Supreme Court ruling highlights need for prompt security for costs applications

The court set aside an order requiring security for costs in a long-running case between those behind a proposed private hospital and the insurance company VHI after finding an unexplained eight year delay in the bringing of the application seeking security for costs was ‘truly extraordinary’.

Ms. Justice Donnelly warned in her ruling that such delays were against the public interest, tying up court resources for a substantial period of time, writing: “Having cases linger unnecessarily in court lists takes up time in the hearing of what might have been unnecessary applications if security for costs applications were made earlier. Such late applications delay the ultimate resolution of the proceedings on the merits.”

Lisa Carty, a commercial litigation expert with Pinsent Masons in Dublin, said the decision reflects an increased judicial focus on the efficient use of court resources and discouraging a culture of delay.

“The court made clear that where delay is “very significant”, the balance may shift in favour of refusing an application seeking security for costs even in the absence of proven prejudice,” she explained.

“The Court held that in cases of exceptional delay, it may refuse the application unless there is a “pressing exigency of justice”. In such cases, prejudice may be inferred from the length of the delay, and in cases of especially significant delay, the delay itself may be sufficient to shift the balance against granting the security for costs application, without the need to establish prejudice.

“The judgment also places this approach within a broader public interest framework, as the court emphasised that tolerating lengthy delays risks signalling judicial indifference to litigation inefficiency and undermining the proper administration of justice.”

The case came about after Shay Sweeney and The Limerick Private Limited planned to establish a private hospital in Limerick, entering into negotiations with the VHI Board to have the hospital approved for insurance purposes.

However, after negotiations broke down, they commenced proceedings in May 2015 claiming, amongst other things, breaches of competition law by VHI. The VHI did not issue a motion for security for costs until 28 June 2023 – nearly eight years after first seeking the voluntary provision of security for costs.

After the Court of Appeal had upheld a High Court order granting security for costs, the appellant appealed to the Supreme Court, arguing the eight-year delay had represented a sufficient ‘special circumstance’ to defeat the application, which the Supreme Court upheld.

The Supreme Court found that it must strike a balance between ensuring access to justice and avoiding a substantive assessment of the case at an interlocutory stage. It held that delay could be treated as a special circumstance as parties are entitled to have all relevant information before deciding whether to continue proceedings and incur further costs, and adverse costs risks.

Aisling Doran, a legal expert with Pinsent Masons in Dublin, said the decision highlighted the need for parties to ensure they treat security for costs applications seriously and efficiently.

“From a practical perspective, the judgment sends a clear message: applications for security for costs must be brought promptly,” she said.

“Significant or unexplained delay carries a real risk of defeating the application even where the underlying merits would otherwise favour the granting of an order for security for costs.”

Doran explained that the ruling should ensure that future parties are more mindful of using court time and resources efficiently when bringing applications – as delays may result in avoidable expenses, and motions for security for costs being refused.

“Delays exceeding one year are likely to be regarded as significant and, if unexplained, may prove fatal to the application,” she added.

“Any delay should be explained in the grounding affidavit accompanying the security for costs application. A failure to explain delay is likely to weigh against the granting of security for costs.”