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Cite as: [2006] IEHC 309

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Judgment Title: ADM Londis Plc -v- Arman Retail Ltd

Neutral Citation: [2006] IEHC 309

High Court Record Number: 2005 1552 S

Date of Delivery: 12 July 2006

Court: High Court

Composition of Court: Clarke J.

Judgment by: Clarke J.

Status of Judgment: Approved

Neutral Citation Number [2006] IEHC 309

THE HIGH COURT

DUBLIN

2005/1152S

ADM LONDIS PLC. Plaintiff

ARMAN RETAIL LTD., AZAZ ARMAN & MARY Defendants

ARMAN (NEE McEVOY)

APPROVED JUDGMENT OF MR. JUSTICE CLARKE

DELIVERED ON WEDNESDAY, 12TH JULY 2006

THE HEARING RESUMED AS FOLLOWS ON WEDNESDAY, 12TH JULY

JUDGMENT WAS DELIVERED AS FOLLOWS

MR. JUSTICE CLARKE: This matter comes before
the court as an application

for summary judgment as against the second and

third-named Defendants on foot of guarantees relating

to the liability of the first named Defendant.

The second and third-named Defendants were the

proprietors of the first named Defendant company and

judgment has already been obtained in relation to the

first named Defendant company which, it is agreed, is

insolvent, in the full sum claimed of €162,110.37. The

liabilities arise from a course of trading between the

Plaintiff and the first named Defendant company, which

ran a retail outlet under the Londis banner in respect

of which goods were supplied. The liability having

been established as against the first named Defendant,

the Plaintiff seeks judgment as against the second and

third-named Defendants on foot of a guarantee.

Five separate issues are raised by the Defendants as

suggesting that there are substantial grounds for

defending the proceedings which should, it is said,

allow the matter to go to plenary hearing. I will turn

to those matters in early course, but it is necessary,

firstly, to refer to the legal principles by reference

to which an application such as this needs to be

determined.

Firstly, it is well settled that the hurdle which a

Defendant needs to meet in order to be given leave to

defend is not a very high hurdle. The most recent

decision of the Supreme Court is to be found in Aer

Rianta -v- Ryanair, 2001, 4 IR 607 and the judgment of

Hardiman J. in that case. In the recent case of

McGrath -v- O'Driscoll (2006) IEHC, 195 I considered

the judgment of the Supreme Court in Aer Rianta -v-

Ryanair and other authority and expressed the following

views at paragraphs 3.4 and 3.5:

"So far as factual issues are concerned
it is clear, therefore, that a mere
assertion of a Defence is insufficient.
But any evidence of fact which would,
if true, arguably give rise to a
Defence will, in the ordinary way, be
sufficient to require that leave to
defend be given so that that issue of
fact can be resolved.

So far as questions of law or
construction are concerned the court
can, on a motion for summary judgment,
resolve such questions, including,
where appropriate, questions of the
construction of documents, but should
only do so where the issues which arise
are relatively straightforward and
where there is no real risk of an
injustice being done by determining
those questions within the somewhat
limited framework of a motion for
summary judgment."

It seems to me that that is the appropriate test that I

need to apply to the issues of defence raised. Can it

be shown, insofar as the Defences raised are based on

facts, that the Defendant has put forward facts which,

if true, might arguably give rise to a Defence? And

insofar as issues of law or construction are concerned,

are those issues straightforward and capable of

resolution on a motion such as this or are they complex
and should await a full plenary hearing?

Five specific matters are relied upon by the

Defendants. I propose dealing with each in turn. The

first Defence put forward is a Defence of non est

factum. The factual basis for such a Defence is a

contention on the part of the Defendants that they were

unaware of the contents of the guarantee, having signed

a series of documents at the time when the contractual

relations between the Plaintiffs and the various

Defendants were entered into.

