Irish Court of Appeal

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 8th day of June 2016

1. This is an appeal brought by the plaintiff companies against the decision of the High Court (Birmingham J.) directing that they provide security for costs in favour of the defendants pursuant to s. 390 of the Companies Act 1963 (“the 1963 Act”): see Paulson Investments Ltd. v. Jons Civil Engineering Ltd. [2012] IEHC 541. As it happens, the security for costs rules in respect of companies have subsequently been altered by the new s. 52 of the Companies Act 2014 which came into force on 1st June 2015. It is, however, agreed that as this litigation and, indeed, the judgment under appeal ante-dates the coming into force of this provision, the applicable law for the purposes of this appeal remains that contained in s. 390 of the 1963 Act.

2. Section 390 of the 1963 Act provides:

“Where a limited company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter, may, if it appears by credible testimony 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 and may stay all proceedings until the security is given.”

4. The present litigation arises from developments which took place at a site in Dyer Street, Drogheda, Co. Louth as far back as 2000. The plaintiffs are related companies involved in property development. Both companies form part of what is known as the Mirella Group and each is a wholly owned subsidiary of Mirella Investment Ltd. Mr. Willie Smyth is a director and is the principal shareholder of both plaintiff companies and also of Mirella Investments Ltd.

5. The first named plaintiff, Paulson Investments Limited (“Paulson”) is the owner of a site at Dyer Street, Drogheda, which is bounded to the south by the River Boyne. In 2000, it was decided that the site would be developed and that the development would take place through the second named plaintiff, Albert Enterprises Limited (“AEL”). It was intended that the development would consist of a three storey basement, with six floors above ground, offering office, retail, commercial and residential elements. The first named defendant, Jons Engineering Ltd. (“Jons”), carried on a civil engineering business, while the second named defendant, P.J. Edwards & Company Limited (“Edwards”), is a specialist piling contractor.

6. At some stage in 2000 Mr. Willie Smyth entered into discussions with a view to entering into a fixed price contract with Jons to construct the three storey basement element of the development. Somewhat unusually, however, at no point was a written contract actually entered into by the plaintiffs or, indeed, by Mr. Willie Smyth with the first defendant, Jons. It is agreed that the plaintiffs and Edwards had no contract with each other.

7. There is, in fact, some dispute about whether at particular stages, Jons was dealing with the plaintiff companies or whether it was dealing with Mr. Willie Smyth personally. Indeed, at one point Jons issued summary proceedings in 2001 against Mr. Smyth claiming the payment of invoices in the sum of €600,000 arising out of this dispute. It is only fair to record that the defence of Mr. Smyth was to the effect that the contract was with the plaintiff companies. As will presently be seen, one of the defences advanced by Jons is to the effect that its contract was with Mr. Smyth personally and not with the plaintiff companies.

8. Jons was engaged as the main contractor to excavate the basement. It was also to design and construct the temporary and permanent works required for the three basement floors. Jons engaged the services of AGL Consultancy to prepare this design. Jons were also responsible for monitoring these works.

9. The plaintiffs retained consulting engineers, Hendrick Ryan and Associates (“Hendrick Ryan”), to advise in relation to the construction of the development. Hendrick Ryan issued drawings, specifications and instructions for the construction of the basement and the piling and ground works associated with this. In preparing its specifications Hendrick Ryan contemplated the use of what is known as secant piles in constructing the basement retaining wall. (Secant piles are a series of interlocking piles forming a structure around the building site below ground level.)

10. This procedure is described as involving bored and case in situ piles which would be constructed using rotary bored piling techniques and, if necessary, would use support fluids to support collapsing or unstable boring ground. In essence, the Hendrick Ryan specifications contemplated the use of conventional or traditional methods involving as it did large diameter bored cast in place piles, using temporary casing and a support fluid to maintain the stability of the bore if necessary.

11. The tender documentation was furnished to Edwards, which responded and ultimately took on the task of piling. It is, however, a matter of some controversy as to who actually engaged Edwards to carry out the pile driving. The plaintiffs contend that Edwards was engaged by the Jons to carry out the piling works. This is disputed by Jons who maintain that the appointment of Edwards was made by the plaintiffs and/or by Mr. Smith personally.

12. As it happens, Edwards had previously worked on a site in close proximity to the Dyer Street site. On that occasion they had not used the traditional secant pile method of piling but, rather, an alternative method of constructing a secant piled wall which has the capacity to be quicker and more economical known as “continuous flight augering” (“CFA”). (The secant piled wall itself can be used either as a retaining wall or as a temporary support structure during construction work).

