THE SUPREME COURT
[Appeal No. 2013/416]
McKechnie J.
MacMenamin J.
Laffoy J.
BETWEEN
ALLIED IRISH BANKS PLC
PLAINTIFF/RESPONDENT
AND
THOMAS DARCY AND ANTOINETTE DARCY
DEFENDANTS/APPELLANTS
Judgment of Ms. Justice Laffoy delivered the 10th day of November, 2016
Background to the application which gave rise to the order under appeal
1. There has been a considerable amount of litigation between the plaintiff/respondent (the Bank) and the defendants/appellants (the Appellants) in the High Court, the Court of Appeal and in this Court arising out of the banker/customer relationship of the Bank and the Appellants. This appeal arises out of plenary proceedings initiated in the High Court by the Bank against the Appellants by plenary summons which issued on 26th February, 2010 (Record No. 2010/1965P) (the 2010 Plenary Proceedings). Those proceedings related to a very distinct aspect of the banker/customer relationship of the Bank and the Appellants, which I consider it is important to identify and to distinguish from other issues arising from that relationship which have generated other litigation.
2. The Appellants, as the owners of a dwelling house known as “Woodview”, situate at Grey’s Lane, Howth, County Dublin (“Woodview”), by a mortgage dated 27th January, 2006 made between the Appellants of the one part and the Bank of the other part (the Mortgage) mortgaged and charged “Woodview” and other properties in favour of the Bank as security for all monies and liabilities due by the Appellants to the Bank.
3. “Woodview” was seriously damaged by fire in May 2009. At the time, “Woodview” was insured with AXA Insurance Company (AXA), but the interest of the Bank as mortgagee in “Woodview” was not noted on the relevant insurance policy. Hence, the 2010 Plenary Proceedings were initiated by the Bank to enforce the obligations of the Appellants to it under the Mortgage in relation to insuring “Woodview”.
4. The Appellants’ obligations in relation to insuring “Woodview” were regulated by Clause 7 of the Mortgage, which contained the covenants by the Appellants as mortgagors. Paragraph (d) dealt specifically with the obligations to take out and maintain index-linked insurance cover over, inter alia, “Woodview”. It was specifically provided that, on request, the Appellants would complete all necessary documentation to enable the Bank to have its interest in “Woodview” noted by the insurance company on the policy (sub-paragraph (iii)). There was also provision that the Bank (but without obligation) might pay any premium or effect such insurance if the Appellants did not do so (sub-paragraph (iv)). In sub-paragraph (v) the Appellants covenanted with the Bank in the following terms:
“To apply any moneys payable or received on any insurance of the mortgaged property whether effected by the Mortgagor or the Bank (without prejudice to any obligation to the contrary imposed by law or special contract) exclusively and expeditiously either in or towards making good the loss or damage in respect of which such moneys are payable or received or in default towards the discharge of the secured moneys AND the Mortgagor hereby declares that any such moneys payable to or received by him shall be held upon trust for the Bank subject to the proviso for redemption herein before contained.”
5. As was noted earlier, when the 2010 Plenary Proceedings were initiated, the interest of the Bank was not noted on the policy of insurance which the Appellants had taken out over “Woodview” with AXA. Moreover, while the Appellants had made a claim against AXA on foot of that policy in respect of the fire damage to “Woodview”, the claim was subject to proceedings by the Appellants against AXA, which were then pending. In order to protect its interest, the first relief sought by the Bank in the general endorsement of claim on the plenary summons was an order directing the Appellants to take all steps necessary to have the Bank’s interest noted by AXA on the policy in relation to “Woodview”. The Bank also sought orders restraining the Appellants from seeking or receiving payment of the proceeds of any claim for damage to “Woodview” in their sole name and for an order directing the Appellants to furnish to the Bank full information in respect of the progress of the claim and to consult with the Bank prior to acceptance of any sum in settlement of such liability. The Bank also sought an order in the following terms:
“An Order directing the [Appellants] to apply any monies payable or received on foot of such policy of insurance solely and exclusively for the purposes set out in Covenant 7(d)(v) [of the Mortgage] . . .”
Damages for breach of contract were also claimed.
6. The next step taken by the Bank in the 2010 Plenary Proceedings after issuing the plenary summons was to bring a motion which was returnable in the High Court on 10th May, 2010. In the notice of motion the Bank sought orders in precisely the same terms as the orders sought on the general endorsement of claim on the plenary summons for injunctive relief, which have been outlined above. The duration of the orders sought was not limited to the period pending the determination of the 2010 Plenary Proceedings, as is usual when interlocutory injunctive relief is sought, nor were the orders sought described as interlocutory orders.
