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Cite as: [2020] IECA 30

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THE COURT OF APPEAL

Neutral Citation Number: [2020] IECA 30

Record Number: 2018/69

Baker J.

Whelan J.

McGovern J.

BETWEEN/

DECLAN O’MAHONY, DIAMOND DEVELOPMENTS LIMITED,

BRIDE VIEW DEVELOPMENTS LIMITED, AMBLEDENE LIMITED

AND KATHLEEN O’MAHONY

RESPONDENTS

- AND –

PROMONTORIA (GEM) DAC

APPELLANT

JUDGMENT of Ms. Justice Máire Whelan delivered on the 19th day of February 2020

Introduction

1. This is an appeal against a judgment delivered in the High Court (Haughton J.) on the 8th

February, 2018 and consequent orders, perfected on the 21st February, 2018, granting

specific performance of an agreement for the release and discharge by the appellant of all

indebtedness and securities over certain assets of the respondents in accordance with an

agreement determined to have been evidenced in writing by email dated 20th June,

2017. The said agreement was determined by the Court to have been varied in terms of

the amount of the deposit and as to the mode of implementation thereof.

2. The High Court declared invalid a purported notice of termination of a 2014 settlement

agreement served by the appellant on the first and second named respondents on the 7th

September, 2017 and dismissed a counterclaim against the second-named respondent.

The Court further awarded €20,000 by way of exemplary or punitive damages in favour of

the first named respondent.

Background

3. The first named respondent was a successful developer until the economic crash. He had

substantial borrowings with AIB Bank Plc. and had granted security to the said bank in

respect of same. The second and third named respondents had also provided certain

guarantees or otherwise assumed obligations in respect of the said liabilities. The

development loans with AIB were transferred to the National Asset Management Agency

(NAMA) in December 2009 during the economic crash. Pursuant to the powers provided to

NAMA under the National Asset Management Agency Act, 2009, the entity National Asset

Loan Management Designated Activity Company (NALM) became legally and beneficially

entitled to all of the said facilities, the security and all other rights connected to them.

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4. The first and fifth respondents are husband and wife (the O’Mahonys). The fifth

respondent was not a party to the original loans or charges and is a party to these

proceedings primarily by reason of her beneficial interest in a property adjacent to the

family home which was the subject of a guarantee specified in a settlement agreement of

1st October, 2014 referred to hereafter.

5. The settlement agreement provided that the O’Mahonys would be left with their family

home together with another property free from debt. The High Court characterised the

fifth respondent’s involvement thus: -

“Firstly, that an ancillary dwelling house on a plot beside Mr. and Mrs. O’Mahony’s

home at Moneygourney, Douglas, be charged to NALM by way of First Legal Charge

as security for Mr. O’Mahony’s obligations. It is solely because Mrs. O’Mahony had a

beneficial interest in this property that she is a co-plaintiff.”

Some, but not all, of the secured assets were thereafter sold by NAMA and in particular

four specific development properties in Co. Cork remained undisposed of as of January

2017 when the rights of NAMA/NALM under the loans, securities and the 2014 settlement

agreement were transferred to Promontoria, the appellant. As of May 2016, the four

remaining development properties all situate in Co. Cork were vested in the second

respondent, Diamond Developments Limited.

6. Pursuant to the terms of the deed of transfer dated the 27th January, 2017 and made

between NALM and the appellant, the latter acquired all the rights, title and interest of

NALM/NAMA to the said facilities and the security.

Negotiations and subsequent events

7. Thereafter, there was engagement between Mr. O’Mahony and the appellant with a view

to reaching agreement between them for the redemption of the loans, discharging all

liabilities and securing unencumbered title to the relevant properties.

8. In or about the month of May 2017, Mr. O’Mahony made an offer to the appellant to

discharge the indebtedness for a sum of €4M. By email dated the 9th May, 2017 the

appellant rejected that offer and invited an offer “at or above €6M” which was

characterised as the appellant’s “target price”. At all material times communications on

behalf of the appellant were primarily through their agent, Capita Asset Services (Ireland)

Limited (“Capita”).

9. On the 22nd May, 2017 Mr. O’Mahony made an offer to pay €6,000,000 for the release of

the four secured properties unencumbered with closing to be effected on the 31st August,

2017. This offer made no reference to the payment of a deposit.

10. On the 6th June, 2017 Capita emailed Mr. O’Mahony stating “… The approval request for

this deal is progressing”. Certain information was sought, including concerning mezzanine

or short-term lending options. The email stated in respect of the appellant “Our client

seeks a ten percent deposit upon signing to demonstrate your commitment to the deal”.

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11. Over two weeks later by email dated the 20th June, 2017, entitled “Heads of Terms and

KYC”, the appellant responded to the May 22nd offer. The legal effect of this email was a

central issue in the High Court. There was a fundamental dispute between the parties as

to whether the said email contained all the essential terms of the agreement between the

parties and whether it introduced any new material terms, particularly with regard to the

requirement for a deposit of ten percent and whether in substance the said email

amounted to a counter offer on the part of the appellant which was never thereafter

expressly accepted or performed by the respondents.

12. The respondents argue that they concluded a binding agreement with the appellant in full

and final settlement of their indebtedness to it and for the release of the properties

charged, which are listed in the Schedule to the plenary summons, free from all claims,

securities and demands in consideration of the payment of the total consideration of

€6,000,000.

13. The appellant contends that since relevant email communications were expressed to be

“subject to contract” the email of the 20th June, 2017 did not give rise to a binding and

concluded agreement between the parties.

14. A significant issue between the parties is the materiality or otherwise of the payment of a

deposit and the amount of the said deposit and whether same was a material term of the

contract.

15. The appellant in the email of the 20th June, 2017 proposed that the structure for the

redemption of the mortgages and the release of the four secured properties would be by

means of a loan sale deed. Subsequently, it was discovered that the appellant had not

been registered in the Land Registry as owner of the charges and that proposed structure

was varied to a deed of settlement and release.

16. The appellant contended that if the email sent by Capita on the 20th June, 2017

contained the material terms of a release agreement (which they deny) the respondents

had failed to perform the material terms on or before the nominated closing date of the

31st August, 2017. The respondents contended that in the course of further negotiations

between the parties from on or about 10th to 14th August, 2017 the parties had varied

non-material terms of the agreement including, inter alia:

i. variation on the amount of the deposit from to €600,000 down to €60,000;

ii. variation in the structure of the release and settlement necessitated in

circumstances where the appellant’s ownership of the development loans had never

been registered in the Property Registration Authority/Land Registry;

iii. that the respondents would be responsible for additional legal fees of the

appellants;

iv. that the purchase monies would be paid by the second respondent in respect of

whom anti-money laundering (KYC) material would be furnished to the appellant;

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v. a deed of settlement and release in respect of the entire transaction would be

executed on the 25th August, 2017 and the deposit was payable on that date; and

vi. the balance of the purchase monies was payable by 31st August, 2017.

17. The respondents contend that on the 22nd August, 2017, upon being advised of the

source and method of funding, the appellant informed Mr. O’Mahony that it would not

complete the release agreement.

18. The appellant disputes the contention that the variations contended for by the

respondents to the release agreement were not material. The appellant further contends

that the respondents were not ready, willing and able to comply with their obligations

should the Court determine that a concluded legally binding agreement had been entered

into between the parties in the manner contended for.

19. The appellant contends that it was entitled to serve a notice of termination and demand

on the 7th September, 2017 which triggered an obligation to consensually effect a sale of

the assets the subject of the security and that such failure amounted to an event of

default, triggering an obligation to repay the total sum of €39,741,707.29 together with

daily interest accruing upon the expiration of forty-eight hours after receipt of the notice

of termination aforesaid.

Application for a non-suit

20. At the trial of the action at the close of the respondents’ case after concluding cross-

examination of the respondents’ three witnesses, all of whom had undergone cross-

examination on the stated basis that the appellant’s witnesses would testify and

contradict their evidence, an application for a direction and dismissal of the proceedings

was made on behalf of the appellant on the basis that the defence did not intend to go

into evidence. It was contended that the respondents’ case had not been made out on the

balance of probabilities.

The judgment

21. Judgment was delivered on 8th February, 2018 and runs to 129 pages. The Court noted

that the suit was “an action for breach of contract and the Court’s primary task is that to

decide the contractual issues presented by the pleadings and the evidence.”

Grounds for non-suit application

22. The trial judge identified three separate bases for the appellant’s application for a

direction. Firstly, that no binding contract existed between the parties and the email of

the 20th June, 2017 “... in response to an offer from Mr. O’Mahony by email of the 22nd

May, 2017 was a counter-offer with new terms.” It was contended that Mr. O’Mahony

never communicated his acceptance of the 20th June terms and that there was no implied

acceptance. It was contended that the deposit was a material term and that the use of

the words “subject to contract/contract denied” in communications concerning the

amount of the deposit “meant that there was not any agreement in respect of that item”

(p. 24).

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23. The second basis concerned alterations in the mechanism for completion of the deal, it

being contended on behalf of the appellant that as matters had progressed: -

“…the proposed deal was restructured and became technically different…

At the Plaintiffs’ solicitor’s request and for the Plaintiffs’ benefit, the proposed deal

was now to be effected by a deed of settlement and release, whereby the loans

would be settled for a deposit of €60,000 and a balance paid on closing of

€5,940,000 and the charges over the remaining of the properties released, with

additional costs being paid to A&L Goodbody, the Defendant’s solicitors.”

The contention was that this constituted “A new structure, which was so different from

the previous agreed structure that there could be no binding agreement.”

24. Thirdly it was contended that the respondents had not established that they were “ready,

able and willing to complete on 31st August, 2017”.

25. The judgment analysed the arguments and submissions advanced on behalf of the

respondents in opposition to the application for a direction, noting their contentions that

exemplary damages should be awarded on the basis of the manner in which the defence

had been conducted in court and the imputations arising from the cross-examination that

the first respondent had not been “up front”.

26. The judge went on to note at p. 11 of the judgment that in circumstances where the

appellant’s witnesses had not given evidence: -

“…they have effectively forfeited the opportunity to dispute the accuracy or

contents of any of the relevant documents. I am therefore are entitled to treat such

documents as evidence of the truth of their contents.”

Having reviewed the evidence, at p. 15 he concludes: -

“I am satisfied that prior to June 2017, Mr. O’Mahony and the Plaintiffs fully

complied with all their obligations under the 2014 settlement agreement.”

27. The Court notes the respondents’ claim was that: -

“On 20th June 2017, the Defendant agreed, in consideration of €6m, to transfer the

residual loans to the Plaintiffs and release all the security, leaving the Plaintiffs debt

free. It is claimed that the Defendant wrongfully repudiated this agreement on the

22nd August, 2017.” (p. 16)

In analysing the pleadings the Court noted at p. 20 “The Defence fundamentally denies

that there was any binding agreement…” The judgment considered the defence delivered.

The Court noted that it was expressly pleaded in the defence that no new consideration

was provided in respect of any later agreements observing: -

“I should say in passing here that this reflects the law as set out in Pinnel’s case,

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but it was not a defence that was actually pursued in argument ...”

28. The judgment noted that the application for a direction was resisted, inter alia, on the

basis that no contract for sale in the conventional sense of the Law Society General

Conditions was contemplated but rather implementation of the agreement was to be by

means of a loan sale deed and release. It was argued that the provisions in the email of

the 20th of June were “just details” concerning the aspects of completion including the

deposit and the provision of anti-money laundering information. It was further contended

that even were the email of the 20th June 2017 to be regarded as a counter offer, it had

been accepted and the respondents’ and appellant’s solicitors had acted on foot of same

and incurred fees.

29. The respondents further argued that the late introduction of “subject to contract” in

emails from the appellant’s solicitors on the 30th June, 2017 could not affect the validity

of the June agreement. It was contended that the deposit was never a material term and

once same was renegotiated to a non-refundable €60,000 there was in fact a variation

agreement for a revised deposit to replace the initially contemplated €600,000 deposit.

30. Regarding the change of structure, it was contended that this was not a material change

in the contract, it was merely a different conveyancing mechanism “…for achieving the

same end...”

31. The respondents contended that it was solely the wrongful repudiation on the 25th August

2017 on the part of the appellant which prevented finalising the deed of settlement and

exchange: -

“Time was never of the essence in respect of the payment of the deposit and…there

was no point in the Plaintiffs or their solicitors turning up to close on the 31st

August as the Defendants [sic] were clearly not willing to close at that point in

time.”

32. In considering whether the Court was entitled to draw adverse inferences from the fact

that witnesses who might be called were not called by the appellant, the judge noted at p.

31 that the Court can do so “… but the Court should do so cautiously.” The decision of

Kelly J. (as he then was) in Smart Mobile Limited v ComReg [2016] IEHC 338 which had

considered the earlier decision of the High Court in Fyffes v DCC and Ors [2005] IEHC 477

wherein Laffoy J. had followed the reasoning in Wisniewski v Central Manchester Health

Authority [1998] Lloyds Reports Med. 223 was cited with approval.

33. The judgment reiterated the necessity for caution in drawing inferences from a decision

not to call witnesses on behalf of a party to litigation citing Cregan J. in Flynn v NALM

[2014] IEHC 408. It reiterated the core submission on behalf of the appellant that no

evidence was called since it was not required “as the Plaintiffs’ case was not made out on

the balance of probabilities”. Having noted the explanation tendered for why the

witnesses were not being called the trial judge concluded, “It is one that I do consider in

the context of drawing inferences.”

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34. The trial judge reviewed the authorities to determine the appropriate test to be applied

where the defence was not intending to go into evidence. He outlined in detail the

relevant jurisprudence, including Hetherington v Ultra Tyre Service Limited [1993] 2 IR

535, the Supreme Court decision in Schuit v Mylotte [2010] IESC 56 and O’Leary v HSE

[2016] IECA 25. He concluded at p. 7 of the judgment: -

“... I must approach this ruling which is effectively my final judgment, on the basis

that the Plaintiffs must establish their case on the balance of probabilities.”

