Collateral Contracts
Cases
Howden v. Ulster Bank and Others.
[1924] 1 IR 117
Wilson J. Ch. Div. (N. I.)
I do not doubt or impugn the settled rule of evidence, that parol evidence is not admissible to add to, vary, or contradict a written agreement or any transaction in writing: Meres v.Ansell (1); but in this case I have come to the conclusion that the letters are not a written agreement and do not contain or purport to contain the whole transaction, and in allowing the evidence I follow the law laid down in Roscoe’s Nisi Prius Evidence, 18th ed., p. 17; and Allen v. Pink (2), which decided that parol evidence of a verbal transaction is not excluded by the fact that a writing was made concerning or relating to it unless such writing was in fact the transaction itself and not merely a note or memorandum of it or portion of the transaction; and the judgment therein of Lord Abinger C.B., concurred in by Bolland and Alderson BB.: “The general principle is quite true that if there has been a parol agreement, which is afterwards reduced by the parties into writing, that writing alone must be looked to to ascertain the terms of the contract; but the principle does not apply here; there was no evidence of any agreement by the plaintiff that the whole contract should be reduced into writing by the defendant; the contract is first concluded by parol and afterwards the paper is drawn up, which appears to have been meant merely as a memorandum of the transaction or an informal receipt for the money, not as containing the terms of the contract itself.”The case of Lockett v. Nicklin (3) comes nearest in its facts to the present of any of those I have read, and throws some doubt on the case of Ford v. Yates (4), relied on by Mr. Murphy for the defendants. In that case the defendant by letter ordered certain goods from the plaintiffs, and the letter stated,”if approved, as I told Mr. Lockett, I will give you further orders.” The goods were sent with an invoice in the nature of a sold note showing parties, goods, and price, and stating nothing as to the time of payment. Similar orders were subsequently given and similarly dealt with; and plaintiffs then brought their action for the price, and the defendant tendered evidence to prove that there had been a conversation between the parties prior to the order for the goods, at which, inter alia, it was stated that defendant was to get six months’ credit and pay them by a bill at three months, and that it was on these terms that the order for the goods was given. The evidence
was objected to and admitted, and a verdict found for defendant, leave being reserved to the plaintiffs to move to enter a verdict for them. At the trial Patterson J. admitted the evidence, not for the purpose of varying the contract, but of supplying the omission in the written documents as to the time of payment. The motion was argued before Barons Parke, Alderson, and Platt. I refer to all the judgments in that case, and the admission of the evidence and the verdict for the defendants were upheld, and the rule for a new trial was discharged. Again in Hutton v. Warren (1) Baron Parke says that the principle on which extensive evidence is admissible to annex incidents to written contracts is a presumption that the parties did not mean to express in writing the whole of the contract by which they intended to be bound. In Angell v. Duke (2)Blackburne J. says: “It is a most important rule of law that people should not add to or vary a written contract, which is the record of all the terms relating to the same matter agreed upon between the parties.”
It is because it was alleged that the letters in this case on their face were not intended to be the record of all the terms agreed on between the parties that I admitted the parol evidence. If I was wrong in admitting this evidence, the judgment I delivered should be set aside, as the parol evidence materially affected my decision. It was proved to my satisfaction that the plaintiffs and the Company both knew of the quotations of the firm across the water for the building of dredgers, and that there was a full discussion about them, and a rough specification for the boat was produced at the meeting to which I have referred of the four persons on the morning of 14th August, 1919. Mr. Harbinson, on behalf of the plaintiffs, gave the Company the order for building this dredger. Brown, on behalf of the Company, ordered M’Intyre to make up full specification. Then M’Intyre asked what about payments, and Brown said: she would be built on the usual shipbuilding agreement. Harbinson, for plaintiffs, was satisfied with that, and knew, or thought he knew, what it meant. The company’s representatives shook hands with Mr. Harbinson, representing plaintiffs, and thanked him for the order. Mr. Harbinson then retired, and the letters were written as already mentioned.
Macklin v. Graecen & Co.
[1983] IR 61 S.C.
Griffin J
When (as in this case) a transaction has been reduced to writing by agreement of the parties, no evidence may be given to prove the terms of the transaction except the document itself, and extrinsic evidence is not admissible to vary the terms of the document. I agree with the learned trial judge that, in an appropriate case, an agreement made by the holder of a licence for its extinguishment is enforceable; indeed, such agreements are frequently made. Such an agreement would be more elaborate in form and would (inter alia) recite such matters as the agreement of the parties, that the licensee holds the licence, that the licence is subsisting and will be kept in force, the intended application to the court for a new licence, the description of the premises to which it is attached, and the agreement to consent to the extinguishment of the licence. But this is not such a case. Here, the plaintiffs’ claim is, and remains, one for specific performance of an agreement to sell the licence. It is not and cannot be treated as a claim seeking rectification of the document, in which case parol evidence would be admissible in support of such a claim.
Therefore, the plaintiffs’ claim must be confined to the terms of the agreement and, unquestionably, those terms make the agreement one for the sale of the licence. For almost 100 years it has been accepted that a licence to sell intoxicating liquor is inalienable and must be attached to premises. The law on the matter has been stated succinctly in O’Connor’s Irish Justice of the Peace (2nd ed. vol. 2 at p. 688) as follows: “The doctor cannot sell his degree, because it is attached to himself; on the other hand, the holder of a licence cannot sell the licence to any other person, unless such other person also buys the premises. The licence per se is inalienable. It must always, so long as it exists at all, remain attached to premises (see observations of Barry, L.J. in Brennan v. Dorney 5 at p. 368).”
AIB Mortgage Bank -v- Hayes & anor
[2016] IEHC 280
Baker J
22. The parol evidence rule has been long considered as a rule observed as much by reason of its exceptions than as arising from observance of the rule itself. I adopt the reasoning of Hogan J. in Tennants Building Products Ltd. v. O’Connell [2013] IEHC 197 where, at para. 19, he explained the parol evidence rule as:
“By virtue of this rule, the parties to a written contract are presumed to have reduced the entirety of their agreement to writing and that to permit one party to introduce new oral evidence which in effect contradicts the terms of the written agreement would be destructive of legal certainty.”
23. Hogan J. explained the parol evidence rule as meaning inter alia that the Court will not hear evidence as to what one party subjectively believes the contract meant, and quoted the Supreme Court judgment in Macklin v. Graecen & Co. Ltd. [1983] I.R. 61 as authority for that proposition. As Hogan J. correctly said, the parol evidence rule has been “consistently diluted” by various doctrines including misrepresentation and the recognition that collateral contracts may exist side-by-side with a main contract found in a written document.
24. In Analog Devices B.V. & Ors. v. Zurich Insurance Co. & Anor. [2005] 1 IR 274 at p. 281, Geoghegan J. identified the rule as the third proposition stated by Lord Hoffmann in I.C.S Ltd v. West Bromwich Building Society & Anor. [1998] 1 WLR 896 as follows:
“The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.”
25. That statement of principle is relied on by counsel for the plaintiff. It is, in my view, not a precise statement of the parol evidence rule, in that the rule relates to circumstances where the parties commit their contract to writing, and where the evidence shows that the contract was intended to be found in that written document. The third principle of Lord Hoffmann is rather a more general proposition relating to the law of contract, i.e. that the court will look to find the meaning of a contract in the terms actually agreed, and whether they be written or in other form is irrelevant to that proposition, and evidence of intention or what was said or discussed in negotiations is not evidence which is admissible as evidence either to vary the contract or to explain what it means. This arises from the first principles of contract law that a contract evolves from the unequivocal and complete acceptance of an offer, and in complex contractual negotiations it is the final terms offered and accepted which form the basis of the contract, and not terms varied in the course of negotiations. The court will not look to the negotiations to ascertain why the parties reached a particular position, as the focus of the court in interpreting contractual obligations is on what was agreed, not on why it was agreed or what was varied in the course of negotiations and why.
26. In Bula Ltd. v. Tara Mines Ltd. [1999] IESC 17 the Supreme Court quoted with approval the dicta of Lord Wilberforce in Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989 at pp. 995-6 as follows:
“No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as ‘the surrounding circumstances’ but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating…”
27. In that case, the Supreme Court said that while the general rule is that evidence is not admissible to vary the terms of a contract which has been reduced to writing, the rule was subject, inter alia to a qualification that oral evidence may be received as to the “factual matrix”. It is the evidence of the negotiations and subjective intentions that is not admissible.
28. Counsel for the Bank also relies on two judgments of McGovern J., Ulster Bank Ireland Ltd. v. Deane [2012] IEHC 248 and Allied Irish Banks Plc. v. Taylor & Anor. [2016] IEHC 121. In the first of these cases, the Court refused to permit the defendants to defend summary proceedings when they sought to advance evidence which contradicted the terms of a written facility letter which the bank asserted contained the agreement between the parties. McGovern J. rejected that evidence as inadmissible as being an impermissible breach of the parol evidence rule, and in reliance on Macklin v. Graecen & Co. Ltd. and O’Neill v. Ryan & Ors. [1992] 1 I.R. 166 he described the rule as:
“In short, a party is not permitted to adduce evidence which, in effect, contradicts the reasonable construction of words used in a written agreement.”
29. McGovern J. followed his own judgment in the later case of Allied Irish Banks Plc. v. Taylor.
30. In each of these cases McGovern J. predicated his decision on a view, not seriously contested, that the parties intended the written document to comprise the contract, i.e. he explained the test as being that extraneous evidence could not contradict or defeat a contract which was reduced to writing. Implicit in that approach is that the parties intend that the written document be the sole repository of the contract. Those judgments of Mc Govern J. do not deal with circumstances where the contract is found in other documents or exchanges.
31. The parol evidence rule does not exclude the argument that express assurances can have contractual force, or can sound in the law of tort as a misrepresentation. In that regard Hogan J. in Tennants Building Products Ltd. v. O’Connell adopted the analysis of Finlay Geoghegan J. in Allied Irish Banks Plc. v. Galvin Developments (Killarney) Limited & Ors. [2011] IEHC 314 which was also referred to extensively by counsel for both parties in the present case, and to which I now turn.
32. I find most useful for the purposes of the analysis of the factual circumstances in the present case the authoritative analysis contained in the judgment of Finlay Geoghegan J. in Allied Irish Banks Plc. v. Galvin Developments (Killarney) Limited & Ors. The bank in that case argued that the contract was to be found in the suite of written documents. While she did not analyse the matter by reference to the parol evidence rule, Finlay Geoghegan J. did find that there existed a collateral contract by which the bank agreed to limit its right of recourse to 50% of the loan advanced. She used the term “collateral contract” with some hesitation and pointed out that it was not intended to denote a contract existing side by side with the main contract, but rather a contract preliminary to the main contract, arising from a promise made in the context of the main contract and but for which the main contract would not have been made.
33. I consider the analysis of Hogan J. of the relationship between the pure parol evidence rule as explained by McGovern J. in Ulster Bank Ireland Ltd. v. Deane, and the finding of a collateral contract as was done by Finlay Geoghegan J. in Allied Irish Banks Plc. v. Galvin Developments (Killarney) Limited & Ors., to point to the power of the court to recognise the existence of a collateral or preliminary contract arising from a promise intended to have contractual effect made in the course of negotiations. The written contract may not always contain the whole of the evidence of the terms on which the parties have contracted, albeit this may arise in exceptional cases and only where the evidence is clear. As Hogan J. said in Tennants Building Products Ltd. v. O’Connell, the finding of such a collateral contract is not the norm, and will require cogent evidence, often found in pre-contract documents.
34. The defendants argue that the loan sanction letter of the 14th April, 2005 and the emails were not intended by either party to be devoid of legal effect or purpose. It is argued that in the case of negotiations between commercial entities the court should assume there existed an intention to create legal relations. Reliance is placed on the decision of Megaw J. in Edwards v. Skyways Ltd [1964] 1 W.L.R. 349. That case involved a negotiation between representatives of the British Airline Pilots Association and the airline company regarding pension rights of pilots who were made redundant. The company contended that the representation made by it in the course of negotiations was not intended to give rise to legal relations, and the High Court of England and Wales disagreed. Megaw J. found that the promise and agreement made by the airline was made in the context of a business relationship and not in a domestic or social context, and accordingly, the onus would be on the party denying that legal relations were intended to show that there was no intention to create legal relations. I accept that proposition and consider this to follow form the analysis of Finlay Geoghegan J. in Allied Irish Banks Plc. v. Galvin Developments (Killarney) Limited & Ors. and Hogan J. in Tennants Building Products Ltd. v. O’Connell.
35. The leading recent Irish case which deals with whether a representation has become a term of a contract is the considered judgment of Gilligan J. in Carey v. Independent Newspapers (Ireland) Ltd [2004] 3 I.R 52. In that case the plaintiff joined the staff of one of the newspapers operated by the defendant as a political correspondent. She had discussed her working arrangements with the editor before taking the position, and had made it clear that for personal reasons, she would not be in a position to work the early morning shift. The editor discussed the plaintiff’s working requirements with a member of senior management, who expressed serious reservations about the possibility that the plaintiff could work from home for the early morning shift, as was proposed. The editor was advised by the senior manager that if the editor did support the plaintiff’s proposal, that he too would support it, but that he would not confirm the arrangement in writing as he felt the newspaper might wish to review the working arrangements at a later date. The plaintiff was not advised of these reservations.
36. When the editor was subsequently replaced, the plaintiff was required to work the early morning shift and brought proceedings in the High Court claiming damages for breach of contract and/or damages for misrepresentation. The legal proposition relevant to the present case was that the representations made by the editor to the plaintiff had contractual force. Gilligan J. reviewed the law relating to when a statement and representation made in pre-contractual negotiations could be said to form part of a concluded contract. He pointed to the fact that the text books often distinguished between representations which did not become terms of a contract, and those which did, sometimes described as “warranties”, this term meaning “a term having contractual effect” and denoting a contractual term.
37. Gilligan J. made the point, which I accept, that a pre-contract representation may become a term of a contract even if it is not called or characterised as a warranty in the negotiations or conversations in which the representation was made. I also accept the general proposition stated by Gilligan J., that the significance of the term to the “eventual entry into the contract on the part of either or other of the parties” is a relevant factor in determining whether a representation has contractual effect. In that case, Gilligan J. found that the agreement with regard to morning working was a fundamental term of the agreement reached between the defendant and the plaintiff, and “constituted a warranty and inducement” to the plaintiff to take the position offered.
….
Conflict between formal written documents and prior assurances
41. How then is one to reconcile the fact that Mr. and Mrs. Hayes both signed a formal loan offer document which did not contain a reference to a review after five years?
42. Mr. and Mrs. Hayes engaged with their solicitor for the purposes of witnessing the document, and Mr. Hayes spoke highly of her, a partner in the firm of McCarthy and McCarthy, Ballincollig, Co. Cork, with whom Mr. and Mrs. Hayes had dealt in regards to all or most of their financial and personal property deals. I regard it as significant in that context that when Mr. and Mrs. Hayes came to sign the loan offer in the presence of their solicitor, they did not discuss with her that the loan offer did not mention a review after five years. Mr. Hayes gave evidence that he phoned Mr. Dudley before he signed the document. He was unable to remember whether he phoned Mr. Dudley from the Ballincollig office of his solicitor, or from an office in Cork. That this phone call occurred was never put to Mr. Dudley in cross-examination. What exactly was said in the course of conversation was also not identified by Mr. Hayes. He never mentioned the phone call to his solicitor, and I heard no evidence at all from Mrs. Hayes in the course of the case. Mr. Hayes says that he brought the difference to Mr. Dudley’s attention before he signed the loan offer, but that he was told a further five years interest free would be granted as a matter of “a rubber stamp”, and that the final loan documentation took the form it did to suit the “paperwork”, in the context where Mr. Hayes knew and was expressly told that the Bank did not have a ten year product. That the five year offer issued in order to suit the paperwork requirement of the bank was put to Mr. Dudley, and his reply was that he had never issued a ten year loan offer, that such a product was not available, and that he never had, nor would he have, issued a loan offer to a customer and then told them that the terms were different from those expressed in writing.
43. I accept Mr. Dudley’s evidence in this regard, and reject that of Mr. Hayes. Mr. Hayes said he was happy to sign the document on the 2nd June, 2005, because of his conversation with Mr. Dudley on that day. I do not accept that this conversation happened, and if it did, I do not accept the evidence of Mr. Hayes that he was assured by Mr. Dudley that in essence, the document that he was signing did not mean what it said. Mr. Hayes is a very experienced businessman, and I found him to be a very intelligent witness. He had built a very substantial property portfolio, he is a qualified engineer and has been engaged in business for a long number of years, and must have in the course of his business dealings executed very many documents. He took the trouble of executing the loan offer in the presence of his solicitor, a solicitor with whom he had a lot of dealings over a long number of years. Almost two months had passed from the date of the letter from Mr. Dudley on the 14th April, 2005 and the formal loan offer acceptance. Mr. Hayes knew he was a valued customer of the Bank and he could have reverted to Mr. Dudley or to another person in the Bank, or had his solicitor revert, to have the formal loan document revised to reflect what he said was agreed. I regard it as not credible, that Mr Hayes would not have mentioned the phone conversation and the assurance said to have been given to him by Mr Dudley because he had such trust in his solicitor and her expertise.
44. However, I cannot ignore the fact that the agreement that the Bank would meet the costs of breaking the fixed rate loans was also not reflected in the loan document, and that agreement was performed and agreed to have been a term of the loan.
45. Counsel for the defendants argues that the expression “all things being equal there wouldn’t be any issue in extending at that stage for a further five years”, must have been, was intended to, and did in fact have contractual import. In my view this is correct and the Bank did intend to give a degree of comfort or assurance to Mr. Hayes in the negotiation, that should he accept the loan offer, the interest only facility would be favourably reviewed after the five years, and that it was anticipated that the interest only period would be continued for another five years.
46. It is in the circumstances my view that the formal loan document was not intended to comprise all of the elements of the agreement for loan. Two elements at least were omitted from the written document, although both found clear expression in other written documents adduced in evidence, primarily the letter of the 14th April, 2005. I am satisfied that there was an agreement between the parties, that the Bank would meet the cost of breaking the fixed interest loans, and note that was a complex agreement by which Mr. Hayes met half of the cost in the first year and was reimbursed those monies the following year subject to certain conditions which were met. I am also satisfied that there was an agreement that the facility would be reviewed after five years and that there was to be no automatic reverting to annuity at that stage. This is borne out also by the internal Bank documents in 2007 and 2009. I accept the evidence of Mr. Dudley that it would have been unusual, if indeed impossible, for Bank headquarters to have issued a mortgage loan offer that made express reference to a review after five years. Mr. Hayes, in the course of his evidence, suggested that Mr. Dudley had said to him that the Bank “paperwork” would not normally include a reference to a review, and I accept that that is so.
47. In the circumstances the matter can be dealt with by means of the analysis conducted by Finlay Geoghegan J. in Allied Irish Banks Plc. v. Galvin Developments (Killarney) Limited & Ors., i.e. that there is sufficient written evidence of a collateral agreement between the parties and that the evidence points me to a conclusion that the formal offer of mortgage loan dated the 5th May, 2005, did not contain the entire of the agreement between the parties
48. Thus it seems to me that counsel for the Bank is incorrect in arguing that this case may be answered by application of the parol evidence rule, as that rule has no application when the parties do not commit the entire of their agreement to writing.
Conclusion on contractual force of assurances
49. Accordingly, the contract between the Bank and Mr. and Mrs. Hayes did provide for a review of the facility after five years, with regard to whether Mr. and Mrs. Hayes should be offered a further period during which repayments would be on an interest only basis. I consider that this was a term of the contract, or that it operates as a preliminary contract.
