Master’s Court
Cases
Allied Irish Banks Plc v Honohan
[2015] IEHC 247
JUDGMENT of Ms. Justice Iseult O’Malley delivered the 17th day of April 2015
Introduction
1. The respondent to this application is the Master of the High Court. The case concerns the manner in which he dealt with a special summons issued by the applicant banks. The notice party is the defendant in those proceedings. She is a former solicitor, now bankrupt, but who was still in practice as a solicitor when the applicants initiated their action against her.
2. The proceedings sought enforcement of certain undertakings given by the notice party in her capacity as solicitor. As they were initiated by special summons, the matter came before the respondent in the first instance rather than being entered directly into the court list. It remained in the list over a period of months and was dealt with by the respondent on several separate occasions. On the 14th May, 2014, the respondent announced that he was going to refer the papers in the case to the Director of Public Prosecutions because of what he considered to be perjury in one or more of the affidavits sworn by bank officials.
3. The applicants sought leave to seek judicial review of this decision. They claimed that the respondent, firstly, had taken it upon himself to enquire into the merits of the case when his function was purely administrative; secondly, had decided to send the papers in the case to the Director of Public Prosecutions for investigation into what he pronounced, wrongly and irrationally, to be perjury on the part of a bank witness; and, thirdly, had refused to draw up an order either confirming that decision (so that it could be appealed) or reflecting his refusal to draw up such an order (which could also be appealed).
4. After leave to seek judicial review had been granted, the respondent requested the applicants to withdraw the special summons proceedings (which were still before him). After they had refused to do so he struck out the summons. The applicants then obtained leave to amend the judicial review application in order to seek additional reliefs relevant to that decision.
5. The applicants say that in dealing with the matter as he did the respondent acted without jurisdiction and in an irrational and biased fashion.
6. The respondent takes the position that in deciding to send the papers to the Director of Public Prosecutions he was acting as a private citizen and is in that context not amenable to judicial review. It is also pleaded that the public has a right to expect every public official to report suspected crime, and that the applicants are attempting to prevent him from reporting a serious crime.
7. The respondent
“invites the Judge hearing this Judicial Review application to dismiss the application and instead refer the Plaintiff banks’ Affidavits to the Director of Public Prosecutions.”
8. He says that there is “incontestable prima facie evidence of perjury” and argues on this basis that it is inevitable that the matter must be referred to the DPP. The case is, he says, therefore moot.
9. It is claimed that the special summons proceedings against the notice party are in fact an attempt by the applicants to gain unjust enrichment, and that they should be refused relief in the judicial review, on the basis of the maxim ex turpi causa non oritur actio, because they are seeking to avoid the consequences of perjury.
10. It is denied that there is any evidence of bias, and it is pleaded that the applicants waived any right to object at the relevant hearing. It is further pleaded that the respondent at all times afforded fair procedures to the applicants.
11. The locus standi of the applicants is challenged on two grounds. Firstly, it is said, in effect, that the banks have no right to take this application because they have no special interest in their employees’ “personal concerns”. Secondly, there is an express plea that the applicants should lose their standing because the allegation of bias is a malicious abuse of the court’s processes.
“The bank is seeking to engineer a general defamation of the Master, under cover of absolute privilege, leaving the Master with no remedy in defamation.”
12. In relation to the striking out of the summons, the respondent says that he was entitled to do so because, despite several adjournments to facilitate correction of the banks’ position, the case was not ready for hearing.
The evidence
13. The facts of the case as set out in the applicants’ affidavits are not in dispute and the respondent has not filed an affidavit. The notice party, who supports the position of the respondent, did not appear in the matter before the respondent until the 23rd July, 2014, and has not contradicted any averment made on behalf of the applicants as to what happened on that occasion.
14. Since the respondent stands over his view that there was evidence of perjury, and claims that this judicial review application is an effort by the applicants to cover up that evidence, the case will be laid out in considerable detail.
Background facts – the special summons against the Notice Party
15. The applicants had issued a special summons against the notice party, in which the reliefs claimed were an order that she comply with undertakings that she had given in her capacity as a solicitor, acting for customers of the banks in relation to loans relating to certain properties, and/or compensation for loss suffered by them as a result of her failure to comply with those undertakings.
16. Allied Irish Banks plc was the first named plaintiff on the summons and AIB Mortgage Bank the second. The loans in question, totalling in excess of €3 million, were all made to members of the same family. (Since it is accepted that the borrowers have not defaulted on the loans, they were not joined as parties in either the special summons proceedings or before this court and there is no need to identify them in this judgment.)
17. The schedule to the summons listed eight undertakings, given by the notice party to the plaintiffs on dates between February, 1999 and March 2009, covering some twenty properties. As the schedule is relevant to at least some of the difficulties that subsequently arose, it is here set out in full.
1. Solicitor’s undertaking dated 25 May 2005 in favour of the First Named Plaintiff pertaining to Apartment Nos. 8, 23, 31, 55, 56, 39 and 194 Bracken Hill, Simonsbridge, Sandyford, Dublin 18.
2. Solicitor’s undertaking dated 9 April 2002 in favour of the First Named Plaintiff pertaining to Apartment Nos. 2, 3, 4, 5, 6, 7, 8 & 9, Bow Bridge, Bow Lane West, Dublin 8.
3. Solicitor’s undertaking dated 23 March 2009 in favour of the Second Named Plaintiff pertaining to Apartment 71, Bow Bridge, Kilmainham, Dublin 8.
4. Solicitor’s undertaking dated 6 October 2003 in favour of the Second Named Plaintiff pertaining to Apartment 10, New Row Place, Dublin 8.
5. Solicitor’s undertaking dated 16 November 2005 in favour of the First Named Plaintiff pertaining to Apartment 31, Bracken Hill, Sandyford, Dublin 18.
6. Solicitor’s undertaking dated 13 January 2009 in favour of the Second Named Plaintiff, pertaining to 5 Seamount, Stillorgan Road, Mount Merrion, County Dublin.
7. Solicitor’s undertaking 4 February 1999 in favour of the Second Named Plaintiff pertaining to Apartment No. 2 Seamount, Mount Merrion, Dublin 4.
8. Solicitor’s undertaking dated 13 March 2009 in favour of the Second Named Plaintiff pertaining to 7 La Rochelle, Christchurch, Dublin 8.
18. It is agreed that in each case the notice party undertook:
i) that the borrowers would acquire good and marketable title to the properties;
ii) that the bank’s standard form of all sums mortgage/charge had been or would be executed by the borrowers;
iii) as soon as practicable, to stamp and register the mortgage/charge to ensure that the bank would obtain a valid first legal mortgage/charge on the property;
iv) to lodge with the bank a certified copy of the folio showing the bank’s charge duly registered; and
v) to lodge with the bank the solicitor’s report and certificate of title.
19. It is important to appreciate that such undertakings are a common and perhaps essential feature of residential mortgages in this country, obviating the need for the lender to have its own solicitor. Compliance with an undertaking given by a solicitor is a serious professional obligation. Where there is failure to fulfil that obligation, the lender is entitled to invoke the High Court’s inherent supervisory jurisdiction over solicitors and ask for an order to compel compliance. If performance of the undertaking is no longer possible, the solicitor may, if it is appropriate, be ordered to compensate the lender for any loss incurred.
20. The banks’ grounding affidavits in the case were sworn by Lynn Hogan, (on behalf of Allied Irish Banks PLC, the first named plaintiff) and Jim O’Keeffe (on behalf of AIB Mortgage Bank, the second named plaintiff).
21. Ms. Hogan, whose address was given in the affidavit as being that of the registered office of Allied Irish Banks plc at Bankcentre in Ballsbridge, averred that she was employed as a bank official in that bank’s Financial Services Group.
22. Ms. Hogan set out the undertakings given by the notice party to Allied Irish Banks plc as follows:
1. Undertaking dated March 2009 relating to 7 La Rochelle, Christchurch, Dublin 8;
2. Undertaking dated 9 April 2002 relating to apartments 2,3,4,5,6,7,8 and 9 Bow Bridge, Kilmainham, Dublin 8;
3. Undertaking dated 23 March 2009 relating to Apt 71 Bow Bridge, Kilmainham, Dublin 8;
4. Undertaking related to 11 Apartments at 23/24 Middle Gardiner Street, Dublin 1;
5. Undertaking dated 25 May 2005 relating to Apartments 8, 23, 55, 56, 39 and 194 Bracken Hill, Simmonsridge, Sandyford, Dublin 18;
6. Undertaking dated 6 October relating to New Row Place, Dublin 8;
7. Undertaking dated 16 November 2005 relating to Apt 31 Bracken Hill, Sandyford, Dublin 18.
23. Ms. Hogan averred that the notice party had been requested on various dates to comply with the undertakings and had failed, refused or neglected to do so in respect of Nos. 1, 2, 3, 5, 6 and 7 in this list. She said that as a consequence
“the Bank is not in a position to enforce the security in respect of the loans referred to above and by reason of the failure on the part of the Defendant to comply with her undertakings the Bank has thereby incurred significant loss, damage and expense.”
24. On behalf of AIB Mortgage Bank, Mr. O’Keeffe referred to five undertakings given by the notice party as follows:
1. Undertaking dated 23 March 2009 relating to Apartment 71 Bow Bridge, Kilmainham, Dublin 8;
2. Undertaking dated 6 October 2005 relating to 10 New Row Place, Dublin 8;
3. Undertaking dated March 2009 relating to 7 La Rochelle, Christchurch, Dublin 8;
4. Undertaking dated 13 January 1999 relating to 5 Seamount, Stillorgan Road; and
5. Undertaking dated 4 February 1999 relating to 2 Seamount, Stillorgan Road.
25. Mr. O’Keeffe averred that despite requests on various dates the notice party had failed, refused or neglected to comply with the undertakings. He made the same claim as Ms. Hogan that in consequence the bank was not in a position to enforce its security and had thereby suffered significant loss, damage and expense.
The proceedings before the respondent
26. The special summons was issued on the 12th December, 2013. A special summons is, under the Rules of the Superior Courts, processed through the Master’s Court to ensure that the papers in the case are in order before transferring the matter to the Court List to be dealt with by a judge. This summons was given a return date of the 23rd January, 2014, before the respondent. No appearance had been entered to the summons and counsel on behalf of the applicants applied to have the matter transferred to the court list.
27. It appears that the respondent raised a query as to the entitlement of the two banks to bring their claims against the notice party in one set of proceedings. The matter was adjourned for two weeks to deal with this issue.
28. On the second hearing date, counsel submitted that the requirements of O. 15, r. 1 of the Rules were fulfilled having regard to the relationship between the plaintiffs, the relationship between the borrowers and the capacity in which the notice party acted in each transaction. Counsel again applied for the matter to be transferred. The respondent permitted the application to proceed.
29. When counsel opened the papers to him, it became apparent to the respondent that Ms. Hogan, who had sworn the affidavit for Allied Irish Banks plc, had included in her affidavit the undertaking relating to 7 La Rochelle. As the schedule to the summons, and indeed the document itself, makes clear, this undertaking was in fact in favour of AIB Mortgage Bank and it also appeared in Mr. O’Keeffe’s affidavit. The respondent stated that Ms. Hogan had been “untruthful” in exhibiting that undertaking. Counsel acknowledged that it should not have been included in Ms. Hogan’s list but contested the accusation of untruthfulness and said that it was most likely the result of inadvertence.
30. The respondent then queried whether there was any evidence as to the nature of the alleged non-compliance with the undertakings. Counsel acknowledged that there was no specific averment but relied on the averment that there had not been compliance. The respondent stated that it was a matter that went to the truthfulness of the affidavit.
31. The respondent pointed out that some of the undertakings post-dated the advancement of certain of the monies and could not therefore be said to have been relied upon in making the relevant loans. Counsel accepted that it might have been a mistake to refer to these undertakings in the affidavit but referred the respondent to the special summons in order to clarify the fact that those undertakings were not the subject of the reliefs sought. The respondent said that it went to the truthfulness of the affidavit. He adjourned the matter to allow corrective affidavits to be filed.
32. On the next occasion supplemental affidavits from Ms. Hogan and Mr. O’Keeffe had been filed. Ms. Hogan confirmed that two of the undertakings referred to in her grounding affidavit – relating to 7 La Rochelle and also 71 Bow Bridge – were in favour of AIB Mortgage Bank and not Allied Irish Banks plc. She said that the undertakings to Allied Irish Banks plc which remained outstanding were
• The undertaking of the 25thMay, 2005, relating to 8, 23, 31, 55, 56, 39 and 194 Bracken Hill.
• A separate undertaking relating to 31 Bracken Hill, dated the 16th November, 2005.
• The undertaking dated the 9th April, 2002, relating to 2, 3, 4, 5, 6, 7, 8 and 9 Bow Bridge. Ms. Hogan stated that this undertaking had been satisfied in relation to Nos. 8 and 9 but was outstanding in so far as it related to the other six apartments.
33. Mr. O’Keeffe averred that each of the five undertakings referred to in his grounding affidavit remained outstanding. He said that in each case,
“the Defendant herein has failed to furnish a solicitor’s report and certificate of title (in the Lender’s standard form) duly completed along with the documentation required to accompany said solicitors report and certificate of title to include but not limited to the Second Named Plaintiff’s Mortgage/Charge and the Title Deeds relating to the secured property.”
34. Mr O’Keeffe concluded that
“As the undertakings remain outstanding, the Second Named Plaintiff’s security in each case remains outstanding.”
35. The respondent was not satisfied with the evidence in relation to non-compliance and adjourned the matter again.
36. Prior to the next hearing date Ms. Hogan swore a third affidavit. She averred that in the case of each of the three undertakings in favour of Allied Irish Banks plc
“the Defendant has failed to furnish a solicitor’s report and certificate of title (in the Lender’s standard form) duly completed along with the documentation required to accompany said solicitors report and certificate of title to include but not limited to the First Named Plaintiff’s Mortgage/Charge and the Title Deeds relating to the secured property.”
37. Like Mr. O’Keeffe, Ms. Hogan stated that as the undertakings remained outstanding, the bank’s security in each case remained outstanding.
38. The matter next came before the respondent on the 14th May, 2014. On this occasion the respondent queried what was meant by the phrase “documentation required to accompany said solicitor’s report and certificate of title”. Counsel said that he was unsure but that the absence of the specified documents was sufficient to establish a breach of undertaking.
39. The respondent then took issue with the averment that, because the undertakings were outstanding, the security was outstanding. He said that there was no evidence that the security had not been put in place and that the averment that the security was outstanding was untruthful. Counsel submitted that this was a legal question, upon which the respondent had no jurisdiction to adjudicate. Counsel sought the transfer of the matter to the Court list.
40. The respondent then stated that he would be sending the papers in the proceedings to the Director of Public Prosecutions. Counsel repeated the submission that the issue was a legal rather than factual one, but said that if the respondent required, he would take instructions on filing a corrective affidavit. The respondent stated that any explanation would have to be given to the Gardaí.
41. The matter was then adjourned to the 18th June, 2014.
42. The applicants wished to appeal this decision but, on requesting a copy of the order, found that the record referred only to the adjournment. Counsel was therefore instructed to mention the matter in the respondent’s list on the 16th May, 2014, to request that an order be drawn up so that it could be appealed. The respondent refused to do this, and further refused to make an order reflecting his refusal, on the basis that he was taking this course as a private citizen.
43. On the 5th June, 2014, the applicants sought and were granted leave to apply for judicial review. They were also granted an interim order restraining the respondent from acting on foot of his purported decision to refer the papers to the Director of Public Prosecutions.
44. The requisite notice of motion was issued on the 6th June, 2014, and a statement of opposition was filed on behalf of the respondent on the 17th June, 2014.
45. The special summons came back into the respondent’s list on the 18th June, 2014. Counsel for the banks once more applied to have it transferred to the Court list.
46. The respondent referred to the fact that the High Court had granted an interim injunction against him. Counsel submitted that the order did not affect his capacity to transfer the proceedings. The respondent adjourned the matter to the 23rd July, 2014.
47. On the 23rd July, 2014, the notice party, who had been informed in writing of each adjourned date, was present for the first time. She stated that she wished to file an affidavit. She informed the court that she had been adjudicated bankrupt. Counsel for the applicants indicated that there was no objection to her filing an affidavit in court.
48. The affidavit in question is very short, but indicates that the notice party wished to raise issues about the propriety of the service of the special summons, the history of the loan offers to her clients, contact between herself and the banks, and the date on the special summons.
49. It is averred by Mr. Emmett Martin, who was attending counsel, that counsel then applied to have the matter transferred.
“Before letting the application proceed, however, the Respondent indicated to Counsel that upon the advice of his lawyers, he was formally requesting that the Special Summons Proceedings be withdrawn.”
50. Counsel responded that he had no instructions to withdraw and that he intended to proceed. The respondent then asked whether the proceedings were now moot having regard to the bankruptcy of the notice party and the fact that she was no longer a solicitor. Counsel responded that while this might affect her ability to comply with the undertakings, there was also the issue of compensation. Although she was bankrupt she might have insurance cover in place to deal with such claims.
51. The respondent then said that the proceedings were nothing other than “an insurance claim”, and an attempt by the banks to reclaim the full value of the monies lent from an insurance company. Counsel did not accept that characterisation and said that it was possible that the banks could simply procure the services of another solicitor to complete the undertakings, thereby rendering any claim for compensation “very modest”.
52. Counsel then commenced opening the affidavits, beginning with the grounding affidavit of Ms. Hogan. The respondent queried whether this affidavit was admissible, having regard to the fact that it did not give the deponent’s place of abode.
53. The respondent asked what the purpose of Ms. Hogan’s second affidavit was. On being told that it was to correct the inaccuracy in the first affidavit as to the number of undertakings outstanding, the respondent noted that it was not described as a “corrective affidavit”. He asked whether, since the inaccurate evidence had not been formally withdrawn, there was prima facie evidence of perjury. He said that it would have been better if the deponent had apologised for her mistake.
54. The respondent then pointed to the averment in Ms. Hogan’s second affidavit that the undertaking had been satisfied in relation to Nos. 8 and 9 Bow Bridge, and queried whether this amounted to prima facie evidence of perjury, since one or other of the first and second affidavits must be incorrect.
55. Counsel submitted that any inaccuracies in the record had been corrected in the supplemental affidavits and accordingly no question of perjury arose. The respondent replied that the inaccuracies had not been corrected to the extent that the perjury had been discharged.
56. When the third affidavit of Ms. Hogan was opened the respondent remarked that the bank had done a “180 degree turn” in that it had originally sought relief in respect of six undertakings but now sought relief in respect of three. Counsel again referred him to the special summons for the list of undertakings sought to be enforced. The respondent said that the confusion had arisen because of the fact that the two banks had brought their claims in the same proceedings and again queried the legal basis for this.
57. The respondent went on to say that the bank was pursuing an insurance claim and had been forced into a “180 degree turn”. He said that he was being asked to turn a blind eye to perjury but would be referring the papers to the DPP as soon as the injunction against him was lifted.
58. The respondent then queried again the averment that the banks’ security was outstanding, in the absence of evidence that the mortgages had not been registered. Counsel said that in any event it would be impossible for the bank to realise any security without the original deeds of mortgage. The respondent disagreed and referred to a High Court judgment to the effect that the bank would be able to get a well-charging order in those circumstances. He said that the averment was as to fact, since the deponent did not say that she had received legal advice that the security was outstanding. Counsel submitted that it was a legal assertion, the correctness of which was a matter for adjudication by a judge.
59. The respondent said that the applicants had “gone after” the notice party as soon as they heard that she was “on the slide”. Ms. Hogan had sworn an untruth in the hopes of getting it “under the radar”. He asked why the borrowers had not been joined to the proceedings and was told that they were not in default. The respondent then said that the applicants had failed to mitigate their loss and were seeking to be unjustly enriched.
60. Turning to the affidavits of Mr. O’Keeffe, the respondent raised a similar issue as to the deponent’s place of abode and commented that the place of abode becomes very important where perjury is concerned. He referred to the fact that Mr. O’Keeffe had set out the state of the loans as of the 9th October, 2013, and said that this represented an attempt by the bank to quantify its insurance claim.
61. Counsel submitted that it was improper to impugn the integrity of the deponents in this way. According to Mr. Martin,
“The respondent replied that the deponents had impugned their own reputation by their actions and that their names were already in the public domain. He further stated that he was entitled to speculate as to the true purpose of the Special Summons Proceeding and that the allegations of perjury would have to be adjudicated upon by a District Judge.”
62. The respondent stated that that if he transferred the proceedings “downstairs” (i.e. to the Court list) there would be nobody to challenge the banks’ version of events and that the evidence before the judge would be compromised by perjury.
63. The notice party then addressed the respondent on a number of issues not relevant to the matter before this Court.
64. The respondent then gave his decision.
“He stated that there was an unsatisfactory sequence of affidavits and that it was his duty, not necessarily as Master of the High Court, to bring same to the attention of the authorities. He stated that he was ‘going to be very nice to the Bank and offer them an easy way out’ [or, according to Mr. Martin’s original note, “a massive favour”]. He then stated that the summons would be struck out.”
65. On the 5th September, 2014, after a contested hearing, the applicants were granted liberty to amend their statement of grounds in order to apply for reliefs in relation to this decision. They now seek an order of mandamus, if necessary, directing the respondent to make an order reflecting his decision to refer papers to the DPP; certiorari to quash that decision; an order of certiorari quashing the decision to strike out the special summons; an order of mandamus, if necessary, compelling the transfer of the special summons for hearing before a judge of the High Court; and declarations to the effect that the respondent has no jurisdiction in matters of this sort to go beyond the provisions of O.38 r.6 and inquire into the substantive content of affidavits filed in the proceedings.
Evidence in the judicial review proceedings
66. The above account of events is taken from the affidavits of Mr. Brian O’Neill, the applicants’ solicitor, and Mr. Emmett Martin, who attended counsel.
67. In addition, Ms. Hogan has sworn two affidavits. In the first she rejects any accusations of untruthfulness. While there were certain inaccuracies in her affidavits in the special summons proceedings, she believes that the material facts to which she deposed were true and accurate. She says that the respondent’s decision to refer the papers to the DPP has caused her significant alarm, distress, anxiety and upset and is a matter of enormous concern to her and to her employer.
68. In the second, sworn in response to the statement of opposition, Ms. Hogan deals with the matter of the outstanding undertakings and the effect of non-compliance. However, since the effect of this is to introduce new evidence of a substantive nature, relating to the merits of the special summons, I do not think it appropriate to consider it here.
69. The notice party swore an affidavit in the judicial review proceedings on the 2nd July, 2014 (after the decision to refer the papers to the DPP but before the strike-out). In effect, she blames the borrowers and the banks for her inability to comply with the undertaking. Since this is not of relevance to the issues between the applicants and the respondent in these proceedings, I do not propose to set out her contentions.
70. The respondent has not filed an affidavit.
Order 38 of the Rules of the Superior Courts
71. Order 38 provides that every special summons is to be returnable before the Master. In a case where he has jurisdiction, he may decide the matter himself but has the option of putting it into the court list for hearing.
72. Rule 6 provides as follows:
In all cases in which he shall not have jurisdiction, and in all such other cases which he shall decide to put in the court list for hearing, the Master shall transfer the summons, when in order for hearing, to the court list for hearing on the first opportunity.
Submissions
The applicants’ case
73. The applicants submit, in reliance on The State (Richard F. Gallagher, Shatter & Co.) v de Valera (unrep., Costello J. 9th December, 1983) and Elwyn Cottons Limited v The Master of the High Court [1989] I.R. 14, that the Master of the High Court is an officer attached to the Court and is amenable to judicial review. They accept that under the Rules his decisions could as an alternative be appealed but say that in this case judicial review is appropriate because of the nature of the case they wish to make requires detailed consideration of the actions of the respondent, and largely concerns the legal question as to the extent of the respondent’s jurisdiction. In any event, it was not possible to appeal the decision to refer the papers to the DPP since the respondent had refused to have an order drawn up on that issue.
74. They submit that the respondent enjoys only the jurisdiction conferred upon him by statute and by the Rules. The special summons in question was not one in relation to which he had any substantive jurisdiction, in that it did not involve him either a) acting under O. 63, r. 2 and assessing damages or taking an account, or b) acting under O. 63, r. 3 and trying an issue of fact with the consent of the parties. It therefore came into the category, covered by O. 38 r. 6, of a special summons where he did not have jurisdiction. His role under that rule was to put the matter in the court list when it was in order for hearing.
75. In this regard reliance is placed on the decision of Hogan J. in ACC Bank plc v. Heffernan [2013] IEHC 557, where the phrase “in order for hearing” was said to mean
“ nothing more than that the case is administratively ready for hearing so that, for example, all appropriate affidavits have been sworn and filed.”
76. It is submitted that this does not involve a decision as to whether the case is properly constituted. Still less does it involve an examination of the veracity of witnesses, the merits of a case or the determination of the issues raised in the proceedings – that is the role of a judge.
77. The applicants do not accept the respondent’s statement that in referring the matter to the DPP he would be acting in his capacity as a private citizen. They argue that he is not a private citizen when sitting as Master, but is exercising a public law function ancillary to and in support of the administration of justice. He would not otherwise have access to the papers in the case.
78. It is submitted that even if the respondent had had jurisdiction to refer the papers, the decision was on the facts of the case manifestly irrational in that there was no basis on which a reasonable decision-maker could have made a finding of perjury against Ms. Hogan.
79. The assertion by the respondent that the applicants were using the special summons procedure in an attempt to recover the full amount of the original loans from the notice party or her insurers is described as “manifestly incorrect and baseless”, where the primary relief sought was compliance with the undertakings. Compensation was sought as an alternative, and it was never suggested that compensation should be in a sum equivalent to the loans.
80. In relation to the striking-out of the summons, reliance is placed on the High Court decisions of Laffoy J. in ACC Bank v. Tobin [2012] IEHC 348; Hogan J. in ACC Bank v. Heffernan (referred to above) and Kearns P. in Bank of Ireland v. Dunne & Cawley [2013] IEHC 484 for the proposition that the Master has no power to strike out a special summons.
81. It is contended that the decision to strike out, even if the respondent had power to do so, was tainted by objective bias, having regard to the comments made by him in the course of the hearing of the 23rd July, 2014 and in the light of the history of the case. It is accepted that, on the authorities, bias cannot be inferred from the making of the decision in itself, or the claimed perversity of the decision, but must be shown to arise from something external. The conduct of the decision-maker at the hearing will not normally suffice for a finding of bias but is relevant where the issue is one of pre-judgment of the sort identified by Clarke J. in P. v. Judge McDonagh [2009] IEHC 316, which
“can only happen at a hearing and arises from the adjudicator creating…an impression that a rush to judgment has occurred…”
82. The applicants say that this is what occurred in this case.
The respondent’s submissions
83. The respondent says that the reliefs sought are not, as a matter of law, available to the applicants and that in any event judicial review should not be granted where an appeal would have been more appropriate. He contends that he had jurisdiction to strike out the summons, and continues to maintain that Ms. Hogan’s affidavit was tainted by perjury.
84. Looking at the reliefs sought against him, it is argued that mandamus cannot lie where a respondent had expressed an intention to take a particular course of action that he was not legally obliged to take (i.e. refer a matter to the DPP). In any event, it could not lie where he was acting as a private citizen rather than in exercise of a public function. It also contended that the respondent has no power to direct his registrar to draw up an order.
85. It is submitted that to seek mandamus in this respect conflicts with the application for certiorari. In any event it is said that certiorari does not lie because the respondent had only expressed an intention, had not taken a final decision, and was acting as a private citizen.
86. The applications for declaratory relief are described as an attempt to determine rules of civil procedure by means of a High Court judgment. It is suggested that if any proceedings were appropriate for such a result, it would be plenary proceedings involving the State as a party. This is said to be because of the far-reaching consequences for civil procedure and the requirement for this court to adopt a position on the nature and function of the Master generally, including his jurisdiction.
87. It is said that if the court does adopt such a position, it will open the door to judicial reviews and determinations on the Rules and on the scope of each and every one of the Master’s functions. It is pointed out that this respondent has not been judicially reviewed since taking up office, and that no holder of the office has ever been judicially reviewed in respect of a function conferred on him by the Rules. If, however, it was thought that judicial review was permissible, there would be a considerable burden placed on the High Court because
“representatives, of whatever seniority, who felt they were hard done by or disrespected in the hurly burly of the Master’s Court would seek judicial review. The availability would place an additional layer of cost on parties and on the State.”
88. The respondent accepts that it was not open to the applicants to appeal a decision by him to refer the matter to the DPP, in the absence of any order having been made. It is submitted that the decision to refer was the choice of the respondent as private citizen and could not as such be judicially reviewed. In any event it was not a decision involving an adjudication with legal consequences.
89. It is submitted that the applicants should not be permitted to seek the discretionary relief of judicial review in relation to the strike out, when a full right of appeal was available. There would have been no loss in terms of “opportunity, time or money” if they had appealed that order and made the claim in the appeal that the court should give them judgment on the summons.
90. However, it is also argued that the Master is not amenable to judicial review in the exercise of his functions under the Rules. This is said to be because under the Rules he is exercising part of the jurisdiction of the High Court, and the High Court is not judicially reviewable. In this respect the respondent refers to the judgment of Geoghegan J. in Taylor v. Clonmel Healthcare [2004] 1 IR 169. He says that the applicants’ special summons constituted an invocation of the inherent jurisdiction of the High Court and that in these circumstances the role of the Master is “closely associated” with the role of a judge.
91. The cases relied upon by the applicants are said to be distinguishable and in any event not binding on this court. The Gallagher, Shatter case concerned the Taxing Master, whose functions are said to be very different from those of the Master in that the latter
“has an obligation to do justice in the light of precedent and general principles and, in certain cases, to prefigure what a judge would do.
The role involves analysis and potentially prejudicial orders, including discovery ‘where necessary’. The assessment of necessity involves adjudication. The Master must make assessments based on jurisdiction.
The Master must apply European Union law, and has obligations thereunder and under the Irish Human Rights Act.”
92. Elwyn Cottons is distinguished on the basis that it concerned a particular jurisdiction conferred on the Master under an EU regulation, rather than a function under the Rules, so that the appeal mechanism under the Rules was not available.
93. The comments of Laffoy J in ACC v Tobin are described as obiter, in circumstances where the judge was dealing with an appeal in a contested case where the respondent had dismissed the proceedings rather than striking out.
94. On the jurisdictional issue, it is submitted that the applicants are attempting to narrow the role and function of the Master, and to codify the office through decisions in judicial review cases.
95. It is contended that the Master has “jurisdiction and function in controlling the proceedings in front of him”, and that this includes “raising an issue on papers which appear to state falsity”. In this case, he saw something that was prima facie perjury and that was capable of giving rise to serious injustice.