7. The outcome of that motion was that an order was made by the High Court (Murphy J.) by consent on 19th May, 2010 (the Consent Order). The Consent Order, the duration of the effect of which was not stated therein to be limited, encompassed all of the four components of the injunctive reliefs sought against the Appellants both in the notice of motion and in the general endorsement on the plenary summons, with some minor variations. The second component of the curial part of the Consent Order (paragraph 2), which restrained the Appellants from seeking or receiving payment of the proceeds of any claim in their sole name contained the following additional provisions:
The wording of the final component of the curial part of the Consent Order (paragraph 4) differs from the final relief sought on the motion in that it was worded as a direction that the Appellants -
“do apply any proceeds of claim attributable to the reinstatement works exclusively and expeditiously towards making good loss/damage in accordance with the covenant 7(d)(v) contained in the [Mortgage] and thereby fully reinstating the property to its pre-fire condition (without prejudice to the Bank’s right to rely on any default as stated at 2 above).”
The order then provided that the “matter” was adjourned to 14th June, 2012 with liberty to apply. The Consent Order did not record that the Bank had given an undertaking as to damages to the Court, as is usual when interlocutory injunctive relief is granted by the Court.
8. After the Consent Order was made, the claim against AXA was settled and a sum of €650,000 was available for the reinstatement works to “Woodview”. In accordance with an agreement in writing entered into between the Bank and the Appellants on 9th March, 2011, the proceeds of the claim were held in a deposit account at the Sutton branch of the Bank in the name of the second named appellant solely, it having transpired that the policy was in her name solely. It was also agreed that the Bank was entitled to apply a “management hold” to the funds in that account and that, in accordance with the terms of the Consent Order, “any payments from the account were to be made against Architect’s certificates confirming completion of reinstatement works” and with the signature of the second named appellant and the approval and signature of an official of the Bank.
9. Preparation for the reinstatement of “Woodview” commenced in early 2011. Planning permission for demolition and reconstruction was granted by Fingal County Council on foot of a decision dated 2nd June, 2011. The first Architect’s certificate submitted to the Bank by the Appellants for payment was in the sum of €43,050. That certificate was discharged by the Bank in April 2011. However, the second Architect’s certificate submitted to the Bank, which was in the sum of €146,123, which the Bank considered to be remarkably high, was not discharged by the Bank. In fact, a dispute ensued between the Bank and the Appellants in relation to the costs of reinstatement and the discharge of those costs. That dispute culminated in the application which resulted in the order of the High Court which is being appealed against.
The application which gave rise to the order of the High Court under appeal
10. On 27th June, 2012 the Bank brought a motion (the 2012 Application) in the 2010 Plenary Proceedings seeking the following orders:
11. The 2012 Application was grounded on an affidavit sworn by Kevin Lynch, Senior Lending Manager with the Bank, on 27th June, 2012. Having outlined the relevant facts from the Bank’s perspective and having referred to “changed circumstances”, Mr. Lynch explained the Bank’s position as follows in his affidavit (at para. 30):
“. . . the [Bank] proposes to apply the monies paid on foot of the insurance claim in reduction of the Mortgage liability and to take advice as to the proper course to realise the maximum value. It is unclear whether this will necessarily involve the reconstruction of the premises or whether it may be preferable to simply dispose of the property in its current condition, while giving credit for the balance of the insurance proceeds. It is clear that the [Appellants] have in truth no interest in the property and have been furnished with an opportunity prior to obtaining possession to satisfy the [Bank] of the good faith of their arrangements, and have signally failed to do so.”
Mr. Lynch then went on in the following paragraph (para. 31) to explain why the Bank was bringing the 2012 Application as follows:
“In order to avoid any suggestion that the [Bank] is disregarding the Order of the High Court, this Application is being brought in order to allow the payment out of the monies being currently held by the Bank in an account in the name of [the second named appellant]. The effect of this would be to reduce the principal and also the accumulating interest on the overall loan liability of €18,324,811.71 which the [Appellants] have no prospect of discharging in any event. The [Bank] is not however prepared to continue with a Building Contract of the type put forward by the [Appellants] in circumstances where there has been so much unanswered and where the suspicion is that the [Appellants] have been attempting to siphon funds for themselves.”