The law in relation to a Defence of non est factum is

now, in my view, well settled and is to be found in

Tedcastle McCormack & Co Ltd -v- McCrystal, a judgment

of Morris J. of 15th March 1999 in which, relying on

Saunders -v- Anglia Building Society, 1971 AC 1,004, it

is stated that the following factual matters require to

be established in order that the Defence be proven:

A. That there was a radical or fundamental difference

between what was signed and what it was thought was

being signed.

B. That the mistake was as to the general character of

the document as opposed to its legal effect.

C. That there was a lack of negligence. That is, that

the person concerned took all reasonable precautions in

the circumstances to find out what the document was.

On the facts of this case it is manifestly clear that

the Defendants signed a document which is clearly, on

its face, a guarantee. In those circumstances, even a

cursory reading of the document would have brought to

the Defendants' attention the fact that they were

signing a guarantee. In those circumstances, it seems

to me that the Defendants could not be said to have

established any Defence under the non est factum

doctrine. On that basis, it does not seem to me that

that ground gives rise to any possible Defence or

should lead to liberty to defend.

A second ground relied upon stems from a change in the

legal nature of the Plaintiff company. However, I am

satisfied that no change that has occurred is such as

would give rise to any disentitlement to the now

Plaintiff to pursue claims in respect of contracts and

guarantees entered into by the same entity in its

previous manifestation. In those circumstances, I am

not satisfied that that issue gives rise to a Defence.

I will pass for a moment from the third ground, which

concerns a potential counterclaim, as that is the issue

which gives rise, in my view, to the greatest

difficulty in this case.

Fourthly, certain specific items which question the

amount of the principal liability are raised. It seems

to me that it is reasonable to take the view on the

evidence that the Defendants have established a

potential Defence to the extent of the sum of €12,000

under those items. In those circumstances, it seems to

me the Defendant is entitled to liberty to defend so

far as €12,000 is concerned under those headings.

The fifth issue concerns the fact that there is

undoubtedly in place a form of second guarantee through

a financial institution which might lead to an

independent means (separate from these proceedings) of

the Plaintiff recovering some of its liabilities which,

in turn, might lead to liabilities being placed

indirectly upon the second and third-named Defendant.

However, it seems to me that the fact that there may be

a different basis upon which the Plaintiff might also

recover the same sum of money does not disentitle the

Plaintiff in principle to recovery against the

Defendants if it is otherwise appropriate that the

Plaintiff should so recover.

It is frequently the case that in appropriate

circumstances the court grants judgment jointly and

severally against two individuals. It is axiomatic in

such circumstances that a Plaintiff cannot recover the

full sum against both Defendants and it equally

follows, therefore, that to the extent that the

Plaintiff may recover against one Defendant in those

circumstances, it is precluded from executing as

against the other Defendant for a sum which would

amount to double recovery.

But that fact does not prevent the Plaintiff from

getting judgment against both Defendants jointly and

severally for the full sum. By analogy, it seems to

me, that the fact that the fact that the Plaintiff may

have the ability to recover some of these monies from

another source does not prevent the Plaintiff from

being entitled to also obtain judgment against these

Defendants. It is clearly the case that, to the extent

that the Plaintiff may actually recover the same monies

by some other route, it would be precluded from issuing

execution as against these Defendants for the relevant

sums.

Therefore, so far as those four matters are concerned,

the only matter of defence which, it seems to me, has

been established is a Defence to the extent of €12,000

in relation to the calculation of the principal sum

due.

The final matter which arises is a contended for

counterclaim. The circumstances surrounding the

counterclaim are difficult from two points of view;

firstly, there is a legal issue as to whether it is

open to a surety such as the second and third-named

Defendants to rely upon a counterclaim which, of

course, is not their own claim but would be a claim

which the principal debtor, the first named Defendant,

would, if it be a good claim, have been entitled to

maintain as against the Plaintiff.

I have been referred to limited United Kingdom and more

detailed Australian authority on the issue. I have

come to the view that the issue concerned raises

important and difficult questions of law which, in the

terms which I used in McGrath -v- O'Driscoll, are not

capable of resolution on a motion for judgment without

there being a real risk of an injustice. Therefore,

for the purposes of this application I am prepared to

accept that it is arguable that a surety is entitled to

rely, at least in some circumstances, upon a

counterclaim which might have been available to the

principal debtor.