96. The statutory provisions dealing with the office of the Master – specifically, the Court Officers Act, 1926, s. 15 of the Courts of Justice Act, 1953, the Courts (Supplemental Provisions) Act, 1961 (including the relevant provisions of the Eighth Schedule), the Courts and Court Officers Act, 1995, and O. 63 of the Rules are referred to. It is noted that neither the Rules nor any statutory provision purport to give an exhaustive description of the Master’s functions and jurisdiction.
97. With particular reference to the special summons procedure and to O. 38 r. 6, it is submitted that it is for the respondent to determine whether or not the papers in the case are “in order for hearing”. If he considers that they are not, because (for example) there is no evidence, or there are irreconcilable versions of affidavits, or the proceedings are an abuse of process, strike out must be an option.
98. It is the view of the respondent that the judges of the High Court will assume that papers in a case have been checked by him and are in order, and may therefore not be inclined, in a busy list, to scrutinise them further.
99. Turning to the papers in the special summons proceedings, it is submitted that they presented serious deficiencies and, in the respondent’s view, untruths. These issues are addressed in order to counter the applicants’ claims that the respondent acted in excess of jurisdiction, behaved irrationally and demonstrated bias. It is also submitted that the alleged deficiencies are relevant to the exercise of the Court’s discretion to refuse relief by way of judicial review.
100. It is said that
“Allied Irish Bank appears to have repeatedly attempted to ram through this office of the High Court papers which were
a. in breach of the RSC
b. contained an untrue picture of the facts
c. in uncontested proceedings
d. where it sought handsome relief, presumably executable against insurers.”
101. The respondent refers specifically to the conflict between the averments in Ms. Hogan’s first affidavit as to the number of relevant undertakings provided to Allied Irish Banks plc, and the undertakings actually exhibited and listed in the schedule.
102. It is submitted that Ms. Hogan’s averment that the notice party had failed to meet the obligations set out in the undertakings implied that each of the undertakings remained outstanding in its entirety, and therefore that the notice party had failed to take each of the five steps referred to in paragraph 18 above in respect of each undertaking. After the supplemental affidavits had been filed, that remained the position in respect of the three undertakings then said to be in issue. Ms. Hogan had sworn that in relation to these, the security remained outstanding.
103. The respondent submits that this averment was incorrect, insofar as mortgages had been executed in respect of two out of three of the properties, the subject of undertakings to this bank. He further submits that this must have been known to Ms. Hogan. Accordingly, her statement that there was security outstanding was a knowingly false statement of fact.
104. Detailed submissions have been made to the court as to the meaning of “security” in this context. It is said that the absence of title documents, or the solicitor’s certificate, may make it more difficult for a lender to enforce its security, or make the land less valuable, but does not mean that the security is “outstanding”. A party is described as having “security” once they have an interest in the property.
105. Criticism is made of Ms. Hogan for not including in her affidavit the fact that the borrowers were up to date. This is described as “the elephant in the room”, because the impression given to the respondent was that the defendant would be liable for the full amount of the borrowings.
106. However, it is submitted on behalf of the respondent that he did not make a finding of perjury. Rather, he made comments “directed to referring the matter to the investigative body”. He afforded repeated opportunities for correction of the papers and struck the case out when the correction was not made.
107. Referring to the argument made by the applicants that what the respondent did was irrational and in the teeth of the evidence, the following submission is made:
“The Master contends that he is not, as Master, obliged to disregard false testimony as an irrelevant consideration but must consider the injustice of a later uncontested trial on this evidence and the unjust enrichment of the plaintiff; and he also contends that, one way or the other, in the alternative to acting qua Master, he is entitled as a citizen to refer suspected crime to the proper authorities.
The Master’s comments in this case were relevant and justifiable. If anything, they are indicative of a professional taking his task and responsibility and workload seriously. The very taking of this judicial review operates as an attempt to chill that ardour.”
108. Dealing with the matter of the strike out, the respondent is critical of the applicants’ submissions on the phrase “in order for hearing”, and says that to focus exclusively on that phrase can lead to
“an inaccurate simplification and emaciation of the Master’s nature and function if it is construed, as the applicants would have it, as a reduction of function and responsibility to the administrative shuffling of papers….
…the stipulation that the matter be transferred when “ready for hearing” must be assessed by reference to a combination of jurisdictional fact and operative discretion.
The Master must take into account a number of matters, including whether or not due process has been followed, or whether the Rules have been complied with…
…The corollary of the condition of readiness for hearing is that papers, which are not ready, must not be transferred. Order 38 Rule 6 only makes sense if the Master is empowered to refuse a transfer and, in consequence, strike out the Summons. The entitlement to strike out is ancillary to the decision to refuse to transfer. There is no point in requiring the Master to check the papers if he has no available sanction for rule non-compliance.
In exercising his discretion in regard to Rule non-compliance, the Master must have regard, not merely to the Rules, but also to the overarching interests of justice including, of course, Article 6 of the European Convention, and, in consequence of Section 3(1) of the European Convention on Human Rights Act, 2003 the Master must perform his functions in a manner compatible with the State’s obligations under the Convention.”
109. It is submitted that the papers in the special summons case were not in order for hearing for the following reasons:
a) There was a breach of the principle laid down in Plunkett v Houlihan [2004] IEHC 357 that plaintiffs cannot join similar claims in a single action where the only common factor is the identity of the defendant.
b) The claim for compensation was not suitable for disposal by special summons, since the lenders’ losses were not capable of summary assessment on affidavit. Even if they were capable of being so assessed, summary assessment would be inappropriate where the defendant is a bankrupt and cannot defend the case personally.
c) There was a conflict between the affidavits as to the undertakings.
d) The affidavits did not state the place of abode of the deponents.
e) It was deposed by Ms. Hogan that monies had been lent in reliance on six undertakings when in fact three of the six post-dated the advance and were in any event in favour of the second named plaintiff.
f) The affidavits contained an untrue averment to the effect that the security was outstanding. The consequent assertion that the plaintiffs had suffered loss was also untrue.
g) The affidavit of Mr. O’Keeffe referred to five undertakings but exhibited only three. The claim in respect of the other two was therefore bound to fail unless leave was given to amend the summons.
110. It is accepted that not all of these points were raised by the respondent before the matter was struck out but the court is urged to take them into consideration in the context of the allegation of bias.
111. In relation to the claim of bias, it is noted that no complaint of bias was made before the strike out, and it is submitted that the applicants cannot therefore rely on the comments made at earlier hearings.
112. It is said that the respondent’s comments on the day of the final hearing should be seen against the background of the fact that he had already been publicly criticised.
113. The request to the applicants to withdraw the special summons is explained as being the giving of an opportunity to the banks to withdraw without embarrassment, rather than as evidence of bias. Withdrawal of the summons would have entailed withdrawal of the affidavits considered to be perjured, with the result that there would have been no referral to the DPP. The respondent’s view was that the case was “holed irremediably under the waterline” and that if it went forward it was bound to fail.
114. It is suggested that
“It may be that the lawyers for the banks have become accustomed to their paperwork being waved through preferentially, without scrutiny, almost as if the presumption ‘omnia rite esse acta’ applies generally to all banks’ paperwork. There is no preferential treatment for the banks (and there is no bias in not being accorded preferential treatment). The reverse, rather: it obliges the Court to examine banks’ paperwork with greater care, especially if there is no appearance by the defendant”.
115. It is contended that an objective observer would recognise as frustration, or even “provocative overstatement”, rather than prejudgment or bias,
“ the Master’s reaction to the wilful refusal of the applicants’ lawyers to acknowledge even at that late stage, that the case was improperly prepared.”
116. It is submitted that the respondent was not exercising power for personal advantage and there was no question of material gain to him.
The notice party’s submissions
117. The notice party has made an application to dismiss these proceedings. Her submissions are concerned to some extent with the merits of the banks’ proceedings against her, which are not of any relevance to the judicial review application. I do not propose to summarise her arguments in this respect. However, it may be noted that she considers that the case made on behalf of the respondent involves allegations that
“constitutionally appointed members of the Judiciary in Ireland are playing fast and loose with civil procedure to indulge Lending Institutions”.
118. I do not think that the respondent wishes to be understood as making that accusation.
119. The notice party also refers to s. 19 of the Criminal Justice Act, 2011, which provides in relevant part that it is an offence if a person, who has information which he or she knows or believes might be of material assistance in (for the purposes of this case) securing the apprehension, prosecution or conviction of any other person for a relevant offence, fails without reasonable excuse to disclose that information as soon as it is practicable to do so to the Gardaí.
Relevant statutory provisions
120. Section 5(2) of the Court Officers Act 1926 provides as follows:-
“In addition to the general superintendence and control aforesaid the Master of the High Court shall also have and exercise such powers and authorities and perform and fulfil such duties and functions as shall be from time to time conferred on or assigned to him by statute or rule of court, and in particular (unless and until otherwise provided by statute or rule of court) shall have and perform all such other powers, authorities, duties and functions as are or become vested in him by virtue of any other provision of this Act”
121. Section 14(3) of the Courts (Supplemental Provisions) Act 1961 provides as follows:-
“Rules of court may, in relation to proceedings and matters (not being criminal proceedings or matters relating to the liberty of the person) in the High Court and Supreme Court, authorise the Master of the High Court and other principal officers, within the meaning of the Court Officers Acts 1926 to 1951, to exercise functions, powers and jurisdiction in uncontested cases and to take accounts, conduct inquiries and make orders of an interlocutory nature.”
122. Paragraph 4(2) of the 8th Schedule of the Act sets out the powers and functions of the Master:-
“The Master of the High Court shall have and exercise such powers and authorities and perform such duties and functions as are from time to time conferred on or assigned to him by statute or rule of court, and in particular (unless and until otherwise provided by statute or rules of court) shall have and perform all such other powers, authorities, duties and functions as are vested in him by virtue of subsection (3) of section 31 of the Act of 1926.”
123. Section 24 of the Court and Court Officers Act 1995 provides as follows:-
“The Master of the High Court is hereby authorised by law to exercise limited functions and powers of a judicial nature within the scope of Article 37 of the Constitution.”
124. Section 25 of the Court and Court Officers Act 1995 provides as follows:-
“(1) Subject to subsection (2) of this section and section 26 of this Act, the Master of the High Court may, in all such applications made ex parte or by motion on notice whether interlocutory or otherwise and in all such application for judgment by consent or in default of appearance or defence as may from time to time be allocated for hearing by the Master of the High Court by the President of the High Court, exercise all the functions, powers and jurisdiction which a judge of the High Court exercises from time to time.
[…]
(3) All the functions, powers and jurisdiction exercised by the Master of the High Court immediately before the passing of this Act by virtue of any statute or rule of court may continue to be exercised by the Master of the High Court save in so far as the same are inconsistent with the exceptions mentioned in subsection (2) of this section
(4) The Master of the High Court may exercise such further or other functions and powers in relation to matters arising before the trial of an action as may from time to time be conferred on the Master of the High Court by rules of court.
(5) All orders of the Master of the High Court shall be subject to appeal to the High Court.
(6) Rules of court may be made by the Superior Courts Rules Committee, with the concurrence of the Minister in relation to any function, power or jurisdiction conferred on the Master of the High Court under this section.”
Relevant authorities
Amenability of the Master to judicial review
125. In State (Richard F. Gallagher, Shatter and Company) v. De Valera (unrep., Costello J., 9th Dec., 1983), the applicant solicitors sought orders of certiorari in respect of certain rulings made by the Taxing Master. One of the issues in the case was whether certiorari was available. It was contended on behalf of the Taxing Master that he should be regarded as a “delegate” of the High Court and that, just as the High Court could not make an order of certiorari against itself it could not make an order against its own delegate. Costello J. rejected this argument. He held that the office of Taxing Master was, by virtue of the 8th Schedule to the Courts (Supplemental Provisions) Act, 1961, one of a number of offices “attached to” the High Court, the Supreme Court and the President of the High Court. Reference was made to the judgment of Gannon J. in Magauran v Dargan (1981) I.M.L.R. 7, where the nature of the office was described as follows:
“The Taxing Master’s functions may be described as ancillary to the judicial process only in the sense of being supplementary to it but forming an essential part of it.”
126. In Elwyn (Cottons) Ltd. v. The Master of The High Court [1989] I.R. 14, the Master had declined to make a particular order under the provisions of the Jurisdiction of Courts and Enforcement of Judgments (European Communities) Act, 1988 and the new rules of court made thereunder, on the basis that he believed that he did not have jurisdiction to make the order. The applicants had lodged an appeal but were unsuccessful, as Carroll J. held that the Rules did not make provision for an appeal in the circumstances. The applicants then applied for an order of mandamus directing the Master to make the order sought.
127. O’Hanlon J. noted the fact that there was no case, in the long history of the office of Master, in which an order of mandamus had been made.
“This might suggest that it has never been considered appropriate, or perhaps even within the jurisdiction of the High Court, to make such an order against an officer who may be regarded as an arm of the High Court itself, but it appears to me that the more likely explanation lies in the fact that there was no need to involve the procedure by way of mandamus when the alternative and simpler and more expeditious procedure by way of appeal under O. 63, r. 9, was always available.”
128. O’Hanlon J. referred to the judgment of Costello J. already cited, and noted that the office of Master of the High Court was “attached” to the High Court by virtue of the same legislative provisions as those dealt with in that judgment. It was therefore clear that an order could be made against the Master in the same way as the Taxing Master. On the basis that an appeal could not be taken under the measures in question, the order sought was granted.
The “jurisdiction” or powers of the Master
129. In Taylor v Clonmel Healthcare Ltd. [2004] 1 IR 169 Geoghegan J. dealt with the Master’s jurisdiction in the following terms:-
“Although with reference to the Master, the word ‘jurisdiction’ is included in the index of the Rules of the Superior Courts 1986, it is not included in the body of the rules and is, in my opinion, a misnomer. The Master has the powers and duties conferred upon him by the Rules of the Superior Courts 1986. The powers of the Rules making Committee in this regard in turn derive from the Courts (Supplemental Provisions) Act 1961 and by cross-reference the Courts and Court Officers Act 1926. But, as I would see it, it is not a conferring of jurisdiction on the Master. It is rather limited powers given to the Master to exercise the jurisdiction conferred on the High Court. The rules of court simply regulate the jurisdiction already conferred. The rules do not themselves confer a jurisdiction. Under the definition of ‘court’ in the Rules of the Superior Courts 1986, the Master is included when exercising his powers under the rules.”
130. Kennedy v. Killeen Corrugated Products Limited [2007] 2 IR 561 was an appeal from an order made by the Master that a plaintiff’s solicitor should pay personally the costs of an unsuccessful motion before him. The power to make such an order was contended to come from a combination of O. 63, r. 6, which gives discretion to the Master to award costs in matters before him, and O. 99 r. 7, which provides that “the Court” may make an order of costs against a solicitor where costs have been “improperly or without any reasonable cause incurred”. Order 125 of the Rules provides inter alia that “the Court” means either, as the context requires, the High Court or a judge or judges thereof, and includes the Master where he has jurisdiction.
131. Finnegan P. held that power to award costs against a solicitor had its origin in the inherent jurisdiction of the High Court over solicitors, and is exercisable where there has been improper conduct by a solicitor in the course of proceedings. On the facts of the case, he was satisfied that the conduct of the solicitor in question was not improper. He went on to consider whether, in any event, the Master had the power to make such an order and concluded, having reviewed the statutory provisions in relation to his office, that he did not. The Master’s powers in relation to costs were encompassed in O. 63, r. 6.
132. Finnegan P. noted that an allegation of improper conduct by a solicitor could give rise to complex issues, requiring a determination as to whether the solicitor whose conduct was in question had been guilty of professional misconduct or negligence sufficient to amount to misconduct or gross negligence.
“Leaving aside any issue arising under Article 37 of the Constitution, jurisdiction could only be conferred upon the Master by statute, by rules of court or by an allocation by the President of the High Court. There is no statute nor is there a rule nor is there such an allocation.”
133. In ACC Bank v. Tobin [2012] IEHC 348, the plaintiff bank had claimed that the defendant, a solicitor, was in breach of an undertaking given by him as solicitor. The proceedings were taken by way of special summons. After a replying affidavit was filed, the Master struck out the summons, with costs to the defendant, apparently on the basis that the papers were not “in order”. Allowing the appeal, Laffoy J. referred to the provisions of O. 38 and said that the Master had no jurisdiction to dismiss the proceedings.
134. In ACC Bank plc v. Heffernan [2013] IEHC 557, Hogan J. dealt with the question of whether the Master was entitled to strike out summary summons proceedings on the basis that the action should have been commenced by plenary summons. The facts were that the plaintiff had issued a summary summons seeking judgment for a liquidated sum. A motion for liberty to enter final judgment was responded to by affidavits on behalf of the defendants, contesting liability. The plaintiff then applied to the Master to transfer the matter into the High Court on the basis that it was contested. Instead, the Master acceded to an application by the defendants to strike out the proceedings, on the ground that the plaintiff must have been aware when the proceedings had commenced and that the defendants had a substantive defence.
135. Order 37, r. 6 provides that
“In contested cases, the Master shall transfer the case, when in order for hearing by the Court, to the Court list for hearing on the first opportunity; and for this purpose, the Master may extend the time for the filing of affidavits and adjourn the case before himself as he shall think fit. The Master may also, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons…”
136. Hogan J. held that, accordingly, the Master had no jurisdiction to enter final judgment in contested cases.
“His task in such cases is rather to transfer the matter to the High Court for hearing when the case is “in order” for hearing by the Court. The reference to “in order for hearing” means nothing more than that the case is administratively ready for hearing so that, for example, all appropriate affidavits have been sworn and filed. This phrase does not give the Master a jurisdiction to strike out contested cases on the ground that the pleadings are in some way irregular or that the proceedings ought to have been commenced by plenary action rather than by way of summary summons: see here by analogy the comments of Laffoy J. to like effect in ACC Bank v. Tobin [2012] IEHC 348.”
137. Hogan J. noted that it had been established as early as 1927 that the Master had no jurisdiction to determine contested cases (referring to Grace v. Molloy [1927] I.R. 405). Considering the meaning of the difference between a “contested case” and an “uncontested case”, he said that an uncontested case was one where the defendant offered no opposition to the application over and above the entry of an appearance. Where, as in that case, the defendants opposed the application for liberty to enter final judgment by filing affidavits disputing the plaintiff’s claim, the case fell into the category of a contested case.
“In those circumstances, as the comments of O’Byrne J. in Grace make clear, the Master’s task is simply either to transfer the case into the High Court for adjudication once satisfied that the papers are in order and the matter is ready for determination or, should the parties so consent, adjourn the case for plenary hearing.”
138. It is important to note that the learned judge continued as follows:
“Specifically, the Master has no function to resolve a conflict of fact or to make an assessment of the likely strength of the case made by either the plaintiff or the defendant or to determine that the case ought to have been commenced by plenary summons.”
139. Four days after the decision of Hogan J. in ACC Bank v. Heffernan, Kearns P. delivered judgment in the case of Bank of Ireland v. Dunne and Cawley [2013] IEHC 484. There, the plaintiff bank had applied to the respondent for liberty to enter final judgment on foot of a summary summons. The grounding affidavit contained an averment that the defendants had no bona fide defence to the proceedings and that the appearance had been entered for the purposes of delay. The defendants then swore affidavits claiming to have a full defence, which would require a plenary hearing. The respondent dismissed the plaintiff’s summons and awarded costs of the proceedings against it, apparently for similar reasons as in ACC v. Heffernan.
140. On the appeal, the only issue was whether the Master had jurisdiction to dismiss the proceedings rather than being compelled to put the matter into the court list. The court had before it the written decision of the Master in the Heffernan case, in which the Master had stated inter alia that the phrase “in order” must mean “in accordance with the Rules and the law”. He had taken the view in that case that if the plaintiff was incorrect in averring that the defendant had no defence, the summons was bad in law and not “in order”.
141. Kearns P. referred to the provisions of O.37, rule 4 of which permits the Master to deal summarily with an uncontested motion for judgment. In that type of action, he may give liberty to enter judgment, or he may dismiss the action “and generally may make such order for the determination of the action as may seem just”. He also set out Rule 6 and went on:
“These rules are clear and unambiguous. The Master’s jurisdiction to dismiss an action arises only in uncontested cases. This is not an uncontested case.
The Master has no discretion in a contested case. Where a case is contested, the Master is obliged by rules of court to transfer the case to the court list for hearing at the first opportunity…Further, where a case is contested and there is some inadequacy as to form, the Rules do not confer on the Master a jurisdiction to dismiss the proceedings out of hand – his jurisdiction, clearly spelt out in the Rules (Order 37, Rule 6) permits him only to go so far as to decline to transfer the case to the court list until those deficiencies are rectified and the matter thereby becomes ‘in order’…
The power to dismiss a contested case is clearly reserved to the High Court …
No part of Order 37 confers jurisdiction on the Master in a contested case to analyse affidavits filed in reply by a defendant to retrospectively impugn or invalidate a grounding affidavit sworn in support of a claim for a liquidated sum so as to permit or effect a finding that it is or might be in conflict with the stated requirements of Order 37.”
Bias
142. A.P. v. Judge McDonagh [2009] IEHC 316 concerned divorce proceedings in the Circuit Court. After the case had opened and the wife’s evidence had been heard, the parties reached agreement on the terms of a settlement. The matter then came before the judge for ruling on the settlement. It was not in dispute that, under the relevant statutory provisions, the judge had an obligation to ensure that the settlement made “proper provision” for the wife. The complaint in the judicial review proceedings arose primarily from the fact that the judge said that he wanted to see a specified lump sum payment, and indicated that if the husband was not prepared to pay that figure he would make an order that it be paid. The husband (who had not yet given evidence) then applied unsuccessfully for the case to be transferred to another judge. In the judicial review, it was argued on behalf of the husband that the judge’s conduct gave rise to an apprehension of objective bias.
143. In his judgment, Clarke J. analysed the jurisprudence on bias, with particular reference to the decisions of the Supreme Court in Bula Ltd. V. Tara Mines Ltd (No.6) [2000] 4 I.R. 412, O’Neill v Beaumont Hospital Board [1990] I.L.R.M. 419 and Orange Ltd. V. Director of Telecoms (No.2) [2000] 4 IR 159. He noted that the test is whether there is a reasonable apprehension of bias, citing the following passage from the judgment of Geoghegan J. in Orange:
“Even in cases where there is no evidence of actual bias and no evidence of the adjudicator having any proprietary or other interest in the outcome of the matter, there will still be held to be apparent bias if a reasonable person might have apprehended that there might be bias because of some particular proven circumstance external to the matters to be decided in the case such as for instance a family relationship in circumstances where objection may be taken (O’Reilly v. Cassidy [1995] 1 I.L.R.M. 306) or the judge having been involved in a different capacity in matters which were contentious (Dublin Well Woman Centre Limited v. Ireland [1995] 1 I.L.R.M. 408), or where there was evidence of prejudgment by a person adjudicating (O’Neill v Beaumont Hospital Board [1990] I.L.R.M. 419).”
144. Clarke J. also referred to the view of Barron J. in Orange to the effect that where bias may be found to exist or to have existed, it will always predate the actual decision or contemplated decision. Barron J. had said:
“Bias does not come into existence during the course of a hearing. It may become apparent in the course of a hearing and in that way alert a party to the possibility of bias and so enable such party to establish facts which show that the attitude adopted by the decision maker in the course of the hearing was one which might have been expected having regard to those facts. The essence of bias then is the perception – the strength of that perception not being relevant for the purpose of this definition – once all the facts are known, that the particular decision maker could never give or have given a decision in relation to the particular issue uninfluenced by the particular relationship, interest or attitude. Obviously, if it is perceived that it may influence a decision yet to be given, it must exist at that stage…a belief or perception that a decision might have been different is at the heart of bias because if the decision would always have been the same, it cannot have been influenced by bias or any other cause.”
145. Noting also that Barron J. had held that the principles of bias were too wide to be conclusively defined, Clarke J. said that “bias can take a number of forms”.
“What I am concerned with in this case is pre-judgment. To the extent that pre-judgment can be properly regarded as a form of bias, it seems to me that it is, nonetheless, in a different category. Most cases of bias involve an allegation that by reason of some factor external to the adjudicative process, the adjudicator might be perceived to be biased in favour of one party or the other. Thus there may be a relationship or connection between the adjudicator and one of the parties, or some common interest between the adjudicator and such party. Likewise, it might be suggested that the adjudicator did not come to the hearing with an impartial mind, whether because of a connection of the type which I have described or reason of some animus which the adjudicator might bear towards one of the parties, or in relation to the issue which the adjudicator was being called on to determine.
However, it seems to me that there is another form of pre-judgment which arises where the adjudicator indicates that the adjudicator has reached a conclusion on a question in controversy between the parties, at a time prior to it being proper for such adjudicator to reach such a decision (indeed it might well be more accurate to describe such a situation as premature judgment rather than pre-judgment). It can hardly be said that a reasonable and objective and well-informed person would be any the less concerned that a party to proceedings was not going to get a fair adjudication if, at an early stage of the hearing, comments were made by the adjudicator which made it clear that the adjudicator had reached a decision on some important point in the case at a time when no reasonable adjudicator could have, while complying with the principles of natural justice, reached such a conclusion….
…It does not seem to me that the comments of Barron J. in Orange can be taken to prevent a finding of a form of pre-judgment (or premature judgment) to which I have referred (that is to say a pre-judgment stemming from an appearance being given of the adjudicator having made a decision at a time when further evidence or argument on the issue concerned remained to be presented) simply because such contention arises out of what happens at, rather than prior to, the hearing concerned.”
Discussion and conclusion
146. It is not disputed that the respondent may be amenable to judicial review in at least some circumstances, although in general it will be more appropriate to appeal. In my view the applicants were entitled to seek judicial review in this instance.
147. They initially obtained leave to apply in circumstances where the respondent had refused to have an order drawn up reflecting his decision to refer the papers to the DPP, thus denying them an opportunity to appeal. The respondent’s position was, and is, that in making that decision he was acting as a private citizen. That is not, in my view, a tenable proposition. He was sitting in his official capacity, as an officer attached to the court, and he had access to and control over the court file by virtue of that capacity. The physical act of sending papers to the DPP would involve an assertion of a right to take or copy the papers that no private citizen could have.
148. When the respondent struck out the summons, it would in theory have been possible to appeal that order. However, the circumstances of the decision to strike out were so intimately connected with the earlier decision that it cannot be said that it was not appropriate to seek and obtain leave to have it dealt with in the same judicial review proceedings.
149. The next issue, then, is whether the respondent was lawfully entitled to refer the matter to the prosecution authorities.
150. Some time was devoted at the hearing to a submission by the applicants that only a judge has power to take such a step, other persons being restricted to making a complaint to An Garda Síochána. There does not appear to be any authority dealing with this practice, and it does not in my view rest on the basis of any particular concept of judicial status. It appears, in reality, to be merely something that some judges have on occasion found to be an appropriate course of action where it has been determined, after consideration of the evidence in a case, that a potential criminal offence has been disclosed. I would prefer not to embark upon a consideration of the basis for such a practice, because I am satisfied that in any event it could not be seen to be part of the functions being exercised by the respondent in this case.
151. The notice party claims that the respondent was obliged to refer the matter by virtue of the provisions of s. 19 of the Criminal justice Act, 2011. However, that provision itself makes it clear that the offence is only committed if the person concerned “fails without reasonable excuse” to inform the Gardaí.
152. Civil litigation involves, generally speaking, disputes between parties. There are of course some cases where the only dispute is as to legal consequences of a particular, agreed, state of affairs, or where there is no dispute but a court order is required for a particular purpose. However, most of the time, litigation involves parties making allegations of misconduct, of varying degrees, against other parties. The allegations may in turn be responded to with counter-allegations. These allegations will, prior to being heard in court, have been put in writing, and the papers will be seen by any official whose task it is to deal with the court files. If every official were to feel entitled to form a view on reading the papers that one of the parties was lying, and were to therefore refer the matter to the criminal prosecution authorities rather than fulfil his or her function of assisting in bringing the matter into the civil courts, the consequences would be extraordinary. This is not just a question of “inconvenience”, as counsel for the respondent suggested when the court put this scenario to him. It would amount to a fundamental undermining of the constitutionally-mandated process for the resolution of civil disputes. I do not consider that s.19 of the Act of 2011 can apply in this context. If it does, the provision relating to “reasonable excuse” must apply.
153. This is not, it must be emphasised, a question of expecting public officials to turn a blind eye to evidence of criminality. The point here is that the role of officials attached to the courts is (apart from minor matters where they have been given decision-making powers of a limited nature) to assist in bringing disputes into the forum where they belong. That forum is a court, presided over by a judge who administers justice in public, in accordance with the Constitution. The suggestion inherent in the respondent’s submissions, to the effect that the judges are too busy to consider the papers in a case properly, and will permit injustice to be done as a result, is one that is not proper for a court official to make and certainly not one that a court can accept.
154. As a separate consideration, there is the question of whether the respondent could rationally have reached the conclusion that the affidavits were perjured.
155. The crime of perjury involves a sworn statement that the maker knows to be false. Since the offence requires proof of the mental element, a judge or jury would have to examine the surrounding circumstances in order to come to a decision as to whether a statement, demonstrated to have been in fact false, was made in the knowledge that it was false. In this case, the respondent’s suspicions of perjury appear to have centred on, firstly, the inclusion in Ms. Hogan’s list of undertakings that were in fact made to the co-plaintiff bank rather than to her own employer; and secondly, the assertion by her (and indeed by Mr. O’Keeffe) that, because the notice party had not complied with her undertaking, the “security was outstanding”.
156. With regard to the first of these averments, it is abundantly clear that there was nothing to be gained for either Ms. Hogan or the bank that employed her by including in her affidavit undertakings that did not apply to that bank. Given that the relief sought was, primarily, enforcement of the undertakings set out in the special summons, there was no prospect of any benefit to her employer either. In the context of this case, an undertaking can only be fulfilled once, and only in the interest of the party to whom it is given. Even if the issue ultimately came down to compensation, there could be no question of both banks being compensated in respect of the same undertaking. Any relief to be granted could only be by reference to the reliefs sought in the special summons. There is, in my view, absolutely nothing to indicate a deliberate intention to swear to a falsehood.
157. The deponent may well be accused of sloppiness, which is an all-too frequent phenomenon in these matters, but that is a very far cry from a finding that there is an “incontestable prima facie case of perjury”.
158. The other ground argued for the accusation of perjury seems to be in relation to the assertion that the security was outstanding. For the purposes of this case it is not necessary to embark upon an analysis of the law relating to the meaning of the term “security”. Firstly, this is clearly an assertion of law and it is irrelevant, in this context, that the deponent did not state that she had received legal advice in making the assertion. Secondly, it is clear from the authorities that it is no part of the respondent’s functions under the Rules to reach his own conclusions as to the merits of the contents of affidavits grounding a special summons that he has no jurisdiction to deal with. That is a matter for the court, into whose list he is supposed to transfer the case.
