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Judgment Title: Keohane v Hynes & another Neutral Citation: [2014] IESC 66 Supreme Court Record Number: 15/10 High Court Record Number: 2006 4225 p Date of Delivery: 20/11/2014 Court: Supreme Court Composition of Court: Hardiman J., Clarke J., Laffoy J. Judgment by: Clarke J. Status of Judgment: Approved |
THE SUPREME COURT [Appeal No: 15/2010] Hardiman J. Clarke J. Laffoy J.
Michael Keohane Plaintiff/Appellant and
John Hynes First Named Defendant and
Duncan Grehan practising under the style and title of Duncan Grehan and Partners Second Named Defendant/Respondent Judgment of Mr. Justice Clarke delivered the 20th November, 2014 1. Introduction 1.2 Mr. Keohane alleges that Mr. Hynes is liable to pay the euro equivalent of that balance together with interest. However, Mr. Keohane has also joined the second named defendant/respondent ("Grehan and Partners") who are the solicitors who acted both on his behalf and on behalf of the purchaser in the transaction in question. Against Grehan and Partners it is alleged that they were negligent in failing to advise Mr. Keohane of the fact that he was contracting with a company rather than with Mr. Hynes personally. In addition, Mr. Keohane claims that some of the provisions of the contract were insufficient to protect his interests. It is said that there was an actionable failure on the part of his solicitors to ensure that any contract entered into was, irrespective of who the purchaser might be, sufficient to protect his interests. It is argued that those issues are exacerbated by what is said to have been the conflict of interest arising by virtue of the fact that Grehan and Partners acted for both sides. In summary, Mr. Keohane alleges that, if the true nature of the contract which he was to sign had been explained to him, he would not have entered into that contract. In addition, it is said that it was possible that, if there had been no wrongdoing on the part of Grehan and Partners, a contract which was with Mr. Hynes personally and which did adequately protect his interests could have been procured and entered into. It is said that Studley became insolvent and was dissolved so that the contract with them became worthless. The claim is framed in the tort of negligence, in breach of contract and in misrepresentation. 1.3 Against that background, Grehan and Partners brought an application before the High Court seeking to have the proceedings dismissed either under O.19, r.28 of the Rules of the Superior Courts or under the inherent jurisdiction of the Court. Hedigan J. acceded to that application and dismissed the proceedings: (See Keohane v. Hynes & anor [2009] IEHC 601). Mr. Keohane appealed to this Court against that finding. It also appears that Hedigan J. made an order striking out as being bound to fail the proceedings not only as against Grehan and Partners but also against Mr. Hynes. It would appear that no application had been brought by Mr. Hynes seeking such a strike out. In those circumstances, it is said that there could have been no proper basis on which the claim against Mr. Hynes could have been struck out in any event. This side issue is one to which it will be necessary to turn in due course. 1.4 In addition, in the context of this appeal, Mr. Keohane sought leave to introduce additional evidence in the form of what is said to be a recording of a conversation between his wife and a solicitor in the firm of Grehan and Partners. 1.5 At the conclusion of the hearing, and having taken some time to consider the matter, the Court informed the parties that the appeal as and between Mr. Keohane and Grehan and Partners would be allowed and that the order of Hedigan J. dismissing the proceedings as against Grehan and Partners would be vacated. The Court indicated that it had reached that conclusion without needing to address the question of additional evidence for, as the Court noted, it was satisfied that, on the basis of the evidence before the High Court, the proceedings should not have been dismissed. It was not, therefore, necessary to determine the question of whether, had a different conclusion been reached, it would have been appropriate to admit the additional evidence concerned. Other than recording the nature of that application to admit additional evidence for the record and noting the issues which thereon arose, this judgment, which sets out the reasons why I supported the Court's view as thus announced, will not seek to express any view on the additional evidence question. Against that background, it is necessary to record the issues which arose at the hearing. 2. The Issues 2.2 So far as the substantive issue on the appeal is concerned, it was accepted by both parties that the jurisdiction to dismiss on the basis of being bound to fail is to be sparingly exercised. It might be said that there was a minor issue between the parties as to the precise application of that jurisprudence to certain types of what might be called "documents cases" and also as to the extent to which this case can properly be regarded as such a documents case. In fairness, that question arose more in the context of the argument raised on behalf of Mr. Keohane concerning the approach of the trial judge rather than on the argument before this Court. 2.3 It was urged on behalf of Mr. Keohane that the trial judge had impermissibly reached conclusions of fact on an application to dismiss. Rather, it was said, the trial judge should have accepted, for the purposes of the application to dismiss, that the facts were as averred to in the affidavit evidence filed on his behalf. Against the background of those issues, it is first necessary to refer to the judgment of the trial judge. 3. The High Court Judgment 3.2 The trial judge then moved on to the consequences of this finding for Grehan and Partners. He examined the possibility that Mr. Keohane might still be able to sustain a claim against his solicitors on the following two grounds:
(b) That Grehan and Partners failed generally to ensure that Mr. Keohane received the amount due to him under the contract.