12. The Appellants disputed the Bank’s entitlement to the reliefs sought in the 2012 Application both on a factual and legal basis. The first replying affidavit which was sworn by the first named appellant on 30th October, 2012 disputed many of the averments contained in the grounding affidavit of Mr. Lynch. For instance, the first named appellant averred (at para. 28) that he took grave exception to the suggestion that the Building Contract was being used as a means of diverting or siphoning money to the Appellants in the manner suggested by Mr. Lynch and he characterised Mr. Lynch’s averment as “an untrue and outrageous allegation which has no basis in fact or in evidence”. Later, the first named appellant (at para. 32) set out his understanding, on the basis of advice, that the grounds upon which the Bank sought the specific relief set out in the 2012 Application were not legally or factually sound in that he had been advised that the Consent Order and Clause 7(d)(v) of the Mortgage -
“. . . provide only one trigger for the relief sought (namely, evidence that the [Appellants] have omitted to make good the property at issue) and the said trigger has never been activated nor proven.”
13. The first named appellant’s response to the averment contained in para. 30 of Mr. Lynch’s grounding affidavit quoted above was set out as follows (at para. 33):
“I say in addition that it is entirely inaccurate and false for the [Bank] to state, as it does in paragraph 30 of its affidavit, that the [Appellants] ‘have no interest in the property’. I say that this has been demonstrated in the manner in which the [Appellants] have attempted to furnish information to the Bank far in excess of what is required pursuant to the [Consent Order]. I say that it is also evidenced in the manner in which my wife and I have sought to defend the possession proceedings on the basis that “Woodview” represents our family home and as such we fully desire it to be reconstructed with the proceeds of the insurance claim set aside specifically for that purpose, with the agreement of the [Bank]. Moreover, even as is denied, in circumstances should the [Bank] ever recover possession of the property at issue, I say that the [Appellants] are still entitled to implement such full reinstatement of their home (pursuant to the Order) in order to fully maximise the value/return arising upon subsequent disposal of the property and thereby maximise the reduction in the [Appellants’] liability to the Bank.”
Finally, the first named appellant asserted that any attempt by the Bank to apply the proceeds of the monies paid on foot of the insurance claim for any purpose other than reinstatement of the family home clearly would amount to a breach of the Consent Order.
14. Exchange of affidavits on the 2012 Application continued thereafter. In an affidavit sworn on 13th December, 2012, Kevin Cronin, a Project Manager retained by the Bank to carry out a site inspection to assess the value of the works completed on the site in relation to the second Architect’s certificate, testified in relation to the site inspection which he had carried out on 23rd August, 2011. Mr. Cronin expressed the opinion that the entire fashion in which the project was being operated, based on his site inspection, “could only be regarded as eccentric in character and appeared to provide no control over the demands of the builder as far as payment procedure was concerned”. Earlier, Mr. Cronin had averred that he was concerned that the architect retained by the Appellants, who had signed the Architect’s certificates, had informed Mr. Cronin that, while he was signing certificates for payment, “he was really signing for the record or words to that effect, the amount claimed by the builder and not the value of the work completed on site”. A factor to which counsel for the Bank attaches significance is that no affidavit sworn by the architect retained by the Appellants was filed in response to Mr. Cronin’s affidavit.
15. A further affidavit sworn by Mr. Lynch on 18th December, 2012 was filed in response to the affidavits filed on behalf of the Appellants. Mr. Lynch expressly disputed certain matters of fact referred to in the affidavits filed on behalf of the Appellants. In particular, Mr. Lynch, on the basis of the facts he had outlined, averred that it was demonstrably the case that the second Architect’s certificate furnished was overstated. He went on to state that, while the Bank might have had a preference to see the monies (that is say, the insurance monies) applied towards a reduction of liability, the Bank regarded itself as bound by the terms of the Mortgage. He continued (at para. 19):
“The [Bank] was extremely disturbed that the manner in which the works were being conducted by the [Appellants] or their contractor (if different) created a real danger that the works would never be completed and was consistent with an intent to divert funds. The total liability of the [Appellants] to the [Bank] is in excess of €17,422,780.63 and in these circumstances, the [Appellants] have a very strong incentive to ensure that they are the beneficiaries of any funds. It is clear that no benefit will be conferred upon them by the completion of the works.”
Later, Mr. Lynch averred (at para. 26) that the conduct of the Appellants in relation to the case generally added to the concerns of the Bank, “particularly in circumstances where the [Appellants] clearly have no continuing legal interest in possession of the property and have a liability to the [Bank] in excess of €17,422,780.63.”
16. Taking an overview of the affidavits filed on the 2012 Application, they reveal a serious conflict of evidence, which could not be resolved by reference to the affidavits on their own.
Changed circumstances when appeal heard
17. The legal relationship between the Bank and the Appellants, as customers of the Bank and as mortgagors of “Woodview”, had indeed changed between the making of the Consent Order and the initiation of the 2012 Application and the circumstances changed further thereafter prior to the hearing of the appeal by this Court on 15th March, 2016.
