Supreme Court of Ireland Decisions

Smyth & Anor v. Tunney & Ors [2004] IESC 24 (21 April 2004)

 
THE SUPREME COURT

Denham J.

Murray J.

Geoghegan J.

349/01

350/01

BETWEEN/

PHILIP SMYTH AND GENPORT LIMITED

Plaintiffs/Appellants

and HUGH TUNNEY, CROFTER PROPERTIES LIMITED, GERARD B. COULTER AND CAROLINE DEVINE

Defendants/Respondents

JUDGMENT of Mr. Justice Geoghegan delivered the 21st day of April 2004 [Nem Diss]

This appeal arises from two applications made to the High Court under O. 42, r. 24 of the Rules of the Superior Courts for leave to issue execution on foot of judgments for costs which said judgments were more than six years old. In respect of a costs order made on the 24^th November, 1989 the first, second and fourth-named respondents applied and in respect of two subsequent costs orders made on the 26^th June, 1992 and the 1^st March, 1995 respectively the application was brought by the first and second-named respondents only. The High Court (McCracken J.) granted the order sought on the 23^rd November, 2001 and the plaintiffs/appellants have appealed on a number of grounds. It is appropriate at this point to cite in full O. 42, r. 23 of the Rules of the Superior Courts and the relevant part of r. 24.

"23. As between the original parties to a judgment or order, execution may issue at any time within six years from the recovery of the judgment, or the date of the order.

24. In the following cases, viz.:-

(a) where six years have elapsed since the judgment or

order, …

(b) …

(c) …;

the party alleging himself to be entitled to execution may apply to the Court for leave to issue execution accordingly. The Court may, if satisfied that the party so applying is entitled to issue execution, make an order to that effect, or may order that any issue or question necessary to determine the rights of the parties shall be tried in any of the ways in which any question in an action may be tried: …"

This rule has a long ancestry going back to the Common Law Procedure Amendment Act, (Ireland) 1853 and I will return to it in due course. In his judgment the learned High Court judge commented inter alia as follows.

"The respondents opposed this application on the basis that there is an onus on the applicants to show reasons for the delay. I accept this is so."

In the High Court that principle was not originally conceded by Mr. Noonan, counsel for the first and second-named defendants (respondents on the appeal). He argued that the order under r. 24 was not really a discretionary order at all but that the court had to decide whether to make the order or to direct first that an issue or question be determined as to the rights of the party which might be relevant to the order. That argument however cannot be correct having regard to the decision of this court in Fitzgerald v. Gowrie Park Utilities Society Limited [1966] I.R. 662 which made it perfectly clear as did some old Irish cases that the order is discretionary. Once the order is discretionary there must be something on which the judge can attach himself to in exercising the discretion. I think that it can be fairly said that that much was accepted by all sides at the hearing of this appeal. The real issue is whether there have to be some quite exceptional or special reasons or whether it is sufficient that in a general way the applicant was reasonable in making the application at the stage he did. When I come to deal with the law I will analyse this more fully. First it is necessary to look at the facts.

The application of the first and second-named respondents was grounded on the affidavit of their solicitor, Mr. Adrian O'Doherty. He referred to the relevant orders and that the sums remained unpaid despite unsuccessful attempts to levy execution against the first-named appellant. In the affidavit, Mr. Doherty explains why his clients up to that date had sought to issue execution against the first-named appellant only. He said it was primarily because the only asset of substance which to the knowledge of their clients was owned by the second-named appellant was his leasehold interest in Sachs Hotel, Dublin of which the second-named respondent was the landlord. There had been a long history of landlord and tenant proceedings culminating in proceedings seeking forfeiture on the grounds of non-payment of rent to the tune of £588,605.41 and interest and a counterclaim for damages for defamation which proceedings were not concluded. There is then a key paragraph in the affidavit, paragraph 5 which reads as follows:

"5. I say and believe that the first and second-named defendants had determined originally to await the outcome of those proceedings before attempting further execution on foot of the said judgments in the within proceedings on the assumption that those proceedings would have long since concluded. However because of the lengthy delays that have occurred in finalising the current proceedings, the first and second-named defendants are now extremely concerned having regard to the fact that twelve years will have elapsed from the date of the said judgment on the 24^th November, 2001."