159. On this issue, I find that the respondent acted irrationally.
160. I therefore conclude that the respondent had no power, and no entitlement, to deal with the court file in the manner proposed by him.
161. The next issue is whether the respondent had the power to strike out the summons.
162. Having regard to the authorities cited above, certain propositions relevant to this case seem to be beyond dispute. The first is that the respondent only has powers where such are given to him by statute, the Rules, or (in some circumstances) allocation by the President of the High Court. The second, arising from the first, is that he has no power to take a step which amounts to a determination of the rights and liabilities of parties save where he has jurisdiction to do so. The third is that he has no function in assessing the veracity or accuracy of affidavits in cases where he does not have jurisdiction. The fourth is that he has no power to strike out a special summons.
163. The submissions made on behalf of the respondent on this issue depend on the court distinguishing or refusing to follow the various High Court judgments referred to. There is no basis upon which I could properly take either course of action.
164. I do not think it necessarily correct to characterise the observations of Laffoy J. in ACC Bank v. Tobin as obiter, given that the appeal before her was primarily an appeal against an order striking out the summons. The fact that she also determined the substantive matter does not alter that. In any event, her reasoning was followed by Hogan J. in Heffernan.
165. The fact that the relief sought in the special summons involves an invocation of the inherent jurisdiction of the High Court in my view weakens rather than strengthens the respondent’s position. The supervisory jurisdiction over solicitors inheres in the High Court. It is clear from Killeen that no part of that jurisdiction has been allocated to the respondent.
166. The submission that it is part of the role of the respondent to, in some way, “prefigure” the function of a judge, and that he is entitled to strike out proceedings that are “bound to fail”, is one that I have to admit I have difficulty in understanding. If it means that he believes that he has the same powers as a judge to dismiss proceedings that are bound to fail, the submission is mistaken.
167. The contention that, because the authorities relied upon by the applicants are decisions of the High Court, this court can decline to follow them is misconceived. Having regard to the principles set out in Irish Trust Bank v Central Bank (1976 -7) I.L.R.M. 50, In Re Worldport Ireland Limited [2005] IEHC 189 and Kadri v Governor of Wheatfield Prison [2012] IESC 27, I am bound by them unless persuaded that they are wrong on one of the grounds set out in those judgments. As it happens, I completely agree with the authorities and do not propose to differ from them.
168. References to the European Convention on Human Rights and the European Convention on Human Rights Act, 2003 do not assist. The Convention requires the State to ensure that litigants can have a fair and impartial hearing by an independent tribunal “established by law”. The “tribunals” in this State are the courts, and the relevant law of the State, in so far as this case is concerned, is to be found in the applicable legislation and the Rules.
169. The Act of 2003 requires organs of the State to carry out their functions in a manner compatible with the State’s obligations under the Convention. This, if it applies to the respondent, certainly requires him to act fairly towards parties when carrying out his functions. His functions are determined by the applicable law. Neither the Convention nor the Act can conceivably be thought to confer on court officials a power that they did not already have, such that they could be entitled to determine the rights and liabilities of parties.
170. Finally, there is the issue of bias.
171. Having considered the authorities, I do not think that this case falls into the category of “pre-judgment” or “premature judgment” identified by Clarke J. It could not properly be said that there was a rush to judgment, or that the respondent’s decision was made before he had heard all that he should have heard.
172. However, I think that what occurred on the 23rd July, 2014, is a matter for real concern. Adopting the test of the reasonable onlooker, the sequence of events was that the respondent announced that his legal advisers had advised him to formally request the withdrawal of the special summons. (It may be noted that it would be a surprising thing for any public official to do this in a public forum. It is particularly surprising for the request to be made by a senior court official sitting to transact court business.) A reasonably informed onlooker would know that the effect of a withdrawal of the summons would have been to render the judicial review moot. Counsel representing the applicants refused to withdraw the summons. The respondent subsequently struck it out.
173. In my view, a reasonable onlooker might well have apprehended from this that the respondent had been advised prior to the hearing that the judicial review proceedings would become moot if the summons was withdrawn; that it was therefore in his interest that the special summons not proceed, and that his decision to strike out the summons was not uninfluenced by that consideration.
174. This is a matter of objective, rather than proven, bias and is in itself sufficient grounds for quashing the decision. I bear in mind that in Kenny v. Trinity College [2008] 2 IR 40, the Supreme Court reviewed one of its own judgments to adjudicate on a question of objective bias arising from a familial relationship between a member of that Court and a party in the litigation. The judgment of the Court makes it clear that because it was reviewing its own judgment on this basis, it was particularly necessary to take the interpretation more favourable to the person challenging the decision. I consider that this is an appropriate approach in a case involving a senior court official.
Reliefs
175. The respondent appears to have misunderstood the reason why the applicants have sought an order of mandamus to direct him to draw up an order, and also an order of certiorari to quash that order when drawn up. I understand this to be because of the traditional rule that the order to be quashed must be presented to the court having power to quash it, and that, if the decision-maker had not drawn up an order, mandamus would lie for that purpose.
176. In the circumstances of this case, I do not believe that it is necessary to go through that particular procedure and I propose therefore to grant a declaration that the respondent has no power to copy or otherwise take possession of the court file in the case for the purpose of sending it to the Director of Public Prosecutions.
177. I will also make an order of certiorari quashing the order made by the respondent striking out the special summons proceedings.
178. It is unlikely that any further order will be required.
Mellowhide Products Ltd v Barry Agencies Ltd
1981 No. 5615
High Court
22 February 1982
[1983] I.L.R.M. 152
FINLAY P
delivered his judgment on 22 February 1982 saying: This is a summary summons brought by the plaintiffs to recover a sum of £7,747.77 sterling from the defendants being monies due and owing for goods sold and delivered by the plaintiffs to the defendants between 20 November 1980 and 30 April 1981. The summons was issued on 15 July 1981.
The matter came before the Master of the High Court on 6 November 1981. He then ordered that the plaintiff should be at liberty to enter final judgment for the sum of £7,747.77 sterling, the amount claimed in the indorsement of claim, together with further interest thereon at the rate of 11% on arrears from 15 July 1981. This order was made in default of any appearance by or on behalf of the defendant.
Upon the solicitor for the plaintiff seeking to enter judgment with the registrar of the High Court pursuant to the leave contained in the Master’s Order, the registrar ruled that she was not satisfied that she had power pursuant to the provisions of s. 22 of the Courts Act, 1981 to comply with so much of the order of the Master as gave leave to enter judgment for interest from 15 July 1981.
The solicitors for the plaintiff on 29 January 1982 applied to the Master of the High Court as a result of that ruling and it was then ordered by the Master that the order made by him on 6 November 1981 be discharged and that the summons should be transferred to the Judge’s list for hearing on 8 February 1982.
The matter came before me and I then directed that notice of the application to the court to enter judgment for the amount claimed and for interest should be given to the solicitors who had entered an appearance on behalf of the defendants. This was done and they appeared as a matter of courtesy before the court and informed me that they were unable to obtain any further instructions on behalf of the defendants. I heard therefore only submissions made on behalf of the plaintiffs. Having heard those submissions, I reserved judgment on the issues arising.
The material provisions of s. 22 of the Courts Act, 1981 reads as follows:
(1) Where in any proceedings a court orders the payment by any person of a sum of money (which expression includes in this section damages), the judge concerned may, if he thinks fit, also order the payment by the person of interest at the rate per annum standing specified for the time being in s. 26 of the Debtors (Ireland) Act, 1840, on the whole or any part of the sum in respect of the whole or any part of the period between the date when the cause of action accrued and the date of judgment.
Sub-s. (2) of the section then provides for a number of exceptions to this power to order the payment of interest, the only material one of which is contained at sub-clause (d) which prohibits the giving of interest in respect of a period before the passing of the Act. The date of the passing of the Courts Act was 12 May 1981. By virtue of the provisions of s. 19 (1) of the Act, the rate per annum standing specified for the time being in s. 26 of the Debtors (Ireland) Act, 1840 is 11%.
Two issues would appear to arise before me on this application. The first one being as to whether it is within the jurisdiction of the Master of the High Court to make an order pursuant to the provisions of s. 22(1) of 1981 Act in an appropriate case. The second issue is as to whether if it is not within his jurisdiction so to do I should in this particular case make an order for the payment of interest under that section.
Having carefully considered the sub-section concerned I am satisfied that the entry of judgment by the registrar of the High Court either in default of appearance on what is ordinarily known as a default judgment or by virtue of an order made by the Master of the High Court giving leave to enter judgment is an order by a court to wit the High Court for the payment by a person of a sum of money. The first condition of s. 22(1) of the 1981 Act is therefore fulfilled by the order made by the Master and the subsequent application in pursuance of it to enter judgment with the registrar of the High Court. I have reluctantly come to the conclusion, however, that the phrase contained in the section:
the judge concerned may if he thinks fit also order the payment by the person of interest.
cannot be construed as giving to the Master of the High Court jurisdiction to make such an order. The Courts Act 1981, is entitled as an Act to amend and extend the Courts of Justice Acts 1924 to 1961 and the Courts (Supplemental Provisions) Act 1961 to 1979. A consideration of the provisions of the Courts (Supplemental Provisions) Act 1961 makes it quite clear that the phrase ‘a judge of the High Court’ is strictly confined to judges appointed to the High Court under the Constitution and there is no conceivable room for interpreting that Act so as to include any officer of the High Court whether a Registrar or a Master within the meaning of the phrase ‘Judge of the High Court’.
It seems to me to follow from this that where the provisions of s. 22 of the 1981 Act confine the discretion to award or not to award interest from the date of the accrual of the action upon the court ordering the payment of a sum by any person to another to the judge concerned that it is not possible to construe it as giving that power to the registrar of the High Court who enters a default judgment even where it is by leave of an order of the Master of the High Court.
As indicated, I have reached this conclusion with reluctance because it appears to me that this provision in the Act which incidentally is different from in this regard the provisions of the statute of the United Kingdom the Law Reform (Miscellaneous Provisions) Act 1934, which is otherwise similar in its effect, could create an unnecessary anomaly and one which I would have thought the legislature might consider as a matter of urgency. If in order to recover interest before judgment a creditor suing in default of appearance or in default of a defence has to seek to have the matter put in the judge’s list then such creditor will be put to additional cost and expense and if the amount is recoverable in full the debtor will be put to additional cost and expense even if he does not appear or defend. There would appear to be no logical reason why the Master of the High Court should not exercise the discretion contained in the section but having regard to the actual words used in the section coupled with the consideration of the 1961 Act of which it is an extension and amendment I cannot without doing violence to the clear meaning of the section rule that the entry of a default judgment in either of the two circumstances which I have outlined by the registrar of the High Court with an order for interest before the date of judgment is permissable.
The matter having come before me for the purpose of giving leave to enter judgment, I am satisfied that on the facts of this particular case I should make a provision for interest under s. 22. The claim is one between two commercial firms for a sum due by the defendants to the plaintiffs for goods sold and delivered. There is no appearance by or on behalf of the defendants nor any facts or matters submitted by them to the court which would indicate that there are good reasons in justice why they should not pay interest on the amount which was apparently due since April of last year. Where a debt is due as the result of an ordinary trading or commercial transaction it would appear to me that the debtor delaying the due payment of his liabilities is clearly and in a sense intentionally depriving his creditor of the use and value of the money concerned. I am also influenced by the fact as a matter of common knowledge that the amount money can earn by way of interest rates at present is higher than the figure of 11% which is now provided in the Debtors (Ireland) Act 1840. For these reasons I am satisfied that the plaintiff is entitled to an order for interest and I so decree. I am satisfied that there are no grounds either for postponing the commencement of the period of that to the date of the issue of the summons as the master’s original order would appear to have done. On the particulars in the summons and on the affidavit of debt it would appear that the sum was due from 30 April 1981. In these circumstances, I would give judgment for the sum of £7,747.77 sterling together with interest thereon at the rate of 11% per annum from 12 May 1981.
I should make it clear, however, that my decision to grant an order for the payment of interest under s. 22 relies upon the particular facts of this case which I have outlined. It does not mean that the recovery of interest on arrears in regard to any claim for liquidated demand should be automatic. The court must exercise a discretion and it may well be that plaintiffs seeking an order for such interest and unless and until the legislation is amended having to come to the court for that purpose may well be advised to amplify the effects and consequences of the failure or refusal of the defendant to pay so as to justify a claim for interest. On the other hand, it may well be that a defendant faced with a claim for a liquidated sum and accordingly with an application by a plaintiff to put the matter in the judge’s list for the purpose of obtaining an order for interest on arrears may well be advised to file affidavits concerning the position and facts and merits of the case which might lead the court to refuse to exercise its discretion.
One other point arose in the case very properly brought to my attention by the solicitor for the plaintiff Mr Murphy who made submissions to me. That was, the claim on the summons did not include a claim for interest. Having regard to the provisions of the Act, I am not satisfied that this is in the circumstances a necessary claim and accordingly notwithstanding its absence though the inclusion of such a claim may well be a wise precaution I am satisfied to make the order which I have indicated. This decision does not of course affect the amendment of s. 26 of the Debtors (Ireland) Act 1840 provided for in s. 19(1) of the Courts Act 1981, as a result of which 11% is the rate of interest payable on all judgments after they have been entered irrespective of whether they are default judgments entered by leave of the Master or entered by the court.
Moohan v S & R Motors (Donegal) Ltd
[2007] I.E.H.C. 435
JUDGMENT of Mr. Justice Clarke delivered the 14th December, 2007
- Introduction
1.1 The defendants (S.& R. Motors) employed the plaintiffs (“Bradley Construction”) to build a Volkswagen car show room at Drumlonagher in Donegal town. The parties entered into a written building construction contract (“the agreement”) on 24th June, 2004. The agreement used the Royal Institute of Architects of Ireland (“RIAI”), 2002 template contract as its basis.
1.2 The disputes which have now arisen between the parties concern on the one hand, an allegation on the part of Bradley Construction of non-payment and, on the other hand, an allegation on the part of S.& R. Motors of faulty workmanship. Bradley Construction have issued summary summons proceedings claiming sums due on foot of architects’ certificates issued under the terms of the agreement. The issues which I have to decide concern whether Bradley Construction is entitled to judgment at this stage in those proceedings or whether the proceedings should be stayed pending a possible arbitration of the disputes which have arisen concerning workmanship. In order to properly set out the specific issues which have now arisen it is necessary to turn firstly to the procedural history of this case.
- Procedural History
2.1 A summary summons claiming the amounts certified by the architect concerned in Certificates 11 and 12 (together with interest on those amounts in accordance with Clause 35(m) of the agreement and the retention monies held under the provisions of that agreement) totalling €233,098.34 was issued on 23rd November, 2006. The summons as originally issued claimed pounds sterling by error and also misdescribed the defendant company. By order of 11th May, 2007 the Master, on the application of Bradley Construction, amended the summons by substituting the euro sign “€” in lieu of the sterling pound sign “£” and also amended the name of the defendant to read “S. & R. Motors (Donegal) Limited”. Thereafter Bradley Construction brought a motion for judgment which was initially returnable on 26th July, 2007 seeking the above sum together with continuing interest. That motion was adjourned on a number of occasions and finally until the 26th October, 2007. In the meantime, on 25th September, 2007, solicitors on behalf of S. & R. Motors requested, by letter, a stay on the proceedings to enable the issues between the parties to be referred to arbitration. Solicitors for Bradley Construction declined and on 9th October, 2007 a motion seeking such a stay was issued before this court which was made returnable for the 19th November, 2007. However, in the meantime, on 26th October, 2007, the motion for judgment came on before the Master who declined to adjourn same to enable the stay application to be first considered by this court.
2.2 The stated basis put forward on behalf of S. & R. Motors for seeking an adjournment on the 26th October, 2007 was that, in order for S & R Motors to be entitled to successfully pursue an application for a stay pending arbitration, it was necessary, in accordance with the jurisprudence of the courts in the area, that no step be taken in the proceedings by S & R Motors prior to the stay application. In those circumstances it was said that S. & R. Motors were unable to file a replying affidavit setting out their substantive defence to the motion for judgment because so to do would amount to a step in the proceedings and would, thus, lose S & R Motors any entitlement which they might have, to have the case stayed pending arbitration. Notwithstanding that application the Master declined to further adjourn the motion for judgment and, in the absence of any effective opposition evidence, proceeded to give judgment in favour of Bradley Construction.
2.3 S. & R. Motors has appealed against that decision of the Master. That appeal together with the application for a stay came on for hearing at the same time before me and this judgment is directed towards both issues.
- The legal consequence of the sequence of events
3.1 The first procedural issue which arises concerns the sequence of events which I have just outlined. I am satisfied that the Master was not correct in going ahead with the motion for judgment in circumstances where there was already pending before the court, an application for a stay pending arbitration. It seems to me that S. & R. Motors were placed in an invidious position. S & R Motors correctly argued that, had they contested the motion for judgment by filing replying affidavits, a step would have been deemed to have been taken by them in the proceedings and they would, thus, have lost any entitlement which they might have to arbitration. The situation might have been otherwise if S. & R. Motors had not already pending before this court a motion in which such a stay was sought. In those circumstances it would have been open to the Master to take the view that a party wishing to seek such a stay had lost any such entitlement by virtue of a failure to initiate the appropriate application prior to the motion for judgment coming on for hearing. However, that was not the case here. S. & R. Motors had initiated an application for a stay. Unfortunately S & R Motors could not be accommodated with a hearing date for that application in this court until the 19th November, 2007 notwithstanding that the motion for judgment was due for hearing on 26th October, 2007. The timing of court listings of that type should not affect the substantive rights of parties. In those circumstances it seems to me that it would have been appropriate for the Master to adjourn the motion for judgment until such time as the stay application had been considered. Be that as it may, both matters are now before this court and it is possible to deal with both of them at the same time.
3.2 In substance the real issue which I have to decide is as to whether S. & R. Motors must now make payment on foot of the architect’s certificates which have issued. The contention of S & R Motors is that they should not be required to make payment because they have a bona fide cross claim which would, in principle, entitle them to defend these proceedings but, having regard to the fact that the cross claim ought, under the terms of the agreement, be referred to arbitration, entitles them, on the facts of this case, to a stay pending such arbitration. Against that background it is appropriate to turn first to the legal principles applicable.
- The Law
4.1 The test to be applied in deciding whether a party should be given leave to defend a summary judgment application was most recently addressed by the Supreme Court in Aer Rianta Cpt v. Ryanair Limited, [2002] 1 ILRM 381. In that case the court indicated that the test is as to whether, looking at the whole situation, the defendant has satisfied the court that there is a fair and reasonable probability that he has a real and bona fide defence. As pointed out by Hardiman J., the test does not mean that the party must establish that he has a defence which will probably succeed; rather he must establish that it is probable that he has a bona fide defence.
4.2 Where the nature of the defence put forward amounts to a form of cross claim slightly different considerations may apply. In those circumstances the court has a wider discretion. Where the defendant does not establish a bona fide defence to the claim as such, but maintains that he has a cross claim against the plaintiff, then the first question which needs to be determined is as to whether that cross claim would give rise to a defence in equity to the proceedings. It is clear from Prendergast v. Biddle (Unreported, Supreme Court, 21st July, 1957, Kingsmill Moore J.), that the test as to whether a cross claim gives rise to a defence in equity, depends on whether the cross claim stems from the same set of facts (such as the same contract) as gives rise to the primary claim. If it does, then an equitable set off is available so that the debt arising on the claim will be disallowed to the extent that the cross claim may be made out.
4.3 On the other hand if the cross claim arises from some independent set of circumstances then the claim (unless it can be defended on separate grounds) will have to be allowed, but the defendant may be able to establish a counter claim in due course, which may in whole or in part, be set against the claim. What the position is to be in the intervening period creates a difficulty as explained by Kingsmill Moore J., in Prendergast v. Biddle in the following terms:-
“On the one hand it may be asked, why a plaintiff with approved and perhaps uncontested claim should wait for a judgment or execution of judgment on this claim because the defendant asserts a plausible but unproved and contested counter claim. On the other hand it may equally be asked why a defendant should be required to pay the plaintiffs demand when he asserts and may be able to prove that the plaintiff owes him a larger amount”.
4.4 The courts discretion is to be exercised on the basis of the principles set out by Kingsmill Moore J. later in the course of the same judgment in the following terms:-
“It seems to me that a judge in exercising his discretion may take into account the apparent strength of the counter claim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims, the nature of their claims and also the financial position of the parties. If, for instance, the defendant could show that the plaintiff was in embarrassed circumstances it might be considered a reason why the plaintiff should not be allowed to get judgment, or execute judgment on his claim, until after the counter claim had been heard, for the plaintiff having received payment by dues the monies to pay his debts or otherwise dissipated so the judgment on a counter claim would be fruitless. I mentioned earlier some of the factors which a judge before whom the application comes may have to take into consideration in the exercise of this discretion”.
4.5 It seems to me that it also follows that a court in determining whether a set off in equity may be available, so as to provide a defence to the claim itself, also has to have regard to the fact that the set off is equitable in nature and, it follows, a defendant seeking to assert such a set off must himself do equity.
4.6 On that basis the overall approach to a case such as this (involving, as it does, a cross claim) seems to me to be the following:-
(a) It is firstly necessary to determine whether the defendant has established a defence as such to the plaintiffs claim. In order for the asserted cross claim to amount to a defence as such, it must arguably give rise to a set off in equity, and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendants case, it would not be inequitable to allow the asserted set off;
(b) If, and to the extent that, a prima facie case for such a set off arises the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);
(c) If the cross claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle.
- Application to the facts of this case – Architects Certificates
5.1 The first issue which arises is as to whether it is open S & R Motors to raise a set off in equity as against architects certificates issued under a contract incorporating the RIA template. This topic has been the subject of a number of decisions of the courts in this jurisdiction over the last number of decades which, at a minimum, suggest at least a difference of emphasis if not a positive disagreement.
5.2 In John Sisk & Sons Ltd v. Lawter Products B.V. (Unreported, High Court, Finlay P., 15th of November, 1976) the then edition of the RIAI template was considered by Finlay P. in the following terms:-
“Clause 31 provides for the arbitration of disputes and claims with a proviso that such references to arbitration shall not, apart from exceptions irrelevant to these issues, be opened until after the practical completion of the works. It gives however each party to the contract a clear right to refer disputes to arbitration.
The issue of law which arises on these facts and on these terms in the contract shortly is as to whether the employer upon the due issue of an interim certificate is entitled to set-off against the sum so found due, claims against the contractor quantified but not yet proved arising in respect of alleged breaches by them of the contract …
Clause 29 sub-sections (a) and (b) clearly give to the contractor a right to payment of the amount provided for in an interim certificate within fourteen days of its issue subject only to two clearly specified qualifications. The first is that arising under clause 15(c) in respect of previous default in his payments to nominated sub-contractors and the second is that arising by way of the right of the employer to retain and ascertain some.
The amount so recoverable on the interim certificate furthermore is confined to the amount which in the judgment of the architect is the total value of the work duly executed and of the goods and materials specially prepared for the works.
The architect therefore who is part under the terms of the building contract an agent of the employer and in part in a quasi judicial position must before using an interim certificate exercise a Value Judgment.
Furthermore there is an express remedy for such delay as is here complained of given to the employer in Clause 24.
Again it is envisaged in Clause 28 that a bare failure on the part of the employer to pay upon an interim certificate would justify the contractor in suspending the works.
Finally, clause 31, in my view, clearly envisages the arbitration of all disputes at the instance of either party but not before the practical completion of the works. If an employer were entitled, as the defendants here contend, to set-off or counter-claim for a disputed claim against the amount due on foot of an interim certificate he would thus effectively deprive the contractor of his right to refer such dispute to arbitration and thus effectively frustrate Clause 31.
Applying therefore the test which I consider to be the true legal test, namely whether the common law right of set-off and counter-claim is consistent with:
(a) A specific right of payment on an interim certificate subject only to specified deductions as is contained in Clause 29.
(b) A right of the contractor to suspend the works on mere non-payment on an interim certificate.
(c) A specific right of each party to refer disputes to arbitration not to be opened until after the practical completion of the works.
I find that it is inconsistent and that therefore the contract should be construed as by its terms excluding such a right.
I am therefore satisfied that the plaintiffs are entitled to enter Summary Judgment in the amount claimed.”
5.3 That judgment was, at a minimum, distinguished by Murphy J., in P.J. Hegarty & Sons Ltd v. Royal Liver Friendly Society [1985] I.R. 524 in the following terms:-
“It seems to me that the main propositions to be gleaned from the decision of the House of Lords in Modern Engineering v. Gilbert-Ash [1974] A.C. 689 may be summarised as follows:-
(1) That an amount included in a certificate (whether interim or final) does not constitute a debt of a particular character and enjoys no special immunity from any cross-claim or right of set off to which the debtor may be entitled.
(2) One starts with the presumption that each party to a building contract is entitled to all those remedies for its breach as would arise by operation of law including the remedy of setting up a breach of warranty in diminution or extinction of the price of materials supplied or work executed under the contract.
(3) Parties to building contracts or sub-contracts, like the parties to any other type of contract, are entitled to incorporate in their contract any clause they please. There is nothing to prevent them from extinguishing, curtailing or enlarging the ordinary rights of set off.
(4) Whether the parties have in fact curtailed or restricted the common law or equitable right of set off depends upon the construction of the agreement between them.
I believe I am correct in saying that in John Sisk and Son Ltd. v. Lawter Products B.V. (Unreported, Finlay P., 13th November, 1976), the then President of the High Court accepted – though not in those terms – the foregoing propositions. However, though otherwise accepting the judgment of Lord Diplock and the implied criticism by him of Lord Denning, he declined to accept the views of Lord Diplock as to the weight of evidence required to rebut the presumption that each party intended to maintain the rights to which they were entitled at law. Lord Diplock had expressed his views on that topic (at p. 718) in the following terms:-
‘To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract.”
Having reviewed John Sisk, Murphy J. went on to say:-
“Whilst the value of precedent in the actual construction of documents as opposed to the principles by which they fall to be construed may be of relatively little value I would have been extremely slow to differ from the conclusion reached in John Sisk and Son Ltd. v. Lawter Products B.V., (Unreported, Finlay P., 13th November, 1976) were it not for this important distinction. There is no doubt that the then President attached very considerable importance to the form of the arbitration clause in the agreement before him. In that he appears to have taken a somewhat different view from that expressed by Lord Salmon with regard to the terms of the arbitration clause under consideration in Modern Engineering v. Gilbert-Ash [1974] A.C. 689 (at page 762). Be that as it may, once the arbitration point is taken out of the reckoning, one is left in the present case with the basic provisions requiring that the interim certificate should be honoured by the employer within seven working days of presentation of same to him by the contractor (Clause 35) and the other provisions, to which the President had referred, providing that if the employer should not pay the contractor within the period for honouring the certificates, that the contractor should be entitled after seven days notice to the employer to suspend the works (Clause 34). It seems to me in effect that they are the only two clauses which bear on the issue and that they do not go very far beyond describing the interim certificate procedure and the manner in which that procedure would operate in any case, whether the right of set off was to be preserved, restricted or excluded.
In these circumstances I take the view that the terms of the contracts between the parties in the presence case are not inconsistent with the rights of set off and counterclaim and that accordingly the employer/defendant is entitled to set up its claim by way of defence to the liquidated demand of the builders/plaintiffs herein.
5.4 Thereafter Costello J., in Rohan Construction Ltd v. Antigen Ltd [1989] ILRM 783, described the previous two decisions to which I have referred as “an unfortunate difference of opinion” but found himself in agreement with Finlay P., on the construction of the contract.
5.5 Finally, and in more recent times, in Powderly v. McDonagh (Unreported, High Court, Kelly J., 31st of January, 2006), the conflicting authorities were considered again in slightly unusual circumstances where there was, in fact, no single written contract between the parties. It is, however, worthy of note that Kelly J., described the analysis conducted by Murphy J., in P J Hegarty & Sons Ltd as “perhaps the best analysis of the position”. I agree.
5.6 It seems to me, therefore, that the overall test is as to whether, as a matter of construction of the contract taken as whole, it can properly be said that the parties have agreed that there can be no set off.
5.7 The default position is that a party is entitled to a set off in equity in relation to any cross claim arising out of the same contract. Thus if a builder is owed money on foot of a construction contract, the employer is prima facie entitled to a set off in equity, in principle, in respect of any defective works. The question which arises is as to whether that prima facie position has been displaced by the terms of the contract. There is no doubt but that the parties are free to agree that there will be no set off. The question is whether they have in fact done so. I am not satisfied that the balance of the authorities favours the view that the current standard form RIAI template does give rise to an agreement to exclude a set off, at least, and this is the only issue relevant in this case, in circumstances where the contract is completed to the stage of a certificate of practical completion having been issued by the architect and where, therefore, any entitlement to arbitration on the part of the employer is immediate. It is, of course, the case that Finlay P, in John Sisk had significant regard to the fact that, in the case then under consideration, there was no immediate right to arbitration as the contract was ongoing.
5.8 In those circumstances I am satisfied that, as a matter of construction of the contract in this case, S & R Motors are prima facie entitled to a set off in respect of any cross claim which they can maintain. However, that set off arises in equity and is, as I have previously noted, subject to S & R Motors themselves having done equity.
- An Assessment of the Cross Claim
6.1 The most striking feature of the cross claim now put forward by S & R Motors is the extent to which it has only been formulated with any precision in very recent times indeed. It was only on the filing of an affidavit of the 29th of November, 2007 (just a few days before the motions came on for hearing) that any attempt to establish that the cross claim might be such as would extinguish the claim was attempted. The architects certificates concerned date from the 1st of June, 2005 and the 26th of April, 2006 respectively.
6.2 The underlying basis of the counter claim is an allegation that the floor of the car showrooms concerned is uneven and defective. While that fact was raised at an early stage, I am not satisfied on the affidavit evidence that any meaningful attempt to quantify a claim arising therefrom, or have same properly referred to arbitration, has been established by S & R Motors until very recent times indeed. There is reference in the affidavit of evidence of attempts made to engage in dispute resolution. While parties are to be commended for attempting to engage in dispute resolution which does not require the intervention of the court, a point is, nonetheless, reached where a party who is not satisfied with the direction in which such dispute resolution attempts are going has an obligation to bring such attempts to a conclusion or embark on whatever action might be required for enforcement in the absence of agreement. Such a party cannot just sit on its hands and then reactivate its complaints when it suits.
6.3 It has often been said that delay defeats equity and that he who seeks equity must do equity. Having regard to the very belated attempt to quantify, in any significant way, a claim arising out of the defective floor, I am not satisfied that S & R Motors has done equity. For reasons which I have already addressed I accept that S & R Motors had a real difficulty in putting its defence on affidavit until recent times. If its cross claim had been set out in any reasonable detail in correspondence prior to the proceedings having been issued, then the absence of affidavit evidence until very recent times would not, in my view, on the facts of this case, be material.
