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Judgment Title: Lismore Builders Limited (In Receivership) v Bank of Ireland Finance Limited & ors Neutral Citation: [2013] IESC 6 Supreme Court Record Number: 363 & 364/2006 High Court Record Number: 1990 5939 P & 1990 5724 P Date of Delivery: 08/02/2013 Court: Supreme Court Composition of Court: Denham C.J., Hardiman J., MacMenamin J. Judgment by: MacMenamin J. Status of Judgment: Approved
Outcome: Allow And Set Aside | ||||||||||||||||
THE SUPREME COURT Denham C.J. Hardiman J. MacMenamin J. S.C. APPEAL NO. 363/2006
LISMORE BUILDERS LIMTIED (IN RECEIVERSHIP) PLAINTIFF/APPELLANT AND BANK OF IRELAND FINANCE LIMITED, DELOITTE HASKINS AND SELLS
DEFENDANTS/RESPONDENTS and THE SUPREME COURT S.C. APPEAL NO. 364/2006
LISMORE HOMES LIMITED (IN RECEIVERSHIP) PLAINTIFF/APPELLANT AND BANK OF IRELAND FINANCE LIMITED, DELOITTE HASKINS AND SELLS
DEFENDANTS/RESPONDENTS JUDGMENT of Mr. Justice MacMenamin dated the 8th day of February 2013. 1. On the 30th June, 2006, the High Court (Quirke J.) delivered judgment in the two proceedings which are the subject of this appeal. He decided to dismiss the claims brought by both plaintiffs (‘the appellants’) herein, by reason of inordinate and inexcusable delay. The appellants, (collectively “the Lismore companies”) have appealed that decision. For brevity, the appellant in the first action will also be referred to as “Builders”; the appellant in the second action as “Homes”. A further appeal, brought against the High Court judge’s decision to refuse the appellants leave to amend their claim by an amended consolidated statement of claim in both cases, containing additional claims for deceit, conspiracy and misrepresentation, and purporting to quantify the appellants’ damages in the sum of €45,106,108.35, has been withdrawn. However, the existence of this issue in the High Court is relevant to the appeal, in that the High Court judge dealt first in his judgment with the amendment applications and second, the applications to dismiss. This sequencing may well have had a significant bearing on the manner in which the judgment addresses the issues, a point dealt with later in this judgment. Introduction The legal principles applicable “The principles of law relevant to the consideration of the issues raised in this appeal may be summarised as follows:—
(b) it must, in the first instance, be established by the party seeking a dismissal of proceedings for want of prosecution on the ground of delay in the prosecution thereof, that the delay was inordinate and inexcusable; (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:
(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 expression "discretionary order" can cover a huge variety of orders, some of them involving substantive rights and others being merely procedural in nature including mundane day to day procedural orders, such as orders for adjournments etc. I think that in reality over the years since In bonis Morelli; Vella v. Morelli this court has exercised common sense in relation to that issue. The court would be very slow indeed to interfere with the High Court Judge's management of his or her list, but in a case such as this particular case where much more substantial issues are at stake the court, while having respect for the view of the High Court Judge, must seriously consider whether in all the circumstances and in the interests of justice it should re-exercise the discretion in a different direction.” The onus of proof 5. A further principle, also set out in Primor, is that the onus of proof lies upon the party asserting delay. Therefore, the onus falls on the respondents in this appeal. But at one part of the judgment, the learned High Court judge stated:- “I am satisfied that where there has been inordinate delay on the part of a plaintiff in prosecuting a claim against a defendant, there is an onus upon that plaintiff to offer an explanation by way of evidence or argument or both demonstrating that the delay has been excusable in the circumstances. I am satisfied that such an onus lie upon Homes in these proceedings. I am not satisfied that Homes has discharged that onus.” It is said by the respondents that this passage is unrepresentative of the approach adopted generally in the judgment. I do not agree. I think that in this the learned trial judge erred. Here, and at a number of other points in the judgment, he appeared to approach matters as if the primary onus of proof in this application before him lay upon the appellants, who were of course the respondents to the motion. At a number of points, he observed that the appellants were unable to justify or explain steps that they took in a context which again conveys the clear impression that that primary onus lay upon those appellants to explain delays which undoubtedly occurred in the cases. This error is explicable in light of the fact that the appellants, as the moving parties in the application to amend the statement of claim, went first at the High Court hearing. The onus lay upon them in that application to justify the granting of leave to amend and to consolidate. But the onus of proof in applications to dismiss for inordinate and inexcusable delay lies upon the moving party (here the respondents) to demonstrate that the delay was inordinate and inexcusable; not the converse. The error is entirely understandable, but it is highly material. 