18. First, the Bank obtained judgment in default of appearance on 16th February, 2011 in the Central Office of the High Court in summary proceedings between the Bank and the Appellants (Record No. 2010/2292S) in the sum of €17,422,780.63. The subsequent application brought by the Appellants to set aside that judgment was refused in a judgment of the High Court (Ryan J.) dated 20th July, 2012 ([2012] IEHC 305) and by order of the High Court (Ryan J.) of the same day. That judgment remains in being and this Court was informed that it has not been satisfied.
19. Secondly, in proceedings for possession of four properties secured in favour of the Bank by the Mortgage, including “Woodview”, in the High Court (Record No. 2010/539SP) the Bank was granted an order for possession in respect of the properties, including “Woodview”, by order of the High Court (McGovern J.) dated 16th April, 2012. A subsequent application by the Appellants for a stay on the order was refused by the High Court (McGovern J.). However, the Appellants appealed both orders of the High Court (McGovern J.) in the proceedings for possession to this Court. Those appeals were pending when the 2012 Application was initiated and when it was heard in the High Court. Eventually the Appellants’ appeal against the order for possession was successful. By order of this Court made on 13th November, 2013 the appeal was allowed, the orders of the High Court were discharged and the proceedings were remitted to the High Court for plenary hearing. Those proceedings were subsequently wholly discontinued by the Bank.
20. Thirdly, new proceedings were initiated by the Bank for possession of, inter alia, “Woodview” (Record No. 2014/44SP). By a judgment of the High Court (Keane J.) dated 20th May, 2015 ([2015] IEHC 353), it was found that the Bank was entitled to possession of four properties, including “Woodview”. That judgment was reflected in an order of the High Court dated 3rd June, 2015. At the hearing of this appeal, that order was subject to an appeal to the Court of Appeal, which this Court was informed was due to be heard on 16th June, 2016
Judgment and order of the High Court
21. The 2012 Application was heard in the High Court by Gilligan J. (the trial judge) on 23rd July, 2013. A transcript of the digital audio recording of the hearing was put before this Court.
22. Having heard the submissions of counsel for the Bank and counsel for the Appellants, the trial judge gave an ex tempore judgment. His conclusion on the Bank’s application (Transcript p. 45) was as follows:
“However, the overriding view I take is this, I think the matter has to be approached pragmatically, the reality is that nothing is happening and can happen to the property without the agreement of all the parties and the agreement of all the parties is not forthcoming and the situation has, in my view, altered legally since the [Consent Order] and the reality at that stage [the Appellants] were the owners of the property and at this stage [the Bank] is the owner of the property as a matter of law and, subject to their duty and their fiduciary duty, as to what they do with the property to the mortgagor, they are entitled to exercise their legal entitlements in relation to the property. So, it does appear to me that it is appropriate that in the circumstances the [Consent Order] should be set aside and I propose to do so.
I also propose to permit the application of the balance of the funds in the joint account with AIB, which were placed there pursuant to the [Consent Order], to be applied in reduction of the liability of the [Appellants] to the [Bank], and I propose to order accordingly.”
23. In his note of his judgment for the purposes of this appeal dated 16th December, 2013, the trial judge stated in relation to the position between the parties after the making of the Consent Order:
“. . . a further issue arose as regards the nature and extent of the work that was being carried out to restore the premises the subject matter of the [M]ortgage and, in particular, the identity and connection of the persons who were carrying out the work on the [Appellants’] behalf, complete trust was lost in the situation that prevailed and an application was brought to this Court for an order varying or discharging the previous [Consent Order] . . .”
No mention was made in that note of the other litigation which was pending.
24. The conclusion of the trial judge is reflected in the order of the High Court dated 23rd July, 2013 and perfected on 10th September, 2013 against which the Appellants now appeal. It ordered that the Consent Order be discharged to permit the application of the funds the subject thereof in reduction of the liability of the Appellants to the Bank. However, execution on foot of that order was stayed in the event of an appeal.
The appeal
25. The notice of appeal against the order of 23rd July, 2013 was filed by the first named appellant in person. While various grounds of appeal were set out in the notice of appeal, for example, it was asserted that the trial judge had erred in law in granting the relief sought by the Bank in the absence of such proofs required at law and the Constitution for the making of such an order, nowhere in the notice of appeal was there reference to “Woodview” having been the family home of the Appellants, obviously before the fire. Accordingly, the emphasis attached by counsel for the Appellants to that fact on the hearing of the appeal was misconceived, and is not a matter for consideration on the appeal.