The alleged determination to await the outcome of the other proceedings must be read in the context of three different letters to similar effect written by the solicitors for the appellants, Messrs PCL Halpenny & Son and exhibited earlier in the affidavit. The learned High Court judge was obviously of the view and was clearly entitled to be of the view that the existence of those letters lent credibility to what is contained in paragraph 5 above. The letters were written in response to formal demands for the respective sums which were a prelude to proposed bankruptcy proceedings. The letters alleged abuse of the legal process and formally called upon the first-named respondent to desist from proceeding any further with threatened bankruptcy proceedings until a petition to wind up Genport Limited brought by the fourth-named respondent and an appeal from High Court proceedings were disposed of. As McCracken J. points out, the demand in each of the letters is much the same, that is to say, that the first-named respondent should hold back until all proceedings between the parties were disposed of.

Mr. Adrian O'Doherty also states in his affidavit that in the course of a recent hearing in the petition to wind-up the second-named plaintiff one of the grounds of objection was that no attempt had been made by the petitioner to send in the sheriff "to seize the furniture and effects in Sachs Hotel". Mr. O'Doherty points to the logic of that statement namely, that there must be goods and chattels in the hotel amenable to execution.

With regard to the similar application by the fourth-named respondent, that is grounded on an affidavit of Mr. Peter B. Brady, solicitor in the firm of John Murray solicitors, solicitors for the fourth-named defendant. That affidavit refers to the petition to wind-up the second-named plaintiff which was presented by the fourth-named respondent but was adjourned by the High Court judge also McCracken J. with liberty to re-enter. As no efforts were made by either of the appellants to pay the costs due to the fourth-named defendant, the petition was re-entered but was again adjourned by McCracken J. with liberty to re-enter as the learned High Court judge considered that the proceedings between the two companies should first be determined. In paragraph 7 of the affidavit however Mr. Brady states the following:

"7. The fourth-named defendant is conscious that her right to renew the action under O. 42, r. 24 may be extinguished pursuant to the provisions of the Statute of Limitations, 1957, section 11(6) as the original judgment on which it is based is dated the 24^th of November, 1989."

I should mention in passing that this is an argument that was heavily relied on also by the first and second-named respondents in submissions before both courts. As it happens and for reasons which I will be explaining when I am treating of the law, the key word in the said paragraph 7 cited above is "may". Mr. Brady then goes on to refer to the same point as was made by Mr. O'Doherty that is to say that one of the grounds of objection in the petition was that no attempt had been made to seize the furniture and effects in Sachs Hotel. In paragraph 9 of the affidavit he avers to the fact that the first-named appellant had been the controlling shareholder of the second-named appellant but had disposed of his shares in or about 10^th of December, 1999.

In response to these affidavits the first-named appellant, Mr. Smyth, swore an affidavit on the 21^st of November, 2001. The nub of his opposition to the order giving liberty to execute is contained in paragraph 4 of this affidavit which reads as follows:

"4. I say and believe that if the defendants were given liberty to issue execution at this very late stage, it would work a serious injustice on both me and Genport by virtue of the significant change in circumstances which has taken place in relation to the affairs of Genport since the original judgment was given in 1989. This change in affairs is particularly significant over the past six years since 1995 as Genport's financial position has seriously deteriorated over this period, and more especially, in recent years. Furthermore, I disposed of my shareholding in Genport in December, 1999 and can exercise no control over the management or affairs of Genport (save in relation to the conduct of the counterclaim in current proceedings (Crofter Properties Limited v. Genport Record No. 1996 No. 25P). My personal position in relation to the judgments in question has been seriously prejudiced by the lapse of time because I always assumed and was reasonably entitled to expect as a matter of commercial reality that the liability for these judgments rested with Genport which was for many years in a financial position to discharge those judgments. My personal position was therefore protected because the defendants could obviously not recover twice on foot of the judgments, once against Genport and once against me."

