[2016] IEHC 48
THE HIGH COURT
Record No. 6736P/2012
Between:
RYANAIR LIMITED
Plaintiff
- and -
THE REVENUE COMMISSIONERS
IRELAND
THE ATTORNEY GENERAL,
AND
THE MINISTER FOR FINANCE
Defendants
JUDGMENT of Mr Justice Max Barrett delivered on 2ndFebruary, 2016.
Part 1: Overview
1. The net issue arising in the within proceedings is whether Ryanair should now be awarded the costs for a discovery-related application that it brought, which has been rendered moot by circumstance, and which, if costs go in Ryanair’s favour, would result in the State being liable to Ryanair for a great many euro. To understand the within application, it is necessary to describe briefly what has been happening for the last couple of years or more.
Part 2: Chronology
2. Ryanair obtained an order for discovery against the State in Minister for Finance and Ireland v. Ryanair Limited (2013/3286P), the ‘State aid recovery proceedings’. This order was made on 5th November, 2013, and the category of discovery ordered was:
“all documents noting, recording and/or discussing the State’s ability and/or vires to impose a differentiated Air Travel Tax (‘ATT’) of the nature contained in Section 55 of the Finance (No. 2) Act 2008 whether prior to the enactment of the said Section 55 while it was in force and/or following its amendment including any documents noting, recording and/or discussing the legality of the differentiated ATT whether in the form of legal opinions provided or copied to the plaintiffs or otherwise limited to inter and intradepartmental correspondence between the Department of Transport, Tourism and Sport (formerly the Department of Arts, Sports and Tourism), the Department of Finance and/or Department of Foreign Affairs and correspondence between these government departments (including the Permanent Representative of Ireland) and the Office of the Attorney General and/or the European Commission.”
3. Ryanair, by letter of 6th March, 2014, subsequently sought discovery in the within proceedings in similar terms to the discovery which was ordered in the State aid recovery proceedings. The State responded on 30th May, 2014, proposing that discovery be made in the within proceedings based on the condition that the same order and methodology would apply in these proceedings as in the State aid recovery proceedings.
4. The State initially indicated in its letter of 30th May, 2014, that discovery would be made within four months of Ryanair’s acceptance of its proposals in relation to discovery. The State informed Ryanair in a letter from its solicitors of 24th July, 2014, that it (the State) would make discovery by 30th November, 2014. Subsequently the State issued a letter dated 25th July, 2014, in respect of the State aid recovery proceedings stating that it intended to commence the discovery process in August 2014 and suggested that the proceedings be mentioned before the court in October 2014 to apprise the court of the progress of discovery. The proceedings were listed for mention on 7th October, 2014 and, on that occasion, this Court extended the deadline for discovery to 30th November, 2014, on consent.
5. On 5th December, 2014, the State’s solicitors wrote to Ryanair’s solicitors, confirming that the State’s document review was complete but that further work was required to finalise discovery, including a review of the documents by counsel for privilege, a review by Government officials of confidential documents for the purposes of redaction, drafting an affidavit of discovery, and affidavit production. The State also indicated that it intended to put the proceedings in for mention before this Court on 18th December, 2014, so as to update the court on when the State’s discovery would be provided.
6. On 17th December, 2014, the State’s solicitors again wrote to Ryanair’s solicitors stating that the State had experienced difficulties when printing its discovery documents and that it was going through a process of manually collating the documents into ‘families’ of documents. As a result, the State sought Ryanair’s consent to a further adjournment of the matter on the basis that it would be in a position to exchange discovery by the end of January 2015.
7. On 18th December, 2014, this Court adjourned matters to 27th January, 2015, on consent, the understanding being that the discovery affidavits would be exchanged by end-January 2015.
8. On 27th January, 2015, the State advised this Court that it was still having technical difficulties with its discovery and that it needed an additional eight weeks within which to make discovery.
9. The Court of Justice of the European Union issued judgment on 5th February, 2015, in Case T-500/12, Ryanair v. Commission, in which it annulled Art.4 of Commission Decision C(2012) 5037 final. This decision resulted in the parties agreeing to stay the State aid recovery proceedings. Ryanair’s solicitors wrote to the Chief State Solicitor’s Office on 9th February, 2015, noting that although Ryanair’s position was that, due to the Court of Justice’s decision, there was no longer any legal basis for the State aid recovery proceedings, the State’s discovery obligations in the within proceedings remained unchanged.
10. No further correspondence was exchanged between the parties in relation to discovery between 5th February, 2015 and 9th June, 2015, when the proceedings were again listed before this Court. When the matter was mentioned on 9th June, the State’s counsel indicated that it would not be realistic for the State to make discovery by end-July 2015 but would be in a position to make discovery in October 2015. The court listed the matter for mention again on 21st July.
