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Judgment | Title: | Quinn Insurance Limited (Under Administration) v Pricewaterhousecoopers (A Firm) | | Neutral Citation: | [2019] IESC 13 | | Supreme Court Record Number: | 79/2017 | | Court of Appeal Record Number: | 525/2015 | | High Court Record Number : | 2012 1540 P | | Date of Delivery: | 08/03/2019 | | Court: | Supreme Court | | Composition of Court: | Clarke C.J., O'Donnell Donal J., MacMenamin J., Charleton J., O'Malley Iseult J. | | Judgment by: | O'Donnell Donal J. | | Status: | Approved | | Result: | Other | | | |
THE SUPREME COURT S:AP:IE:2017:000079
Clarke C.J.
O'Donnell J.
MacMenamin J.
Charleton J.
O'Malley J.
QUINN INSURANCE LIMITED
(UNDER ADMINISTRATION) Plaintiff/Respondent - and - PRICEWATERHOUSECOOPERS
(A FIRM) Defendant/Appellant
Judgment of O'Donnell J. delivered the 8th day of March 2019.
Introduction
1 This appeal arises from one of the largest and most complex cases to come before the Irish courts, but raises an issue which is encountered almost on a weekly basis in courts across the country: what particulars of a claim must a party be obliged to provide in pleadings or in further and better particulars in advance of discovery, and, where relevant, the exchange of witness statements? The answer the law has given for more than a hundred years is well known to almost every lawyer: a pleading should contain "facts - not law", and "facts - not evidence". It is necessary that the pleadings set out in broad outline the case that a party proposes to make, so that the other party can prepare a defence, limit discovery, and will not be taken by surprise at the trial. However, the application of these well worn principles in particular cases is often difficult and unpredictable, and remains stubbornly resistant to much greater elucidation than the observation made by Murnaghan J. in Caulfield v. Bell and Company Ltd. [1958] I.R. 326 at p. 333 that the matter was "essentially a matter of degree".
2 The background facts to this case are set out in very clear judgments delivered in the High Court (Costello J.) ([2015] IEHC 303), and the Court of Appeal (Hogan J.; Ryan P. and Irvine J. concurring) ([2017] IECA 94), and it is accordingly sufficient to set them out in brief outline. The plaintiff, Quinn Insurance Limited ("Quinn") is an insurance company with an extensive business in the Irish market which collapsed and went into administration on 15 April 2010. The deficit was very substantial indeed. At the time of the High Court judgment, it was estimated that €1.6 billion, and certainly by that point €1.2 billion, had been drawn down from the Insurance Compensation Fund to meet the deficit. The defendant, PricewaterhouseCoopers ("PwC"), is a well-known firm of accountants and registered auditors who audited Quinn's accounts and regulated returns for the years 2005, 2006, 2007 and 2008, which are the "relevant years" for the purposes of these proceedings. In 2012, Quinn, in administration, commenced proceedings against PwC for breach of contract and negligence in relation to the auditing of the accounts and regulatory returns for the relevant years. It is said that the claim for damages may amount to as much as €800 million. It is agreed that the trial of the case will be enormously complex, and could last for 12 months or more. One indicator of this is that the quest for particulars and replies thereto already runs to more than 800 pages.
3 These proceedings are made more complex by some features that are common to many claims by insolvent companies in liquidation or administration brought against their former auditors. Although the legal entity bringing the claim is the same, the persons running it are quite different. This gives the plaintiff a certain legal advantage, in that the administrators have the benefit of a contractual relationship with the former auditors, and a certain moral advantage, in that they can distance themselves from any wrongdoing on the part of the company, and present themselves as seeking recovery on behalf of the creditors. However, this comes with a significant informational and evidential deficit, since the administrators or liquidators will not have been involved in the company at the relevant time, and may have difficulty securing the cooperation of those who were. On the other hand, it is said that auditors, by necessity, obtain a very full understanding of the business of a company, and to that extent may indeed know more about the events in issue than their immediate adversaries.
4 These proceedings have an added layer of complexity in comparison to other claims in negligence against auditors, in that Quinn was a very substantial insurance company. The accounts of an insurance company cannot simply record the transactions occurring in each accounting year setting premiums received against claims paid. Many insurance liabilities will only materialise in future years. It is necessary, therefore, in order to provide a true and fair view of the accounts of an insurance company, and to make proper regulatory returns, that the accounts should include figures for what are described as "technical provisions": that is, an estimate of the future costs of claims. The plaintiff's core allegation in these proceedings is that the figure for technical provisions in the annual accounts for the material years was significantly and materially understated.
5 It is agreed that the estimation of technical provisions is an actuarial exercise. First, the company produces its own "best estimate" of future claims. This is done in conjunction with actuarial advice. The company then adjusts that figure applying a margin for risk and prudence, and produces a technical provisions figure, which is then the subject of a statement of actuarial opinion. Unusually, Quinn did not have or use in-house actuarial expertise. Instead, Quinn utilised the services of an independent firm of actuaries, Milliman. A further complication in this case is that Milliman have neither been sued as co-defendants, nor, it appears, are their papers available to Quinn for these proceedings, at least at the moment. In PwC's case, it also had to have recourse to actuarial assistance in auditing the technical provisions, and in this case used the services of its own actuarial arm, PwC AIMS, when carrying out the audit.