13. In broad terms, CFA piling is a replacement piling technique where the boring operation removes matter and replaces it with concrete. The concrete is injected under pressure through the hollow stem of the auger. Once the pumping of the concrete has commenced, the auger is then progressively withdrawn, bringing with it extracted soils from the bore up to the surface. After the auger is removed, reinforcement is then inserted. The advantage of CFA is that it can be used to construct a continuous bore without ever leaving an open hole.

14. By tender dated 5th July, 2000, which was accompanied by a letter dated the 17th July, 2000, Edwards tendered for the piling aspect of the contract at a price of €1,082,700 plus VAT. This tender was premised on the use of the CFA piling method. Edwards qualified its tender in the following manner:-

“We have based our tender on being able to use CFA bored piles which has never been a problem in Drogheda where we have worked literally less than 50 metres from the site. However, we do note the very long chiselling times recorded below 11 metres which would cast some doubt on the use of CFA methods. It would be prudent, therefore, to qualify our tender which would be subject to test boring, which we would carry out at our own expense.”

16. Jons entered upon the site in September 2000, in apparent anticipation of the execution of a written contract incorporating the terms and conditions of the Institute of Engineers of Ireland (“IEI”) standard contract. In passing it might be observed that the parties are agreed - at least for the purposes of this motion - that the relationship between the plaintiffs and Jons is indeed governed by the IEI standard contract.

17. In February 2001 Edwards entered on site and commenced piling work without, however, having carried out the test boring to which they had referred in their letter of 17th July 2000. A new rig (a Llamada P90TT) was used in the first instance. It would seem that the on-board computerised instrumentation on the Llamada rig was not functioning properly, at least not initially.

18. Two piles were bored on the first day, but problems quickly emerged as during the concreting process, concrete from the first borehole “slumped” into the adjoining one. Further secant and loadbearing piles were installed and bored and these initial problems were addressed at a meeting between Jons, (and its consultants, AGL Consultancy), and Edwards on 9th February 2001. (Neither Henricks Ryan nor the plaintiffs were present at this meeting.)

19. Shortly after the commencement of piling operations, the ground in the vicinity of the piling became unstable. This resulted in ground movement or settlement which exceeded the stipulated maxima. On the 10th/11th February 2001 Edwards replaced the Llamada rig with a Casagrande CFA 26 rig. Considerable problems nonetheless persisted and the piling records showed multiple cases of auger rotation with minimal penetration as well as auger withdrawal using forward rotation without back screwing. There were, it would seem, up to thirty open boreholes. It does not appear to be in doubt that these practices are highly undesirable: the plaintiffs’ expert, Mr. Wasilewski, described the conduct of Edwards as “folly”. He further stated that in his opinion the latter’s “incorrect choice of pile type and defective workmanship had caused the [ground] movement.” It is only fair to observe that there is, nevertheless, considerable debate among the various experts as to whether these difficulties were caused or exacerbated by unsuitable ground conditions.

20. On the 2nd March, 2001, Hendrick Ryan instructed that piling should cease. Edwards maintained that the piling difficulties which had been encountered were due to unforeseen ground conditions which were not suitable for the CFA piling techniques. The experts retained by Edwards were very critical of the soil evaluations that had been carried out prior to its involvement. Following discussions, there followed attempts at site improvements involving, in particular, engaging in a process known as “grouting” in an effort to stiffen the ground. However, these efforts to keep settlement within the specified parameters ultimately failed. Hendrick Ryan were not prepared to relax the parameters or tolerances and work was then suspended in September 2001 at which stage the defendants were requested to leave the site.

21. The plaintiffs ultimately proceeded with a modified development consisting of a seven storey over ground structure, thus omitting the basement which had been proposed.

22. The present proceedings were commenced by the plaintiffs in November 2005. The claim against Jons involves allegations of breach of contract and also involves claims in tort, whereas the claim against Edwards is brought entirely in tort. The plaintiffs claim sums of approximately €2m. for wasted professional fees. There is, additionally, a claim for approximately €22m. in respect of the reduced capital value of what was actually constructed as compared with what had been originally intended.

