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Cite as: [2004] 3 IR 401, [2004] IEHC 123

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HC 229/04

THE HIGH COURT

RECORD NO. 1991 4171 P

BETWEEN

SEAN O'LEARY

and

AGRICULTURAL CREDIT CORPORATION PLC AND

REYNOLDS McCARRON

DEFENDANTS

JUDGMENT of Mr. Justice Kelly delivered on the 24^th day of June, 2004

INTRODUCTION These proceedings were commenced on the 20^th March, 1991. They relate to events which took place between 1985 and 1989. The proceedings were never served on the second defendant. A purported service which was effected on the 15^th November, 2000 was set aside by Johnson J. on the 23^rd July, 2001. The proceedings were served on the first defendant, (the bank), and an appearance was entered by it on the 8^th May, 1991. Over ten years later on the 11^th May, 2001 the Statement of Claim was delivered. That defendant's defence was delivered on the 15^th April, 2002 following a motion for judgment which was heard on the 11^th March, 2002 when time for so doing was extended by consent by Smyth J. On the 20^th June, 2003 the bank brought the motion with which I am concerned seeking to have the plaintiff's action dismissed because of inordinate and inexcusable delay on the part of the plaintiff in the prosecution of the proceedings. That motion came to hearing before me on Thursday last.

THE PLAINTIFF'S CASE In his Statement of Claim the plaintiff alleges that he was the owner of lands in Broadway, Co. Wexford. 30.5 acres had a registered title whilst the remaining 20 acres were unregistered. On the 2^nd November, 1977 the plaintiff granted a charge over his registered lands to the bank as security for all present and future advances made by it to him. By deeds of appointment in April and August 1985 the bank appointed a receiver over the rents and profits of the plaintiff's registered lands. That appointment was not published until the 25^th July, 1986. The receiver was John P. Kavanagh who was a partner in the second defendants. It is difficult to understand why Mr. Kavanagh was not named as a defendant in the proceedings since it was he who was appointed as receiver and not the firm to which he belonged. Indeed in a letter from the then solicitors for the bank to the plaintiff's then solicitors dated the 15^th May, 1991 it was expressly pointed out that it was Mr. Kavanagh who had been appointed receiver and not the second defendant. The letter went on to point out that the plaintiff ought to amend his summons accordingly. Despite that letter no amendment was made and as I have already indicated no valid service of the proceedings was ever effected upon the second defendant. The statement of claim goes on to allege that the receiver in carrying out his functions owed a duty of care to the plaintiff to manage his registered lands and the fruit farming business which was being carried on by the plaintiff in such a manner as to preserve the value of the lands and to maximise the rents and profits generated therefrom. He is also alleged to have owed a duty to preserve and nurture the fruit plants growing thereon so as to maximise their output and to insure that the fruits produced by the plants were harvested in a timely and efficient manner. It is alleged that the receiver intermeddled in the running of the plaintiff's business in such a manner as to prevent the plaintiff from carrying it on but it is said the receiver did not himself carry on the business with reasonable skill, care and diligence. It is also alleged that the receiver interfered with the plaintiff's use and enjoyment of the unregistered lands and held himself out as having being appointed as receiver over them even though the plaintiffs indebtedness to the bank was not secured by a charge or mortgage of those lands. Particulars of these allegations are then set out in the Statement of Claim. The particulars include an allegation that the receiver went on holidays when the blackcurrant crop was to be harvested; that he failed to take steps to preserve the blackcurrant and strawberry plants after they fruited in 1986; that he failed to insure that the plants were nurtured with appropriate fertilizers and that in 1987 he abandoned the crops. Furthermore it is alleged that the receiver took no steps to manage the business of the plaintiff and attended at the lands on only one occasion during the receivership. The above summarises the first complaint which is made in the Statement of Claim.