50. Mr Hayes however asserts that the agreement with the Bank was that the interest only facility would automatically be renewed at the five-year review and that it was a matter of a “rubber stamp”. I turn now to consider this argument as: [2016] IEHC 280
Maloney v O’Connor & anor
[2015] IEHC 678
Barrett J
PART 8: COLLATERAL CONTRACTS
ii. Nature and effect of collateral contracts
30. Sometimes it may be difficult to treat a statement made in the course of negotiations for a contract as a term of the contract, either because the statement was (a) clearly prior to or outside the contract, or (b) because the so-called parol evidence ‘rule’ prevents its inclusion. When it comes to the issue of collateral contracts, the court was referred, inter alia, to the decision of the House of Lords in Heilbut Symons & Co. v.Buckleton [1913] AC 30, and to the following observation of Lord Moulton therein, at 47:
“Such collateral contracts, the sole effect of which is to vary or add to the terms of the written contract, are therefore viewed with suspicion by the law….Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be strictly shown.”
31. Presumably the reason counsel referred to such a vintage case was to persuade the court that the quoted text represents a long-standing and settled point of law from which the court should be slow to depart. But the problem with citing a more-than-one-century-old case is that a lot of legal water has passed under the jurisprudential bridge in the hundred years or so since.Indeed, much that was stated in Heilbut Symons has now become entirely out of date, as was noted by no less an authority than Lord Denningalmost 40 years ago in J Evans & Son (Portsmouth) Ltd. v. Andrea Merzario Ltd. [1976] 1 W.L.R. 1078, 1081. Evans went un-cited in the within proceedings -Mr O’Connor, as a so-called ‘lay respondent’, could hardly be expected to cite it – so the court does not tarry to consider it in any detail. However, one hardly needs to have regard to Lord Denning’s eminent wisdom before recognising as a truth that the courts are nowadays much more willing than they were before the Great War to accept that a pre-contractual assurance gives rise to a collateral contract. In truth, it is now trite law to state that when a person gives a promise or an assurance to another, intending that she should act on it by entering into a contract, and she does act on it by entering into the contract, that promise or assurance is held to be binding.
32. As a general rule, breach of a collateral contract gives rise to an action for damages for its breach. However, it does not seem to the court that experience, law or logic offer any reason why, as a matter of principle, it should not be possible for the court to treat a main contract as repudiated by virtue of the non-observation or contravention of a collateral contract. Just because one form of remedy is typical does not have its necessary consequence that another form of remedy is unavailable. Other effects of a collateral contract may be to vary the terms of the main contract or – notably, in the context of the within proceedings – to estop a party from acting inconsistently with it where it would be inequitable for him to do so. The court returns to these last possibilities later below.
PART 9: THE PAROL EVIDENCE ‘RULE’
33. The court was referred by counsel for Mr Maloney to the parol evidence ‘rule’, a supposed ‘rule of law’ which19th-century judges, in particular, seem to have applied with an almost peculiar relish. Under the most rigorous version of that ‘rule’,parol testimony cannot be received to contradict, vary, add to, or subtract from the terms of a written contract, or the terms in which the parties have deliberately agreed to record any part of their contract. Operation of the parol evidence ‘rule’ was never confined to oral evidence. Thus, it has also been taken to exclude extrinsic matter in writing. However, the ‘rule’ has the potential to be so crushingly unfair in its result that it has long been subject to what Murphy J. describes in Cotter v. Minister for Agriculture (Unreported, High Court, 15th November, 1991), as “numerous exceptions”. In fact these last-mentioned exceptions are so numerous as to suggest that in truth the ‘rule’ has continuously presented with difficulties in its conception, construct, and how it is carried through in practice. So much so, that it can no longer be asserted as a truth that the mere production of a written agreement, however complete it may seem to be, will, by ‘rule of law’, render inadmissible evidence of other terms that do not appear in, or are not expressly incorporated into, that agreement.
34. A court is entitled in every case to look, and as a matter of natural justice must look, at all the evidence from start to finish to see what the bargain was that was struck between the parties. That is what this Court has done in the within proceedings. Here, counsel for Mr Maloney contends that the evidence points to the existence of a main contract (re. the sale of land) and a collateral contract(re. the stamp duty benefit). The court, by contrast, finds that, consistent with Mr O’Connor’s contentions and the contract of 9th April, 2003, the consideration for the sale of the above-mentioned lands, as agreed before the ‘closing’, was ‘Cash Price + Split Benefit’, that absent this combined consideration there would have been no sale of the land, and that what presents therefore is not two contracts (one main, one collateral),but one contract where the consideration due is split into two elements.
Irish Bank Resolution Corporation Ltd -v- McCaughey
[2014] IEHC 230
Kelly J
Collateral Contract
18. Collateral contracts are dealt with by Chitty at para. 12.103 as follows:-
“Even though the parties intended to express the whole of the agreement in a particular document, extrinsic evidence will nevertheless be admitted to prove a contract or warranty, collateral to that agreement. The reason is that ‘the parol agreement neither alters nor adds to the written one, but is an independent agreement’.
Such evidence is certainly admissible in respect of a matter on which the written contract is silent. In a number of older cases it was stated that evidence of such a contract or warranty must not contradict the express terms of the written contract. However, more recently the courts have admitted evidence to prove an overriding oral warranty or to prove an oral promise that the written contract will not be enforced in accordance with its terms. Thus, in City Westminster Properties (1934) Limited v. Mudd, the draft of a new lease presented to a tenant contained a covenant that he would use the premises for business purposes only and not a sleeping quarters. The tenant objected to this covenant and the landlords gave him an oral assurance that if he signed the lease, they would not enforce it against him. The tenant signed the lease, but later the landlord sought to forfeit the lease for breach of this covenant. Harman J. held that the oral assurance constituted a separate collateral contract from which the landlords would not be permitted to resile. The collateral contract or warranty may be formal or informal even though the main contract is one which is required by law to be in or evidenced by writing.”
19. In Tennants Building Products Limited v. O’Connell [2013] IEHC 197, Hogan J. neatly summarised the modern case law on this topic as follows:-
“The effect of this case-law may be said to be that while the courts will permit a party to set up a collateral contract to vary the terms of a written contract, this can only be done by means of cogent evidence, often itself involving (as in Mudd and in Galvin) written pre-contractual documents which, it can be shown, were intended to induce the other party into entering the contract. By contrast, generalised assertions regarding verbal assurances given in the course of the contractual negotiations will often fall foul of the parol evidence rule for all the reasons offered by McGovern J. in Deane.”
20. Reference was also made to the decision of Finlay Geoghegan J. in AIB Plc v. Galvin [2011] IEHC 314 where she said:-
“I am using ‘collateral contract’ in the sense explained by Cooke J., in the Supreme Court of New Zealand in Industrial Steel Plant Ltd. v. Smith [1980] 1 N.Z.L.R. 545, at p. 555, quoting with approval from Cheshire and Fifoot on Contracts:
‘The name is not, perhaps, altogether fortunate. The word ‘collateral’ suggests something that stands side by side with the main contract, springing out of it and fortifying it. But, as will be seen from the examples that follow, the purpose of the device usually is to enforce a promise given prior to the main contract and but for which this main contract would not have been made. It is rather a preliminary than a collateral contract. But it would be pedantic to quarrel with the name if the invention itself is salutary and successful.’
It is clear that not every statement or promise made in the course of negotiations for a contract may give rise to a finding that a collateral contract exists. To be so treated, a statement must be intended to have contractual effect.”
21. All of these cases were, of course, decided on full oral hearings and not on applications for summary judgment.
22. It is clear that the courts have over the years on occasions accepted that in appropriate circumstances the terms of a written agreement may be affected by the existence of a collateral contract or warranty made between the parties. That is the case which is sought to be made here. Counsel for the plaintiff in reply sought to analyse very thoroughly the precise wording of the affidavit evidence from Mr. McCaughey and Mr. Drennan on this topic so as to demonstrate that it falls short of the “cogent evidence size=”2″ face=”Verdana”>” referred to by Hogan J. and could better be characterised as general assertion. He also sought to raise the ability of Mr. Drennan to bind the Bank. Whilst ultimately these criticisms may well prove to be correct, it does not appear to me that I can, at this juncture, say that it is very clear that the defendant has not demonstrated a triable issue in respect of this allegation of collateral contract. There is his own sworn testimony, bolstered by Mr. Drennan’s and fortified by the material which was presented to the credit committee which material antedates the signing of the formal contracts in each case.
23. Given the low threshold of proof that is required to be established at this stage of the proceedings, I am of opinion that a triable issue has been raised as to the possible existence of a collateral agreement to the effect that the term of the agreements would be “for the duration of the funds”.
24. This line of argument could have been entirely precluded by the plaintiff by having in its contractual terms an “entire agreement” clause. These clauses have been commonplace for years and provide that the written agreement contains the entire and only agreement between the parties and supersedes all previous agreements and understandings respecting the subject matter of the contract. Furthermore, such clauses commonly contain an acknowledgement that when entering into the agreement, the borrower has not relied on any representation or undertaking whether oral or in writing save such as are expressly incorporated into the written document. Had such an “entire agreement” clause been incorporated into the conditions of the plaintiff, this line of argument would not have been available at all to the defendant.
25. Having concluded that a triable issue as to existence of a collateral contract which provided that the term would be for the duration of the funds thus not making the monies advanced repayable on demand, I now consider the consequences of that conclusion.
26. This collateral contract on the terms contended for by the defendant has its limitations. First, he accepts in his affidavit that it only applies to the first agreement, second agreement, third agreement, facility A and facility B and part of the fourth agreement. It has no relevance in relation to other parts of the claim.
Burley v Joseph W Burley Partners Ltd & Anor
[2002] EWCA
Rix LJ
For the purposes of the parol evidence rule he was content to rely, as his sole authority, on the statement of the Law Commission in its report on the Law of Contract, the Parol Evidence Rule, Law Com 154 of January 1986, Cmd 9700. Paragraph 2.7 of that report, which is the essence of Mr Newman’s case, reads as follows:
“We have now concluded that although a proposition of law can be stated which can be described as the `parol evidence rule’ it is not a rule of law which, correctly applied, could lead to evidence being unjustly excluded. Rather, it is a proposition of law which is no more than a circular statement: when it is proved or admitted that the parties to a contract intended that all the express terms of their agreement should be as recorded in a particular document or documents, evidence will be inadmissible (because irrelevant) if it is tendered only for the purpose of adding to, varying, subtracting from or contradicting the express terms of that contract. We have considerable doubts whether such a proposition should properly be characterized as a `rule’ at all, but several leading textbook writers and judges have referred to it as a `rule’ and we are content to adopt their terminology for the purposes of this report.”
I will refer also to paragraphs 2.14 and 2.19 of the report on which Mr Newman also relied:
“The issue whether parties intended that the whole of their agreement should be as recorded in a particular document or documents is to be judged objectively. The court is not concerned with whether both parties, in their minds, intended the writing to contain the whole of the agreement between them but whether, having regard to what was said or done, and to what documents were signed and exchanged, and when, a reasonable person would have understood the writing to contain the whole of the agreement. A party is not permitted to give evidence of his private but uncommunicated intention as to what was to be agreed, or as to what the written agreement was to mean.”
Paragraph 2.19:
“So far, we have discussed only the situation in which it is proved or admitted that the whole of the parties’ contract is intended to be as recorded in a particular document. However, similar principles will apply where only a part of the contract is so recorded. In that situation, once it is proved or admitted that the parties intended the document to be conclusive as to the matters mentioned in it, then further evidence as to their agreement on those matters will be irrelevant.”
In the present case Mr Newman asserts that it is proved – certainly it has not been admitted – that the parties to these proceedings intended that all the express terms of their agreement should be recorded in what I refer to as the 1966 letter. I cannot say that is admitted or proved by evidence. He seeks to shut out all the evidence of Kenneth to which I have referred. He says that simply from the four corners of the 1966 letter he can prove that on any reasonable objective construction of that letter the parties must have intended that letter to record the whole of their agreement on the subject of Kenneth’s pension. His first difficulty is that the letter begins with a reference to only “some” provision. His first submission was that “some” meant “all”. He withdrew from that submission and was content to accept that the expression was neutral; “some provision” meant “provision”. He submitted that various terms relating to the right of the firm to stop paying premiums or to refuse the pension in case of fraud or misconduct and so forth were inconsistent with the promise of a two-thirds final salary pension. But he was not able to submit that the essential clause (clause 3) of the letter was inconsistent with a two-thirds final pension because he had to accept that, dependent upon the accrued profits of the pension policy, it might turn out that the policy would – though not designed expressly to be being a two-thirds final salary policy – yield sufficient funds to provide a two-thirds final salary pension. In this connection he also accepted that the express provision to a cap of two-thirds final salary was again not inconsistent with making provision for a two-thirds final salary pension; that is clearly correct.
However whether or not there are provisions in the letter which are inconsistent with the promise of two-thirds final salary pension – and I am inclined to think there is nothing inconsistent with such a promise, but that does not matter for present purposes – his essential submission had to be that that letter by itself was plain proof that the parties intended that the letter made full exclusive and total provision on the subject matter of Kenneth’s pension.
However in a case like this it seems to me that it is not possible to assert the conclusive effect of a parol evidence exclusion principle without taking into account all the alleged facts and evidence in the case. In this connection it seems to me that paragraph 12-095 in Chitty on Contracts 28th Edn 1999 sets the matter out sufficiently for present purposes. It reads as follows:
“However, the parol evidence rule is and has long been subject to a number of exceptions. In particular, since the nineteenth century, the courts have been prepared to admit extrinsic evidence of terms additional to those contained in the written document if it is shown that the document was not intended to express the entire agreement between the parties. So, for example, if the parties intend their contract to be partly oral and partly in writing, extrinsic evidence is admissible to prove the oral part of the agreement. In Gillespie Bros. & Co. v Cheney, Eggar & Co., [[1986] 2 QB 59, 62] Lord Russell CJ stated
`although when the parties arrive at a definite written contract the implication or presumption is very strong that such contract is intended to contain all the terms of their bargain, it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement.’
It cannot therefore be asserted that, in modern times, the mere production of a written agreement, however complete it may look will as a matter of law render inadmissible evidence of other terms not included expressly or by reference in the document. `The court is entitled to look at and should look at all the evidence from start to finish in order to see what the bargain was that was struck between the parties.'”
That last sentence was a citation from the judgment of this court in J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078, 1083.
So in the present case I cannot see how, as a matter of law, the application of the parol evidence rule can be said – in the face of Kenneth’s witness statements which have for present purposes at any rate to be accepted as correct – that all that evidence must be excluded. On the contrary, the most general rule is that the court should look at all the evidence to see what was the bargain that was struck between the parties in a case such as this where the evidence is that part of the agreement was expressed orally and, on the evidence given by Kenneth, that oral part of the parties’ arrangements was intended to survive the making of the agreement contained in the 1966 letter.
Mr Newman accepted that the question for the court was this: bearing in mind the oral contract or promise alleged, can it be said for certain that the parties must have intended that oral contract or promise to have been superseded by a written contract intended to contain all of the parties’ arrangements? For reasons which I have indicated I cannot see that that is a question which can be determined on the evidence currently before the court in the summary fashion in which the judge dealt with it.
There is also the question of collateral contract. Collateral contracts are a well-known exception to the parol evidence rule in any event. One comes back to the same question: was what is relied on as being a collateral contract intended to be superseded by the ultimate contract or intended to survive as a matter of contract collateral to the ultimate contract? Ultimately, it is the same question. However in the context of collateral contracts, Mr Newman went on to submit that the oral contract, the oral promise of a two-thirds final salary pension, was not a collateral contract at all in that it did not fit into two categories of cases identified by him, being in the first place cases where a statement is made which leads a party to believe an exemption clause will not be relied upon and, in the second place, cases where a promise is made that a particular provision of the written contract will not be relied upon.
I doubt myself that the question of collateral contract can be categorised in that way. It is not necessary, however, to come to any conclusion about it. It seems to me that one must not be misled in this connection by the mere names of things. It seems to me not to matter whether the alleged oral promise of a two-thirds final salary pension is regarded as part of the contract of employment or collateral to the contract of employment or collateral to the contract contained in the 1966 letter. It may be that it is only necessary to talk in terms of collateral contract in particular circumstances where the only consideration given for the antecedent promise is the entering into of the main contact. That perhaps is a typical case of a true collateral contract. It matters not, for one must not be misled by these terms, provided there is evidence of two contracts side by side. It hardly matters for these purposes whether the antecedent contract is oral or in writing. The question remains – is that antecedent contract intended to survive the making of the subsequent or main contract or is it intended to be swallowed up by and superseded by the later contract? Those are questions which it may be can only be resolved on a consideration of the complete evidence as to the parties’ objective intentions and following an attempt to construe two contracts side by side.
Of course, when I speak of complete evidence relating to those contracts it should be understood as going without saying that I do not mean to embrace in such evidence evidence which, on different or narrower aspects of what is called the parol evidence rule, is in any event inadmissible. Thus it is not in dispute in this case that the subjective intentions of the parties are irrelevant and inadmissible. It is not in dispute in this case that mere negotiations in the sense discussed by the House of Lords in Prenn v Simmonds [1971] 1 WlR 1381 are not admissible. But this case is not concerned with an attempt to give evidence of mere subjective intention or an attempt to give in evidence mere negotiations leading to a written contract. The evidence which is in dispute in the witness statements of Kenneth is evidence regarding a completed oral agreement relating to the terms on which Kenneth was willing to give up his employment at the AA and join the family firm.
The question is, as I have said before, whether those contractual arrangements were intended to be wholly superseded and replaced by the 1966 letter or could continue to live side by side with that letter. That is not a question which this court or the court below could have decided without a trial. It therefore follows that this appeal against the summary dismissal of Kenneth’s case should be allowed.
THE VICE-CHANCELLOR: I agree.
Hamid (t/a Hamid Properties) v Francis Bradshaw Partnership
Jackson LJ
Part 5. The law
The parol evidence rule has been part of the common law for over two centuries. This provides that where there is a written contract, oral evidence cannot be received to add to, subtract from or vary the written terms: see Chitty on Contracts, 13th Edition, paragraph 12-096. Although the contract in the present case is partly oral and partly written, counsel have referred to the parol evidence rule in relation to the interpretation of the letter dated 10th March 2004.
There are a number of exceptions to the parol evidence rule and these have increased in recent years. This may in part be due to the increasing ease and speed with which documents can be created and dispatched. The temptations of the keyboard, the ‘cut and paste’ facility and the mouse cannot always be resisted.
Lord Hoffmann has authoritatively stated the modern approach to interpreting written contracts in Investors Compensations Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at pages 912-913 as follows:
“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. http://www.bailii.org/uk/cases/UKHL/1997/19.html[1997] AC 749.
(5) The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had….”
It should be noted that this formulation of the principles does not require the court, when construing a document, to take into account matters which the parties might have discovered but did not in fact discover.
A discrete body of case law has developed concerning contracts in which the identity of parties is in controversy. Such cases constitute an exception to the parol evidence rule. Extrinsic evidence may be admitted to establish the correct identity of a party: see Fung Ping Shan v Tong Shun [1918] AC 403 at pages 406-407.
In F. Goldsmith (Sicklesmere) Ltd v Baxter [1970] 1 Ch 85 a piece of land was conveyed to a company in the wrong name. The company’s correct name was F. Goldsmith (Sicklesmere) Ltd. The incorrect name printed on the conveyance was Goldsmith Coaches (Sicklesmere) Ltd. Stamp J received evidence as to how the mistake had come about. He then granted relief, the effect of which was that F. Goldsmith (Sicklesmere) Ltd became the owner of the land.
In Badgerhill Properties Ltd v Cottrell [1991] BCC 463 the plaintiff company claimed £14,327 in respect of work, services and materials sold and delivered by the company to the defendant, ‘C’, under contracts constituted by three written estimates, as revised, signed by C by way of acceptance. The estimates were given on notepaper which was headed with a trading name (“The Plumbing Centre” on two estimates and “Wendell (Builders)” on the other) and on which the name “Badgerhill Property Ltd” appeared at the foot. The misdescription of the company was a printer’s error. The word “Property” should have been “Properties”. The estimates were signed by a director of the company, “T”. The relevant name appeared above T’s signature, and on the two plumbing centre estimates the word “director” appeared below. The plaintiff company succeeded in its claim. The Court of Appeal concluded that in two instances the defendant was contracting with whatever company was trading under the trading name “The Plumbing Centre”. In the third instance the defendant was contracting with whatever company was trading under the name “Wendell (Builders)”.