23. For the purposes of the application for security for costs the parties reached agreement on a number of factual matters. First, the defence costs of trial can be estimated at €784,983 plus VAT in the case of Jons and €769,000.73 plus VAT in the case of Edwards calculated on the basis of a twenty day hearing. These sums amount in total to €1,553,983.73 plus VAT. Second, the aggregate value of the plaintiffs by reference to the accounts filed by them for year ending the 31st March, 2010, amounts to €830,579, while the accounts for year ended the 31st March, 2011, show aggregate net asset values of €158,859.

24. It is, accordingly, not in dispute that the plaintiffs will be unable to pay the costs of either defendant if both defendants are successful in their defence. The principal issues, therefore, both in the High Court and, on appeal, in this Court are whether:-

(i) the defendants could establish a prima facie defence

and

(ii) whether there are other special circumstances which would justify the Court in not making any such order for security for costs.

The judgment in the High Court
26. In a characteristically thorough and careful judgment Birmingham J. concluded (albeit with some hesitation, it would appear) that the defendants had each established a prima facie defence under the various headings I am about separately to consider. He also concluded that the defendants were justified in delaying making their application for security for costs in view of the fact that the financial position of the plaintiffs had deteriorated in the period after 2009. He accordingly concluded that it was appropriate to make the requisite order for security for costs.

Has Jons established a prima facie defence?
27. Turning first to the question of whether a prima facie defence case has been established by Jons, the recent case-law shows that the mere assertion of such a defence is not enough (Tribune Newspapers v. Associated Newspapers (Ire.) Ltd., High Court, 25th March 2011). A defendant wishing to advance a prima facie defence must also go further than demonstrating that such a defence is simply arguable (Pagnell Ltd. v. OCE (Ire.) Ltd. [2015] IECA 25). Such a defendant must also show that there is an evidential basis for the suggested prima facie defence (see, e.g., Tribune Newspapers and Pagnell).

28. As Charleton J. stated in Oltech (Systems) Ltd. v. Olivetti UK Ltd. [2012] IEHC 512, this means that the defendant has a “reasonably sustainable defence”. This did not mean:

“…a barely arguable defence, since experience demonstrates that there is little that cannot be argued. It has to be demonstrated, rather, that if there is a legal defence that it is potentially sustainable on a practical view of the law or, if the defence is one of fact, that if what the defendant alleges in answer to the plaintiff is proven in court that it will defeat the plaintiff’s claim.”

30. It would have to be acknowledged, however, that in complex litigation of the kind presented by this case, the prima facie defence requirement gives rise to some difficulties. While this Court has stressed that the courts must avoid, where possible, delving “unduly deeply into complex matters which constitute the subject matter of the litigation” (see CMC Medical Operations Ltd. v. Voluntary Health Insurance Board [2015] IECA 69, per Mahon J.), there are times when, in order to ascertain whether there is such a defence, this seems unavoidable.

31. Where, as here, nearly all of the issues are highly - even unusually - complex, both in terms of law and fact, the prima facie test becomes extremely difficult to apply, at least without a detailed evaluation of the claim and the defence of the kind that the courts have traditionally avoided in interlocutory applications of this kind. The defendants can certainly advance arguable defences in respect of every single point. If, however, the higher standard of “reasonably sustainable defence” suggested in Oltech is to be applied, then on the particular facts of this case it would in truth be necessary to have a detailed analysis of these substantive points in the manner almost suggestive of a mini-trial in order to do justice to the parties.

32. In this vein, Jons has advanced four potential defences. First, it is suggested that the contract was with Mr. Smyth personally and not with the plaintiff companies. Second, that it bore no responsibility for Edwards under the IEI contract. Third, and related to the second, that Edwards was in the nature of a nominated contractor and it relies on the Supreme Court’s decision in Norta Wallpapers v. John Sisk & Sons [1978] I.R. 114 for this purpose. Fourth, it is said that any damage was caused by the unforeseen nature of the ground soil or its unsuitability for CFA piling. These arguments may now be considered in turn.