26. There were other unsatisfactory aspects of the conduct of the appeal for which the Appellants, not the Bank, bear responsibility. When the matter was first listed for hearing on 25th November, 2015, the first named appellant in person sought an adjournment so that he could instruct a solicitor and that counsel could be briefed to appear on behalf of the Appellants. The adjournment was allowed and the matter was re-listed for hearing on 15th March, 2016. However, the solicitor did not come on record until 14th March, 2016. No outline legal submissions in writing were filed on behalf of the Appellants. The Bank did, however, comply with the direction given by the Court on 25th November, 2015 and filed outline legal submissions in writing on 9th December, 2015. In reality, the Bank’s submissions contain the only guidance which the Court has been given in relation to the legal principles applicable to the issues which arise on the appeal and the relevant authorities which support those principles.
The issues on the appeal
27. Taking an overview of the matter, it seems to me that the issues which arise on the appeal are the following:
In addressing those issues, it is convenient to consider the legal submissions made on behalf of the Bank first.
Legal submissions on behalf of the Bank
28. It is submitted on behalf of the Bank that the Consent Order was interlocutory in character, although it is recognised that, having regard to the nature of the relief sought and the orders made, it was to be expected that there would be no further requirement for the matter to proceed to plenary hearing. However, the Bank’s position is that the possibility of a claim for damages in the event of a breach by the Appellants could not be completely excluded. Acknowledging that no statement of claim was subsequently delivered, nonetheless it is submitted that the nature of the application was fundamentally interlocutory in character and that the trial judge was entitled to have regard to the “liberty to apply” in respect of it embodied in the Consent Order. While in support of its submissions, the Bank relies on the helpful commentary in Delany and McGrath on Civil Procedure in the Superior Courts, 3rd Ed. (Dublin, 2012) on interlocutory orders, the commentary (at para. 24 - 28) in relation to the distinction between interlocutory and final judgments and orders is not addressed. In short, the Bank’s submissions proceed on the assumption that the Consent Order was an interlocutory order, which leads to a consideration of the commentary in Delany and McGrath (op cit.) (at para. 24 - 30) as to the jurisdiction of the Court to alter or vary interlocutory orders and some of the authorities cited in the commentary.
29. The earliest authority on which counsel for the Bank relies is the decision of the Court of Appeal of England and Wales in Purcell v. F.C. Trigell Ltd. [1971] 1 Q.B. 358. In the passage from the judgment of Lord Denning M.R. on which counsel for the Bank relies it is stated (at p. 363):
“The plaintiff says that no appeal lies from an order made with the consent of the parties, except in circumstances in which a contract may be set aside or varied, such as mistake, misrepresentation, and so forth; and that this applies on interlocutory orders as well as to final orders. . . . I think that the plaintiff puts his case too high. I think that a party, who gets leave, can appeal from a consent order on wider grounds, at any rate in interlocutory matters. He can appeal, for instance, on the ground of his own mistake: see Mullins v. Howell (1879) 11 ChD 763, where Sir George Jessel M.R. said, at p. 766, ‘There is a larger discretion as to orders made on interlocutory applications than as to those which are final judgments.’ But there is no ground here so far as I can see for setting aside this consent order. It was deliberately made, with full knowledge, with the full agreement of the solicitors on both sides. It cannot be set aside. But, even though the order cannot be set aside, there is still a question whether it should be enforced. The court has always a control over interlocutory orders. It may, in its discretion, vary or alter them even though made originally by consent.”
The consent order in that case was an “unless” order made in the plaintiff’s personal injuries action to the effect that the defendants’ defence would be struck out unless answers to interrogatories raised by the plaintiff were delivered within a specified time. Some months later, there having been failure to comply with the consent order, judgment was entered for the plaintiff with the damages to be assessed. The Court of Appeal held that there was no ground for setting aside or not enforcing that consent order.
30. The decision in Purcell v. F.C. Trigell Ltd. was followed by the High Court in this jurisdiction in Irish Commercial Society Ltd. & Ors. v. Plunkett & Ors. [1986] I.L.R.M. 625. As is disclosed in the headnote, the application under consideration formed part of an action, which was obviously a plenary action, in which the plaintiffs sought, inter alia, an order directing the aggregation of the assets of five of the defendant companies with the plaintiff companies, one of the defendant companies in question being the sixth named defendant. By order of the High Court made in May 1984, the plaintiffs had been directed to furnish security for the costs of the sixth named defendant. The plaintiff companies were obviously in liquidation at the time and their liquidator had consented to the making of the order. Subsequently, following examinations of officers and former officers of the plaintiff and the defendant companies under s. 245 of the Companies Act 1963, the liquidator sought to have the order of May 1984 set aside on the grounds that he would not have consented to it if, at the time he consented, he had the information which became available on foot of the examinations.