In particular, it seems to me that such an argument

arises in circumstances where the counterclaim, if it

had been pursued by the principal debtor, might have

amounted to a Defence by way of set off in equity under

the principles identified by the Supreme Court in

Prendergast -v- Biddel, an unreported judgment of 31st

July 1957, which establishes that where a counterclaim

arises out of event which are closely connected to

those giving rise to the amount claimed on foot of a

summary application, the counterclaim can amount to a

Defence in addition to being a counterclaim so as to

justify the entinguishment in whole or in part of the

claim.

That the counterclaim arises out of a closely connected

series of transactions involving the business between

the Plaintiff and the first named Defendant company is

more than arguable. However a number of other matters

arise.

The two particular difficulties that arise are,

firstly, that there appears to be evidence to suggest

that the franchise agreement which, it is alleged, was

breached and the breach of which, it is suggested,

gives rise to the counterclaim seems to be with a

different company within the group operating under the

Londis banner. It may well be that that will cause

difficulties for the Defendants in establishing that

there is a sufficient counterclaim maintainable against

the Plaintiff to extinguish the Plaintiff's claim in

whole or in part so as to lead to the second and

third-named Defendants escaping from liability.

However, I am not at this stage persuaded that that

matter is clear. Firstly, it is arguable that where a

group of companies choose to do their business in a

manner whereby one company within the group sells

products on foot of an arrangement and on foot of the

same arrangement another company within the group

enters into other commitments, that there is a

sufficient connection between the set of contractual

arrangements entered into so as to give rise to

collateral obligations.

I should emphasise that I am by no means deciding that

that is so, but merely indicating that there is an
argument to that effect. In those circumstances, while

undoubtedly the court at a plenary hearing would be

required to deal with that difficult question, I am not

prepared to hold that the Defendants could not succeed

in persuading the court that some form of collateral

arrangement must be impliedly taken to exist which

would entitle them to rely on any breaches which they

could establish of the franchise agreement to

extinguish in whole or in part the claim of the

Plaintiff in these proceedings.

The second matter concerns the fact that very limited

evidence has been placed before the court to establish

the possible quantum of any counterclaim that might be

pursued. It is clear on the evidence of the second

named Defendant that the underlying cause of the

difficulties encountered by the business was the

establishment of a competing outlet in very close

proximity to that being operated by the first named

Defendant.

In those circumstances, it does not seem to me to be

credible to suggest that the entirety of the

difficulties encountered by the first named Defendant

could be attributable to wrongful actions on the part

of the Plaintiffs or companies connected with the

Plaintiffs.

The Defendants have not put forward any detailed

evidence from which the court could reach a conclusion

as to the highwater mark of any counterclaim that might

be maintained. However, I am mindful of the fact that

the only proceedings in which it would be open to the

second and third-named Defendants to raise these issues

are these proceedings. They clearly would not be able

to maintain an independent counterclaim, not being the

party who suffered damage, that party being the first

named Defendant.

In those circumstances, notwithstanding the fact that

there is no clear evidence as to the precise amount of

the counterclaim that might, on a best case scenario

from the Defendant's point of view, be established, it

seems to me that the justice of this case would be met

by making an approximate estimation of the extent to

which a counterclaim might arise.

For the reasons which I have outlined, the claim is for

€162,000 and there is an admitted arguable Defence so

far as individual items are concerned of €12,000. That

would leave a balance of €150,000. In the

circumstances, it does not seem to me that even at its

most optimistic, from the Defendant's point of view,

the counterclaim could amount to more than 50% of that

sum.

In those circumstances, I would propose giving judgment

to the Plaintiff against the second and third-named

Defendants in a sum of €75,000 and giving the second

and third-named Defendants liberty to defend, including

defend by way of counterclaim, in respect of the

balance.

THE JUDGMENT WAS CONCLUDED

12

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