However, on the evidence I am not satisfied that S & R Motors made any reasonable attempt to quantify or pursue their cross claim by arbitration in a timely manner.
6.4 In those circumstances I am not satisfied that S & R Motors have established a prima facie defence as such to these proceedings. S & R Motors has, however, established a prima facie cross claim and it seems to me that I must apply the principles set out by Kingsmill Moore J., in Prendergast v. Biddle, in assessing what, in those circumstance, should occur.
- Conclusion
7.1 It follows that the claim must be allowed and judgment entered for the sum claimed. The question is as to whether execution on that judgment should be stayed pending an arbitration of the issues which S & R Motors wish to raise concerning the defective floor. It seems to me that, in equity, I must have regard to the fact that the claim, at least in general terms, has been asserted from the beginning. It is only in recent times, however, that there has been any attempt to put forward a basis upon which it might be asserted that the claim would be of an order of magnitude which could meet and extinguish the claim made by Bradley Construction. It is clear from the passage from the judgment of Kingsmill Moore J., in Prendergast v. Biddle, to which I have referred, that delay is a factor to be properly taken into account. I equally take into account the fact that no basis has been put forward for suggesting that Bradley Construction would not be in a position to meet any award which an arbitrator might make in favour of S & R Motors arising out of the defective floor claim.
7.2. Taking all of those factors into account I would propose entering judgment in the sum claimed but placing a stay on the execution of any sum in excess of €100,000.00 until the determination of an arbitration in respect of the claims made by S & R Motors relating to defective construction or further order. I would also propose giving liberty to apply in that I would be minded to remove that stay unless S & R Motors expedite (insofar as that it is within their power) the maintenance of the appropriate arbitration proceedings.
Danske Bank A/S trading as National Irish Bank v Durkan New Homes
[2009] IEHC 278;
Judgment of Mr. Justice Charleton delivered on the 26th day of June 2009
- The plaintiff claims summary judgment against each of the defendants for the repayment of two loans of €29,460,000 and €7,640,000 together with interest. The liability of some of the defendants is dependent upon guarantees for the repayment of those amounts. These guarantees are not in dispute. Instead, both parties are agreed that the guarantees are dependant upon the correct interpretation of the main contract of loan advanced by two similar letters dated 22nd February, 2006. Each letter offered one of the loans and each of them was accepted on the terms therein set out. If these primary contracts establish liability to repay the amounts, then the guarantees are operative. Although there were two separate loan offers advanced by the plaintiff to Durkan New Homes and to Tullycross Developments Limited respectively, the contract terms were identical. Hence, two separate sets of proceedings have been consolidated. It is only necessary in this judgment to refer to one set of documents as the other duplicates this.
- The plaintiff argues an entitlement to summary judgment, contending that the terms of the contract are clear and that none of the defendants have any defence to these primary contracts on which the guarantee liability of the other defendants are dependant.
Facts
- Under a letter of 22nd February, 2006, the plaintiff offered the first, second and third named defendants a loan of €29,460,000. This happened in the context of existing loans on land which were to be refinanced, and in order to facilitate the purchase of additional houses, whereby a large site could be made up at Beech Park, Cabinteely, County Dublin. Some eleven or twelve individual suburban houses were to be bought and these were to be knocked, a large site was then to be assembled, and planning permission was to be sought for some hundreds of dwellings. There was a moratorium put on interest and capital payments but full repayment was to be effected on date scheduled as being two years and six months after the date of the first drawdown. A separate letter of loan offer dated the same date, as the first letter, offered the fourth named defendant the sum of €7,640,000 on the same terms. Then, by separate guarantees, the defendants accepted liability conditional upon these loans for the repayment of the relevant sums. In addition, a claim is made for interest by the plaintiff as and from the 30th September, 2008. On that date, it is agreed, two years and six months had expired from the date of the first drawdown of the relevant tranche of finance. When that date is over is in dispute: was it at midnight, as would be usual, or when office work had customarily ceased? On that date, within office hours, the defendants had paid such interest as was due to the plaintiff over the term of two years and six months from the date of the first drawdown. If there is liability under this judgment, then they must also pay interest from that date to the date hereof.
- The defendant claims that they are not liable to pay interest after that date. They further claim that the terms of the contract entered into between the parties allowed the plaintiff bank recourse only to certain secured properties and to no more than that. The defendants are willing to hand over these properties to the plaintiff bank which, they say, is not entitled to any judgment against them for the return of the loans advanced.
- A loan to the first, second and third named defendants was secured by a guarantee provided by the fourth named defendant and that in turn was supported by a legal charge executed by the fourth named defendant over its interest in certain specified properties. These were, in essence, the various pieces of property that were individually purchased and which were to be gathered together into one large site for development. The loan offered to the fourth named defendant was conditional on a guarantee by the first second and third named defendants and this in turn was supported by a first legal charge to be executed by them over and in respect of their interests in certain of the specified properties. These, in turn, were portions of the large agglomerated site.
- I will, in due course, quote the relevant documents in this case as they are and without putting in (sic) or making any comment as to grammar. For precision I will need later to quote the precise terms of the loan offer letter of 22nd February, 2006. In summary, however, the condition which gives rise to a claim by the defendants that there is no liability for summary judgment in this case, and in fact no liability at all, is one whereby the value of the property securing the loan was to be at least 70% of the loan. When the amounts of the two offers are added together, and when that figure is looked at as being 70% of the sum necessary to secure the loan, it meant that the value of the property could not drop below the sum of €53,000,000.
- As a matter of fact, no one disputes that as of the repayment date of the 30th September, 2008, the value of these properties had declined below that figure. As of that date, the agglomeration of properties was worth €45,000,000. If the plaintiff bank’s recourse against the defendants is limited to their respective interests in those properties, then the bank is entitled to possess these properties, to realise whatever it can from them and, in the event of shortfall, which in the current market is more than probable, they have no recourse against the defendants. The plaintiff bank does not agree with this. Their argument is that the terms of the contract are clear in establishing that this limitation on liability by the defendants is not operative.
- The date when the first drawdown of the loan facilities was made, clearly establishes 30th September, 2008 as the repayment date. There is no dispute that during the summer of that year, concerns began to arise as to the value of the secured property. In consequence, howsoever it came about, a valuation firm called CB Richard Ellis conducted a detailed study of the properties and gave comparative valuations with a view to arriving at an overall figure. This exercise was done in July. Some dispute arose to the accuracy of the valuation. The defendants suggested that an initial valuation of €40,000,000 was incorrect. They submitted a figure which was, in itself, below the value of €53,000,000 required for limitation of recourse under the contracts. The valuer revised his estimate upwards, whereby on 24th September, 2008 the defendants were advised that the final valuation was €45,000,000. The plaintiff bank was notified some few days later. Then followed a flurry of activity centred on the 30th September.
- As there are two separate loan contracts, two separate letters were written in respect of each issue. I need only refer to one and to one of the similar sets of letters whereby the alleged dispute on limitation of recourse arose. By letter delivered by hand on 30th September, 2008, the defendants wrote to the bank enclosing a cheque for all the interest due under the loans over its two and half year duration up to that date and saying:
“We refer to the Facility Letter and wish to advise that in accordance with clause 5 we have today discharged all interest due up to and including the “Repayment Date”. Accordingly the provisions of clause 11 apply and your right of recourse is limited to the properties specified in paragraph 6”.
- This interest payment was made, and this letter was delivered, during what has been described in court as “normal office hours”. I presume that means after 09.00 and before 18.00 on that day. After this communication was received, the plaintiff bank shot back a reply which, all agree, was received on that day but at some time after 18.00 or, as it is put “outside normal office hours”. This letter read:
“We refer to facility letter dated 22nd February 2006 and in particular Clause 10. As you are aware from recent discussions with the Bank, a valuation of the property held as security under Clause 6 has been undertaken on our behalf by CB Richard Ellis dated 2nd July 2008. The final valuation report was received by the Bank yesterday and dated the 26th September 2008.
This valuation gives a market value of EURO 45,000,000 and in accordance with Clause 10 of the facility letter we formally request the Borrowers to reduce the current aggregate indebtedness of Tullycross Developments Limited [and the other liabilities of the other defendants] and the Borrowers to EURO 31,500,000.
In addition we further advise that this facility is due for repayment in full under Clause 4 on 30th September 2008.”
- That letter, and other correspondence, makes reference to subsequent negotiations which are irrelevant for these purposes. In a further letter, dated 1st October, 2008, the plaintiff bank sought repayment of the loan in full. The defendants, calling themselves “members of the Tullycross Co-ownership” replied, referring to the letter dated 30th September, 2008 in the following terms:-
“We note that the letter referred to above was sent to us following the delivery by hand of our letter at 4.30 p.m. on 30th September 2008 and after close of business on 30th September 2008 and received by us on 1st October.
As your request under clause 10(b) was sent after the expiry of the term of the Facility Letter above we have complied with the requirements of clause 11 (limited recourse) at the expiry of the term and we continue to rely on the provisions of clause 11.
Please note we did not receive the revised facility letter, which was sent with your letter referred to above, until 1st October 2008 and consequently could not have accepted it prior to your letter.”
It has subsequently been accepted on affidavit that the letter was received, not on the 1st October, 2008, but after close of business on the previous day.
Facility Letter
- I now need to refer to the contract, in the form of the facility letter, in detail. The letter of offer accepted by the defendants described the facility as “a structured term loan”. It states that its purpose is to assist with refinancing existing loans and to allow the purchase of additional houses and sites at Beech Park, Cabinteely, County Dublin. Repayment is specified as being two years and six months after the date of first drawdown of the loan funds. During that time, no interest was payable but, instead, there was to be a capital repayment on that rollover, the operative date being, as I have said, the 30th September, 2008. Interest was to be calculated in accordance with a scheme set out in an appendix to the letter. It was payable without deduction quarterly in arrears on the last business day of each quarter, provided that the aggregate of the monies drawn down, including interest capitalised thereon, did not exceed the maximum amount of the facility, then the interest was to be treated as additional drawdown and added to the total principal amount outstanding. Thus, in repaying the capital, interest would also be repaid. Clause 5 puts it in this way:- “Any interest outstanding on the date of Repayment shall be paid on such date.” The security in respect of which the limitation of recourse to the defendants is said by the defendants to be constrained was set out in clause 6. These comprise, in the main, references to individual properties in Dublin 18, parts of the agglomerated site. Reference is made to insurance, requiring the defendants to insure the properties. Since these are no longer insured by the defendants, the plaintiff bank’s claims for reimbursement in respect of these insurance sums are correct, if the plaintiff bank succeeds in this application. Events of default are set out in appendix B to the letter. These include failing to pay the principal or interest on the due date and “default in the performance of any other term, condition or covenant” in the agreement, where that default continues unremedied “for ten days after written notice shall have been given” by the plaintiff bank to the defendant.
- Clauses 4, 10 and 11 require to be read together. I will set them out:-
“Repayment:
- Following a 2 year and 6 month moratorium from the date of the first drawdown, capital repayment will be effected by a bullet repayment on that date…
Notwithstanding anything before contained herein, the Loan Facility and interest accrued thereon shall become immediately due and payable on demand by the Bank made following the occurrence and during the continuance of any events (each an ‘Event of Default’) set forth in ‘Events of Default Relating to Structured Term Loans Facilities” attached at Appendix B. hereto. In addition, the Loan Facility will also become payable if Tullycross Developments Limited defaults in the repayment on demand of the facility offered to it by the Bank pursuant to the Bank’s letter of even date herewith (“the Company Facility Letter”).
“Financial Covenants:
10 (a) Throughout the term of the loan, the Borrowers’ indebtedness to the Bank pursuant to this Facility Letter together with the indebtedness of Tullycross Developments Limited pursuant to the Company Facility Letter shall not exceed 70% of the combined value of the properties (“the Specified Percentage”) detailed at paragraph 6 hereof.
(b) In the event that there is a breach of the Bank’s requirements as set out at subclause (a) hereof, the Borrowers shall either:-
(i) Within four weeks of being called upon by the Bank to do so pay (or procure payment) to the Bank such amount as would result in the total of such indebtedness not exceeding the Specified Percentage or
(ii) Furnish to the Bank as soon as possible after they are requested to do so but in any event no later than 4 weeks from the date of such request such additional security acceptable to the Bank and its Solicitors (acting reasonably) as may be required by the Bank to ensure that the total amount of such indebtedness does not exceed the Specified Percentage.
(iii) The Borrowers further agree to provide evidence of title to the Bank which is satisfactory to the Bank’s Solicitors (acting reasonably) in relation to such additional security.
(c) For the avoidance of any doubt the Borrowers acknowledge that the Bank will be entitled to call for valuations of the said properties at any time throughout the term of this loan as often as it may choose for the purposes of determining whether or not there has been a breach of the Bank’s requirements as set out at sub clause (a) hereof. The Bank shall be entitled to call for not more than four such valuations to be carried out at the Borrowers’ expense. All (if any) further such valuations shall be carried out at the Bank’s expense. Each such valuation shall be carried out by a reputable valuer…written valuation of such valuer shall (save in the case of manifest error) be conclusive and binding on both the Bank and the Borrowers.”
“Recourse
- The Bank has agreed with the Borrowers that provided the Borrowers comply with their obligations as set out at paragraph 10 (b) hereof and pay all interest due to the Bank pursuant to this Facility Letter the Bank’s recourse will be limited to the respective interests in the properties detailed in paragraph 6 hereof. Accordingly:-
(a) Notwithstanding any other provision of this Facility Letter or any of the Security Documents and save as expressly provided in sub clauses (b) and (c) hereof of this paragraph, the Bank’s recourse to the Borrowers in respect of the Borrowers’ obligations hereunder and under the Security Documents and/or any judgment arising therefrom shall be limited to the respective interests in the properties detailed in paragraph 6 hereof and the Bank shall not otherwise take or pursue any judicial or other steps or proceedings or exercise any other right or remedy that it may have against the Borrowers for the discharge of any outstanding indebtedness in respect of the Loan or otherwise under this Facility Letter or the Security Documents and no action, proceedings, claim, levy, judgment or other process shall be taken or levied against the Borrowers save to the extent reasonably required by the Bank in connection with any enforcement or realisation of the security given pursuant to this Facility Letter.
(b) The Borrowers shall be jointly and severely liable to make payments to the Bank in respect of all interests due to the Bank pursuant to the Facility Letter.
(c) In addition, the Borrowers shall be jointly and severely liable to the Bank for all the indebtedness of the Borrower to the Bank pursuant to this Facility Letter if and so often as there is a breach of the covenant set out in paragraph 10 (a) hereof, unless the Borrowers have complied with their obligations as set out in paragraph 10(b) hereof.”
Contended Defence
- It has been skilfully argued on behalf of the defendants that this contract was a term loan. As such it is said that it was loan that existed for a limited term, in other words two years and six months after the first drawdown. The loan does not continue thereafter, it is contended, because the term will have expired. That clause, it is said, is clearly set out in clause 4 and in the provision as to interest and capital requiring single repayment. The repayment date, it is argued, might be accelerated at any time during the currency of the two year and six month term of the loan on the occurrence of any of the events set out in the second appendix to the facility letter but, it is claimed, this did not occur in accordance with the contracts between the parties. As of 30th September, it is argued, the plaintiff bank had not demanded further security so as to bring the 70% debt to security ratio back into balance: nor had they made a demand to decrease the debt. In fact, the defendants argue, any such demand was made after the close of business and was, therefore, inoperative. As of the operative date, 30th September 2008, the defendants had complied with their obligations by paying, under clause 11(b), all of the interest due. Thereafter, the sole recourse of the plaintiff bank was to the security set out in clause 6 of the agreement, for whatever it might then be worth. That would then not be the problem of the defendants, who claim that they have provided precisely in the contract for default. Having paid the interest, it is argued, the defendants had simply to make the property available to complete their contract. Thus, it is contended, the defendants had, as 30th September, 2008, a choice. First, they could make the properties available and pay the interest. This they did as to the interest over the two year and six month term; regarding the properties, they never objected to the plaintiff bank taking them through a receiver or howsoever they choose. Secondly, they could repay the total amount of capital (including rolled over interest) in accordance with clause 4. They chose the former, rather than the latter, and this, it is argued, is a complete performance of the contract. An “event” under clause 4 means a default and a failure to rectify this over ten days. However, the defendants say, that the longer time limit of four weeks in clause 10 requires that margin of appreciation under the contract, hence, if the valuation took a few days, the last date on which the plaintiff bank could have acted was not the 30th September, 2008 during business hours, as they would say, but instead the plaintiff bank would have had to call for a valuation sometime in August, receive that valuation at the latest as of 2nd September, 2008 and then, presumably during business hours, make a demand for further security or for the repayment of some of the debt so that the 70% loan to security ratio would be restored. Since, it is contended, the valuation report remained a draft report up to the 26th September, any action taken by the bank was too late. Further, it is argued, in an overall sense this was a term loan with a repayment date and, therefore, none of the obligations arising under the contract as to limited recourse could possibly continue beyond the close of business on 30th September, 2008.
Summary Judgment
- Any summary summons, the form usually used for the repayment of liquidated debt, is returned before the Master of the High Court. His function is to deal with the matter summarily where the case is uncontested. He may give liberty to enter judgment, which thereafter becomes an order of the High Court once it is entered in the Central Office. Under O. 37, r. 6, of the Rules of the Superior Courts, in contested cases, the Master is required to transfer the case to the High Court for hearing at the first opportunity. If there is consent, the Master may adjourn a case for plenary hearing with directions as to pleadings, discovery, and the settlement of issues, as may be appropriate. Since this is a contested case, the argument on behalf of the plaintiff bank is that judgment should be entered on the documents before the court. The argument of the defendants is that the case is clear enough for the court to dismiss the claim, leaving the plaintiff bank to realise its security, it having been already repaid the interest. In the alternative, it is contended that the matter should go for plenary hearing. O.37, r. 7 provides:-
“7. Upon the hearing of any such motion by the Court, the Court may give judgement for the relief to which the plaintiff may appear to be entitled or may dismiss the action or may adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings or discovery or settlement of issues or otherwise as may be appropriate, and generally may make such order for determination of the questions in issue in the action as may seem just”.
- In exercising this jurisdiction, I am obliged to proceed with great care. I have affidavit evidence in front of me and I have considered it. There is nothing in it, however, which gives rise to a controversy whereby, on the hearing of evidence, any issue of fact likely to be necessary for the resolution of the dispute might emerge. I feel that this is the test that the authorities indicate that I should first apply. If a question of law then arises, I feel that I am obliged to decide it. This is not a case in which there is counterclaim whereby the value of the plaintiff’s claim may be diminished. I adopt as correct the analysis by Clarke J. at paras. 3.3 to 3.5 of his judgment in McGrath v. O’Driscoll IEHC 195 (Unreported, 14th June, 2006):
“3.3 It is first necessary to turn to the principles applicable to giving leave to defend on an application for summary judgment. In Aer Rianta v. Ryanair [2001] 4 IR 607 Hardiman J., having reviewed recent Irish authority, noted that those authorities supported the view that ‘the defendants hurdle on a motion such as this is a low one, and the jurisdiction is one to be used with great care’ (at p. 621).
3.3 Having noted the formulation of the test for summary judgment in Banc de Paris v. de Naray [1984] 1 Lloyds Law Rep. 21 (as adopted by the Supreme Court in First National Commercial Bank -v- Anglin [1996] 1 IR 75 at 79) Hardiman J. noted that:
‘The ‘fair and reasonable probability of the defendants having a real or bona fide defence’ is not the same thing as a defence which will probably succeed, or even a defence whose success is not improbable.’
In summary, Hardiman J. concluded (at p. 623):
‘In my view the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendants’ affidavits fail to disclose even an arguable defence?’
3.4 So far as factual issues are concerned it is clear, therefore, that a mere assertion of a defence is insufficient but any evidence of fact which would, if true, arguably give rise to a defence will, in the ordinary way, be sufficient to require leave to defend be given so that issue of fact can be resolved.
3.5 So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
- To the last paragraph of the judgment of Clarke J. just quoted I would add this qualification. If the addition of evidence can assist in any material way in the construction of a document then, I agree, the matter should be put for plenary hearing. If, on the other hand the question of law arising on affidavit evidence can be as well considered on a motion for summary judgment as at a plenary hearing, then I feel it is the obligation of the court to resolve it on hearing that motion. In Cow v. Casey, [1949] 1 KB 474, the issue before the Court of Appeal was whether the High Court ought to have given summary judgment where a complex issue arose concerning the statutory rights of a tenant. Lord Greene M.R. in accordance with the approach in our jurisdiction has emphasised a very cautious line in entering summary judgment in any case. As to a controversy of law, he had this say, with which I agree:-
“The only point is, that, as everybody knows the Rent Restriction Acts are complicated acts. They contain a number of difficult matters and there are a number of authorities decided upon them. But is not sufficient under an O. 14 case to flourish the title of the Increase of Rent Restrictions Acts in the face of the court and say that is enough to leave to defend. If a point taken under the Rent Restriction Act is quite obviously an unarguable point, the court has precisely the same duty under O. 14 as it has in any other case. It may take a little longer to understand the point and to be quite sure that one has seen all around it in a case under the Rent Restriction Acts than in other cases, but when the point is understood and the court is satisfied that it is really unarguable, the court has the duty to apply the rule…”
There is nothing involved in the legal issues in this case which necessitates a plenary hearing. There is no issue of law that has not already been argued in full.
Construction
- The intention of the parties is to be discerned from the language of the facility letter dated the 22nd February, 2006. There is nothing in the construction of the guarantee contracts or in the mortgage documents which changes my view of the intentions of the party as expressed therein. In particular, clause 7 detailing the covenants between the mortgagor and the mortgagee of the mortgage document dated the 31st March, 2006, between the first three defendants and the plaintiff bank may be regarded as relevant. However, it does not change anything at all.
- The principles of construction of a contract were set out in the Supreme Court decision of Igote Limited v. Badsey Limited [2001] 4 IR 511. To these I have nothing to add. It is merely necessary to quote the relevant part of the judgment of Murphy J. at pp. 513 and 514. He stated:-
“The issue between the parties concerns the proper construction of the share subscription agreement. The purpose of construing a document entered into between two or more persons is to ascertain their common intention. What ‘intention’ in that context means and how it is ascertained has been the subject matter of much judicial authority in respect of which no real controversy arises in the present case. Perhaps a convenient explanation of the word ‘intention’ in this context was provided by Lord Shaw in Great Western Railway v. Bristol Corporation (1918) 87 L.J. Ch. 414 when he said at p. 424:-
‘. . . one hears much use made of the word ‘intention’, but courts of law when on the work of interpretation are not engaged upon the task or study of what parties intended to do, but of what the language which they employed shows that they did: in other words, they are not constructing a contract on the lines of what may be thought to have been what the parties intended, but they are construing the words and expressions used by the parties themselves. What do these mean? That, when ascertained, is the meaning to be given effect to, the meaning of the contract by which the parties are bound. The suggestion of an intention of parties different from the meaning conveyed by the words employed is no part of interpretation, but is mere confusion.’
Lord Wright expressed the same view in not dissimilar terms in Inland Revenue Commissioners v. Raphael [1935] A.C. 96 when he said at p. 142:-
‘It must be remembered at the outset that the court, while it seeks to give effect to the intention of the parties, must give effect to that intention as expressed, that is, it must ascertain the meaning of the words actually used. There is often an ambiguity in the use of the word ‘intention’ in cases of this character. The word is constantly used as meaning motive, purpose, desire, as a state of mind, and not as meaning intention as expressed.’”
At p. 516 Murphy J. added
“At the end of the day the rule as to construction and the context in which it is to be achieved is most succinctly expressed in the judgment of Keane J. (as he then was) in Kramer v Arnold [1997] 3 I.R. 43 at p. 55 when he said:-
‘In this case, as in any case where the parties are in disagreement as to what a particular provision of a contract means, the task of the court is to decide what the intention of the parties was, having regard to the language used in the contract itself and the surrounding circumstances.’”
- Where the court is called upon to construe a will, one of the primary rules is that the terms of the will should be seen, as it were, from the armchair of the testator. That, however, does not enable the court to change any intention that is plainly expressed in the language of a will, a trust document or a contract; National Tourism Development Authority v. Coughlan [2009] IEHC 53. Rather, the will is seen within its proper context. Similarly, a contract should be seen within its proper context. As Lord Wilberforce said in Reardon Smith Line Limited v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989 at 995:-
“No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as the ‘surrounding circumstances’ but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”
- Placing myself within, as Lord Wilberforce put it “the same factual matrix as that in which the parties were”, it is clear that negotiations took place at arms length between the plaintiff bank and the defendants, whereby a carefully drafted contract was agreed. This happened against the background of serious borrowing for development purposes on the part of the defendants. The recourse of the plaintiff bank to the defendants was to be limited. As it turns out, that limit was clearly expressed upon express conditions set out in the facility letter of the 22nd February, 2006. Once the ratio of borrowing to security did not breach the 70% limit, recourse was to be had only to the security set out in the contract. Once that was breached, the plaintiff bank had an option to call for either the reduction of the debt or the provision of additional security. The choice in re-instigating the 70% balance rested with the defendants as borrowers. It is impossible for me to construe the agreement any other way. The crux of the argument advanced by the defendants related to time.
- I must reject the argument that the borrowing of the defendants was by way of a term loan. Insofar as it is suggested that a term loan ends on a particular day, this argument may be correct. There is nothing in this agreement, however, to suggest that there is a cut-off date as of the 30th September, 2008, whereby the obligation, as clause 10 indicates, to keep the 70% ratio “throughout the term of the loan” ends. More importantly, however, there is nothing about a term loan which excludes events being defined within it whereby during its term the loan may be recalled. In Burgess, Law of Loans and Borrowing (London, 2006), the following passage occurs at para 3.25:-
“A term loan, as its name implies, is a loan for a specified period requiring payment at or by the end of the period; such repayment may be of the entire sum borrowed or, and more usually in practice, according to an agreed repayment schedule.”
- This, in as far as it goes, is unexceptionable, Burgess, however, discusses the authorities which now establish that a term loan may contain a condition as apparently contradictory as immediate repayment being required within the term of the loan upon notice being given. As Lawrence Collins J. stated in Bank of Ireland v. AMCD (Property Holdings) Limited [2001] 2 All E.R. (Comm.) 894, the parties to a contract are at liberty to determine for themselves what obligations they will accept. Once there is a clear statement that repayment may be called for within the currency of a term loan, then the court is obliged to give effect to it. That term may require payment on demand, or payment in the event of the occurrence, as in this case, of an event of default. There was a clear breach within the term of this loan, accepting for this purpose the argument of the defendants that a term loan defines obligations only within the term and not thereafter, to maintain the 70% ratio of borrowing to security. Had the plaintiff bank sat on its hands and done nothing by way of valuation, it could not argue that the relevant provisions of the contract had been invoked. It is unarguable, however, that the covenant within the agreement was breached on the part of the defendants always was to keep up that ratio. This is made clear by the wording at para. 10(a) and (c) which clearly refers to the continuation of that obligation at all times during the term of the loan.
- The limit on recourse, whereby the properties in clause 6 alone were to be the plaintiff bank’s security for the borrowing is contingent, under clause 11, on the defendants as borrowers complying with their obligations as to debt to security ratio. Had they met that obligation, it would have been arguable that their only additional contractual duty was to pay the interest due to the bank under the facility letter; clause 11(c).
- In construing the other arguments of the defendants, it is hardly necessary for me to give a business construction to this contract. As Lord Diplock warned in Antaios Compania Naviera SA v. Salan Rederiena AB [1985] A.C. 191 at 201:-
“[I]f detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”
- Even without applying this principle, which was quoted with approval by Geoghegan J. in Analogue Devices v. Zurich Insurance [2005] 2 ILRM 131, the argument of the defendants as to the alleged time issue is bound to fail. There is no principle of law whereby the plaintiff bank could have argued that if the defendants had repaid this loan by midnight on the 30th September, 2008, that they would not have fulfilled their obligations under the contract because the money was received after 18.00 hours on that day. Such a construction, if argued for on the part of the plaintiff would be untenable.
- The law of contract is concerned with mutual obligations. The parties to a business contract are to be taken as behaving reasonably in making requirements under a contract and as expecting a rational construction of their mutual agreement. I do not think that a loan contract is any different to any other contract in that respect. It is equally untenable now, when argued, albeit with great skill, on behalf of the defendant that the plaintiff bank was late in demanding after business hours of 30 September, 2008 that the debt to security ratio be restored. It would require me to re-write the terms of this agreement to allow this argument to succeed. It would mean that a date ceases to have validity. If the parties had wished to put in a clause referring to a date for the end of the term of the loan by specifying, for instance, the next nearest business day, so as to exclude weekends and bank holidays, or if the parties had wished to refer to their obligations being somehow crystallised by close of business on a particular day, this could have been done. Instead, the general law regards a date as continuing up to the stroke of midnight on that day. The obligation as to security to debt ratio undertaken by the defendants continued, it is clear to me, throughout the term of the loan. The bank was entitled to call for a valuation “at any time throughout the term of this loan”. Once there was a breach of the banks requirements as to debt to security ratio, they were obliged under clause 10(b) to make a requirement that the debt should decrease or that further security should be proffered by the defendants.
- It would upset the clear wording of the contract were I to hold that the entitlement of the plaintiff bank was dependent on them giving four weeks notice prior to the 30 September, 2008 whereby the obligation might be fulfilled on the last day, as the defendants would put it, of the term of the loan. Would they argue that they could not fulfil any of their obligations except within business hours? I would regard that argument as unattractive too. The obligation of the defendants continued “throughout the term of the loan”. The entitlement of the plaintiff bank to the debt to security ratio, so carefully set out in the contract, did not end at a period four weeks prior to that term. Moreover, in addition to that, it is argued that the plaintiff bank would have been obliged to take the time to obtain a valuation and then to give four weeks notice of their requirements on the debt to security ratio. There is nothing in the agreement which would allow for such a construction. If the wording were as unclear as to allow such an interpretation, it might be an instance where the requirement of business efficacy would suggest a different interpretation. There is no need, in my view, for me to apply that cannon of construction.
Result
- In the result, the plaintiff bank is entitled to a judgment jointly and severally for the amounts stated in the summary summons as against all of the defendants.
ACC v Heffernan
[2013] IEHC 557
Neutral Citation: [2013] IEHC 557
THE HIGH COURT
[2011 No. 2085 S]
BETWEEN
ACC BANK PLC
PLAINTIFF
AND
THOMAS HEFFERNAN AND MARY HEFFERNAN
DEFENDANTS
JUDGMENT of Mr. Justice Hogan delivered on 4th November, 2013
- Where a plaintiff commences proceedings by summary summons seeking a liquidated debt and thereafter applies to the Master of the High Court for summary judgment and it is concluded that the proceedings ought instead to have been commenced by plenary summons, is the Master nonetheless entitled to strike out the summary summons proceedings and require the plaintiff to recommence by way of plenary action? This, in essence is the issue which is presented in this appeal pursuant to O. 63, r. 9 from a decision of the Master to this effect.