6 The claim that the technical provisions were materially understated emerged in the following way. In the immediate aftermath of the collapse of the company, the 2009 accounts remained to be finalised. The defendant was still the auditor. Initially, it recommended increasing the provisioning by €68 million, which would have provided for a total loss for the financial year of €115 million. The administrators retained another firm of actuarial experts, EMB Actuarial Consultants, to carry out a review, which concluded that the reserves had been underestimated by a figure of €380 million. The defendant agreed with this analysis in 2011, and therefore the plaintiff set aside additional reserves of €800 million to cater for the deficiencies. The 2009 accounts were signed off, and the defendant was replaced as auditor for the following years.
The Mazars exercise
7 Arising out of the matters which emerged in the finalisation of the 2009 accounts, the plaintiff retained the accountancy firm, Mazars, to report to it on the accounts. Mazars reported their conclusion that, in respect of the material years, the technical provisions were so far outside the range of reasonable estimates that they could not have been conducted properly in accordance with appropriate and relevant standards, and were therefore materially underestimated. This exercise is the basis upon which the proceedings were commenced, and the pleadings prepared. Considerable further detail was provided, but the essence of the plaintiff's claim remains its contention that the figures contained in the accounts and regulatory returns audited by the defendant, in respect of the technical provisions, were materially misstated, because Mazars had conducted a re-estimate of those figures which was so different that the estimate in the material years could not have been properly conducted.
The detail provided
8 The plaintiff has provided a specific breakdown in relation to the relevant figures. Thus, in replies to particulars delivered on 24 June 2014, while formally maintaining the position that the allegation of material underestimation had been adequately pleaded and that further particulars was a matter for evidence, the plaintiff nevertheless provided, without prejudice, its best estimate of Quinn's ultimate net claims cost, which had been recalculated for eleven classes of business representing between 80 per cent and 91 per cent of the ultimate rejected claims costs as estimated by Milliman in each year. This exercise was carried out in respect of each of the material years, but it will be sufficient to consider simply the results for year ending 31 December 2005. The plaintiff set out the results as follows:- Best estimate of ultimate claims cost
Re-Projected Lines of Business | Per Milliman/QIL
€'000 | Re-Estimation
€'000 | Difference
€'000 | | Private Motor ROI | 560,726 | 622,909 | (62,183) | | Commercial Motor ROI | 158,865 | 184,203 | (25,338) | | Liability ROI | 140,472 | 199,086 | (58,614) | | Private Motor NI | 82,527 | 87,328 | (4,801) | | Private Motor GB | 26,576 | 28,502 | (1,926) | | Commercial Motor GB | 4,504 | 4,083 | 421 | | Property Damage ROI | 12,578 | 13,061 | (483) | | Household ROI | 3,243 | 3,368 | (125) | | Commercial Motor NI | 26,054 | 30,339 | (4,285) | | Liability NI | 21,220 | 43,052 | (21,832) | | Property Damage NI | 2,944 | 3,072 | (128) | | Household NI | 230 | 316 | (86) | | Liability GB | 25,379 | 36,377 | (10,998) | | Property Damage GB | 2,131 | 2, 297 | (166) | | Total: | 1,067,449 | 1,257,994 | (190,545) | | Paid Claims | (624,976) | (624,976) | | | Best Estimate of Net Claims Reserve | 442,474 | 633,018 | (190,545) |
9 Subsequently, the plaintiff provided an even further breakdown of these figures. The degree of detail can again be illustrated by taking simply one figure from the previous heading, that is, the first column of figures in respect of "Private Motor ROI", in respect of which the Milliman/Quinn figure was €560,726,000, and the Mazars estimate was €622,909,000, with a difference of €62,183,000. The plaintiff provided a breakdown in relation this figure by reference to accident years from 1996/97 to 2005 as follows:-
| Accident year | Ultimate net claims cost per Milliman
€'000 | Ultimate net claims cost per Re-estimation
€'000 | Difference
€'000 | | 1996/97 | 25,458 | 25,986 | (528) | | 1998 | 27,010 | 26,327 | 683 | | 1999 | 42,709 | 43,515 | (806) | | 2000 | 61,815 | 63,415 | (1,600) | | 2001 | 76,130 | 78,676 | (2,546) | | 2002 | 70,156 | 73,588 | (3,432) | | 2003 | 70,351 | 74,096 | (3,745) | | 2004 | 77,877 | 93,868 | (15,991) | | 2005 | 109,219 | 143,437 | (34,218) | | Rounding | 1 | 1 | 1 | | Total | 560,726 | 622,909 | (62,183) |
10 In addition to the foregoing, the plaintiff has also pleaded that the errors which it alleged against the defendant were the result of a failure to take into account or take sufficient account of what were described as "relevant factors". These were listed in the statement of claim and particulars, and were helpfully collated in the first affidavit of Mr. Tony Weldon, the senior audit partner in the defendant firm, as follows:- i. The plaintiff did not have qualified actuarial status;
ii. Many individuals did not appear to have the appropriate knowledge and skills for their roles and responsibilities;
iii. There were significant and ongoing changes in both the claims processes within the plaintiff and the personnel of the plaintiff;
iv. A bonus system which rewarded managers for early closure of claims (the so-called "Fast Track" method of disposing of claims) resulted in an incentive to settle at an inappropriately high level;
v. The plaintiff had a materially higher level of ‘reopened' claims than industry norms;
vi. The plaintiff used regional claims managers who were paid a fee on the basis of, inter alia, the potential claims - which had not yet crystallised into actual claims - that they settled;
vii. The plaintiff incentivised claims handlers prematurely to close claim files;
viii. The plaintiff did not encourage or accept the making of prudent reserves in claims files;
ix. The plaintiff discouraged claims handlers from revising claims reserves upwards;
x. The plaintiff's board of directors neither considered nor approved the methodology for calculating its technical provision;
xi. The plaintiff had a weak file estimation policy;
xii. There was a culture within the plaintiff that dictated much lower file estimates than industry norms in which frequently ignored professional legal advice received;
xiii. The scale of change in claims processes was very significant;
xiv. The plaintiff was not reflecting the views of its legal panel on quantum on settling claims file estimates and that it failed to discuss this with Milliman;
xv. A significant number of files had serious under reserves;
xvi. The plaintiff had an overall culture which dictated much lower file estimates than industry norms and which frequently ignored professional legal advice received;
xvii. The plaintiff's business grew rapidly;
xviii. The plaintiff was inexperienced in the mainland UK market, and faced significant commercial challenges in order to grow its share of that market;
xix. There was lack of sophistication in the plaintiff's pricing policies, in particular in the mainland UK market;
xx. There was a lack of continuity in the plaintiff's key claim and settlement processes;
xxi. There were differences between the plaintiff's approach to claim settlement and to those of a more traditional non-life insurer (including in particular the Fast Track model);
xxii. There were relevant industry bench marks for reserving of which insufficient account was taken;
xxiii. The plaintiff suffered a deteriorating loss ratio and/or there were inconsistencies between loss ratios in different years;
xxiv. Claims development patterns were affected by changes in the plaintiff's portfolio over time;
xxv. There were trends in the claim environment of which insufficient account was taken;
xxvi. There were differences between different countries in which business had been carried on by the plaintiff;
xxvii. There were changes in the mix of the plaintiff's business segment; and
xxviii. Insufficient account was taken of the plaintiff's status as part of a privately owned group."
