US bankers Warburg Pincus and some associated companies lost a Supreme Court appeal yesterday on costs issues in a case relating to a "disastrous" joint venture between Irish Press plc and Mr Ralph Ingersoll. They lost their appeal against the High Court's refusal to make an order for security for costs against Irish Press plc in an action which the Irish company is taking against them.
Irish Press plc has brought a claim against Warburg Pincus for damages for alleged negligent advice, misrepresentation and breach of fiduciary duty as a result of which, it claims, it entered a joint venture with Mr Ingersoll and companies controlled by him.
The venture turned out to be "disastrous" for Irish Press plc, it is claimed. Irish Press alleges that when Warburg advised the Irish Press that the Ingersoll companies were financially sound and thriving, they were in fact in serious financial difficulties and losing millions of dollars a year.
Irish Press plc also alleges its losses were established as being more than £6 million in High Court proceedings against the Ingersoll companies and others under Section 205 of the Companies Act. The High Court award of that sum was set aside by the Supreme Court on the basis that damages were not a remedy available in proceedings under Section 205.
Giving the Supreme Court judgment yesterday, Mr Justice Lynch said it was clear Irish Press plc had a statable case in the proceedings. It was also clear from affidavits filed on behalf of Warburg that it had a statable defence. Mr Justice Lynch said the financial position of Irish Press plc for the year to March 31st, 1996, the latest accounts available to the High Court, was borderline so far as ability to pay Warburg's costs if it was successful was concerned.
Since the High Court hearing, however, accounts to March 1997 and March 1998 had become available. It seemed sensible to re view the position in light of those and draft accounts for the year to March 31st last. There had been revaluations and/or realisations of the financial assets in recent years.
Draft accounts to March last for the group of companies of which Irish Press plc was the parent showed total assets less current liabilities of £2,556,000. If one deducted from that figure long-term creditors whose claims fell due after more than one year in the sum of £350,000, one was still left with total assets after deductions of all liabilities, current and long term, of £2,206,000.
Mr Justice Lynch said this figure may seem more than adequate to enable Irish Press plc to pay Warburg's costs if the US company was successful in its defence.
Nevertheless, the submission by Warburg that there was a constant loss to Irish Press plc and drain on its assets because it was incurring expenses and not trading to generate profits was valid. It behoved the directors to "trim their sails" so long as Irish Press plc and its subsidiaries were not trading to achieve a situation that normal outgoings and expenses fell within the total of interest and dividends receivable, the judge said.
Even then, Irish Press plc's own costs of the current litigation would be a drain on its resources, especially if Warburg should ultimately succeed in its defence. However, £253,000 was recovered by Irish Press plc in 1997 in res pect of a £688,000 debt due by Irish Press Newspapers Ltd which was in liquidation and which debt had been written off. A further and final payment of £200,000 would be made in the near future.
Mr Justice Lynch said it followed that Irish Press plc would certainly be able to pay the costs of Warburg if they were awarded now or within the next year or so. This would not always remain the position if, for example, the case dragged on for another three or four years with a continuing drain on Irish Press plc's resources. The court upheld the High Court order.