- The present proceedings were commenced by summary summons on 18th May, 2011. The plaintiff, ACC Bank, contends that it advanced the sum of €3,360,000 to the defendants, Mr. and Ms. Heffernan, in September 2007 following the acceptance of a loan offer by them. In February 2011 the plaintiff demanded repayment of the principal and interest in the sum of €4,152,755 which it contended was due under the loan agreement. Appearances were entered by the two defendants a few weeks thereafter and on 28th June, 2011, the plaintiff issued a motion for liberty to enter final judgment in the sum of €4,244,749 (including further interest). The defendants filed three replying affidavit by way of defence.
- This matter was then listed before the Master of the High Court on 12th July, 2012. On that occasion counsel for the plaintiff submitted that as this was a contested matter, the case should be transferred into the High Court in accordance with O. 37, r. 6. The defendants’ solicitor submitted that as the plaintiff was aware at the proceedings had been commenced that the defendants had a substantive defence to the proceedings, the proceedings ought to be struck ought. In a reserved decision delivered on 18th October 2012 the Master acceded to this latter application and struck out the proceedings on this ground, adding that the plaintiff could always start again by way of plenary summons. The plaintiff bank now appeals to this Court against that decision.
The provisions of Order 37, rr. 4 and 6
- The procedure governing the hearing of proceedings commenced by summary summons is set out in O. 37 of the Rules of the Superior Courts 1986. Order 37, r. 1 provides that every summary summons endorsed with a claim for a liquidated sum “shall be set down before the Master by the plaintiff on motion for liberty to enter final judgment for the amount claimed”. Order 37, r. 2 provides that, generally speaking, any motion for liberty to enter final judgment shall be heard on affidavit. Order 37, r. 3 provides that the defendant “may show cause against such motion by affidavit.”
- Order 37 next distinguishes between the powers of the Master in uncontested cases on the one hand and those which obtain in contested cases on the other. Order 37, r. 4 deals with the power of the Master in uncontested cases:
“Upon the hearing of any such motion, the Master, in all uncontested cases, may deal with the matter summarily, and may give liberty to enter judgement for the relief to which the plaintiff may appear to be entitled and, for that purpose, in the case of an action for the recovery of land for non-payment of rent, may ascertain the amount of rent due, or he may dismiss the action and generally may make such order for the determination of the action as may seem just.”
- It is thus plain that in uncontested cases the Master may deal with the matter summarily and give liberty to enter final judgment.
- Order 37, r. 6 deals, however, with contested cases and this rule provides:
“In contested cases, the Master shall transfer the case, when in order for hearing by the Court, to the Court list for hearing on the first opportunity; and, for this purpose, the Master may extend the time for filing affidavits and give such directions and adjourn the case before himself as he shall think fit. The Master may also, on consent, adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings, discovery, settlement of issues or otherwise as may be appropriate.”
- It will accordingly be seen that the Master has no jurisdiction to enter final judgment in contested cases. His task in such cases is rather to the transfer the matter to the High Court for hearing when the case is “in order” for hearing by the Court. The reference to “in order for hearing” means nothing more than that the case is administratively ready for hearing so that, for example, all appropriate affidavits have been sworn and filed. This phrase does not gave the Master a jurisdiction to strike out contested cases on the ground that the pleadings are in some way irregular or that the proceedings ought to have been commenced by plenary action rather than by way of summary summons: see here by analogy the comments of Laffoy J. to like effect in ACC Bank plc v. Tobin [2012] IEHC 348. In that case she held that the Master had no jurisdiction to strike out a special summons on the grounds that the papers were not in order for the purposes of O. 38, r. 5.
- While it may seem curious that the provisions of O. 37, r. 4 and O. 37, r. 6 (and their pre-1986 predecessors) have heretofore received comparatively little judicial scrutiny, there can nonetheless be little enough doubt regarding the meaning and effect of these provisions. In Grace v. Molloy [1927] IR 405 the plaintiff issued a summary summons claiming a fixed sum by way of arrears of rent. The defendant filed a replying affidavit claiming that he had an arrangement with the plaintiff to the effect that the plaintiff was to continue to pay rent to the head landlord under the lease and to remain as tenant under that lease and that it was only on the plaintiff making such payments that the defendant was obliged to recoup him in respect of the same amount. The defendant stated that the plaintiff had not paid the rent due to the head landlord and claimed that until such payments were made in the first instance he was not liable. The Master made an order for final judgment on the ground that the defendant’s affidavit did not disclose the fact entitling him to defend.
- The defendant’s appeal against that decision of the Master succeeded before this Court. As O’Byrne J. observed ([1927] IR 405, 405) Order XIII, r. 5 of the Ru1es of the High Court and Supreme Court 1926 gave the Master power to make certain orders, including an order for final judgment in uncontested cases. It was, however, otherwise in the case of a contested case. On this point O’Byrne J. stated:
“The present is admittedly a contested case, and therefore the Master had no power under that Rule to make the order for judgment, nor has he such jurisdiction under any order of the Rules of the High Court and Supreme Court.”
- It is clear, therefore, that the Master has no jurisdiction to determine contested cases. In the case at hand everything turns on the meaning of the words “contested case” and “uncontested case.” For my part I would interpret the reference to “an uncontested case” in its ordinary sense as meaning one where the defendant offers no opposition to the application over and above the entry of an appearance. The mere entry of an appearance is not in itself sufficient to bring a case into the category of a contested case, since this is simply the administrative mechanism which (subject to some exceptions not here relevant) acknowledges due service of the proceedings and fulfils the function of either permitting a solicitor to come on record or, where the litigant is acting in person, allowing for address for service to be thereby given.
- But where – as here – the defendants oppose the application for liberty to enter final judgment under O. 37, r. 1 by the filing of affidavits disputing the plaintiffs claim, then the case falls into the category of a contested case. In those circumstances, as the comments of O’Byme J. in Grace make clear, the Master’s task-is simply either to transfer the case into the High Court for adjudication once satisfied that the papers are in order and the matter is ready for determination or, should the parties so consent, adjourn the case for plenary hearing. Specifically, the Master has no function to resolve a conflict of fact or to make an assessment of the likely strength of the case made by either the plaintiff or the defendant or to determine that the case ought to have been commenced by Plenary summons.
Conclusions
- For the reasons just stated, the plaintiff’s appeal must be allowed. The case was plainly a contested case in that the defendants have elected to defend the proceedings by filing affidavits setting out that defence. In these circumstances the Master had no jurisdiction but to transfer the case to the judge’s list of the High Court in accordance with O. 37, r. 6 once the case was administratively ready for this purpose.
McNamee v Estherfield
[2014] IEHC 205
JUDGMENT of Mr. Justice Barrett delivered on the 1st day of April, 2014
- This is an application for summary judgment brought by the plaintiffs, Mr. and Ms. McNamee, in respect of rent that they claim is owed to them jointly and severally by Estherfield Limited, the first named defendant, and Hickey’s Pharmacy Limited, the second named defendant, under a lease and license arrangement pursuant to which Hickey’s Pharmacy Limited operates a pharmacy on the plaintiffs’ premises at the junction of Grafton Street and Duke Street in Dublin City.
Facts
- By Indenture of Lease dated 26th March, 1992, Dublin City Properties Limited, as landlord, and Spellbound Limited, as tenant, entered into a 35-year lease in respect of the premises referred to above. The plaintiffs acquired the premises from Dublin City Properties Limited on 28th January, 2003. The second-named defendant is currently in occupation of, and operates a pharmacy on, the premises. By virtue of the lease and a subsequent licence entered into between the plaintiffs, Spellbound Limited and the defendants, on 3rd April, 2003, the defendants are jointly and severally liable for rents owing under the lease. Certain rents not having been paid, the plaintiffs have commenced the instant proceedings. The defendants have raised a number of defences to the claim and contend that this is a matter that ought to be remitted to plenary hearing. In essence, the defences raised are as follows: first, the defendants dispute the amounts claimed; second, the defendants contend that an allegedly unauthorised development by the plaintiffs at a premises that does not adjoin the demised premises will adversely affect the business operated at the demised premises; and third, they dispute that they can be found liable in these proceedings for amounts of rent that became owing after the notice of motion grounding these proceedings issued.
- Based on the evidence contained in the pleadings, the court finds that the various amounts sought by the plaintiffs by way of outstanding rent are correctly accounted for. That means of the three defences raised to these summary proceedings, only those as to planning and the recovery of post-notice of motion sums survive for consideration.
The planning law issue
- The hurdle that must be surmounted by the defendants as regards obtaining leave to defend at plenary hearing is a low one. As Hardiman J. stated in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607 at 623:-
“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
- In Harrisrange Limited v. Michael Duncan [2003] 4 IR 1 at 7, McKechnie J. summarised the principles that he considered to be relevant when a court approaches the issue of whether to grant summary judgment or leave to defend, viz:-
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case …
(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…
(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;
(v) where however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;
(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;
(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible? ‘…
(viii) the test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;
(ix) leave to defend should be granted unless it is very clear that there is no defence;
(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;
(xi) leave should not be granted where the only relevant averment in the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;
(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person ‘s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”
- In the present case, the planning law issue raised by the defendants is more in the nature of a cross-claim or counterclaim, rather than a defence to the summary proceedings. What is the court to do in a case where a defendant raises a cross-claim in defence to a motion for summary judgment? The classic precedent in this regard is the Supreme Court decision in Prendergast v. Biddle (Unreported, Supreme Court, 31st July, 1957), the principles identified therein having been recently amplified upon in Moohan v. S & R Motors (Donegal) Limited [2008] 3 IR 650. In that later case, Clarke J. summarises the approach to be adopted by a court where a defendant raises a cross-claim as follows at 656:-
“(a) …In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set off in equity and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set off;
(b) if and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an entire proportion of) the claim …
(c) if the cross-claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle…”
- Clarke J. concluded in Moohan that a set-off was available there, the default position being that a party is entitled to a set-off in equity in relation to any cross claim arising out of the same contract. In the present case, the court finds that no such set-off is available. The cross-claim in these proceedings is concerned with a matter that has nothing to do with the rents owing under the lease. Taking the defendants’ case at its height, even if a claim in respect of a purportedly unauthorised development at a property owned by the plaintiffs but not adjoining the demised premises was entirely successful, this is a matter so unconnected to the issue of rent owing under the lease pertaining to the demised premises as not to yield any right of set-off in equity. This is not a case where, as in Moohan, a single construction contract has yielded a claim for monies due and a counterclaim for defective works. In truth, the court struggles to see that there is any substantive connection between the issue of the rents claimed by the plaintiffs and the planning issue raised by the defendants except for the somewhat tenuous connection that the various relevant properties are ultimately in common ownership. The cross-claim here amounts to an entirely independent claim and that, per Clarke J. in Moohan, has the result that judgment should be entered on the plaintiffs’ claim with the question as to whether execution ought to be stayed falling to be determined by reference to the principles set out in Prendergast. In that earlier case, Kingsmill Moore J., at 7, stated that:-
“If… the Defendant, while admitting that he has no direct defence to the claim, puts forward a plausible counterclaim a difficult problem must arise. Though the necessary evidence to support the claim is already before the Court and judgment on the claim can be given at once, there must usually be delay in formulating the counterclaim in a pleading, in preparing the evidence to support it at a hearing (if it be contested), and in waiting for a trial. On the one hand it may be as/red why a Plaintiff with a proved and perhaps uncontested claim should wait for judgment or execution of a judgment on his claim because the Defendant asserts a plausible but improved [unproved?] and contested counterclaim. On the other hand it may equally be asked why a Defendant should be required to pay the Plaintiff’s demand when he asserts and may be able to prove that the Plaintiff owes him a larger amount. To such questions there can be no hard and fast answer. It seems to me that a judge in exercising his discretion may take into account the apparent strength of the counterclaim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims, the nature of their claims and also the financial position of the parties.”
- The starting-point of Kingsmill Moore J’s observations is that a defendant has a plausible counterclaim. It is not at all clear that in the present case the defendants in fact have a plausible counterclaim. Certainly there is little evidence on affidavit to assist the court as to the strength of the counterclaim and there is no evidence to suggest that it would succeed. Nor is there any attempt to quantify the loss alleged. Indeed, it might perhaps be contended that the counterclaim raised in these proceedings is nothing more than a last-ditch effort on the part of the defendants to construct a defence that is adequate to satisfy the low hurdle identified in Aer Rianta and Harrisrange for remittal of summary proceedings to plenary hearing. However, the court considers that even the low hurdle identified in Aer Rianta and Harrisrange has not been satisfied. Moreover, even if the defendants’ counterclaim was plausible, the court does not consider that the Prendergast principles require that any entitlement of the plaintiffs to recover the outstanding rent monies be postponed until the conclusion of plenary proceedings in which the substance and strength of an as yet barely formulated counterclaim of uncertain plausibility is tested.
Claims for rents arising after proceedings commenced
- The defendants have disputed that they can be found liable in these proceedings for amounts of rent that became owing after the notice of motion grounding these proceedings issued. A consideration of the recent jurisprudence of the court, in particular the decision of Clarke J. in Dublin Docklands Development Authority v. Jermyn Street Limited and Black Tie Limited [2010] IEHC 217 and O’Neill J. in Quarryvale Two Limited and Quarryvale Three Limited v. Stephen Beere and Graeme Beere [2012] IEHC 546 indicates that the defendants are mistaken in this contention.
- In Jermyn Street, the Dublin Docklands Development Authority brought proceedings seeking to recover rent and other charges against Jermyn Street and in relation to the guarantee of that rent and other charges against Black Tie. With regard to the Authority’s claim in respect of continuing, and rising, arrears of rent and other charges, the defendants claimed, much as the defendants in this case, that it is not permissible to maintain a claim in respect of ongoing rent or charges in summary proceedings. Writing in this regard Clarke J. stated, at 12, that:-
“The basis for that contention is that it is said that each failure to pay rent (or indeed other charges) as they fall due, gives rise to a separate cause of action. Thus, it is argued, sums due in respect of rent which have not arisen as of the time of issuing of proceedings relate to causes of action not then extant such that the same cannot be maintained in the same proceedings. It was accepted on behalf of Jermyn Street that ….continuing interest can be claimed in summary summons proceedings where the interest is provided for and ascertainable under the terms of the relevant contract or is fixed by statute. It is clear, therefore, that continuing interest can be claimed even though that interest accrues after the date when a summary summons is issued. It seems to me that there is no reason in principle why continuing rent cannot be claimed on the same basis.”
- In Quarryvale, O’Neill J. approved the reasoning in Jermyn Street and allowed a claim for amounts additional to those contained in the original summary summons, stating, at paras. 23 and 24, that:-
“The additional claims sought to be made in these proceedings are so closely associated with the original claims made in the summary summons that it makes complete sense, both in terms of procedural efficiency and the avoidance of unnecessary cost, to have these claims dealt with in the one set of proceedings. Indeed, the converse, namely that as each quarter of rent and/or services charges fell due and into arrears, afresh set of proceedings was required, offends any sensible notion of procedural efficiency and would lead to much greater and unnecessary cost in making these types of claims.
…I am quite satisfied that within the summary summons procedure, where serial or sequential claims arise out of circumstances similar to and closely associated with the causes of action raised in the endorsement of claim on the summary summons, additional claims can be the subject matter of the application for liberty to enter final judgment if such additional claims are appropriately set out and supported by affidavit evidence. Needless to say, these additional claims could only be for liquidated sums.”
- This Court respectfully agrees with the reasoning adopted respectively by Clarke J. and O’Neill J. in the Jermyn Street and Quarryvale cases. To borrow from the phraseology of O’Neill J., the claims for post-notice of motion arrears made in the instant proceedings clearly arise out of circumstances similar to and closely associated with the causes of action raised in the endorsement of claim on the summary summons: what is being sought is simply more rent owing under the same lease and licence arrangements. In terms of procedural efficiency and the avoidance of unnecessary cost, it would be absurd if the court was to hold that only rent owing at the time of issuance of these proceedings could be claimed and that the commencement, hearing and determination of fresh proceedings in which precisely the same issues as have arisen before this Court would need to take place before later- owing rents could be recovered by the plaintiffs.
Conclusion
- For the reasons stated above, the court does not consider that these summary proceedings should be referred to plenary hearing and grants judgment to the plaintiffs for the amount sought, being €557,780.93 plus interest and costs.
- The case can now accordingly proceed to a consideration of the separate question Of whether the plaintiff is entitled to summary judgment.
BOI Mortgage Bank v Heron
[2015] IECA 66
Judgment of the Court delivered on the 26th day of March 2015
Introduction
- On the 9th March, 2015, this Court allowed an appeal against an order of the High Court (O’Hanlon J.) made on the 1st December, 2014. These are our reasons for so doing. By her order, the judge refused the plaintiff’s application for summary judgment and remitted the litigation to plenary hearing.
- The plaintiff bank appealed to this Court on two grounds. They were:
(a) that the trial judge erred in law in finding that the defendants had established a fair and reasonable probability of having a real or bona fide defence to the claim and
(b) that the defendants had failed to establish a stateable defence to the plaintiffs claim.
The Proceedings
- On the 12th September, 2012, the plaintiff bank commenced proceedings seeking judgment against the defendants for €162,102.15 together with interest thereon, on foot of a loan agreement concluded between the parties.
- The usual application for leave to enter final judgment followed. By the time the notice of motion seeking such relief issued, the sum outstanding had grown to €171,699.92 taking account of interest which accrued in the meantime.
- The motion was transferred to the judge’s list where it was heard on the 1st December, 2014.
The Hearing before the High Court
- This Court has been provided with a transcript of what took place before the High Court judge. It is clear that the affidavits exchanged between the parties were opened to the court as were the relevant legal principles to be applied on an application for summary judgment.
- Counsel for the plaintiff maintained its entitlement to summary judgment and submitted that the affidavit filed on behalf of the defendants did not demonstrate that they had a real or bona fide defence to the claim notwithstanding the seven purported grounds of defence contained in it.
- Counsel on behalf of the defendants submitted to the High Court judge that the defendants’ single affidavit raised sufficient matters to justify the case being adjourned to plenary hearing. He argued that only in the context of such a hearing would the defendants have the opportunity of testing the validity of the plaintiff’s claim and of pursuing their own allegations of negligence in respect of the plaintiffs alleged failure to notice alleged problems with the title to the property which the defendants purchased with the monies advanced to them by the plaintiff.
The judgment of the High Court
- The transcript revealed that at the conclusion of the argument in the High Court, the judge simply announced as follows:
“All right. What I am going to say is the following, it would benefit with a plenary hearing. It should go to plenary hearing so that at the end of the day I am erring on the side of caution and giving the defendants that full opportunity.”
- The trial judge did not give any reasons to support her decision. That is not a satisfactory situation from the point of view of either the parties or this Court. This issue will be addressed later in this judgment.
The jurisdiction of the High Court under O. 37
- Order 37, r. 6 of the Rules of the Superior Courts requires the Master of the High Court, in contested summary cases, to transfer the proceedings for determination by a judge.
- On a contested application for summary judgment, the High Court judge may do one of three things. He may (a) dismiss the action, (b) grant judgment for the sum to which he believes the plaintiff is entitled or (c) grant leave to the defendant to defend the proceedings in whole or in part unconditionally or subject to terms (O. 37, rr. 7 and 10 RSC).
- Any decision made by a judge on an application for summary judgment will have significant repercussions for the parties to the litigation. For a plaintiff whose claim is remitted to plenary hearing, there will be substantial delay encountered in their efforts to recover the sum claimed. Such a plaintiff will also incur additional costs in bringing the action to a full trial.
- On the other hand, if judgment is granted against the defendant, the consequences of that decision may be very serious indeed. Such a defendant is denied the opportunity of a full trial because of a failure to reach the low threshold of proof of an arguable defence.
- A failure on the part of a judge to give reasons for deciding to take whichever option is available under the provisions of O. 37 means that the parties to the litigation cannot make an informed decision as to whether the order may be successfully challenged on appeal or not.
Need to give reasons
- For many years the Superior Courts have held that administrative bodies making judicial or quasi judicial decisions must give reasons for so doing. Such bodies must satisfy the criteria identified by Murphy J. in O’Donoghue v. An Bord Pleanála [1991] ILRM 750 where he said in the context of a decision given by the Planning Board that it:
“. . . must be sufficient first to enable the courts to review it and secondly, to satisfy the person having recourse to the Tribunal that it has directed its mind adequately to the issues before it.”
- That line has been followed in many subsequent decisions including Grealish v. An Bord Pleanála [2006] IEHC 310, Mulholland v. An Bord Pleanála [2006] ILRM 287, and Deerland Construction Limited v. Aquaculture Licences Appeals Board [2008] IEHC 289. Given that administrative bodies are required to give reasons for their decisions, no lesser standard can be required of courts exercising judicial functions.
- That such is the case cannot be doubted having regard to the decision of McCarthy J. in Foley v. Murphy [2008] 1 IR 619.
- In that case McCarthy J. considered a number of Irish and English authorities in favour of the proposition that reasons must be given for judicial decisions. In Foley’s case, Her Honour Judge Murphy, a Circuit Court judge, had failed to give reasons for refusing an award of the applicant’s costs. On judicial review McCarthy J. granted certiorari to quash her decision because of the failure to give reasons for it. He remitted the matter back so that the question could be determined in accordance with law.
- In the course of his judgment he cited with approval the judgment of the Court of Appeal in England in English v. Emery Reimbold and Strick Limited [2002] WLR 2409. In the course of that judgment the Court of Appeal quoted with approval from the judgment of Henry L.J. in Flannery v. Halifax Estate Agencies Limited [2000] 1 WLR 377. There that judge said in respect of the duty to give reasons as follows:-
“(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties – especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know . . . whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.
(2) The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself.
(3) The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject-matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases.
(4) This is not to suggest that there is one rule for cases concerning the witnesses’ truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise). The rule is the same: the judge must explain why he has reached his decision. The question is always, what is required of the judge to do so; and that will differ from case to case. Transparency should be the watchword.”
- In English’s case Lord Phillips M.R. put it succinctly when he said:-
“The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the Judge’s decision.”
- The majority of judgments in the High Court are delivered ex tempore. Such judgments cannot be expected to include anything like the same degree of detail as might be expected in a reserved judgment. They do not have to be discursive. But even an ex tempore judgment must comply with the essential requirement identified by Lord Phillips namely, that it should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge’s decision.
- The court is sympathetic to the predicament of a High Court judge faced with a lengthy motion list on every Monday of the legal term. The present case was just such a motion listed on Monday the 1st December, 2014. But a judge cannot be relieved of the obligation to set out briefly the principal reasons underlying a decision on that account. If a judge is unable to deliver a judgment ex tempore because of the complexity of the facts or legal issues, then judgment should be reserved. But it is never sufficient to do as was done in the present case and merely announce a decision without giving any reasons for it.
This Appeal
- Despite seven issues identified in the replying affidavit which was placed before the High Court judge, we were fortunate that on this appeal it was accepted that there was really only one possible defence which fell to be considered. The court will turn to that presently, but before doing so, ought to identify the legal test which has to be applied on an application for summary judgment. The parties to this litigation were not in dispute concerning it and so it is sufficient to refer to just two relevant authorities. The first is Aer Rianta v. Ryanair [2001] 4 IR 607, where Hardiman J. stated that the court should ask itself the following question on a summary judgment application:-
“Is it very clear that the defendant has no defence? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
Only if those questions are answered in the affirmative should judgment follow.
- In Harrisrange Limited v. Duncan [2003] 4 IR 1 McKechnie J. set out the approach to be adopted on an application for summary judgment by reference to twelve different considerations (see p. 7). This Court takes into account each of those factors.
The affidavit evidence
- The plaintiff bank’s grounding affidavit set out and exhibited the loan offer of the 24th August, 2005, whereby the plaintiff agreed to advance to the defendants a loan of €152,000 for a term of 25 years repayable by instalments. The first default on those obligations occurred in August 2007. By August 2012, there were arrears of €29,112.36. In that month the plaintiff made demand of both defendants for repayment of the outstanding sum which as of then was €162,102.15.
- The only ground sought to be raised on this appeal by way of defence was an assertion that the plaintiff’s solicitors having examined the title to the property which the defendants purchased with the loan monies, had failed to notice a problem with it. The defendants asserted that they had relied on the inspection by the bank’s solicitors when they purchased the property and had they known that the title was defective, they would never have entered into the loan.
- This is how the matter was dealt with in the defendants’ affidavit:-
“I say that the plaintiff bank’s solicitors conducted an examination of the title of 27 Doran Close, Bundoran, Co. Donegal, as part of the mortgage approval process. I say that the plaintiff bank’s solicitors failed to notice the problems with the title to the said property. I say that we relied upon the plaintiff bank to carry out a proper investigation of the title of 27 Doran Close, Bundoran, Co. Donegal, and that we would not have proceeded with the loan had we known that the title was defective. I say that my wife and I want to have these proceedings remitted to plenary hearing so we can enter a defence to all, or part of the plaintiff bank’s claim against us based on the plaintiff bank’s solicitors failure to notice the problems with the title to the said property. I say that we are unable to provide further details of the nature of that defence at present due to the nature of the proceedings instituted against us by the plaintiff bank and failure to seek discovery from the plaintiff bank.”
- The response to that averment was contained in a supplemental affidavit sworn on behalf of the bank. This is what the deponent said:-
“Insofar as the first named defendant states that the defendants relied upon the plaintiff to carry out a proper investigation of the title of 27 Doran Close, Bundoran, in the County of Donegal, I say and believe and I am informed that the plaintiff did not engage solicitors to act either on its own behalf or on the defendants behalf with respect to the conveyance of the charged property at issue in these proceedings, namely 27 Doran Close, Bundoran in the County of Donegal. Mr. Aidan Kelly of John McGale Kelly & Co. solicitors, provided a solicitors undertaking on behalf of his then clients, the defendants, on the 12th December, 2005, wherein he undertook inter alia to ensure that the defendants were acquiring good marketable title to the property. Mr. Kelly subsequently provided a certificate of title to the plaintiff on the 28th May, 2010, confirming that the defendants had good marketable title to the property. The said solicitors undertaking and the certificate of title were expressly given by Mr. Kelly as the solicitor for the borrowers namely the defendants herein. Mr. Kelly was at all times the agent of the defendants. Accordingly, the plaintiff relied upon the said solicitors undertaking and certificate of title furnished by Mr. Kelly when it advanced the loan monies the subject matter of these proceedings to the defendants and the plaintiff continues to rely on same.”
- The affidavit then exhibited the undertaking and the certificate of title furnished by the solicitor. Although that affidavit was sworn on the 13th March, 2014, and the motion for summary judgment was not dealt with until the 1st December, 2014, no affidavit was sworn by the defendants controverting in any way that averment. Neither was any notice to cross examine the deponent of the bank’s affidavit served.
- The exhibits contained in the replying affidavit of the bank consist of the undertaking given by Mr. Kelly whereby he promised to acquire good marketable title to the property on the defendants’ behalf. The undertaking is signed by both defendants. It acknowledges that the solicitor was retained and authorised by them to deal with the bank on their behalf. The certificate of title furnished by Mr. Kelly in May 2010, confirms that the defendants had acquired good marketable title to the property.
- It is clear in the light to this material that the relevant part of the defendants’ affidavit which is relied upon as demonstrating an arguable defence is mere assertion. Furthermore it is not credible. The supplemental affidavit sworn on behalf of the bank together with its exhibits demonstrates that the bank did not engage solicitors to act on its behalf in relation to the title to the property. Rather it relied upon the undertaking furnished by the defendants own solicitor, that he would obtain good title to the property on behalf of the defendants. No arguable defence has been shown.
- It is of some concern to this Court that when swearing his affidavit, the first defendant must have known the true state of affairs particularly since he himself is a solicitor in Northern Ireland.
Disposal
- This Court is satisfied that the defendants did not meet even the low threshold required to justify the case being adjourned to plenary hearing. The trial judge erred in making the order which she did. It is for these reasons that this Court allowed the appeal and entered judgment in favour of the plaintiffs.
NALM v Kelleher
[2016] IECA 118
JUDGMENT delivered on the 15th day of April 2016 by Ms. Justice Finlay Geoghegan
- This appeal raises an important point of procedure which does not appear previously to have been the subject of a written judgment. Further it is agreed between the parties that the point was not expressly adverted to in submission to the trial judge before judgment.
- The point is as follows. Where, on an application by a plaintiff for summary judgment the defendant seeks leave to defend upon two grounds: (i) a pure defence and (ii) a defence by way of set off of a counterclaim for damages and the judge determines that the pure defence meets the arguable threshold, but the defence in reliance on the counterclaim does not, has the court in remitting the matter to plenary hearing with leave to defend upon the pure defence jurisdiction to preclude the defendant raising the counterclaim and if so, what are the criteria according to which such a decision should be made.
- The issue arises in this appeal, upon the following facts. The plaintiff issued a summary summons seeking judgment for €46,834,472.35 pursuant to guarantees given by the defendant originally to Irish Bank Resolution Corporation Limited of facilities advanced to companies of which the defendant was the ultimate beneficiary.
- The plaintiff brought a motion seeking entry to the Commercial List and summary judgment against the defendant in the usual way. The proceedings were entered in the Commercial List and a significant number of affidavits were exchanged on the application for summary judgment.
- The defendant does not dispute the guarantees entered into nor the amounts owing on the guaranteed facilities. He asserted two defences to the claim against him:
(i) the plaintiff is estopped from enforcing the guarantees by reason of representations made that if the defendant cooperated with the plaintiff, which he maintains he did, that it would not enforce the guarantees. This defence was referred to as the estoppel defence.
(ii) the defendant as the ultimate beneficiary of companies collectively referred to by the plaintiff as the “Shelbourne Connection” has a counterclaim against the plaintiff for damages by reason of certain actions of the plaintiff which diminished the value of assets held by companies within the Shelbourne Connection such that the companies were unable to discharge the amounts due on the facilities and also the defendant as ultimate beneficiary is unable to discharge the amounts due under the guarantees. Alternatively it was contended that the amount of the damages recoverable on the counterclaim exceeded the value of the claim against which it might be set off.
High Court hearing and judgment
- The summary judgment application was heard over two days in the High Court by Fullam J. upon significant affidavit evidence and exhibits. It was not in dispute that the defences sought to be raised had to meet the threshold of arguability or a bona fide defence in accordance with cases such as Aer Rianta v. Ryanair [2001] 4 IR 607.
- Fullam J. delivered a written judgment on the 24th February, 2015, in which he identified the two defences raised and having analysed the estoppel defence, concluded that the defendant had an arguable defence on that ground. That finding was not in dispute before this Court.
- The position in relation to the second ground of defence in reliance upon the counterclaim relating to the Chicago Spire is more complex.