11. Ryanair’s solicitors wrote to the State’s solicitors on 17th July, 2015 and on 20th July in relation to discovery, and specifically in relation to how discovery matters might be dealt with before the court on 21st July. The letter, dated 20th July, noted the understanding of Ryanair’s solicitors that counsel had that day discussed the contents of the letter of the 17th and had “agreed that (subject to the Court) the proceedings may be adjourned tomorrow on consent to the first available Tuesday in October, on the basis that the State will state its intention to make its discovery by the end of October and that Ryanair may issue its intended motion (for a peremptory Order against the State compelling it to make its discovery by the end of October) seeking a return date for the first Tuesday in October”.
12. The proceedings came on before this court for mention on 21st July, 2015. The State’s counsel indicated that it intended to make its discovery by 30th October and that the State would update Ryanair if there was to be any change to that position. The court then adjourned proceedings for mention to 6th October, 2015.
13. The State’s solicitors wrote to Ryanair’s solicitors on 5th October, 2015, indicating that for the various reasons set out in the letter, the State now anticipated that it would make discovery on or before 30th November, 2015, and that it proposed to write to Ryanair’s solicitors by 30th October providing an update as to progress and, at that stage, to give a definitive date for the making by the State of its discovery.
14. On 6th October, 2015, the matter was again listed before this Court. On that occasion, reflecting its letter dated 5th October, 2015, counsel for the State indicated that the State would not be in a position to make discovery until 30th November, 2015. This Court ordered that all the parties make discovery by 30th November, 2015, and listed the proceedings for 8th December, 2015, noting that in the event of a party failing to make discovery by that date, it would be open to the opposing party to seek an ‘unless’ order against the defaulting party.
15. On 1st December, 2015, the State wrote to Ryanair explaining the steps taken to date and the matters remaining to be done. Those matters included the physical production of documents, the creation of schedules to the affidavits of discovery and the final completion of that affidavit. The letter stated that the State expected to be in a position to make discovery by 21st December. However, given the unexpected difficulties which had arisen throughout the process, the State did not present this as an absolute guarantee. The letter stated:
“As you are aware, the State’s discovery has required an ongoing effort by the Defendants and their legal advisers. In the past you have referred to the possibility of bringing motions against the Defendants to compel discovery. Bringing such a motion now would considerably slow down the State’s discovery rather than accelerating it. The making of discovery could not be achieved if the relevant staff and the Defendants’ legal advisers had to stop work on discovery and deal with motions.”
16. The letter ended by asking Ryanair to agree to this position. This letter seems to the court to have been prudent and reasonable in the circumstances, though Ryanair could be forgiven if it considered that this letter offered little and promised less.
17. On 3rd December, 2015, Ryanair issued a notice of motion seeking the following principal reliefs, as well as certain ancillary reliefs:
“1. An Order pursuant to the terms of Order 31, Rule 21 of the Rules of the Superior Courts and/or the inherent jurisdiction of this Honourable Court that unless the Defendants serve their Affidavit of Discovery in the within proceedings by the deadline of 5pm on Friday 18th December 2015, the Defendant’s Defence shall be struck out and Judgment entered for the Plaintiff, with direction from this Honourable Court as to the amount to be entered for Judgment.
2. In the alternative to the Order sought in the terms of paragraph 1, an Order pursuant to the terms of Order 31, Rule 21 of the Rules of the Superior Courts and/or the inherent jurisdiction of this Honourable Court that unless the Defendants serve their Affidavit of Discovery in the within proceedings by the deadline of 5pm on Friday 18 December 2015, an Order that the Defendants shall not recover the costs of and occasioned by the making of their discovery regardless of the outcome of these proceedings.”
18. When the matter was mentioned before the court on 8th December, the court decided, on the application of the State’s counsel, to adjourn matters until 12th January, 2016. Discovery was finally made by the State on 11th January, 2016.
19. Although this is a decision as to costs in a now moot application brought by Ryanair, the focus of that application was the State’s behaviour and thus the State’s actions get the lion-share of the mention in this judgment. However, it is only fair to note that Ryanair has not exactly showered itself with glory when it comes to discharging its own discovery commitments. Voluntary discovery was sought of Ryanair on 20th June, 2014. In July 2014, Ryanair agreed to make voluntary discovery by 30th November, 2014. On 26th November, the Chief State Solicitor wrote to Ryanair’s solicitor asking when Ryanair would make discovery. On 28th November, 2014, Ryanair replied that there had been unexpected delays but that “[W]e anticipate that we will not require significant time beyond 30 November 2014.” (In fact it was to take another year). On 22nd January, 2015, the Chief State Solicitor wrote again to Ryanair’s solicitors asking when Ryanair would make discovery. By letter of 26th January, 2015, Ryanair’s solicitor wrote that Ryanair expected to make discovery by end-January 2015 or very shortly thereafter, and promised to keep the State updated as to any slippage that might arise. No such update was received. Eight months later, on 5thOctober, 2015, the State wrote to Ryanair and asked when it would make discovery. No reply to this letter was received. At last, on 30th November, 2015, Ryanair delivered its affidavit of discovery. Forty-two days later, after the intervening end-of-yearholidays, the State made its affidavit of discovery. So the race for discovery ended up being a close-run thing, with Ryanair edging the State into second place.