6. At the core of these appeals, there lies one simple central point. The Primor tests are sequential. A significant part of the learned High Court judge’s judgment amounted to a sustained, and, be it said, often justified, criticism of the appellants’ conduct in the proceedings. He castigated them for “contumelious conduct”, and cited persuasive authority to the effect that:- “…a series of separate inordinate and inexcusable delays in complete disregard of the rules of court and with full awareness of the consequences can also properly be regarded as contumelious conduct or if not that, to an abuse of the process of the court…” (per Parker LJ in Culbert v Westwell and Company [1992] 2 P.I.Q.R. 54) He held that, prima facie, a delay of (then) sixteen years between the commencement of proceedings and the trial of those proceedings was inordinate, and that the delays were inexcusable. He also held in light of that elapse of time, prejudice should be presumed. In this computation, the judge included periods in excess of seven years while appeals were pending in the court system. This was, by any standard, a substantial period of the time elapse. Absent very unusual circumstances, I am not persuaded that, in this case at least, it was appropriate to include such delays in the computation of time. Regrettably, then and later, such delays were significant. 7. The question for consideration here is whether the appellants were guilty of that inordinate delay, and whether delay for which they were responsible was inexcusable. This judgment concludes that the High Court judge erred in his application of the two tests. Extraneous considerations Was there actual prejudice? 10. But this test does not arise unless and until it has been established that the delay has been inordinate and inexcusable. This point is critical in these appeals. In applications of this type, misconduct may be considered as part of the balance of justice. Such conduct will obviously arise in an application to dismiss for abuse of court process. 11. Some of the procedural stances adopted by both sides here seem to have been motivated more by perceived tactical advantage in a procedural war of attrition, rather than by any desire to get the proceedings back on a firm footing. By way of illustration, at one point early in the proceedings, the respondents sought to consolidate the two sets of proceedings. Ill advisedly, the appellants resisted the applications. Years later, the appellants sought to remedy the situation, by themselves applying to consolidate the proceedings. Yet, by then, the respondents objected to the application on grounds which can only be described as technical. Payment of security for costs 13. For the reasons which are set out herein, therefore, I conclude that these cases are to be seen as, to an extent, standing on their own unusual facts and arising in a situation where, despite the elapses of time which have undoubtedly occurred, the delay is excusable. The claim, therefore, should not be dismissed, but rather steps should immediately be taken to expedite, and ensure an early hearing in a manner most appropriate to deal with a very substantial claim in the most expeditious way. The nature of the claim The background circumstances 16. It is said that in accordance with this arrangement, an employee of Deloitte, although not a qualified accountant, became the financial controller of the Lismore companies at the (even now) very substantial salary of £2,750 per week. The companies did not prosper. On the 26th September, 1989, the Bank appointed Bernard Somers to be the receiver over the two properties of the two plaintiffs. The appellant companies claimed originally that the Bank, Deloitte, the quantity surveyors, and the auctioneers managed the affairs of the companies so badly that they ran the business into the ground. They claimed that Mr Somers, the fifth defendant, sold the companies’ assets at an undervalue. All this has yet to be established. The two proceedings “Why the plaintiffs thought it appropriate to institute independent proceedings in the High Court I do not know. All the matters complained could be resolved in one action and the institution of two independent sets of proceedings can only increase the costs of the litigation to all parties.” (see Lismore Homes Limited (in Receivership) v Bank of Ireland Finance Limited, Deloitte Haskins and Sells, Brendan Merry and Partners, PB Gunne (Dublin) Limited and Bernard Somers; Lismore Builders (In Receivership) v Bank of Ireland Finance Limited, Deloitte Haskins and Sells, Brendan Merry and Partners, PB Gunne (Dublin) Limited and Brendan Somers [1999] 1 I.R. 501 at p. 505) In his dissenting judgment in the same appeal, Lynch J. stated, in blunt terms, that the only possible motivation for the initiation of the two separate sets of proceedings was to put pressure on the defendants by the threat of incurring two very substantial sets of costs. In itself, this is not a sufficient ground to dismiss the claim. 