35. The Court then considered the proposition advanced on behalf of the respondents that,

given the basis and vigorous nature of the cross-examination, the appellant ought to be

denied the opportunity to apply for a non-suit. The trial judge cited with approval from

the judgment of Ryan J. in O’Leary v HSE which had rejected the proposition that the

nature of a cross-examination per se could deny a defendant the opportunity of applying

for a non-suit. At issue in the said case was whether counsel, having put to the plaintiff’s

witnesses certain statements that defence witnesses were going to make and which, it

was posited, would contradict the evidence of the plaintiff’s witnesses, whether this mode

of cross-examination constituted in substance going into evidence. The Court of Appeal

held that it did not “… and neither is there some other rule that would prevent the parties

applying for a direction.”

The trial judge then concluded at p. 9 of the judgment: -

“If the Plaintiffs do make out their case on the balance of probabilities, then they

are entitled to succeed.”

36. The judgment noted that the application for a direction was made on day four, at

conclusion of evidence of the respondents’ three witnesses who “underwent cross-

examination on the basis that the Defendant’s witnesses would testify and give certain

specified evidence on matters in dispute between the parties”. It continued: -

“It therefore came as a surprise to the Court and also seemingly counsel for the

Plaintiffs when the application for a direction was made by [counsel] who indicated

that the defence would not be going into evidence.”

At p. 9 he stated: -

“The fact that the Defendant has chosen not to call witnesses, despite the manner

in which the Plaintiffs’ witnesses were cross-examined, is something from which the

Court may draw one or more appropriate inferences.”

The trial judge then proceeded to analyse the evidential status of the discovered

documents in circumstances where the appellant had reached a decision not to go into

evidence.

Concluded contract for sale

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37. The judgment then proceeds to make findings on the evidence as to whether a concluded

contract for sale had come into existence. The Court reviewed the course of dealings

between the parties from January 2017 when the appellant had acquired the interests of

NALM under the 2014 settlement agreement. The Court reviewed communications

between the parties in April and May 2017 and at p. 41 analysed what it considered to be

an important email where Mr. O’Mahony wrote to Mr. McWhinney of Capita on the 22nd

May:-

“Further to your email of the 19th May, I would like to respond as follows. I hereby

confirm my formal offer of €6 million to purchase the remaining assets and loan

notes, a full and final settlement of all outstanding liabilities.”

Mr. McWhinney of Capita replied on the 23rd May: -

“Thanks for this additional information. Note that the deal is still subject to a

formal Promontoria approval and we will revert in due course.”

38. The Court reviewed the communications with regard to the initial position of the parties

concerning the anticipated structure of the deal. In analysing the email communications

between Mr. O’Mahony and Mr. McWhinney of Capita the judgment noted at p. 43: -

“Clearly, from his response, Mr. O’Mahony understood the key elements of what

was required by Promontoria. Also, he was, in his response, up front in relation to

the funding. The reference to a single transaction is significant because it is later

reflected in the authority that Promontoria gave in relation to the approval.”

The judgment attaches weight to other content in the email of the 19th May including that

there was no mention of a deposit “It is clear that the key requirements from Promontoria

were receipt of €6 million by 31st August, 2017.”

It noted that it had been put to Mr. O’Mahony in cross-examination that for there to be a

deal:

“…there would have to be formal legal executed contracts… and this is what was

meant by ‘go into legals’. Mr. O’Mahony was emphatic in his denial that this was

ever discussed, or that he understood this to be the meaning of ‘go into legals’.”

The judge accepted the first respondent’s uncontested evidence on the issue concluding: -

“I find as a fact that ‘go into legals’ did not infer entering into formal contracts in

the conventional sense but rather refer to the parties’ lawyers dealing with the legal

documentation required to implement and give effect to the transaction and to

close the deal … by 31st August 2017.” (pp. 43-44 of judgment)

39. In the course of the judgment the Court notes that the source of funding for the deal was

initially Mr. Seamus Geaney, a property developer. The funding was subject to the

disposal by the latter of two sites. That was the position as of the 19th May, 2017. By the

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7th June, 2017 it became apparent that Mr. Geaney would not be in a position to fund the

transaction to meet a completion date of the 31st August, 2017. It was common case that

Mr. O’Mahony did not disclose this state of affairs to the appellant or their agent Capita at

that time. At p. 44 the judgment notes: -

“I accept that this was a delicate situation for Mr. O’Mahony at the time and the

suggestion was put to him that he wasn’t up front with Mr. McWhinney at this time.

This, I believe, was unfair and unwarranted in the circumstances, given the

commercial circumstances.”

40. P. 46 of the judgment noted regarding an email sent by Mr. McWhinney to Mr. O’Mahony

on the 6th June, 2017: -

“I regard this email as a key document because in it, Capita introduced reference to

a deposit of 10% upon signing.”

The email had raised a series of issues including: -

(a) Regarding funding, it sought information on whether Seamus Geaney (a suggested

funder of the transaction) had proceeded to sell two sites and whether completion

could be effected by the 31st August. It also enquired whether mezzanine finance

or short term lending had been put in place “to provide bridging if the Geaney sales

do not complete”.

(b) A deposit “our client seeks a 10% deposit upon signing to demonstrate your

commitment to the deal.”

The Court concluded that: -

“The sequence envisaged is:

1. Promontoria approval of the deal.

2. … Issuance by A&L Goodbody of a draft Loan Sale Deed …

3. Payment of 10% deposit upon signing of Loan Sale Deed.”

The judgment noted at p. 47: -

“Mr. O’Mahony could not recall in evidence whether he expressly agreed to pay the

deposit.”

41. The judge made findings of fact on the evidence including as follows: -

“1. From 6th June on, Mr. O’Mahony knew that a 10% deposit would be payable as

part of the deal on signing the Loan Sale Deed.

2. That the Plaintiffs continued to negotiate and work towards a deal on the basis that

such a deposit would be part of it.

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3. … Mr. O’Mahony never questioned that there was to be such a deposit ...

4. … I also accept Mr. O’Mahony’s evidence that he did not regard the deposit as

material and that it never became a material part of the discussions between

himself and Mr. McWhinney prior to 20th June, 2017.

These findings must be considered in the context of Promontoria and its agents driving

the negotiating – dictating the terms would be a better characterisation – and that the

key terms known and understood by the Plaintiffs and the Defendant and its agents were

that €6m would have to be paid by 31st August, 2017 for release of the loans and

security.”

42. With regard to the deposit the judgment concluded at p. 47 of the judgment: -

“I find on the evidence that a deposit of 10% on signing the Loan Sale Deed

became part and parcel of the Plaintiffs’ proposal and, as a result of the email from

Mr. McWhinney, became superimposed on the offer formalised by Mr. O’Mahony in

his email of 22nd May, 2017.”

The Court observed that: -

“Firstly, this was not a conventional sale that would involve a conventional

agreement for sale with special conditions and Law Society General Conditions of

Sale or a deposit payable at an early point in time. The concept of agreement in

emails without deposit followed by [a] Loan Sale Deed, which effects the sale of

loans, is very different and what was contemplated here was payment of the

deposit on signing of the Loan Sale Deed by the Plaintiffs and shortly thereafter,

payment of the balance on closing.

Secondly, the relative unimportance of a deposit from Promontoria’s perspective is

very evident, from Advisory Note 134 approving the sale with payment by one

instalment of €6 million and without any reference whatsoever to a deposit

payment. Indeed Capita... shows that it prepared that note and did not even

bother to include a recommendation in relation to a deposit.

Thirdly, as will be seen when Mr. O’Mahony sought to renegotiate the deposit, it is

evident from email exchanges that Mr. McWhinney and Ms. McNamee of Capita had

no difficulty agreeing on behalf of Promontoria a a non-refundable deposit of 1% or

€60,000.” (pp. 48-49 of the judgment)

43. The Court noted from the evidence that prior to the 20th June, 2017 Mr. O’Mahony had

obtained access to funding for the €6M purchase price. (p. 50)

The judgment characterises as critical Advisory Note 134 dated the 16th June, 2017: -

“It was prepared by Capita … with its recommendation to Promontoria and the

document sets out the authorisation signed on behalf of Promontoria to Capita to

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conclude a contract with the Plaintiffs.

It gives a description at the top by reference to Diamond Developments Limited … it

says at the last bullet point:

‘The central promotor of Diamond Developments is Declan O’Mahony, who

now wishes to take back all remaining assets by way of a loan sale.’”

The Court observed that the document stated: -

“Payment to be made by one instalment of €6m to PGD… by 31st August, 2017…

Upon receipt of the full payment, all security will be released and the borrowers will

have no further liability to PGD.”

The Court noted that PGD was Promontoria.

The judgment observes at p. 54: -

“It will be noted that there is no reference to a deposit in this authorisation. From

this, it is clear that Capita was expressly authorised to contract with the Plaintiffs to

take back all of the remaining assets by way of loan sale for one instalment of €6m

plus payment of A&L Goodbody’s set fees for the Loan Sale Deed and Release.

Although redacted, it is readily apparent that it was signed by an asset manager on

behalf of the Defendant and date stamped 19th June, 2017. It is notable that there

is no reference in the recommendations or authorisation to the requirement of any

deposit and on its face, Capita did not seek authority for a deposit and Promontoria

did not require it. If nothing else, this demonstrates how unimportant a deposit

was to Promontoria and Capita.”

44. The judgment noted at p. 55 the tenor of the email of the 20th June, 2017 from Mr.

McWhinney of Capita, “Declan, I can confirm that Promontoria Gem DAC (Promontoria)

has made decision.” The email identified “Heads of Terms”. It identifies “Purchase price

€6m. Purchasing entity, TBC” which the Court observed – “I take to mean to be

confirmed”.

There was reference to exchange “Exchange by 6th July, 2017. 10% deposit payable

upon exchange, completion by 31st August 2017.”

45. There were additional details regarding the fees of the vendor’s solicitors A&L Goodbody

and anti-money laundering requirements in connection with any proposed SPV. In

attaching weight to the authority of Capita and the importance of the email of the 20th

June, 2017 the judge noted at pp. 57-58:

“The express authority of Promontoria to Capita to communicate this document and

these terms clearly overrides this boilerplate limitation on authority. I find that in

contrast to Capita’s email of the 9th May, and this email was not without prejudice,

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and secondly the email was not subject to contract or contract denied.

Thirdly, it was not subject to any conditions precedent.

Fourthly, it did not introduce any new material terms or conditions.

Fifthly, the references to ‘exchange’ must be read in context, in particular by

reference to a Loan Sale Deed in the ensuing paragraph. It meant exchange of the

Loan Sale Deed upon which the deposit would be due.

Sixthly, the terms related to exchange, and the term related to A&L Goodbody’s

fees and the KYC terms related to conveyancing and implementation.

Seventhly, the reference to 10% deposit was not a new term for reasons that I

have already stated.

Eighthly, the email on its face did not request or require any further confirmation or

acceptance from the Plaintiffs. …

Ninthly, it contained the parties, Promontoria Gem DAC and the Connection 067

Diamond Developments Limited. It contained the parcels by reference to the

connection and previous correspondence, in particular Mr. O’Mahony’s emails. It set

out the price of €6 million. Insofar as the deposit might be said to be legally

required, it provided for 10% deposit on exchange.

Tenthly, there was no verbal or written response to this email from Mr. O’Mahony

such as the Defendants [sic] argue was required to communicate acceptance to the

Defendant. In direct evidence, Mr. O’Mahony gave his understanding on receipt of

this email. He said at Day two, page 97 of the transcript: ‘A. I was saying, great, I

am now after getting a formal acceptance of my offer and that I advised my

solicitor accordingly that this document had come in and could she just get on, I

was at all times just emphasising how the 31st August was the important thing to

complete.’”

Court’s assessment of the first respondent

46. The Court noted the tenor of the first respondent’s witness statement, concluding at p.

59: -

“I find that Mr. Mahony’s subjective understanding and belief was that there was,

by this email, a concluded and legally binding agreement. At this point, I should

say that I found Mr. O’Mahony to be a good and honest witness. He was aptly

described by Mr. O’Flynn in his evidence as a ‘straight talker’ and I accept his

evidence as sound.”

Offer & acceptance

47. The Court then considered and addressed the legal arguments which had been advanced,

the first being whether the email from Capita dated the 20th June, 2017 was a counter

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offer and not an acceptance of the respondents’ offer. The trial judge cited Chitty on

Contracts (32nd edn.) at para. 2.027 where the author states: -

“The Court must then look at the whole correspondence and decide, whether on its

true construction, the parties had agreed to the same terms.”

48. At p. 64 the judge outlines the approach he is adopting in determining whether the email

of the 20th June amounted to an acceptance or merely a counter offer stating: -

“I must, as I have already done, look at the whole correspondence and decide if, on

its true construction and objectively considered, the parties had agreed to the same

terms. Of course, I do not have the benefit of evidence from the Defendant’s

witnesses. However, there were business people on both sides. Promontoria was

driving for a quick sale at €6m. I am satisfied they had what they wanted by 20th

June 2017 and the Advisory Note 134 evidences their agreement and the essential

terms and their intention to enter binding legal relations and their authority to

Capita to communicate this and the essential terms to Mr. O’Mahony and the

Plaintiffs. They were, of course, already in legal relations with the Plaintiffs under

the terms of the 2014 settlement. This new agreement had the effect of varying

that legal relationship and if and when completed, of bringing the 2014 Settlement

to an end.”

49. At p. 65 the judge expresses the view: -

“Nor do I consider, in the light of the negotiation and in particular the email from

Mr. McWhinney introducing the 10% deposit term and the continued negotiation

thereafter, without demur from Mr. O’Mahony, that the email of the 20th June,

2017 introduced any new condition or any new material term. The intention to

create legal relations is also clear from the email of the 20th June. It is not headed

‘subject to contract’ or ‘contract denied’. That heads of agreement can constitute a

binding agreement was not really disputed.”