11 The plaintiff contends that this is a more than sufficient particularisation of the claim, whereas the defendant maintains that it is entitled to more by way of particulars. Around these basic positions, some further points are made by way of argument. The plaintiff maintains that until it receives the defendant's audit papers, it cannot identify the precise errors the defendant must have made. The defendant, for its part, maintains that the obligation of the plaintiff was to publish accurate accounts, which must mean that it has carried out the exercise of identifying and correcting what it considers to be the errors of previous years. Accordingly, it must be in a position to identify these in the proceedings. Furthermore, in the intervening period since the Mazars exercise was carried out, the plaintiff has of necessity settled most of the outstanding claims, and, accordingly, is in a position to tell whether the estimates made were correct or not. The result was a certain symmetry in the approach taken by each side in this regard. The plaintiff, as I understand it, wishes to get access to the PwC audit papers and conduct a case involving a detailed review in hindsight of what those papers disclose, in which case the relevance of the Mazars exercise would recede into the background. On the other hand, the defendant would like to have early access to the Mazars exercise in the hope of subjecting it to similarly robust scrutiny, in the belief that this may undermine the re-estimation, and with it the plaintiff's case.
12 The case is undeniably complex, and is further complicated by the following unusual features. Initially, the defendant brought a motion seeking an order under O. 19, r. 7 (1) RSC to compel the replies to a large number of particulars. The High Court judge dealt with all of these. The plaintiff appealed, and the Court of Appeal dealt with a number of the issues. However, the defendant has now limited its appeal to this court to four particulars to which the plaintiff was ordered by the High Court to provide replies, which order was reversed by the Court of Appeal. The four particulars, identified as particulars 11(3) II, V, VIII and XI, raise essentially identical queries in respect of each of the material years. It is therefore sufficient to identify one of these requests for particulars contained in the plaintiff's rejoinders, namely particular 11(3) II:- "In respect of the alleged understatement of each accident year within each class within each geographic region at 31 December 2005, please specify the reasons and the financial effect of each reason for the alleged understatement identified by the Plaintiff in its re-estimation of the Plaintiff's technical provisions."
13 However, the detail of this particular does not feature largely in the judgments or indeed the written submissions of either party. Indeed, in the defendant's application for leave to appeal to this court, and in its written submissions, it sought to paraphrase the particular in the following way:- "What do you, [Quinn], say are the errors in your own estimates of the Technical Provisions, attested to by your own actuary, and approved by your own Board?"
14 One of the great and perhaps undervalued skills of advocacy is the capacity to simplify complex issues in order to reveal the core issue to be decided by the court, and it is possible to see in this reformulation just that clarity of analysis and presentation. However, the plaintiff complains, perhaps with some justification, that the formulation is apt to mislead: certainly the references to Quinn's "own" estimates, actuary, and board, are perhaps somewhat tendentious. It is not suggested that the fact that the figures originated with the plaintiff is relevant to the question of whether the particulars should be ordered: the question is whether, arising from the plaintiff's pleadings, the defendant is entitled to the detailed particulars sought. While it is highly likely, indeed inevitable, that this aspect of the case (the complaint that the defendant failed to identify errors in the accounts prepared by the plaintiff itself) will be relied on heavily in the proceedings, it does not appear relevant to the issue of whether or not the particulars sought here ought to be ordered. Here, the question is: what detail of the claim made is required to be provided? However, I do consider that the issue can be reduced to one which illustrates a very clear point of dispute between the parties. In this regard, it is sufficient to look at the particulars originally sought in relation to the technical provisions, and focus on even one of the issues in respect of which detail has already been produced by the plaintiff. Taking one example, the plaintiff's claim is that the accounts and regulatory returns were materially underestimated, and accordingly could not have properly been prepared or audited. Looking at the figures for the year end 31 December 2005, the basis of that claim is certainly crystal clear: in one instance, it is said that the figure audited of €560,726,000 for Private Motor ROI could not be correct, because Mazars re-estimate came to the significantly different and higher figure of €622,909,000. Breaking that figure down further, it is possible to identify how the difference of €62,183,000 is made up, so that, for example, Quinn/Milliman included a figure of €70,351,000 and €77,877,000 for the years 2003 and 2004 respectively, while the Mazars re-estimate for those years was €74,096,000 and €93,868,000. This same dispute is replicated across all the other figures for the material years, but the same issue of principle arises: manifestly, the plaintiff has set out the error it contends for, but does not explain why it contends the Quinn/Milliman figures are wrong, or correspondingly why the Mazars figures are correct. As already observed, the High Court judge found that the defendant was entitled to be provided with particulars of why the Quinn/Milliman figures were wrong, but refused to order particulars of the Mazars figures because she considered that that did not truly arise from the pleadings. The Court of Appeal reversed the decision on the Milliman figures so that the plaintiff was not required to provide particulars in either respect. The defendant now appeals from the refusal to order the plaintiff to provide the particulars in relation to the Quinn/Milliman figures.