The Smyth contract point
33. In the High Court, Birmingham J. considered that Jons had established a prima facie defence on this point:

“So far as the defences raised by the first named defendant are concerned, perhaps the most straightforward is the contention that any contract it had was with Mr. Willie Smyth personally and not with either of the companies named as plaintiffs. Ordinarily, one has to say, a defence based on a contention that a plaintiff has sued the wrong party or in this instance that the wrong parties are plaintiffs is one that would be greeted with scepticism or a lack of enthusiasm. It is most frequently encountered when an individual defendant says that he is not responsible for a debt but that responsibility rests with a limited company. However, there are some factors present that might suggest that on this occasion, the point may have some substance. It is a matter of interest, if no more than that, that the first shot in this litigation was fired by the first named defendant issuing proceedings by way of summary summons for an amount of approximately €600,000 in 2001 against Mr. William Smyth. These proceedings were issued at a time when the Mirella Group was a strong one and when there was no doubts about any of the companies within it, so there would have been no particular tactical advantage in pursuing Mr. Smyth personally. Now, it is the case that Mr. Smyth’s response to the proceedings was to say, inter alia, that the proper defendants in those proceedings were Paulson and AEL and that the response of the plaintiff in those proceedings was to join those companies. Nevertheless, the fact that the first instincts of the plaintiffs in those proceedings was that they had been dealing with Mr. Smyth is of interest. Counsel for the plaintiff is dismissive of the suggested defence and points to the fact that invoices were issued to AEL. However, in turn, counsel for the defendants’ points to the summary summons proceedings and the contention there, that after work had been carried out that the plaintiffs in those proceedings were asked to issue invoices to a particular company and complied with the request that was made of them. It seems to me that the point raised, while manifestly by no means guaranteed to succeed, cannot be dismissed.”

35. It must also be noted that in a replying affidavit filed in those 2001 proceedings Mr. Smyth immediately denied he was the proper defendant. If, however, an inference is nonetheless to be drawn from the fact that Jons issued proceedings against Mr. Smith on this basis - even though Mr. Smyth subsequently denied that he was the appropriate defendant - it would amount in the circumstances to a breach of the rule against narrative or, as the rule is sometimes described, the rule against self-corroboration: see McGrath, Evidence (2nd ed.) at 139.

36. Subject to certain defined exceptions, the rule against narrative prevents witnesses referring to earlier consistent statements in order to re-inforce their own credibility. In this context, the claim made by Jons in the 2001 proceedings amounts to an earlier statement that it believed that Mr. Smyth was the contracting party. In these circumstances, Jons cannot point to its earlier consistent statement with a view to bolstering its present claim that the Mr. Smyth was the appropriate defendant.

37. I think, however, that Jons can place more weight on the letter of October 2011 from McCann FitzGerald, the solicitors for the plaintiffs, which accepted the termination of the agreement between the parties. It may well be significant that this letter refers to the client as Mr. Smyth, especially as there was no written contract in the first place. The statement in this letter must, however, be viewed against the fact:

(i) that the second plaintiff, Albert Enterprises Ltd., discharged the invoices

and

(ii) there was no unequivocal plea in the defence denying that the plaintiffs were the proper plaintiffs.

39. I do not think that, for the reasons just stated, the fact that Jons elected to sue Mr. Smyth (rather than the plaintiffs) is sufficient in itself to demonstrate the existence of a reasonably sustainable defence. I do think, however, the reference to Mr. Smyth as the client in the October 2011 correspondence is sufficient to establish a prima facie defence for this purpose, even if there are also powerful arguments - such as the fact that Albert Enterprises discharged the invoices - which point in the opposite direction.

40. Given the finely balanced nature of the competing arguments, I propose to return to this issue at a later stage in this judgment.

Whether Jons is responsible for the conduct of Edwards under the IEI contract
41. Clause 8(1) of the IEI contract provides that the contractor is responsible for the “methods of construction”, even it is not for design and specifications. On this basis, therefore, Jons would in principle be liable for the faulty workmanship of Edwards.

42. There is considerable evidence from the records and the report prepared by Mr. Wasilewski (on behalf of the plaintiffs) that, as I have already described, inappropriate auger withdrawals occurred. It would also appear that there were auger withdrawals on a number of occasions without back screwing. It is further accepted that this practice is inherently dangerous and so much is not really disputed by Mr. Turner, the expert retained by Jons.

43. While it is most assuredly not my wish to pronounce on the substantive merits of this complex dispute in the context of an interlocutory application of this kind save to the extent that I am perforce obliged to do so, I find it nonetheless difficult to accept that there is a prima facie defence to the claim of defective workmanship. On that basis, therefore, Jons might well be exposed to liability by virtue of Clause 8(2) of the IEI contract, even if difficult question of causation remain.

The Norta Wallpapers defence
44. So far as any defective workmanship on the part of Edwards is concerned, Jons has indicated that it proposes to rely on what might be termed the Norta Wallpapers defence.