At pp. 66-67 he found: -

“That the parties agreed all the essential terms and intended and agreed that all of

the terms in the email of the 20th June, 2017 were binding. Words used such as

‘terms’, ‘Promontoria approve’, ‘this deal has been approved’ all connote and

demonstrate the finality of the agreement and this was their bargain. There was no

need for further acceptance, or any further need for discussion or negotiation. The

wording used and the circumstances of this case are such as to lead me to conclude

that there is a binding contract … in this case …”

Conduct subsequent to 20th June, 2017

50. The judgment then considers the subsequent conduct, particularly of the first respondent,

concluding: -

“I find that Mr. O’Mahony did telephone [his solicitor] on 20th June to inform her of

Page 14 ⇓

the deal and also that he forwarded the 20th June, 2017 email to her on the 22nd

June and that he rang her then to stress to her the need to complete on or before

31st August, 2017 and that she would be hearing from A&L Goodbody.”

The Court also noted that fees were being incurred by the appellant with their own

solicitors “for which Mr. O’Mahony could be liable under the contract”. He observed: -

“It seems to me that further demonstrates that the Defendant regarded itself as

contractually bound and hence supports the contention that the letter of the 20th

June was not merely a counter offer.”

The deposit

51. With regard to the issue of a deposit and variation to same the Court opines at p. 69: -

“…while the parties may agree that a deposit was not an important or essential

term, it became a material term simply by virtue of the emails of Mr. McWhinney of

6th June and 20th of June 2017. It is also thus described in paragraph 18 of the

Statement of Claim. The evidence heard and considered does not lay bare all of the

interaction between Promontoria and Capita. What can be said at least from the

Plaintiffs’ perspective and an objective reading of the emails of the 20th June is that

Capita stated it had actual authority to communicate a deal that actually included a

term requiring payment of a 10% deposit payable on exchange. In my view, the

Plaintiffs cannot have it both ways. If, as I have found, the 10% deposit was part of

the concluded contract, they cannot seek to negate that in reliance on Advice Note

134. As to the second point it is necessary to outline my relevant findings as to

what occurred after 20th June, 2017.”

52. The judgment considered email traffic between the parties and their agents including an

email of the 5th July, 2017 from Mr. McWhinney to Mr. O’Mahony which the Court found:-

“…demonstrates just how unimportant to Capita and the Defendant was the amount

of deposit payable upon exchange.”

He concluded, accepting the evidence of Mr. O’Mahony that the deposit “… was not an

issue” (p. 71).

53. The Court having considered and reviewed the evidence and the email communications

together with discovered documents concluded at p. 75: -

“I make certain findings from this evidence. Firstly, the negotiation concluded with

Mr. McWhinney confirming that the deposit point is now agreed and that is evident

from the last email in this tranche from Mr. McWhinney dated 11th August, 2017, in

which he says in the third paragraph:

‘With the deposit point now agreed, we await comments on the Loan Sale

Deed…’”

Secondly, the judge noted: -

Page 15 ⇓

“…it is very evident that the level of deposit was unimportant from Promontoria and

Capita’s perspective. Thirdly, the introduction of ‘Without Prejudice’, ‘Subject to

Contract’ and ‘Contract Denied’ was not intended to relate to the contract terms

which I found were concluded and binding on the 20th June, 2017 and it is, I

believe, absurd to suggest otherwise. Fourthly, the new deposit had been agreed

and the most that could be argued in terms of the effect of the ‘Subject to Contract’

was that €60,000 instead of €600,000 needed to be inserted in the document

effecting the contract, which by this time was a settlement deed. This was merely

a conveyancing step.”

54. The Court proceeded to consider the email of the 18th August, 2017 headed “Subject to

Contract/Contract Denied”, from Ms. Brennan of A&L Goodbody. Analysing same the

Court concludes at p. 76: -

“It can be seen, therefore, that the new deposit of €60,000 had in fact been

inserted in the draft settlement deed that accompanied this email and it is in Clause

1.1, which refers to a deposit of €60,000 and also by inference in the definition of

‘settlement sum’, which is now the €5,940,000. Also, it is expressly apparent from

the requirement in Clause 2.1 that the deposit be paid as a condition precedent

prior to the settlement date of the 31st August, 2017.”

55. The Court continues at p. 77: -

“I have already accepted as correct the proposition from Chitty that renegotiation of

a term post contract does not affect the existence of the original contract, that is

the general position. … So far as the renegotiation of the deposit is concerned, the

correspondence and emails hold no hint that the parties regarded this renegotiation

as undermining, let alone rescinding, the deal. I am satisfied that Mr. Mahony’s

unthinking inclusion of ‘Without Prejudice, Subject to Contract and Contract Denied’

in his email of the 11th August, cannot be construed as having any meaning. It

certainly did not express any intention to rescind.”

56. In that regard the Court relied on the decision of Jodifern v Fitzgerald [2000] 3 IR 321. At

pp. 78-79 he observes: -

“In my judgment, the email evidence that agreement was actually reached between

Mr. O’Mahony and Capita, is subject only to the new deposit term being inserted

into a formal implementing document, namely the settlement deed, that was the

agreement.”

He found that: -

“In the present case, the insertion of ‘Subject to Contract’ by Ms. Kelly was not

destructive ...retrospectively of the agreement made on the 20th June, 2017.”

At pp. 79-80 he concluded: -

Page 16 ⇓

“I conclude on this issue firstly that variation of the deposit from €600,000 to

€60,000 was agreed and binding on all parties subject only to its formal

incorporation into the settlement deed. Secondly that ‘Subject to Contract’ used in

the course of that renegotiation did not negate the agreement of the 20th June,

2017.”

Change of structure

57. He then turned to the second ground namely the change of structure for completion, and

in particular the contention of the appellant that same was so fundamental as to negate

any earlier agreement if such had ever existed. He observed at p. 80: -

“The test as to whether a variation is merely that or may destroy the whole

contract, or give rise to a [rescission], would seem to depend on the intention of

the parties to be derived from the evidence as a whole and the nature and extent of

the variation.”

He cited with approval McGovern J. in Redfern Ltd v O’Mahony & Others [2010] IEHC 253

and adopted the approach indicated in the latter judgment observing that: -

“Under the Draft Loan Sale Deed, the Defendant agreed firstly to sell to the

Plaintiffs the loan accounts. That is Clause 2.1. and these were the scheduled loan

agreements and security documents, consisting of various charges, guarantees and

also the 2014 settlement agreement. Secondly, the Defendant agreed to execute

and deliver releases or transfers, being such releases or transfers as were

necessary to release the loan assets to the Plaintiffs.”

58. He considers and analyses the draft settlement deed and its recitals and terms including

its operative terms. The learned judge observes at pp. 86-88: -

“So the draft settlement differs in that instead of a transfer of the loans or loan

assets, the Defendant applies and accepts €6 million in full and final settlement of

the secured liabilities; and instead of releases or transfers of the loan assets, the

Defendant in Clause 5 agrees to release the Plaintiffs from the facilities or liabilities

and to release the charged asset and each registered charge and to release all

guarantees.

So far as releases are concerned, I find it difficult to discern any meaningful

difference between the Loan Sale Deed and the Draft Settlement and Release.

Certainly, from the Defendants’ perspective, there is no material difference other

than additional legal fees which the Plaintiffs agree to discharge. The change from

Loan Sale Deed to payment of €6 million to settle the debt is a change of structure,

but again it does not involve any meaningful change from the Defendant’s

perspective. The significance of a change in structure for implementing the deal

needs to be viewed in the context of the core contractual terms. These were that in

consideration of €6m Promontoria would relinquish all its interests in the loans and

security such that the Plaintiffs would, so far as the Defendant was concerned, hold

Page 17 ⇓

the secured assets free from the debt after closing on or before 31st August 2017.

These were the parties’ original intentions. I am satisfied that it mattered not one

whit to the Defendant whether this was achieved through a Loan Sale Deed and

releases, or settlement of debt and releases. The correspondence leading to the

variation does not evince any intention by the Plaintiffs or Defendant to rescind the

original deal. I find that this change in structure was not fundamental or significant.

It was purely a change in conveyancing mechanism better suited to achieving the

mutually desired end, given the delay in registration of the Defendant as owner of

the charges in the PRA. It was prompted by the Plaintiffs’ solicitor and taken up and

agreed by the Defendant’s solicitors…”

In this regard the Court concludes: -

“For the same reasons given earlier in this judgment, in the context of variation of

the deposit, the variation of implementation in the structure was actually agreed

and the continued use of the ‘Subject to Contract’ label cannot negate this, or

negate the existence of the contract that became legally binding on the 20th June,

2017.” (p. 88)

Ready, willing and able

59. The judgment considered the third ground on which the appellant sought a direction,

namely that the respondents had not been ready, able and willing to complete. The

contention advanced was that it was incumbent on the respondents to show on the

balance of probabilities that they were ready, able and willing to complete on the date of

completion which was the 31st August, 2017. Reliance in particular had been placed by

the appellant on the decision of Jackson Veitch [1858] Irish Jurist, New Series, 201. The

trial judge observed at p. 90: -

“The decision is so different in detail and so lacking in reasoned judgment and so

distant in time as to be of little assistance to the Court in this case.”

In Jackson v Veitch, McVeigh J. referred to the case of Cort v Ambergate Railway (1851)

17 QB 127 in respect of which the trial judge observed: -

“On the facts, of course, that was a very different case and I am satisfied that the

ratio decidendi was that the Plaintiff in that case was in breach of [a condition] in

that he failed to come up with the cash. However, I do accept the general

proposition that the Plaintiff in a specific performance suit must be ready, able and

willing to complete and must generally plead this, and it is notable that it is pleaded

in this case.” (pp. 92-93)

60. He concluded: -

“I am satisfied on the evidence that the agreement and performance of it were on

track in mid-August 2017. Around this time Mr. O’Mahony had secured Mr. Michael

O’Flynn of O’Flynn Construction Co. as funder for €6m. In response to repeated

requests from Capita for details of the funder, Mr. O’Mahony emailed a Mr. Peter

Page 18 ⇓

Jordan of Capita on the 21st August, 2017 as follows: -

‘Diamond Developments has entered into an agreement with O’Flynn

Construction Company, or a related company, OFC, for the purchase by OFC

of certain assets and the provision by OFC of funds in respect of same.’

At this point the Plaintiffs were contract compliant. Out of the blue, at 11.30 a.m.

on the 23rd August, 2017 Mr. O’Mahony received a call from Mr. McWhinney who

informed him that: -

‘The boss was in the Belfast Office that morning and he had made a decision

that he was not proceeding with the deal.’

I am satisfied that these were the words used and this constituted a repudiation of

the agreement concluded on the 20th June, 2017.

It was a wrongful repudiation because there was no good or justifiable reason for it

and the Defendant has not gone into evidence to suggest otherwise. I will advert

later to the reasons for repudiation emerging from discovered documentation, but

none of these could justify the repudiation in law.”

61. At p. 97 the judgment notes: -

“I am satisfied that the Court is entitled to take into account all relevant

circumstances when considering whether a purchaser is to be deprived of a right to

specific performance in the face of a defence that, on the closing date, he was not

able, ready and willing to complete.”

In light of the evidence the Court observed: -

“Non-completion was not the fault of the Plaintiffs in this case. They were, in my

view through the involvement of Mr. O’Flynn and his companies, disposed and able

to complete it. Common sense must be applied and the Court is entitled to take into

account the nature of the transaction, the size of the consideration, and above all,

in this case, the fact of wrongful repudiation.”

He also observed at p. 99: -

“There can be no hard and fast rule as to the evidence that may prove readiness

and ability to fund a deal on closing. I am satisfied on the balance of probabilities

that there was a strong oral agreement and commitment from Mr. O’Flynn and his

company with Mr. O’Mahony to pay €6 million to fund the deal, payable through

Diamond Developments Limited, and that Avenue were in place to fund some €5

million... I am satisfied that but for the wrongful repudiation, Mr. Berg’s and A&L

Goodbody’s confirmation of that repudiation, that on and up to 30th August,

funding would have been arranged and in place for closing on or before 31st

August.…”

Page 19 ⇓

62. The judgment continues: -

“I would add that Promontoria’s attempts to rely on this defence is wholly

unmeritorious. It relies to a large extent on their own wrongdoing. Furthermore

the discovered documentation reveals no concern whatsoever in relation to the

Plaintiffs’ ability to come up with the money.” (pp. 99-100)

63. Having reviewed other completion issues raised by the appellant, including the identity of

the SPV, the CGT Clearance and Family Home Protection Act Declaration, the Court

concluded: -

“I am quite satisfied that on the balance of probabilities, the Plaintiffs were

disposed and ready to complete but for the repudiation and even thereafter, and

that they will be in a position to complete.”

Notice of Termination dated 7th September, 2017

64. The judgment then considered the notice of termination of the 2014 settlement

agreement served by the appellant on the respondents on the 7th September, 2017

observing:-

“The breach alleged in that notice is two-fold. Firstly, its refusal to consensually sell

the assets and secondly, it seems to rely on the issue of these proceedings.”

The Court rejects both propositions observing: -

“As to the first, the agreement of 20th June, 2017 was fundamentally a variation of

the 2014 settlement in the sense that if the agreement was completed, the 2014

settlement would be at an end. The effect of the 20th June agreement was to

suspend the obligation of the Plaintiff to cooperate with sales by Promontoria to

other parties pending completion. … Moreover there is no suggestion that prior to

20th June, the Plaintiffs were in breach of the 2014 settlement. On the contrary, I

am satisfied that prior to that date Mr. Mahony’s co-operation with NALM and

subsequently the Defendant was exemplary and beyond reproach.” (p. 103)

Exemplary damages

65. The trial judge then turns to the issue of exemplary damages noting that the appellant

opposed the claim contending that: -

“…exemplary damages are only appropriate in cases of tort or breach of

constitutional rights and that, in any event the Court should have regard to the

factual background, including the high level of ...Mr. O’Mahony’s indebtedness

which ...was in the order of €63 million.”

66. The Court considered in some detail the decision of Conway v INTO [1991] 2 IR 305,

particularly the dictum of Barron J. who had stated: -

“Punitive or exemplary damages arising from the nature of the wrong which has

been committed and/or the manner of its commission which are intended to mark

Page 20 ⇓

the Court's particular disapproval of the Defendant's conduct in all the

circumstances of the case and its decision that it should publicly be seen to have

punished the Defendant for such conduct by awarding such damages, quite apart

from its obligation, where it may exist in the same case, to compensate the plaintiff

for the damage which he or she has suffered. … In our law punitive and exemplary

damages must be recognised as constituting the same element.”