15 It is easy (and perhaps tempting) to affect an attitude of Olympian detachment and suggest that the dispute does not really merit resolution, let alone the attention of two appellate courts. After all, it is inconceivable that this case would go to trial without all this information and more being provided, whether by way of detailed witness statements, or additional pleadings and particulars revised in the light of discovery in expert reports. It might be thought, therefore, that little is gained either way if an order is made or refused: if the defendant does not get the information now, perhaps heavily qualified by statements that these are the best particulars which the plaintiff can now give pending discovery, it is unlikely that this will be particularly damaging to the defence, and perhaps highly unlikely to have any influence on the outcome of the case. Conversely, the possibility is perhaps equally remote that the plaintiff, if required to provide these particulars (again, possibly heavily qualified in the same way) will damage its case in any significant or measurable way.
16 However, I do not think the court should succumb to the temptation of treating this dispute as trivial or inconsequential. First, hard fought litigation is, like other endeavours, a game of inches. It is not possible to say at the outset what will be the outcome at the end of the day, or whether the margin will be comfortable or wafer-thin. The parties must therefore seek to win all of the small collisions, even by small margins, since that might prove decisive in the end. Furthermore, there are larger and tactical considerations involved, and the plaintiff will often wish to avoid early disclosure of details of its case, if it can avoid it. Equally, a plaintiff will wish to keep open as many lines of attack as possible, in the knowledge that the defendant may view some of these as posing a more serious risk, and accordingly be more inclined to compromise the proceedings. A defendant, for its part, will want to gather as much information as possible, and to try and to turn the focus of the case to perceived weaknesses in the plaintiff's case. Both parties will be nervous about disclosure of the details of their case, which might lead to damage which can be difficult to anticipate, and will seek to avoid being forced to take positions from which it will be difficult to retreat. The affidavit of Mr. Michael McAteer, one of the joint administrators of Quinn, makes the point clearly: "The joint administrators run the risk of unknowingly prejudicing the plaintiff's case by providing the defendant with evidential information before - inter alia - discovery has been completed by both parties or the plaintiff's experts have sight of, for example, the defendant's audit working papers". It is almost inevitable in any adversarial process that the mere fact that the opposing parties seek something is often seen as a good enough reason to refuse it. Fundamentally, however, both parties are entitled to stand upon their understanding of the legal position. The plaintiff here is entitled to maintain that, while it may have the information sought, it does not wish to provide it, while the defendant is entitled to maintain the position that, while it may, however, have a shrewd idea of the detail of what the plaintiff is contending, and will undoubtedly get more detail before the trial, it wishes to have the information in clear, precise, and written form now. The issue the courts must determine is which of them is correct, which raises an important general issue to be decided against the particular facts of this case.
Evidence
17 This motion is a microcosm of what might be involved in a trial of the proceedings proper. The parties have deployed an impressive range of expert evidence. On behalf of the defendant, affidavits are sworn by Mr. Tony Weldon, the audit partner of the defendant with more than 25 years' experience. That is supported by an affidavit from Mr. Richard Indge, a partner in the Fraud Investigation and Dispute Services of Ernst and Young in the UK and Ireland. The plaintiff has responded with affidavits from Mr. Philip Haberman, a forensic accountant, who had previously led the same dispute team in Ernst and Young in London prior to Mr. Indge, and provided further affidavits from Mr. Andrew Goldsworthy, the leader of the Mazars UK insurance technical team. There were two rounds of affidavits from each witness. Each of the affidavits were obviously carefully prepared, and are helpful in the detail provided.
The judgments of the High Court and the Court of Appeal
18 The decision of the High Court (Costello J.) dealt with a large number of the claims for particulars which are no longer live between the parties. However, she dealt with the particular issue relating to the technical provisions in the following extracts from her judgment, beginning at para. 42:- "42. The particulars sought in relation to the calculation of the Technical Provisions fall broadly into two categories. In simple terms, the defendant needs to know why, according to the plaintiff, the estimates as calculated by the plaintiff and Milliman for the relevant years in the Material Period were wrong and materially underestimated the Technical Provisions. Secondly, it seeks to know the details of the Mazars re-estimation of the Technical Provisions so that it can understand how Mazars approached the exercise, understand the data used, the methodology employed and the assumptions and professional judgements which the plaintiff will say at trial were the appropriate ones in all the circumstances. The plaintiff has objected to providing the particulars on the basis that the defendant understands and knows the case it has to meet and that the particulars sought amount to an inappropriate interrogation of evidence including expert evidence which will be adduced at the trial of the action. Its counsel submits that the statement of claim and the particulars delivered set out very fully the plaintiff's case against the defendant.