45. In that case the Supreme Court accepted that normally a term would be implied in a building contract as between between a builder and employer making the builder liable to the employer for loss and damage suffered as a result of goods, materials or work supplied or constructed by a subcontractor not being fit for purpose. The Court nevertheless held that such a term would not be implied in that case in relation to the fitness of the design of particular roof lights in a situation where, as Henchy J. put it ([1978] I.R. 114, 125-126), Sisks (the defendant builders) were put “…in the position of being little more than ordering agents for a roof that had already been vetted and passed by Norta’s engineer.”

46. For my part, I doubt that the Norta Wallpapers defence is available to Jons having regard to the facts of this case. Norta Wallpapers was a case where the defects related to the designs in the roof lights which had been prepared by specialist sub-contractors nominated by Norta and actually approved by the employer’s engineer. There was no evidence by which it might be inferred that Norta relied on Sisks to detect any flaw in the design of the roof lights. But even here Henchy J. suggested that the general contractor remains responsible to the employer for the poor workmanship of the specialist sub-contractor: see [1978] I.R. 114, 126.

47. One may accept that Jons probably knew nothing about CFA methods and were simply passive onlookers so far as the choice of specialist piling techniques employed by Edwards were concerned. But Jons nonetheless accepted the contract knowing that there would be a specialist contractor using such methods. In contrast to the position in Norta Wallpapers, there is no evidence to suggest that either the plaintiffs or its engineer, Hendricks Ryan, had ever actively approved the use of the CFA piling technique. This, after all, had been first suggested by Edwards in their cover letter of 17th July 2000 when they had qualified their tender by saying that they proposed to use CFA bored piles, subject only to test boring.

48. In any event, it is clear from Norta Wallpapers that the builder remains responsible to the employer for the poor workmanship of the sub-contractor. As I think that there is clear evidence of such poor workmanship on the part of Edwards (a topic dealt with elsewhere in this judgment), I do not think that it can be said that Jons has established a prima facie defence qua builder under this heading.

The unanticipated grounds defence
49. Jons maintains that it was not guilty of negligence or breach of contract, contending that it carried out the relevant works in accordance with the specifications of Hendricks Ryan (the plaintiffs’ engineer). It argues that in accordance with Clause 8(1) of the IEI contract, Hendricks Ryan were responsible for the design and specification of any such permanent works. There is, indeed, an issue as to whether the works at issue - namely, the secant pile wall - were intended to be permanent within the meaning of that clause and whether they would have remained part of the permanent structures.

50. Jons further contends that some of the piles on the secant pile wall were intended to be load-bearing (and, hence, permanent structures), whereas the support structure utilised following the construction of the secant wall were simply the temporary works. Jons then maintains that the defendants encountered ground conditions which were not reasonably foreseeable. These unfavourable ground conditions produced an unexpected degree of settlement and neither the plaintiffs nor Hendricks Ryan instructed it as to how the physical conditions of the site were to be dealt with such that the piling could be carried on with the meaning of Clause 12(1) of the IEI contract.

51. It thus summarises its case by saying that these adverse physical conditions rendered it physically impossible (within the meaning of Clause 13 of the IEI contract) for Jons to carry the works in accordance with the specifications of the plaintiffs’ engineers and that in accordance with Clause 13 it stands discharged of any liability: the settlement and the consequent damage were caused by the unforeseen grounds conditions.

52. In this respect it should be noted that the plaintiffs have placed great significance on one aspect of the report of Mr. Luby of SLR Global Environment Solutions (“SLR”). Mr. Luby concluded that the ground conditions on site were not unforeseen and the plaintiffs contend that that conclusion has not been contradicted. Accordingly, the plaintiffs say that the entire substructure of the defendants’ defence falls away in its entirety. In his report, Mr. Luby stated:

“The construction of the bored pile foundations for the existing mixed use scheme in late 2002 and early 2003 did not encounter or reveal any unexpected characteristics of the natural ground. The ground conditions encountered during the piling contract were similar to those described in the original ground Investigation reports. The weight of available evidence therefore indicates that there is no basis for any contractual claims in relation to unforeseen ground conditions at this site.”

54. In this respect the question of the ground conditions actually encountered by Edwards and how that compared with what had been expected having regard to site investigations carried out on behalf of the plaintiffs before the involvement of either of the defendants remains central. The defendants’ case is that the initial specifications stipulated by Hendrick Ryan, and the relaxed tolerances to which they were prepared to agree, could not have been achieved having regard to the prevailing ground conditions which they actually encountered.