18. I turn then to the sequence of events. A chronology of events 20. The plenary summonses herein were issued on the 20th April, 1990. The Bank entered its appearances on the 16th May, 1990. On the 18th May, 1990, Messrs A&L Goodbody entered appearances for Deloitte. On the 18th September, 1990, Homes and Builders served their plenary summonses on the solicitors for the fourth named defendant, who undertook to enter an appearance. On the 10th October, 1990, both Homes and Builders served plenary summons on solicitors for the third named defendant, who also undertook to enter an appearance. On the 1st November, 1990, the appellants served their plenary summons on the solicitors for the fifth named defendant, who also undertook to enter an appearance. 21. On the 8th March, 1991, the solicitors for the third named defendant, Brendan Merry, issued motions for security for costs against Builders. On the 8th April, 1991, Homes and Builders both delivered their statements of claim. On the 10th June, 1991, the Bank issued notices for particulars arising from the two statements of claim. On the 15th July, 1991, Homes and Builders brought motions seeking discovery against all the then defendants. These motions were, apparently, adjourned from time to time and, on the 30th July, 1992, the motions were adjourned generally with liberty to re-enter. The initiation of two sets of proceedings was not the only procedural irregularity. Having unnecessarily issued two sets of proceedings, the appellants then brought motions for discovery prior to any of the defendants filing their defences. This is not in accord with normal procedure. The applications for security of costs The orders of Keane J. on the 2nd March, 1992 24. After Keane J.’s order aforesaid, the two sets of proceedings moved out of step with each other. This procedural disjunction was never truly remedied. As a consequence, the proceedings remained “out of kilter” and delays in one, fed into, and caused delays in the other. Much of the fault for this must, of course, be laid at the appellants’ door. They had chosen to initiate the two separate sets of proceedings. Many of the confused and misconceived steps described here took place in an era before active case management. If ever there were cases requiring robust case management, these were those cases. It is noteworthy however that no party even saw fit to bring a motion for directions under the Rules of the Superior Courts 1986, a course of action which was open to them even then. Appeals against Keane J.’s orders Deloitte’s application to consolidate the proceedings while the Homes appeal was pending before this court - Keane J.’s order of the 30th July, 1992 26. On the 27th May, 1992, Deloitte brought a motion before the High Court seeking to consolidate the two proceedings which had been brought by Homes and Builders. A similar motion was brought by the Bank on the 16th June, 1992. The Lismore companies objected to this application. It will be remembered that, by this point, the two proceedings had become separated, and, by then, the appeal brought by Homes was pending before this Court. Unsurprisingly, therefore, in the light of this unsatisfactory situation, Keane J. on the 30th July, 1992, ordered that while the actions could not be actually consolidated, they should be nonetheless tried together; that all further proceedings in the Homes action against the Bank and Deloitte be stayed pending lodgement of security for costs in favour of those defendants; and, further, that all subsequent proceedings in the Homes action as against the third defendant, Brendan Merry and Partners, the fourth defendant, PB Gunne (Dublin) Limited, and the fifth defendant, Bernard Somers, the receiver, be stayed pending the determination of the appeals to the Supreme Court. That judge also ordered that all further proceedings in the Builders proceeding be stayed “pending the determination of all appeals to the Supreme Court by the plaintiff” in respect of the security for costs orders made on the 2nd March, 1992. He also ordered that the motions for discovery, brought by Homes and Builders, be adjourned generally with liberty to re-enter. Builders decide to appeal Keane J.’s order of the 30th July, 1992, linking, but not consolidating, the two proceedings Homes applies to extend the time to appeal Keane J.’s order of the 2nd March, 1992 Builders’ Supreme Court appeal of Keane J.’s order directing payment of security for costs 30. This Court allowed Builders’ appeal against the security for costs orders which had been made in favour of the Bank and Deloitte; but dismissed appeals brought by Homes and Builders requiring them to give security for costs to the third named defendant, Brendan Merry, and to PB Gunne, the fourth named defendant. This Court’s observations on the appeal in 1998 32. However, in summary, it must be accepted that up to the 11th February, 1998, a delay of up to almost six years was attributable to lapse of time while appeals were pending in the court system. In light of the outcome of the appeal, it cannot be said they were without merit. How the delays were characterised in the judgment of the High Court “…no evidence was adduced that Homes was concerned by this very substantial delay, or took any steps to reduce the extent of that delay. The same can of course be said of the Bank and Deloittes, (and the other defendants). However as indicated earlier, the obligation to prosecute a claim of this kind rests principally on the plaintiff.” I find it difficult to identify precisely the nature of the added duty or onus on the appellants when the matter was awaiting hearing on appeal or the procedural steps which should