67. Having considered the jurisprudence and authorities at p. 110 the judge observes: -

“It seems to me that it would be an artificial distinction to say on the one hand that

the manner in which a defence of an action in tort or for breach of constitutional

right is conducted in open court may lead to an award of exemplary damages, yet

to say on the other hand this cannot arise in relation to an action for breach of

contract, also defended in open court. There is the public element in both of them.

There is also clear precedent for the award of exemplary damages in Garvey and I

am persuaded by Judge McCracken’s willingness to award exemplary damages in a

breach of franchise case, a pure breach of contract case, had he been of the view

that the breach was oppressive. I am persuaded that does open to the Court a

jurisdiction to award exemplary damages in an appropriate case. The fact that a

claim for such is not pleaded cannot bar this, and that is clear from the judgment of

Chief Justice Finlay in Conway at page 320.”

68. The judge proceeded to apply the principles thus identified in regard to exemplary

damages to the facts, taking into account discovered documentation and at p. 114 of the

judgment considers same, including Advisory Note 0244 of the 6th September, 2017, the

day before the notice of termination was served, which he found to be “illuminating”

continuing:-

“In the section dealing with background information, the third bullet point reads:

‘The agreed DPO (debt pay off) has been abandoned as an off-market offer

has been received which may allow PGD (Promontoria) to recover

considerably more than the €6 million loan sale consideration.’

Later on in that advisory note, there was a box ‘Details, deal terms, terms of

contracts’ and in the first bullet point appears the following.

‘CMT (Capita) proposed for Promontoria to discharge ALG’s invoices for

aborted DPO and settlement agreements. These costs were originally for the

borrower. However, this deal was abandoned due to an off-market offer for

the subject properties, which was significantly in excess of the proposed €6m

deal.’”

The judgment continues: -

“[Counsel] cross-examined Mr. O’Mahony on the basis that this off market offer did

not relate to any offer received by Promontoria and related, if anything, to their

Page 21 ⇓

belief that the Plaintiff had received offers. There is no evidence adduced before

the Court that backs that up. I am driven to the conclusion on the evidence that

Promontoria was motivated to abandon the deal because of a belief that it could

realise significantly more than €6m. In other words, it was greedy for more profit

and would not countenance the Plaintiffs taking that profit.”

The Court also observed: -

“The swiftness with which the Defendant moved after 22nd August to instruct

agents to sell the property is also marked in its ruthlessness.”

The judgment goes on: -

“As to the conduct of the case, and this is not a personal criticism in any way of

eminent Counsel who are obviously acting on instructions, it was a feature of the

cross-examination of Mr. O’Mahony firstly that the evidence was put to him on

numerous occasions on the basis that his evidence would be refuted by what a

defence witness ‘will’ say. The clear impression given was that the defence

witnesses would be called, and, of course, subjected to cross-examination. On Day

3 at the close of the Plaintiffs’ evidence, I arranged for an early start the next day

in order to start in an attempt to finish with the Defendant’s witnesses on that day.

There was no hint of a direction application, which came as a surprise at the start

of Day 4.”

69. The Court noted that on many occasions Counsel had put to Mr. O’Mahony that: -

“He had not been ‘up front’ with the Defendant and Capita and that he was not

being ‘up front’ with the Court in his evidence. This was a polite way of attacking

his credibility, his integrity, his honesty and his truthfulness under oath. For the

Defendant not to call any witnesses to give evidence to back up these allegations

was egregious misconduct of proceedings in all the circumstances.”

70. The Court noted cross-examination of Mr. O’Mahony regarding an understanding ascribed

to Promontoria/Capita: -

“They understood that you were flipping the properties for €10 million and playing

them for fools.”

The Court in this regard observed: -

“If the Defendants were to adopt such a righteous approach to the defence of these

proceedings, they should have had the honesty and strength of character to go into

evidence in open Court.”

The Court noted: -

“I was struck by Mr. O’Mahony’s evidence that he had no option but to pursue

Page 22 ⇓

these proceedings and that in order to fund them he had to cash in his pension and

borrow from his wife and his brother. No financial loss from this was proved but it

was a consequence of the Defendant’s conduct. The oppressiveness of the

Defendant in the period 22nd August to 7th September, 2017 and their conduct of

the defence before me demonstrates a callousness and disregard for the Plaintiffs,

and in particular Mr. O’Mahony, that justifies an award of exemplary damages and I

propose to make one. However, I am mindful that the purpose of such an order is

to mark the Court’s displeasure. It is punitive. It is to express disapproval of the

Defendant’s conduct and it should not be excessive. While I might be of the view

that a much greater award would be proportionate, I note the relatively small

award of McWilliam J. in Garvey and Barron J. in Conway. I will award €20,000

exemplary damages to the First Named Plaintiff, Mr. O’Mahony.” (p. 117)

The Court granted a decree of specific performance, awarded €20,000 exemplary

damages to the first named respondent and dismissed the counter-claim against the

second named respondent.

The Notice of Appeal

71. The appellant appealed the decision. The key grounds relied upon include:-

i. That the trial judge erred in the manner he dealt with the application for a direction

including his application of the law and his drawing of inferences which, it was

argued, displayed partiality.

ii. His error in finding that a specifically enforceable contract had come into existence

between the parties arose, inter alia, from his erroneous treatment of the words

“subject to contract” in correspondence between the parties and his construction of

correspondence as giving rise to acceptance rather than constituting a counter offer

which was never accepted by the respondents.

iii. The appellant contended that the deposit and its amount were material terms of the

contract as was the structure intended to give effect to the transaction which the

trial judge erroneously failed to characterise as such.

iv. It is argued that the respondents were unable to show that they were “ready,

willing and able” to complete the transaction in late August 2017.

v. The appellant contends that its notice of termination the dated 7th September,

2017 was valid and that an award of €20,000 exemplary damages was made on an

erroneous basis, the trial judge having erred in finding that the appellant was guilty

of “egregious misconduct” and “oppressiveness” in its dealings with the

respondents in relation to the alleged contract.

Submissions on behalf of the appellant

Adverse inferences

72. In written submissions and arguments, the appellant contends as follows; Firstly, in

regard to Hay v O’Grady [1992] 1 IR 210, the appellant emphasises the limitations of the

Page 23 ⇓

principles in circumstances where at issue are the inferences drawn by the trial judge. In

particular the excerpt from McCarthy J. in that judgment where he stated at p. 217:-

“…

[3.] Inferences of fact are drawn in most trials; it is said that an appellate court is in as

good a position as the High Court to draw inferences of fact. …I do not accept that

this is always necessarily so. It may be that the demeanour of a witness in giving

evidence will, itself, lead to an appropriate inference which an appellate court would

not draw. In my judgment, an appellate court should be slow to substitute its own

inference of fact where such depends on oral evidence or recollection of fact and a

different inference has been drawn by the trial judge. In the drawing of inferences

from circumstantial evidence, an appellate tribunal is in as good a position as the

trial judge.

[4.] A further issue arises as to the conclusion of law to be drawn from the combination

of primary fact and a proper inference - in a case of this kind, was there

negligence? …”

73. The appellant cited the decision of Ryan P. in Emerald Isle Assurances and Investments

Limited v Dorgan & Ors [2016] IECA 12, a case where the Court of Appeal was satisfied

that it was entitled to review the basis on which the High Court judge had drawn

inferences referred to in his judgment. Ryan P. concluded that the appellant had

established that the conclusions reached by the trial judge were erroneous, observing at

para. 47: -

“The essential facts – all of the facts on which the decision as to the negligence of

the second defendant falls to be made – are not in dispute and the question for this

Court is whether the inferences and conclusions that were drawn by Kearns P. were

correct. In my view, those inferences are reviewable by this Court and they are not

correct.”

74. The appellant contends that it was not open to the trial judge to draw adverse inferences

from the fact that the appellant elected not to call witnesses notwithstanding the manner

in which the respondents’ witnesses had been cross-examined and the trial judge was not

entitled to take a view that such conduct was “…something from which the court may

draw one or more appropriate inferences.” (p. 9 of judgment)

75. In the notice of appeal at 3.1.8 the appellant contends:-

“The Judge drew an adverse inference that as a result of the cross examination of

the First Named Respondent, which was on the basis that his evidence would be

refuted by a defence witness, the impression was given that defence witnesses

would be called and subjected to cross examination.”

76. The appellant argued that a decision as to whether to call a witness or indeed whether a

defendant would go into evidence is often only made as the case proceeds. Reliance was

Page 24 ⇓

placed on Moorview v First Active [2009] IEHC 214, where Clarke J. (as he then was)

stated:-

“It does not seem to me that the alteration in the Rules of Court applicable to the

Commercial Court … could be taken to have altered the substantive law. The law is

that a plaintiff is required to establish a prima facie case in respect of any issues

arising on the pleadings on the basis of admissible evidence tendered on behalf of

that plaintiff. …if the plaintiff fails to establish a prima facie case on such evidence,

then a defendant is entitled to a non-suit and is not required itself to go into

evidence.…”

77. The appellant placed particular reliance on the decision of this Court in O’Leary v HSE

where Ryan P. considered whether the manner of cross-examination could have denied

the defendants the opportunity of applying for a non-suit. The appellant contends that the

High Court had made an adverse inference that as a result of the cross-examination of

Mr. O’Mahony on the basis that his testimony would be refuted by a defence witness, an

impression was given that defence witnesses would be called and subjected to cross-

examination. It was argued that the approach of the trial judge failed to recognise and

uphold the decision of the Court of Appeal in O’Leary.

78. With regard to the entitlement of a trial judge to draw inferences from the fact that

witnesses who might be called have not been called, it was contended that the trial judge

erred in relying on the judgment in Smart Mobile, which was distinguishable on its facts.

Citing Fyffes plc v DCC plc [2009] 2 IR 417 and Flynn v NALM, the appellant contended

that it was a legitimate tactical decision to make within the adversarial process to proceed

to cross-examine on such a basis and the High Court ought not to have made an adverse

inference from the decision not to call the witnesses in question. The appellant further

contends that the adverse inference drawn by the trial judge as a result of the cross-

examination of Mr. O’Mahony in circumstances where the appellant’s own witness was

ultimately not called, displayed a partiality on the part of the trial judge.

Offer and Acceptance

79. The appellant contends that there was no specifically enforceable agreement concluded

between the parties citing McDermott & McDermott, Contract Law (2nd edition,

Bloomsbury Professional, 2017) at para. 2.7 that “…there must be a unqualified

acceptance of the terms of the offer”.

80. The appellant contended that the payment of a deposit and its amount was a material

term of the agreement and that the email dated 22nd May, 2017 did not contain any

reference to the payment of a deposit. That the trial judge erroneously had concluded

that as a result of an email from Capita dated 6th June, 2017 a deposit of 10 percent on

signing had been: -

“superimposed on the offer formalised by Mr. O’Mahony in his email of 22nd May,

2017.”

Page 25 ⇓

The appellant argues that the trial judge made a series of errors in the context of the

deposit negotiations. It further contends that the email communication of the 20th June,

2017 constituted a counter offer and not acceptance of an offer: -

“…it was clear from both the documentary and oral evidence that there was no

clear and unequivocal acceptance of the terms of the counter offer. The email of 22

May was not accepted but rather different terms were proposed in the 20 June

email.”

“Ready willing and able to complete”

81. The appellant argued that a fundamental prerequisite to establish entitlement to a decree

of specific performance was that a plaintiff demonstrate that he was ready, willing and

able to complete on the operative date. The respondents had failed to establish same. In

the instant case it is contended that the trial judge misunderstood the legal test which

was that: -

“…regardless of whether or not the Appellant wrongly repudiated the asserted

agreement, nevertheless the Respondents were obliged to show that as of the

identified and agreed completion date (31 August 2017), they were disposed to and

able to complete.” (para. 70 of written submissions)

Change of Structure

82. With regard to the change of structure laterally proposed for completion – whereby the

second respondent would sell one of its properties to an SPV which would be owned or

controlled by a third party – the appellant asserted that a number of critical elements

were absent including: -

i. The SPV had not been identified, neither was there any evidence given of an actual

agreement concluded by the primary funder, Avenue, to lend the purchase monies

in question.

ii. No witness was called from Avenue and Mr. O Flynn, was unable to definitively

identify from which company within O’Flynn Construction Group a sum of €1M,

being part of the purchase money, would be sourced and no evidence was adduced

that such funding was available to any such entity in August 2017.

Exemplary damages

83. Finally, with regard to exemplary damages, the appellant contended that an award of

exemplary damages was not appropriate in the context of a simple breach of contract

claim and if exemplary damages were appropriate in the context of a simple breach of

contract claim, such an award was not justified in this case.

84. The appellant contended that in the neighbouring jurisdiction since the 1909 decision of

the House of Lords in Addis v Gramophone & Co. Limited [1909] AC 488, such damages

are unavailable in the United Kingdom. With regard to the test for exemplary damages,

reliance was placed on the decision in Conway v INTO. The respondent had sought

damages in the nature of exemplary damages in the High Court on the basis that the

Page 26 ⇓

appellant’s conduct, particularly the conduct of the case, and in particular cross-

examination, had been egregious under the third category of exemplary damages

identified by Finlay C.J. in Conway:-

“(c) conduct of the wrongdoer and/or his representatives in the defence of the

claim of the wronged plaintiff, up to and including the trial of the action.”

It was contended that the trial judge had not indicated whether he was confining himself

to limb (c). It was contended that the expression of the view by the trial judge at p. 109

of the judgment that: -

“The manner in which and the reason why the Defendant repudiated the deal in this

case, so far as can be ascertained from the evidence, and discovered documents…”

was suggestive of limb (a) of the Conway test: -

“(a) The manner in which the wrong was committed, involving such elements as

oppressiveness, arrogance or outrage...”

It was contended that neither limb had any application in the instant case.

85. The appellant argued that it is well established that the denial of liability is not an abuse

of process and a defendant is entitled to put forward a robust defence without being in

fear of the sword of punitive damages.