31. Against that background, in his judgment Costello J. identified the first issue for decision as whether the High Court had jurisdiction to make an order pursuant to the interlocutory motion to set aside the consent order of May 1984, the defendants having submitted that such an order could only be made in a substantive action brought to set aside the contract into which the parties had entered. On this issue, Costello J. stated (at p. 625):
“This submission, it seems to me, fails to take into account the distinction between final orders made on consent and interlocutory orders so made (see Ainsworth v. Wilding [1896] 1 Ch 673, 677). As pointed out by Lord Denning, MR in Purcell v. Trigell Ltd. [1971] 1QB 358 at p. 364 the court always has control over interlocutory orders and it may in its discretion vary or alter them even though made originally by consent (see also in this connection Jessel MR in Mullins v. Howell (1879) 11 Ch D 763). Whether or not it should exercise it in a given case will largely depend on the circumstances in which the consent order was made and the reasons advanced for its discharge. In this case it seems to me that it would fly in the face of common sense as well as involve a considerable injustice to require a substantive action to be mounted to determine issues that can reasonably be disposed of by means of an interlocutory motion.”
In answer to the defendants’ argument that, even assuming that the Court had jurisdiction on the motion to set aside the order of May 1984, it should not exercise it in the plaintiffs’ favour, the liquidator had relied on the principles enunciated by the Supreme Court in Peppard & Co. Ltd. v. Bogoff [1962] I.R. 180. Following that decision, Costello J. held that, where the financial position of the plaintiff may be due to the actions which are the subject matter of the proceedings, the Court should exercise its discretion in favour of the plaintiff, and refuse to order security for costs. At the end of his judgment he stated:
“The court will not grant specific performance of an agreement on which a consent order is based if it will be inequitable to do so (see Mullins v. Howell . . .). It would be inequitable to enforce the May 1984 agreement in the circumstances of this case. To give effect to this view, I will set aside the order made pursuant to it.”
32. The most recent, and, in my view, the most helpful, authority which was cited on behalf of the Bank is the decision of the High Court (Morris J.) in Michael Byrne Motors Ltd. v. Rover Ireland Ltd. [1998] IEHC 232. The plenary action in that case arose out of a dealership agreement between the plaintiff dealer and the defendant supplier of motor vehicles and parts. In August 1998, after the defendant had discontinued supplying Rover cars to the plaintiff, as a result of which the plaintiff’s business was adversely affected, the plaintiff, as a matter of extreme urgency, sought an interlocutory injunction restraining the defendant from breaching the terms of the dealership agreements between the parties and an interlocutory injunction directing the defendant to continue to supply to the plaintiff the vehicles subject to the usual terms and conditions as applicable between the parties. The motion came on for hearing on the 19th August, 1998, but prior to the hearing an agreement had been entered into between the parties. The terms of the agreement are set out in full in the judgment of Morris J. Under the agreement the defendant undertook to recommence with immediate effect the supply of parts and vehicles to the plaintiff in accordance with existing or future Rover terms. There then followed detailed terms in relation to the obligations of both the defendant and the plaintiff. While the terms, as set out in the judgment, do not indicate that the agreement was to apply pending the hearing of the action, clearly that was the intention of the parties, because the agreement contained provision for the delivery of a statement of claim within five weeks and the delivery of a defence within four weeks thereafter and it was provided that both parties would use all reasonable speed and diligence to bring the matters to a hearing. As is recorded in the judgment of Morris J., on 19th August, 1998 the High Court (Kelly J.) made an order by consent reflecting the terms of the agreement. The consent order noted -
“. . . the Undertaking given by said Counsel for the Defendant on behalf of the Defendant in the terms of Paragraph (1) of the Consent namely that the Defendant undertakes to recommence with immediate effect the supply of parts and vehicles to the Plaintiff herein to include the supply of vehicles for stock purposes as well as sale in accordance with existing or future Rover terms.”
However, as Morris J. noted, notwithstanding the agreement, thereafter the parties had failed to achieve a comfortable trading relationship with each other. The ongoing dispute between the parties came to a head in October 1998 when the defendant notified the plaintiff of the immediate termination of its dealership with the defendant on six grounds, which are outlined in the judgment. That action by the defendant prompted the bringing of a motion by the plaintiff, which came before Morris J., in which, on the ground of alleged wilful disobedience of the undertaking and order made on 19th August, 1998, the plaintiff sought various reliefs, namely: sequestration of the corporate property of the defendant; attachment of directors and officers of the defendant and, in particular, one named officer; and sequestration of the property of the directors and officers of the defendant, in particular the named officer.
