A firm set up to fund production of a film about the murdered journalist, Veronica Guerin, was ordered by the High Court yesterday to provide security for the legal costs of four companies it is suing.
Johnstown Ltd, an Isle of Man shelf firm, was set up with a loan exceeding £2.3 million from businessman Mr Dermot Desmond, to back the film When the Sky Falls.
In a reserved judgment, Mr Justice McCracken said the scheme provided that private investors would invest their money in Thiennez Ltd, set up as the film production company, but that Johnstown would lodge an equivalent amount of money with Anglo Irish Corporation (Isle of Man) plc.
The scheme also provided that, when a certificate of completion and delivery was produced from the film's distributor, Icon Entertainment International, or, in certain circumstances, from Film Finances Inc (which furnished a completion guarantee for the film), the bank would release the money to Thiennez.
Under the scheme, Johnstown would then be reimbursed with income from the film. Johnstown had also insured itself against receipts falling below a certain figure.
Mr Justice McCracken said two certificates of completion and delivery were furnished but the insurance firm claimed it had no liability as they were issued out of time and were not in the correct form. Johnstown had issued proceedings in the UK against the insurers claiming the certificates were valid.
In the Irish proceedings, it had taken a contrary position, and was opposing the payment out of £2.3 million to Thiennez and others, claiming the issuing of the certificates was void and that the defendants are in breach of contract.
Last September, the High Court restrained Thiennez and its agents - ISH Sales and Distribution Ltd, Tallaght, Dublin - from disposing or dealing with the money pending the hearing of the action brought by Johnstown.
It also ordered the payment of the film's proceeds into an agreed bank account. No order was made against Icon Entertainment or Film Finances, which are also being sued by Johnstown.
The judge said Johnstown gave an undertaking as to damages in those proceedings and counsel for Mr Desmond had undertaken that any money payable on foot of the undertaking would take priority over repayment by Johnstown to Mr Desmond.
Mr Justice McCracken said the four companies being sued by Johnstown all challenged Johnstown's ability to pay their legal costs if it lost its action.
While the matter of costs was at hearing before him, quite incredibly, Johnstown had acknowledged it would be unable to meet the costs, the judge said. Johnstown had also disclosed it had recently charged its assets in favour of Mr Desmond to secure its debt to him. This had the effect, should costs be awarded in favour of the four companies, they would not even rank as equals with Mr Desmond.
Mr Justice McCracken said he had no way of knowing the validity of this purported charge as it would be a matter for Isle of Man law. It was clear, he added, that Johnstown would be unable to meet any award of costs made against it should it prove unsuccessful.
He said Johnstown had failed to show any special circumstances as to why he should refuse to make an order for security for costs.
The judge ordered that Johnstown provide security for costs. But he put a stay on those orders in the event of an appeal.