Submissions of the respondents

Adverse inferences

86. The respondents contend that the Court was entitled to draw adverse inferences from the

fact that one party to proceedings did not call witnesses of fact: -

“Particularly witnesses who are parties to relevant communications and who may be

expected to be in a position to give relevant evidence.”

It was argued that: -

“The type of inferences that may be drawn is that the witness’ evidence would be

averse to the interests of the party in question. This is what is typically referred to

as drawing ‘adverse inferences.’”

The respondents contend that the alleged inference that “the impression was given that

defence witnesses would be called” is neither an inference or adverse. It is instead a clear

finding based on the judge’s direct observation of the conduct of the case and is wholly

supported by the evidence as well as being accepted by counsel for the appellant, who

states at p. 46 of Day 4 of the transcript: “Judge, you can take it that I accept that such

articulations were made during cross-examination… I am quite happy to make that

concession”.

Page 27 ⇓

87. The respondents contended “that the appellant has identified only one alleged ‘adverse

inference’” namely that as a result of the cross-examination of Mr. O’Mahony on the basis

that his evidence would be refuted by a defence witness, an impression was given that

the defence would call witnesses who would be subject to cross-examination.

88. In support of their contention that the trial judge engaged not in drawing an adverse

inference but rather in making clear findings of fact based on evidence, reliance was

placed on the Supreme Court decision in Whelan v AIB [2014] 2 IR 199 at para. 92 where

O’Donnell J. had observed that “Each case… involves a consideration of the specific

inference which the court is invited to draw.”

89. It was contended that the trial judge exercised the discretion to draw adverse inferences

correctly with appropriate caution in light of the relevant authorities including Smart

Mobile and Wisniewski. The respondents contend that there is nothing in the judgment

which amounts to an adverse inference drawn against the appellant. The respondents

argue that the trial judge exercised very considerable caution in exercising his discretion

to draw inferences and did not in fact draw a single adverse inference (as opposed to

findings on the evidence) from the failure of the appellant to adduce evidence or from the

absence of any particular witness, and no such inference has been or could be identified

by the appellant.

90. It was contended that the principles in Hay v O’Grady are engaged and reliance was

placed on the decision of the Supreme Court in Leopardstown Club Limited v Templeville

[2017] IESC 50 where Denham C.J. stated that: -

“… an appellate court should not interfere with a primary finding of fact by a trial

court which has heard oral evidence, unless it is so clearly against the weight of the

evidence as to be unjust.”

Offer and acceptance

91. The respondents assert that weight should be attached to the defence as pleaded by the

appellant including that the defence failed to plead that: -

(a) The email of the 20th June, 2017 (when read with the variations in August 2017)

failed to record the material terms of the transaction or to reflect what was agreed

between the parties.

(b) The appellant did not agree the material terms of the agreement.

(d) The 20th June email was a counter offer, or intended to be such.

(e) There was no binding agreement because there was no express acceptance by the

respondents in respect of a deposit.

(f) That the change in the proposed structure for completion of the transaction which

occurred post the 20th June, 2017 was significant or material to the appellant.

Page 28 ⇓

(g) That the appellant did authorise its agents to negotiate after the 20th June, 2017

and to include the words “subject to contract” in its communications.

92. The respondents rely on Supermacs Ireland Limited v Katesan (Naas) Limited [2000] 4 IR

273 as authority for the proposition that there is scope for a contention that a deposit

may not have been considered essential in any particular contract for the sale of land.

Further, it was contended that if the appellant wished to argue that no agreement was

formed on the 20th June 2017 because the issue of a deposit had not been agreed and it

was at that time awaiting a response from the respondents to a counter offer, then it was

incumbent on the appellant to adduce evidence in support of that contention direction as

the trial judge found.

93. It was contended that there was no evidence of any alleged impact or relevance identified

at the hearing as arising from the change of structure and there is no basis in law or fact

for interfering with the findings of fact made by the trial judge in that regard.

94. With regard to the requirement to be “ready, willing and able” to complete it was argued

that the trial judge made clear findings of fact that the respondents were so ready which

were based on evidence adduced at the hearing and there was no basis for disturbing the

said findings of the trial judge.

Exemplary damages

95. The respondents rely on the High Court decision in Slattery v Friends First Life Assurance

[2013] IEHC 136 where the said judgment concluded: -

“… that the Court is vested with a discretion to award compensatory damages,

including aggravated damages, notwithstanding any failure to explicitly plead the

latter category.”

The respondents contend that exemplary damages were warranted on the basis of

findings of the trial judge from evidence adduced at trial that:-

(a) It was implicit that the appellant withdrew from the deal without being aware as to

whether or not there were binding Heads of Terms;

(b) On the basis of the discovered emails and documents the real reason that the

appellant pulled out of the bargain was that it objected to the possibility, which

they perceived, based on hearsay, that Mr. O’Mahony would profit, possibly up to

€4M from a deal; and

could realise significantly more than €6M and was greedy for more profit and would

not countenance the respondents taking that profit.

96. Based on such findings the High Court concluded that the oppressiveness of the appellant

in the period from the 22nd August, 2017 to the 7th September, 2017 and their conduct

Page 29 ⇓

of the defence demonstrated a callousness and disregard for the respondents and in

particular Mr. O’Mahony that justified an award of exemplary damages.

The cross-examination of Mr. O’Mahony

97. The respondents argued that the decision of the trial judge to award exemplary damages

was part of a discretion uniquely held by a trial judge who presides over a trial and sees

at first-hand how it is conducted and how a litigant or witness is treated during a trial.

Accordingly, the award was based on the judge’s observation of the evidence and his

direct observation of the conduct of the proceedings. It was contended that the award of

exemplary damages was validly made in the exercise of the Court’s discretion and there

was no basis for interfering with it.

Discussion and analysis

Hay v O’Grady

98. The approach that an appeal court ought to take in an appeal from a decision to grant a

non-suit application bears analysis and the extent to which the principles articulated in

Hay v O’Grady apply calls for consideration. The issue was the subject of consideration in

the Supreme Court judgment of O’Donnell J. in Schuit v Mylotte, a case which concerned

an application for a direction by several defendants. An argument advanced before the

Supreme Court was on the authority of Hanafin v Minister for the Environment [1996] 2

IR 321 that a trial judge’s decision on an application for a non-suit was one to which the

principles in Hay v O’Grady applied, such that if there was evidence upon which the trial

judge could come to the conclusion which he did, the decision should not be disturbed on

appeal. O’Donnell J. rejected that contention stating: -

“I cannot agree. Hanafin is a case which was very much sui generis and has never

been treated as an authority of general application on the principles to be applied

on an application for a non-suit in personal injuries litigation. That case concerned

a petition to set aside the outcome of the constitutional referendum, and it is not

easily compared to simple inter partes litigation…The test in Hay v O’Grady is

derived from the fact that an appeal Court which does not hear the evidence must

give considerable deference to a trial Court’s assessment of the cogency and

credibility of evidence given to it. This follows from the different functions of a trial

court and appeal Court. As a result, the question for a Court on appeal is

essentially a matter of logic: was there evidence whatever its apparent credibility or

cogency, upon which the trial judge could come to the conclusion he or she did.

The test in Hetherington v Ultra Tyre Service and O’Toole v Heavey provides in

truth little scope for the application of the principle in Hay v O’Grady since it is rare

that a Court will proceed to assess the credibility of witnesses at the end of the

plaintiff’s case. While I do not rule out the possibility that a Court could come to

the conclusion that the plaintiff’s evidence was so incredible that there was no

plausible or viable case, in most cases the issue is simply a matter of logic: is there

evidence, whatever its relative cogency or strength, upon which a Court could

conclude that a defendant was liable. That exercise is very similar to that set out in

Hay v O’Grady. It does not normally, and did not here, involve the type of

assessment of the cogency or credibility which attracts the rule in Hay v O’Grady,

Page 30 ⇓

and accordingly the decision is fully reviewable on appeal.”

99. I take that decision to mean that the principles in Hay v O’Grady do not automatically

operate when considering an appeal from a decision to grant a non-suit. In each case it is

a matter of the application of logic. However, such “rare” cases include those where the

trial judge has carried out a comprehensive assessment of the cogency and credibility of

the witnesses and they have been subjected to competent and effective cross-

examination concerning all salient issues between the parties and the evidence, including

documentary evidence. Where same have been thoroughly assessed and evaluated by the

trial judge in the process of reaching his determination on the application before him, a

process which requires the judge to be satisfied that the plaintiff has established as a

matter of probability the facts necessary to support a verdict in his favour, an appeal

court may well be less entitled to disregard the rule in Hay v O’Grady as not applicable or

consider findings as to credibility of such witnesses reviewable on appeal.

100. This is one such “rare” case where the Court did proceed to assess with great care the

credibility of witnesses at the end of the plaintiff’s case.

Offer and acceptance

101. With regard to the principles governing the formation of a contract for the sale of an

interest in land, it must comply with the general principles of the law of contract relating

to the formation of a contract. Wylie and Woods in their text Irish Conveyancing Law (4th

edn., 2019) state at para. 9.02 that the parties to the purported contract: -

“… must have had an intention to create legal relations, and the terms of their

agreement must be sufficiently certain that, if necessary, a Court will be able to see

precisely what it is they have agreed. There must have been a proper offer and

acceptance, and the agreement must be supported by consideration.”

102. Woods and Wylie observe at para. 9.18: -

“As Geoghegan J pointed out in Supermacs Ireland Limited v Katesan (Naas)

Limited [2000] 4 I.R. 273 at 286:

‘Only the material terms need be included in a note or memorandum for it to

be sufficient but all the terms, whether they be important or unimportant

must be agreed before there can be said to be a concluded agreement.’”

The authors go on to observe: -

“The absence of a discussion in relation to certain terms will not always prove fatal

as the courts will frequently be willing to imply terms, for example, that the sale is

to close within a reasonable time or that there is an obligation to give vacant

possession.”

In each case it is necessary to consider whether the written offer has been rejected e.g.

by a counter offer.

Page 31 ⇓

103. In the instant case there was clear evidence to support the trial judge’s findings that a

binding contract came into existence between the parties for the reasons set out herein.

Subject to contract and the deposit

104. With regard to the use of the words “subject to contract” the use of such language in

correspondence does not deprive it of all contractual force. As Woods and Wylie observe

at para. 9.15: -

“It may, for example, and depending on the context, amount to an offer or a

rejection of an offer (together with a counter-offer). Similarly, where a concluded

agreement has been reached and it is followed by correspondence headed ‘Subject

to Contract’ which varies certain terms, this will not negate the existence of the

contract.”

105. Where the language “subject to contract” is used in circumstances which concern a non-

material additional term of a contract, Buckley, Conroy and O’Neill in Specific Performance

in Ireland (Bloomsbury, 2012) observe at para. 5.47: -

“The time at which the phrase has been introduced may be a significant cause of

controversy. A key question would be whether the proviso applied (expressly or

implicitly) throughout the negotiations or whether it has been introduced ex post

facto by the legal representatives after the parties consider themselves to have

concluded an oral or written contract. The significance of the distinction is identified

by Gibson J. in Thompson v. The King [1920] IR 365 at 386:

‘Where an offer and acceptance are made subject to a subsequent formal

contract, if such contract is a condition or term which until performed keeps

the agreement in suspense, the offer and acceptance have no contractual

force. On the other hand, if all the terms are agreed on, and a formal

contract is only contemplated as putting the terms in legal shape, the

agreement is effectual before and irrespective of such formal contract. Where

there is correspondence in the course of which it is alleged that a contract

has been created the whole correspondence should be read; but if it appears

that a final agreement was come to at any stage, subsequent attempts to

introduce new and varied terms must be disregarded.’”

106. With regard to the deposit it is to be recalled that this was not a contract governed by the

Incorporated Law Society of Ireland Conveyancing Contract Standard Form. As Hardiman

J. observed in Supermacs Ireland Limited v Katesan (Naas) Limited at p. 280: -

“There is no doubt that an agreement in relation to deposit is usual in concluded

agreements for the sale of land. But the cases prior to Boyle v Lee [1992] 1 I.R.

555 demonstrate that it is not invariable… I believe that there is at least scope for

contention that a deposit may not have been considered essential. It seems to me

that the factual position will be a good deal clearer after discovery and more

importantly, oral evidence ….”

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107. The provisions of the Land and Conveyancing Law Reform Act, 2009 and in particular

section 51, can be seen as a recalibration of the position such that now a term as to the

payment of a deposit and the amount of same is not to be deemed, in the absence of an

express agreement to the contrary, to be a fundamental or material term of a contract for

the sale of an interest in land.

108. The evidence in this case all points to the payment of some amount by way of deposit

being an agreed term of this contract. Negotiations regarding the amount of the deposit

did not undermine the existence of a binding agreement. In the instant case the parties

ultimately agreed to a 1% non-refundable deposit. The email which confirmed same was

marked “subject to contract” dated the 10th August, 2017 and sent by Mr. O’Mahony but

by then as there was a concluded agreement between the parties identifying all the

material terms, the use of the words “subject to contract” had no legal effect.

Change in structure

109. With regard to the significance of a change in structure the decision of O’Connor v P.

Elliott and Company Limited [2010] IEHC 167 suggests that the mode of transfer of

property is not necessarily, depending on the circumstances of the case, a matter that

affects the enforceability of the contract. The analysis called for is an assessment as to

whether the mode of giving effect to the transaction is of fundamental importance and a

matter of substance or whether it of secondary importance, the primary objective being

that there be an effective mechanism to achieve the agreement of the parties and that

the other party to the transaction has raised no objection with regard to the mechanism

proposed or a variation of same introducing a new mode of implementation of the

transaction. For instance, a change in mechanism will frequently arise from tax advice

relating to the mode of transfer. It is not however an issue that undermines the existence

of a contract.