43. It can fairly be said that the pleadings set out the case to be advanced against the defendant in relation to its alleged wrongdoing. However, it is not clear from either the pleadings or the particulars furnished to date precisely what the plaintiff says was wrong with the Technical Provisions as calculated by the plaintiff and Milliman in the Material Period. It is common case that the plaintiff will first have to establish that these estimates were materially underestimated. In order for the defendant fairly to meet this case, I am of the opinion that it needs particulars of why the plaintiff alleges the Technical Provisions were in fact materially underestimated.
44. On the other hand, I do not believe that the defendant is entitled to particulars of how Mazars conducted the re-estimate of the Technical Provisions in preparation for this case. The plaintiff's case is not advanced upon a direct comparison between the Mazars exercise and the exercise previously carried out by the plaintiff and Milliman. It follows that the requested particulars do not in fact arise out of the plaintiff's claim and therefore do not relate to the issues in the case. Clearly they relate to the evidence which the plaintiff will lead at trial. However, it is well established and the authorities are clear that a party is not entitled to its opponent's evidence by way of particulars of the claim or defence.
45. Furthermore, the plaintiff says that it has not in fact conducted the exercise of comparing the differences between the Mazars calculation with the Milliman calculation in the manner contended for by the defendant. It says it simply does not have the information in the format requested by the defendant in its notice for particulars. In order to answer the questions actually posed by the defendant in relation to these matters, it would have to carry out a further analysis and calculations which it has not done and which do not form part of its case against the defendant. This is a further reason for refusing these requests [for particulars].
46. Thirdly, the parties are agreed that there is a range of possible estimates that might legitimately be made in calculating the Technical Provisions. Therefore, while the Mazars re-estimation is relevant to the plaintiff's allegation that the original estimation of the reserves was wrong it is not the plaintiff's case that the Mazars re-estimate of the Technical Provisions is the only correct estimate of the provisions. It will be perfectly possible for another actuary to re-estimate the reserves for the Material Period, taking account of the errors alleged by the plaintiff to have arisen, and bona fide to arrive at different values and ultimately at a different estimate for the Technical Provisions, provided appropriate account is taken [of] the relevant factors and there is appropriate professional expertise and judgement employed in preparing the estimates, it could legitimately be argued that this further re-estimation is as valid as that conducted by Mazars. It follows that the exercise carried out by Mazars is truly a matter of evidence which ultimately will be subject of expert reports and cross-examination rather than particulars of the plaintiff's claim against the defendant." (Emphasis added).
19 The Court of Appeal reversed this aspect of the decision of the High Court. Again, the essence of the judgment is to be found in four paragraphs: "38. In my judgment, however, viewing the matter both from the standpoint both of practice and existing authority it would be hard to see how requests of this kind could be accommodated within the ordinary parameters of a notice for particulars. The pleader in a standard personal injuries action is not required, for example, to explain why the driver of the motor vehicle which caused the crash was driving too fast or why he failed to keep a proper look-out immediately prior to the accident. The gist of such a claim, after all, is that the defendant was in fact negligent by driving too quickly and by failing to keep a proper look-out. While it is true that, as I have already noted, Baker J. observed in Playboy Enterprises that the scope and range of admissible particulars in complex commercial litigation is naturally more extensive and broad-ranging than in straightforward personal injury actions, the general principle to which I have adverted nonetheless holds true.
39. One is driven to the same conclusion if the matter is viewed following a consideration of the authorities. The particulars already supplied in relation to the claim enable PwC to know, adopting Fitzgerald J.'s classic formulation in Mahon v. Celbridge Spinning Co. Ltd. [1967] 1.R. 1, 3, the broad outline of the case it will have to meet at trial. It knows with precision the extent to which under-provision was allegedly made in respect of the technical reserves for each relevant year and how it is said to have been negligent in this respect.
40. Counsel for PwC […] pressed the Court for these particulars on the grounds that, given the multiplicity of possible variables relating to the alleged under-provision, his clients were entitled to know - at least in general terms - the major causal factors which the plaintiff contends were responsible for the alleged under-provision. Given the complexity of the claim, he submitted, the plaintiff was entitled to know what factors or issues the defendant says it ought to have noticed in the course of the audit but that it somehow missed.
41. The most straightforward answer to this submission is to recall that the purpose of pleadings is to define the issues between the parties and that the purpose of particulars is in turn to clarify more precisely the parameters of the pleadings. Here [Quinn] have defined the extent and scope of the claim in respect of the alleged under-provision in, it must be said, elaborate detail for each of the relevant years.
42. To go further is effectively to require the other party either to identify items of evidence which it proposes to lead or to provide something in the nature of a factual narrative in support of the claim…"
The law 20 It is apparent from a reading of the judgments in the courts below that there is little difference on the applicable law. The guidance to be gleaned from the case law on O. 19, r. 7 (1) RSC can, I think, be summarised as follows:- i. The basic rule remains the classic formulation in Mahon v. The Celbridge Spinning Co. Ltd. [1967] I.R. 1, at p. 3. A party is entitled to know the nature of the case being made against them. However, the role of particulars is not to require a party to furnish detailed particulars or specific aspects of the case. It is sufficient that the issues between the parties should be adequately defined and the parties should know in broad outline what is going to be said at the trial of the action.