The matters raised by Mr. Smyth only come into play if the respondents can be regarded as having prima facie given acceptable reasons for granting the order. The order is a discretionary one and this court would be slow to interfere with the High Court judge's exercise of that discretion. Clearly, McCracken J. was of the view that sufficient reasons had been shown because he expressly accepted that that was a requirement. He then effectively went on to outline the reasons. Not only was it entirely open to the learned High Court judge to take the view which he did in relation to this aspect of the matter but I do not think that he could have taken any other view. For reasons which I will explain in greater detail when treating of the law, I am satisfied that it is not necessary to give some unusual, exceptional or very special reasons for obtaining permission to execute out of time provided that there is some explanation at least for the lapse of time. It is, of course, accepted by all sides that even if a good reason is given the court must consider counterbalancing allegations of prejudice. It is in that context that the first-named appellant's affidavit comes into play. I cannot see that the first-named appellant was prejudiced in any legal sense. When he was in control of the company and it was thriving he could have procured that the judgments were paid off. As was pointed out by Mr. Noonan in the High Court the downturn in the company's fortunes first occurred at a stage when the six year period had not run out. No relevance can be attached in my view to the disposal of the shares in Genport by the first-named appellant. He did that with his eyes open knowing that the debt was outstanding, knowing that he would no longer have any control over Genport and, therefore, over the efficiency of its business and he cannot now use any of these factors as grounds of prejudice to prevent leave to execute being granted. The learned trial judge puts it more strongly than I have done and it is worth quoting him.

"The respondents further complain that they are prejudiced by the delay because Genport Limited is now in a much worse financial position than it would have been had the parties moved earlier. I find this an astonishing proposition in the present circumstances. The respondents can hardly be heard to say that they are prejudiced because they failed to pay their own debts due by them on foot of judgment. It is also true that Mr. Smyth has sold his interest in Genport Limited. But of course this sale must have been with the full knowledge of the debt of both parties."

I heartily endorse the sentiments of the learned trial judge. For this reason, I do not propose to analyse those parts of the affidavit of the first-named appellant which deal in detail with the finances and profitability of the company. It is also suggested by the first-named appellant that the application was not brought for a bona fide purpose of recovering money but rather for ulterior purposes. Quite apart from the fact that this court would not be entitled to speculate on these matters, it is absurd to suggest that in circumstances where there was quite genuinely a fear at least on the part of the legal advisers that once the statutory period for bringing an action on foot of the judgment had elapsed leave to execute could not be granted, that they would allow the judgments go by default and not make sure to obtain the leave before the period ran out. It is not necessary to consider whether that alone is a good reason because in this case there were clearly circumstances which had rendered it reasonable to delay execution, as the learned trial judge accepted.

I am satisfied that there were good reasons for making the application when it was made and that the delay in executing up to that time was explained. I am also satisfied that there was no relevant prejudice to the appellants. I must now consider what in those circumstances are the correct legal principles to be applied.

O. 42, r. 24 does not set out any express criteria on foot of which the leave to execute after the six years may be granted or refused. That seems to be still the position in the equivalent modern English rule though in the "white book" extract which has been furnished to the court there are footnotes which set out the practice in the Queen's Bench Division. Apparently, in England the application may be made ex parte grounded on an affidavit of facts giving the obvious formal particulars relating to the judgment and "showing causes of delay". This ex parte application may apparently be made to the Master but the footnote goes on to say that the Master "may" direct a summons to issue. As it happens, as I write this judgment I have in front of me "Annual Practice" ("The White Book") as far back as 1936 and the footnote including the requirement of showing cause for delay is virtually identical with one exception. The 1936 edition says that the Master "will, however, generally direct a summons to issue". Be that as it may, the fact that the application in England has traditionally been made at least in the first instance ex parte would suggest to me that no very strong or exceptional reasons that would have to be adjudicated upon were required. Some reason for delay had to be shown but no more. Interestingly, in the 1936 edition at p. 782 after setting out the requirements which I have already outlined the following passage appears:

"The Court of Appeal in Ireland decided that, after a lapse of six years, leave to issue execution ought not to be granted ex parte, unless special circumstances were shown, and that an affidavit of belief that if notice were given to the defendant he would remove his goods was not such a special circumstance (National Bank v. Cullen [1894] 2 I.R. 683)."