4. New Evidence 4.2 Order 58, rule 8 of the Rules of the Superior Courts provides that the Supreme Court has full discretionary power to receive further evidence on questions of fact. However, if the new evidence sought to be tendered was in existence before the date of the decision in the High Court, such evidence should normally only be admitted on special grounds and the leave of the Court must be obtained. Mr. Keohane sought to have this new evidence admitted in the interests of justice. He additionally argued that his case on this point is outside the established jurisprudence as the High Court judgment was not reached after a final trial on all the issues but rather on a motion in which it was asserted that the case was bound to fail. 4.3 Grehan and Partners relied on the judgment of this Court in Murphy v. Minister for Defence [1991] 2 I.R. 161, where Finlay C.J. posited the following three criteria for the admission of new evidence:
2. The evidence must be such that if given it would probably have an important influence on the result of the case, though it need not be decisive; 3. The evidence must be such as is presumably to be believed or, in other words, it must be apparently credible, though it need not be incontrovertible.” 4.4 It was argued on behalf of Mr. Keohane that the jurisprudence to which I have referred does not apply to the fullest extent in cases where it is sought to dismiss proceedings on the basis of their being bound to fail. In that context, reliance was placed, by analogy, on the approach of the courts to the dismissal of cases which do not disclose a cause of action on the pleadings. For instance, in Sun Fat Chan v. Osseous Ltd [1992] 1 I.R. 425, the Supreme Court, per McCarthy J., stated at p. 428:
4.6 Whatever may be the merits of those arguments concerning the test by reference to which it might be appropriate to admit new evidence on appeal in a case involving an application to dismiss as being bound to fail, and whatever might have been the merits of the application to admit new evidence in this case, it seemed to me to be clear that it would only be necessary to consider whether it was appropriate to admit new evidence if the Court came to the conclusion that Hedigan J. was correct to dismiss the proceedings against Grehan and Partners as being bound to fail on the basis of the evidence which was before him. The only basis on which the additional evidence was sought to be tendered (as confirmed by counsel for Mr. Keohane) was to bolster a contention that the claim was not bound to fail in the event that the Court agreed with Hedigan J. that the proceedings could properly be regarded as being bound to fail on the basis of the evidence which was before the High Court. It was for that reason that I supported the Court's finding that it was unnecessary to consider whether new evidence ought be admitted, for I fully agreed with the Court's view that the proceedings could not be said to be bound to fail even on the basis of the evidence which was before the High Court. 4.7 Against that background, it is appropriate to set out the reasons why I supported the Court's view that the proceedings had not been shown to be bound to fail 5. Were the proceedings bound to fail? 5.2 I do not read the judgment of the trial judge as taking the view that such claims might not, at least in theory, be successful. Rather, the view which the trial judge appears to have taken is that the necessary factual basis for such a claim could not be established. As noted above, Hedigan J. concluded that Mr. Keohane’s claim was fundamentally premised on the contention that he was understood that he was contracting solely with Mr. Hynes, and not Studley. Having held there was no evidence to sustain this contention, the judge ruled it was “impossible to run the case on this basis”. 5.3 It is on that issue that it is necessary to examine the evidence. Mr. Keohane, in his affidavit of the 18th March, 2009, denied that he was aware of the fact that he was contracting with a limited liability company, and affirmed that it was his belief that he was contracting with Mr. Hynes personally. He further claimed that he was so advised both by Mr. Hynes and by Grehan and Partners. On the date the agreement was concluded, Mr. Keohane stated that portions of the agreement were read to him, although he was not allowed to read the document personally. It is said that the document was immediately taken away from him when he signed it and that he was refused a copy. The account of Ms. Betty Keohane, the wife of Mr. Keohane, who was also present at the signing of the agreement in 2000, as set out in her affidavit of the 17th July, 2009, is almost identical to that of Mr. Keohane. This version of events is denied by Grehan and Partners, who have given an alternative account in the affidavits of Malachy O’Callaghan. 