110. Whilst it is clear from the emails and communications that there was discussion as to the

mode of transfer of the interest in question and whether there would be a loan purchase,

change was precipitated primarily by reason of the non-registration of the appellant’s

interests over the subject properties in the Land Registry in accordance with the relevant

legislation. I am satisfied that there was clear evidence before the trial judge which

entitled him to find that the issue of the mode of transfer and the modalities for giving

effect to same were not considered material at the time, and in particular in the months

of June, July or August of 2017. It follows from the evidence and the discovery that

changes in the mode of giving effect to the agreement did not affect the existence of the

agreement.

111. A change in structure necessitated by a circumstance or factor not known to one or both

parties at the time of the initial agreement is not generally capable of annulling a

concluded agreement otherwise specifically enforceable, nor does it have the effect of

rescinding the original agreement.

“Ready, willing and able to complete”

Page 33 ⇓

112. In the instant case we are not dealing with contractual completion notices in the context

of condition 36 of the Law Society’s Conditions of Sale 2019 Edition. The common law

requirement was that at the point where a party seeks enforcement of the contract they

must be either “ready, able and willing” to complete the sale or not so ready by reason of

default or misconduct of the other party. The operative date accordingly on the facts of

this case is on the date of the institution of the proceedings namely, the 25th August,

2017, some days prior to the agreed completion date of the 31st August, 2017. It was a

question of fact for the trial judge to determine whether on the evidence before him the

respondents were in a position to complete and pay the purchase monies in their entirety.

113. The Court had the evidence of three witnesses who, notwithstanding robust cross-

examinations, each maintained their respective positions that completion was on track, a

funding arrangement was in place and the monies would have been available but for the

precipitative behaviour of the appellant on the 23rd August, 2017 making a phone call to

the first respondent informing him that it was not proceeding with the deal. It is

significant that on the 29th August, 2017 a date prior to the agreed completion date, the

appellant moved to appoint a sales agent over the properties in question.

Application for a non-suit

114. The relationship between the parties was defined by significant mutual mistrust. Having

re-considered the entirety of the cross-examination it is evident that in late August 2017

the appellant was convinced and harboured no doubt but that the first respondent was

poised to effect a sale on of the properties for a substantial profit. The appellant

harboured no doubt but that they had been misled and had entered into a bargain to

dispose of an interest worth over €63,000,000 for less than a tenth of its value to a

debtor who was about to profiteer at their expense. In that suspicion they were mistaken

as the cross-examination demonstrated.

115. The principles governing an application for a non-suit is to be found in the Supreme Court

decision Hetherington v Ultra Tyre Service Limited and Ors and the decision in O’Toole v

Heavey [1993] 2 IR 544.

116. In Hetherington Finlay C.J. at pp. 541-542 stated: -

“… it may be of assistance if I express a view with which I understand my

colleagues to be in substantial agreement at present, on the position arising when

applications for direction are made. If a defendant to an action being tried by a

judge sitting without a jury applies for a direction on the basis that the evidence

adduced by the plaintiff is not sufficient to establish a case against him, I think it is

reasonable for a judge, if he sees fit, on a trial to inquire from that person as to

whether he intends to stand on that application. If he indicates that he intends to

give evidence in the event of the application failing, the judge may well properly

defer the decision on the issue as to whether a case is being made out by the

plaintiff until he has heard all the evidence.”

McCarthy J. supported that analysis at p. 542 stating: -

Page 34 ⇓

“The party seeking the dismissal of an action should be put to his election as to

whether or not he will call evidence.”

117. In the subsequent O’Toole decision Finlay C. J. returned to the issue, elaborating what the

Court considered to be the most appropriate and just procedure to be followed when such

an application is made stating: -

“The position would appear to me to be as follows.

[1.] If an action is brought either in tort or contract against one defendant only, and if

at the conclusion of the evidence for the plaintiff the defendant applies for a

dismiss, then it seems appropriate that the trial judge should inquire from the

defendant as to whether in the event of a refusal of that application the defendant

would intend to go into evidence.

…

[3.] If upon applying for a non-suit at the conclusion of the plaintiff's case, in a case

where one defendant only has been sued, it is indicated that the defendant does

not intend, if the application is refused, to go into evidence, then, in effect, the

learned trial judge is being asked to determine the following question, which is:

having regard to his view of the evidence of the plaintiff, whether the plaintiff has

(that being the only evidence before him) established as a matter of probability the

facts necessary to support a verdict in his favour. Unless he is so satisfied, he must

dismiss the action; if he is so satisfied it appears to me that he must give judgment

for the plaintiff.”

118. In the instant case the position adopted by the appellant at the close of the respondents’

case was unequivocal. There was no intention to go into evidence either on the issue of

liability or on the issue of damages.

119. The principles governing the correct approach of a trial judge on an application for a non-

suit were considered by the Supreme Court in O’Donovan v Southern Health Board

[2001] 3 IR 385 wherein Keane C.J. followed the test laid down in O’Toole v Heavey emphasising

the obligation of the trial judge to take the plaintiff’s case at its highest stating at p. 386:-

“If [the trial judge] had been informed by counsel that he would not be going into

evidence then the trial judge would have applied the appropriate test which is

whether the plaintiff had at that stage discharged the onus of proof and had

satisfied him on the balance of probabilities that he was entitled to judgment.”

He proceeded to contrast that with the approach to be adopted where counsel reserved

the right on behalf of a litigant to go into evidence which did not arise in the instant case.

Whether the trial judge applied the correct principles in determining the non-suit

application

120. The decision in Schuit v Mylotte involved a case, unlike the instant suit, where there were

several defendants. At the time of seeking the non-suit the Court had been informed on

Page 35 ⇓

behalf of the second, third and fourth named defendants that if they were unsuccessful in

their application for a non-suit it was their intention to go into evidence on the issues of

liability as well as damages. Hence, in contrast with the facts in the instant case, in Schuit

consideration of the plaintiff’s claim and witnesses required the trial judge at the direction

application to determine merely whether the plaintiff had made out a prima facie case and

whether there was any evidence from which negligence might be inferred against the said

defendants and to consider was there evidence, whatever its relative cogency or strength,

upon which a court could conclude that they were liable.

Conduct of cross-examination and punitive damages

121. In a free society the maintenance of the rule of law depends on the right of an individual,

whether confronted by criminal sanction or through the enforcement of civil obligation, to

enjoy and exercise an opportunity to have their position presented vigorously by an

independent profession. In our society the Independent Referral Bar discharges that vital

function.

As Lord Pearce observed in Rondel v Worsley [1969] 1 AC 191, 274: -

“It is easier, pleasant or more advantageous professionally for barristers to

represent or defend those who are decent and reasonable and likely to succeed in

their action or their defence, than those who are unpleasant, unreasonable,

disreputable and have an apparently hopeless case. Yet it would be tragic if our

legal system failed to provide reputable defenders, representatives or advocates for

the latter.”

122. McGrath in Evidence (2nd edn., 2014, Round Hall) at para. 3-139 considers the

requirement to put matters to a witness on cross-examination stating: -

“As a general rule, a party who intends to call evidence to contradict the testimony

given by a witness on examination-in-chief is required to put that evidence to him

during cross-examination so that he or she has an opportunity of providing an

explanation in relation to that evidence. In Browne v Dunn (1893) 6 R. 67 Lord

Herschell explained the rationale for this rule as follows –

‘… it seems to me to be absolutely essential to the proper conduct of a cause,

where it is intended to suggest that a witness is not speaking the truth on a

particular point, to direct his attention to the fact by some questions put in

cross-examination showing that the imputation is intended to be made, and

not to take his evidence and pass it by as a matter altogether unchallenged,

and then, when it is impossible for him to explain, as perhaps he might have

been able to do so if such questions had been put to him, the circumstances

which it is suggested indicate that the story he tells ought not to be believed,

to argue that he is a witness unworthy of credit. … I have always understood

that if you intend to impeach a witness you are bound, whilst he is in the

box, to give an opportunity to making any explanation which is open to him;

and, it seems to me, that is not only a rule of professional practice in the

Page 36 ⇓

conduct of a case, but is essential to fair play and to fair dealing with

witnesses.’”

123. McGrath further states at para. 3-141: -

“This requirement to put matters to a witness applies not only to contradictory

evidence but also where a party intends to impeach the credibility of a witness in

closing argument and suggest that a witness is not to be believed in relation to a

particular matter. In Browne v Dunn, Lord Halsbury stated:

‘…. nothing would be more absolutely unjust than not to cross-examine

witnesses upon evidence which they have given, so as to give them notice,

and to give them an opportunity of explanation, and that opportunity often to

defend their own character, and, not having given them such an opportunity,

to ask the jury afterwards to disbelieve what they have said, although not

one question has been directed either to their credit or to the accuracy of the

facts they have deposed to.’” (pp. 76-77 of the judgment)

124. This is illustrative of the professional obligation incumbent on senior counsel to conduct

the cross-examinations of the respondents’ witnesses in accordance with his instructions.

There is no suggestion that at any time he acted otherwise than in accordance with those

instructions.

125. Two distinct aspects of the conduct of the appellant at the hearing were singled out by the

trial judge in the judgment: -

i. The respondents’ witnesses were cross-examined on the express and repeated

basis that the appellant would go into evidence and contradict their testimony in a

significant number of crucial respects.

ii. The Court was not disabused of that intention until on the morning of the fourth

day of the hearing an application for a direction was made by senior counsel on the

basis that the appellant did not intend to go into evidence.

Powers of a judge in regard to cross-examination

126. A judge may restrict cross-examination in the course of a hearing where he considers it to

be unduly oppressive or improper. Phipson On Evidence, (19th edn., 2019) at para. 12-13

states: -

“A judge may not allow a cross-examination on matters about which the witness

could not fairly be expected to have any knowledge.”

Constitutional protection of the right to cross-examine

127. McGrath (op. cit.) points out at para. 3-86: - “Cross-examination is considered to be of

pivotal importance in the trial process.”

The author also analyses the constitutional basis of the right to cross-examine at para. 3-

88:

Page 37 ⇓

“Given the importance of cross-examination to the trial process, it is unsurprising

that the right to cross-examine is considered to be a fundamental procedural right

in this jurisdiction, constitutionally guaranteed in both civil and criminal cases.”

128. McGrath notes that in Donnelly v Ireland [1998] 1 IR 321 at p. 350 Hamilton C.J.

described the right to cross-examine as an “essential ingredient in the concept of fair

procedures”. In the Criminal Law (Jurisdiction) Bill, 1975 [1997] IR 129 at p. 154

O’Higgins C.J. observed: -

“An opportunity to cross-examine on behalf of the accused any witness called

against him is fundamental to a trial in due course of law and the taking of

evidence for production at such trial without such an opportunity would be contrary

to the Constitution.”

In the context of civil cases the following excerpt of McGrath’s text warrants

consideration: -

“The right to cross-examine also enjoys constitutional protection in civil cases by

virtue of the guarantee of the personal rights of the citizen contained in Article

40.3.

Delivering the judgment of the Supreme Court in Re Haughey [1971] I.R. 217, Ó

Dálaigh C.J. stated that Art 40.3 ‘is a guarantee to the citizen of basic fairness of

procedures’ which required, inter alia, that the defendant in that case ‘be allowed to

cross-examine, by counsel, his accuser or accusers’.

In Donnelly v Ireland Hamilton CJ stated that: -

‘The central concern of the requirements of due process and fair procedures is the

same, that is to ensure the fairness of the trial of an accused person. This

undoubtedly involves the rigorous testing by cross-examination of the evidence

against him or her.’” (para. 3-89)

The limits of cross-examination

129. I can find no better exposition on the limits on cross-examination in the context of our

constitutional position than that set out by McGrath in his text (op. cit.). The author

states at para. 3-97 that: -

“The central feature of cross-examination, which distinguishes it from examination-

in-chief, is that the cross-examining party is permitted to ask leading questions.

This enables the cross-examining party to engage in more intensive questioning of

the witness and that cross-examination can be ‘hard, detailed, challenging and

bruising’ (People (DPP) v D.O. [2006] IESC 12, (per Hardiman J)). A cross-

examiner is also permitted to put questions based on information that is

inadmissible or that he or she is unable to prove except through cross-examination

and to ‘pursue any hypothesis that is honestly advanced on the strength of

reasonable inference, experience or intuition’…”

Page 38 ⇓

130. Hardiman J. in People (DPP) v D.O. observed at paras. 38-39: -

“...it is important to record that this court has on a number of occasions

emphasised the central and indispensable position in our system of justice held by

what Henchy J. called the ‘truth eliciting’ process of cross-examination. It is

necessarily only to mention: Kiely v. The Minister for Social Welfare [1967] I.R.

267; Re Haughey [1971] I.R. 217; Maguire v. Ardagh [2002] 1 IR 385;

O’Callaghan v. Mahon (Supreme Court, unreported, 9th March, 2005).

In proceedings such as the present where everything that makes life worth living

may be at stake, it is to be expected that cross-examination on both sides will be

hard, detailed, challenging and bruising. It is equally clear that much discretion

must be left to the cross-examiner, for reasons indicted in my judgment in Maguire

v. Ardagh. No topic can be taboo so long as it passes the criterion of having some

proper use in the cross-examiner’s task.”

131. McGrath further observes at para. 3-97: -

“However, it is important to note that there are limits to the form, content and

length of questioning that is permissible on cross-examination. In particular, cross-

examination by counsel is expected to be conducted with restraint and appropriate

courtesy in consideration for the witness and he or she cannot put questions based

on a factual premise that he or she knows to be false or is reckless as to whether it

is false. A cross-examiner should also avoid comment in the course of cross-

examination and refrain from unnecessary and personalised attacks on expert

witnesses.”

132. The author continues at para. 3-100: -

“However, given the importance and constitutional basis of the right to cross-

examine, the discretion of trial judges to disallow questions or otherwise curtail

cross-examination is somewhat circumscribed and a trial judge should not rule out

a line of questioning unless it is clearly irrelevant or otherwise objectionable.”

133. The Supreme Court in O’Callaghan v Mahon [2006] 2 IR 32 acknowledged that the right

to cross-examination is required by the constitutional guarantee of fair procedures.

Geoghegan J. delivering the majority judgment of the Supreme Court held that it was

“absolutely essential” that the tribunal should disclose documents that were necessary for

the effective cross-examination of a witness who in evidence before the tribunal had

made serious allegations of which the applicant had no prior notice or knowledge.