33. It is recorded in the judgment of Morris J. that, on the hearing of the plaintiff’s motion, he expressed his view to counsel for the parties that, irrespective of the validity of the complaints which the defendant made in relation to the conduct of the plaintiff, the defendant had no right to unilaterally disregard and ignore the order made by the Court and the undertaking given to the Court and, if it was the intention of the defendant to resile from the agreement, it could only do so with the approval and consent of the Court and by varying the order made on 19th August, 1998. He also expressed the view that he would be prepared, by consent of the parties, to treat the motion, in addition to a motion for committal for contempt, as a motion by the defendant to seek to be relieved of the obligations which it undertook by reason of the order of the Court of 19th August, 1998. He recorded that counsel on behalf of each party agreed to that procedure.
34. In that context, which, in the light of the assumptions made later (in para. 37), is analogous to the context in which the trial judge was considering whether to accede to the Bank’s application to vary or discharge the Consent Order, in considering the position of the defendant, Morris J. stated that he was satisfied on the authority of Irish Commercial Society Ltd. & Ors. v. Plunkett [1986] ILRM 624 that there was vested in the Court a jurisdiction to reconsider interlocutory orders made by consent. He quoted the passage from the judgment of Costello J. which has been quoted above. He then identified the basis on which the defendant could be allowed to resile from the agreement as if it was established to the satisfaction of the Court that there had been a fundamental breach on the part of the plaintiff of its obligations under the agreement of 19th August, 1998. Having analysed the factual situation, Morris J. stated that after 19th August, 1998 the defendant had become disenchanted with the plaintiff and regretted the decision in coming to the out of court settlement and was determined to terminate the plaintiff’s dealership and sought a justification for doing so. Morris J. concluded that the defendant had not made out any fundamental breach on the part of the plaintiff such as would justify resiling from the agreement of 19th August, 1998, nor to move the Court to amend the order made on that date. Accordingly, he refused the relief sought by the defendant.
35. Before considering the manner in which the principles outlined in the authorities cited should be applied to the factual and procedural context on this appeal, it is pertinent to record that none of the authorities outlined above were cited on the hearing of the 2012 Application in the High Court.
Application of principles to procedural/factual context
36. In applying the principles derived from the authorities outlined above, the first question which arises is whether the Consent Order in this case was a final order or, alternatively, as the Bank submits, fundamentally interlocutory in character. It has already been commented that the Bank’s submissions do not address the distinction between interlocutory and final judgments and orders and, in particular, the commentary on that topic contained in Delany and McGrath (at para. 24 - 28). The authority which the authors cite there as explaining the distinction is the decision of this Court in Minister for Agriculture v. Alte Leipziger [2000] 4 IR 32. The order under consideration by this Court in that case was not a consent order. It was an order of the High Court that the plaintiff was entitled to sue the defendant in this jurisdiction pursuant to Article 8 of the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters. The majority decision in this Court was that the order of the High Court on the question of jurisdiction was a final order subject only to appeal. As the authors point out in a footnote, in the course of his dissenting judgment, Keane C.J. (at p. 41) noted a difference of judicial opinion evident in England in determining whether a judgment was interlocutory or final, but summarised the nature of such difference as being whether one looks at the orders as made or the nature of the application when one is determining whether it is final or interlocutory in its nature.
37. Some unusual features of the Bank’s application which led to, and the terms of, the Consent Order have already been adverted to. In particular, the fact that neither the notice of motion nor the Consent Order limited the duration of the orders sought and, more significantly, the orders granted in the Consent Order to the period pending the determination of the proceedings and the fact that the substantive action did not proceed in the normal way after the making of the Consent Order, must give rise to real doubt as to whether the Consent Order was an interlocutory order, as the Bank contends, or, in reality, a final order on the injunctive reliefs which it granted. Having said that, it would not be appropriate for this Court to express any definitive view as to whether the Consent Order was an interlocutory order or a final order in the factual context here and in the absence of the point having been fully argued by both sides. Rather, I consider that the proper approach to adopt is to assume that it was an interlocutory order made on consent. Accordingly, notwithstanding the doubt which the unusual features of both the application which led to it, and the form of the Consent Order raise, I consider the appropriate course is to assume that the High Court had jurisdiction to determine the 2012 Application.
38. That leads to the question whether the discharge by the trial judge of the Consent Order, so as to permit the application of the insurance funds to be used in reduction of the Appellants’ liability to the Bank, was a proper exercise of that jurisdiction. It must be emphasised that, even assuming that the Consent Order was an interlocutory order, which I understand to mean that it would continue in force only until the determination of the substantive action, leaving aside the possibility of an appeal, ex facie the order made by the trial judge on 23rd July, 2013, in practical terms, marked the end of the road as regards all of the permanent injunctive reliefs sought by the Bank in the endorsement of claim on the plenary summons.