Crucial features of this case are that T expressly signed two of the estimates as “director”. The name of the limited liability company was printed at the foot of the page with one small inconsequential error.
In Internaut Shipping GmbH v Fercometal SARL [2003] EWCA Civ 812, [2003] 2 Lloyds LR 430 the defendant chartered a vessel on the Gencon form. In box three of the form the owners’ name was stated to be “Sphinx Navigation Ltd, Liberia C/O Internaut Shipping GmbH”. At the end of the form was a box headed “Signature/Owners”. The owners’ name was there shown as Internaut Shipping, followed by an address with a signature over the stamp. The Court of Appeal held that the contracting party was Internaut Shipping. That company was not to be treated as having contracted on behalf of Sphinx Navigation Ltd. Rix LJ, with whom Mummery and Sedley LJJ agreed, stated the relevant principles as follows at paragraph 53:
“It may be asked, indeed the question was raised in the course of argument, why the principle whereby particular attention is paid to the form of the signature, which is in effect a maxim of construction and not a rule of law, exists: from where does it take its force? I would answer that it reflects the commercial facts of life, the promptings of commercial common sense. The signature is, as it were, the party’s seal upon the contract; and that remains the case even where, as here, the contract has already been made (in the fixture telexes). Prima facie a person does not sign a document without intending to be bound under it, or, to put that thought in the objective rather than subjective form, without properly being regarded as intending to be bound under it. If therefore he wishes to be regarded as not binding himself under it, then he should qualify his signature or otherwise make it plain that the contract does not bind him personally.”
Shogun Finance Ltd v Hudson [2003] UKHL 62, [2004] 1 AC 919 concerned a motor vehicle which a fraudster acquired on hire purchase in a false name and then re-sold to an innocent purchaser. For present purposes, I need not trace the history of this litigation or the intricacies to which it gave rise. The important statement of principle, to which counsel have drawn attention in this appeal, is at paragraphs 119 to 121 of Lord Phillips’ speech. This passage is as follows:
“119. The critical issue in this case is whether a hire-purchase agreement was ever concluded between Shogun and the rogue. If an agreement was concluded, then the rogue was the ‘debtor’ under section 27 of the 1964 Act and passed good title in the vehicle to Mr Hudson. If no agreement was concluded, then the rogue stole the vehicle by deception and passed no title to Mr Hudson.
“What’s in a name?”
120. This area of the law has developed because of confusion about names and it may be helpful at the outset to reflect on the nature of a name. Words in a language have one or more ordinary meaning, which will be known to anyone who speaks that language. Names are not those kind of words. A name is a word, or a series of words, that is used to identify a specific individual. It can be described as a label. Whenever a name is used, extrinsic evidence, or additional information, will be required in order to identify the specific individual that the user of the name intends to identify by the name – the person to whom he intends to attach the label. Almost all individuals have two or more names which they use to identify themselves and where a name is mentioned in a particular context, or a particular milieu, those who hear it may have the additional information that they need to identify to whom the speaker is referring.
121. Where a name appears in a written document, the document itself may contain additional information which will enable the reader to identify the individual to whom the writer intended to refer when he wrote the name.”
In Estor Ltd v Multifit (UK) Ltd [2009] EWHC 2565 (TCC) an issue arose as to which company within a group of companies known as Ginger Group was the employer under a building contract. Akenhead J took as his starting point the passage in Lord Hoffmann’s speech in Investors Compensation Scheme which I have quoted above. He then stated that where the identity of a contracting party was unclear, it was legitimate to consider what the parties said to each other in the period leading up to the offer and acceptance. He added that the correct approach was an objective one. The court would take into account facts known to both parties, but not their private thoughts. I agree with that analysis.
In my view the principles which emerge from this line of authorities are the following:
i) Where an issue arises as to the identity of a party referred to in a deed or contract, extrinsic evidence is admissible to assist the resolution of that issue.
ii) In determining the identity of the contracting party, the court’s approach is objective, not subjective. The question is what a reasonable person, furnished with the relevant information, would conclude. The private thoughts of the protagonists concerning who was contracting with whom are irrelevant and inadmissible.
iii) If the extrinsic evidence establishes that a party has been misdescribed in the document, the court may correct that error as a matter of construction without any need for formal rectification.
iv) Where the issue is whether a party signed a document as principal or as agent for someone else, there is no automatic relaxation of the parol evidence rule. The person who signed is the contracting party unless (a) the document makes clear that he signed as agent for a sufficiently identified principal or as the officer of a sufficiently identified company, or (b) extrinsic evidence establishes that both parties knew he was signing as agent or company officer.
In my fourth proposition the phrase ‘sufficiently identified’ is not a happy one. It is intended to include cases where there is an inconsequential misdescription of the entity on behalf of whom the individual was signing. This is exemplified by Badgerhill Properties.
With the benefit of this guidance from the authorities, I must address the issues in the present case.
Kazeminy & Ors v Siddiqi & Ors
[2009] EWHC 3207
Teare J
Inadmissibility of evidence as to the alleged oral agreement
There is long standing authority that a contemporaneous oral agreement cannot be set up to contradict the terms of a promissory note; see Chitty on Contracts 30th.ed. at para.12-101, Young v Austen (1868-69) LR 4 CP 553, New London Credit Syndicate Limited v Neale [1898] 2 QB 487 and Hitchings v Northern Leather Company [1914] 3 KB 907. It was submitted on behalf of the Claimants that the defence based upon the alleged overarching agreement is therefore inadmissible and would inevitably fail as a matter of law.
On behalf of the Defendants it was submitted that the reasoning in such cases was based on the parol evidence rule, that that rule has been subject to restrictions since the nineteenth century and that the courts are in fact prepared to admit extrinsic evidence if it is shown that the written instrument was not intended to express the entire agreement between the parties; see Chitty at paras. 12-096 – 12-100. It was further submitted that no special rule applied to bills of exchange or promissory notes. In the present case the Defendants will seek to use the evidence as to the alleged oral agreement in one or more different ways including a wider agreement going beyond the terms of the written notes, a collateral contract and an estoppel by convention.
Bills of exchange and promissory notes have always been treated as analogous to the payment of cash. Unliquidated cross-claims cannot be set-off against them. Such is the importance of bills of exchange and promissory notes as a means of payment in commerce that the courts are reluctant to allow “any erosion of the certainties of the application by our Courts of the law merchant relating to bills of exchange”; see Cebora SNC v SIP (Industrial Products) Ltd. [1976] 1 Lloyd’s Rep. 271 at p.278. It is to be expected therefore that the Defendants will encounter difficulty in persuading the Commercial Court that the long established principle relied upon by the Claimants is not what it seems and is subject to exceptions.
However, there is support for the proposition that the principle in question is based upon the parol evidence rule rather than upon any provision of the Bills of Exchange Act 1882; see New London Credit Syndicate Limited v Neale [1898] 2 QB 487 at p.490. There is also support for the proposition that the parol evidence rule does not prevent a party from adducing evidence to prove that a written document is not a complete record of the parties’ agreement; see Chitty at the paragraphs mentioned above. It is therefore arguable that the basis of the principle has been eroded and that the principle may not be as absolute as the cases suggest. I am told that no modern case has examined the application of the parol evidence rule to bills of exchange or promissory notes. In those circumstances there appears to me some scope for arguing that where there is evidence that the note does not contain the parties’ entire agreement extrinsic evidence is admissible to establish the parties’ entire agreement. The contrary argument is that the effect of the requirement in the Bills of Exchange Act 1882 that bills of exchange and promissory notes must be in writing is that they cannot be varied by an oral agreement; see Chitty at para.12-101. However, this was not said to be the basis of the principle in any of the cases to which reference has been made. Those cases suggest that the basis of the principle was the parol evidence rule. It is to be noted that in Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes 17th.ed. the following is stated at para.2-157:
“Exceptions to the parol evidence rule. There are a number of exceptions to the parol evidence rule, or, more accurately, situations where the parol evidence rule will not be applied. The dividing line between the rule and the “exceptions” is often subtle, and it is not particularly useful to try to reconcile apparently conflicting decisions. In the result, the scope of application of the rule is an area of difficulty and uncertainty for the practitioner. That difficulty and uncertainty is exacerbated by the fact that, in relation to bills and notes, the majority of the decisions on the application or non-application of the rule date from the nineteenth century and do not necessarily reflect the somewhat more relaxed approach which is adopted by the courts in respect of contracts generally.
Where the exceptions apply, even oral evidence may be admitted to qualify the ostensible contract of a party on the instrument. However, a person to whom a bill or note is negotiated or delivered is entitled to assume that each party’s promise is absolute and unqualified unless it is otherwise indicated on the instrument itself. In most cases, therefore, extrinsic evidence will be admissible only as between immediate parties, or as regard a remote party who took the instrument with knowledge of the qualification.”
The present dispute is between the immediate parties to the promissory notes. I find myself unable to dismiss the Defendants’ argument on the law as one which is bound to fail. This hearing is not the appropriate occasion on which to determine whether that argument is correct. If there are relevant exceptions to the principle relied upon by the Claimants they are likely to be fact sensitive. The appropriate time to decide this important question of law is at trial when the court has heard all the evidence. This is particularly so in the present case where, on the Defendants’ case, the terms of the promissory notes are affected by the provisions of the written agreements dated 20 September 2006 and 23 January 2007 which agreements are in turn said to be supplemented by an oral agreement.
Barry v. Medical Defence Union Ltd.
[2004] IEHC 62 (31 March 2004)
JUDGMENT of Ms. Justice Carroll delivered the 31st day of March, 2004.
The Plaintiff who is a medical doctor issued a plenary summons in this matter on 9th February, 2001. In his statement of claim delivered 23rd February, 2001 the Plaintiff claims that he purchased professional indemnity insurance from the Defendant (referred to as the MDU) for over twenty seven years until his retirement in 1995, by way of annual sums, entitling him to an indemnity in respect of any order for damages or costs obtained by a patient or former patient in respect of negligence or breach of duty of the Plaintiff as a medical practitioner; also for costs incurred in defending any such claim or in defending any disciplinary proceedings brought against him under Part 5 of the Medical Practitioners Act, 1978. He claims that he was entitled to the exercise of good faith by the MDU in its dealings with him and that in making any determination in such dealings the MDU would act in accordance with the requirements of natural and constitutional justice.
In the alternative he claims there was a contract preliminary or collateral to his becoming a member of the MDU whereby the MDU bound itself to provide the same entitlements.
Alternatively the Plaintiff claims that the MDU made warranties and representations to the Plaintiff in the terms already stated in order to induce the Plaintiff to pay sums to the MDU.
The Plaintiff was sued by three former patients in the Circuit Court, which actions were defended by the Plaintiff’s solicitors, Messrs. Denis O’Sullivan & Co. He was also sued by thirty six other Plaintiffs, former patients, in the Circuit Court, in the years between 1995 and 1999. The Plaintiff also took judicial review proceedings in two of those cases (E309/96 and E388/95). In addition, three High Court actions were initiated against him by former patients in 1995 and 1996.
Notice of Inquiries under Part 5 of the Medical Practitioners Act, 1976 dated 17th November, 1995 and 21st February, 1996 were served and judicial review proceedings in respect of those inquiries were brought (ultimately unsuccessfully).
A claim for personal injuries was not pursued.
By way of relief the Plaintiff claims inter alia a series of declarations that he is entitled to be indemnified for any damages or costs obtained against him in any of the actions mentioned, including the judicial review proceedings, and also for the costs incurred in defending any of the civil actions or prosecuting the related judicial review actions. He also claims the costs of defending the disciplinary proceedings and prosecuting the related judicial review proceedings.
The MDU in its defence delivered 21st June, 2001 denies the Plaintiff purchased professional indemnity insurance or that the Plaintiff is entitled to any indemnity as claimed. It also denies any preliminary or collateral contract. The defence says that the Plaintiff was a member of the MDU and his entitlements were subject to the terms and conditions set out from time to time in the Memorandum and Articles of Association. It claimed the MDU could give to a member advice or legal assistance or defend any matter affecting the professional character or interests or conduct in a professional capacity or raising a question of professional principle. The person making a request was bound to abide absolutely by every decision of the Board of Management of the MDU (or other authorised person or committee) on the conduct or defence of the matter and should not without prior consent take any steps with reference to such matter.
The MDU claims that under Article 48 (which is set out in its material parts, in the Defence) an indemnity may be granted in whole or in part with regard to actions affecting the professional character or interests or conduct in a professional capacity of a member raising a question of professional principle but only on such terms and conditions as the Board of Management should think proper, the Board of Management (or other authorised person or committee) to have an absolute discretion to limit or restrict the grant of such indemnity or altogether to decline to grant the same or to determine any indemnity granted without giving any reason.
The MDU claims that while the Plaintiff requested indemnity in respect of the civil actions, it has not to date agreed to provide the indemnity. It claims the Plaintiff has to date failed to co-operate by providing information and instructions in relation to the proceedings and the circumstances giving rise to them, in spite of repeated requests. The MDU denies that it acted otherwise than in good faith and also denies that the rules of natural and constitutional justice have any application to the dealings between the parties, their relationship being governed by the terms of the Memorandum and Articles of Association.
The MDU admits the Plaintiff through his agent (i.e. his solicitors) sought an indemnity in respect of the disciplinary proceedings under the Medical Practitioners Act, 1978 and said it agreed by letter dated 29th April, 1997 that it was prepared to offer advice and legal assistance subject to conditions that the legal assistance would be provided by solicitors and counsel appointed by the MDU, that the Plaintiff would provide full co-operation by means of a full disclosure of the facts and that his instructions would be given directly to those appointed. The MDU said it could not grant assistance in relation to costs and expenses incurred to date. That offer was not accepted by the Plaintiff.
The MDU also said that while a request was made for indemnity in respect of the costs incurred as a result of the judicial review proceedings in relation to the disciplinary proceedings, the MDU declined to grant indemnity, as it was entitled to do.
It denied it acted wrongfully or in breach of contract or otherwise than in good faith in its dealings with the Plaintiff and claims that all requests by the Plaintiff for advice, assistance or indemnity were properly and fairly considered by the MDU on the basis of the information and material furnished by or on behalf of the Plaintiff.
It claims it reconsidered the matter on 24th July, 2001 and told the Plaintiff it would assist his request for assistance if specified information was provided by him.
In his reply the Plaintiff joins issue with the MDU, claiming the MDU is estopped from denying their liability and by amendment he claims the decisions of 31st May, 2000 and 18th July, 2001 were made in bad faith and in violation of natural and constitutional justice and used as a device in litigation and were unfair in that the MDU refused an offer of the Plaintiff to personally attend its office for interview when the MDU attributed pre-eminent importance to such interview in deciding whether to allow an indemnity. In relation to the decision of 31st May, 2000 the Plaintiff claims it was unfair as it was kept secret from the Plaintiff. In relation to the decision of 18th July, 2001 the Plaintiff claims it must be regarded as tainted by the MDU’s own concerns and that the persons making the decision were affected by bias.
There are certain matters that can be disposed of at the start.
The Plaintiff did not give any evidence at all and as far as the court is aware did not attend the trial.
Evidence by Mr. Thomas Russell, a Consultant Neurosurgeon in Edinburgh, was offered. He said that he heard of the MDU when he was at university in 1975 and he was going to say what was said to him. I ruled that what was said to him about the MDU was irrelevant.
The other witness on behalf of the Plaintiff was Mr. Brendan Phelan, a civil servant in the Department of Health. He said he was responsible for medical insurance since 1990.
A group scheme was put out to tender in 1992 and the MDU did not tender. The MDU tendered in 1995. He was familiar with the Memorandum and Articles of association of the MDU and the absolute discretion provided for. He raised the issue of the discretionary nature of the indemnity. Three insurance companies and the MDU tendered and the MDU was the preferred supplier. There was a medical indemnity agreement concluded on 12th June, 1996 subject to the MDU’s Memorandum and Articles of Association. He agreed the MDU was not an insurance company and was not covered by insurance legislation.
Apart from that evidence which did not advance the Plaintiff’s claim one whit, the evidence on behalf of the Plaintiff consisted of agreed correspondence and the Memorandum and Articles of Association.
Since there was no evidence given by the Plaintiff, the question of a contract preliminary or collateral to the Plaintiff becoming a member of the MDU or of implied terms simply does not arise. This is quite apart from the question of whether there could be implied terms which would contradict the provisions of the Memorandum and Articles of Association. Therefore, the only contract which falls to be interpreted is the Memorandum and Articles of Association of the MDU. It was admitted that the Plaintiff was a member of the MDU.
Another question which can be dealt with at this stage is whether the rules of natural and constitutional justice are applicable in this case. The Plaintiff relies on Glover v BLN [1972] I.R. 388 and Garvey v Ireland [1981] I.R. 75. These are representative of a type of case relating to employment law and dismissal. The MDU relies on Carna Foods Limited v Eagle Star Insurance Company Ireland Limited [1995] 1 I.R. 526 (affirmed on appeal to the Supreme Court [1997] 2 I.R. 193). In the High Court, McCracken J. held (at p. 531) that he did not consider that any principle of natural justice or constitutional justice applied to a decision of an insurance company to give reasons for its decision to cancel a policy of insurance. He said that to decide otherwise would be a serious interference in the contractual position of parties in a commercial contract and with very wide-ranging consequences.
In my opinion there is no justification for extending what is essentially public law to the area of private contract. The principles of natural law do not lie easily in private contract law. For example concerning the principle “nemo iudex in causa sua”, it may well be that someone who has to make a decision at a lower level may also be involved at a higher level, for example, a bank manager who refuses a loan or an insurance official who refuses to pay out on a policy, may also take part in a discussion and decision at a higher level. Likewise the submission on behalf of the Plaintiff concerning the principle audi alteram partem, that the Plaintiff had to have a person represent him at the various levels which dealt with his case, is unsustainable. The MDU was entitled to reach a decision on the information furnished by the plaintiff.
Constitutional justice, as represented by fair procedures, concerns public matters. As McCracken J. points out in Carna Foods, where a decision is taken to exercise a function in the public realm, the person affected is entitled to know the reasons for the decision. This is because statutory powers must be determined and exercised reasonably. The same principle does not apply to private contract matters.
What is not disputed by the MDU is that it must deal fairly in considering the Plaintiff’s application. This however is on the basis that it may not act unreasonably in carrying out its obligations under its contract with the Plaintiff rather than that it was constrained by the Constitution to apply fair procedures.
Another plea which does not arise relates to estoppel. Since there was no evidence given by the Plaintiff, there is no evidence of any representation relied on by the Plaintiff to his detriment.
The issues which are left are, what are the parameters of the Plaintiff’s entitlements under the Memorandum and Articles of Association and, as conceded by the MDU, whether the Plaintiff was treated fairly by the MDU in its dealings with him or whether there was absence of good faith on its part.
The MDU is a company limited by guarantee incorporated in the UK. It has a large number of medical practitioners in this State who are members. Each member pays an annual subscription, the amount depending on which category of subscriber they belong to.
Article 47 and Article 48 of the current Articles of Association, which are materially identical to earlier editions of the Articles provide as follows.
Article 47
“The Board of Management or any member of the Board of Management or employee or agent or committee of the MDU authorised by the Board of Management for the purpose may subject to the limits of any such authority give advice or legal assistance or defend or take part in advising, assisting or defending in respect of any matter cause or proceeding, concerning or affecting whether directly or indirectly the professional character or interests or conduct in a professional capacity of any member, any applicant for election to membership, any former member, or any deceased member (who was at the date of his death a member or who was not at the date of his death a member but had formally being a member and had ceased to be such) or in respect of any matter cause or proceeding which raises directly or indirectly a question of professional principle;
provided that –
(1) The Board of Management or such member of the Board of Management or employee or agent or committee shall be satisfied that in a case involving a member, applicant for election to membership, former member or deceased member the matter originated or the cause or proceedings arose during the period when the person concerned was a member of the MDU or an applicant for election to membership.