ii. This reflects the classic distinction, dating at least from O. XIX, r. 4 of the Rules of Court scheduled to the Supreme Court of Judicature Act 1875 enacted in England and Wales, and also to be found in O. XIX, r. 4 of the 1905 Rules of the Superior Courts made pursuant to s. 61 of the Supreme Court of Judicature (Ireland) Act 1877, that pleadings should contain facts and not evidence. This is now set out in O.19, r. 3 RSC, which provides:-
"Every pleading shall contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim or defence, as the case may be, but not the evidence by which they are to be proved […]"
iii. The purpose of particulars may be viewed in the light of the fact that they are directed towards a trial, which in most cases will ultimately be decided by reference to oral evidence. Particulars in pleadings should facilitate the trial and not be a substitute for it: McGee v. O'Reilly [1996] 2 I.R. 229, at p. 234.
iv. The defendant is entitled to be told of the facts as the plaintiff alleges them to be, and it is not a ground for refusing particulars that the defendant may know the true facts: Moorview Developments Ltd. v. First Active plc [2005] IEHC 329, (Unreported, High Court, Clarke J., 20 October 2005), para. 7.2.
v. In complex cases, more detailed particulars may properly be required: Playboy Enterprises International Inc. v. Entertainment Media Networks Ltd. [2015] IEHC 102, (Unreported, High Court, Baker J., 19 February 2015), para. 14.
vi. The party is entitled to know the range of evidence (rather than any particular item of evidence) with which he or she will have to deal with at the trial: Cooney v. Browne [1985] I.R. 185, p. 191.
vii. The procedures requiring an exchange of witness statements may reduce the risk of a party being taken by surprise at a trial, but does not mean that less is required by way of particulars. One important function of particulars is to limit the range of discovery, which can be burdensome and expensive for the parties: Thema International Fund plc v. Institutional Trust Services (Ireland) Ltd. [2010] IEHC 19, (Unreported, High Court, Clarke J., 26 January 2010), para. 4.1. While these statements are undoubtedly helpful, there is some tension between them with regard to the precise issue which arises for resolution in this appeal, that is, the degree of particularisation which is required in any case. The High Court, which ordered that the particulars be provided, referred to Thema and Playboy , which tend to support the argument for further particulars, whereas the Court of Appeal, reversing that order, placed heavier emphasis on Mahon and the concept that it was necessary simply to set out the broad outline of the case.
Observations
21 The issue is here identified in very clear detail (albeit contained in two bankers' boxes of papers), and was argued with considerable clarity. However, the clarity with which it is possible to view the progress of this litigation leads me to the conclusion that unless a case is very clear cut, an appellate court should be very reluctant to interfere with the decision of a case management judge on an issue such as this. The pleadings in this case were, on any view, extensive. The issues raised must be viewed against the background of the case, the detail provided, the orders made and refused, and the fact that the High Court judge hearing the matter may have heard other interlocutory applications in the proceedings and thus acquired a sense of the case, which is a useful advantage. Here, the High Court decision was made nearly four years ago, and it is difficult to think that the delay necessitated by the appeal on this issue has been outweighed by any greater clarity as to the purpose of pleadings, or indeed the scope of this litigation. Second, while simplification is welcome, I doubt that it is useful to attempt to resolve the question of the particulars required in a case as complex as this by drawing an analogy with a personal injuries action. Such claims were once the routine unit of currency of all courts and are still quite common. However, they operate within a relatively narrow range with a limited set of possibilities in terms of the type of negligence giving rise to a claim, the injuries which can be suffered, and the loss sustained. The extent of the particulars required in such actions is fairly well known. In that regard the observations of the High Court in Armstrong v. Moffatt [2013] IEHC 148, [2013] 1 I.R. 417 and Burke v. Associated Newspapers (Ireland) Limited [2010] IEHC 447, (Unreported, High Court, Hogan J., 10 December 2010) are both a useful guide and a valuable corrective to the tendency of defendants to treat the request for particulars as a questionnaire demanding information without any reference to the pleadings, or indeed the principles of law which apply. But I doubt, with respect, that the analogy proposed by the Court of Appeal at para. 38 of its judgment is helpful here. In particular, it is not helpful, by way of comparison with the position of "the pleader in a standard personal injuries action", to emphasise the fact that the requests sought details of why it was alleged the driver of the motor vehicle was driving too fast or why he failed to keep a proper lookout. If the claim had been stated at a higher level of generality and it had simply been alleged that the car was driven carelessly or negligently, it would have been entirely appropriate to seek particulars of why that was alleged. If it can be said that many proper requests for particulars can be paraphrased as asking why or how the party pleading the matter makes the relevant contention. However, the real issue is whether the party requesting particulars is entitled to the level of detail which is sought.
22 This leads to a further consideration. While the distinction between fact and evidence is hallowed by repetition, it deserves closer attention. In most cases it is, of course, the case that a defendant is not entitled to demand particulars of how a plaintiff will prove his or her case i.e. the identity of the witness or what that witness will say. But it is rare, in fact, that a contest about the request for particulars involves this type of issue. Indeed, it is recognised that if the provision of proper particulars is clearly necessary to enable the applicant properly to prepare for trial, or in other respects the application is a proper one, the information must be given, even though it discloses some portion of the evidence on which the other party proposes to rely at trial: see Marriott v. Chamberlain (1886) 17 QBD 154, at p. 161.
