THE HIGH COURT 
2001 No 1457OP
BETWEEN 
THE WEST DONEGAL LAND LEAGUE LIMITED
PLAINTIFF
AND
UDARAS NA GAELTACHTA, JOSEPH HAMILTON BOYD, DANIEL HARLEY AND TOGAIL DHUN NA NGALL TEORANTA AND AERPHORT IDIRNAISIUNTA DHUN NA NGALL TEORANTA
DEFENDANTS
JUDGMENT of Mr. Justice T.C. Smyth delivered the 26th November, 2003.
	The second named defendant appears on Folio 33573 as of 25th October, 1983 to be the full owner of certain lands, detailed therein in the County of Donegal.  The land purchase annuity appears to be outstanding, fishing rights are to the order of the Land Commission while the notice of equities is cancelled, there is a right to reside, be supported and maintained in a dwelling house – a right which was conferred on Thomas Alcorn and Mary Ann Alcorn.
	The plaintiff is a private limited company by guarantee which has registered as a charity, its members are stated to be graziers of the lands of which the second defendant is the registered owner.  The plaintiffs allege that the second defendant is not the real beneficial owner but holds the lands as trustee for the plaintiffs; this is disputed by the second defendant.  There exists a document referred to as a signed statement of the second defendant dated 5th November, 1999 (Exhibit “B” in Mr. Gillespie’s affidavit sworn 22nd July, 2003) and what is referred to in Exhibit “C” to the aforesaid affidavit as a “copy of contract” between the second and fourth defendant, in which special condition (7) provides as follows:-
	“The property, the subject matter of this sale, may be subject to grazing or other rights.  The Vendor is not aware of the legal position relating thereto.  The Vendor sells the property subject to any such rights which exist at law or in equity and the Purchaser is hereby deemed to have notice of same.”
	Insofar as the statement of the 5th November, 1999 is concerned, the second defendant’s solicitor by open letter dated 7th April, 2000, challenges the reliability of the statement on the basis that the second defendant did not at any time receive independent legal advice in relation to the contents of the document, and that the signature was procured rather than willingly given. 
	On the basis of the information given in Exhibit “E” of Mr. Gillespie’s affidavit - referred to, the Plaintiff had as of 31st December, 2002 current assets only (no fixed assets) of €25,768 and Equity Shareholders Funds of €25,515.  In a letter dated 10th December, 2002 (Exhibit “G” in Mr. Gillespie’s affidavit) the Charities Section of the Revenue Commissioners (inter alia) state to Mr. Gillespie as follows:- 
“I refer to your recent correspondence in connection with the forthcoming High Court proceedings relating to the ownership of lands by the above company and your request for permission to accumulate funds to cover the anticipated costs of these proceedings.
In view of the circumstances outlined, the proposed accumulation of funds for this purpose is acceptable to this Office.” [Emphasis supplied]
	While the ostensible purpose of the Plaintiff as stated in the Director’s Report is expressed thus – 
“The principal activity of the company is to preserve and improve the natural and cultural heritage of West Donegal.”
Its real purpose in making what is referred to as a “profit” is to set up a fighting fund for this litigation.
The second defendant by notice of motion dated 17th June, 2003 seeks security for costs against the plaintiff pursuant to the provisions of s. 390 of the Companies Act,  1963 which states:-
“390. - 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 evidence 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.”
In my judgment the section is as applicable to a company limited by guarantee as to a company of limited liability by shares.  Charitable status does not exempt a company from all compliance with company law.  There is no averment on the part of the plaintiff that it will be able to pay the costs of the second defendant if he is successful in his defence.  The assets of the plaintiff if put into the hands of its solicitor to prosecute and pursue the case and instruct counsel for the plaintiff, would in today’s terms, unless such services were freely given or charged at less than normal charges be wholly unlikely to be sufficient to meet the costs of the plaintiff on the case as disclosed on the papers.  I make no assessment as to the likely outcome of the case.  I have considered the arguments of counsel and the authorities referred to in the extracts in Civil Procedure by Delaney and McGrath and specifically the judgment of the Supreme Court in Irish Press plc -v- F.M. Warburg Pincus & Co (delivered by Lynch J. and dated 29th July, 1998).
Bearing in mind that:-
(a)	Under the section it should appear by credible testimony that there is reason to believe that the company would be unable to pay the costs of the defendant if successful in his defence; and 
(b)	It is the likely inability to pay the costs of a successful defendant which is the essential prerequisite for obtaining an order for security.
I am satisfied and find as a fact both (a) and (b) aforesaid and that the second defendant has a prima facia defence to the plaintiff’s claim and the plaintiff will not be able to pay the second defendant’s costs.  I am not at all convinced that the plaintiff’s inability to discharge the second defendant’s costs of successfully defending the action flow from any wrong allegedly committed by the party seeking the security.  In my judgment the plaintiff has not established “special circumstances” which would justify the refusal of the order.  In this case there is no averment or assertion of the fund accumulated is designed and intended for no other purpose than to meet a potential liability to the second defendant or any defendant, rather it is clear that it is a fighting fund which if exhausted or exceeded in application to the plaintiff’s own case will leave a successful defendant with a paper company with no assets of any kind.  There is no evidence that the plaintiff has suffered any impecuniosity as a result of any wrongful act of the second defendant – it simply does not exist.
While mindful of the remarks of Fitzgibbon J. in Perry -v- Stratham [1928] I.R. 580 that “security is not intended as an indemnity against all costs which may be incurred or as an encouragement to luxurious litigation”, the context of the present application cannot be ignored.  While the facts in Fallon -v- An Bord Pleanála [1992] 2 I.R. 380 are clearly distinguishable from those of the instant case, the thirty or so individuals whose interests are broadly similar are entitled to organise themselves under the aegis of a limited liability company.  They are not thereby entitled under such guise entitled to wage litigation essentially to protect their own private interests and leave the empty shell behind to a successful defendant.  The use or abuse of the devise of a company cannot be ignored by the law (see Lynch J. in Malahide Community Council Limited -v- Fingal County Council & Ors [1997] 3 I.R. 383 at p.399/400.  While making no such finding of abuse as such in this case on this motion, such may be a matter of inquiry on the hearing of the action.
As to the amount of security – I have no evidence of figures, the evidence of costs drawers for the respective parties could be put before the appropriate court to determine such sum.
In my judgment this is a matter which would be much more conveniently and much less costly to conduct in the Circuit Court in Donegal where the majority of the witnesses are resident and where it would appear that the defendants may very well have their offices or the personnel most likely to be involved in the case.  
(On the request of counsel no order has been drawn on foot of this judgment on the day of its delivery to enable instructions to be taken concerning the consent of the parties to have the matter remitted to the Circuit Court).