(2) If the Board of Management or such member of the Board of Management or employee or agent or committee decides to act in accordance with this Article the person making a request that it do so shall abide absolutely by every decision of the Board of Management or any such member of the Board of Management or employee or agent or committee on the conduct or defence of the matter and shall not himself without prior consent of the Board of Management or any such member of the Board of Management or employee or agent or committee take any steps with reference to such matter or the determination thereof.
For the purpose of proviso (1), in the case of an application by a former member for reinstatement on any register or for restoration of a licence or entitlement to practice the profession previously carried on by him or the lifting of a suspension the matter shall be deemed to have originated immediately before the date upon which his name was erased from such register or his licence or entitlement so to practice was withdrawn or cancelled or upon which his registration in such register, licence or entitlement was suspended as the case may be.
Article 48
(1) The Board of Management or any member of the Board of Management or employee or agent or committee of the MDU authorised by the Board of Management for the purpose may subject to the limits of any such authority and subparagraph (3) of this Article and subject also to the like conditions as are specified in the provisos of the proceeding Article, grant from the funds of the MDU to any member or any applicant for election to membership or former member or the personal representatives of any deceased member, an indemnity wholly or in part with regard to any action proceeding claims or demands by or against them in respect of any matter concerning or affecting whether directly or indirectly the professional character or interests or conduct in a professional capacity of any such member, applicant for election to membership or former member or deceased member as the case may be or which raises directly or indirectly a question of professional principle and such indemnity may extend to all incidental or consequential losses, damages, costs, charges and expenses but excluding fines and penalties.
(2) The Board of Management or any authorised committee or agent may determine any such indemnity at any time by notice in writing to the member or applicant for election to membership or former member (or if the member, applicant or former member dies subsequent to the granting of the indemnity, his personal representatives) or the personal representatives of the deceased member concerned as the case may be.
(3) Any such indemnity may be granted or determined by resolution of the Board of Management or any authorised committee or decision of any authorised agent and the grant of indemnity in every case shall be made only upon such terms and conditions as the Board of Management committee or agent shall think proper and it shall rest only in the absolute discretion of the Board of Management, committee or agent in every case to limit or restrict the grant of such indemnity or altogether to decline to grant the same or to determine any indemnity so granted without assigning any reason.
By virtue of Section 14 of the UK Companies Act 1985 (equivalent to Section 25 of the Companies Act 1963) the Memorandum and Articles of Association bind each member as if they respectively had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the Memorandum and Articles.
The question of whether the MDU was an insurer was considered in the case of MDU v. Department of Trade [1980] CH 82. It was held by McGarry V.C. that the MDU was not an insurance company which carried on any class of insurance business for the purposes of the Insurance Companies Act 1974.
In Rafter v. Solicitors Mutual Defence Fund Limited ([1999] 2 I.L.R.M. 305) it was held by McCracken J.(approving MDU v. Department of Trade) that the Solicitors Mutual Defence Fund Limited (which was modelled on the MDU scheme) did not provide policies of insurance to its members. He said (at p. 313) “An obligation to pay on the happening of a specified event is essential to the existence of a contract of insurance”. He was also satisfied that no contract of indemnity existed. The indemnity was discretionary.
I am satisfied that the plaintiff’s rights were limited to those expressly set out in the Memorandum and Articles of Association. In MDU v. Department of Trade McGarry V.C. said at p. 693 … “the right of a member in relation to both proceedings and to indemnities is merely a right to have his request fairly considered by the council or one of its committees. Only if the request is granted is a member is entitled to have the proceedings conducted by the Union and to have an indemnity; subject to the provisions of the Articles and not least Article 44(3)” (equivalent to Article 48(3)) “for the purposes of this case I do not think it matters whether the right is a right to have the request heard and determined “fairly” or “in good faith”. It is common ground that it must not be dealt with by whim or caprice and it is not contended that such a right is valueless”.
Therefore the entitlement of the plaintiff as a member of the MDU under the Memorandum and Articles of Association was to have his request for assistance and indemnity fairly considered by the Board of Management or the person or committee duly authorised. The plaintiff on his part was obliged to abide absolutely by every decision on the conduct or defence of the matter and not to take any steps with reference to the matter without the prior consent of the Board (or other authorised person or committee). (See Article 47 (2))
The agreed correspondence which is proffered by the Plaintiff as evidence in his behalf, extended over a number of years and I have attempted to summarise it.
31st July 1995 The Plaintiff’s solicitor wrote to the MDU enclosing copies of two letters (dated 18th July 1995) from Messrs Cuddigan Joyce and Co. Solicitors on behalf of two ex-patients of the Plaintiff making a claim for damages. The Plaintiff’s solicitor said that they had taken no steps in the matter in accordance with the Plaintiff’s policy of insurance.
4th August 1995 The MDU (per Dr. Catherine E. James) wrote directly to the Plaintiff acknowledging receipt of these letters. She said she would ask Messrs McCann Fitzgerald (who were their nominated solicitors) to liaise with him and Messrs Cuddigan Joyce & Co in respect of the two ex patients. She said they needed considerably more information than was in Messrs Cuddigan Joyce & Co’s letter. She said a solicitor in Messrs McCann McFitzgerald would get in touch with him. She asked if he would provide her with a full copy set of notes relating to both patients as soon as possible. A copy of this letter was sent to the Plaintiff’s solicitors.
22nd August 1995 Messrs McCann Fitzgerald wrote directly to the plaintiff asking for a statement and copy of the relevant medical records relating to the treatment of the two ex patients.
22nd August 1995 Messrs McCann Fitzgerald wrote to the Plaintiff’s solicitor asking for any further documents in the matter.
30th August 1995 The Plaintiff’s solicitors wrote to Messrs. McCann Fitzgerald to say they had received the original medical file of the two patients and asked for confirmation that it was in order to furnish it to them.
4th September 1995 This confirmation was given
6th September 1995 Messrs McCann Fitzgerald wrote to the Plaintiff’s solicitor asking for the original file and to contact them to discuss the claims being made against the plaintiff.
6th September 1995 Messrs McCann Fitzgerald wrote directly to the Plaintiff to tell him plenary summonses had been served and they expected the statements of claim would shortly be served. They would send a copy for his comments and asked him to contact them if he wished.
11th September 1995 The Plaintiff’s solicitors sent the files of the two patients to Messrs McCann Fitzgerald.
18th September 1995 Messrs McCann Fitzgerald wrote to the Plaintiff to say they had difficulty deciphering his clinical notes and asking could he have them typed up.
9th October 1995 The Plaintiff’s solicitor wrote to say the Plaintiff had retired from practice and was a patient in St. Gabriel’s Hospital in Dublin. If they required further information from the Plaintiff they could contact him at the hospital. He was under the care of Dr. Peter Fahy, Psychiatrist.
13th October 1995 This letter was acknowledged by Messrs McCann Fitzgerald.
25th October 1995 The MDU (per Melissa Hackett, Claims Handler) wrote to the Plaintiff’s solicitor to say his letter of 9th October had been passed to the MDU and they did not wish to harm the plaintiff’s recovery. She asked if he could advise if it would be appropriate to contact the Plaintiff.
8th November 1995 The MDU (per Dr. D.N.L. Beresford) again wrote to the Plaintiff’s solicitor confirming that the Plaintiff was a member and had been since December 1963. He said, subject to being instructed by the Plaintiff, he would be entitled to the discretionary benefits of membership. Dr. Beresford said the MDU was not an insurance company but a non profit making mutual association and he promised to forward the Memorandum and Articles of Association. He mentioned the numerous allegations by patients reported in the press and said in order to offer assistance within the terms of membership, they required a personal approach from the plaintiff seeking assistance and providing the necessary instructions. He asked the Plaintiff’s solicitor if they would indicate whether or not a direct approach to the Plaintiff by the MDU to seek instructions would be appropriate. He said they were unable to approach Dr. Peter Fahy because of professional confidentiality. He finished by saying they did not intend to take any further action on behalf of the Plaintiff before hearing from him or his solicitor on his behalf.
13th November 1995 The Plaintiff’s solicitor replied that there was no question of the Plaintiff being in a position to give the detailed instructions which the MDU obviously required. He said they (i.e. his firm) were satisfied they had authority which pre-dated his recent collapse authorising them to defend any proceedings for malpractice. He assured the MDU that each and every claim was being fully defended and the MDU’s position would in no way be affected. The letter concluded by saying he presumed the MDU had caused their solicitors to deliver a full defence in the actions by the two patients.
23rd November 1995 The Plaintiff’s solicitor asked for a reply to his letter of 13th November. He said proceedings had been served in relation to claims by former patients of the Plaintiff and were being defended. If further details were required he asked the MDU to advise.
31st January 1996 The Plaintiff’s solicitor sent a reminder to the MDU about the letter of 23rd November 1995. This was copied to Messrs McCann Fitzgerald with a covering letter of the same date.
7th February 1996 Messrs McCann Fitzgerald acknowledged the letter of 31st January. They said before they could take any further steps on behalf of the Plaintiff they must have authority from him personally and must meet him to take proper instructions.
14th February 1996 Dr. Beresford on behalf of the MDU replied to the Plaintiff’s solicitor, apologising for the delay. He said before they could consider the grant of discretionary assistance they required a personal approach from the Plaintiff seeking assistance and providing necessary instructions. He said the Plaintiff’s solicitor had not answered his request in the letter of 8th November. He said without the Plaintiff’s personal instructions or at least some explanation from his solicitor why he was not in a position to give instructions, the MDU could not offer discretionary assistance. If he was incapable of providing instructions, they required an explanation of the Plaintiff’s solicitor’s authority to provide those instructions on his behalf to defend any proceedings for malpractice brought against the Plaintiff. He asked for details of the dates of the alleged incidents and the context of the claims already known to them. In addition he required details of other proceedings which the Plaintiff’s solicitor had indicated in his letters of the 13th and 23rd November had been served and in respect of which they had gone on record.
He said that without substantive replies to the points raised, the MDU would not be responsible for any costs incurred by the Plaintiff’s solicitor on his behalf. He also said that in the absence of specific and satisfactory replies, their solicitors would take steps to come off record on the grounds that the Plaintiff was not in a position to provide instructions. He referred to newspaper accounts of defamation proceedings issued against a newspaper on behalf of the Plaintiff when it appeared the Plaintiff was not available to give instructions. He looked for clarification.
15th March 1996 Dr. Beresford (for the MDU), reminded the Plaintiff’s solicitor that no reply had been received to his letter of the 14th February. He referred to a newspaper report that the Plaintiff had returned to the jurisdiction and would be likely to be in a position to provide instructions. He reiterated that while they were willing to offer assistance subject to the absolute discretion of the Board, they did require the Plaintiff’s personal written instructions and an undertaking to accept the MDU’s advice and that of his lawyers and to offer all necessary co-operation by the provision of full information.
21st March 1996 The Plaintiff’s solicitor served notice of change of solicitor on Messrs McCann Fitzgerald.
9th July 1996 The Plaintiff’s solicitor wrote this letter which I consider to be very intemperate, accusing the MDU that at no stage were they willing to offer assistance and further accusing the MDU, concerning the reference in the letter of the 14th February about proceedings in defamation having being issued when it appears the Plaintiff was not available to give any instructions, as putting in issue the integrity of the writer and his firm with a scandalous allegation. The Plaintiff’s solicitors said the reports of numerous actions against their client were untrue. There were three actions in the High Court which he described as moribund and three actions in the Circuit Court which were being defended. He enclosed copy of these proceedings.
He then mentioned an inquiry to be conducted by the Medical Council. He said their firm and counsel retained by them were committed to defending all proceedings brought against the Plaintiff and thus far had been successful. He claimed that if the MDU had been involved hundreds of thousands of pounds would have been distributed on foot of false allegations.
He said they were instructed by the Plaintiff to apply for discretionary assistance in relation to costs and expenses in relation to defences in relation to each matter and which they would continue to sustain even if the MDU did not offer suitable support. He enclosed authority from the Plaintiff authorising the firm to make the communication.
The authority enclosed reads as follows:-
Authority.
“I Dr. J.M. Barry MB PhD confirm that the firm of Messrs Denis O’Sullivan & Co Solicitors at St. Patrick’s Buildings, 64 Patrick Street, in the City of Cork, have at all times acted with my complete authority in relation to all proceedings commenced or defended by me and I authorise and request my said solicitors to make an application for discretionary assistance in the terms of the letter dated 9th July 1996.
Dated this 9th day of July 1996.
Signed James Barry 12 Sydney Place Cork.”
14th January 1997 The Plaintiff’s solicitor wrote asking for a reply to the letter of 9th July.
29th January 1997 Dr. Beresford replied apologising for his serious omission in failing to reply. He took issue over the assertion of bad faith and reviewed the correspondence to date. He pointed out the Plaintiff’s solicitors were aware of the condition which applied to MDU discretionary assistance when they said they had taken no action in accordance with the Plaintiff’s “policy of insurance”. He said the letter of 13th November 1995 was received with surprise and concern. Their letter of 14th February 1996 set out the MDU’s position clearly and sought urgent clarification. He said it was reasonable to interpret service of notice of change of solicitor on Messrs McCann Fitzgerald that the Plaintiff no longer desired the assistance of the MDU.
With regard to the new matter, the inquiry by the Medical Council, he said they did not get copies of the correspondence with the Medical Council. He said the MDU was willing to consider discretionary assistance within the benefits of membership. He asked for full documentation to date, full details of the allegations, supporting statements and details of any High Court applications. He stressed they would require full instructions from the Plaintiff in respect of the allegations. He would then bring it before the Board of Management to seek confirmation of discretionary assistance. He said he would at the same time place before the committee the renewed request for assistance in civil proceedings but stressed it was likely to be a requirement that the Plaintiff instructed the MDU’s specialist solicitor and lawyers and that it was not the usual practice to assist with legal fees incurred without authority.
3rd February 1997 The Plaintiff’s solicitor replied stating that the MDU was willing to abandon the Plaintiff. He said he rejected the suggestion in the letter that his firm and its lawyers were not qualified. He rejected the innuendo about the competence and abilities of the senior counsel retained. He said there were no criminal proceedings pending against the Plaintiff and that the High Court proceedings had not been further prosecuted. He said three actions in the Circuit Court were set down for hearing, another commenced and more threatened. He also said they were taking judicial review in relation to the anonymity granted in these actions. He enclosed a full set of papers relating to proceedings before the Medical Council, the High Court, the Supreme Court and the President of the High Court. He asked the MDU to specify how his firm’s conduct and that of counsel were “substandard” having regard to its “specialist” requirements.
14th February 1997 In the absence of Dr. Beresford the receipt of this letter was acknowledged.
10th March 1997 The Plaintiff’s solicitors again wrote giving details of the outcome of two applications for certiorari, one refused, one granted.
14th March 1997 Dr. Beresford replied to the letter of 3rd February, thanked the Plaintiff’s solicitor for the enclosures and said he would present the Plaintiff’s request for discretionary assistance to the committee of the Board of Management (likely to be heard on 15th April). He refuted the allegations about the MDU. He referred to the state of the various actions against the Plaintiff and reminded the Plaintiff’s solicitors that discretionary assistance was not sought until the letter of the 19th July 1996; he said he would seek this at the committee of the Board of Management but was not optimistic.
He then reviewed the course of events in relation to the Medical Council’s enquiries, noting the Plaintiff sought voluntary removal of his name from the Medical Register on 31st July 1995 after which the Medical Council was alerted to the Plaintiff’s conduct. A preliminary notice of inquiry was sent to the Plaintiff on 13th October 1995. Further complaints were raised, resulting in another notice of inquiry dated 21st February 1996.
Dr. Beresford said it was difficult to understand why these matters were not drawn to the attention of the MDU and its assistance sought. The response of the Plaintiff’s solicitor to the letters of 14th February 1996 and 15th March 1996 was to serve notice of change of solicitors upon Messrs McCann Fitzgerald. He said clearly the Plaintiff’s solicitor were at this stage able to obtain the Plaintiff’s instructions on these matters. He referred to a judicial review proceeding and requested clarification. He said he presumed that at a resumed hearing before the Medical Council Fitness to Practice Committee the Plaintiff would wish that his solicitors and senior and junior counsel already instructed to continue the conduct of the case. He asked for confirmation that that presumption was correct as he would need to place that particular request specifically before the committee. He said he would ask consideration to be given to retrospective reimbursement of costs incurred since formal application for assistance in July 1996. But he referred to the Articles of Association and said it would be unlikely, that if granted, payment of costs would not extend from the beginning to July 1996 nor would the costs of the judicial review necessarily be considered. He thought it likely the committee would bear in mind the second proviso contained in Article 47. He asked for observations before 15th April.
8th April 1997 The Plaintiff’s solicitor replied expressing their outrage and saying that proceedings against the MDU were contemplated. He confirmed they had not received a statement of claim in any High Court proceeding. He enclosed 31 Civil Bills served in March 1997 saying appearances were being entered and notice for particulars being served. The judicial review against the Medical Council was refused in the High Court and was being appealed to the Supreme Court. He enclosed a further copy of a conditional order of certiorari in judicial review proceedings.
11th April 1997 Dr. Beresford replied referring to previous correspondence and documents which had either been sent or not sent. He referred to the forthcoming committee of the Board of Management on 15th April and said in the absence of any comment on the detailed chronology of their correspondence set out in his letters of 29th January, 1997 and 14th March, 1997 he took it that the Plaintiff’s solicitor accepted its factual accuracy. If this was not so he asked for a reply by fax. He also asked the Plaintiff’s solicitor to address the question of the Plaintiff’s wishes in respect of representation before the Medical Council Fitness to Practice Committee which he would need to specifically place before the committee.
14th April 1997 The Plaintiff’s solicitor replied that he did not accept allegations made in the letter of 14th March 1997. He said the proceedings before the Medical Council stopped because of the Plaintiff’s health and because criminal charges were pending. He accused the MDU of evading its responsibility. He said he advised on 9th July when Medical Council proceedings were about to be reactivated of their continued existence and did not get a substantive reply until 14th March, 1997. He enclosed a further copy of proceedings against the Plaintiff and quoted from his letter of 9th July concerning his request for discretionary assistance and enclosing the Plaintiff’s authority.
29th April 1997 Dr. Beresford replied to say the committee of the Board of Management considered the Plaintiff’s request for assistance on 15th April. The committee’s recommendations were adopted by the Board of Management which met on 22nd April. In relation to the inquiry before the Medical Council Fitness to Practice Committee the Board of Management was prepared to offer advice and legal assistance subject to the following conditions which were required in the Board’s absolute discretion in accordance with the Memorandum and Articles of Association. The conditions were (a) that legal assistance would be provided by the solicitor and counsel appointed by the MDU and (b) that the Plaintiff provide full co-operation by means of full disclosure of the facts and his instructions directly to those appointed. The Board decided in its absolute discretion not to grant assistance in relation to costs and expenses incurred in respect of these matters to date.
In respect of the three Circuit Court actions by named Plaintiffs and 31 further proceedings the Board of Management was prepared to consider the question of future discretionary assistance within the benefits of membership. The MDU required full information directly from the Plaintiff in respect of each of his patients including full disclosure of clinical records and full co-operation in meeting with the lawyers appointed by the MDU to secure his full instructions.
7th May 1997 The Plaintiff’s solicitor replied to say proceedings were being drafted against the MDU for breach of contract, breach of trust, negligence, fraud and other breaches of duty and asked for solicitors to be nominated within the jurisdiction to accept service.
14th May 1997 The Plaintiff’s solicitor again wrote and asked for a firm of solicitors to be nominated. He also enclosed papers in a judicial review proceeding in an action by one of the Plaintiff’s patients.