I will return to that case but it should be noted that the reference to "special circumstances" is confined to the situation where it is desired to obtain an ex parte order where an element of surprise is perceived to be necessary. As I will endeavour to show, the old Irish cases did not seem to indicate that strong reasons had to be given in the case of applications on notice.

Before I consider the earlier Irish cases, I think it appropriate to return to the modern authority on the subject to which I have already referred i.e. Fitzgerald v. Gowrie Park Utility Society Limited (cited above). That is clear authority for the proposition that the order is a discretionary one. By a decision of three judges to two it was decided that the High Court judge had erred in principle in exercising his discretion. The lead judgment was delivered by Lavery J. and what was concerning the court was the issue of cross-claim. The order suggested by Lavery J. was a refusal of leave to execute but with liberty to renew the application when a pending appeal relating to the cross-claim had been determined. But that suggested order was made in the context of the particular facts of that case. A solicitor had taken an assignment of a costs order in favour of his own client. The High Court judge had taken the view that when the solicitor took the assignment the judgment was in full force and effect and that, if it was not then available as an asset, he might have obtained some other security. The potential availability of another security was considered wholly unrealistic by Lavery J. and, accordingly, he was of the view that the High Court judge had erred in the exercise of the discretion. But there is an important sentence in the judgment of Lavery J. at p. 672:

"It was not contended in this court that a judge was bound to set off one judgment against another and I hope that nothing I have said suggests that I think so."

I am satisfied that the facts of this case are quite different, given that there was at least a perceived danger that if the application was not made at the time when it was made the benefit of the judgment debt would be lost. It was entirely reasonable that the learned High Court judge should exercise his discretion in favour of the respondents no matter what other claims may have been extant.

If the perception that the benefit of the judgment debts might be lost after the twelve year period elapsed was a reasonable one it is entirely irrelevant whether it was correct in law. I do not propose to express any definitive view as to whether it was correct or not or whether in this connection there is a difference between the English and Irish law. Such consideration should await a case where it is necessary for the decision and where preferably there is a five judge court sitting. But I do have to refer to the case law to some extent with a view to demonstrating that the perception of danger on the part of the legal advisers of the respondents was at least a reasonable one which I believe it was.

I will refer first to Evans v. O'Donnell (1886) 18 LR Ir. 170. It was decided in that case by the Irish Court of Appeal affirming a Divisional Court decision of the Queen's Bench Division in which separate concurring judgments of O'Brien J. and Johnston J. had been delivered that leave could not be granted to issue execution on a judgment which was more than twelve years old having regard to the provisions of s. 8 of the Real Property Limitation Act, 1874 where there had been neither payment nor acknowledgment in the meantime. However, it is only fair to say that on one reading of the Queen's Bench judgments it was in a sense taken for granted that a statute barred judgment debt could not be executed and the real issue was whether the relevant statutory period was the twelve year period prescribed by the 1874 Act or a twenty year period prescribed by the Common Law Procedure Act, (Ireland) 1853. The Queen's Bench Division judgments are reported in (1885) 19 ILTR 53. The issue which arose in this case however was partly and, indeed, summarily disposed of by Lord Ashbourne in his judgment in the Court of Appeal at p. 171 of the report. The following passage from his judgment makes it clear.

"Two questions have been argued before us – one of form, and the other of substance. The question of form may be shortly disposed of. It was urged that it was not open to the plaintiff to rely on section 20 of the Common Law Procedure Act because the present was not an action upon a judgment. I think that this objection is well-founded, because a motion for liberty to issue execution is similar to a motion for liberty to revive a judgment under the old practice. Such motions were expressly held not to be actions on judgments in the cases of Wall v. Walsh and Johnson v. Bell. But this would be an unsatisfactory ground on which to rest a decision."