The second complaint is that having had his business allegedly destroyed because of the misfeasance of the receiver it is said that in January, 1988 the plaintiff and his representatives negotiated an arrangement with the bank which involved leasing all his lands, both registered and unregistered, to one Bernard Keane for a term of ten years at a rent of IR£70.00 per acre thereby yielding a rental income of IR£3,500.00 per annum. He alleges that it was agreed that the entire of that sum would be paid to the bank during the term and at the expiry thereof the plaintiff's indebtedness to the bank would be discharged and the lands would be released to him. He alleges that a named servant or agent of the bank, one Seamus Codd, agreed to that proposal and that pursuant thereto, Bernard Keane went into possession of the lands and commenced to farm them. The third part of the claim is to the effect that notwithstanding the agreement which I have already outlined, on the 28^th December, 1988 the bank purported to execute an order for possession against the plaintiff which had been obtained on the 10^th November, 1986. He contends that, despite the fact that the order related only to his registered lands, entry was made on all of the lands. Subsequently the bank and/or the receiver purported to sell the lands to the plaintiff's brother, Terence O'Leary, for an undisclosed price which was, it is alleged, less than the full value of the lands. These three heads of complaint have resulted in claims for damages being formulated. The first damages claim is in respect of alleged mismanagement by the receiver. The second is for the breach of the agreement involving Mr. Keane and the third seeks damages for the sale of the lands at an under value.

THE LEGAL PRINCIPLES Both sides agree that the legal principles which I have to apply on an application of this sort, involving as it does for the most part delay which has taken place subsequent to the commencement of proceedings, are those set out by the Supreme Court in its decision in Primor PLC v. Stokes Kennedy Crowley (1996) 2 IR 459.

That case affirmed that the court has an inherent jurisdiction to control its own procedure and to dismiss a claim when the interests of justice require it to do so.

The decision held that a party seeking an order of the type with which I am concerned must demonstrate that the delay complained of was both inordinate and inexcusable. Counsel on behalf of the plaintiff in the present proceedings very sensibly accepts that the delay in this case was both inordinate and inexcusable.

That being so I have to concern myself with the third part of the Primor test which was formulated by the Supreme Court in the following terms:-

" (c) Even where the delay has been both inordinate and inexcusable, the court must exercise a judgment on whether, in its discretion, on the facts the balance of justice is in favour of or against the proceeding of the case;

(d) In considering this latter obligation, the court is entitled to take into consideration and have regard to:

(i) The implied constitutional principles of basic fairness of procedures,

(ii) Whether the delay and consequent prejudice in the special facts of the case are such as to make it unfair to the defendant to allow the action to proceed and to make it just to strike out the plaintiff's action,

(iii) Any delay on the part of the defendant – because litigation is a two party operation, the conduct of both parties should be looked at,

(iv) Whether any delay or conduct of the defendant amounts to acquiescence on the part of the defendant in the plaintiff's delay,

(v) The fact that conduct by the defendant which induces the plaintiff to incur further expense in pursuing the action does not, in law, constitute an absolute bar preventing the defendant from obtaining a striking out order but is a relevant factor to be taken into account by the judge in exercising his discretion whether or not to strike out the claim, the weight to be attached to such conduct depending upon all the circumstances of the particular case,

(vi) Whether the delay gives rise to a substantial risk that it is not possible to have a fair trial or is likely to cause or have caused serious prejudice to the defendant;

(vii) The fact that the prejudice to the defendant referred to in (vi) may arise in many ways and be other than that merely caused by the delay, including damage to a defendant's reputation and business."