- The trial judge at paras. 42 and 43 of his judgment set out the defence being advanced and his initial analysis of same in the following terms.
“42. The defendant’s case is that the plaintiff recklessly sold the Spire loan at a gross undervalue for a price of $35 million when the face value of the loan was in excess of $90 million. He says that had the matter been handled properly the site would have realised the sum of $350 million which would have enabled him to clear his indebtedness in respect of the Spire loan and also his liabilities under the Cratloe and Modillion guarantees. Instead, as a result of the sale of the Spire loan in June, 2013, he has been deprived of the opportunity to clear his indebtedness under the Spire loan and the Cratloe and Modillion guarantees.
- The effect of the plaintiff’s contention is that he has a counterclaim for damages which is more than sufficient to offset against any liability under the guarantees in these proceedings. To succeed with such a counterclaim, the defendant acknowledges that he has to establish that ss.10, 11 and 12 of the Act of 2009 impose obligations on NAMA which are more onerous than the normal duties of a mortgagee as set out in Silven Properties Limited v. RBS plc [2004] 1 WLR 997 and approved by the Supreme Court (sic) in Dellway.”
It was common case on appeal that the trial judge intended to refer to the High Court judgment of the Divisional Court in Dellway Investments Limited v. NAMA [2011] 4 I.R. 1 and in particular pp. 76 to 77 rather than the Supreme Court. Nothing turns on this.
- The trial judge appears to have treated the second defence as one dependent on a counterclaim. He first considered the counterclaim asserted in reliance upon ss. 10, 11 and 12 of the National Assets Management Agency Act 2009 and at para. 49 of his judgment stated:-
“In my view, these provisions do not impose additional duties on NAMA towards debtors, guarantors or mortgagors over and above the duties of an ordinary mortgagee in respect of the management and realisation of bank assets.”
- A question has arisen as to whether in the light of the above conclusion that issue is or is not to be considered res judicata between the plaintiff and the defendant herein. This was referred to rather than argued before this Court and it is not necessary to express any view on it for the purposes of the appeal. I only wish to indicate that for the purposes of deciding the appeal I am treating the decision of the trial judge as being that the defendant did not reach the Aer Rianta threshold of arguability on the issue as to whether ss.10, 11 and 12 of the Act of 2009 impose obligations on NAMA (or the plaintiff) which are more onerous than the normal duties of a mortgagee as set out in Silven Properties Limited.
- Notwithstanding his conclusion on the 2009 Act, the trial judge then continued to consider the affidavit evidence in relation to the alleged sale of the Spire loan at an undervalue. Having done so at para. 56 of his judgment, he concluded:-
“. . . It is clear from the evidence that, even if the Court accepted the defendant’s submission, that the Act imposed additional obligations on the plaintiff, the sale of the Spire loan in June, 2013 could not have generated sufficient monies to enable the defendant clear his indebtedness arising from the guarantees subject of these proceedings.
In the circumstances, there is no reality in this defence.”
- The final conclusion of the trial judge was:-
“57. Using the test prescribed by Hardiman J. in Aer Rianta v. Ryanair Ltd. [2001] 4 IR 607:
‘Is it very clear the defendant has no case?”
- I answer that in the negative in respect of the estoppel defence and in the affirmative in respect of the counter claim for damage to assets.
I will remit the case for plenary hearing on the first issue, namely that of estoppel.”
- The defendant on the 25th March, 2015, sought clarification, from the trial judge as to his entitlement to pursue in the plenary proceeding the counterclaim seeking damages for the alleged wrongful actions of the plaintiff. Counsel on his behalf informed this Court, as is apparent from the transcript of a hearing before the trial judge of the 25th March, 2015, that clarification was sought because they did not want to appear to be going behind his judgment on the summary judgment application in pleading a counterclaim. The submission made on behalf of the defendant was that the counterclaim was a claim which he was entitled to pursue pursuant to his constitutional right of access to the courts and that he could pursue it by a separate writ issued but wished to do so by way of counterclaim in the proceedings remitted for plenary hearing. On behalf of the plaintiff it was contended that the second defence advanced was always dependent on the counterclaim; hence even if the defendant were now permitted to pursue the counterclaim the plaintiff would be pleading that it was res judicata. The plaintiff further submitted that the only live issue permitted to remain in the proceedings was the defence of estoppel.
- The trial judge agreed with the latter submission of counsel for the plaintiff that “on the basis of the judgment given on the 24th February, the only matter that can be pleaded either in defence or by way of counterclaim . . . is the question of estoppel”.
- It appears that following that hearing on the 25th March, the order of the 24th February, 2015, was perfected and provides:-
“It is ordered that this action insofar as the point of estoppel is concerned do stand adjourned for plenary hearing as if these proceedings had been commenced by plenary summons.”
Appeal
- The defendant in the notice of appeal and in the written submissions contended that the High Court does not have jurisdiction to limit the defences which may be raised by a defendant once the court has made an order remitting the entire of the claim to plenary hearing. He did so primarily in reliance upon a judgment of Charleton J. in the High Court in Galvin v. Souter Enterprises Limited [2010] IEHC 215, in which at para. 19, he stated that he was “not entitled to confine the defendants to particular defences”. Nevertheless in doing so Counsel for the defendant recognised that a different view had been taken by Clarke J. in the High Court in G.E. Capital Woodchester Limited v. Aktiv Kapital, Asset Investment Limited and Aktiv Kapital ASA [2009] IEHC 512 and by me in the High Court in Bussoleno Limited v. Kelly [2011] IEHC 220; [2012] 1 ILRM 81 and by Cooke J. in IBRC v. Halpin [2013] IEHC 492.
- The point, whilst not pressed was not abandoned at the oral hearing and I have therefore reconsidered the issue having regard in particular to the view expressed by Charleton J. in Galvin v. Souter Enterprises which I think may not have been drawn to my attention when I decided Busoleno Limited v. Kelly [2011] IEHC 220; [2012] 1 ILRM 81, in the High Court.
- Having reconsidered the matter I remain of the view that where on an application for summary judgment the court decides that the defendant has raised an arguable defence to the entire claim such that the court decides to adjourn the full claim for plenary hearing the court may also limit the defences which may be pleaded to those which have met the threshold identified by the Supreme Court in Aer Rianta v. Ryanair and the judgments referred to therein. This conclusion stems from the nature of summary proceedings and the provisions of O. 37, of the Rules of the Superior Courts.
- The summary summons procedure, in general, may be used where a plaintiff seeks to recover a debt or liquidated demand. As stated by Lavery J. in Prendergast v. Biddle (Unreported, Supreme Court, 31st July, 1957) the procedure “is provided in order to enable speedy justice to be done in particular cases where there is either no issue to be tried or the issues involved are simple and capable of being easily determined”. Peart J. more recently has explained the procedure in Motor Insurers Bureau of Ireland v. Hanley [2006] IEHC 405, [2007] 2 I.R. 591, as being one which provides “a simple, informal, expeditious and inexpensive method of obtaining a final judgment”. Whilst the procedure in Order 37 and case law relating thereto provides for such speedy justice or expeditious method of obtaining a final judgment in those cases where there is no issue to be tried, they also set out a procedure which permits a plenary hearing in relation at least to certain issues where a defendant, in the initial procedure raises a bona fide or arguable defence to part or all of the claim. The motion for liberty to enter final judgment or for summary judgment is the filter mechanism through which such balance is achieved.
- Order 37, r. 1, requires the motion for summary judgment to be supported by “an affidavit sworn by the plaintiff or by another person who can swear positively to the facts showing that the plaintiff is entitled to the relief claimed and stating that in the belief of the deponent there is no defence to the action”. A defendant who wishes to show cause against such motion is required to do so pursuant to rule 3 by affidavit and such affidavit must state “whether the defence alleged goes to the whole or part only, and (if so) to what part, of the plaintiffs claim”.
- Order 37, r. 7 and 10, are most relevant to the Court’s general jurisdiction on hearing the motion for summary judgment. These provide:
“7. Upon the hearing of any such motion by the Court, the Court may give judgement for the relief to which the plaintiff may appear to be entitled or may dismiss the action or may adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings or discovery or settlement of issues or otherwise as may be appropriate, and generally may make such order for determination of the questions in issue in the action as may seem just.
. . .
- Leave to defend may be given unconditionally or subject to such terms as to give security, or time and mode of trial or otherwise as the Court may think fit.”
- Rule 8 makes express provision for the granting of judgment for part of a claim and permitting a defendant to defend only as to the residue of the plaintiff’s claim. Rule 9 expressly permits judgment to be given against one defendant only and to remit a claim against other defendants who set up a good defence. Notwithstanding that rules 8 and 9 make express provision for those two situations it appears to me that the general jurisdiction given to the Court to give directions under rule 7 and under rule 10 to grant leave to defend “subject to such terms as to . . . or otherwise as the court may think fit” gives the Court discretion to grant leave to defend subject to terms which provide for a fair and efficient hearing for all parties of the issues in dispute having regard to the claim in the summary summons and any bona fide defence raised by the affidavits. Such an approach is in the interests of the good and fair administration of justice. Where a defendant in the affidavit sworn pursuant to O. 37, r. 3, purports to “show cause” in the sense to indicating the availability of two or more arguable or bona fide defences and upon the hearing of the motion the Court decides that only one defence is arguable or bona fide, then it is consistent with Order 37 and the filter procedure envisaged for claims permitted to be commenced by summary summons and the fair, efficient and cost effective administration of justice that the Court may impose terms restricting the defence to that which meets the bona fide or arguable threshold. They are the issues which have been determined to be in dispute in the proceedings and which require a plenary hearing. To conclude otherwise would undermine the balance sought to be achieved by the procedure of Order 37.
- Accordingly, in my view the trial judge herein was entitled on adjourning the plaintiff’s claim to plenary hearing to impose a term as a condition of the leave to defend, that the defendant might only plead the defence which he decided met the bona fide threshold.
- The further question is where, as in this instance, leave to defend in relation to one defence which is a pure defence is granted but a second defence in reliance upon an alleged entitlement to set off a counterclaim is not considered to meet the bona fide threshold may the Court not only preclude the second defence being pleaded but also impose a term precluding the defendant from raising the counterclaim as a pure counterclaim?
- Counsel for the defendant submitted that even if the Court on hearing the motion for summary judgment may in remitting a summary claim for plenary hearing restrict the defences to a single defence it had no jurisdiction to preclude the bringing of the counterclaim by the defendant. He submits that pursuant to Order 37 the plaintiff’s claim has now been remitted for plenary hearing “as if it had been commenced by plenary summons”. Accordingly, he contends that the defendant may pursuant to O. 19, r. 2, plead with his defence a counterclaim. O. 19, r. 2 provides:
“A defendant in an action may set-off, or set up by way of counterclaim against the claims of the plaintiff, any right or claim, whether such set-off or counterclaim sound in damages or not, and such set-off or counterclaim shall have the same effect as a cross action, so as to enable the Court to pronounce a final judgement in the same action, both on the original and on the cross claim. But the Court may, on the application of the plaintiff before trial, if in the opinion of the Court such set-off or counterclaim cannot be conveniently disposed of in the pending action, or ought not to be allowed, refuse permission to the defendant to avail himself thereof.”
- Counsel for the defendant acknowledges that the Court would have jurisdiction pursuant to O. 10, r. 2, to preclude the pursuit of the counterclaim in the present proceedings but submits that any such decision would have to be made subsequent to the delivery of the counterclaim and different considerations apply. Further he recognises that an application could be made by the plaintiff to strike out the counterclaim on the grounds that it discloses no reasonable cause of action pursuant to O. 19, r. 28 or the inherent jurisdiction of the court, but again it is submitted that different principles apply.
- The real question appears to me to be whether the jurisdiction given to the court upon the hearing of an application for summary judgment pursuant to O. 37, r. 10 is sufficiently wide to permit it to make an order, as a condition of leave to defend, precluding a defendant setting up a counterclaim. My conclusion is that the court does have such a jurisdiction.
- Order 19, sets out the rules which apply, in general, to pleadings. Order 37 applies specifically to summary proceedings. Further, O. 37, r. 7, whilst providing that the court may adjourn the case for plenary hearing “as if the proceedings had been originated by plenary summons” also expressly gives the court jurisdiction to make “such directions as to pleadings . . . as may be appropriate” and also more generally to make “such order for determination of the questions in issue in the action as may seem just”.
- In my judgment O. 37, rules 7 and 10, together give the Court a wide discretion to make orders in relation to pleadings including orders which both restrict defences which may be raised and also restrict the pursuit of a counterclaim where this appears appropriate for the fair determination of the plaintiff’s claim having regard to the real or bona fide issues in dispute as determined by the claim in the summons and the decision made by the court at the time of the motion for summary judgment on the affidavit evidence in relation to the claim and any defence and counterclaim sought to be advanced by the defendant. In particular, where as in this instance the defendant has sought to advance a defence which is dependent upon an asserted entitlement to set off of a counterclaim and on the motion for summary judgment the High Court judge has determined that the substance of the counterclaim does not meet the Aer Rianta threshold then the Court has jurisdiction and is properly entitled to conclude that the plaintiff is entitled to have its claim against the defendant determined in proceedings where the only issues in the proceedings should be those which are required to be determined by reason of a bona fide defence which has met the requisite Aer Rianta threshold. Such an approach is consistent with the general powers given to the court pursuant to O. 37, r. 7 and 10 which appear aimed at ensuring that a claim which is of a type which may be brought by summary summons proceeds to final determination in an efficient and cost effective manner whilst having regard to the right of a defendant to pursue in a full plenary hearing either a defence which meets the bona fide threshold or in certain circumstances a counterclaim which also meets the same threshold both as to its substance and as to its entitlement to be set off against the plaintiff’s claim.
- The Court was referred to applicable principles set out by Clarke J. in the High Court in Moohan v. S. & R. Motors (Donegal) Limited [2007] IEHC 435, [2008] 3 IR 650 at p.656 where on an application for summary judgment the single defence advanced is one to set off a counterclaim or cross claim. Whilst those principles do not determine the questions at issue on this appeal nevertheless the judgment is of assistance. It indicates, I would respectfully say correctly, that when as in these proceedings a defendant contends for a bona fide defence which is to set off a counterclaim or cross claim there are two separate questions which the court must address in considering whether the defence meets the Aer Rianta threshold. A court must consider both whether the connection between the plaintiff’s claim and the counterclaim or cross claim of the defendant is such as to establish a prima facie entitlement of the defendant to set off in equity the amount recoverable on the counterclaim and also whether or not the substance of the counterclaim itself reaches the arguable or bona fide threshold. Both questions must be answered in favour of the defendant to establish a bona fide defence. Unless the counterclaim or cross claim itself meets the Aer Rianta threshold irrespective of the position in relation to set off it cannot constitute a prima facie defence.
- In his judgment Fullam J. considered the substance of the counterclaim and concluded (at minimum) that it did not meet the Aer Rianta or bona fide threshold. In those circumstances it was unnecessary for him to consider in any detail the entitlement to set off any amount which might be recoverable pursuant to the alleged counterclaim.
- The parties accept that they did not make submissions to the trial judge as to the consequences of his finding that the estoppel defence met the Aer Rianta threshold, but concluding that the defence reliant upon the counterclaim did not. Obviously, it would have been preferable that the parties had considered and made submissions on such an outcome at the first hearing. If that had been done the trial judge would have had the opportunity of considering explicitly what is undoubtedly a separate and distinct question as to whether in addition to restricting the defences to the single estoppel defence he should also make an order precluding the defendant from making any counterclaim in the proceedings and in particular the counterclaim which he had rejected as meeting the Aer Rianta threshold.
- The parties indicated to this Court, that if it found that there was jurisdiction to make an order pursuant to O. 37, preventing the defendant raising a counterclaim in the proceedings, that the question of whether such a restriction should be imposed on the facts herein should not be remitted to the High Court but that this Court should now determine the issue on this appeal.
- In summary the defendant submits that the facts upon which he proposes relying for the estoppel defence includes facts relating to the sale of the Chicago Spire loan and that there is therefore a significant potential overlap between the factual basis of the defence he is permitted to pursue and the counterclaim in respect of which he submits he has a constitutional right of access to the courts and which he could now pursue in separate proceedings. The plaintiff disputes this and refers not only to the issues raised by the 2009 Act and the position of the plaintiff but also to further objections it made in the High court to the counterclaim being sought to be advanced by the defendant. These include that the assets which it is alleged were diminished in value are not assets personally owned by the defendant but by companies which are separate legal persons and in whom any such alleged claim vests.
- In my judgment, the counterclaim which the defendant seeks to pursue raises a significant number of issues both legal and factual which do not arise on the estoppel defence as pleaded and the Reply delivered thereto. It appears probable that if the defendant were permitted to pursue the counterclaim in the proceedings it would greatly increase the issues, both legal and factual and hence increase the costs and time required to hear and decide the proceedings. In circumstances where the trial judge concluded, at minimum, that the substance of the counterclaim did not meet the Aer Rianta threshold and having regard to the nature of the counterclaim and the nature of the plaintiff’s claim and the fact neither the guarantees nor the amounts are in dispute I have concluded that it is in the interest of justice that the plaintiff’s claim be determined in proceedings where the only issues which may be pursued are those pursuant to the estoppel defence which is considered to have met the Aer Rianta threshold.
- Accordingly, I would dismiss the appeal.
JUDGMENT OF MR JUSTICE MICHAEL PEART DELIVERED ON THE 15TH DAY OF APRIL 2016
- This is an appeal against an order made by Fullam J. in the Commercial Court on the 24th February 2015 when he adjourned these summary summons proceedings to a plenary hearing, but limited to the single issue as to whether NAMA is estopped from enforcing certain guarantees against Mr Kelleher by virtue of alleged representations made and assurances given to him after the underlying loans had been transferred into NAMA and while he was engaging with NAMA in relation to the security assets.
- In the proceedings NAMA seeks to recover a sum in excess of €46 million plus interest from Mr Kelleher on foot of his guarantees which were executed as part of the security provided for certain loans advanced by former Anglo Irish Bank to corporate entities, together known as the ‘Shelbourne Connection’ of which Mr Kelleher is in reality the beneficial owner.
- The guarantees were given firstly in respect of a loan facility dated 16th June 2005 granted to CWD Properties Ltd to assist with its development of lands at Cratloe, Co. Limerick (‘the Cratloe Facility’), and secondly in respect of loan facilities granted to certain entities within the Shelbourne Connection to assist with their development projects in Dublin and in Belgium (the ‘Modillion Facilities’). The total indebtedness of these corporate entities on foot of these facilities runs to almost €260 million. However, the liability of Mr Kelleher on foot of his guarantees is capped at €50 million.
- The issue on the appeal is whether the defendant ought to have been permitted by the trial judge to raise by way of a counterclaim one of the issues which he had raised by way of defence in his replying affidavits, but which was found by the trial judge not to meet the test in Aer Rianta v. Ryanair [2001] 4 IR 607, or to put it another way, whether the trial judge was entitled to preclude the defendant from pursuing what he now submits is essentially a counterclaim rather than a defence, and therefore not an issue which requires to pass the Aer Rianta test at all.
- That issue sought to be raised by way of counterclaim is whether NAMA breached its duty as mortgagee and in particular the duty imposed upon NAMA by sections 10 and 11 of the NAMA Act, and by doing so wrongly exposed the defendant to a liability on foot of his guarantees. In general terms Mr Kelleher argued before Fullam J. that NAMA sold what has been referred to as the Chicago Spire loan at a fire sale price, and that by failing to maximise the real potential value of the proposed Chicago Spire development which, if achieved, would have enabled all of the Shelbourne Connection loans to be repaid in full, he was left with a liability under his guarantees which he ought not and would not have otherwise had.
- For the avoidance of any doubt I should make clear that the guarantees on foot of which Mr Kelleher is sued in these proceedings did not form part of the security for any of the loans made in respect of the Chicago Spire development, and were confined to the Cratloe facility and Modillion facilities.
- NAMA’s motion for summary judgment was heard on affidavit over three days. The transcripts of those days’ hearings have been made available on this appeal. It is clear from a reading of those transcripts that the issue arising from the sale of the Chicago Spire loan at an undervalue was argued as being a ground of defence. It was not referred to as being a counterclaim before the trial judge until after judgment had been given, and only when counsel for the defendant sought a clarification from Mr Justice Fullam as to whether his ruling was intended to limit the plenary hearing to the estoppel issue alone, and that he was precluding the defendant from bringing a counterclaim for damages arising from the sale of the Chicago Spire loan. The trial judge made it clear that this was his intention. In his written judgment, having examined the ground put forward in respect of this issue, he had concluded that “in the circumstances there is no reality in this defence”, and by reference to the Aer Rianta test – is it very clear the defendant has no case? – he answered this question in the negative in respect of the estoppel issue but in the affirmative in relation to the Chicago Spire loan issue.
- It is accepted on both sides that when the matter was argued in the High Court the question of how the counterclaim should be dealt with in the event that the matter was being sent forward to plenary hearing on the estoppel defence was not addressed specifically, though in written submissions reference had been made to cases such as Prendergast v. Biddle, unreported, Supreme Court, 31st July 1957, and to the judgment of Clarke J. in the High Court in Moohan v. S & R Motors (Donegal) Limited [2008] I.R. 650. Nevertheless, the trial judge was clearly alert to the fact that in reality the Chicago Spire issue is a claim for damages (i.e. a counterclaim) rather than a defence to the plaintiff’s claim on the guarantees, as he stated at the outset of his consideration of it in his judgment at para. 43:-
“43. The effect of the plaintiff’s [sic] contention is that he has a counterclaim for damages which is more than sufficient to offset against any liability under the guarantees in these proceedings. To succeed with such a counterclaim, the defendant acknowledges that he has to establish that ss. 10, 11 and 12 of the Act of 2009 impose obligations on NAMA which are more onerous than the normal duties of a mortgagee as set out in Silven Properties and approved by the Supreme Court in Dellway.”
- During the course of his judgment, Fullam J. referred to the valuation evidence put forward by the defendant which put the potential value of a completed Chicago Spire development at $350 million, and to the evidence put forward by NAMA’s valuer, which included an averment that even if the defendant’s valuations were accepted in full and on a gross basis i.e. $350 million for the Chicago Spire development and $50 million for the secured assets of the Shelbourne Connection, there would still remain a nett liability of €98 million, which would still leave the defendant exposed to the maximum liability under his guarantees. It was in such circumstances that the trial judge expressed his conclusion that “there was no reality in this defence”, and following the delivery of judgment made it clear that he was refusing to allow the issue to be raised even as a counterclaim.
- The defendant submits that the trial judge erred in concluding that there was no reality to the counterclaim, and in excluding it as an issue in the plenary hearing. He emphasises on this appeal that the Chicago Spire issue is not a defence as such to the plaintiff’s claim, but is rather an independent claim or cross-claim for damages which, if successful, would entitle him to an equitable set-off against any sum found to be due to the plaintiff. As such, it is submitted, it is a separate claim which could, if necessary, be brought against the plaintiff in separate proceedings without any leave of the court. However it is submitted that since it is closely linked to the plaintiff’s claim, and the evidence supporting the estoppel defence will be relevant to the Chicago Spire loan issue, at least in part, it would be convenient, including by way of saving in court time and costs, for it to be litigated as part of the plaintiff’s proceedings which have in any event been sent forward to plenary hearing on the estoppel issue.
- The defendant has submitted that where the Court hears a contested motion for judgment in summary proceedings, the question to be determined on that motion is confined to whether the defendant has established the probability that he has a bona fide defence, or, as it is put in Aer Rianta “whether it is very clear that the defendant has no defence”. It is submitted that this does not involve any engagement with the merits or otherwise of any counterclaim which the defendant may wish to bring, whether it is raised on the replying affidavits or not, and that where a plenary hearing has been directed with appropriate directions as to delivery of statement of claim (if required) and defence (in this case on the issue of estoppel) the defendant may include a counterclaim as of right, since in any event he could bring that claim in separate proceedings without any leave to do so from the Court.
- The plaintiff has made it clear that in the event that new separate proceedings are issued in order to litigate the counterclaim, it will argue that the issues raised by way of counterclaim are res judicata as a result of the finding of Fullam J. that there is no reality to the claims and his refusal to permit it to be litigated in these proceedings. Indeed at para. 3 of its Reply to Defence delivered on 13th April 2015 in answer to the defendant’s Defence (limited to the estoppel, but nevertheless referencing the Chicago Spire issue) the plaintiff has pleaded that the defendant is precluded from relying in any way upon matters related to the Chicago Spire because they are res judicata. The defendant submits that these issues could not be considered res judicata given the very limited consideration of them which can take place on a motion for judgment heard only on affidavit evidence, but that in the light of that plea made by the plaintiff, it is all the more necessary that the defendant be permitted to make his case for damages by way of counterclaim in the present proceedings, rather than be met with a res judicata plea in any new proceedings. In reality, however, even if this matter is permitted to be pleaded in these proceedings by way of counterclaim, the plaintiff could still bring a motion to have the counterclaim struck out on the basis that the issue is res judicata, since if this Court was to permit the counterclaim to be pleaded it would be doing so on a jurisdictional basis only, and not by concluding as to the merits of that counterclaim, or expressing any view as to whether it is res judicata.
- The defendant accepts that if new proceedings were issued, the plaintiff might decide to bring an application to strike out the claim on the basis of abuse of process or that the claim is one that is bound to fail. Equally, he accepts that if he is successful in this appeal to the extent that he ought not to have been prevented from pleading the counterclaim with his Defence on the estoppel issue, he might be faced with a similar motion to strike out the counterclaim. However, while that may be something to be faced, he points to the fact that on any such application the plaintiff seeking to have the claim struck out would have to satisfy the court that taking the defendant’s case at its highest it was bound to fail or disclosed no reasonable cause of action – a test which the defendant submits is a different and more onerous test to the Aer Rianta test applied by the trial judge when excluding the counterclaim from the ambit of the plenary hearing.
- The defendant submits that any question of assessing the merits of a defendant’s counterclaim arises only in the event that the plaintiff obtains judgment on a motion for judgment and thereafter the defendant seeking a stay on that judgment until such time as the counterclaim is determined. The Court in such circumstances would be entitled to assess the merit of the counterclaim as part of the exercise normally to be undertaken when deciding whether or not to grant a stay, but that it does not arise where the plaintiff’s claim is being adjourned to a plenary hearing in any event, as in the present case.
- In this regard, Michael Cush SC for the defendant has referred to the judgment of Clarke J. in Moohan v. S & R Motors (Donegal) Limited [supra] where he considered how a cross-claim which might give rise to an equitable set-off was to be treated in a case where there was no defence as such found to pass the Aer Rianta test, and where the plaintiff was entitled to judgment on his claim against the defendant. That consideration involved a consideration of the judgment of Kingsmill Moore J. in Prendergast v. Biddle [supra]. Commencing at para. 9 of his judgment, Clarke J. stated the following:
“9. Where the nature of the defence put forward amounts to a form of cross-claim slightly different considerations may apply. In those circumstances the court has a wide discretion. Where the defendant does not establish a bona fide defence to the claim as such, but maintains that he has a cross-claim against the plaintiff, then the first question which needs to be determined is as to whether that cross-claim would give rise to a defence in equity to the proceedings. It is clear from Prendergast v. Biddle (unreported, Supreme Court 31st July 1957) that the test as to whether a cross-claim gives rise to a defence in equity depends upon whether the cross-claim stems from the same set of facts (such as the same contract) as gives rise to the primary claim. If it does, then an equitable set-off is available so that the debt arising on the claim will be disallowed to the extent that the cross-claim may be set out.
- On the other hand if the cross-claim arises from some independent set of circumstances then the claim (unless it can be defended on separate grounds) will have to be allowed, but the defendant may be able to establish a counterclaim in due course, which may in whole or in part be set against the claim. What the position is to be in the intervening period creates a difficulty as explained by Kingsmill Moore J. in Prendergast v. Biddle … in the following terms at p. 24:-
‘On the one hand it may be asked why a plaintiff with a proved and perhaps uncontested claim should wait for judgment or execution of judgment on his claim because the defendant asserts a plausible but unproved and contested counterclaim. On the other hand it may equally be asked why a defendant should be required to pay the plaintiff’s demand when he asserts and may be able to prove that the plaintiff owes him a larger amount.’
- The court’s discretion is to be exercised on the basis of the principles set out by Kingsmill Moore J. later in the course of the same judgment in the following terms at p. 25:
‘It seems to me that a judge in exercising his discretion may take into account the apparent strength of the counterclaim and the answer suggested to it, the conduct of the parties and the promptitude with which they have asserted their claims, the nature of their claims and also the financial position of the parties. If, for instance, the defendant could show that the plaintiff was in embarrassed circumstances it might be considered a reason why the plaintiff should not be allowed to get judgement, or execute judgement on his claim until after the counterclaim had been heard, for the plaintiff having received payment might use the money to pay his debts or otherwise dissipate it so that judgment on the counterclaim would be fruitless. I mention only some of the factors which a judge before whom the application comes may have to take into consideration in the exercise of this discretion.’
- It seems to me that it also follows that a court in determining whether a set-off in equity may be available, so as to provide a defence to the claim itself, also has to have regard to the fact that the set-off is equitable in nature and, it follows, a defendant seeking to assert such a set off must himself do equity.
- On that basis the overall approach to a case such as this (involving, as it does, a cross-claim) seems to me to be the following: –
(a) it is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross-claim to amount to a defence as such, it must arguably give rise to a set-off in equity and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set-off;
(b) if and to the extent that a prima facie case for such a set off arises, the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim (or have same, in a case such as that with which I am concerned, referred to arbitration);
(c) if the cross-claim amounts to an independent claim then judgment should be entered on the claim but the question of whether execution of such judgments should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast v. Biddle … ”.
- Mr. Cush Submits accordingly that the merit or strength of the cross-claim comes into play only when the Court is being asked to consider the question of a stay on a judgment to which the plaintiff is otherwise entitled to, and that it is clearly envisaged that even though the defendant may not be permitted to defend the plaintiff’s claim, he may nevertheless litigate a counterclaim, the only question then remaining being whether or not the plaintiff’s judgment should be stayed in the meantime, that being a matter for the Court’s discretion. However, as Mr Cush emphasises, there is no question of a stay in the present case as it has been adjourned to plenary hearing on the estoppel issue in any event, so the Court is not concerned as to how to exercise that discretion, and is confined to considering whether the defendant can be shut out from having the cross-claim litigated as a counterclaim in the present proceedings.
