this decision is that the appellants must provide security for the respondents' costs before the appeal may proceed. No new legal precedent was established; rather, the court applied established principles concerning security for costs and the exercise of discretion at the appellate stage.