20. Returning the focus to the State’s actions, the court notes that the State has expended considerable time and effort in satisfying its discovery obligations. However, a number of difficulties were encountered:
- first, resource constraints. Litigation is presently so expensive that even central government has now come to court pleading resource constraints, here as a factor hindering timely compliance with the State’s discovery commitments. Acting within its budgetary limits, central government could not, it appears, ‘staff up’ to the level necessary to ensure perfectly timely discovery in this case.
Inordinate costs are not a necessary price for the achievement of measured justice. The two need not travel together. But for now they are often encountered in company and, for so long as they are, resourcing issues - whether of a type that the State has encountered in these proceedings, or some other form -will doubtless, and too frequently, present in the pursuit of court-administered justice.
- second, methodology discussions. The State suggests that the methodology for discovery was only agreed around July 2014.
- third, file reviews. The State had to search among documents held in different Government departments and offices in a mixture of paper and electronic files.
- fourth, document reviews. Over 50,000 records have been reviewed by documentary counsel. Over 3,000 records are being discovered. This took a considerable time and even more time than usual thanks to the printing difficulties encountered (with e-mails and attachments being spewed out separately and then having to be re-assembled, the court understands).
- fifth, assessment for privilege. This is self-explanatory.
- sixth, checking for confidentiality. This is self-explanatory.
21. All in all over €200,000 in fees has been expended to documentary counsel and e-discovery experts. Excluding the cost of solicitors and counsel, the final cost to the State of the making of discovery and the production of documentation will be around €300,000.
22. All in all, there really can be no doubt that, despite the delay arising (and, in the end, the delay of the State only marginally exceeded that of Ryanair), the State has at all times been conscious of its discovery obligations and has devoted considerable time and money to compliance. The parties, their legal teams, even the court, might wish that matters had gone more smoothly and more swiftly but they did not, not on either side.
Part 3: Law
i. Overview
23. Order 31, rule 21 of the Rules of the Superior Courts (1986), as amended, provides, insofar as relevant to the within application:
“If any party fails to comply with any order…for discovery or inspection of documents, he shall be liable to attachment. He shall also, if a plaintiff be liable to have his action dismissed for want of prosecution, and, if a defendant, to have his defence, if any, struck out, and to be placed in the same position as if he had not been defended…”.
24. Before proceeding further into an analysis of the applicable case-law, it is worth recalling what Ryanair sought in its motion of 3rd December, 2015, namely, that unless the State served its affidavit of discovery by 5pm on 18th December, the court would orderthat (1) the State’s defence be struck out and judgment entered for Ryanair; or (2)the State should not recover the costs of, and occasioned by, the making of discovery, regardless of the overall outcome of the proceedings between the parties.
25. Turning to the applicable case-law, the court has been referred by counsel for the State to three principal cases that identify the nature and extent of the powers enjoyed by the court under O.31, r.21, namely the decisions of the Supreme Court in Mercantile Credit Co. of Ireland v. Heelan [1998] 1 I.R. 81 and Murphy v. J. Donohoe Ltd. [1996] 1 I.R. 123, and the decision of the High Court in Radiac Abrasives Inc. v. Prendergast (Unreported, High Court, Barron J., 13th March, 1996).
(ii) Mercantile Credit Co. of Ireland v. Heelan
26. Pursuant to O.31, r.21 of the Rules of Superior Courts, the High Court struck out the defence of a defendant for failure to make discovery. This strike-out was successfully appealed to the Supreme Court, inter alia, on the basis that O.31, r.21 should not be used by the court to punish parties unless there was deliberate and wilful refusal to make discovery. Giving judgment for the Supreme Court, Hamilton C.J. made various observations as to the proper application of O.31, r.21:
[1] Striking out a defence is a very serious matter because it deprives a defendant of such defences as would be open to him (at 87).
[2] Despite delay and prolongation of proceedings, the interests of justice may require that the defendant be afforded an opportunity of raising such defences as are available to him (at 87).
[3] Court utilisation of O.31, r.21 is discretionary, not obligatory (at 85).