- Declan McGrath SC for NAMA submits first of all that throughout the hearing of the motion for judgment in the High Court the Chicago Spire issue was dealt with only as a point of defence and not dealt with as a counterclaim, and that the defendant ought not now be entitled to argue on a different basis now. In a strict sense that is correct. However, I noted on going through the transcripts of the hearing in the High Court that towards the end of his submissions moving the motion, Brian O’Moore SC for NAMA, having made reference to Prendergast v. Biddle and to Moohan v. S & R Motors, and to what he considered to be the weakness of the Chicago Spire issue, stated the following at page 60, Day 2:
“So even if, I have given many reasons why he shouldn’t be, but even if Mr Kelleher is in a position to assert either directly or through SDWS some entitlement in relation to the Chicago Spire the appropriate order is summary judgement and then some directions as to a counterclaim that may be, or an independent claim that may be pursued. But in truth I don’t press that, judge, because it seems in our submission clear that nothing in relation to the Chicago Spire stacks up as a defence, still less as a counterclaim. It is simply extending the procedure to facilitate a claim being made in that regard even if summary judgement is granted against Mr Kelleher now, that option may be open to the Court but we say on the facts and on the legal status, sorry, on the legal authorities that that would not be the preferred option as far as NAMA is concerned.”
- In the immediate aftermath of that submission, he went on at the judge’s invitation to expand further on that matter, and said:
“Well if the Court was of the view that a claim in relation to the Chicago Spire could be maintained taking into account all of the provisions set out by Mr Justice Clarke and Mr Justice Kingsmill Moore, then the appropriate step would be to enter judgment against Mr. Kelleher and then hear the parties about the circumstances and directions required for the maintenance of the counterclaim, or sorry the claims. It is not in truth a proper counterclaim. But what Prendergast v. Biddle makes clear is that the giving of any such directions in no way prevents execution on the summary judgment. That is why the status of the plaintiff is important. Because if the plaintiff was not meant to be a mark on the independent claim there may be some restriction on the summary judgment being executed but here that simply isn’t the case, because NAMA is clearly a mark on any view.”
- That exchange with the trial judge, however, did not consider the possibility that the estoppel defence would be found to be arguable and what, in such circumstances, should become of the Chicago Spire issue in the context of it being a counterclaim as opposed to a potential defence. It was immediately thereafter that Mr Cush commenced the defendant’s submissions. He identified two issues which would be submitted to constitute prima defences, namely the estoppel issue and the Chicago Spire issue. The latter was at no stage addressed on the basis that it was in the nature of a counterclaim. At the conclusion of his own submissions which were confined to the estoppel defence, Mr Cush informed the trial judge that Shane Murphy SC would address the Court “on the detail of that second line of defence” (emphasis added) i.e. the alleged reckless sale of the Chicago Spire loan at what the defendant argues was in the order of just 10% of what he considers to have been the full potential value of that development, if its value had been maximised. The issue was then addressed by Mr Murphy solely on the basis that this issue was a potential point of defence. In fact, what is now stated to be the reality of the issue, namely that it is a counterclaim and not a defence as such to the claim on the guarantees, was not referred to at all during Mr Murphy’s submissions.
- It is hardly surprising therefore that the trial judge examined whether that issue passed the Aer Rianta test as a bona fide defence being advanced by the defendant. In the event, he decided that while the estoppel issue met the test, the Chicago Spire issue did not. As I have mentioned already, it was only after judgment had been handed down, but before the order adjourning the case to plenary hearing on the estoppel issue was perfected that the defendant sought to raise the question of whether the order to be made excluded the possibility for the defendant to raise the Chicago Spire issue as a counterclaim. As stated already, the trial judge made it clear that on that occasion that he was not permitting the issue to be raised as a counterclaim. The order as drawn makes no reference to any counterclaim. It simply refers to the case being adjourned to plenary hearing on the single issue of estoppel.
- In so far as the trial judge made it clear that his intention was to confine the plenary hearing to the single issue of estoppel, and that the counterclaim could not be pleaded as part of any Defence which the defendant would deliver, on the basis that there was “no reality in this defence”, the defendant appeals to this Court on the basis that the trial judge exceeded his jurisdiction under O. 37 RSC by reaching a conclusion on the merits of what was, according to the defendant’s submissions before this Court at least, not in fact a defence but rather a counterclaim, even if it was never presented to the trial judge on that basis.
- In relation to the point made that the issue was never raised in the High Court as being a counterclaim (and therefore arguably is something which the defendant ought not now be entitled to argue on appeal) Declan McGrath SC for NAMA does not ask this Court to send the issue back to the High Court. I think that is the correct approach given the fact that it was ventilated, albeit late in the day, after the matter was raised with the trial judge between the delivery of judgment and the perfecting of the order.
Discussion
- The availability to a plaintiff of a procedure by way of summary summons enables a plaintiff who is owed by a defendant a money debt which can be easily ascertained by means of arithmetic calculation to obtain judgment for that debt by a simplified procedure and therefore more expeditiously than if the claim was commenced by way of plenary summons. That was recognised by Lavery J. in Prendergast v. Biddle [supra] when he stated:
“The procedure by summary summons is provided in order to enable speedy justice to be done in particular cases where there is either no issue to be tried or the issues involved are simple and capable of being easily determined”.
- Hence a defendant who wishes to defend against such a claim must, unlike a defendant to a plenary summons, must first satisfy the Court on a motion for judgment brought by the plaintiff, that he has a bona fide and arguable defence. This requirement ensures as far as possible, and in a way that ensures that justice is done to each party, that a plaintiff in such a claim is not unjustly delayed in getting a judgment by a defendant who either admits the debt, or merely asserts a denial of the debt without putting forward an evidential basis or otherwise substantiating the basis for his denial. O’Dalaigh J. (as he then was) emphasised the importance of this summary procedure in respect of liquidated claims in his judgment in Prendergast v. Biddle [supra] when he stated:
“That the Rules of 1926 permit a judge to enter up judgment for a liquidated sum admitted to be due is not a matter for surprise. The law attaches to a judgment debt several privileges. Moreover as payments of debts in certain circumstances are made in order of priority the prompt obtaining of judgment is also generally a matter of importance”.
- The filter mechanism provided in O. 37 of the Rules of the Superior Courts whereby the Court may assess the merits of a defence put up by the defendant on affidavit to the plaintiff’s claim enables the Court to strike an appropriate balance between the plaintiff’s right to obtain an expeditious judgment for a debt claimed to be due, and the defendant’s right to have a reasonable opportunity to advance his defence to that claim by being given leave to defend.
- Where the Court is satisfied that a bona fide defence is raised by the defendant on his affidavit(s) and that a plenary hearing should take place, the Court under O. 37, r. 3 of the Rules of the Superior Courts may give such directions as to pleadings, and also “may make such order for determination of the questions in issue in the action as may seem just”. It is clear that these provisions give the Court a wide discretion as to the manner in which the case proceeds to a plenary hearing in order to ensure that justice between the parties is done. The most usual order made when a bona fide defence is found to exist is one adjourning the case to plenary hearing and directing the plaintiff to deliver a statement of claim within, say, twenty one days, and permitting the defendant to deliver his defence within a similar period from the date of receipt of that statement of claim.
- However, as was made clear by Finlay Geoghegan J. in Bussoleno Ltd v. Kelly [2012] 1 ILRM 81, where the defendant raises in his affidavits a number of different issues by way of defence to the plaintiff’s claim, the Court may decide that not all the issues raised are sufficiently substantiated by evidence or arguable in order to pass the test, and in such circumstances the Court may limit the defence of the claim to a specific issue or issues, as indeed happened in the present case where Fullam J. directed a plenary hearing but confined to the single issue of estoppel.
- There can, of course, be cases where not only does the defendant raise defence to the claim, but indicates that he has in addition to a defence a counterclaim which he wishes to have heard at the same time as the plaintiff’s claim. ,Where such a counterclaim arises from, say, the same contract on foot of which the plaintiff sues, little difficulty arises in deciding that it is convenient for the counterclaim to be permitted to be determined as part of the proceedings sent for plenary hearing. ,For example, the plaintiff, a builder, may sue for money due on foot of a contract to build a house for the defendant. While, strictly speaking, there is no defence as such to the amount claimed by the plaintiff on foot of such a contract the defendant may seek to counterclaim for damages for bad workmanship, and set off those damages against the amount due under the contract. Such a counterclaim amounts to a defence by way of equitable set off. In such a case, there is little difficulty in concluding that it is mutually convenient for the counterclaim to be dealt with in the same plenary hearing as the plaintiff’s claim. But because the counterclaim is in reality a defence to the claim by way of equitable set off, an examination of the merits of such a counterclaim may be undertaken by the Court in deciding whether a plenary hearing should be directed in respect of that defence by way of counterclaim. Such situations have been considered in cases such as, inter alia, Prendergast v. Biddle [supra], Agra Trading Ltd v. Minister for Agriculture, High Court (Barrington J.) 19th May 1983, Soanes v. Leisure Corporation International Ltd, High Court (Geoghegan J.) 18th December 1992, McGrath v. O’Driscoll [200] IEHC, [2007] ILRM 203, and Moohan v. S & R Motors (Donegal) Ltd [2007] IEHC 435, [2008] 3 IR 650.
- It is important to distinguish between a defence put forward by way of counterclaim, and which gives rise to an equitable set off, and a counterclaim which is in fact an independent claim, and not one which naturally arises from the same factual basis for the plaintiff’s claim. This is something which is specifically mentioned by Clarke J. in his judgment in Moohan v. S & R Motors (Donegal) Ltd in para. 13 in the passage quoted at para.15 above. He distinguishes between a cross-claim or counterclaim which amounts to a defence to the plaintiff’s claim giving rise to an equitable set off, and one which is simply an independent claim arising on different facts altogether. It is clear from what he states in his para. 13 that in respect of the former which is put up by way of a defence, the Court will assess its as a defence, and if it passes muster in that regard, the Court will not enter judgment for the plaintiff, and the defendant will be permitted to defend the claim in full. I think it would follow also that if it is clear that the maximum value of the cross-claim by way of equitable set off will be less than the amount of the plaintiff’s claim, then the plaintiff may be entitled to get judgment for part of the sum claimed, with the balance being adjourned to a plenary hearing.
- But where the cross-claim amounts to an independent claim (i.e. arising from different facts) it is not considered to be a defence by way of equitable set off at all. That link between the plaintiff’s claim and the defendant’s counterclaim is absent. In such circumstances, as explained by Clarke J. in Moohan v. S & R Motors (Donegal) Ltd, where there is no other defence considered to exist to the plaintiff’s claim, the plaintiff will probably be found entitled to judgment on his claim, and the only further question arising will be whether that judgment should be stayed pending the determination of the defendant’s independent counterclaim, and whether that counterclaim can be more conveniently dealt with by adjourning the proceedings to a plenary hearing on that counterclaim alone, or whether, instead, the defendant should commence separate proceedings against the defendant in respect of the counterclaim. But in such a case, the Court will give judgment (with or without a stay thereon) and will adjourn the proceedings to a plenary hearing on the defendant’s counterclaim. The Court in such a case is not concerned with the merit of the asserted counterclaim, unless as part of its consideration as of to the exercise its discretion to grant a stay on the plaintiff’s judgment or not pending the determination of the counterclaim. But the important point is that the defendant is entitled to litigate that counterclaim (with or without a stay on the plaintiff’s judgment) either in those proceedings or in separate proceedings, without any leave of the court.
- In none of the cases discussed thus far has consideration been given to the situation which exists in the present proceedings, namely where the Court has been satisfied that one ground of defence (estoppel) put forward meets the required test and a plenary hearing has been directed on that issue alone, and where the defendant wishes in addition to that estoppel defence raise a counterclaim, not by way of an equitable set off, but in respect of an independent claim. It is correct in my view to see the counterclaim sought to be argued in these proceedings arising from the manner in which the plaintiff sold the Chicago Spire loan as being an independent claim and not a counterclaim giving rise to a defence by way of an equitable set off. In my view, that claim does not arise from the guarantees on foot of which the plaintiff sues. Those guarantees are not backing any loan that was advanced in relation to the Chicago Spire development. The representations relied upon as giving rise to an estoppel in respect of claims made under the guarantees sued upon have nothing to do with the claims being made as to the reckless disposal of the Chicago Spire loan. Another factor is that it is certainly arguable that any claim made in relation to the sale of the Chicago Spire loan at an undervalue is a not a claim maintainable by the defendant personally, but rather by the companies involved in that development project.
- The question remains as to how the counterclaim which the defendant indicated it wished to bring ought to have been dealt with in the court below after it was clarified by the defendant following the trial judge’s judgment (and prior to the perfection of any order) that he wished to bring it as a counterclaim, even though the point had been rejected as meeting the required test as a defence as such to the plaintiff’s claim. While I have set forth above an exchange between Mr O’Moore and the trial judge in relation to how the issue of a potential counterclaim should be dealt with, it was only discussed in a context where no defence was found to exist and where judgment was being entered for the plaintiff, and how the counterclaim would then be dealt with in accordance with Prendergast v. Biddle. There was no discussion at that stage as to what the position would be where the matter was in any event being adjourned to a plenary hearing on the estoppel defence. When the trial judge was asked by the defendant to clarify if he intended by his ruling that the defendant was prohibited from pleading his counterclaim when delivering his Defence on the estoppel issue, and he so confirmed that such was his intention, there was no elaboration of his reasons for so concluding. There is a lack of clarity as to the basis on which the trial judge excluded the defendant from pursuing his intended counterclaim.
- But in the light of Mr McGrath’s assurance that he was not asking this Court to send the matter back to the trial judge on the issue of the counterclaim, I am satisfied that this Court should reach its own conclusion as to the defendant’s entitlement to continue to pursue the Chicago Spire issue and, if he is so entitled, the manner in which he should do so in the light of the authorities.
- Firstly I wish to reiterate my view that since the Chicago Spire issue was raised specifically as a point of defence and not at all as being a counterclaim, the trial judge was entirely correct to consider it in that light, and to form a view that it did not amount to a bona fide defence to the plaintiff’s claim on the guarantees. I appreciate that he expressed this view in terms that there was not reality to the point, but given the manner in which the issue was argued by counsel, it is clear that what he was deciding was whether or not the issue met what I will loosely term the Aer Rianta test. It would not be fair in such circumstances to decide that the trial judge applied the wrong test.
- This counterclaim is an independent claim which the defendant wishes to bring against the plaintiff. It is not a defence to the plaintiff’s claim. Indeed, if the estoppel issue did not exist in the proceedings, it is likely that the Court would have given judgment to the plaintiff on its motion, and in my view unlikely that the Court would have granted a stay on that judgment while the Chicago Spire issue was litigated, whether in a separate action or by way of a counterclaim in these proceedings. Such a conclusion might well have been arrived because of the evidence available, which does not appear to be in contest, that even if the value of a completed Chicago Spire development as given by the defendant is taken at its highest, success on the counterclaim would still leave the defendant exposed on these guarantees to the maximum claimable thereunder.
- A claim on foot of a guarantee is a straightforward claim in most cases, and therefore ideally suited to a determination in summary manner on foot of a summary summons procedure. A party entitled to judgment on foot of such a claim ought to get the benefit of such a judgment as quickly as is consistent with justice also being done to the defendant. By obtaining judgment, the judgment creditor can achieve some priority of importance in some scenarios. Delay in obtaining judgment may seriously prejudice the creditor’s chances of recovery. It is for that reason that a Court will not permit a defendant to hold up the plaintiff’s entitlement to judgment by reason merely of a desire on his part to litigate by way of a counterclaim some issue that realistically has little or nothing to do with the plaintiff’s claim on foot of the guarantee. The position is put well by Jessel MR in Anglo-Italian Bank v. Wells [1878] 38 L.T. 197 when he stated in relation to summary proceedings for money due by defendants on foot of certain promissory notes:
“The defendant says, as regards the deed, that there is another covenant in that deed which you, the plaintiffs, have broken, and that by reason of your breach of that covenant, I am entitled to claim damages from you; and if I establish the breach and get the damages, I may be entitled to set-off those damages against the sum claimed in the action. I must remark that, as regards that form of defence, it is not necessarily a defence under this order. It is quite true that you may, by way of counter-claim, bring forward, under the pleading rules, a defence of set-off of damages, but even that is in the discretion of the judge. He may strike out the counter-claim when it is there,’ if in the opinion of the court or judge such set-off or counter-claim cannot be conveniently disposed of in the pending action, or ought not to be allowed’. So, that it is merely a right depending on the discretion of the judge. It is not an absolute right to set off damages against a debt; and I must say, speaking for myself, that I should hesitate long before I allowed a defendant in an action on a bill of exchange to set up a case for damages by reason of the breach by the plaintiff of some of the contract or the commission of some tort.”
- In the present case, being a claim on foot of guarantees a plenary hearing on the estoppel defence alone will be a straightforward matter, and can be disposed of in a relatively short timeframe. The amount of the plaintiff’s claim is not in dispute. Some discovery may be necessary in relation to the estoppel, and if no agreement is reached in relation to discovery any necessary motion can be brought rapidly once pleadings are closed. Notice of trial can then be served and a date for hearing obtained.
- By contrast, if the defendant is to be permitted to add into the present proceedings his entirely separate claim that the plaintiff, by exercising of its statutory powers of enforcement by recklessly disposing of the Chicago Spire loan at a value representing perhaps as little as 10% of what the defendant says was the true value, and in breach of its obligations under the Act of 1999, caused him to have an exposure under the guarantees sued upon that he would not otherwise have had, the plenary hearing directed will assume an altogether different profile. It will become immensely more complex, lengthy and costly both in terns of costs and court time, and its chances of getting on for hearing in early course will disappear. Given the counterclaim’s lack of relationship to the claims on foot of the guarantees, it would be unjust to require that the plaintiff should be held up in the determination of the unrelated estoppel issue while embroiled in what inevitably become a long and complex litigation of the counterclaim. In my view, it was correct to confine the present proceedings to the estoppel issue, even if the Chicago Spire issue had been addressed by the defendant in the High Court as a counterclaim and not a point of defence.
- The defendant is perfectly free to bring his counterclaim by way of separate proceedings. He requires no leave to do so. He argues that he will be met by an argument from the plaintiff that the issue he wishes to litigate is res judicata as a result of the conclusions expressed by the trial judge on the motion for judgment herein. That may well be the case. But as I have already stated, that argument would have been open to the plaintiff in any event, even if this Court determined that justice required that the defendant be permitted to proceed by way of a counterclaim in these proceedings. Whether or not the issue is already determined by Fullam J. and is res judicata, is not something upon which this Court should express any view. That issue may arise for a determination at first instance, and will have to be addressed then on the basis of the applicable principles. It does not arise on this appeal.
- I would uphold the decision of Fullam J. confining these proceedings to the issue of estoppel identified by him as constituting a bona fide defence to the plaintiff’s claim, and dismiss the appeal.
Promontoria (Aran) Ltd v Tiernan
[2016] IESC 67
Judgment of Ms. Justice Laffoy delivered the 16th day of November, 2016
The appeal and its procedural background
- The High Court proceedings the subject of this appeal were initiated by a summary summons issued on 3rd September, 2009 by Ulster Bank Ireland Limited (Ulster Bank), as plaintiff, against the appellant (Ms. Tiernan), as defendant. In the special endorsement of claim Ulster Bank claimed the sum of €1, 731,774.47 representing principal and interest alleged to be due by Ms. Tiernan to Ulster Bank in respect of money lent and advanced by Ulster Bank to Ms. Tiernan at her request and for further interest from 29th August, 2009 to the date of judgment. An appearance was entered on behalf of Ms. Tiernan to the summary summons.
- Subsequently on 10th November, 2009 Ulster Bank filed a motion in the summary proceedings for liberty to enter final judgment in the terms of the special endorsement of claim. The first affidavit filed on behalf of Ulster Bank to ground the motion for summary judgment was filed on 17th December, 2009. That was an affidavit sworn by Gerry Duignan (Mr. Duignan), the Manager of Ulster Bank’s Business Centre in Drogheda, which was sworn on 14th December, 2009. The contents of that affidavit will be addressed later.
- A peculiar aspect of this case is that when the motion for summary judgment came on for hearing in the High Court before MacMenamin J. (the trial judge), there were before the Court some affidavits which bore the record number of other proceedings brought by Ulster Bank against Ms. Tiernan. Those proceedings were proceedings by way of special summons (Record No. 1149/2009 SP), which I understand were proceedings wherein Ulster Bank sought to enforce security it held over certain properties created by solicitor’s undertakings alleged to have been given to it on foot of irrevocable letters of authority given by Ms. Tiernan. The only relevance of those proceedings to the appeal being addressed in this judgment is that some of the affidavits filed in the High Court on the motion for summary judgment were apparently affidavits which were filed in the special summons proceedings and bear the record number of the special summons proceedings. A pragmatic and sensible approach was adopted by counsel on both sides in relation to those affidavits on the hearing of the appeal, in that neither side raised any point in relation to those affidavits, being considered by this Court. Apart from the grounding affidavit already referred to, the following affidavits are, accordingly, before this Court on the appeal:
(a) an affidavit sworn by Mr. Duignan on 28th January, 2010;
(b) an affidavit sworn by Ms. Tiernan on 25th March, 2010;
(c) an affidavit sworn by Mr. Duignan on 11th May, 2010; and
(d) an affidavit sworn by Ms. Tiernan on 1st July, 2010.
The foregoing affidavits will require to be considered in some detail later.
- The motion for summary judgment came on for hearing in the High Court on 20th January, 2011. The outcome was that Ulster Bank obtained summary judgment in the sum of €1,798,267.02 with interest thereon at the statutory rate and the costs of the proceedings against Ms. Tiernan. An ex tempore judgment was delivered by the trial judge on 20th January, 2011. While counsel for both sides did not agree a note of the judgment, there is before this Court on the appeal a note of the judgment prepared by counsel for Ulster Bank and approved of by the trial judge. Once again, adopting a pragmatic and sensible approach, counsel for the appellant on this appeal has made his case on the basis of that approved note.
- Having obtained an order from this Court (Murray C.J., Denham J. and Hardiman J.) on 6th May, 2011 to extend the time for service of notice of appeal, Ms. Tiernan served notice to appeal from the judgment and order of the High Court. Later, in 2013 a motion was brought on behalf of Ms. Tiernan to this Court for –
(a) liberty to file an amended notice of appeal; and
(b) liberty to adduce further evidence for the hearing of the said appeal.
That motion having been heard by this Court (Fennelly J., O’Donnell J. and McKechnie J.), by order dated 12th July, 2013 it was ordered that –
(i) Ms. Tiernan be at liberty to file the amended notice of appeal as sought, but subject to the qualification that the Court hearing the appeal would have the right not to admit any ground of appeal; and
(ii) the further evidence aspect of the motion would stand adjourned to the hearing of the appeal.
- The position, accordingly, when the appeal came on for hearing was that, in addition to addressing the appeal against the judgment and order of the High Court, this Court might have had to consider whether or not to admit any new ground of appeal set out in the amended notice of appeal and would have had to adjudicate on the application on behalf of Ms. Tiernan to adduce further evidence. As it happened, at the commencement of the hearing, counsel for Ms. Tiernan informed this Court that those two additional matters were not being pursued on the appeal and no objection was raised on behalf of the respondent referred to in the next paragraph to that approach being adopted.
- Finally, before the appeal came on for hearing in this Court, by order of the High Court made on 4th February, 2016, the title of the proceedings was amended by the substitution for Ulster Bank of Promontoria (Aran) Limited (the respondent) as plaintiff, and, consequently, as respondent on the appeal. On the hearing of the appeal it was made clear that no issue was being raised on behalf of Ms. Tiernan in relation to that amendment.
The issue on the appeal
- In the light of the foregoing the only issue on the appeal is whether the order of the High Court giving judgment against Ms. Tiernan should be set aside, so that the proceedings can proceed to plenary hearing and be defended on behalf of Ms. Tiernan. That issue is to be determined on the basis of the affidavits itemised earlier which were before the High Court and the contents of which will be outlined by reference to the submissions made on the hearing of the appeal. Although the affidavit evidence is outlined in some detail, it is not to be inferred that the Court has formed any view as to the credibility of the evidence put forward by either deponent, as distinct from whether, insofar as is necessary, a general view is formed as to the credibility of the defence put forward by Ms. Tiernan in line with the proper approach as laid down by this Court, having regard to the judgment of Clarke J. in what is referred to later as the IRBC case, which approach was reiterated more recently in the judgment delivered in this Court by Clarke J. in Camiveo Limited v. Dunnes Stores [2015] IESC 43 (at para. 3.2).
Outline of evidence before the High Court
Grounding affidavit of Mr. Duignan
- The grounding affidavit of Mr. Duignan was, as counsel for Ms. Tiernan pointed out, very bare. However, Mr. Duignan corrected an error in the special endorsement of claim on the summary summons as to the amount claimed to be due by Ms. Tiernan to Ulster Bank. It was averred that the corrected sum, €1,738,942.32 was then due and owing by Ms. Tiernan to Ulster Bank on foot of the loan account referred to in the special endorsement of claim. Further, it was averred that Ms. Tiernan had no bona fide defence to the action. The only document exhibited in the grounding affidavit was a so-called “Statement of Liability”, being a table showing the amount alleged to be due by Ms. Tiernan to Ulster Bank as at 22nd October, 2009.
Mr. Duignan’s affidavit of 28th January, 2010
- The affidavit sworn by Mr. Duignan on 28th January, 2010 contained an averment that on or about 28th November, 2007 Ms. Tiernan was advanced the sum of €1,747,000.00 by Ulster Bank repayable on demand with a moratorium on repayment of principal and interest for a period of seven months from the date of the said advance. A copy of the facility letter outlining the terms of the said advance was exhibited. The facility letter was dated 28th November, 2007 and it was addressed to Ms. Tiernan. It gave the name of the borrower as Ms. Tiernan. The facility was described as a “Demand Loan Facility” and the amount was given as €1,747,000.000. The purpose of the facility was outlined as being for the sole purpose of assisting with: repayment of a Bank of Scotland loan facility of €850,000; the purchase of a residential property at Gallery Quay, Grand Canal, Dublin, costing €710,000; and payment of various amounts in respect of stamp duty, legal fees, bank fees and fund bank interest. The facility also provided that the Bank would get security by way of first legal charge over licensed premises trading as “The Milestone” situate at Carlingford, County Louth and also security by way of first legal charge over the residential property situate at Gallery Quay. The fourth page of the facility letter contained the acceptance by Ms. Tiernan. It was signed by Ms. Tiernan and dated 28th November, 2007.
- Mr. Duignan also averred that Ulster Bank had received, as security for the advance to Ms. Tiernan, two undertakings, both dated 5th December, 2007, from “Messrs. Traynor & Company” (Traynors), Solicitors, with an address in Dundalk, County Louth agreeing to register both properties which were to be given as security to Ulster Bank in the name of Ms. Tiernan and to hold the title deeds of both properties to the order of Ulster Bank. Mr. Duignan averred that, although called upon to do so, Traynors had failed to comply with the terms of the undertakings to Ulster Bank. Mr. Duignan averred that neither of the properties was a family home within the meaning of the Family Home Protection Act 1976 by reference to certificates on the solicitors’ undertakings, copies of which were exhibited, which it was alleged were signed by Ms. Tiernan on 5th December, 2007. The affidavit also exhibited a copy of a letter dated 13th August, 2009 from Ulster Bank to Ms. Tiernan demanding repayment of the amount due on foot of the loan agreement. The correction of the amount claimed as being due in the grounding affidavit was explained on the basis of “one payment of €14,646.62 having been received on 18th August, 2009” after that letter.
Ms. Tiernan’s affidavit of 25th March, 2010
- In her affidavit sworn on 25th March, 2010 in reply to Mr. Duignan’s affidavit sworn on 28th January, 2010, Ms. Tiernan averred that three of the signatures purporting to be her signatures which appeared on the documents exhibited by Mr. Duignan, that is to say, the loan facility and the two solicitors’ undertakings, were not made by her. However, she did not deny that the signature on the acceptance portion, that is to say the fourth page, of the facility letter was her signature. However, she averred that she had no recollection of seeing the first three pages of the facility letter prior to 28th November, 2007, that is to say, the date on which she signed the acceptance. She then made the following averment, which is crucial to the defence she advances to the claim of Ulster Bank:
“I state and believe that [Ulster Bank] and its agents and in particular the deponent [Mr. Duignan] is fully aware of the identity of the person who negotiated, arranged and obtained the loan subject matter of these proceedings from [Ulster Bank] and that person is my father. [Ulster Bank’s] managers, including the said Mr. Duignan were engaged in a subterfuge to disguise the fact that they were advancing further monies to a person who had already received substantial advances from [Ulster Bank]. At the time of the transactions referred to in the affidavit of the said Mr. Duignan I had only recently qualified as a solicitor and was still in the course of an apprenticeship with a firm of solicitors in Dublin. The idea that [Ulster Bank] would have considered me for a loan of €1,713,774.47 simply flies in the face of common sense.”
- Ms. Tiernan pointed out in her affidavit that Mr. Duignan in his affidavit had not directly stated by whom the payment of €14,646.62 was made and she continued:
“[Ulster Bank] is well aware that I was not in a position to make any payment of such magnitude. I state and believe that [Ulster Bank] is fully aware of the identity of the person who made such payment. [Ulster Bank] is exploiting the fact that I was prepared to help my father from time to time in his dealings with the Bank. In e-mails and certain documents he requested from me Mr. Duignan maintained the subterfuge that he was dealing with me as a principal contracting party. At all stages he knew that the person with whom he was dealing was my father.”
- As regards the undertakings given by Traynors to Ulster Bank, Ms. Tiernan averred that she had not authorised any such undertaking, that she had not had and, at the time of swearing the affidavit, did not have any beneficial interest in the properties in question. Finally, she averred that she had a full defence to the proceedings commenced by summary summons and in relation thereto she averred that Ulster Bank –
“. . . well knew that they were contracting with my father and my limited involvement would not have been sufficient to have my part deemed to be that of an agent.”
Although it has to be acknowledged that the rather strangely worded last statement in that quotation appears to be at variance with the position now adopted by Ms. Tiernan, I have come to the conclusion that it should not detract from the position now being adopted by Ms. Tiernan.
Mr. Duignan’s affidavit of 11th May, 2010
- Ulster Bank’s reply to Ms. Tiernan’s affidavit was in the affidavit sworn by Mr. Duignan on 11th May, 2010. Addressing Ms. Tiernan’s averment that the signatures on a number of documents were not hers, Mr. Duignan averred that, in circumstances where she “negotiated the loan advance” from Ulster Bank and had subsequently entered into extensive correspondence with Ulster Bank in relation to the loan and her business affairs, Ulster Bank was astonished by that “contention now being raised for the first time”. He averred that Ulster Bank did not accept the same. Mr. Duignan expressed further astonishment in relation to the other averments made by Ms. Tiernan, for example, that the identity of the person who negotiated, arranged and obtained the loan was known to him and that he and his colleagues were engaged in subterfuge, suggesting that the averments were a desperate attempt on the part of Ms. Tiernan to avoid her obligations to Ulster Bank. Mr. Duignan then averred:
“I say that there is no substance whatever to the averments made by [Ms. Tiernan] in her affidavit sworn on 27th March, 2010.”