5.4 The real question was as to whether, based on that evidence, it can fairly be said that Mr. Keohane's claim as against Grehan and Partners is bound to fail on the facts. 5.5 At this stage, it is important record what, in my view, was a very significant development which occurred at the hearing of the appeal. As noted earlier, the clear focus of the judgment of the trial judge was on the question of whether the allegation that Mr. Keohane did not know that he was contracting with Studley was capable of being sustained. As also noted, Hedigan J. concluded that that allegation could not be sustained and that an inability to sustain that allegation rendered the proceedings bound to fail. 5.6 However, at the hearing of the appeal, counsel on behalf of Grehan and Partners acknowledged that, in accordance with the jurisprudence to which I will shortly refer, the Court would have to accept, for the purposes of this application, that Mr. Keohane would be able to sustain the factual basis of his argument. Likewise, counsel accepted that there were other potentially sustainable allegations of negligence concerning the way in which the contract was drafted. Thus, to a very real extent, it appeared to me that counsel largely abandoned the reasoning of the trial judge but sought to justify the trial judge's ultimate conclusions on a different basis. While it will be necessary to explore that basis in more detail in due course, it can, in summary, be said that the focus of the argument presented to this Court was that there was no sustainable basis on which Mr. Keohane would be able to establish any adverse consequences of any wrongdoing which might be proven. On that basis, it was said that a wrong without damage was not actionable and that proceedings in which it was impossible that damage could be established were, in substance, bound to fail. 5.7 It seemed to me to follow, therefore, that counsel accepted, to a very significant extent indeed, the principal criticism which was made by Mr. Keohane of the trial judge's judgment, being that the trial judge had strayed impermissibly into issues of fact. 5.8 Given the approach which was adopted by the trial judge and in the light of the argument as it developed, it does seem to me to be important, at this stage, to revisit and restate the undoubted limitations which exist, in the context of a motion to dismiss as being bound to fail, on seeking to determine facts. I, therefore, turn to the jurisprudence. 6. Jurisprudence
In that same case, Murray J., in explaining the need for caution in such an application, stated at p. 334:
The object of such an order is not to protect a defendant from hardship in proceedings to which he or she may have a good defence but to prevent the injustice to a defendant which would result from an abuse of the process of the court by a plaintiff. Clearly, therefore, the hearing of an application by a defendant to the High Court to exercise its inherent jurisdiction to stay or dismiss an action cannot be of a form of summary disposal of the case either on issues of fact or substantial questions of law in substitute for the normal plenary proceedings.” 6.4 More recently still, in Lopes, I said the following at para. 2.6 of my judgment:
3.10 However, it is important to emphasise the different role which documents may play in proceedings. In cases, such as the examples which I have given earlier, involving contracts and the like, the document itself may govern the legal relations between the parties so that the court can consider the terms of the document on its face and may be able to come to a clear view as to the legal consequences flowing from the parties having governed their relations by the document concerned. 3.11 However, there are other cases where documents are not vital in themselves save that they may cast light on the underlying facts which may be at the heart of the proceedings concerned. Correspondence, minutes of meetings, memoranda and the like, do not, of themselves, create legal relations between the parties. Rather they purport to reflect facts such as what was said at meetings, what was communicated from one party to another or the like. Parties may explain or seek to clarify what might otherwise appear to be the natural meaning of such documents. At the end of the day, it will be what view the court takes as to what actually happened that will determine the facts on the basis of which the court will come to its judgment. Contemporary documentation is often a very valuable guide to such facts, but such documentation is not necessarily determinative. It is important, in that context, not to confuse cases which are dependent on documents themselves with cases where documents may be a guide, albeit often a most important guide, to the underlying facts which need to be determined in order to resolve the issues between the parties.” 