THE FIRST CLAIM This claim is made against the bank on the basis that it is vicariously liable for the alleged wrongdoing of the receiver. The Statement of Claim asserts that the bank appointed the receiver over the rents and profits of the plaintiff's registered lands. He was appointed pursuant to the provisions of the Conveyancing Acts. The receiver has sworn an affidavit in support of the motion. He had been acting as receiver for the bank for approximately two years prior to the instant appointment. He received numerous appointments as receiver at the instance of the bank. He has studied his own notes and records and those of the bank in an attempt to familiarise himself with the events in issue. He swears that the only specific recollection of any kind that he has concerning the plaintiff involved him attending at the plaintiff's lands to advise him of his appointment as receiver. He remembers that the plaintiff's business involved a fruit farm and that strawberries were being harvested at the time. The sole purpose of his visit was to notify the plaintiff of his appointment. He avers that he was aware of the limitations of his office as receiver appointed pursuant to the provisions of the Conveyancing Acts and is reasonably certain that he would have advised the plaintiff that all income from the land and business would come directly to the receiver. He goes on to point out that his duties as a receiver were confined to the keeping of formal accounts by way of receipts of profits as well as insuring that essential expenditure to provide cash flow was authorised and sanctioned. That would involve sanctioning the payment of monies for insecticides or such other material as might be needed so as to protect the crop and maximise its yield. He says that he would have had no hand, act or part in any running of the business on a day to day basis or in dealing with such matters as preventing an individual borrower from carrying out his own business in accordance with that borrower's skill and expertise. He has no recollection whatsoever of the plaintiff's business or dealings. He does recall that the receivership was not a particularly successful one and there was almost little or no income generated for a number of years from the business. By the time his appointment was terminated in 1989 he does not believe that any significant inroads had been made into the plaintiff's liability to the bank. He regards the allegations made against him as serious and as reflecting upon his own good name and reputation. He is a fellow of the Institute of Chartered Accountants and is currently the chief executive of a firm of solicitors. At the time of the matters in dispute he was a partner in the second defendant. Whilst correspondence exists concerning the receivership, he points out that such would normally be written in circumstances where discussions had taken place between the receiver, the borrower and the relevant bank official. He is not in a position to categorically state the context or the intention of a particular letter or piece of correspondence. He expresses no confidence in his ability to defend himself or assist the bank in defending itself because of the lapse of time and lack of recollection. In a replying affidavit sworn by the plaintiff's present solicitor it is accepted that the receiver has little recollection of the manner in which the receivership was handled. It is contended however that that is of little relevance because it is said that the bank has been aware of this claim since it was first mooted and that it is reasonable to suppose that some investigation was carried out on its behalf which would generate reports and that therefore the bank ought to be in a position to defend this element of the claim. The allegations which are made in respect of this claim are directed against the receiver. All of the particulars which are set forth in paragraphs 9A through F and which relate to this part of the claim are directed against the receiver. On any view of them, they amount to serious complaints against him in his professional capacity. They are damaging to his professional reputation and business. It is not surprising that the receiver has little or no recollection of the events in question at this remove in time. That is particularly so having regard to the very limited functions which a receiver appointed under the Conveyaning Acts has. Indeed even in the Statement of Claim itself it is accepted that he was appointed as receiver of the rents and profits of the registered land and was not a receiver in any broader sense than that. The evidence of the receiver would be crucial to the proper defence of these proceedings both from the point of view of defending the claim to damages and his professional reputation. In the exercise of my discretion and having regard to the matters which I am obliged to take into consideration in such exercise, which are set forth in the passage from the Primor decision which I have already quoted, I conclude that to allow this part of the claim to proceed would involve a real and serious risk of an unfair trial.

THE SECOND CLAIM This involves the alleged agreement to lease the lands to Mr. Bernard Keane for a period of ten years. Insofar as the receiver can cast any light on this aspect of the matter, he says that his records demonstrate that there was no rental flow involved in any income generated by the plaintiff during the period. Income was generated solely from the sale and/or supply of produce from the lands. The bank official who is specifically identified as having an involvement in this aspect of the matter is Mr. Seamus Codd. He has sworn an affidavit. He is now retired but was at one time the manager of the Wexford branch of the bank. He says that at this time his recollection as to specific events or happenings dealing with files held by the bank is particularly vague. He read the papers put before this court and acknowledges that certain of the material which he has read has assisted him in his memory. However he goes on to point out that he has no recollection of the event which forms the subject matter of this part of the claim. He furthermore says that the bank files record the fact that no letting agreement was entered into with Mr. Keane for any sustained period of time at any fixed rent per acre nor is there any record of any contact between him or any other representative of the bank and Mr. Keane. Furthermore there is no record of any payment having being received by the bank from Mr. Keane. He says that in the light of the indebtedness of the plaintiff to the bank, an arrangement such as the entering into a letting agreement with a third party would have been greatly welcomed because it would have gone some way towards ameliorating the plaintiff's position. Such an arrangement would have been apparent from the bank's files but there was nothing there in support of it. In fact he says that the records are completely contradictory to the assertions of the plaintiff. He contends that he has little or no memory of any day to day specifics in relation to the file pertaining to the plaintiff. He says that he does not feel that he would be in a position to defend himself in any meaningful or comprehensive way against allegations of impropriety made against him by the plaintiff in circumstances where they date back to as long ago as the mid 1980s. In the light of the foregoing I have come to the conclusion that in the exercise of my discretion, I ought to dismiss this part of the plaintiff's claim also. Mr. Codd's assertions on oath are not controverted and to require him at this remove in time to defend the allegations made against him would put justice to the hazard.