19th May 1997 Dr. Beresford replied to say he was awaiting senior management advice concerning the nomination of solicitors and acknowledged receipt of the document.
4th June 1997 Messrs Arthur Cox, Solicitors on behalf of the MDU, wrote asking the Plaintiff’s solicitor to specify what complaints the Plaintiff had against the MDU and saying any proceedings would be fully defended.
6th June 1997 The Plaintiff’s solicitor wrote to the MDU asking for solicitors to be nominated to accept service.
23rd July 1997 The Plaintiff’s solicitor wrote concerning an approach from the solicitor (Mr. Martin Harvey) acting for 35 of the patients who were suing the Plaintiff. He forwarded “without prejudice” proposals given to Mr. Harvey which included an opening offer of contribution to the ex-patients’ costs of £18,500. He asked for a reply as a matter of urgency.
25th July 1997 Messrs Arthur Cox replied to this letter on the behalf of the MDU saying the position was set out clearly in the letter of 29th April. Full information had not been forthcoming and accordingly the MDU were not in a position to consider future discretionary assistance in relation to civil claims. It was therefore a decision that Dr. Barry and not the MDU would have to make in relation to the proposed settlement.
28th July 1997 The Plaintiff’s solicitor acknowledged receipt and suggested the MDU had abandoned the plaintiff and refused to reply to correspondence.
23rd September 1999 The Plaintiff’s solicitor wrote to the MDU saying he understood it represented the Plaintiff as insurers. He enclosed a letter dated 6th September, 1999 addressed to the Plaintiff by Messrs Eugene Carey and Company, Solicitors on behalf of an ex patient claiming the Plaintiff behaved in a negligent unsuitable and inappropriate manner towards their client and threatening proceedings in the absence of an adequate offer of compensation. The Plaintiff’s solicitor also enclosed a statement of the Plaintiff dated 10th March 1999 in relation to the said patient.
On the same date a copy of the correspondence was sent to Messrs McCann Fitzgerald.
28th September 1999 Messrs McCann Fitzgerald replied to say they had no instructions to act on the Plaintiff’s behalf in this matter.
4th October 1999 The Plaintiff’s solicitor sent to the MDU a similar letter from the same firm of solicitors, Messrs Eugene Carey & Co., dated 21st September 1999 on behalf of another patient. He enclosed a statement by the Plaintiff in relation to the said patient dated 10th March, 1999
A copy of this correspondence was also sent to Messrs McCann Fitzgerald.
4th October 1999 The Plaintiff’s solicitors sent to the MDU a copy of a Civil Bill
served on the Plaintiff and asked for acknowledgement of the letter of 23rd September 1999.
He also sent a copy of the Civil Bill to Messrs McCann Fitzgerald.
7th October 1999 Dr. David Morgan on behalf of the MDU replied to the letter of 23rd September. He asked if the plaintiff’s solicitor could confirm whether he represented the Plaintiff, what was the nature of his instructions and what assistance was being requested.
8th October 1999 Dr. David Morgan again wrote to the Plaintiff’s solicitor in reply to the letter of 4th October. He said the statement of the patient referred to by the Plaintiff in his statement of 10th March was not included and asked for it to be forwarded.
22nd October 1999 The Plaintiff’s solicitor replied to the letter of 7th October, 1999 he referred to the issue of proceedings against the Plaintiff and said that Dr. Morgan might not be aware of their previous requests for assistance on behalf of the Plaintiff and would be obliged if he would consult their files. He said the assistance they required on behalf of the Plaintiff was indemnity in respect of any relevant damages, judgments and in respect of the costs of defending himself against civil disciplinary or criminal proceedings arising out of his practice. He regretted that previous correspondence ended on an acrimonious note and said their involvement in the matter was forced on them by the fact that the Plaintiff was a longstanding client of the office who suffered a nervous breakdown and they bore the burden of protecting his interests in circumstances where he had no hope of being able to pay them for their services. He had no difficulty in handing over all civil files to their nominated solicitors if they would to agree to indemnify Dr. Barry. They would expect to be paid a reasonable remuneration in respect of work done to date. He referred to a doctor whose services they had obtained and also the doctor who had advised 33 claimants referred to and the investigation of her conduct by the medical council.
In relation to the disciplinary and criminal proceedings he said the plaintiff had the right to have lawyers of his personal choice retained. He added if there was any step or thing which the MDU required them to do, which they could properly do for the purpose of meeting their requirements for indemnity for the Plaintiff, they would comply with such requirements.
5th November 1999 Dr. Morgan replied on behalf of the MDU saying Dr. Beresford had retired and he was dealing with the matter. He said he had been able to access previous files. He referred to the assistance required for the Plaintiff. He said his colleague Dr. Beresford had carefully explained the MDU’s position in the letter dated 14th February 1996 and he said for the avoidance of doubt he reiterated the essential of what he wrote at the time. In order that the Board of Management could consider a grant of discretionary assistance they required a personal approach from the Plaintiff seeking assistance and providing necessary instructions. If the Plaintiff was not capable of providing instructions, the MDU wished to have authorisation from a valid power of attorney in respect of the Plaintiff’s affairs. The MDU required details of the individual cases and details of the dates of the alleged incident or incidents to consider any request. The MDU also required details in relation to the Medical Council and criminal matters. He said at that stage the MDU was unable to indicate what discretionary benefit (if any) could be provided. The MDU would expect not only to instruct solicitors but experts of their own choice and no undertaking could be given to pay for previous legal costs incurred. The MDU was unable to fund the work involved in the provision of the details mentioned and he reiterated the importance of receiving the Plaintiff’s instructions.
15th December 1999 The Plaintiff’s solicitor replied to the letter of 5th November 1999. In relation to civil proceedings he said they had prepared copies of the files of the 36 actions in the Circuit Court, three actions in the High Court and an action which they had successfully defended. They prepared photocopies where initiating letters had been written and files where proceedings were commenced but where notice of discontinuance was served.
In relation to judicial review, proceedings in respect of anonymity orders had been adjourned pending the outcome of criminal prosecution. He said copies of the files were being forwarded by surface mail. He considered the disclaimer by the MDU of responsibility for expenses incurred in providing information as mean and petty. He noted the requirement that it was a condition of the MDU being willing to indemnify the Plaintiff that its nominated solicitors should act and said that was a reasonable requirement. They would advise the Plaintiff to comply with any requirement that the civil matters be dealt by Messrs McCann Fitzgerald subject to the MDU accepting responsibility to indemnify the Plaintiff in respect of any judgment obtained against him and in respect of his costs of defending these actions including his costs incurred to date. He said they were in possession of considerable background information which they were willing to share. He said if a satisfactory accommodation could not be reached with the MDU they would issue third party proceedings claiming indemnity in respect of any judgment obtained and payment in respect of their costs of defending the action.
Re the disciplinary proceedings, he said they had been adjourned pending the outcome of the criminal prosecutions brought against the Plaintiff. Also he said the decision of the Medical Council upheld by the Supreme Court in judicial review proceedings to hold their inquiry in private was being considered by the European Court of Human Rights.
Re criminal prosecutions he referred to the letter dated 9th July 1996 that certain criminal prosecutions had been successfully defended by the Plaintiff. In November 1997 the State brought a series of prosecutions for indecent assault (247 incidents alleged against 43 women over a 30 year period) against the Plaintiff. This was met with judicial review proceedings still pending before the High Court. They were forwarding a full set of papers in these proceedings.
He said that pending the outcome of the criminal prosecutions, neither the disciplinary proceedings nor the civil proceedings could proceed because of the danger of prejudicing the outcome of the criminal prosecutions. In regard to the requirement of a “personal approach” he said they were at a complete loss to understand what they meant when they said they required a personal approach from the Plaintiff seeking their assistance and providing necessary instructions. He said as solicitors acting on behalf of the Plaintiff they had his instructions which they had consistently communicated to the MDU. He said other judicial authorities accepted their authority and their instructions from the Plaintiff but the MDU consistently failed to do so. He said the MDU was acting under some misconception which they could not fathom. He referred to the written authority from the Plaintiff sent with the letter of 9th July 1996 and he said if by “personal approach” the MDU wished Dr. Barry to attend at its offices then this could be arranged. But if this was what was required to specify the same. Concerning information in the Plaintiff’s possession he said there are his medical files but nothing else. He said that the matter must be brought to a conclusion and if it would be of assistance the writer (i.e. the Plaintiff’s solicitor) would be willing to travel to England for discussions on an entirely “without prejudice” basis. He concluded by stressing the seriousness of the situation from the Plaintiff’s point of view.
5th January 2000 Dr. Karen Dalby Senior Medical Claims Handler replied on behalf of the MDU to the letter of the 15th December. Concerning their request for direct contact from the Plaintiff, she said this is a requirement of the MDU when considering offering assistance and is set out in the Memorandum and Articles of Association as previously advised. She noted they were authorised to act on behalf of Dr. Barry and she suggested they leave matters as they are for the moment. In due course they might require an alternative form of contact. She noted the civil cases were on hold awaiting the outcome of the criminal prosecutions and judicial review proceedings were pending. She said the work on the criminal cases would be at the Plaintiff’s own expense. As a result she understood there was little active work that could be undertaken on the civil claims until these proceedings were concluded. She said they would be able to advise of the MDU’s position regarding its assistance in respect of the civil claims when the outcome of the criminal prosecutions were known and she asked to be advised when the information was to hand.
13th January 2000 The Plaintiff’s solicitor, further to the letter of 15th December 1999, enclosed a copy of a civil bill received by the Plaintiff from another litigant. They had asked for a full and complete statement from the plaintiff and for a copy of the medical file. When they received the documents they would forward them.
19th January 2000 Dr. Dalby asked for confirmation that the letter of 5th January 2000 had been received.
8th March 2000 The Plaintiff’s solicitor acknowledged the letter of 5th January 2000. He said they were pleased at what they felt was a conciliatory tone of the letter. They were disposed to allow the matter to rest provided the MDU agreed that the withholding of proceedings against the MDU would not afford any defence based on the Statute of Limitations or laches. He said they did not accept that the work on the criminal cases would be at the Plaintiff’s expense. He said there was necessary ongoing management of the civil cases and he asked if the MDU required to be kept appraised or would a report on inquiry be sufficient.
21st March 2000 Dr. Dalby replied that their position was as set out in the letter of 5th January and said it was a matter for the Plaintiff’s solicitor to decide the extent to which he wished to continue investigating civil cases.
7th April 2000 The Plaintiff’s solicitor replied to that letter saying they had no alternative but to issue proceedings to prevent the MDU being able to raise a defence of laches or the Statute of Limitations and he also enquired about solicitors to accept service of proceedings.
10th April 2000 Dr. Frances Szekely, Senior Medical Claims Handler, replied on behalf of the MDU. She indicated they were disappointed with the position taken as previous correspondence indicated the Plaintiff’s solicitor was content to await the outcome of criminal proceedings. She asked if it was the intention to issue proceedings against the MDU in respect of their position on assisting the Plaintiff with the criminal proceedings. She confirmed in open correspondence that the MDU would not take any point on limitation in any subsequent proceedings issued on this matter. She asked for clarification.
18th May 2000 The Plaintiff’s solicitor reiterated that the liability of the MDU to the Plaintiff extended to indemnities in respect of the costs and expenses of defending civil proceedings and of the disciplinary proceedings, before the Medical Council and of criminal prosecutions and also indemnity in respect of liability of the Plaintiff for compensation costs or expenses incurred in the civil proceedings. He said they did not propose to litigate the issue of the MDU’s liability at that time on the understanding that the MDU would not raise a defence of limitation or delay in respect of any of the identified claims. They did not accept the MDU’s contention that they were entitled to defer assistance pending the outcome of criminal proceedings.
2nd June 2000 Dr. Szekely replied on behalf of the MDU. She said the position of the MDU had been clearly stated on a number of previous occasions. With respect to civil claims they would not indemnify the Plaintiff for any legal costs incurred to date. They would only consider providing assistance if they were provided with full, frank and unrestricted co-operation by the Plaintiff. This would be direct co-operation and not through any third party. It would involve a disclosure of all materials relevant to the claims including documents photographs and video tapes. The Plaintiff would be required to give his full and open co-operation to any legal representative they appointed on his behalf. They were not of opinion that such co-operation had been forthcoming in the past and they would require immediate direct contact from the plaintiff. She said they should note that in the event of it being decided that the circumstances which gave rise to the claims fell outside the provision of ordinary medical services, they would normally withdraw their assistance and not indemnify members for damages which would arise as a result of such claims. She asked that they would acquaint the Plaintiff with the contents of the letter without delay. If the plaintiff’s solicitor was instructed to issue proceedings, she asked to be advised so they might nominate solicitors to accept service.
24th January 2001 The Plaintiff’s solicitor said they had been instructed to commence proceedings against the MDU and setting out the headings of such claims.
13th February 2001 The plenary summons in this matter was served on the MDU’s solicitors Messrs Arthur Cox & Co.
Correspondence relating to particulars and discovery ensued.
14th June 2001 Messrs Arthur Cox wrote to the Plaintiff’s solicitor referring to correspondence regarding requests for assistance made to the MDU on behalf of the Plaintiff. They said the MDU’s position was clearly stated on a number of occasions in previous correspondence. Before the Plaintiff’s request for assistance could properly be considered by the Board of Management direct personal co-operation and instructions of the Plaintiff with the MDU was essential. He said unfortunately such
co-operation and instructions had not been forthcoming to date. Entirely without prejudice to its powers and entitlements under its Memorandum and Articles of Association and without prejudice to its defence of the proceedings already instituted, the MDU was prepared to offer the Plaintiff a further opportunity to co-operate in the matter and to put his clients request for assistance before the Board of Management. The appropriate committee of the Board of Management would consider the Plaintiff’s request at its meeting on 17th July 2001 with its recommendation being put before the Board for approval at its meeting on 24th July 2001. They asked that the following would be provided to Dr. Julia Nield, the Head of Claims Handling, in advance of the committee meeting and no later than 13th July 2001 as follows
1. The Plaintiff’s personal instructions as to the matters giving rise to the various proceedings in respect of which assistance was sought.
2. The present status of the criminal proceedings
3. Whether any civil claims have been successful
4. The total number of civil claims now outstanding
5. The status of any disciplinary proceedings
6. Confirmation of full and unrestricted access by the MDU to the Plaintiff.
She said even if the above was not forthcoming it was still intended to put the matter before the Board of Management on 24th July 2001 but it would be in the Plaintiff’s interests to provide the information as requested. If there was any additional matter which he wished to draw attention to, it would be put before the Board.
25th June, 2001 The Plaintiff’s solicitor replied to Messrs. Arthur Cox to say the letter of 14th June, 2001, was unusual in that it ignored the existence of litigation and that it was a device in that litigation. He alleged that reconsideration of their position could only be regarded as tainted by their own concerns in the present litigation. He said it was scandalous to assert the plaintiff’s co-operation and instructions were not forthcoming. When they said the plaintiff was willing to travel to England to meet the MDU’s representatives they rejected the offer. As to the six items listed he said the MDU had been given full particulars of or co-operation in the same. He confirmed there was no change in this status of the criminal proceedings and disciplinary proceedings and no civil claim had succeeded.
3rd July, 2001. Messrs Arthur Cox replied saying it was clear no useful purpose could be served by further correspondence but rejected the allegations in a letter. They said the plaintiff’s request for assistance would be considered at the appropriate committee of the Board of Management on 17th July, 2001 and its recommendations put before the Board on 24th July. The decision would be communicated.
5th July, 2001 The plaintiff’s solicitor acknowledged receipt and made further allegations.
1st August, 2001 Messrs Arthur Cox wrote to the plaintiff’s solicitors to say the Board of Management on 24th July, 2001, adopted the recommendation of the Advisory Management Committee made on 18th July, 2001, that the plaintiff be not assisted with his case.
It can be seen from this correspondence that the plaintiff never made personal contact with the MDU to give instructions or with Messrs McCann Fitzgerald, despite that being a key requirement of the MDU. Requests for the plaintiff to make personal contact and to give personal instructions were mentioned in the letter to the plaintiff from Messrs McCann Fitzgerald, dated 22nd August, 1995, (to which no reply was received) and thereafter to the plaintiff’s solicitor in letters dated 8th November, 1995, 7th February, 1996, 14th February, 1996, 15th March, 1996, 29th January, 1997, 29th April, 1997, 25th July, 1997, 5th November 1999, and 2nd June, 2000.
Much emphasis has been laid by the plaintiff that in the letter of 15th December, 1999, the plaintiff’s solicitor (having said he was at a complete loss to understand what the MDU meant when they said they required a personal approach from the plaintiff providing the necessary instructions) said if the MDU wished the plaintiff to attend its offices it could be arranged. In reply dated 5th January, 2000, the MDU (Dr. Karen Dalby) said the request for direct contact was a requirement of the MDU when considering offering assistance. Her suggestion that they leave matters as they were for the moment was made in the context that her understanding was that little active work could be undertaken on the civil cases until the outcome of the criminal prosecution was known. She also said in due course they might require an alternative form of contact. In due course on 2nd June, 2000, the MDU did require direct co-operation by the plaintiff and not through a third party. This was never forthcoming. There is not a single letter written by the plaintiff himself. The only communication from him was the authority signed by him on 9th July, 1996, authorising his solicitor to make an application for discretionary assistance.
It is difficult to understand the attitude of the plaintiff’s solicitor. How could a solicitor not understand what was meant by requiring a personal approach from the plaintiff to give necessary instructions? He was obviously aware at the very start (see letter of 31st July, 1995) that it was not appropriate for his firm to take any steps because he mentions the plaintiff’s “policy of insurance”. It would be very normal in insurance cases that the insurance companies want to brief their own solicitor and counsel. Even though the MDU was not an insurance company it followed the same practice. It reacted promptly to that first letter by appointing Messrs McCann Fitzgerald as the solicitors to represent the plaintiff. But it never received direct instructions or co-operation from the plaintiff at any time. Also the plaintiff never received authority from the MDU to engage his own solicitor and counsel.
On behalf of the MDU evidence was given by Mr. David Eric Markham, an orthopaedic surgeon. He qualified in 1961 and became a member of the Medical Protection Society. In 1977 he was invited to join the council of the MDU and he moved his membership to the MDU. He said the MDU had been formed 125 years ago and it was always a discretionary mutual members’ company. He was a member of the Cases Committee in 1977, he became the chairman in 1992 for five years, then he became vice chairman of the company and was then elected chairman and president in 2001 and he still holds those offices. When he was chairman of the Cases Committee it met once a month. Papers were circulated to 40 or 50 members who were across all specialities. He would have a briefing meeting for one hour before the meeting with the staff who were to present the cases. There would be 24 to 25 case summaries with additional papers. Some cases were straightforward and others clinically complex. It would be impossible to predict which cases would generate discussion. In this case there had been difficulty in getting to first base, namely getting basic information from the member. They needed records and correspondence. There had to be dialogue in full detail so that the committee could assess if the case merited assistance. They do not want contact through a third party. It has to be directly with a member unless there is a death. Even there they would insist on disclosure of all records. The MDU would regard steps taken on a member’s behalf before there was recourse to the MDU, as a worry. The Articles state “take no step” (this is a reference to article 47 proviso 2). He said there was no summary judgment made. They look as hard as they can to see if they can assist and do not look to refuse assistance. They would not pay costs incurred here because they had no input into that solicitor. They would assist with the disciplinary body if the member co-operated and gave all the facts. It was normal protocol to instruct solicitors appropriate to those facts. The MDU orchestrate from beginning to end. Only by getting the right solicitor with competence in the field could they be doing their best for the member and for the membership as a whole.
There was the Cases Committee meeting on 15th April, 1997, at which Mr. Markham was in the chair and Dr. Beresford was present. The case summary sets out the details of the correspondence and records the recommendation to the Board of Management as:
(a) do not pay legal costs to date,
(b) assist with IMC if member co-operates and gives full disclosure of the facts,
(c) if (b) not achieved, withdraw assistance,
(d) if assistance provided to do so with MDU appointed solicitors only and
(e) seek further information in relation to civil claims.