6.6 It is for that reason that all of the jurisprudence emphasises that the jurisdiction is to be sparingly exercised and only adopted when it is clear that the proceedings are bound to fail rather than where the plaintiff's case is very weak or where it is sought to have an early determination on some point of fact or law. It is against that background that the extent of the court's entitlement to look at the facts needs to be judged. 6.7 I am in full agreement with the views expressed by Birmingham J. in Burke. Where there is evidence placed before the court on affidavit on behalf of a plaintiff which, if accepted at trial, might arguably lead to the plaintiff succeeding, then that is an end of the matter. But it does not necessarily follow that a plaintiff even has to put evidence of that type before the court. In Lopes, I observed at para 2.5:
6.9 In summary, it is important to emphasise the significant limitations on the extent to which a court can engage with the facts in an application to dismiss on the grounds of being bound to fail. In cases where the legal rights and obligations of the parties are governed by documents, then the court can examine those documents to consider whether the plaintiff's claim is bound to fail and may, in that regard, have to ask the question as to whether there is any evidence outside of that documentary record which could realistically have a bearing on the rights and obligations concerned. Second, where the only evidence which could be put forward concerning essential factual allegations made on behalf of the plaintiff is documentary evidence, then the court can examine that evidence to see if there is any basis on which it could provide support for a plaintiff's allegations. Third, and finally, a court may examine an allegation to determine whether it is a mere assertion and, if so, to consider whether any credible basis has been put forward for suggesting that evidence might be available at trial to substantiate it. While there may be other unusual circumstances in which it would be appropriate for the court to engage with the facts, it does not seem to me that the proper determination of an application to dismiss as being bound to fail can, ordinarily, go beyond the limited form of factual analysis to which I have referred. 6.10 It is an abuse of process to bring a claim based on a breach of rights or failure to observe obligations where those rights and obligations are defined by documents and where there is no reasonable basis for suggesting that the relevant documents could establish the rights and obligations asserted. Likewise, it is an abuse of process to maintain a claim based on facts which can only be established by a documentary record and where that record could not sustain any necessary part of the factual assertions which underlie the case. Finally, it is an abuse of process to maintain a claim based on a factual assertion in circumstances where there is no evidence available for that assertion and, importantly, where there is no reasonable basis for believing that evidence could become available at the trial to substantiate the relevant assertion. However, the bringing of a claim based on a factual assertion for which there is or may be evidence (even if the defendant can point to many reasons why it might be argued that a successful challenge could be mounted to the credibility of the evidence concerned) is not an abuse of process. It is for that reason that a court cannot properly engage with the credibility of evidence on a motion to dismiss as being bound to fail and it is for that reason that the very significant limitations which I have sought to identify exist in relation to the extent to which a court can properly engage with the facts on such an application. 6.11 Against the background of that analysis, it seems to me that the argument raised on behalf of Mr. Keohane, to the effect that the trial judge had trespassed into the facts beyond the limits which I have sought to identify, was well made. The points noted by the trial judge, including the correspondence to which he referred, are all matters which, doubtless, can be put to Mr. Keohane and his witnesses at trial and may, depending on the view which the trial judge takes of those points and the response of any relevant witnesses to them, be properly taken into account by the trial judge in assessing the credibility of the evidence presented by and on behalf of Mr. Keohane. But those points are no more than that. They are issues which may go to credibility. Credibility is for the trial and not for a motion to dismiss as being bound to fail. Against that background, it is, perhaps, not surprising that counsel for Grehan and Partners conceded that this application should progress on the assumption (despite it being strenuously denied by his clients) that Mr. Keohane would be able to establish a breach of duty or breach of contract on the part of Grehan and Partners in relation both to the argument that the contract should have been with Mr. Hynes personally and also as to what was said to be the inadequacies of the contract itself. In substance, counsel's argument, in light of that concession, was that there was no sustainable basis on which Mr. Keohane could establish any adverse consequences of any such breach. I, therefore, turn to that question. 7. Could there be consequences? 7.2 This Court, in Lough Swilly Shellfish Growers Co-Operative Society Ltd & anor v. Bradley & anor [2013] 1 I.R. 227, set out the basis for allowing a new argument to be made on appeal. At para. 27 of the judgment, O’Donnell J. said:-