THE THIRD CLAIM The plaintiff alleges that the bank and the receiver purported to sell his lands to his brother for an undisclosed price. It is asserted that the land was worth in excess of IR£90,000.00 which was more than the plaintiff's indebtedness to the bank. The sale was at an under value, giving rise to loss on the part of the plaintiff. The plaintiff does not know the price paid for the land. He has not spoken to his brother for years. It is astonishing that at no stage was a simple letter written to the bank asking it to disclose the price. The bank official who had some dealings with the sale is now retired. He is Mr. John Reddin, and has sworn an affidavit in the proceedings. He says that he dealt with the proposal to sell the plaintiff's lands to his brother. The proposal involved a significant write off on the part of the bank. The proposal to sell the lands to the plaintiff's brother at the (as yet undisclosed) price specified was formulated by him and put to the relevant committee within the bank. Mr. Reddin says in his affidavit that the bank "does not have the benefit of the considerations adopted by it at that time and I am also aware that a core member of the decision making committee, Mr. John Sheehy, died a number of years ago". While Mr. Reddin was involved in the preparation of the submission to the committee which made the decision to sell the lands, he was not involved in the final decision process. He supported the submission and avers that he can give his own evidence in relation thereto. He furthermore points out that the court would be well aware of the types of consideration that would be applicable in the case of a sale of agricultural lands during a period of financial hardship for the farming industry within a rural community. His memory of the entire series of events has dimmed considerably with time. This has increased with his retirement from active banking. However he does have a recollection of the bank's dealings with the plaintiff during the period in question. It appears to me on a fair reading of Mr. Reddins affidavit that he does have relevant evidence which he can give in respect of this aspect of the matter. He does not assert that he has any particular difficulty in recollecting the circumstances of the sale. It is clear that there is documentary evidence of the proposal which was put to the relevant committee. Whilst it is true that Mr. Sheehy has died, he appears to have been only one member of the committee that actually made the decision. The court is not given any information as to the other members of that committee or their availability to give evidence. Neither has the court been apprised of any particular difficulty insofar as the documentary evidence touching upon this part of the case is concerned. It appears to me that on the present state of the evidence the bank does, or ought to have in its possession, documents and witnesses which would enable it to defend this aspect of the proceedings. Whilst the death of Mr. Sheehy is regrettable from the bank's point of view, it seems clear that he was but one member of a committee which made the relevant decision and there is nothing to suggest that the other members of that committee are not available to give evidence. It also appears clear that Mr. Reddin is in a position to give evidence of the considerations that were applicable to the sale to the plaintiff's brother at the relevant price. I have no doubt but that evidence of the valuation of such land and its comparators at the particular time will be available from competent valuers who were in practice at that time. Counsel on behalf of the bank fairly and accurately accepted that this was the weakest limb of his application to dismiss. Having regard to the evidence as a whole, whilst I regard the delay as regrettable, I am not satisfied as a matter of discretion that it has so prejudiced the bank as to run the risk of an unfair trial. It appears to me that there is no evidence to the effect that there is not documentary evidence available to the bank to deal with the allegations. Indeed the evidence is if anything to the contrary. . There is also the evidence of Mr. Reddin and presumably (in the absence of any evidence to the contrary,) other members of the committee on which Mr. Sheehy served. In the exercise at my discretion I refuse to dismiss this part of the plaintiff's claim.

CONCLUSION In the light of the foregoing I dismiss the first two parts of the plaintiff's claim but will permit the third part relating to the allegation of the sale of the lands to his brother at an undervalue to proceed to trial.