[4] Court utilisation of O.31, r.21 should not occur unless the court is satisfied the defendant is endeavouring to avoid giving discovery (at 85).
[5] Court utilisation of O.31, r.21 should only occur where there is wilful default or negligence on the part of the defendant, and then only upon application to the court for such order (at 85).
[6] Court utilisation of O.31, r.21 should not be effected where an omission or neglect to comply is not culpable, e.g. if due to memory loss or illness (at 85).
[7] The powers of the court to secure compliance with court rules and orders regarding discovery should not be exercised to punish a party for failure to comply with an order for discovery in the time limited by same (at 85).
(iii) Murphy v. J. Donohoe Ltd.
27. This was a successful appeal to the Supreme Court against orders of the High Court purporting to strike out certain defences of particulars defendants for alleged failure to comply with an order for discovery. The decision of the Supreme Court in Murphy issued almost a year to the day after that in Mercantile Credit and is largely supplementary to that earlier decision. Barrington J., giving judgment for the Court, made three observations that might be counted as additional to the observations of Hamilton C.J. in Mercantile Credit concerning O.31, r.21, namely:
[8] Cases may exist where one party may not be able to get a fair trial because of the other party’s wilful refusal to comply with an order for discovery. In such cases it may be necessary to dismiss a plaintiff’s claim or strike out a defendant’s defence. “But such cases will be extreme cases” (at 142).
[9] Acting on the legal advice of independent legal advisors is a mitigating factor that counts against strike-out, even if the trial judge considers the said advice wrong (at 143).
[10] An offer of further and better discoveryis a mitigating factor that counts against strike-out (at 143).
(iv) Radiac Abrasives Inc. v. Prendergast
28. This was a failed application to strike out a defence for failure to make proper discovery and, in the alternative, an order for further and better discovery. The particular significance of Barron J.’s judgment was because, at 7, he offered the view that:
[11] If there were deliberate concealment in the course of discovery, the proper remedy would be to order a strike-out. “A party to proceedings who has deliberately concealed documents in its discovery cannot, when it has been found out, be allowed merely to amend its discovery.”
Part 4: Conclusion
29. It would be difficult to avoid concluding, having regard to the eleven principles mentioned above, that O.31, r.21 is ‘all bark and next to no bite’. The rule makes it seem like the High Court has drastic powers open to it, and technically it does, but they can only be applied in circumstances that are so extreme that they seem likely to occur only very rarely. Indeed, it is notable that in Radiac Abrasives, even though Barron J., at 8, finds that “There are certainly elements in the present motion which suggest such deliberate conduct [as to warrant a striking out of the defence]”, he nonetheless gave the defendants a further opportunity to place a full affidavit of discovery before the court.
30. There is nothing in the facts before this Court at this time to suggest that had Ryanair’s application proceeded under O.31, r.21, it would have succeeded in obtaining the first of the two orders sought. The State has not been endeavouring to avoid discovery. There is no wilful default on the part of the State. The fact that there has been delay is not of itself suggestive of any negligence. There is no culpability on the part of the State. Even if the court were minded for some reason to ‘punish’ the State for its actions (and the court most certainly is not so minded), O.31, r.21 does not fall to be exercised as a means of punishment for untimely compliance with a discovery order. This is not a case where Ryanair will be unable to get a fair trial because of wilful refusal by the State (of which there is none) to comply with an order for discovery; discovery has now been made. The State has acted on the advice of its legal advisors, and it has at all times been open to the court and Ryanair as to progress made and problems encountered as regards making discovery. There is not a whiff of a suggestion of any deliberate concealment on the part of the State. Lastly, the gap between when discovery was made by Ryanair (end-November) and the State (start-January), with the end-of-year holidays coming in between is such that it is difficult to believe the extra five or six weeks taken by the State to make discovery can have had much if any effect on Ryanair or on the overall pace of the proceedings.
31. As to the second of the orders sought, the court has never heard of such an order, doubts that such an order has ever issued from these courts, and sees in such an order the potential to wreak so gross an injustice that the court cannot conceive of a circumstance in which such a form of order would ever be made.
32. The form of application brought by Ryanair seems likely to have failed entirely. Moreover, there is no evidence that the bringing of the application assisted matters by pushing the State across the line of completing discovery sooner, rather than later. Indeed the State contends that the bringing of the application by Ryanair was more hindrance than help in this regard. All of the foregoing being so, the State has indicated in argument that if costs are to be ordered at all, they ought to be ordered in its favour. However, given the significant, almost equal, delay on both sides in making discovery (albeit that the State had more documents of which to make discovery), it seems to the court that the fairest way of dealing with the issue of the costs of Ryanair’s now-moot application is to reserve them for the trial judge to adjudicate upon following the trial of the substantive dispute between the parties.
