High Court 

Inter Finance Group Limited v KPMG Peat Marwick trading as KPMG Management Consulting

1996/10585 P

29 June 1998 

MORRIS P: 

This matter comes before the Court as a Motion brought by thedefendants pursuant to Order 29 of the Rules of the Superior Courts seeking an order directing the plaintiff herein to furnish security of the costs of these proceedings together with ancillary reliefs. 

In so far as is relevant to this application the core facts of the case may be summarised as follows:- 

In 1993 the plaintiff conceived an idea of developing a software package that would assist large organisations to run their accounts departments to integrate the functions of the issuing of invoices and statements the management of credit control and debt collection. The plaintiff intended to sell on the said accounting system to customers or the rights therein to third parties and obtained the services of the defendants to act as computer consultants to develop the package. 

The contract between the parties was entered into between August 1993 and January 1994 and under the contract the defendants agreed to design a software package to the plaintiffs specifications. 

It is the plaintiffs case that there was an obligation on the defendants to observe confidentiality in relation to the development of the software package and do all things necessary to test the package so as to enable the plaintiff fully to exploit the software package and accountancy scheme as it saw fit. 

The plaintiff claims that the defendant in breach of the contract purported to sell and install the software system in a number of other sites, held itself out as owning the software system and failed to take the necessary steps to put the plaintiff in a position to exploit the software package. The plaintiff claims as a result he has suffered loss and damage. 

It may well be that the plaintiff company will find it necessary to join a second company as a co-plaintiff in the action however this fact is not material to the present application because it is accepted by both the existing plaintiff and the contemplated additional plaintiff that neither of them is in a position to discharge a Bill of Costs if the defendants succeeded in the action and was awarded costs against it or them. 

While not expressly stated in the Notice of Motion the application is brought pursuant to section 309 of the Companies Acts 1963 to 1990 (the plaintiff makes no point that this section is not specifically referred to in the Notice of Motion). 

The relevant part of the section provides; 

"Where a limited company is plaintiff in an action or other legal proceedings, any judge having jurisdiction of 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 security is given". 

No issues arises on the capacity of the plaintiff or the possible co-plaintiff to pay the costs of the defendant if successful. It's inability to pay is accepted by the plaintiff 

The authorities upon which an application of this nature is to be determined are SEE Company Limited v Public Lighting Services Limited [1987] ILRM 255 and Jack O'Toole Limited and Eoin Kelly Associates and Others' [1986] IR 277. 

From these authorities it emerges that to succeed there is an onus on the moving party the defendant to establish (a) that he has a prima facie defence to the plaintiffs claim and (b) that the defendant will not be able to pay the defendant's costs if successful in his defence. 

On establishing these two I facts then the order sought should be made unless it can be shown that there are specific circumstances in the case which would cause the court to exercise it's discretion not to make the order sought. Such special circumstances might be; 

(I) that the plaintiffs inability to discharge the defendants costs of successfully defending the action flow from the wrong allegedly committed by the parties seeking the security or 

(II) there has been delay by the moving party in seeking the relief now claimed 

(III) some other circumstance which might arise in the case. 

Applying the foregoing tests it falls first to consider whether the defendant has shown that he has a prima facie defence to the plaintiffs claim. 

The area of dispute in this case lies in the ownership of the copyright in the software programme. The plaintiff claims that it was part of the contract, into which it entered with the defendants, that the plaintiff company should be beneficially entitled to the programme. The defendant claims that since the contract between the parties is silent that it, as the author of the programme, is beneficially entitled to it. Reliance is placed on Statutory Instrument of 1993 entitled European Communities (Legal Protection of Computer Programmes) Regulations 1993. Regulation 3 provides; 

(1) Subject to paragraph (2) of these Regulations Copyright shall subsist in a computer programme and the Copyright Acts 1963 and 1987 shall apply to every original computer programme as if it were a literary work and the legal protection so afforded shall apply to the expression in any form of a computer programme. 

(2) Without prejudice to the generality of paragraph (1) of this Regulation, a computer programme shall be protected if it is original in the sense of being the author's own intellectual creation". 

It is the defendant's case that since it was the author of the programme it is beneficially entitled to the copyright in the programme. 

While it is clear that in the correspondence which led up to the contract between the parties a variety of different arrangements were proposed such as a "sole user licence" of the programme or a "joint enterprise", the actual contract which is entered into between the parties is silent as to any such arrangement and accordingly I am satisfied, for the purposes of determining this application, that the beneficial ownership in the programme was not affected by any term of any contract entered into between the parties. It remains therefore to decide, at the hearing of this action, in whom the beneficial ownership is vested. Both Mr Foley on behalf of the plaintiff and Mr Sloan on behalf of the defendant claim beneficial ownership. Each has supported their claim with a variety of arguments and submissions. 

In determining the issue, for the purposes of this motion, I am satisfied that the defendants have established a prima facie defence to the plaintiff's claim. I consider that it is undesirable to elaborate upon the nature of this defence as to do so might well prejudice the ultimate hearing. Accordingly I am of the view that the defendants have overcome the second of the two necessary proofs in order to succeed in this motion. 

Their remains then to consider whether the plaintiff has shown that its inability to discharge the defendants costs flow from the wrong alleged having been committed by the defendant. 

In this regard it is well settled that the plaintiff must do more than merely state this to be the fact. It must support this assertion with details. Mr John Foley, the plaintiffs Managing Director, in his affidavit claims this to be the case but calls in aid the fact that the plaintiffs "Investment in the project for the development of the software programme (which amounted to a sum of £90,000 to £100,000) rendered it unable to continue trading on the success of that venture. In support of this statement he exhibits draft accounts for the ten month period ending on the 30 of June, 1994. No where in these accounts is the transaction referred to by Mr Foley reflected. Accordingly far from supporting the allegation that it was the conduct of the defendants which rendered the plaintiff unable to meet the costs, in my view these accounts tend to discredit Mr Foley's statement. 

I accept that there is vested in the court an overall discretion in special circumstances not to make an order for security for costs, not withstanding that all of the circumstances exist which would normally cause the court to make such an order. It has been urged on me that two such special circumstances exist in this case. 

The first is that it is alleged that there is a lack of frankness and bona fides on the part of the plaintiffs in that they refuse to disclose transactions which they had with a gentlemen who was formerly a member of the plaintiff company Mr Ronan Bairead and the second is that it is submitted that since a variety of proposals were made to the plaintiffs by the defendants prior to the contract which incorporated a joint venture or an agency arrangement, that on the balance of probabilities such a term did in fact exist in the transaction even if not reflected in the written agreement. 

I have considered these submissions and I have reread the papers in the light of the allegation that there is a lack of frankness on the part of the defendants. I do not agree that this is the case. I am prepared to accept that whatever transactions may have taken place between the defendants and Mr Bairead are confidential and not material to the issues between the parties at the very least in so far as this application is concerned. I have considerable doubt as to whether even if it were the case that there was a lack of such frankness that this would amount to justification for refusing the order now sought. 

With regard to the second point I am unable to see any basis upon which the court should, simply on the. basis that an offer existed to trade in a certain way that the court should conclude that this offer remained an option and part of the contract eventually concluded between the parties. 

Accordingly I am satisfied that no special conditions arise in this case such as should cause me to decline to make the order sought. 

Accordingly I make the order sought and I direct that the matter be sent forward to the Master for the purpose of fixing the amount of the security.