55. It might further be noted that the reports prepared by Jons’ expert, Mr. Turner, are critical of the site investigations carried out between September and November 2009 by Site Investigations Ltd. (“SIL”). These investigations were carried out by SIL on the instructions of Hendrick Ryan. Mr. Turner concluded that it was likely that the alluvial sandy soil found on the site was denser and more compact than the site investigations reports prepared by SIL suggested. Mr. Turner pointed out that site investigations on a nearby site at Laurence Street, Drogheda, recorded the presence of what he describes as dense conditions. If this were correct, then it would follow that such denser conditions would require more effort to drill than had been anticipated.

56. This is another example of a hugely complex issue in respect of which Jons can establish a reasonably sustainable defence. But the matter is finely balanced, because it could equally be said that the plaintiffs have by the same token established a reasonably sustainable cause of action. After all, the plaintiffs can argue with some force that if Jons wanted to advance this unforeseen ground conditions defence, there would have to be evidence of a notice under clause 12(1) of the IEI contract passing the responsibility on to the plaintiffs’ nominated engineer, namely, Hendricks Ryan.

57. As Birmingham J. recognised:

“Insofar as there is disagreement between the experts, this is a matter that requires to be explored through oral evidence and cross-examination. It is not a matter that can be resolved by identifying selected extracts from reports.”

The position of Edwards
59. As I mentioned already, there is a good deal of evidence of poor workmanship on the part of Edwards. By its own admission it did not conduct the test boring which it had previously suggested might be necessary. It would also appear that the computerised on-board instrumentation on the Llamada rig was either not functioning or was not used properly on the first day of boring on 6th February 2001. No report sheets were kept in respect of the “slumping” of one of the secant piles. Within a few days of commencing boring Edwards notified Jons, Hendricks Ryan and the plaintiff companies on 12th February 2001 of the existence of an open borehole. It now appears that there were apparently in total over 30 such open boreholes.

60. In these circumstances, it would be hard to accept that Edwards has established a prima facie case that it was not negligent. Independently of that question, however, it has argued that if it was negligent, any losses suffered by the plaintiffs amounted to pure economic loss in that there was no damage to person or property. It contends, however, that it owed no duty of care to avoid pure economic loss based on decisions such as that of the English Court of Appeal in Robinson v. PE Jones (Contractors) Ltd. [2011] EWCA Civ 9, [2011] 3 WLR 815. There are also questions of causation.

61. It is long been settled law that a builder owes a duty of care by reference to the law of negligence to protect the owner (and other persons who either acquire the property or who use it) from suffering personal injury or damage to other property. The extent to which (if at all) the builder owes a wider duty is a more complex issue. Specifically, does the builder owe a duty of care to avoid building defects which do not cause either personal injury or damage to other property?

62. There is no doubt but that the Supreme Court has previously decided that there are cases where such liability in tort might be imposed: see, e.g., Siney v. Dublin Corporation [1980] I.R. 400 and Ward v. McMaster [1988] IESC 3, [1988] I.R. 337. These decisions were clearly influenced by earlier parallel developments in the UK in leading cases such as Anns v. Merton L.B.C. [1978] AC 728 and Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 AC 520.

63. There then began in the UK a long retreat from the decisions in Anns and Junior Books, beginning with the House of Lords decision in Murphy v. Brentwood District Council [1991] 1 AC 398 to the point where these earlier decisions permitting recovery in negligence for pure economic loss in a building context are now regarded, in the words of Stanley Burnton L.J. in Robinson, as “aberrant” and “heretical”. In the course of that retreat, the English judges have stressed the distinct and different nature of contractual obligations (which are consensually assumed) as compared with those obligations which are imposed by the law of tort (i.e., independently of contract or consent). On that basis, as both Jackson L.J. and Stanley Burnton L.J. stressed in their respective judgments in Robinson, the English courts now take the view that while these obligations overlap, there is a difference as to the extent of the obligations in both tort and contract.

64. It was precisely for those reasons that the English Court of Appeal concluded in Robinson that a homeowner could not recover in tort against the builder in respect of defective chimney flues as these defects had caused neither damage to person or to other property.