have been taken arising from such a duty. In hindsight, it would undoubtedly have served them better if they had been seen to apply for priority for the appeal but there were clearly extensive delays in the system then. Neither party made such an application. It is unclear what the result of such an application would have been. All this must also be seen in the context of Keane J.’s order restraining Homes from prosecuting its claim against the Bank pending the resolution of its appeals before the Supreme Court, and the fact that the appeals were pending at that time. Up to the year 1998, therefore, I do not believe that it was legitimate to conclude that either Homes or Builders had in fact been guilty of inordinate and inexcusable delay. Undoubtedly, the delay in itself was inordinate but this is not to say that appellants had been responsible for it, or that it was inexcusable. The High Court judge concluded that the elapse of time placed an added onus on the appellants to press on the proceedings. In my view, insofar as the judgment took this period into account at all, I think it was in error. The sequencing of the Primor tests It is always necessary for the defendant applicant to demonstrate, and he bears that burden, that the plaintiff has been guilty of inordinate and inexcusable delay. Subject to that, however, the court should aim at a global appreciation of the interests of justice and should balance all the considerations as they emerge from the conduct of and the interests of all the parties to the litigation. The separate considerations mentioned by Hamilton C.J. should not be treated as distinct cumulative tests but as related matters affecting the central decision as to what is just.” (emphasis added) Any balance of justice considerations must hinge on inordinate and inexcusable delay being established as a condition precedent. Undoubtedly, the plaintiffs’ conduct of proceedings can be taken into account in a consideration of ‘all the circumstances of the case’, but as a prior condition to a weighing of the balance, there must be an analysis of whether there was, actually, inordinate and inexcusable delay on the part of the appellants. 35. Somewhat different considerations arise in the context of the next period to be considered from the 11th February, 1998, onwards to the issuing of the notices of motion to dismiss. What transpired between the Supreme Court judgment of the 11th May, 1998, and the initiation of this motion to dismiss for want of prosecution on the 25th February, 2005 The respondents’ reaction to the effort to “merge” the two proceedings 38. In response to this letter, on the 12th July, 1999, Homes’ and Builders’ solicitors reiterated their contention that they intended to serve a combined statement of claim. On the 29th July, 1999, the Bank issued a motion to fix the amount of security for costs to be paid by Homes. On the 6th August, 1999, Deloitte’s solicitors reiterated that they would not consent to, or accept delivery of, a combined statement of claim and, on the 27th October, 1999, they also issued a motion to fix the amount of security for costs to be paid by Homes. In November 1999, Homes withdrew the notice of appeal which it had entered on 14th September, 1992, appealing the decision of Keane J. that Homes and Builders actions be heard linked together. This should have created a situation where, had matters proceeded normally, the Homes action might have been got on with reasonable efforts from both sides. But that was not to be. 39. On the 25th February, 2000, both Homes and Builders again purported to serve, what has been described in submissions, aptly, as, a “blockbuster” “combined amended statement of claim” on behalf of both appellants. They had no leave to do so. No application had been brought to court to consolidate the proceedings. In February and March 2000, all the defendants rejected this document which, as the learned High Court judge in these motions rightly pointed out, was deficient in many respects over the entire of its one hundred and twenty nine pages. 24th March 2000: McCracken J. fixes the amounts of security in the High Court Appeals against McCracken J.’s orders on the amount of the security Particulars and discovery motions 43. On the 4th February, 2003, the Master of the High Court directed Homes to make discovery to the Bank and, ultimately, on the 25th June, 2003, Antoinette Kennedy, James Kennedy’s wife and also a director of the two Lismore companies, swore an affidavit of discovery. 44. On the 16th January, 2004, the appeal in relation to Johnson J.’s order directing particulars was heard by this Court. The appellants were directed to provide the particulars within four weeks. The particulars were provided on the 13th February, 2004. 45. On the 1st April, 2004, Homes and Builders withdrew their appeals against the quantum of the security ordered in the case of the third, fourth and fifth named defendants. As a consequence, the Lismore companies became liable for orders for security against each of those three defendants for a total sum of €1,250,000. It is unnecessary to particularise the precise apportionment between the defendants in the light of subsequent events where, ultimately, the claims against each of those defendants was discontinued. On the 1st June, 2004, the proceedings against Brendan Somers too, were discontinued.