39. Of the authorities upon which the Bank relies, the closest analogy to the application under appeal here is the application which Morris J., with the consent of the parties, determined in Michael Byrne Motors Ltd. v. Rover Ireland Ltd., which, in effect, was a motion to set aside the consent order made in that case. If one applies the test applied by Morris J. on that motion, the core issue which falls for consideration is whether the High Court could have been satisfied that there was a fundamental breach of the Consent Order on the part of the Appellants which would justify the Bank having the Consent Order discharged and the insurance monies paid to it in discharge of the Appellants’ liability. In order to apply that test, one has to first determine what was agreed by the parties in relation to the insurance money as reflected by the Consent Order, and, secondly, whether the Appellants were in breach of the agreement.
40. On the first question, what was agreed in paragraph 2 of the Consent Order, including the additional provisions at a. and b. quoted at para. 7 above, was that the proceeds of the insurance claim be used to pay for the reinstatement works to “Woodview” and that the works would be carried out exclusively and expeditiously in accordance with Covenant 7(d)(v) contained in the Mortgage. That covenant, which has been quoted at para. 4 above, provided that any insurance monies received would be applied exclusively and expeditiously towards making good the loss or damage in respect of which such monies were payable. However, there was a proviso that “in default” the monies would be paid towards discharge of the secured monies. That default provision was highlighted in para. 2b. of the Consent Order, where it was stated that it referred “only to the obligation to make good therein” and it was confirmed that the Bank would be entitled to rely on such default if and when it should arise. On the hearing of the 2012 Application in the High Court, counsel for the Appellants was correct in his submission that para. 2b. gave “extra clarification” as to the meaning of default (Transcript of trial, 23rd July, 2013, page 30, line 34). As a matter of construction of para. 2b. of the Consent Order read in conjunction with Covenant 7(d)(v) of the Mortgage, it is absolutely clear that what was agreed was that, in the event of the Appellants being in breach of their obligation to use the proceeds of the insurance claim in making good the damage to “Woodview”, they would be in default and that default would, as was deposed to in the affidavit of the first named appellant, trigger the entitlement of the Bank to seek to use the insurance money to discharge the monies secured by the Mortgage. 41. Turning to the second question in applying the test applied by Morris J. to the facts of this case, the nub of that question is whether the trial judge could have been satisfied that there was a fundamental breach by the plaintiffs of their obligations under the Consent Order, when read in conjunction with Covenant 7(d)(v) of the Mortgage such as to trigger the entitlement of the Bank to rely on the default provision and require the insurance monies to be applied towards the discharge of the monies secured by the Mortgage. As has been stated following the summary of the affidavit evidence filed on the 2012 Application set out earlier, what emerges is a serious conflict of evidence as to the reinstatement of “Woodview”, which could not be resolved by reference to the affidavits on their own. That being the case, in my view, on the hearing on 23rd July, 2013 the Court could not have been satisfied that the Bank had established a fundamental breach on the part of the Appellants which justified the discharge of the Consent Order. Irrespective of the existence at that time of the order for possession of “Woodview” in favour of the Bank, the Consent Order could not have been disregarded, nor, on the evidence before the High Court, could it have been set aside.
Summary of conclusions on issues on appeal
42. On the issue as to whether the High Court had jurisdiction to discharge the Consent Order, as it purported to do, I have concluded, for the reasons outlined above, that the appropriate course to adopt on this application is to assume that the High Court did have such jurisdiction. On the basis of that assumption, on the question whether the jurisdiction was properly exercised, for the reasons outlined above, I have come to the conclusion that it was not. The consequence of those conclusions is that the Consent Order should not have been discharged and should have remained in place. Therefore, the appeal must be allowed, the effect of which is that the Consent Order is reinstated.
43. While in the overall context of the banker/customer relationship between the Bank and the Appellants, a pragmatic approach to the outcome of the 2012 Application, as was urged on behalf of the Bank and as was taken by the trial judge, would seem to make more sense, as a matter of law such an approach is not open to this Court on the appeal. Having said that, the Appellants would be foolish not to take a commonsense approach to the 2010 Plenary Proceedings in the future. In this context, it is a matter of public record that judgment was given in favour of the Bank by the Court of Appeal (Peart J., Irvine J. and Charleton J.) on 14th July, 2016 in the appeal referred to earlier (in para. 20) under Neutral Citation [2016] IECA 214, in which the order of the High Court (Keane J.) was upheld.
Order
44. I propose that there be an order allowing the appeal and discharging the order of the High Court made on 23rd July, 2013.