The decision of the Board of Management on 22nd April, 1997, records that the Cases Committee recommendation be approved. Mr. Markham was present at the Board of Management meeting as a board member.
Between 1997 and 2000 there was a reform of the decision-making apparatus of the MDU. Two additional committees were set up, the Claims Management Committee (CMC) and the Advisory Management Committee (AMC). The old Cases Committee which met once a month had a very large caseload and was not able to process cases as quickly as the rules required. The new CMC met once a week and discussed clinical aspects. It would decide if further information was needed or if solicitors would be instructed. The AMC met once a week. It was a telephone committee and dealt with disciplinary and criminal matters. He said the plaintiff’s case bridged both systems and was dealt with by the AMC. The Cases Committee continued but with a smaller number of complex cases.
There was an AMC meeting on 31st May, 2000. (This is the one to which the plaintiff objected because he had not been notified. This was after the plaintiff threatened to sue the MDU and the letter of 18th May 2000 from the plaintiff’s solicitor setting out what indemnity he required.)
There was a case summary. It was not considered in isolation, but with the earlier case summary. The whole matter was revisited that the member had not co-operated. They were taken through the facts of the case with reference to the previous committee. He said there was discussion and Dr. Szekely presented the case. The recommendation of the AMC to the Board of Management was:
(a) do not assist with civil claim/criminal charges,
(b) do not assist with legal costs to date and
(c) inform member’s solicitor that MDU assistance cannot be considered unless full details are provided.
Mr. Markham said that paragraph (c) left the door open if full details were provided. Dr. Szekely’s letter of 2nd June, 2000 set out their concern that their member would know and that they were saying please ensure that the plaintiff knows what is required of him.
The recommendation of the AMC of 31st May, 2000, was approved by the Board of Management meeting on 27th June, 2000. Mr. Markham was present.
In cross examination following a weekend interval Mr. Markham said he could not say if he was present at the AMC meeting on 31st May 2000.
When this aspect was revisited the next day he was asked how he could give evidence about what happened at a meeting he had not attended. Mr. Markham said he could now say he had chaired the AMC meeting on 31st May 2000. He had had time to reflect and he could assure the court he had chaired the meeting.
He was criticised strongly by counsel for the defence, however I am satisfied he gave his evidence in good faith and to the best of his ability and I accept his explanation.
The next meeting of the AMC in relation to this matter was the 18th July, 2001. It was noted that proceedings had been served on 19th February, 2001, against the MDU and that the MDU had recently written to the plaintiff’s solicitors requesting information and the deadline for receipt of this information was 13th July, 2001. The reason for the reference was to ask the AMC to consider the plaintiff’s request for assistance in the light of the above and any response received. Jill Harding presented the background detail. In the summary it is recorded that when asked if there was any reason why the plaintiff could not provide instructions personally, Jill Harding replied that the plaintiff had recently attended a conference with counsel on a case with which he was being assisted by the MDU. The AMC recommendation to the Board of Management was not to assist.
The matter was considered by the Chairman’s Committee on 24th July, 2001. This committee had delegated authority from the Board of Management to review all cases from the AMC. It could approve and send on to the Board or could send back to the AMC. It was another check. It vets and filters and then passes on to the Board matters for final consideration.
The Board of Management met on 18th September, 2001, and accepted the recommendation. Mr. Markham was present. He said he had not seen the letter of 23rd July, 1997 concerning a possible compromise of the cases but he said it was irrelevant. The plaintiff had never complied with their requests.
He said the MDU had no pecuniary interest in the outcome of the disciplinary proceedings and he denied there was any conflict of interest. He said a solicitor who is instructed, when giving an opinion in an individual case, would not take into consideration the membership as a whole.
Dr. Beresford who was a member of the Medical Secretariat from 1987 to 1999, went through the correspondence he had with the plaintiff’s solicitor. He confirmed that he prepared a written summary to place before the Cases Committee on 15th April, 1997. He was not present at the meeting of the Board of Management. He said that after receiving the letter of 7th May, 1997, threatening proceedings against the MDU he passed the correspondence to his manager as he could not deal with it.
He accepted that there was a six month delay in replying to the plaintiff’s solicitor’s letter of the 9th July, 1996. But he said in fairness, the point that the MDU should be responsible for the period of delay was put to the Committee. He also said to the Committee that the plaintiff wanted his own lawyers to continue.
Dr. Cathy James, also a medical doctor, joined the MDU in 1987. She wrote the initiating correspondence to the plaintiff to establish contact with him. There had been several previous contacts with the plaintiff. One was a medical council enquiry. The plaintiff had initiated contact personally. The MDU instructed solicitors in Ireland to assist him. There was communication directly with the plaintiff who was assisted in drafting a reply to the medical council, who took it no further. She went through the correspondence she had in this matter. She said Melissa Hackett was a non medical claims handler who wrote the letter of 25th October, 1995, after discussing the case with her.
She (Dr. James) next became involved as Head of Case Decisions at the AMC meeting of 3rd May, 2000. She participated in that decision. There was full discussion before the recommendation. She said co-operation is essential. It is first base. She was also at the AMC meeting on 18th July, 2001, at which Jill Harding presented the case. She said the plaintiff had applied in June, 2001, for assistance in another matter. He gave clinical details and co-operation. He was assisted in the usual way. A formal decision was not required. He had also attended a conference with counsel in relation to another claim. There were two existing matters in which he was co-operating fully.
Regarding the decision of 18th July, 2001, she said they wished to look again notwithstanding litigation. She said litigation is not a bar to giving legal assistance. It was not the motivating factor. She refuted the suggestion that there was a conflict of interest for solicitors appointed by the MDU. She said they are there for the benefit of the member involved. Their sole duty is to assist the member with that matter.
Dr. Joseph Smith, a consultant urologist joined the council of the MDU in 1969. He as a member of the council from 1969 to 1987. In 1987/88 he chaired the Cases Committee. From 1988 to 1992 he was Treasurer. He became a member of the Board of Management in 1990, vice-president in 1996 and chair of the Board of Management and president of the MDU from 1997 to 2001. Now Mr. Markham is chair and president. At the board meeting on 18th July, 2001, he retired and
Mr. Markham took over. He could not see any conflict of interest in the appointment of solicitors and counsel by the MDU. He said they are doctors for doctors and lean over backwards to give assistance.
In my opinion what is provided by the MDU under its Memorandum and Articles of Association and what the plaintiff was entitled to was discretionary assistance. As a first step the MDU required direct access to them by the plaintiff and full co-operation. This was the first base referred to by MDU and the plaintiff never got there. The Department of Health accepted the MDU as the preferred supplier by agreement of 12th June, 1996, knowing of the absolute discretion and knowing it was not an insurance company.
It was submitted that the decision of April, 1997, was not taken in good faith. As I have already held the principles of natural and constitutional justice do not apply. The decision of April, 1997, was taken first by the AMC on 15th April and their recommendation was approved by the Board of Management on 22nd April.
The failure of Dr. Beresford to reply to correspondence for six months between July, 1996, and 29th January, 1997, can certainly be criticised but it is also to be noted that the plaintiff’s solicitor sent no reminder until 4th January, 1997. No doubt if he had, six months would not have elapsed. The delay in replying is not evidence of bad faith. Dr. Beresford did make the submissions to the AMC he promised. It was the AMC not Dr. Beresford who reached the decision. The recommendation of 15th April, and decision of 22nd April, was not arbitrary because it required assistance to be provided by their appointed solicitor and counsel. In this they have been completely consistent with their practice. The plaintiff did not have any right of choice of his own solicitor and counsel.
The defence alleges in written submissions that “there may be a conflict of interest involved because the defendants might attempt to use an adverse result in the disciplinary proceedings for the purpose of evading their liability to indemnify the civil proceedings and lawyers retained by the defendants would owe a duty to their employer which might be in conflict with that owed to the member”.
I reject this contention completely. I have no doubt that the solicitors and counsel appointed by the MDU would act for the benefit of the client they are representing not for the benefit of the MDU, as indeed Dr. James said. Mr. Markham specifically rejected the suggestion that the MDU had a pecuniary interest in the outcome of the disciplinary proceedings. I fully accept that this is indeed the case.
The plaintiff’s submissions in relation to the significance of the offer in the plaintiff’s solicitor’s letter of 15th December, 1999, that a visit of Dr. Barry to the MDU’s office could be arranged, has been blown out of all proportions. The MDU never resiled from its requirement that there must be a personal approach and co-operation by the plaintiff. The reply of Dr. Dalby of 5th January, 2000, emphasised that direct contact is a requirement of the MDU when considering offering assistance. All she suggested was to leave matters on hold to await the outcome of the criminal proceedings. There was never any suggestion that a direct approach was no longer required. The letter of 2nd June, 2000 from Dr. Szekely again required direct co-operation and not through a third party. There was no response to this until 24th January, 2001, when the plaintiff’s solicitors said they were instructed to sue the MDU.
Mr. Markham had no doubt that the letter of 15th December, 1999, was drawn to the attention of the AMC. But whether it was or not, is neither here nor there. The subsequent action of the plaintiff in not making direct contact when required to do so by letter of 2nd June, 2000 throws doubt on the genuineness of the offer to attend the MDU’s offices.
The suggestion that the Board of the MDU could not meet to consider the situation when litigation was threatened without notifying the defendant in advance, bears no basis in reality. The plaintiff’s solicitor threatened legal proceedings on 7th April, 2000. In answer to a request for clarification, he sets out in a letter of 18th May, 2000, all the indemnities which were required but said they did not propose to litigate at that time on the basis that the MDU would not raise a defence of the Statute of Limitations or delay in respect of any of the identified claims. Of course the Board of Management were entitled to consider the matter without first notifying the plaintiff. They did consider it and the letter from Dr. Szekely of 2nd June, 2000, fairly sets out the decision of the Board of Management. The decision is totally consistent with the attitude of the MDU all along: namely requiring direct contact and full co-operation. There was nothing unfair in the way the Board of Management reached their decision.
The decision of 18th July, 2001 which has been categorised by the plaintiff as “a device in litigation” adds nothing to the situation. It is totally consistent with everything that had gone before. The reason given by Dr. James for holding the AMC meeting on 18th July, 2001 was to look again at the matter notwithstanding the litigation, because the plaintiff had applied in June, 2001 for assistance in another matter and had co-operated and was given assistance in the usual way. As it turned out the decision was totally consistent with the previous decisions.
There is no evidence that the decision was tainted by the MDU’s concerns with litigation, was made for their own benefit and was affected by bias. Nothing changed as a result of this decision and no advantage was obtained. If this decision had not been made, the outcome of the litigation would be identical.
The plaintiff has failed to prove his case. The action is dismissed.
Flynn v Dermot Kelly Limited & Anor
[2007] IEHC 103 (16 March 2007)
Judgment of Mr. Justice O’Neill delivered on the 16th day of March 2007
The plaintiff is a farmer and lives near Enfield, Co. Meath. The first named defendant is a seller of farm equipment and the second named defendant is a finance and leasing company. On or about the 8th of April 1998, the plaintiff sought to acquire from the first named defendant a tractor model “New Holland M 115” with a registration number 98 MH 2837. The first named defendant was the party from whom the plaintiff sought to make this acquisition. The method of completion of the transaction was by way of a leasing agreement made between the plaintiff and the second named defendant, whereby the tractor was sold by the first named defendant to the second named defendant and leased by them to the plaintiff. The lease was for a period of six months at the monthly rent of IR £3,504.13. The lease was to run from 8th April 1998, until 8th October 2002.
On 8th June 1998, the plaintiff was assisting a friend of his, Mr. Dixon an agricultural contractor, to cut silage on the farm of Mr. Hiney. They were using three tractors, the plaintiff’s New Holland and two Fiat tractors owned by Mr. Dixon. The two Fiats were a Fiat 980 and a Fiat 1580. They were respectively fifteen and eighteen years old. The three tractors were each pulling a trailer, used to draw the cut silage to a silage pit.
The work went on late into the evening and finished at around about 11.00 pm. After that the plaintiff and Mr. Dixon helped Mr. Hiney to cover his silage pit. When this was done at about 11.30 the three tractors were parked beside each other with their trailers attached in a field close to the silage pit. The plaintiff and Mr. Dixon left to go home.
Early next morning the plaintiff was phoned and given very bad news concerning his tractor. He rushed to the scene to discover that his tractor and those of Mr. Dixon had been totally destroyed by fire.
In due course these proceedings were issued by the plaintiff claiming from both defendants damages in respect of the loss of the tractor.
In this respect the quantum of special damages was agreed between the parties in the sum of €42,387.34.
In the trial the core issue was the cause of the fire.
The plaintiff through his witnesses and in particular his engineer Mr. Slack contended that the cause of the fire was an electrical fault in the area of a control panel to the right of the driver’s seat resulting in the commencement of a “resistive” type of combustion which ignited into a fire within the closed locked cab of the plaintiff’s tractor and from there spread to the fuel tanks and then up to the engine compartment and thereon, to engulf and consume the entire tractor. A moderate wind blowing diagonally across the three tractors from the plaintiff’s tractor over to the Fiat 1580 ensured the spread of the fire to the two Fiats causing their total destruction as well.
Arising from this evidence the plaintiff contends that the cause of the fire as so proved meant that the New Holland tractor contained an inherent defect in its electrical system which rendered the tractor dangerously defective and unfit for its intended purpose and not of merchantable quality.
For the defendants evidence was given by Dr. Woods, an engineer, to the effect that the remains of the three tractors did not furnish any evidence which indicate any specific cause or seat of the fire. In particular he differed from Mr. Slack’s opinion that the fire was caused by an electrical fault at or near the control panel on the right side of the driver seat. Specifically he said that the presence of globules at the end of copper wires in this area and evidence of high temperature damage to two connectors did not indicate “resistive” heating in these cables leading to combustion but was, rather the result of the fire itself, rather than its cause. Whilst Dr. Woods’s evidence was to the effect that there was no evidence of the cause of the fire he was of the opinion that the other Fiat tractors were a much more likely or probable source of the fire having regard to the age and probable worn and brittle condition of the wiring in these two tractors. Dr. Woods did not advance any opinion to the effect that the fire was started maliciously although that explanation was pursued vigorously by Mr. Keane S.C. in cross examination of Mr. Slack.
A specific theory advanced by Mr. Keane S.C. was that the fire was started by a rag doused with an accelerant being placed behind a wheel up against the outside of the mudguard adjacent to the plate where the control panel referred to by Mr. Slack was located and hence if the fire did start there it could have been caused maliciously in this way. Dr. Woods agreed that this was a possible explanation of the fire.
A second theory pursued by Mr. Keane was that a miscreant, finding that the doors of the two Fiat tractors were not locked started the fire by igniting materials such as a rag or rags doused with an accelerant in the cabs of one or other of them. Both Dr. Woods and Mr. Stack acknowledged that this was a possibility.
Another theory advanced on behalf of the defendants was that even if the fire had started in the cab of the New Holland tractor, that because the cab was locked the fire would have self extinguished due to oxygen starvation because of the fact that the vents in the cab were at roof level and rising smoke from the fire would have prevented the entry of air thus causing the fire to self extinguish.
Evidence relating to the question of whether the fire was malicious was given by Detective Garda Farrelly. He attended at the scene on the morning of the fire and took samples which he sent to the Garda Technical Bureau for analysis.
The results of these tests as reported to him and his knowledge of the area caused Garda Farrelly to be satisfied that the fire was not started maliciously.
I am satisfied that the evidence does not support the conclusion that the fire was malicious. The theories advanced by Mr. Keane in this regard are not supported by evidence and in my view are unconvincing. I am inclined to the view that the fire was in all probability not started maliciously.
Mr. Slack gave evidence of finding debris on the floor of the cab of the plaintiff’s tractor and of examining the layers of that debris. He said that in this debris he found plastics at the bottom and glass on top, and this, he said indicated that plastics in the cab burned first before the windows of the cab broke causing glass to fall to the floor of the cab. This meant that the fire occurred within the cab rather than coming from outside. If the fire had come back from outside, the glass would have broken first resulting in the glass being found at the bottom of the debris rather than at the top as was the case.
This evidence of Mr. Slack was not contradicted by Dr. Woods. I accept Mr. Slack’s evidence in this regard. The consequence of this finding are decisive for the resolution of the issue of how the fire started. The undisputed evidence was that the cab of the plaintiff’s tractor was locked. Thus I conclude that the fire was not started maliciously inside the cab of the Holland tractor. If the fire started within the cab of the plaintiff’s tractor and was not started maliciously, having regard to the age of the tractor in my view it is highly probable the fire was started by an electrical fault in the cab. Mr. Slack’s explanation of how this happened seems to me to be convincing, particularly in the light of the fact that Dr. Woods agrees that the two connectors showed evidence of exposure to higher temperatures than affected other connectors. I have come to the conclusion that it is probable that the fire did start in the manner described by Mr. Slack.
I am satisfied that the fire spread from the plaintiff’s tractor to the other two driven to a significant extent by winds coming across the plaintiff’s tractor and blowing diagonally in the direction of the two Fiats. The scorching of the grass on the right side of the Fiat 1580 tends to support the view that the fire was moved in that direction by the wind. So also does the extensive damage to the trailer behind the Fiat 980.
In the light of the finding that the fire did start in the cab of the plaintiff’s tractor it would seem to me to be highly improbable that there would be a second seat of the fire and hence the theory that the fire should have self extinguished cannot be valid. Sufficient air must have been available for the fire to develop, be it from leaks from the underside of the tractor or from the vents in the roof to have enabled the fire to develop to the extent of breaking the glass in the cab, at which stage ample oxygen would have been available.
I am therefore satisfied that the fire was caused by an electrical fault in the cab of the New Holland tractor. It remains to decide whether the defendants have a liability for the damage so caused.
It was conceded that the plaintiff was not a “consumer” as defined in s. 2 of the Consumer Credit Act 1995, because the plaintiff purchased the tractor in the course of his business as a farmer.
It was submitted by Mr. Keane S.C. for the defendants that because the plaintiff was not a “consumer” he could not then be a “hirer” as defined in s. 2 of this Act, and if he was not a “hirer” then the agreement entered into by the plaintiff with the second named defendant was not a “consumer hire agreement” as defined in s. 2 of the Act and hence the plaintiff was not entitled to the benefit of the implied undertakings as to quality or fitness as contained in s. 76 of this Act.
It was further submitted by Mr. Keane S.C. that as there was no contract for the sale of goods as between the plaintiff and either of the defendants, because the only contract entered into was between the plaintiff and the second named defendant and that was simply a leasing agreement, the implied conditions and warranties as to quality and fitness contained in the Sale of Goods and Supply of Services Act, 1980 did not apply.
It was further submitted that the plaintiff had not given any evidence as to express warranties given to him by the first named defendant when he was acquiring the tractor, and therefore, even if the court found that the fire had been caused by an electrical fault in the tractor as contended for by the plaintiff, there was no breach of contract on the part of the first named defendant and as the agreement between the plaintiff and the second named defendant was a leasing agreement to which the Consumer Credit Act, 1995 did not apply, and as the agreement entered into between the plaintiff and the second named defendant for the lease of the tractor contained a clause at clause 8 which excluded any liability on the part of the second named defendant in respect of any liability in contract or tort, in respect of any defect in the tractor, be it a latent or apparent defect, no liability could attach to the second named defendant either.
Hence it was submitted that the plaintiff had failed to prove any breach of contract against either defendant.
For the plaintiff it was submitted that apart from the agreement between the plaintiff and the second named defendant there was a collateral agreement between the plaintiff and the first named defendant, whereby in consideration of the plaintiff entering into the leasing agreement with the second named defendant, the first named defendant agreed to sell the tractor to the second named defendant which was then leased to the plaintiff. It was submitted that as the agreement was for the supply of a new tractor it was necessarily to be implied that that agreement contained a condition that the tractor was of merchantable quality and fit for its intended purpose, and did not have dangerous defects.