23 The distinction at issue in this appeal (and indeed in most cases of difficulty) is not between facts that must be proved, and the evidence which may prove them (sometimes referred to as a distinction between what would be proved and how it will be proved): it is a distinction as to the level of detail which is required at the stage of pleadings. At a certain point, the other party will have been sufficiently informed of the case it has to meet, and further detail can be left to evidence at the trial. At that stage, any further detail is not a matter for particulars or pleadings in advance of trial, but for evidence at the trial. In that sense, it is properly said in response to any request for particulars that the information sought is not a matter for particulars, but rather for evidence. However, that distinction is not drawn by asking if the particulars seek an explanation of why or how something is alleged to have occurred. If a plaintiff simply pleaded that a defendant was negligent or careless or failed to take sufficient care, a defendant would be entitled to require particulars of how or why that is so, and if the plaintiff refused to provide such details, a court would order the necessary particulars be delivered.
24 What is a sufficient level of detail must be viewed against the background of the case that is sought to be made. For that reason, I am satisfied that the more complex the case is, the more detailed the particulars that should be required. Accordingly, I doubt that much guidance is to be gained from a consideration of perhaps the simplest and certainly most familiar cause of action encountered in the courts. Even in a routine personal injuries action arising out of a road traffic accident, however, a plaintiff is required to go beyond the standard boilerplate of alleging that the defendant failed to stop, slow down, swerve, or control their vehicle so as to avoid the collision.
25 One reason why a complex case requires detailed particulars is, as Clarke J. pointed out in Thema International Fund plc v. Institutional Trust Services (Ireland) Ltd . [2010] IEHC 19, (Unreported, High Court, Clarke J., 26 January 2010), to limit the range of discovery. Discovery is an essential tool in any significant litigation, but it can place an onerous, expensive, and therefore oppressive burden on the parties, which risks creating, rather than avoiding, injustice. I fully agree that the fact that witness statements are now routinely required in commercial actions and in other proceedings does not in any way reduce the weight to be attached to this justification for a greater precision in pleadings. Furthermore, in my view, the justification extends beyond the question of discovery and applies more generally to the preparation of a case, as indeed this case and this motion illustrates.
26 The allegation that a firm of auditors was negligent in auditing the technical provisions of a large insurance company, which provisions are required to be prepared (and audited) with actuarial assistance, necessarily gives rise to a requirement for significant expert evidence. The witnesses who have the level of expertise necessary to give a credible opinion on such issues are nearly always the heads of teams in large international firms of accountants and actuaries. The question of what particulars should be provided in this case has resulted in the deployment of two rounds of very detailed affidavit evidence from senior partners in London-based international firms of accountants. It is to be expected that such affidavits would be drafted and re-drafted by senior lawyers, and were themselves based upon accounts which were prepared, verified and checked by a team of accountants in each of the firms involved. All of this comes at a very substantial cost, albeit that this motion is only directed to a preliminary question in these proceedings of the nature of the particulars which must be provided. The preparation for these proceedings, and ultimately the trial, involves a high degree of expert involvement. When, in due course, expert witness statements are prepared, that too will be an extensive, and, unavoidably, expensive task. But that is only one part of the expertise that will be required to be called on in this case. It is anticipated that the same exercise will be required in respect of witnesses with actuarial expertise, and, quite possibly, experts in the insurance business. If the pleadings are ill-defined and sprawling, then the scope of inquiries which must be made, and the preparation which must be undertaken, is necessarily broad, and the cost of the exercise, which is already significant, will increase exponentially. If the pleadings can be properly refined, and thus the issues defined at a relatively early stage of proceedings, then that necessarily limits the scope of the research, inquiry, and preparation. It is to be anticipated that the focus of a case may change as further evidence is obtained, discovery reviewed, and the arguments refined, but that exercise can properly occur by the delivery of further particulars, or, if necessary, the amendment of pleadings. It is not a justification for unduly broad or vague pleadings or particulars at the outset.
27 Turning to this case, it is of course the case that the plaintiff has provided an impressive amount of information already at this stage. It is also the case that there is a necessary limit to what the plaintiff can be expected to plead at this stage of the proceedings, particularly in advance of obtaining discovery of the PwC audit papers, and perhaps the Milliman papers on third-party discovery. It is also the case that the manner in which the case is put at the moment - that the Quinn/Milliman figures audited by PwC are so wrong by reference to the Mazars exercise, that PwC must therefore have been negligent, is somewhat unusual, which may have a consequential impact on the form and nature of particulars required. But at the risk of significant oversimplification, this case, and in particular the case the plaintiff seeks to make at the moment, is one of rival calculations. It is contended that the figures audited by PwC are wrong, indeed so wrong, that they could not have been approved by competent auditors performing their task professionally. Furthermore, in each of the headings and for each of the relevant years, the plaintiff is able to identify the relevant figures which were audited, and both assert that they are wrong, and identify what is or ought to be in the correct range of figures at which a careful exercise would have arrived at. The plaintiff is also in a position to quantify the difference, since this is a necessary step towards quantifying the damages claimed. It is necessary to show that there is such a significant difference between the audited accounts and the figures which should have been audited and approved, that the plaintiff can plausibly maintain the next limb of its case, namely that it would not have engaged in certain transactions or would have taken corrective action if it had been aware of what the plaintiff now contends were the true figures.