Effectively, he then goes on to deal with the substantive issue holding that the 1874 Act limitation period of twelve years applied and that there could, therefore, be no execution. There were concurring judgments from FitgGibbon LJ and Barry LJ. What is noteworthy about that case is that the court was accepting the proposition put forward by Mr. Michael Collins, S.C., counsel for the appellants in this case that a motion for liberty to execute a judgment is not an action to recover a judgment within the meaning of the Statute of Limitations but was nevertheless holding contrary to Mr. Collins's submissions that it was a complete answer to such an application that the debt was statute barred and, therefore, extinguished. Interestingly, in the latest English case Lowsley v. Forbes [1999] 1 AC 329 at 339 Lord Lloyd of Berwick seems to take a different theoretical view as to what the English law was. The relevant passage reads:

"I agree, of course, that Ord. 42, r. 23(a) was not ultra vires. Mr. Terrell's argument was indeed a bold one, as Scott LJ observed. (A reference to the judgment of Scott LJ in WT Lamb and Sons v. Rider [1948] 2 KB 331). But I would not with respect, agree with the steps in Scott LJ's reasoning. In particular I cannot agree that the words 'action, suit or other proceeding' in section 40 of the Act of 1833 and section 8 of the Act of 1874 were given the narrow meaning to which Scott LJ referred."

Lord Lloyd then goes on to comment on what he regards as selective citation by Scott LJ omitting to mention two relevant cases as he saw it. This distinction, of course, makes no difference because whether one applies the old Irish Court of Appeal law or the modern House of Lords law the end result is the same though the jurisprudential basis for it is different. In either case, leave to execute a statute barred judgment debt could not be granted.

Long before that recent House of Lords case however the waters had become muddied by an important decision of the English Court of Appeal in National Westminster Bank Plc v. Powney [1991] Ch. 339. The Court of Appeal in that case was called upon to decide between two conflicting decisions of its own namely, WT Lambe and Sons v. Rider cited above and Lougher v. Donovan [1948] 2 All E.R. 11. It had been held in Lougher's case that an application to extend the process of execution on a judgment was an "action" within the meaning of the English Limitation Act, 1939 where the relevant provision and definition were similar to those contained in our Statute of Limitations, 1957. In the Lambe case however heard by a different division of the Court of Appeal though in each case including Scott LJ, the opposite was held though the court was not prepared to admit it at the time. The following passage from the judgment cited at p. 354 in the National Westminster Bank report reads as follows:

"It follows from the above brief survey that the right to sue on a judgment has always been regarded as a matter quite different from the right to issue execution under it and that the two conceptions have been the subject of different treatment. Execution is essentially a matter of procedure – machinery which the court can, subject to the rules from time to time in force operate for the purpose of enforcing its judgments or orders. It is only fair to say that in that case what seems to have been argued was somewhat different than what is argued in this case. It seems to have been argued that the rule was ultra vires given that you could sue out on the judgment at any time within twelve years. This submission was rejected.

What complicates the matter still further as Mr. Michael Collins rightly pointed out is that although Lord Lloyd of Berwick in Lowsley v. Forbes cited above disagreed with the reasoning of the Court of Appeal in National Westminster Bank v. Powney cited above which had endorsed Lambe rather than Lougher, he nevertheless went on to point out that a more modern Limitation Act in England had been clearly drafted on the assumption that the National Westminster Bank case was correct which assumption had also been made by a law reform committee of distinguished judges on foot of whose recommendations the new Limitation Act had been drafted. As a consequence, the House of Lords held that the National Westminster Bank case, although originally wrongly decided, must now be regarded as the law in England and Wales.

Having regard to all these uncertainties emerging from the Irish and English cases it was entirely reasonable for the respondents to be concerned lest they might never be able to obtain leave to execute their judgment or might not be able to execute it once the statutory period for actions for the recovery of a judgment debt had elapsed.