7.4 In essence, the argument put forward on behalf of Grehan and Partners was this. The contract was entered into on the 27th September, 2000. On the basis of his affidavit evidence, Mr. Keohane accepted that, by January or February of the following year, he was aware that the written contract was with Studley. The scheme provided for in the contract had a completion or closing date of the 31st March, 2001, by which time the full purchase price was required to be paid over and in return share transfers and other supporting documentation were to be provided to the purchaser. 7.5 Counsel argued that this was, therefore, clearly, a so-called “no transaction” case (for which see, for example, ACC Bank v. Johnson [2010] IEHC 236). On that basis, it is said that the proper analysis of any adverse consequences of the alleged negligence or breach of contract required one to look at the situation on the basis that, had Mr. Keohane been properly advised, he would not have entered into the contract at all. On that basis, it was argued that there could have been no adverse consequences for Mr. Keohane. However, counsel for Mr. Keohane suggested in argument that there was a credible basis for believing that, given that there were many meetings between Mr. Hynes, Grehan and Partners and Mr. Keohane, a contract could have been procured which was with Mr. Hynes personally and which did not have the alleged failings present in the contract as actually entered into. It is no part of the function of this Court to express any view on whether such an argument might succeed. Indeed, it might well be that, had the consequences issue been raised in the High Court, some additional evidence might have been put before the Court on Mr. Keohane's behalf in that regard. I was, however, satisfied that it did not necessarily follow from the accepted facts of this case that this would be found to be a “no transaction” case. At a minimum, I was satisfied, therefore, that it is not clear (even on the basis of what were said to be uncontested facts) that Mr. Keohane might not be able to establish adverse consequences. On that basis alone, I was satisfied that the claim was not bound to fail. There may, indeed, be other bases on which the consequences argument might be met on behalf of Mr. Keohane at trial. But all those issues are ones for a trial and not for a motion to dismiss. That leads to the third point. 7.6 It did not seem to me to be necessary to reach a final conclusion on whether, at the level of principle, it might be appropriate to dismiss as being bound to fail a claim where, as here, it is accepted that there is a stateable basis for establishing breach of duty or breach of contract but where the only basis put forward for suggesting that the claim was bound to fail concentrated on consequences. 7.7 Likewise, I was satisfied that it was not necessary to reach a final conclusion on whether it was appropriate to permit what I was satisfied was a new argument to be raised for the first time on appeal since I was satisfied that that new argument would not avail Grehan and Partners in any event. 8. Conclusions 8.2 Even on the basis of permitting (without deciding that it was appropriate so to do) a new argument to be raised, I was not satisfied that the lack of consequences argument put forward on behalf of Grehan and Partners was such as made these proceedings bound to fail. 8.3 Finally, it is necessary to return to the question of the position in respect of the claim against Mr. Hynes. I note that Mr. Hynes appears to have been served with the notice of appeal. It seems clear that an order to dismiss the claim as against Mr. Hynes could not validly have been made on an application brought solely by Grehan and Partners in circumstances where no like application was brought before the High Court on behalf of Mr. Hynes. Subject to clarifying with counsel as to the status of the appeal against the order insofar as it related to the claim against Mr. Hynes (given that there was no appearance on behalf of Mr. Hynes at the appeal) I would be minded to allow that aspect of the appeal as well.
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