The position in Ireland regarding punitive damages

Exemplary damages are not generally available for breach of contract per se.

134. The purpose of exemplary damages is punitive. It is to punish the wrongdoer and deter

such wrongdoing. Hence, it is a prerequisite that there be a finding of wrongdoing. The

purpose or rationale in respect of which punitive damages of €20,000 were awarded in

the instant case identified in the judgment include, inter alia, that the appellant was guilty

Page 39 ⇓

of egregious misconduct; “For the Defendant not to call any witnesses to give evidence to

back up these allegations was egregious misconduct of proceedings...” and

“…oppressiveness … in the period 22nd August to 7th September 2017 and their conduct

of the defence before me demonstrates a callousness and disregard for the Plaintiffs, and

in particular Mr. O'Mahony, that justifies an award of exemplary damages”.

135. The decision of McWilliams J. in Garvey v Ireland awarding exemplary damages arising

from oppressive, arbitrary or unconstitutional conduct including breach of contract by the

government is wholly distinguishable. As is self-evident from its title, the suit was brought

in the public law sphere and concerned misconduct by the government in the discharge of

its powers.

136. Having considered the cross-examination in its totality it is clear that it was robust.

However, it was no more vigorous or comprehensive than might be expected from an

eminent member of the Independent Referral Bar. There is no suggestion that it was

conducted otherwise than in accordance with counsel’s instructions as they stood at that

time. A trial is dynamic in nature and the tectonic plates frequently shift beneath the feet

of the most self-assured litigant. At the conclusion of the cross-examination the appellant

had a great deal to reflect upon.

137. It is evident that instructions changed overnight after the appellant and its witnesses had

the opportunity to reflect on the reality that cross-examination had failed to elicit

evidence to support the strongly held convictions which had underpinned its conduct.

There was no evidence before the High Court that the appellant had formed an intention

ab initio not to go into evidence. That is a significant consideration.

Punitive damages for breach of contract

138. The academic Solène Rowan in her article “Reflections on the Introduction of Punitive

Damages for Breach of Contract” (Oxford Journal of Legal Studies, Volume 30, Issue 3,

Autumn 2010) observed: -

“It is generally accepted that the essence of punitive damages is deterrence and

punishment…Rookes v Barnard [1964] AC 1129 (HL) 1221(Lord Devlin) …

Other aims of punitive damages include the vindication of the victim's rights (A v

Bottrill [2002] UKPC 44, [2003] 1 AC 449 [29] (Lord Nicholls)) and marking a legal

system's disapproval of the conduct of the wrongdoer (Kuddus v Chief Constable of

Leicestershire Constabulary [2001] UKHL 29, [2002] 2 AC 122 (Lord Nicholls))…”

139. Punitive damages are not in general available for breach of contract in this jurisdiction.

This proposition originated with Addis v Gramophone Co. Limited which has been followed

by the Supreme Court. As was observed by Denham C.J. in Murray v Budds and Others

[2017] IESC 4 at para. 34: -

“It was established in Addis v Gramophone Co. Ltd [1909] AC 488, that Courts

would not in general permit damages for worry or upset as a consequence of a

breach of contract.”

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She cited Lord Loreburn L.C. in Addis who stated: -

“To my mind it signifies nothing in the present case whether the claim is to be

treated as for wrongful dismissal or not. In any case there was a breach of contract

in not allowing the plaintiff to discharge his duties as manager, and the damages

are exactly the same in either view. …. I cannot agree that the manner of dismissal

affects these damages. Such considerations have never been allowed to influence

damages in this kind of case.”

140. The Supreme Court also noted that Lord Atkinson in Addis had stated: -

“I have always understood that damages for breach of contract were in the nature

of compensation, not punishment…”

Denham C.J. in Murray v Budds noted that the House of Lords had relied on Sikes v Wild

(1861) 1 G. & S. 587 at p. 594 where Lord Blackburn said: -

“I do not see how the existence of misconduct can alter the rule of law by which

damages for breach of contract are to be assessed. It may render the contract

voidable on the ground of fraud or give a cause of action for deceit, but surely it

cannot alter the effect of the contract itself.”

The Court continued: -

“…if he should choose to seek redress in the form of an action for breach of

contract, he lets in all the consequences of that form of action; Thorpe v Thorpe,

(1832) 3 B. & Ad. 580. One of these consequences is, I think, this: that he is to be

paid adequate compensation in money for the loss of that which he would have

received had his contract been kept, and no more.”

141. The Supreme Court in Murray v Budds noted the analysis found in McDermott “Contract

Law” (Butterworths, 2001) and Denham C.J. observed at para. 38: -

“The law was further described in Watts v Morrow [1991] 1 WLR 1421 by Bingham

L.J.: -

‘A contract-breaker is not in general liable for any distress, frustration,

anxiety, displeasure or vexation, tension or aggravation which his breach of

contract may cause to the innocent party. This rule is not, I think, founded

on the assumption that such reactions are not foreseeable, which they surely

are or may be, but on considerations of policy. But the rule is not absolute.

Where the very object of a contract is to provide pleasure, relaxation, peace

of mind, or freedom from molestation, damages will be awarded if the fruit of

the contract is not provided or if the contrary result is procured instead.’”

Denham C.J. stated: -

Page 41 ⇓

“I agree with that statement of Bingham L.J.”

This represents the considered view of the Supreme Court and has been followed by this

Court in Hemani v Ulster Bank [2019] IECA 331.

142. In the second edition of Contract Law, McDermott & McDermott explain the rationale for

the exclusionary rule in regard to punitive damages for breach of contract at para. 23-76

as follows: -

“Many factors explain the courts’ restrictive approach to non-pecuniary losses. The

Addis decision reflects the individualist orientation of traditional law under which

contracts are impersonal relationships, concerned primarily with economic

exchange, and do not typically involve other elements of the parties’ personalities.”

143. The authors go on to analyse Baltic Shipping v Dillon [1993] 176 CLR 344 where Mason

C.J. observed that: -

“The conceptual policy foundations of the general rule are by no means clear. It

seems to rest on the view that damages for a breach of contract are in essence

compensatory and that they are confined to the award of that sum of money which

will put the injured party in the financial position the party would have been had

the breach of contract not taken place.”

144. The authors observe: -

“A breach of a commercial contract is not generally viewed as a personal or a moral

wrong, it is simply an event that gives rise to a liability to pay compensatory

damages…

In a contract case the only link between the parties is the private link that they

have created by the terms of their contract and the innocent plaintiff ‘is not entitled

to be made whole; he is entitled to have that which the contract provided for him

or compensation for its loss.”

145. McDermott & McDermott continue at para. 23.137: -

“The traditional rule is that there is no scope for an award of damages designed to

punish a party who deliberately breaches a contract. However, if a cause of action

arises in both contract and tort, exemplary damages may be awarded by placing

stress on the tortious aspect of the defendant’s conduct.”

The authors reference the Canadian decision of Vorvis v Insurance Corp of British

Columbia [1989] 1 SCR 1085 at 1107.

146. It is noteworthy in the landmark House of Lords decision of A.G. v Blake [2001] 1 AC 268,

Lord Nicholls considered that the deliberateness and cynicism of a breach were, without

more, insufficient to warrant a departure from the normal compensatory basis of

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damages. It made no difference that the breach enabled the promisor to enter into a

more profitable contract elsewhere. (p. 286)

147. In a later decision Experience Hendrix LLC v PPX Enterprises Inc. Gibson L.J.

[2003] EWCA Civ 323, having considered the deliberate nature of the breach of contract in

making a gain-based award, considered that: -

“No doubt deliberate breaches of contract occur frequently in the commercial world;

yet something more is needed to make the circumstances exceptional enough to

justify ordering an account of profits.”

No claim under Lord Cairns’ Act

148. Punitive damages indicate the seriousness of the behaviour of the defaulting party and

mark the disapproval by the Court of his conduct. In the instant case no claim was made

for damages either pursuant to the Chancery Amendment Act of 1858 (Lord Cairns’ Act)

or in addition to specific performance. Further, since the coming into operation of the

Supreme Court of Judicature (Ireland) Act, 1877 the jurisdiction to award damages where

specific performance has been claimed does not depend on there having been any right to

specific performance in the first place. Legal certainty is particularly desirable in the field

of commerce and trade. If punitive damages are to be generally available for breach of

contract there should be clarity and certainty around their introduction. Proponents of the

extension of punitive damages to breach of contract suggest that if introduced such

awards should be confined to breaches that are ‘particularly extreme’ or ‘outrageous’.

149. The observations of Lord Nicholls in Kuddus v Chief Constable of Leicestershire

Constabulary [2002] 2 AC 122 at para. 68, made in the context of awarding punitive

damages in tort, are worthy of note where he observed that: -

“…the ‘essence’ of the conduct constituting the court’s discretionary jurisdiction to

award exemplary damages is conduct which [is] an outrageous disregard of the

plaintiff’s rights”.

To punish and deter

150. Rowan in her article further observed: -

“Only in exceptional cases, in particular where the breach is very serious, would the

further deterrent effect of punitive damages be propitious. It would in this way be

rare and supplementary in nature. Reserving punitive damages for situations in

which other remedies are inadequate would achieve symmetry with the operation of

the remedy in the law of tort, and also with gain-based relief for breach of contract.

In respect of the former, punitive damages are only awarded if compensatory

damages are inadequate to punish and deter.”

151. It is not the function of the courts to engage in indirect regulation of commercial

behaviour through the imposition of punitive damages. As was observed in A.B.

Corporation v C.D. Co. (the “Sine Nomine”) [2002] 1 Lloyds Reports 805: -

Page 43 ⇓

“The commercial law in this country should not make moral judgments or seek to

punish contract-breakers.”

152. I am satisfied that the line of authorities relied upon including Garvey v Ireland – which

concerned the arbitrary and unconstitutional conduct on the part of the government or on

its behalf – are wholly distinguishable from the instant case. The relationship between the

parties exclusively sounds in contract and the alleged breaches of a private contract

between the parties constituted the subject matter of the litigation. No basis has been

established which would warrant an award of exemplary damages calculated to punish the

appellant for its failure to perform the contract in question or the mode or tenor of its

conduct of the litigation before the Court.

153. Whilst damages are available in both contract and tort, there are significant distinctions in

the purposes for which they are awarded and the manner in which they are calculated. In

this jurisdiction, the divergence between contract and tort is discernible from their

respective remedial frameworks. Historically, save in exceptional circumstances as

acknowledged by the Supreme Court in Murray v Budds, punitive damages could only

arise where the case is such an exceptional, egregious one that manifestly calls for such

an award.

154. “Greed” is an emotive word and in commerce a subjective and dangerously imprecise

metric. It is for the legislature alone to set boundaries in the field of private contract law

in a democratic society.

155. The jurisdiction of the Court to grant exemplary damages was described by Finlay C.J. in

Conway v INTO at p. 317:-

“Punitive or exemplary damages arising from the nature of the wrong which has

been committed and/or the manner of its commission which are …. that it should

publicly be seen to have punished the defendant for some conduct by awarding

such damages, quite apart from its obligation, where it may exist, in the same

case, to compensate the plaintiff for the damage which he or she has suffered.”

Conway is a decision in respect of exemplary damages awarded for tort and breach of

constitutional rights and I am satisfied it offers no legal basis for an award of punitive

damages for either breach of contract between private parties or the improper conduct of

cross-examination.

156. The decision in Garvey v Ireland is not of assistance to the respondents either and does

not offer a legal basis for an award of punitive damages against the appellant designed to

punish it for deliberately breaching the contract. The legal basis for the award in Garvey

was the arbitrary and unconstitutional conduct on the part of the State. The decision in

Garvey is wholly distinguishable insofar as a party to the contract was the State and

therefore it could not be characterised as a private bargain of a commercial nature

between private individuals.

Page 44 ⇓

157. Our law does not admit of a punitive damages award for breach of contract simpliciter

and in the absence of fraud, deceit, concomitant tortious wrongdoing, or breach by a

public or State authority of its contractual, statutory or constitutionally mandated

obligations. Insofar as the award of punitive damages is referable to breaches of contract,

it must be set aside.

Punitive damages for the manner in which the cross-examinations and defence were

conducted in court

158. McDermott & McDermott note at para. 23.141: -

“In Royal Bank of Canada v W. Got and Associates Electric Limited the Supreme

Court of Canada has allowed exemplary damages for a breach of contract

independent of any finding that a tort was also committed.”

However, a close analysis of the judgment of the Canadian Supreme Court in Got

indicates several significant material distinctions between the operative facts and those

arising in the instant case. In Got the trial judge had found the bank liable in both

contract and tort.

159. A crucial finding by the trial judge in Got was that the bank had at an early stage misled

the Master in obtaining the receivership order by tendering a misleading affidavit. The

affidavit in question was found to have failed to meet the duty of candour and utmost

good faith required for an ex parte order. The Court was satisfied that absent the “false

air of urgency created in the affidavit, the receivership order would not have been

granted”. The trial judge had found the bank liable in tort for conversion of Got’s assets

and awarded compensatory damages together with exemplary damages to send a clear

message of the impropriety of the bank’s grave and irrevocable conduct and misuse of

the judicial system in misleading the judge in obtaining the receiver.

160. The Canadian Supreme Court on appeal noted at para. 27: -

“We agree that the bank’s conduct did not have to rise to the level of fraud,

malicious prosecution or abuse of process to justify an award of exemplary

damages.”

The Supreme Court concluded at para. 29: -

“…despite our reservations, we agree that it was within the discretion of the trial

judge to award exemplary damages. Viewing the trial judge’s concerns cumulatively

and giving due weight to the advantage he had to assess the need for deterrence

and condemnation of the abuse of the Court’s process, as well as the need to

maintain proper business practices, we are not prepared to interfere with the award

for exemplary damages in this case. We emphasize, however, that an award for

exemplary damages in commercial disputes will remain an extraordinary remedy.”