28 To take one example at the significant level of detail already supplied by the pleadings, it is asserted that for the accident year ending 31 December 2005, the net cost of claims in the Republic of Ireland which was audited, €109,219 million, was understated by €34,218 million. These, it will be noted, are very precise figures. Exactly the same contention is advanced in relation to other years with the same pattern replicated for other heads of business. But the figure of €34,218 million is not taken whole and complete from some source which is identified. They are instead the product of calculations which must necessarily have been carried out. The figure for the cost of claims in the year end 2005 is the product of a calculation which it is to be assumed involves a series of figures and calculations, such as the number of claims, the manner in which they are to be valued, and any factors which are to be applied to basic figures to take account of matters such as inflation, the emergence of further claims, the possibility that long-tail claims are more serious and expensive, and so on. Both the audited figures and the Mazars recalculation purport to address the same basic figures and purport to calculate an amount by reference to certain approaches alleged to be standard in the preparation of accounts, and in particular the technical provisions of a large insurance company. If, therefore, the plaintiff is in a position to launch the proceedings and plead that the audited figures by PwC are not only wrong, but so wrong as to have been negligently prepared and audited, it must follow the plaintiff is in a position to identify, at least to some degree, the errors it alleges were made in either the counting of the basic number of claims, or in the valuation of them, or the factors to be applied to the underlying figures, or perhaps all three. If it is not in a position to do so, the plaintiff must necessarily be able to say how those figures should correctly have been calculated. Moreover, since it is alleged the errors made were systemic rather than individual, and traceable to the relevant factors, it seems likely that the differences between the parties can be reduced to a certain number of rival contentions as to methodology, either in relation to the calculation of a number of claims, the valuation to be applied thereto, or a dispute as to the correct methodology for calculation. If so, and if those matters are identified at this stage, it will provide significant focus for the work that will be undertaken on all sides in preparation for the case. Since that information ought to be available at this stage (subject to qualification and refinement after discovery) it should, in principle, be provided.
29 A complication in this case is that it is suggested that the plaintiff cannot now tell what errors it contends the defendant made in coming to the final figures, since the basis upon which the case now lies depends rather on the assertion that the Mazars recalculation exercise is correct, or perhaps more precisely, an example of one possible correct approach within the range of correct approaches to the preparation of the accounts. It is also pointed out that the High Court judge refused the defendant's request for particularisation of the steps taken by Mazars in its re-estimation exercise on the grounds that this did not arise from the pleadings. As was observed during the course of argument in this case, I think correctly, there is a sense in which the Mazars exercise is the obverse of the particulars now sought, because of the way in which the plaintiff presents its case. It may indeed be the case that the plaintiff is most confident about the alleged error of the Quinn/Milliman figures because it is sure of the alleged correctness of Mazars approach, and it may choose to express the matter in this way. But the plaintiff must be capable of providing particulars of how it contends Quinn/Milliman is incorrect, whether independently or by reference to the Mazars exercise. Again, at the risk of oversimplification, if a pupil gets a complicated calculation wrong, then a teacher who has the correct calculation is able to go through the correct steps, and thus identify the error, or as the case may be, the series of errors made. If it is the case that the pupil has the wrong answer for a series of calculations requiring the same basic techniques to be applied, then it must be possible to identify the error. If, in this case, the plaintiff seeks to insist that it can only assert an error on the part of Quinn/Milliman (and therefore PwC) because it is confident of the correctness of the recalculation by Mazars, then it must at this stage say so, and identify the steps in the Mazars calculation, not with a view to explaining this for its own purposes, but rather because the plaintiff contends that this is the basis for asserting that the defendant was both wrong and negligent. Accordingly, the plaintiff should be obliged to supply the particulars sought, either by saying directly why it contends the Quinn/Milliman figures are wrong, or by saying so indirectly by reference to the exercise the plaintiff has done through Mazars. It is, I think, inconceivable that this case can be heard and determined without those fundamental issues being addressed, and indeed being the centre of the dispute between the parties.
30 By way of a proviso to the forgoing, however, I note that, as recorded at pp. 41 to 43 of the transcript of matters heard before the High Court on 24 July 2015, Costello J. clarified that, in her judgment delivered on 19 May 2015, she considered it appropriate to direct replies to particulars 11 (3) II, V, VIII and XI because PwC was entitled to particulars of why QIL says the technical provisions were in fact materially understated. However, in relation to the request for particulars of "the financial effect of each reason" for the alleged understatement identified by the plaintiff in its re-estimation of the technical provisions, Costello J. stated that if Quinn does not in fact know what the financial effect of each reason is because it never conducted an exercise which would generate that information and it is not actually part of its case, this would be a legitimate reason for not answering that particular insofar as it relates to the financial effect of each reason identified. The fact that the plaintiff has already pleaded that the accounts were understated by specific amounts may suggest that this aspect of the response to particulars might be straightforward, but I agree that, if it is the case that Quinn simply did not perform calculations which would allow it to attribute a specific financial effect to each reason for the alleged understatement, it should be entitled to respond to this aspect of the request by saying so.
31 The plaintiff has the capacity to provide substantial detail at this stage of the proceedings, and should, in my view, be required to do so. It is perhaps inevitable that any particular so provided would be qualified by reference to the limits of the information available, and pending the receipt of discovery. However, this motion raises a fundamental issue of principle as to whether the plaintiff is entitled to refuse this level of detail, whether at this stage of the proceedings, or even after discovery, because the plaintiff contends it is a "matter of evidence". In my view, it is at least possible that the delivery of these particulars at this stage will advance the understanding of the case to be made, tighten its focus, and therefore reduce the scale and cost of the work which must be undertaken to prepare for what is on any version a very detailed, complex and lengthy case. That, I think, is the proper function of further particulars.
32 Accordingly, I would set aside the order of the Court of Appeal in this regard, restore the order of the High Court, and direct that the plaintiff respond to particulars 11 (3) II, V, VIII and XI (subject to the observation made at para. 30 above in respect of the financial effect of each reason for the alleged understatement). The replies should be furnished within six weeks of the date hereof, or such further time as may be agreed between the parties or directed by the High Court. | |
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