Further efforts to merge the two claims 25th February 2005: Deloitte brings their motion to dismiss 48. What then were said to be the periods of culpable delay? The learned High Court judge held that, in all the circumstances there was inordinate and inexcusable delay from 11th February, 1998 onwards. In applications of this nature, what is relevant is the extent and proportion of any system delay in the context of the relevant time periods, seen in the round. The alleged delay from the 11th February 1998 50. There is of course some substance in the contention that from 2002 onwards, there is the appearance that the appellants were seeking, merely, to keep the proceedings “ticking over”. They did not at any point bring a motion for judgment. They did not bring a motion for particulars. Their conduct with regard to seeking to amend the statement of claim and to present a fait accompli regarding consolidation by the consolidated statement of claim was not in accordance with the Rules of the Superior Courts. But it cannot be said there were no ongoing steps in the proceedings. One of those steps, on the 6th February, 2002, was the lodging of €253,947.62 in favour of both the Bank and Deloitte. In my view, this is a significant consideration in assessing the appellants’ bona fides at least insofar as concerning prosecuting the claims. This fact although mentioned in the High Court judgement, was not weighed in the context of a consideration of whether the delay was inexcusable. In my view, there was a failure here to address a relevant consideration. The respondents’ submissions The delay and default in filing defences The High Court judgment 54. The High Court judgment held that there was nothing to prevent Homes from prosecuting its claim as and from the Supreme Court appeal on the 11th February, 1998. As pointed out earlier, in a letter dated the 7th July, 1999, Deloitte’s solicitors actually accepted the onus was on them to bring the application to fix the security. have already made observations on the characterisation of the period from the 25th October 2001 to the 23rd October 2004. 55. On a number of occasions, the judgment refers to “procedural steps” taken by the respondents contributing to the delay. I do not think it is possible to make a value-laiden distinction in principle between the “procedural steps”, in the sense of seeking security and processing appeals, adopted by one side as opposed to steps taken by the appellants. Time began to run on the 6th February, 2002 57. Some of the delays which have occurred in these cases have to be seen as being highly unusual, including lengthy and unfortunate delays in the court system itself during the periods up to the issuing of the notices of motion to dismiss. 58. It is true that the efforts to re-plead the case were inappropriate. The actual pleading of the case in the intended amended pleadings was entirely unsatisfactory. However, this is not an application to strike out the claim for abuse of the court process. The remedy The order
(b) that the defendants will file their defences within three weeks of the receipt of the statements of claim; (c) that all parties will provide particulars of their claims or defences and will complete discovery, on the basis of the claims and defences within a period of three months from the date of filing of the defendants’ respective defences. In default of compliance with conditions (a) and (b), an application may be made on two days notice to the High Court in default of pleading or discovery for further orders including orders as to costs and for orders removing the stay aforesaid; and further (d) that an early application be made to the President of the High Court or a judge nominated by him to monitor and supervise compliance with these orders; for case management; and to fix dates for hearing of the linked cases subject to any further orders as appropriate as to compliance) with the rules of the Commercial Court (whether or not by entry into that Court’s list or not) regarding the provision of statements of the facts of the case, written submissions as to the law, witness statements, the provision of an issue paper, and such other ancillary procedural steps as are necessary to expedite and finalise these long outstanding claims. | ||||||||||||||||