161. In the instant case, having reviewed the cross-examination by the appellant’s senior

counsel of the respondents’ witnesses at the trial and the ensuing events following

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conclusion of the cross-examination when the following day the Court was informed that a

decision had been made to apply for a direction on the basis that the appellant did not

intend to go into evidence, the following can be said: -

i. The cross-examination was thorough, comprehensive, intense, but at all times

professional.

ii. On no basis could it be suggested that it could have been characterised as an

outrageous disregard of the respondents’ rights or operating to assist an abuse of

its processes by the Court or to violate the rule of law.

iii. At no time did the cross-examination go beyond the appropriate exercise by the

appellant of its constitutional right of access to the Court.

iv. If the witnesses were put to the “pin of their collar” and their version of events

stress tested with formidable intensity, that is no more than a valid and appropriate

exercise of the constitutional rights of the appellant pursuant to Article 40.3 to be

afforded every opportunity to defend itself and to avail of the Independent Referral

Bar for the purposes of the vindication of its rights by the cross-examination of

witnesses. It was at all times open to the respondents to raise objection to any line

of questioning and of course the trial judge maintained and exercised the general

supervisory jurisdiction in relation to the conduct of the cross-examination.

v. The cross-examination never exceeded at any time the bounds of fairness or

professionalism and was throughout a proper use in the cross-examiner’s task.

vi. There was nothing in its conduct which called for an award of punitive damages to

“punish and deter”.

vii. The introduction of a right to punitive damages arising from the conduct of a cross-

examination would have a chilling impact on advocacy and would undermine the

core functions of the Independent Referral Bar and thereby risk undermining the

constitutionally protected right to have the other side’s witnesses cross-examined.

This would be contrary to the public interest.

viii. Exceptions could arise in extreme cases where the threshold identified by Hardiman

J. in People (DPP) v D.O. [2006] IESC 12 is met, such as where the liberty of an

individual is jeopardised by the improper use of cross-examination.

The award of punitive damages arising from the cross-examination and the conduct of the

defence in court must be set aside as trenching on the constitutional rights of the

appellant.

Entitlement to draw adverse inferences from failure to call witnesses

162. What was the effect of the appellant failing to call witnesses who would have relevant

knowledge of the facts in dispute and who could be expected to be available to a party to

give evidence in support of his case? In my view, in the absence of a credible explanation

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for an appellant’s failure to call material and available witnesses, the trial judge, in light of

the tenor of the cross-examination, was entitled to draw the inference that the witnesses

in question did not come to court because ultimately, after having heard and considered

the evidence of the respondents’ witnesses, they felt unable to support on oath the case

being put forward by the appellant.

163. In the decision of Wisniewski Brooke L.J. (with whom Aldous and Roch LJJ agreed)

reviewed the English authorities and set out the following relevant principles:

“(1) In certain circumstances a court may be entitled to draw adverse inferences from

the absence or silence of a witness who might be expected to have material

evidence to give on an issue in an action.

(2) If a court is willing to draw such inferences they may go to strengthen the evidence

adduced on that issue by the other party or to weaken the evidence, if any,

adduced by the party who might reasonably have been expected to call the witness.

(3) There must, however, have been some evidence, however weak, adduced by the

former on the matter in question before the court is entitled to draw the desired

inference: in other words, there must be a case to answer on that issue.

(4) If the reason for the witness's absence or silence satisfies the court then no such

adverse inference may be drawn. If, on the other hand, there is some credible

explanation given, even if it is not wholly satisfactory, the potentially detrimental

effect of his/her absence or silence may be reduced or nullified.”

164. As O’Donnell J. observed in the Supreme Court in Whelan v AIB at p. 246: -

“....The drawing of an inference in this context, as indeed in any other, is an

exercise in logic: when one party asserts a given set of affairs, which the identified

witnesses available to the other party could be expected to rebut if untrue, then, if

the second party does not call those witnesses to give evidence, the court may

draw the inference in support of the case made by the first party, that those

witnesses were not called to give such evidence because they would not in fact

rebut the case made by the first party. Each case therefore, involves a

consideration of the specific inference which the court is invited to draw. The

position is well put in two authorities relied on by the bank in this regard. In

McQueen v. Great Western Railway Company (1874 - 75) L.R. 10 Q.B. 569

Cockburn L.J. said at p. 574:

‘If a prima facie case is made out, capable of being displaced, and if the party

against whom it is established might by calling particular witnesses and

producing particular evidence displace that prima facie case, and he omits to

adduce that evidence, then the inference fairly arises, as a matter of

inference for the jury and not as a matter of legal presumption, that the

absence of that evidence is to be accounted for by the fact that even if it

Page 47 ⇓

were adduced it would not disprove the prima facie case. But that always

presupposes that a prima facie case has been established; and unless we can

see our way clearly to the conclusion that a prima facie has been established,

the omission to call witnesses who might have been called on the part of the

defendants amounts to nothing.’”

165. O’Donnell J. noted with approval the principles in Wisniewski which had been adopted in

this jurisdiction by Laffoy J. in Fyffes v DCC and Ors where the plaintiff alleged that the

defendant had engaged in insider dealing in its shares. It submitted that the Court should

draw adverse inferences from the failure of the defendants to call two key witnesses.

Laffoy J. cautioned against an overbroad application of the Wisniewski principles

observing:-

“As a general proposition, the fact that every witness who may have material

evidence on a particular issue was not called, cannot, in my view, give rise to an

adverse inference against the party who might have been expected to call all of the

witnesses.”

Laffoy J. emphasised the fact that the burden of proof rested on the plaintiff and

advocated for a restrictive approach to drawing adverse inferences from a failure to

call witnesses.

166. In civil proceedings the Court may draw adverse inferences from a party's decision not to

give or call evidence as to matters within the knowledge of the party or of witnesses who,

it is reasonable to conclude, would have given evidence if asked to do so. Whether or not

in any particular instance it is appropriate to draw an adverse inference from the absence

of a witness and, if so, the weight to be attached to such inference will always depend on

the particular circumstances of the issue to which the evidence would go.

167. In Murray v DPP [1994] 1 WLR 1 Lord Mustill observed at p. 5:

“Everything depends on the nature of the issue, the weight of the evidence adduced

by the prosecution upon it … and the extent to which the defendant should in the

nature of things be able to give his own account of the particular matter in

question. It is impossible to generalise, for dependent upon circumstances the

failure of the defendant to give evidence may found no inference at all, or one

which is for all practical purposes fatal”.

Such an approach is in my view equally applicable in civil proceedings.

168. Lord Lowry in R v Inland Revenue Comrs, Ex p Coombs (TC) & Co [1991] 2 AC 283 said

at p. 300:

“…In our legal system generally, the silence of one party in face of the other party’s

evidence may convert that evidence into proof in relation to matters which are, or

are likely to be, within the knowledge of the silent party and about which that party

Page 48 ⇓

could be expected to give evidence. Thus, depending on the circumstances, a prima

facie case may become a strong or even an overwhelming case. But, if the silent

party’s failure to give evidence (or to give the necessary evidence) can be credibly

explained, even if not entirely justified, the effect of his silence in favour of the

other party, may be either reduced or nullified…”

In the instant case the tenor of the cross-examination leads to one conclusion – that the

trial judge was entitled to draw an adverse inference from the appellant’s failure to give

evidence. The weight to be attached to a appellant's failure to testify varies with the

circumstances of the case. It is plain that in this case the trial judge rightly attached a

great deal of weight to the silence of the appellant’s witnesses. There was an irresistible

inference from their failure to testify that they had no satisfactory answer to the

respondents’ claim. The trial judge was entitled to draw such an inference.

169. However, this must be viewed in light of the constitutional protection accorded to an

advocate and the central importance of cross-examination and that it be untrammelled

save to the extent that the Court directly intervenes and in the absence of fraud or

dishonesty on the part of a practitioner or his client. These are matters which do not arise

in the instant case. The fact that a direction was sought by the appellant, notwithstanding

the basis on which the respondents’ witnesses had been cross-examined, in

circumstances where a decision had ultimately been made not to call witnesses, was not a

matter such as would warrant a punishment of the appellant by an award of punitive

damages.

170. the facts in Smart Mobile, a case in the public law domain, are distinguishable in many

substantial material respects. Documents discovered demonstrated that Smart Mobile was

engaged in conduct calculated to give a false impression that it was ready to proceed with

the transaction in circumstances where it manifestly was not. The Court had noted that

Smart Mobile had procured an interlocutory injunction from the High Court and at p. 82

observed: -

“Right up to the opening of the trial, Smart continued to assert its entitlements to

have the contract allegedly made between it and ComReg specifically performed.

This was the primary relief sought. It was asserted in pleadings, at the hearing on

the 13th March and in the pre-trial written submissions. It was abandoned during

counsel’s opening of the case.”

171. Kelly J. noted that averments contained in an affidavit sworn by a witness on behalf of

Smart were not true “Although apologies were proffered in respect of this at trial it is

difficult to see how such an averment could have come to be made by the deponent.”

172. A significant distinguishing factor is that in Smart Mobile ultimately at the trial the

plaintiffs relied on public law entitlements alone rather than on private contractual rights.

Two significant witness statements had been tendered on behalf of Smart, one by a

chartered accountant and director of an international firm of accountants and business

advisors, the other by an expert on the role of performance guarantees and the licencing

Page 49 ⇓

process. Both had purported to support the contention that the draft guarantees being

relied upon by Smart were adequate and ought to have been accepted by ComReg.

However, neither witness was called to give evidence and the Court was asked: -

“…to infer from Smart’s failure to call any of these witnesses that they had no

evidence which might help Smart’s case and indeed that Smart was not in a

position to support the assertions, both made in the pleadings and the draft

statements of evidence.”

The Court in Smart Mobile had to address the unsatisfactory conduct of Smart, firstly

towards the Regulator, a statutory body and secondly towards the Court before which an

interlocutory injunction had been improperly obtained. In regard to the latter he

observed: -

“I deprecate the obtaining of an ex parte interim injunction on the basis of sworn

material which, in one important respect, was simply untrue. … Whilst an apology

was tendered for this during the trial that does not remedy the position.”

173. In the instant case, by contrast, the inferences to be drawn sprang primarily from the

decision not to call witnesses despite the manner in which the respondents’ witnesses had

been cross-examined. The decisions in Fyffes, Wisniewiski and Smart Mobile are

distinguishable and ought in general to be confined to cases of witnesses who provide

statements or swear affidavits in regard to matters of central importance that are later at

trial shown by testimony to be inaccurate, baseless or untrue and notwithstanding the

provision of such statements or affidavits at earlier stages in the litigation are not called

without any or any adequate explanation to testify.

The principle in O’Leary v HSE

174. I am satisfied that the High Court correctly identified and applied the legal principles

relevant to the non-suit application on behalf of the appellant and cited a series of

authorities including O’Toole v Heavy, Hetherington v Ultra Tyre Service Limited,

O’Donovan v Southern Health Board, Schuit v Mylotte, Moorview Developments Limited,

Murphy v Callanan [2013] IESC 30 and O’Leary v HSE. I am satisfied that the trial judge

applied the correct test in determining the application for a direction and same is not

open to reproach.

Partiality

175. With regard to the alleged display of partiality I am satisfied that the observations of the

trial judge do not amount to evidence of a display of partiality or lack of impartiality.

176. The approach of the trial judge was measured, and he correctly observed that manner of

the drawing of inferences from the decision of a defendant not to call witnesses: -

“The Court may draw inferences, inter alia from the fact that witnesses who might

be called are not called, but the Court should do so cautiously.”

Page 50 ⇓

The misapplication of the test outlined in Smart Mobile and the jurisprudence is not

evidence of lack of impartiality. It will be recalled that in O’Leary it had been argued that

it was fundamentally unfair to cross-examine on the basis that a defendant’s own expert

witnesses would give different evidence and then proceed not to call the said witnesses. It

had been contended in the Court of Appeal that this was a breach of common law fair trial

procedures. Ryan P. observed: -

“There is no basis for the contention by the appellant that the defendants’ conduct

of the case – and, in particular, the manner in which they cross-examined his two

expert witnesses – committed them to leading their own evidence and precluded

the High Court from determining the applications until they did so. Nor is there any

basis for the contention that the procedure was unjust or inequitable or that it

entailed a breach of fair trial procedure, Article 40.3 of the Constitution and/or

Article 6.1 of the European Convention on Human Rights.”

177. Of assistance too is the analysis by the President of this Court as to whether cross-

examination on the basis that an expert will contradict the witnesses’ evidence could deny

a defendant the opportunity of applying for a non-suit without calling the said witness. At

para. 55 the learned President stated: -

“… There is no logical basis on which this could be the case, but the question is

whether there is some rule of practice or procedure that might apply in favour of

the plaintiff in the circumstances. I am specifically concerned with the issue of

cross-examination. Counsel for each of the defendant parties put to the plaintiff's

two experts certain statements that their witnesses were going to make or that

were contained in reports from their expert witnesses whereby to contradict the

experts giving their evidence. This did not constitute going into evidence and

neither is there some other rule that would prevent the parties applying for a

direction. Indeed, it would have been remiss of Counsel not to put their case to the

expert witnesses. But by doing so, they were not advancing down a path that

stopped them making the case at the end of the plaintiff's evidence that they did

not have a case to meet. It would be a rule that was unjust and unfair and would

also make no sense if such were the case. There is no such rule. The point is that

Counsel is required to put the case for the defence to the witnesses for the plaintiff

so that the latter have the opportunity of commenting on the evidence…”

The learned President continued: -

“… the nature of litigation is that one party presents and the other party defends,

and if the claimant does not succeed in making out a prima facie case, then the

other party is entitled, as of right, to have the action dismissed. To do otherwise is

to impose on a defendant an obligation to prove a negative, that the defendant is

obliged, in the case of a claim made against him or her, to positively demonstrate

by evidence that he or she was not to blame in the circumstances. There is no such

obligation.”

Page 51 ⇓

At para. 77 Ryan P. observed: -

“A party is not precluded from applying for a non-suit because his counsel has

cross-examined the opponent’s witnesses…”

178. The award of exemplary damages was erroneously made and requires to be set aside.

179. Otherwise I would affirm the orders of the High Court.

Result: Allow appeal in part