- Mr. Duignan then went on to make certain averments which may be summarised as follows:
(a) that Ms. Tiernan’s father, Francis Tiernan, was known to Ulster Bank and that he had been advanced loan facilities by Ulster Bank Limited in Northern Ireland but had defaulted and judgment had been entered by Ulster Bank Limited against him on 2nd May, 2007 for the sum of €94,133.65 together with costs;
(b) that a recent article published in the Irish Times, a copy of which was exhibited, related to Mr. Tiernan’s dealings with ACC Bank;
(c) that from Ulster Bank’s point of view, the security to be provided by Ms. Tiernan for the advance to her was “a valuable security relative to the size of the advance and further, that repayment was to be made within a short period from the proceeds of the sale of the . . . licensed premises” at Carlingford; and
(d) that in the period subsequent to the disbursement of the loan to Ms. Tiernan, Ulster Bank had extensive e-mail correspondence with her during all of which it was abundantly clear that she was “dealing with [Ulster Bank] in her own right as borrower and not on behalf of anybody else”, a sample of the correspondence being exhibited.
One of the letters exhibited was a letter to Mr. Duignan signed by Ms. Tiernan, which was headed “Loan for Milestone Bar, Carlingford”, in which Ms. Tiernan confirmed that she authorised Mr. Duignan “to speak openly with my father Frank Tiernan regarding the above matter, as he is speaking with you on my behalf”. While the letter was undated, it would appear that it was sent by facsimile on 8th April, 2009.
- Mr. Duignan also averred that it was clear from the loan and the security documentation and from the correspondence that Ms. Tiernan was at all times fully cognisant of the issues involved and was the borrower of the advances. However, he did not address her contention that the three signatures on the undertakings were not her signatures. He continued:
“It is notable that the outlandish contention that she was in some way acting as a conduit or agent for her father is proffered for the first time in her Affidavit. Not once in all her dealings with [Ulster Bank] did she make reference to such a scenario. The allegation that I, in concert with a number of my colleagues, was engaged in a subterfuge is a very serious allegation for [Ms. Tiernan] to make, particularly as she is a Solicitor. Such an allegation is particularly outrageous given that [Ms. Tiernan] neither provides nor points to any evidence, documentary or otherwise, to substantiate same.”
- Another point made by Mr. Duignan in his affidavit was that Traynors, who were described as the “Solicitors representing [Ms. Tiernan] in her dealings with [Ulster Bank]”, at all times headed their correspondence on the basis that Ms. Tiernan was their client and never mentioned the involvement of Frank Tiernan as the loan recipient.
- The final matter averred to by Mr. Duignan related to a meeting held on 5th May, 2009 in Ulster Bank’s premises in Dundalk, which was attended by Frank Tiernan and by Ms. Tiernan’s then recently appointed solicitor, Danny McNamee, three officials of the Bank including Mr. Duignan and a solicitor representing the Bank. Mr. Duignan averred that at no stage during the meeting was it ever alleged that Ms. Tiernan was not the proper recipient of the advance by Ulster Bank. Mr. Duignan exhibited what he referred to as “a comprehensive note of the discussions which took place” prepared by Paul Cumiskey (Mr. Cumiskey), an official of Ulster Bank.
Ms. Tiernan’s affidavit of 1st July, 2010
- The final affidavit which was before the High Court and which is before this Court is the affidavit sworn by Ms. Tiernan on 1st July, 2010. In that affidavit Ms. Tiernan reiterated that Ulster Bank and its agents and, in particular, Mr. Duignan, were fully aware that the person “who negotiated, arranged and obtained the loan . . . from [Ulster Bank]” was her father. She averred that she did not at any time negotiate the loan advance from Ulster Bank and that the loan advance was negotiated by her father, Francis Tiernan, with Mr. Cumiskey, representing Ulster Bank. Ms. Tiernan averred that at the time that the arrangement was being negotiated, the officials of the Bank, Mr. Duignan and Mr. Cumiskey, whom she averred had dealings with her father when they worked for ACC Bank, could not have reported to their superiors that they were involved in lending further monies to her father because they were aware of certain matters to which she then averred.
- The first matter was her father’s indebtedness to ACC Bank which, as has been outlined, had been obliquely referred to in Mr. Duignan’s affidavit sworn on 11th May, 2010 by reference to what was described as “a recent article published in the Irish Times relating to Mr. Tiernan’s dealings with ACC Bank”. Ms. Tiernan commented that Mr. Duignan did not need to rely on press reports to know the extent of her father’s alleged indebtedness to ACC Bank and knew “that the figures involved allegedly exceeded 10 million euro”. The second matter was the judgment obtained by Ulster Bank Limited against Mr. Tiernan which had been averred to by Mr. Duignan.
- Ms. Tiernan also disputed Mr. Duignan’s reliance on the underlying “valuable security”, pointing out that at the time of the advance she was a trainee solicitor in receipt of income of €23,000 per annum and that, despite the fact that it was a condition precedent of the loan facility that the facility would not be available for drawdown without prior receipt from “client accountant of a net worth statement”, as far as she was aware no such statement was prepared in relation to her “net worth”. She averred that it would have been apparent from any such statement that once the seven month moratorium on repayment had passed, it would have been impossible for her to have serviced the loan.
- Ms. Tiernan went on to connect the first purpose for the facility as set out in the facility letter (repay Bank of Scotland loan facility of €850,000), to the Milestone Bar at Carlingford and the undated letter which appears to have been sent by facsimile on 8th April, 2009 referred to earlier. She averred that she had helped her father in relation to a company known as Fieldore Limited, a company of which she apparently was a director, which was indebted to Bank of Scotland in relation to that property. She averred that her understanding was that her father had acquired the Milestone Bar through Fieldore Limited as an investment. The main purpose of the loan facility was to clear the indebtedness to Bank of Scotland so that “the said premises would be made available by my father to [Ulster Bank] as security”. Referring to the note of the meeting on 7th May, 2009 exhibited by Mr. Duignan, she averred that –
“. . . [it] shows that when [Ulster Bank] wished to sort out the problems in connection with the purported loan herein it referred to my father who alone had information in relation to dealings with the said ‘Milestone Bar’.”
She also averred that Mr. Duignan pressed her to furnish him with authority to speak to her father, as she did in the undated letter, adding that, with the benefit of hindsight, she saw that the said request “was a ploy to maintain the pretence that I was the borrower in question”.
- Referring to the meeting of 7th May, 2009, Ms. Tiernan averred that her solicitor, Mr. McNamee, attended the meeting in purely a fact-finding role to ascertain on her behalf any potential liability which might have attached to her in relation to the loan facility. She averred that at a subsequent meeting between herself and Mr. Duignan attended by Mr. McNamee, “the issue of who had signed what documentation was raised”. Further, she averred that she had a clear recollection that at a meeting between herself and Mr. Duignan in March 2009 she had made it clear to Mr. Duignan that the loan was between Ulster Bank and her father and that the responsibility for satisfying any liabilities on the loan fell to her father. Ms. Tiernan, having stated that she realised that she could be criticised for not making it clearer that her father was the borrower from Ulster Bank, averred that she genuinely believed that –
“. . . [Ulster Bank’s] servants or agents knew well that I was merely the nominal borrower and that the monies the subject matter of these proceedings were paid to my father to refinance his dealings with the ‘Milestone Bar’.”
- Ms. Tiernan also averred that Mr. Joseph Traynor had been her father’s solicitor for many years, but that she had never met or seen him prior to May 2009. She also averred that the officials of Ulster Bank knew, from previous dealings, that he was her father’s solicitor.
- Her contention that she has “a full defence” to the claim by Ulster Bank was reiterated by Ms. Tiernan at the end of her final affidavit. She averred once again that Ulster Bank well knew that it was contracting with her father and that her involvement was “a pretence” operated by Ulster Bank’s officials and her father’s solicitor to allow her father to borrow monies to finance various dealings in circumstances where, because of her father’s indebtedness to Ulster Bank Limited and other institutions, it would not have been viable to present him as a borrower. She stated positively that she did not receive any of the monies claimed by Ulster Bank. She also averred that her name had not appeared on the title to the properties referred to in the loan facility, which appears to have been true when she swore the final affidavit on 1st July, 2010 but which, as regards the Gallery Quay property, seems to have changed subsequently.
The judgment of the High Court
- As has been recorded earlier the judgment delivered by the trial judge on 20th January, 2011 was an ex tempore judgment. For present purposes, I propose to advert to the aspects of the judgment to which counsel for Ms. Tiernan drew attention. While the trial judge pointed to the peculiarity that some of the affidavits before him bore the record number of the special summons proceedings, consistent with the approach outlined earlier, counsel for Ms. Tiernan informed this Court that he accepted that the trial judge was not ruling out the affidavit evidence in the special summons proceedings which was before him.
- Referring to the affidavit evidence of Ms. Tiernan, the trial judge recorded that it was stated that the officers of Ulster Bank operated the loan in a way in which Ms. Tiernan was used “as a conduit for her father, Frank Tiernan”. The trial judge observed that when one examined her affidavit evidence thoroughly, Ms. Tiernan did not deny that she was “a de facto conduit”. Counsel for Ms. Tiernan submitted that “de facto conduit” was not a correct characterisation of Ms. Tiernan’s status.
- The trial judge pointed out that it was not in controversy that the meeting of 7th May, 2009 took place and that Ms. Tiernan acknowledged that it was attended by her solicitor. He described as a noteworthy feature that Mr. Duignan had exhibited in his affidavit of 11th May, 2010 the letter written by the defendant, which, on the assumption that it was sent by facsimile on 8th April, 2009, he correctly identified as having been written prior to the meeting of 7th May, 2009. While the trial judge noted that Ms. Tiernan criticised Ulster Bank for being selective in exhibiting e-mails, he emphasised that what was not in controversy was that Ms. Tiernan had authorised Ulster Bank to speak to her father and that her father would be speaking with Ulster Bank on her behalf.
- Counsel for Ms. Tiernan takes issue with what is stated by the trial judge about a number of factual matters: that none of the essential matters were in controversy, save that Ms. Tiernan alleged that Ulster Bank knew that she was a conduit, which was denied by Mr. Duignan on affidavit; that at no stage prior to the filing of her affidavit in the proceedings did she make her case in any substantive way; and the analysis of what is described as “the uncontradicted minute” of the meeting of 7th May, 2009. The position of counsel for Ms. Tiernan is that those matters are in controversy, giving as an example that Ms. Tiernan’s evidence is that she made the case she has now made on affidavit at least twice before the affidavit in question was sworn. As regards what happened at the meeting on 7th May, 2009, counsel for Ms. Tiernan submitted that the trial judge had embarked on a credibility analysis. In particular, he referred to the statement by the trial judge that it was repeatedly stated in the memorandum “that the loan was to [Ms.] Tiernan”. That was Ulster Bank’s version, it was submitted, and the note prepared by Mr. Cumiskey was Ulster Bank’s memorandum.
- The trial judge stated that it could not be said with any degree of credibility that Ms. Tiernan could say that she did not receive the money and he outlined his reasons for that conclusion. Counsel for Ms. Tiernan disputed a number of those reasons. Consistent with what he had submitted earlier, counsel stated that it was not very late in the day that any third party involvement was raised by Ms. Tiernan, pointing to the two occasions on which she had raised the point before she swore the first affidavit. He disputed that statements made by Ms. Tiernan’s solicitor at the meeting of 7th May, 2009 could “bind her to the agreement”. The trial judge’s last reason was in the following terms:
“Critically in this dispute, it is not denied that [Ms. Tiernan] received the money whether as a conduit or on her own behalf.”
Counsel for Ms. Tiernan re-emphasised that Ms. Tiernan has explicitly denied that she received the money and he submitted that this is critical to the issue this Court has to decide.
- Counsel for Ms. Tiernan also commented on the fact that there was no reference in the judgment to the allegation of forgery made by Ms. Tiernan, although it had been made clear in Mr. Duignan’s affidavit of 11th May, 2010 that Ulster Bank was putting everything in issue.
Legal principles invoked on behalf of Ms. Tiernan in relation to the defence of the substantive action and the respondent’s response
- The position adopted by counsel for Ms. Tiernan was that the evidence which is before this Court shows that she was not a conduit for her father, as characterised by the trial judge, but she was an agent for a disclosed principal, namely, her father, who negotiated the loan and was advanced the money by Ulster Bank. Counsel referred this Court to the commentary in Bowstead & Reynolds on Agency, 20th Ed., (London, 2014) and, in particular the following passage at para. 9 – 001:
“In the absence of other indications, when an agent makes a contract, purporting to act solely on behalf of a disclosed principal, whether identified or unidentified, he is not liable to the third party on it. Nor can he sue the third party on it.”
It was submitted that Ms. Tiernan will have a complete defence to the claim of Ulster Bank if what she contends is borne out on the facts at the hearing, if the matter goes to plenary hearing. Counsel submitted that, having regard to the state of the evidence before the High Court, the High Court should have ordered that the matter go to full trial.
- Counsel for the respondent submitted that the hearing before this Court was the first occasion on which the concept of agency had been raised. In response counsel for Ms. Tiernan referred the Court to the first ground in the original notice of appeal in which it was asserted that the High Court erred in law and in fact –
“in holding that [Ms. Tiernan’s] admission that she was a nominal borrower and acted as a mere conduit for the loan amounts made her liable for the debt even though she was agent for a disclosed principal.”
I should make it clear that my understanding of the position of the parties is that, if this Court on this appeal allows the matter to go to plenary hearing, in the absence of consent between the parties, or an order allowing the filing of an amended notice of appeal, the action will proceed on the basis of the original notice of appeal, not the proposed amended notice of appeal.
- Counsel for the respondent disputed that Ms. Tiernan could, on the evidence before this Court, seek to defend on the basis that she had the status of an agent. He emphasised that counsel for Ms. Tiernan had not pointed to any authority to the effect that, where a person signs a facility letter accepting its terms, he or she may not be liable to repay the debt. The position of the respondent was that only the signature of the borrower named on a loan agreement, or in this case on the acceptance of the terms of the facility letter, determines who is liable to pay the lender back and the lender can only pursue that person. It was also emphasised that Ms. Tiernan did not aver that she entered into the contract on behalf of her father; rather she averred that she entered into the contract instead of her father. It was submitted that Ms. Tiernan had a clear understanding that her father was not creditworthy and entered into the loan agreement instead of him. Even if Ulster Bank declined to lend to Ms. Tiernan’s father, but instead agreed to lend to her, that was alternative borrowing. It was not an agency situation.
Legal principles applicable to a contested application for summary judgment
- As is pointed out in Delany and McGrath Civil Procedure in the Superior Courts 3rd Ed., (Dublin, 2012) (at para. 26 – 44), the test for deciding whether liberty to enter judgment or leave to defend should be granted are essentially the same because if judgment is not granted upon the motion, leave to defend is impliedly given to the defendant. The authors then outline a number of authorities decided over the last twenty years in which the test was considered including, what they describe as a “clear and helpful synthesis of the principles to be applied” as provided by McKechnie J. in the Harrisrange Limited v. Duncan [2003] 4 IR 1. One of the principles set out by McKechnie J. is that leave to defend should be granted unless it is very clear that there is no defence.
- More recently, the test was analysed in judgment delivered in this Court in Irish Bank of Resolution Corporation (in Special Liquidation) v. McCaughey [2014] 1 IR 749 (the IBRC case). In a judgment delivered by Clarke J., with which the other judges concurred, it was stated as follows (at para. 19 et seq.):
“The underlying test is as set out in the judgment of Hardiman J., speaking for this Court, in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607. As Hardiman J. pointed out, at p.623:-
‘… the fundamental question to be posed on an application such as this remains: is it ‘very clear’ that the Defendant has no case?; Is there either no issue to be tried or only issues which are simple and easily determined?; Do the Defendant’s affidavits fail to disclose even an arguable defence?’
[20] It is also important, as Finlay Geoghegan J. pointed out in Bank of Ireland v. Walsh [2009] IEHC 220 (Unreported, High Court, Finlay Geoghegan J., 8th May, 2009), to keep clearly in mind that the use of the term ‘credible’ in relation to a defence has, for the reasons also addressed by Hardiman J. in Aer Rianta v. Ryanair [2001] 4 IR 607, a very narrow meaning. The issues of credibility, which had formed the basis of a conclusion that a defendant had not put forward an arguable defence, in cases such as National Westminster Bank v. Daniel [1993] 1W.L.R. 1453, Banque de Paris v. de Naray [1984] 1 Lloyds Rep. 21 and First National Commercial Bank v. Anglin [1996] 1 IR 75, arose, as Hardiman J. put it, ‘rather starkly’. In National Westminster Bank v. Daniel, the defence affidavits were mutually contradictory. In Bancque de Paris v. de Naray, there was clear evidence, not challenged, from a private detective, which flatly contradicted the plaintiff’s case. In First National Commercial Bank plc v. Anglin, the chronology asserted was entirely inconsistent with commercial documentation which was not, in itself, disputed.
[21] Denham J., speaking for this Court in Danske Bank a/s (t/a National Irish Bank) v. Durkan New Homes [2010] IESC 22 (Unreported, Supreme Court, 22nd April, 2010), also approved a passage from a judgment which I delivered in the High Court in McGrath v. O’Driscoll [2007] I.L.R.M. 203, where, at p. 210, I said the following:-
‘So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.’
Hardiman J. had expressed a similar view in his judgment in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607, in the passage already cited, where he made reference to issues which were simple and easily determined.
[22] It is important, therefore, to reemphasise what is meant by the credibility of a defence. A defence is not incredible simply because the judge is not inclined to believe the defendant. It must, as Hardiman J. pointed out in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607, be clear that the defendant has no defence. If issues of law or construction are put forward as providing an arguable defence, then the Court can assess those issues to determine whether the propositions advanced are stateable as a matter of law and that it is arguable that, if determined in favour of the defendant, they would provide for a defence. In that context, and subject to the inherent limitations on the summary judgment jurisdiction identified in McGrath v. O’Driscoll [2006] IEHC 195, [2007] 1 ILRM 203, the court may come to a final resolution of such issues. That the Court is not obliged to resolve such issues is also clear from Danske Bank a/s (t/a National Irish Bank v. Durkan New Homes [2010] IESC 22, (Unreported, Supreme Court, 22nd April, 2010).
[23] Insofar as facts are put forward, then, subject to a very narrow limitation, the court will be required, for the purposes of the summary judgment application, to accept that facts of which the defendant gives evidence, or facts in respect of which the defendant puts forward a credible basis for believing that evidence may be forthcoming, are as the defendant asserts them to be. The sort of factual assertions, which may not provide an arguable defence, are facts which amount to a mere assertion unsupported either by evidence or by any realistic suggestion that evidence might be available, or, facts which are in themselves contradictory and inconsistent with uncontested documentation or other similar circumstances such as those analysed by Hardiman J. in Aer Rianta c.p.t. v. Ryanair Ltd. [2001] 4 IR 607. It needs to be emphasised again that it is no function of the Court on a summary judgment motion to form any general view as to the credibility of the evidence put forward by the defendant.”
The foregoing principles, insofar as they are relevant, will now be applied to determine whether the summary judgment in favour of Ulster Bank against Ms. Tiernan should be allowed to stand.
Application of legal principles
- At the heart of the contest between the respondent, as successor of Ulster Bank, which contends that it is very clear that Ms. Tiernan has no defence to its claim in the summary proceedings, on the one hand, and Ms. Tiernan, whose case is that she has demonstrated that she has a defence, on the other hand, is the factual and legal dispute which has emerged from the affidavits filed in support of and in response to the motion for summary judgment as to the status in which Ms. Tiernan accepted the terms of the facility letter. The crucial question is whether her acceptance was as agent for her father as a disclosed principal, as she contends, or as principal borrower, as the respondent contends. Looking at the factual component of that dispute by reference to the approach suggested by Clarke J. in para. 23 of the reported judgment in the IBRC case, I am satisfied that Ms. Tiernan has demonstrated in her two affidavits filed in response to Ulster Bank’s claim that the factual matrix within which the transaction entered into by her with Ulster Bank took place may support the defence she puts forward, namely, that she entered into the transaction as an agent for a disclosed principal. In particular, I am satisfied that, notwithstanding the existence, and the terms, of the acceptance portion of the facility letter as executed by Ms. Tiernan, Ms. Tiernan has given evidence on affidavit from which it can be deduced that there is a credible basis for concluding that she may be able to defend the claim of the respondent, as successor of Ulster Bank, on the basis she asserts, namely, that she entered into the transaction as an agent for a disclosed principal.
- Having regard to the evidence before the Court, it is reasonable to predict that, if the claim of the respondent, as successor of Ulster Bank, and the defence which Ms. Tiernan wishes to advance goes to plenary hearing, the core issue to be determined, namely, whether Ms. Tiernan entered into the transaction with Ulster Bank to its knowledge as an agent, not as a principal, as she contends and thus avoids liability to the respondent, as successor of Ulster Bank, for the monies advanced on foot of the facility letter, will be a mixed question of law and fact and will probably involve construction of one or more documents. It is also reasonable to predict, against the background of the complexity of the underlying transaction in the overall context of the dealings of Ulster Bank with Ms. Tiernan and her father, as discernible not only in Ms. Tiernan’s affidavits but also in Mr.Duignan’s affidavits, that the resolution of that core issue will be anything but straightforward. What can be said definitively is that, assuming that to be the core issue, this Court is not required to consider its resolution.
- Having regard to the evidence before this Court as outlined earlier, this is not a case in which one can conclude that it is “very clear” that Ms. Tiernan has no defence to the claim of the respondent, as successor of Ulster Bank. That being the case, Ms. Tiernan must be afforded an opportunity to defend the claim. The evidence put before the Court by Ms. Tiernan, in my view, points to there being a real risk of an injustice being done to her if she is not afforded the opportunity to defend the claim.
Order
- Accordingly I propose that the order of the High Court made on 20th January, 2011 giving summary judgment to Ulster Bank against Ms. Tiernan be discharged and that the matter be remitted to the High Court to go to plenary hearing.
AIB v McNamara [2016] IEHC 160
JUDGMENT of Mr Justice Max Barrett delivered on 5thApril, 2016.
Part 1
Overview
- AIB has lost Mr McNamara’s title documents, and Mr McNamara is considerably aggrieved. Mr McNamara has defaulted on his AIB loan, and AIB wants to recover the monies now owed. AIB has come to court by way of summary proceedings. Mr McNamara maintains that the matters arising are more appropriately dealt with at full plenary hearing.
Part 2
A Brief Chronology of Events
- The Debt Outstanding.
- By loan agreement made in writing on or about 24th August, 2009, AIB agreed to lend Mr McNamara close on €116,000. This was repayable over 13 months by quarterly repayments of €1,185.64, commencing on 30th September, 2009, with a final repayment of just over €112,000 due on 30th September, 2010. Just over €111,000 was advanced to Mr McNamara under the loan agreement on 31st August, 2009 at an APR of 5.22%. Thereafter, Mr McNamara defaulted on the loan. By notice of 6th January, 2015, AIB terminated the loan facility and demanded repayment of all amounts owing there under. At the present time, the amount owing is just in excess of €113,000 for which summary judgment is now sought.
- AIB Loses the Title Deeds.
- By way of security, Mr McNamara was to provide a charge over certain lands in County Clare. As part of his doing so, Mr McNamara had his solicitor provide certain Registry of Deeds documents and land registry certificates to AIB. In what was not a shining moment for AIB, it has since lost all of these title documents. Eventually, and not until a suitably assertive letter issued from Mr McNamara’s solicitor, AIB admitted that it had lost the documentation – though (perhaps a point for all solicitors to note) no admission was forthcoming until that solicitor, clearly a prudent gentleman, was able to produce the An Post certificate for the registered parcel by which he sent the title documents in question to AIB.
Part 3
The Law as Regards Recovering Debt by Summary Proceedings
- Mr McNamara contends that in all the circumstances arising, adjudication on his debt ought to go to plenary hearing. The hurdle that he must cross to succeed in having matters sent to plenary hearing is low. As Hardiman J. stated in the Supreme Court in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607, 623:
“In my view, the fundamental questions to be posed on an application such as this remain: is it ‘very clear’ that the defendant has no case? Is there either no issue to be tried or only issues which are simple and easily determined? Do the defendant’s affidavits fail to disclose even an arguable defence?”
- In Harrisrange Ltd. v. Duncan [2003] 4 IR 1, 7, McKechnie J. summarised the relevant principles when a court approaches the issue of whether to grant summary judgment or leave to defend:
“(i) the power to grant summary judgment should be exercised with discernible caution;
(ii) in deciding upon this issue the court should look at the entirety of the situation and consider the particular facts of each individual case…
(iii) in so doing the court should assess not only the defendant’s response, but also in the context of that response, the cogency of the evidence adduced on behalf of the plaintiff…
(iv) where truly there are no issues or issues of simplicity only or issues easily determinable, then this procedure is suitable for use;
(v) where, however, there are issues of fact which, in themselves, are material to success or failure, then their resolution is unsuitable for this procedure;
(vi) where there are issues of law, this summary process may be appropriate but only so if it is clear that fuller argument and greater thought is evidently not required for a better determination of such issues;
(vii) the test to be applied, as now formulated is whether the defendant has satisfied the court that he has a fair or reasonable probability of having a real or bona fide defence; or as it is sometimes put, ‘is what the defendant says credible?’…
(viii) this test is not the same as and should not be elevated into a threshold of a defendant having to prove that his defence will probably succeed or that success is not improbable, it being sufficient if there is an arguable defence;
(ix) leave to defend should be granted unless it is very clear that there is no defence;
(x) leave to defend should not be refused only because the court has reason to doubt the bona fides of the defendant or has reason to doubt whether he has a genuine cause of action;
(xi) leave should not be granted where the only relevant averment is the totality of the evidence, is a mere assertion of a given situation which is to form the basis of a defence and finally;
(xii) the overriding determinative factor, bearing in mind the constitutional basis of a person’s right of access to justice either to assert or respond to litigation, is the achievement of a just result whether that be liberty to enter judgment or leave to defend, as the case may be.”
- It does not appear that there is any disagreement between the parties as to the above-stated law. Where they do disagree is that, by virtue of AIB’s having lost the title documents, Mr McNamara claims that he has a cross-claim that gives rise to a defence in equity in these proceedings. AIB disputes this.
Part 4
Set-Off in Equity.
- The best recent statement of applicable principle as regards the issue of set-off in equity is that of Clarke J. in Moohan & Anor v. S & R Motors (Donegal) Ltd [2007] IEHC 435, his judgment in this regard being grounded in part on the seminal decision of Kingsmill Moore J., almost sixty years ago, in Prendergast v. Biddle (Unreported, Supreme Court, 21st July, 1957). Having considered matters at some length, Clarke J. summarises the applicable approach as follows, at para.4.6 of his judgment:
“[1]…It is firstly necessary to determine whether the defendant has established a defence as such to the plaintiff’s claim. In order for the asserted cross claim to amount to a defence as such, it must arguably give rise to a set off in equity, and must, thus, stem from the same set of circumstances as give rise to the claim but also arise in circumstances where, on the basis of the defendant’s case, it would not be inequitable to allow the asserted set off…
[2] If, and to the extent that, a prima facie case for such a set off arises the defendant will be taken to have established a defence to the proceedings and should be given liberty to defend the entire (or an appropriate proportion of) the claim…
[3] If the cross claim amounts to an independent claim, then judgment should be entered on the claim but the question of whether execution of such judgment should be stayed must be determined in the discretion of the court by reference to the principles set out by Kingsmill Moore J. in Prendergast…”.
Court Note:
[4] The principles referred to in [3], might be summarised as follows. A judge in exercising her or his discretion may take into account, inter alia, (i) the apparent length of the counter claim, (ii) the answer suggested to it, (iii) the conduct of the parties, (iv) the promptitude which they have asserted their claims, (v) the nature of their claims, and (vi) the financial position of the parties.
[5] To all of the foregoing might be added, and some reference is made to this by Clarke J., at para.4.5 of his judgment in Moohan, that the right of set-off is equitable in nature and thus the maxims and rules of equity come in play as regards determining the availability of this equitable relief, like any other.
Part 5
Application of Principle
- As the court understands Mr McNamara’s case concerning the lost property documents, it is as follows. In the event that someone should offer to buy Mr McNamara’s property, perhaps for an amount in excess of that owed to AIB, his property has been rendered largely unsaleable or would likely need to be sold at a reduced price given the title concerns now presenting. AIB has commenced setting about ‘reconstructing’ the title and this may prove a straightforward matter, but it is not unknown for problems to present when it is sought to effect such a ‘reconstruction’.
- Turning then to the tests as identified above:
– as to [1], it seems that the court can view matters in one of two ways. It can view (a) the loan and security arrangement as a single set of circumstances, or (b) the debt, and it is solely the debt that is being sued upon at this time, as separate from the security arrangement (and thus issues arising in connection with the security documentation as arising from a related but different arrangement). It seems to the court, however, that it would be artificial and inequitable to follow the line of logic suggested by (b). The provision of the loan was conditional on the provision of the security and thus the loan and the security are inexorably linked. Pursuant to a condition of the loan agreement, the security documentation went to AIB, and was lost by AIB. It would not therefore be inequitable to allow the asserted set-off. It is not clear to the court that, at least to this time, there will be much by way of set-off but that seems more a matter for the court at plenary hearing, than for the court deciding whether the matter should go to plenary hearing.
– as to [2], there is no dispute between the parties that AIB has lost the title documents and, in consequence, a prima facie basis on which to ground a claim of the type identified by Mr McNamara appears to present. Coupled with the court’s conclusions re. [1], Mr McNamara falls to be treated as having established a defence and hence liberty should be given to him to defend the claim.
– as to [3] and [4], given the court’s conclusion re.[1], these does not apply.
– as to [5], it does not appear to the court that Mr McNamara has offended against the principles of equity in any way that would justify the court in refusing to send this matter to plenary hearing.
Part 6
Conclusion
- For the reasons stated above, it appears to the court, by reference to Moohan, that Mr McNamara has asserted a form of cross-claim that arguably gives rise to a set-off in equity, and hence established an arguable defence to these summary proceedings. Consequently, by reference to Aer Rianta, AIB’s application for summary judgment in the within proceedings must be declined. In this regard the court is mindful, inter alia, of McKechnie J.’s observation in Harrisrange that the power to grant summary judgment should be exercised with discernible caution. The court will therefore remit this matter to plenary hearing.
- Notwithstanding that the court considers itself to be coerced by law to refer these proceedings to plenary hearing, it would respectfully encourage each of AIB and Mr McNamara to consider, even now, whether some compromise cannot be arrived at between them. It really does not seem in anybody’s interest that a debt of €113,000 – which, though very large, is not the largest of debts – should be the subject of costly High Court proceedings when, for example, a consent to judgment, conditional upon and with due allowance for resolution of the issue presenting as regards the title documentation, might better serve all. However, it is, of course, entirely a matter for the parties as to how they now proceed.