65. As matters stand in this jurisdiction it is not clear whether a property owner can recover for pure economic loss of this kind, the decisions in Siney and Ward v. McMaster notwithstanding. This was the very issue which the Supreme Court left open in Glencar Exploration plc v. Mayo County Council [2002] IESC 64, [2002] 1 IR 112, although it must be said that in his judgment, Keane C.J. (with whom the other members of the Court agreed) appeared to doubt the correctness of the expansive approach which had been taken in cases such as Siney and Ward.

66. The extent to which the duty of care imposed by the law of tort imposes a duty on builders to avoid pure economic loss is, as least so far as the law in this jurisdiction is concerned, a difficult one. As Birmingham J. himself recognised, it would not be appropriate to resolve this issue in the context of assessing whether a particular defendant has established a prima facie case. There is, in any event, the question of whether the “slumping” of one of the concrete piles amounts to damage to other property within the meaning of the test articulated in cases such as Robinson and, if so, whether this was causative of the losses suffered by the plaintiffs.

67. In my view, I am not persuaded on the evidence presently available to the court that, for the reasons already set out elsewhere in this judgment, Edwards have established a prima facie defence so far as the question of workmanship is concerned. I do think, however, that the legal issues arising under this heading (namely, the extent of the duty of care and whether there was, in any event, damage to other property and associated questions of causation) are open and finely-balanced.

Overall conclusions
68. I accept that a good deal of the case-law to date has approached the question of whether security for costs should be ordered has been approached almost on a binary basis (namely, whether the defendant has established a prima facie defence or otherwise). Given the special features of the present litigation, however, I do not think the interests of justice would be best served by adopting this approach in the context of complex multi-party litigation such as this which presents intricate issues of fact and law where in respect of many (albeit not all) of these issues the plaintiffs and defendants alike have presented what at least on a superficial analysis appear to be prima facie claims and defences to those claims.

69. Pulling all of these different threads together, it can be said that in some instances the disparate issues arising in this appeal are so complex (both in terms of fact and, in some instances, law) that it would really be well nigh impossible to assess fairly whether there was in truth a prima facie defence without the kind of detailed examination and analysis of the merits of these defences against which the courts have traditionally set their face in applications of this kind: see, e.g., the comments of Mahon J. in CMC Medical (already referred to) and those of Clarke J. in Parolen Ltd. v. Doherty, High Court, 12th March 2010.

70. In addition, however, there have also been important issues resolved adversely to the defendants. Contrary to the views expressed (albeit with apparent hesitation) by Birmingham J. in the High Court, I think, for example, that the undisputed weight of evidence is such that there is really no prima facie defence to the claim of poor workmanship on the part of Edwards, even if it does not follow from that conclusion that the plaintiffs’ claim in negligence against that defendant will necessarily succeed in view of the issues of recovery and pure economic loss and causation which will also arise. For the reasons already stated, I do not think that Jons can accordingly raise the Norta Wallpapers defence qua builder.

71. The Court is also entitled to have regard to the fact that the plaintiffs have already lodged the sum of €500,000 to the credit of the action. While this sum is less than the estimated costs of the defendants, it is nonetheless a significant sum which will help to provide some comfort to the defendants.

72. In my view, it is the very complex nature of the litigation which makes an assessment of whether there is in fact a prima facie defence so difficult without a detailed, merits-analysis of each claim of the kind normally avoided in applications of this kind is itself a special circumstance for the purposes of s. 390 of the 1963 Act. Even then, in some instances, I have found myself obliged to conclude that no prima facie defence has been established, e.g., in relation to the poor workmanship in respect of the auger withdrawals on the part of Edwards with the consequent implications for Jons in respect of its Norta Wallpapers defence.

73. For this purpose, the categories of special circumstances are not closed: see the judgments of Denham and Geoghegan JJ. to this effect in West Donegal Land League v. Údarás na Gaeltachta [2006] IESC 26, [2007] 1 ILRM 1.

74. In my view, the unusual circumstances of this case in themselves constitute special circumstances. These features are:

(i) that the defendants have failed to establish a prima facie defence in respect of key defences (or aspects of such defences) advanced by them;

(ii) the unusual complexity of the legal and factual issues in the case which makes the ascertainment in an interlocutory application of whether there is in fact a prima facie defence in respect of the remaining defences very difficult and all but impossible;

(iii) the lodgement of a substantial sum (€500,000) by the plaintiffs (representing perhaps one third of the combined costs of the defendants).

76. In these circumstances, I would accordingly allow the appeal and I refuse to make an order for costs pursuant to s. 390 of the 1963 Act.