I would add in another factor to support that view. Even if it was the case that leave under the rules could be granted to execute a statute barred judgment debt on the basis that the application for leave was not an action to recover a judgment within the meaning of the Statute of Limitations and also on the basis that the statute barred debt could not be said to be extinguished altogether, the respondents would still have encountered very considerable problems in persuading a court to exercise discretion in their favour. Even on the best possible view of the law from the point of view of the respondents, the fact that the statutory period has run must surely be a major factor to be considered by a court in considering whether to grant or refuse leave as a matter of discretion. As I indicated, I do not intend to give a definitive view of what I believe to be the correct legal position as I do not find it necessary to do so. No matter what view is taken it was entirely reasonable for the respondents to have had the apprehension which they did have at the time they made the application.

Finally, I want to refer to another Irish case which I have already cited in a different connection - The National Bank v. Cullen [1894] 2 I.R. 683. That was a case before the Irish Court of Appeal consisting of Walker C., Palles CB, FitzGibbon LJ and Barry LJ. The point at issue was whether an application under the rules for leave to execute on a judgment had to be made on notice or could be made ex parte, as was even then, the admitted practice in England. The court affirmed an order of Gibson J. refusing the ex parte application. The practice ever since in Ireland and indeed before that has been that the application is brought on notice and, therefore, that issue does not arise in this case. But I think that passages in the judgment particularly of Palles CB are relevant. He pointed out that the relevant rules at that time Rules 24 and 25 of O. 42 of the Rules under the Judicature Act were substantially similar to sections 148 and 149 of the Common Law Procedure Act (Ireland) 1853. He then pointed out that section 148 of the 1853 Act had modified the common law rule as to the time within which execution should issue and that section 149 substituted in cases within that modified rule a summary application in lieu of the old writ of scire facias. At common law, execution could not issue save in certain exceptional cases later than a year and a day after the rendition of the judgment. Section 148 extended that period to six years. After the period of six years there was to be an application to the court under section 149, which he said was something similar to the pre-1853 Act procedure under the Statute of Westminster II whereby after a year and a day there would be an application to the court for a scire facias. The Chief Baron said that the reason in each case was the same and had been explained by Lord Denman in Hiscocks v. Kemp 3 Ad. & Ell. 676. Lord Denman had said the following as quoted by Palles CB:

"The scire facias in personal actions was given by that statute rather in aid of plaintiffs than in restraint of them. At the common law, a presumption arose, from the plaintiff's delay beyond a year that his judgment had either been satisfied, or, from some supervening cause, ought not be allowed to have its effect in execution. After such a delay, therefore, he was not allowed to issue execution as a matter of course, but was driven to bring a new action on the judgment. The scire facias, which had been in use of the common law for the purpose of executing judgments in real actions after a year and a day's delay, was therefore adopted by the statute as a less expensive and dilatory course for the plaintiff, and as equally affording protection to the defendant, if he had any reason to show why the execution should not issue."

I would pause here to note that none of this suggests that historically, a plaintiff had to have strong reasons for extension of time. Rather the purpose of the application to the court was to give both a benefit to the plaintiff and a protection to the defendant if he was prejudiced. The Chief Baron goes on to put it more clearly at p. 687:

"Thus, the restriction upon the period for issuing execution was for the protection of the defendant, and in consequence of a presumption against the right to issue execution, arising from lapse of time; and if a period so short as a year and a day was, at common law, sufficient to raise such a presumption, so a fortiori must have been the extended period of six years during which, since 1853, execution can issue without leave."

The general thrust of the four judgments is that in special circumstances which would have to be proved on affidavit, the order could be made ex parte but otherwise as a matter of natural justice, the application must be made on notice contrary to the English procedure. The emphasis is then essentially on prejudice to the defendant though obviously some reason must be given by the applicant. Although in this case it has not been fully proved that the relevant respondents could not have executed the judgment debt by some means within the six year period, they have nevertheless shown sufficient reasons why they allowed a lapse of time and should still be allowed to execute if they can. Essentially, the conduct of the appellants heavily contributed to the delay in execution. For the reasons given by the learned High Court judge and the reasons given in this judgment which for all intents and purposes overlap, I would dismiss the appeal.