In addition it was submitted that the implied condition contained in s. 13 of the Sale of Goods and Supply of Services Act, 1980 applied, and that the fire was caused by a defect in the tractor namely an electrical fault which rendered the tractor both dangerous and not of an merchantable quality.
It was further submitted that the occurrence of this defect in the tractor, having regard to the very young age of the tractor and the danger which it posed to the user of the tractor was a fundamental breach of the agreement between the plaintiff and the defendants.
The following statutory provisions are relevant to the issues to be decided.
The Consumer Credit Act, 1995.
“Section 2
“Consumer” means a natural person acting outside his trade, business or profession;
“consumer-hire agreement” means an agreement of more than three months duration for the bailment of goods to a hirer under which the property in the goods remains with the owner;…
“hirer” means a consumer who takes, intends to take or has taken goods from an owner under a hire-purchase agreement or a consumer-hire agreement in return for periodical payments;”
The Sale of Goods and Supply of Services Act, 1980
“Section 13
(1) In this section “motor vehicle” means a vehicle intended or adapted for propulsion by mechanical means, including—
( a ) a bicycle or tricycle with an attachment for propelling it by mechanical power, and
( b ) a vehicle the means of propulsion of which is electrical or partly electrical and partly mechanical.
(2) Without prejudice to any other condition or warranty, in every contract for the sale of a motor vehicle (except a contract in which the buyer is a person whose business it is to deal in motor vehicles) there is an implied condition that at the time of delivery of the vehicle under the contract it is free from any defect which would render it a danger to the public, including persons travelling in the vehicle….”
I am satisfied that Mr. Keane is correct in his submission that the agreement entered into between the plaintiff and the second named defendant for the leasing of this tractor was not a “consumer hire agreement” as defined in the Act of 1995 because the plaintiff was not a “consumer” and therefore he could not be a “hirer” as defined in s. 2 of that Act. That being so, the plaintiff was not entitled to the benefit of the implied undertaking as to quality and fitness contained in s. 76 of that Act.
The contract between the plaintiff and the second named defendant was for the lease of this tractor and hence in my view it was not a contract for the sale of goods and hence the implied conditions as to quality and fitness contained in s. 13 of the Sale of Goods and Supply of Services Act, 1980 did not apply either.
There was no evidence of any warranties or representations on the part of the second named defendant as to the quality or fitness of this tractor and therefore it would seem to me that the plaintiff has failed to make out a case for breach of contract against the second named defendant. That being so it is not necessary to consider whether or not the exclusion clause in s. 8 of the agreement was effective to exclude any such liability.
The position of the first named defendant is somewhat different. The entire basis of the transaction is that the plaintiff went to the first named defendant to acquire a new tractor. Having selected the one he wished to acquire he then, for the purposes of this acquisition, entered into the leasing arrangement with the second named defendant.
In my view a necessary and unavoidable part of this transaction was the agreement of the first named defendant to sell the tractor to the second named defendant. This would not have happened or could not have happened without the agreement of the plaintiff to enter into the leasing agreement with the second named defendant.
I am satisfied that the commercial reality of this transaction dictates the existence of a collateral contract between the plaintiff and the first named defendant whereby the first named defendant agreed to sell the tractor to the second named defendant in consideration of the plaintiff entering into the leasing agreement with the second named defendant.
I am also satisfied that as this was a contract for the supply of new tractor, necessarily, there was implied into that contract between the plaintiff and the first named defendant a condition that the contract was of merchantable quality and free from defects which would render it dangerous or unfit for its intended purpose.
The existence of the defect in the electrical system of this tractor, was in my view, having regard to the age of the tractor a fundamental breach of that implied condition as to quality.
That being so I have come to the conclusion that the first named defendant was in breach of his collateral contract with the plaintiff, and is liable to the plaintiff in damages. These damages have been agreed in the sum of €42,387.34 and there will be judgment in favour of the plaintiff against the first named defendant for that sum.
Irish Bank Resolution Corporation v McCaughey
[2014] IESC 44 (11 July 2014)
Court: Supreme Court
Composition of Court: Clarke J., Laffoy J., Dunne J.
Judgment by: Clarke J.
Status of Judgment: Approved
THE SUPREME COURT
[Appeal No: 70/2014]
Clarke J.
Laffoy J.
Dunne J.
Judgment of Mr. Justice Clarke delivered the 11th July, 2014.
1. Introduction
1.1 This case raises yet again questions about the exercise of the summary judgment jurisdiction of the High Court in bank debt cases. Given the large amount of applications for summary judgment in such cases which have come before the High Court, not least in recent years, and given the not insignificant number of appeals to this Court, it can I think, be said that the general principles for the exercise of the Court’s jurisdiction are well settled. I will turn to those principles in early course for they were not a matter of any significant controversy between the parties on this appeal. I do, however, propose to make a number of minor observations for the purposes of seeking to bring some additional clarity to the proper approach.
1.2 The plaintiff/respondent is, of course, now in special liquidation. As the events which give rise to the issues on this appeal occurred before its name change, I will, in this judgment, refer to the plaintiff/respondent as “Anglo”. There is no dispute but that Anglo lent significant sums of money to the defendant/appellant (“Mr. McCaughey”). Neither is there any dispute that the relevant sums have not been repaid and that interest also falls to be charged in respect of the accounts concerned.
1.3 However, when Anglo sued for the sums said to be due and, an appearance having been entered, brought a motion for summary judgment in accordance with the rules, Mr. McCaughey suggested that he had an arguable defence based, in very general terms, on two propositions. Some of the relevant monies had been advanced for the purposes of investments made by Mr. McCaughey in various projects which had been put together and promoted by Anglo. The relevant loan agreements provided that the sums advanced were to be repayable on demand and in any event by, at the very latest, March 2008, a date which had long since passed before any demand was made or any proceedings issued. On that basis, Anglo asserted that the monies were due. Mr. McCaughey’s case on the summary judgment motion suggested that there was a collateral agreement entered into between him and Anglo at the time of the advance of each of the relevant loans, which was to the effect that the monies would not be repayable until the investment project for which the relevant monies were advanced came to an end, or, until the relevant funds into which the monies were placed were liquidated. Other legal defences were proposed based on the same facts as were said to give rise to such collateral contracts. In addition, Mr. McCaughey asserted that he had a counter claim arising essentially out of an allegation of the mis-selling of the various investment projects.
1.4 In a detailed judgment (Irish Bank Resolution Corporation Limited v. McCaughey, [2014] IEHC 230) Kelly J. held that Mr. McCaughey had established an arguable defence in relation to some but not all of the loans. Insofar as the claims referable to those loans were concerned, the proceedings were remitted to plenary hearing. This Court was told that the pleadings in that regard have now closed and discovery is under consideration. However, Kelly J. was not satisfied, for reasons which it will be necessary to address in due course, that an arguable case had been made out in respect of the remaining loans. In respect of those parts of the claim final judgment was granted. As will appear later it is against certain aspects only of the order of Kelly J. that Mr. McCaughey has appealed to this Court. In order to understand the precise issues which fell for this Court to decide on this appeal it is necessary to start by considering the background facts and, thereafter, the ruling made in the High Court.
2. Background Facts and Issues
2.1 A series of credit agreements and facility letters between Mr. McCaughey and Anglo were executed between the 1st September, 2006 and 28th March, 2007. Kelly J. helpfully described the various facilities at paras.5, 6 and 7 of his judgment as follows:-
“5. The first facility letter is dated 1st September, 2006 and was granted to part fund the defendant’s investment in the AIAC Woolgate Exchanged Geared Property Fund. The second facility was dated 10th October, 2006 and had as its purpose the part funding of the defendant’s equity investment in an entity called Peninsula Real Estate Fund which has been given the nomenclature for the purpose of these proceedings of the New York Hotel Fund. That is how I will refer to it.
6. The third facility was dated 17th November, 2006, and was broken down into three different elements. They were described as Facility A, B and C. Facility A was to increase the defendant’s investment in the Woolgate Exchange Geared Property Fund. Facility B was to part fund the defendant’s investment in the AIAC European Geared Property Fund (E.G.P.F.). Facility C was to fully fund the defendant’s investment in Riverdeep. The fourth facility was dated 2nd January, 2007 and was used to provide the defendant with a €5m investment line of which €1,737,000 was drawn down.
7. The fifth facility was dated 28th March, 2007 and was to part fund the purchase of two units at the Rockefeller Plaza in New York.”
2.2 Thereafter Kelly J. identified a number of common features of each of the facilities in the following terms:
“First, each had a letter of facility setting out specific terms to which I will turn in a moment. Each of them was executed by the defendant. Each of them expressly provided that the facility granted was to be repayable on demand and that that demand might be served at any time by the Bank at its sole discretion without stating any reason for such demand. Without prejudice to the demand nature of each of the facilities they were all expressly stated to be repayable on or before a specified date, the latest of which was March 2008. Each of the facilities was also granted subject to the Bank’s general conditions governing personal loans. All provided that if there was any conflict between the terms of the facility letter and the general conditions, the terms of the facility should prevail. As is clear, the backstop date for the payment of the facilities has long since expired.”
2.3 By the time the matter came before the High Court there had been significant developments in respect of many of the loans. In particular, of relevance to the issues which arise on this appeal, it should be noted that the investments in respect of the Woolgate Exchange Geared Property Fund (which was the subject of the first facility and Facility A of the third facility) had run into significant difficulties. Likewise, the investment in certain New York hotels, which were the subject of the second facility, were suffering similar difficulties. It will be necessary to explain the position in respect of both of those investments in more detail, in due course, for the purposes of assessing the applicability to those loans of the defence put forward on behalf of Mr. McCaughey which suggested that, on various legal bases, Anglo had committed itself not to call in each of the relevant facilities until such time as the investments in question had come to an end.
2.4 As already noted it was also asserted on behalf of Mr. McCaughey that, in substance, various of the facilities were mis-sold in the sense that statements were made concerning the investments to which the facilities related which were incorrect. A number of different legal bases for suggesting that Mr. McCaughey was entitled to defend these proceedings by asserting a cross claim in that regard were put forward. As against that background it is next necessary to turn to the approach of the trial judge.
3. The High Court Judgment
3.1 Having set out the nature of the application and the sums claimed, Kelly J. addressed the test to be applied in such applications. No dispute was raised on this appeal as to the relevant test. Having detailed the various agreements and facilities involved, Kelly J. went on to assess whether Mr. McCaughey had an arguable defence, in accordance with that jurisprudence. First, the trial judge considered the “collateral contract” defence and addressed the law regarding such contracts. In finding that “it is clear the courts have over the years on occasions accepted that in appropriate circumstances the terms of a written agreement may be affected by the existence of a collateral contract or warranty made between the parties” (para.22), Kelly J. concluded that a triable issue had been raised in that regard, given the low threshold of proof required at this stage of the proceedings.
3.2 Having concluded that there was a triable issue on the collateral contract argument, Kelly J. went on to consider the consequences of that conclusion. It should be noted that the collateral contract defence only applied to those loan agreements which were for the purpose of investing in funds offered by Anglo as was accepted by Mr. McCaughey in his replying affidavit of 26th November, 2013. It was, therefore, accepted that the collateral contract argument only applied to the first facility, the second facility, the third facility, (facility A and facility B) and what was referred to as the M & A part of the fourth facility.
3.3 In any event the term of the alleged collateral contract was said to preclude those loans to which it was said to apply from being called in, “for the duration of the funds” or “the duration of the investment”. Taking this into consideration, Kelly J. came to the conclusion that it was clear that the duration of some of the relevant funds and investments had come to an end, and thus, even on the terms of the alleged collateral contract, Mr. McCaughey was found not to have raised arguable grounds of defence in respect of those loans so far as a defence was suggested on the basis of the alleged collateral agreement.
3.4 Next, the trial judge considered the second argument of Mr. McCaughey, which took the form of a counterclaim. Mr. McCaughey asserted negligence, misrepresentation, negligent misstatement, breach of duty and breach of contract against Anglo. Kelly J. concluded that any such claims were statute barred, but nonetheless, considered their merits. The trial judge concluded that Mr. McCaughey “had not demonstrated, even on the low threshold of proof required, the basis for a counterclaim in respect of the various complaints” (para.50). Kelly J. found no evidence pointing to the assertions made and in some respects noted that the issues had been dealt with comprehensively in previous litigation. It will be necessary to refer to that litigation in due course.
3.5 Kelly J. determined the effect of these findings was that judgment should be given on facility C of the third agreement and the Riverdeep part of the fourth agreement and the fifth agreement in full (being those aspects of the facilities to which the collateral agreement did not, even on the basis of Mr. McCaughey’s case, apply).
3.6 Due to fact that the collateral contract defence could not apply once the duration of any relevant investment has expired, Kelly J. determined that judgment should be given in respect of the first agreement and facility A of the third agreement (“the Woolgate loan” and where relevant the “Woolgate Fund”) and on the second facility (“the New York Hotels loan” and where relevant “the New York Hotels Fund”) and also in respect of the M & A part of the fourth agreement. He also determined that the balance of Mr McCaughey’s defence should go to plenary hearing.
3.7 Having delivered his judgment, Kelly J. adjourned the matter to the following day, 30th January, 2014 when he made the order which is the subject of this appeal. In the order, having recited the judgment delivered on 29th January, 2014 and that the Court had indicated that it was prepared to grant judgment in favour of Anglo against Mr. McCaughey in the sum of €5,205,175.90 and that on 30th January, 2014 the Court was told the parties had agreed that the judgment sum should be reduced to €2,516,590.45 and had agreed terms for the discharge of the balance, namely, €2,723,612.93, with liberty to Anglo to apply in the event of that agreement not being complied with by Mr. McCaughey for the purpose of obtaining judgment in the event of such default, it was ordered that:-
(a) Anglo recover against Mr. McCaughey the sum of €2,516,590.45; and
(b) the balance of Mr. McCaughey’s claim be adjourned to plenary hearing.
The judgment was, on that basis, in respect of the Woolgate Fund and the New York Hotel Fund only.
4. The Appeal
4.1 Mr. McCaughey challenged the finding of the trial judge that the duration of the Woolgate Fund had come to an end because a Receiver had been appointed and the relevant properties sold. Mr. McCaughey also contended that the trial judge erred in finding that the New York Hotels Fund had closed and that it was, from an economical and practical point of view, also at an end. The finding that the counter-claim was statute barred was also appealed as was the finding that no arguable basis had been put forward in support of the respective cross claims relating to both relevant loans.
4.2 It follows that the two loans with which this appeal is concerned are those described by the High Court, and in this judgment, as the Woolgate loan and the New York Hotels loan. It is also of some importance to mention that the matter first came before this Court on an application for a stay. In all the circumstances of the case, it appeared to the formation of the Court which was dealing with the stay application that it would be both in the interests of the parties and in the interests of the allocation of scarce court time if the substantive appeal could be readied for hearing as a matter of urgency. In substance the Court would have been required to consider, at least to some material extent, the merits of the appeal itself in order to apply the well established jurisprudence in respect of the grant or refusal of a stay. For that reason, in the circumstances of this case, it seemed unlikely that the hearing of the appeal itself would take much longer than the hearing of the stay application. It will be necessary to make reference in due course to some additional facts which had been placed before the Court, on affidavit, in the context of the stay application.
4.3 Before going on to analyse the grounds of the appeal in respect of the Woolgate and New York Hotels loans it is, as I indicated earlier, appropriate to say just a little about the proper approach of the courts in summary judgment applications.
5. Summary Judgment Applications
5.1 The underlying test is as set out in the judgment of Hardiman J., speaking for this Court, in Aer Rianta c.p.t. v. Ryanair Limited [2001] 4 IR 607. As Hardiman J. pointed out, at p.623:-
“… the fundamental question to be posed on an application such as this remains: is it “very clear” that the Defendant has no case?; is there either no issue to be tried or only issues which are simple and easily determined?; do the Defendant’s affidavits fail to disclose even an arguable defence?”
5.2 It is also important, as Finlay Geoghegan J. pointed out in Bank of Ireland v. Walsh [2009] IEHC 220, to keep clearly in mind that the use of the term “credible” in relation to a defence has, for the reasons also addressed by Hardiman J. in Aer Rianta v. Ryanair, a very narrow meaning. The issues of credibility, which had formed the basis of a conclusion that a defendant had not put forward an arguable defence, in cases such as National Westminster Bank v. Daniel [1993] 1WLR 1453, Banque de Paris v. de Naray [1984] 1 Lloyds Rep. 21 and First National Commercial Bank v. Anglin [1996] 1 IR 75, arose, as Hardiman J. put it, “rather starkly”. In Daniel, the defence affidavits were mutually contradictory. In de Naray, there was clear evidence, not challenged, from a private detective, which flatly contradicted the plaintiff’s case. In Anglin, the chronology asserted was entirely inconsistent with commercial documentation which was not, in itself, disputed.
5.3 Denham J., speaking for this Court in Danske Bank v. Durkan New Homes [2010] IESC 22, also approved a passage from a judgment which I delivered in the High Court in McGrath v. O’Driscoll [2007] I.L.R.M. 203, where, at p. 210, I said the following:-
“So far as questions of law or construction are concerned the court can, on a motion for summary judgment, resolve such questions (including, where appropriate, questions of the construction of documents), but should only do so where the issues which arise are relatively straightforward and where there is no real risk of an injustice being done by determining those questions within the somewhat limited framework of a motion for summary judgment.”
Hardiman J. had expressed a similar view in his judgment in Aer Rianta, in the passage already cited, where he made reference to issues which were simple and easily determined.
5.4 It is important, therefore, to reemphasise what is meant by the credibility of a defence. A defence is not incredible simply because the judge is not inclined to believe the defendant. It must, as Hardiman J. pointed out in Aer Rianta, be clear that the defendant has no defence. If issues of law or construction are put forward as providing an arguable defence, then the Court can assess those issues to determine whether the propositions advanced are stateable as a matter of law and that it is arguable that, if determined in favour of the defendant, they would provide for a defence. In that context, and subject to the inherent limitations on the summary judgment jurisdiction identified in McGrath, the Court may come to a final resolution of such issues. That the Court is not obliged to resolve such issues is also clear from Danske Bank v. Durkan New Homes.
5.5 Insofar as facts are put forward, then, subject to a very narrow limitation, the Court will be required, for the purposes of the summary judgment application, to accept that facts of which the defendant gives evidence, or facts in respect of which the defendant puts forward a credible basis for believing that evidence may be forthcoming, are as the defendant asserts them to be. The sort of factual assertions, which may not provide an arguable defence, are facts which amount to a mere assertion unsupported either by evidence or by any realistic suggestion that evidence might be available, or, facts which are in themselves contradictory and inconsistent with uncontested documentation or other similar circumstances such as those analysed by Hardiman J. in Aer Rianta. It needs to be emphasised again that it is no function of the Court on a summary judgment motion to form any general view as to the credibility of the evidence put forward by the defendant.
5.6 Finally, I should touch on one matter which turned out to be of some specific relevance in the circumstances of this case. As was pointed out by this Court in Lopes v. Minister for Justice, Equality and Law Reform [2014] IESC 21, in the context of an application to dismiss as being bound to fail under the inherent power of the Court first identified in Barry v. Buckley [1981] 1 I.R. 306, the courts, in hearing such applications, must be mindful of the fact that a party may, by a successful application, be shut out from having their claim determined at full trial, be required to be more flexible in relation to the consideration of arguments or materials brought forward on appeal (see para 9.1 of the judgment). It seems to me that like considerations potentially arise in the context of a summary judgment motion for precisely the same reason in that, if successful, the defendant will be shut out from having a full trial of the issues raised by his defence. While it remains important that a defendant put forward his full case on the summary judgment motion, and while it follows, therefore, that the courts will be reluctant to allow a different or additional case (backed up by evidence) to be run on appeal, nonetheless, some proportionality between the consequences of granting summary judgment and the rigour with which the rules applicable to new evidence on appeal ought be enforced, needs to be achieved. Counsel for Anglo quite properly accepted in that context that it was appropriate for this Court, in reaching its overall conclusions on this appeal, to have regard to additional affidavit evidence which had been filed by the parties in the context of a motion which had been brought before this Court on behalf of Mr. McCaughey seeking a stay.
5.7. Against the background of that jurisprudence, I propose to deal separately with the case made in relation to, respectively, the Woolgate and the New York Hotels loans. I will deal first with the issues concerning the New York Hotels loan.
6. The New York Hotels
6.1 While I earlier mentioned two separate grounds of defence put forward on behalf of Mr. McCaughey in respect of each of the loans, it is, strictly speaking, necessary to subdivide the first such set of grounds. As already noted, part of the case made on behalf of Mr. McCaughey, both before the High Court and this Court, concerned statements allegedly made to him by Anglo to the effect that, it was said, the relevant loans would not become repayable until the respective investments had come to an end. It was said that clear statements to that effect were made in the context of the first such loan, which was the Woolgate loan. It is also said that, in respect of each of the other (and subsequent) relevant loans, statements were made that the same terms and conditions applied as had been applied to Woolgate. On that basis it was argued that there existed a collateral contract in respect of each of the loans in question, which was to the effect that, notwithstanding the “on demand” nature of the written loan contract in each case, Anglo would not call in the loan until the investment fund, to which each respective relevant loan related, had come to an end. It is important to recall that Kelly J. concluded that there was an arguable case to the effect that such collateral contracts existed. The reason why Kelly J. remitted the issues arising in respect of some loans to plenary hearing but did not adopt the same course of action in respect of the New York Hotels loan and the Woolgate loan, stemmed from an assessment of whether there was an arguable basis for suggesting that those latter loans were in respect of funds which were not yet at an end. Clearly, if there was no arguable basis for suggesting that the respective funds were not at an end, then the existence of a collateral contract to the effect that the relevant loans would not be called in until the funds were at an end, could not provide an arguable defence.
6.2 Therefore, one of the issues which arises both in respect of the New York Hotels loan and the Woolgate loan is as to whether Kelly J. was correct to conclude that there was no arguable basis for suggesting that the respective loans were not at an end. I will return to that question shortly in the context of the New York Hotels loan.
6.3 However, for completeness it is necessary to add that, in respect of both loans, additional arguments were put forward on behalf of Mr. McCaughey based on misrepresentation and estoppel. However, the factual basis for those assertions in each case was the same as the factual basis which had been put forward for the alleged collateral contract. On that basis counsel for Mr. McCaughey accepted, in the course of argument, that such additional potential defences did not, in the circumstances of this case, add anything to the collateral contract argument. If, in all the circumstances, the asserted collateral contract could not avail Mr. McCaughey of an arguable defence because the relevant fund must be said to be at an end, then equally any defence based on misrepresentation (or indeed any other variation of such a claim based on, for example, promissory estoppel) could not succeed on exactly the same basis. However advanced as a matter of law, the net effect of the contention argued on behalf of Mr. McCaughey under this heading was that there was a legal obligation on Anglo, which prevented the relevant loans from being called in until such time as the corresponding fund was at an end. That was so whether the legal obligation was couched as arising from a collateral contract, as a result of a misrepresentation, or, as a result of an estoppel. If there was no arguable basis for suggesting that either or both of the relevant loans were not at an end, then, however the matter was argued on the law, the factual basis for the defence could not be sustained. On that basis, it does not seem to me to be necessary to give separate consideration to the differing legal bases on which it was suggested that the statements attributed to Anglo might convert into a legal obligation on the part of Anglo not to enforce the loan until the relevant funds had come to an end.
6.4 The key question under this heading, to which I will shortly turn, is, therefore, as to whether Mr. McCaughey has established an arguable case that the New York Hotels Fund has not come to an end. If he has, then it follows that it is arguable that Anglo is not entitled to call in that loan on one or other of the legal bases put forward. It follows that the question of any liability of Mr. McCaughey in respect of the New York Hotels loan would, in those circumstances, have to be remitted to plenary hearing.
6.5 However, before going on to consider that aspect of the potential defence in relation to the New York Hotels loan, I propose to deal briefly with the alternative defence sought to be put forward in respect of those loans, which amounts to a counterclaim arising out of what was said to be a mis-selling of the New York Hotels loan and the project which underlay it. In that context, it is important to point out that Mr. McCaughey mounted previous proceedings in which he claimed relief in respect of the New York Hotels loan arising, in substance, out of an allegation of mis-selling. It is of some importance to note that these proceedings related only to the New York Hotels loan. Those proceedings were dismissed after a full trial by Birmingham J. (Gerard McCaughey v. Anglo Irish Bank Corporation Limited and Mainland Ventures Corp [2011] IEHC 546). An appeal to this Court was also dismissed (McCaughey v. Irish Bank Resolution Corp Ltd & Anor [2013] IESC 17). It, therefore, follows that allegations of mis-selling the New York Hotels investment to Mr. McCaughey have already been dismissed after a full hearing before the courts. In addition, as was accepted by counsel, any refinement of the argument or the evidence, which might now be sought to be put forward, would almost certainly amount to an abuse of process in the sense in which that term is used deriving from the jurisprudence following on from Henderson v. Henderson 3 Hare 100. No factual or legal basis was put forward as providing an arguable ground for suggesting that it would not be an abuse of process to seek to recast the mis-selling claim (which had failed in the previous proceedings) as a defence or counterclaim in respect of the New York Hotels loan aspect of these proceedings. In those circumstances it does not seem to me that, so far as the New York Hotels loan aspect of the claim is concerned, the counterclaim could provide either a defence or cross-claim which might properly be taken into account by the Court in deciding what to do with the substantive claim. On that basis, the question of whether the New York Hotels loan aspect of this case should be remitted to plenary hearing turns solely on the question of whether it can be said that the underlying fund is at an end. If it is at an end then the collateral contract, representation, or promise (even it be established) could not afford any defence. If it is arguable that it is not at an end, then, in the light of the finding by Kelly J. that there was an arguable basis for the proposition that Anglo’s entitlement to call in the loan is postponed until after the fund is at an end, there is clearly an arguable case to defend the New York Hotel loan aspect of this claim.
6.6 It is in that context that the additional evidence put before the Court on the stay application (which updated the position in respect of the New York Hotels loan) is of potential relevance.
6.7 In order to understand the factual position, it is necessary to start by noting that the New York Hotels Fund invested, in substance, in two hotels. The investors (including Mr. McCaughey) became partners in a U.S. limited partnership called Peninsula Real Estate Fund LP (“Peninsula”). Peninsula in turn owned 100% of two further U.S. limited partnerships, which respectively directly owned the two hotels in question, being the Beekman Hotel and the Eastgate Hotel. Each of those later limited partnerships had significant borrowings from Anglo. As part of a larger sale of Anglo’s loan book in the United States, Anglo’s interest in those respective loans was sold to Lone Star. An agreement was reached between the specific partnership which owned the Beekman Hotel and Lone Star whereby, in 2012, the hotel was handed over to Lone Star in settlement of its liabilities. In substance, a significant balance (being the excess of the loan then owed to Lone Star over the value of the hotel at the relevant time) was written off. This would appear to have been of some relevance to Peninsula for there were cross guarantees between the loan owed in respect of the Beekman Hotel and that owed in respect of the Eastgate Hotel. As a result of that transaction the two hotels effectively became decoupled, with the Beekman Hotel disappearing out of the fund and the Eastgate Hotel remaining in the fund, burdened only with its own debt.
6.8 As a result of arrangements entered into in July 2012, a new venture was formed involving Peninsula and certain third parties with a view to converting the Eastgate Hotel into a residential property. The specific limited partnership which owned the Eastgate Hotel was then placed in bankruptcy and the hotel itself transferred to the new venture. It would appear that Peninsula, as one of the members of that new venture, has some possibility of achieving a return depending on the performance of the venture.
6.9 It is important to note that much of this information was not before Kelly J. It is true that the original structure of the New York Hotels investment is no longer in place. Both of the limited partnerships which owned the respective hotels are out of the picture. One of the hotels has been sold. However, it remains the case that Peninsula (which is, after all, the vehicle into which Mr. McCaughey placed his funds), still has a form of interest in the Eastgate Hotel through the new venture to which reference has been made. It appears that this venture carries with it the possibility of some return.
6.10 On that basis, it is argued on behalf of Mr. McCaughey that the New York Hotels Fund is not at an end. It seems to me that there is an arguable basis for that proposition based on the new information which is now available to this Court. It is important to emphasise that the case made on behalf of Mr. McCaughey is not to the effect that there is a real possibility that sufficient funds will be forthcoming from the new venture to clear his liabilities. Given the limited interest which Peninsula has in the new venture that would seem highly improbable. The point made, however, is different. It is argued that the legal consequences of what was said by Anglo at the relevant time is such that the loan in respect of the New York Hotels Fund does not become payable at all until the fund itself comes to an end. On that basis it is argued that it is really a question of timing. Once there remains some prospect that the fund will have some return (however minor) the fund cannot be said to be at an end, and therefore, the argument goes, whether as a matter of collateral contract or misrepresentation or promissory estoppel, Anglo is not yet entitled to call in the loan.
6.11 It seems to me that an arguable case has been put forward on behalf of Mr. McCaughey for that proposition. On the basis of the additional evidence now available I am not satisfied that it can be concluded that there are no arguable grounds for the proposition that the New York Hotels Fund is not at an end. It follows that, in my view, Mr. McCaughey should have leave to defend the claim in respect of the New York Hotels aspect of the loan on that basis, and that that matter should, therefore, be remitted to plenary hearing. I should emphasise that, for the reasons already analysed, I do not believe that it is legitimate for Mr. McCaughey to seek to defend or counterclaim in respect of the New York Hotels loan on the basis of mis-selling, for to do so would be an abuse of process in the light of the previous failed proceedings. So far as the New York Hotels loan are concerned, the matters which should, in my view, be remitted to plenary hearing are those concerning the question of whether the loan is now properly due in the light of the alleged statements made by Anglo and in the light of the argument as to whether it can properly be said that the New York Hotels Fund is at an end. As separate considerations apply in relation to the Woolgate loans I now turn to those questions.
7. The Woolgate Loans
7.1 As with the New York Hotels loan the first question is as to whether there is an arguable case that it can be said that the relevant fund is not at an end. There was some debate at the hearing before this Court as to what might precisely be meant by the fund being “at an end”. Reference was made to the contents of certain internal banking documents, which made reference to “liquidation”. However, those banking documents do not appear to have ever been made available, at any material time, to Mr. McCaughey. Those documents do not, therefore, form part of any potential collateral contract between Mr. McCaughey and Anglo or form the basis of any representation or promise made to him. Those documents may, indeed, be relevant at trial for the purposes of assessing the evidence as to what may actually have been said to Mr. McCaughey. But they do not, in and of themselves, amount to contractual documents. Insofar as it may be open to Mr. McCaughey to place reliance on collateral contracts, representations or promises then it is what was said to him by relevant Anglo officials that matters. The content of internal Anglo documentation will only be relevant insofar as same might be said to corroborate evidence of what was actually said.
7.2 On the other hand, it is important to emphasise that some care should be taken, in the context of a summary judgment motion, in over-analysing the precise wording used in affidavits and in ensuring that affidavits are not treated as if they were contractual documents which required to be very finely analysed. Experience has shown that the precise state of the evidence at the end of a plenary trial often shows at least some nuanced differences from the evidence put forward on affidavit. That is hardly surprising. Affidavits are drafted by lawyers on the basis of instructions and at an early stage of the proceedings. While it is, of course, essential that the true basis of any defence sought to be put forward is accurately reflected in any affidavits filed for the purposes of opposing a summary judgment motion, nonetheless it is not, in my view, appropriate to engage in an excessive parsing and analysing of the contents of affidavits at that stage. Rather, the issue is as to whether, in substance, facts have been deposed to which might arguably provide a defence. If it is possible that a clearer view of the precise and detailed facts may emerge at a plenary trial, then the Court, on a summary judgment motion, should, as it were, give the benefit of the doubt to the defendant. Different considerations would, of course, clearly apply where the legal rights and obligations of relevant parties are defined by documents which have been placed before the Court. In such circumstances the Court can, provided that to do so would not run the risk of injustice, interpret the documents, which task may well involve a careful analysis of the precise wording.
7.3 Against that background it should be emphasised that, in the event that a court of trial is ultimately satisfied that there was either a collateral contract or an operative representation or promise made affecting Anglo’s entitlement to call in its loans from Mr. McCaughey, it will be for the Court, in the light of all the evidence, to come to a conclusion as to the precise event or events which would trigger such entitlement. Against that background, it seems to me that this Court needs to consider whether there is any realistic basis for asserting that, in the light of any possible conclusion as to the events that would trigger the entitlement of Anglo to call in the loan, the Woolgate Fund could be said not to be at an end.
7.4 The facts in respect of Woolgate seem clear. The investment structure was complex in that investors, such as Mr. McCaughey, took out unit linked policies with an Anglo associated assurance company. That company in turn subscribed for shares in a Luxembourg company called Woolgate Exchange SA, which in turn subscribed equity to a German limited partnership which owned the property in question. The uncontested evidence was that a liquidator had been appointed to the Luxembourg company which was insolvent and that there was no prospect of any monies being paid by that Luxembourg company into the unit linked fund. On that basis, I am not satisfied that any arguable grounds have been made out for the suggestion that the Woolgate Fund is not at an end however that term might ultimately be defined or considered in the light of whatever evidence might be tendered at trial. Investors hold unit linked policies in an assurance company where the value of the policy is dependent on the value of the insurance company’s investment in a company which has now been liquidated without any prospect of any monies being available to the fund. On any, even generous, interpretation of the relevant criteria for treating the fund as being at an end, the Woolgate Fund meets that requirement.
7.5 On that basis I am satisfied that Kelly J. was correct to conclude that the Woolgate Fund was clearly at an end and that, even if a collateral contract, representation or promise existed or was made, which would have precluded Anglo from calling its loans until the fund was at an end, same would not avail Mr. McCaughey so far as the Woolgate Fund is concerned, for that point in time has undoubtedly already been reached.
7.6 In relation to Woolgate loan, it remains to consider whether the mis-selling argument put forward could give rise either to a defence in the sense of providing a claim which would amount to a set off in equity, or alternatively to a counterclaim in the shape of a cross claim, which would require the Court to consider the proper course of action to adopt in the light of the principles identified by this Court in Prendergast v. Biddle (Unreported, Supreme Court, 31st July 1957).
7.7 There was some debate between counsel at the hearing of this appeal as to the proper application of the principles, building on Prendergast v. Biddle, which I identified in Moohan v. S. & R. Motors (Donegal) Ltd. [2008] 3 IR 650. I see no reason to depart from those principles. However, in order for those issues to have any application it would be necessary that an arguable case had been made out for a claim of mis-selling in the first place. In that context, it is necessary to identify the allegation of mis-selling which was first put forward by Mr. McCaughey in his replying affidavit to the summary judgment motion.
7.8 In the written submissions filed on behalf of Mr. McCaughey before this Court, two allegations of mis-selling concerning the Woolgate fund are referred to. The first, which is referred to at para. 22 of Mr. McCaughey’s replying affidavit, concerns a suggestion that, as a result of a mis-statement of the recourse element of the relevant loan, the debt level associated with the property was actually 87.5% instead of 83.6%, as said to have been represented at the time of the investment. The loan covenants specified a loan to value ratio of 84% so that the lenders were entitled to call in the loan if the loan to value ratio exceeded that percentage and if remedial action to reduce it to that percentage were not taken. A second allegation is made to the effect that the senior financiers to the fund, Credit Suisse, provided funding of approximately five years, where the fund was described to be for a term of between five and seven years.
7.9 What is particularly striking about Mr. McCaughey’s replying affidavit is that there is no statement made by him at all as to what the consequences would have been had, accepting his case on mis-selling, the true position been pointed out. This is of particular importance in the context of this case. If it were asserted that Mr. McCaughey would not have entered into the investment at all in the absence of those representations, then one would have thought that he would have said so. Doubtless, if such an assertion were made and the matter went to plenary hearing, then the same issues of reliance which arose in the context of the proceedings brought by Mr. McCaughey in respect of the New York Hotels Fund would have arisen again, not least because of the highly marginal extent to which it is said that the true position deviated from that represented. But Mr. McCaughey has made no such contention in his affidavits.
7.10 Insofar as it might be contended that Mr. McCaughey would have gone ahead with the investment but has now suffered loss because the true position was less advantageous than was represented, the truly disastrous performance of the investment makes it clear that the loans would have been called in in any event, whichever loan to value ratio was initially specified and however long the loan from Credit Suisse was provided for. In other circumstances, if the investment did not perform disastrously but nonetheless did not perform as well as expected, then the differences between a loan to value ratio of 87% and 83% and senior finance of 5, as opposed to 5 to 7, years might conceivably have made a difference. In the circumstances of this case they could have made no conceivable difference. There is, therefore, just no factual basis put forward for asserting that the performance of the investment, in the events that happened, was in any way, let alone a significant way, affected by the issues raised. The only basis on which a defence or counterclaim could be mounted in those circumstances was if there was an assertion that, despite the highly marginal nature of what are said to be inaccurate representations, Mr. McCaughey would just not have invested at all. As noted earlier, no such contention is made in the affidavits.
7.11 In those circumstances, I am satisfied that Kelly J. was correct in determining that no arguable basis had been put forward for a claim of mis-selling in respect of the Woolgate at all. It follows that the question of whether such a claim could properly be characterised as a defence or a counterclaim does not arise. Likewise, it is unnecessary to consider the issues relating to the statute of limitations which were addressed in the High Court judgment.
7.12 For those reasons, it seems to me that Kelly J. was correct to permit judgment to be entered in respect of that aspect of the claim which related to the Woolgate loans.
8. Conclusions
8.1 For the reasons which I have sought to analyse, I am satisfied that, in the light of the additional information now available to this Court, the appeal should be allowed in part, insofar as it relates to the New York Hotels loan. The claim in that regard should be remitted to plenary hearing but on the clear basis that Mr. McCaughey is confined to making a case that the loan is not yet due because of a collateral contract, representation or promise made to the effect that the loan would not become due until the relevant investment was at an end. For the avoidance of doubt it should be made clear that Mr. McCaughey is not entitled to defend or raise a counterclaim in respect of the New York Hotels loan on the basis of any allegation of mis-selling.
8.2 So far as the Woolgate loan is concerned the appeal will be dismissed.
8.3 The Court proposes to hear counsel further on the precise form of order which should follow in the light of those findings.
Slaney Foods International Limited v Bradshaw Foods Limited
[2006] IEHC 97 (22 March 2006)
JUDGMENT OF Mr. Justice Kelly delivered on the 22nd day of March, 2006
The Claim
The plaintiff seeks an order for specific performance of an option contained in a written agreement of 6th April, 2004, made between it and the defendant. It contends that it has exercised that option in a valid fashion. By so doing it claims that it is entitled to acquire the lands, premises, plant, machinery and fittings of an abattoir owned by the defendant at Bridge Street, Freshford, Co. Kilkenny. The purchase price is €1,531,859.
The Defence
The defendant does not deny the existence of the agreement in question. Neither does it deny the exercise of the option in accordance with its terms. Rather it contends that there was no entitlement to exercise the option and still less to obtain specific performance of it because the plaintiff is in breach of a collateral oral agreement made between the parties.
The defendant also counterclaims for possession of the premises and mesne rates from 5th April, 2005.
Dramatis Personae
Three witnesses gave evidence in the action.
The first witness was Alec Waugh (Mr. Waugh). He is a director of the plaintiff which is registered and carries on business in Co. Wexford. He is also a director of a Northern Irish company called Linden Foods Limited.
The second witness was Rory Fanning (Mr. Fanning). He is the general manager of the plaintiff.
The third witness was Robert Bradshaw (Mr. Bradshaw). He is a director of the defendant company and described himself as its owner.
It is necessary to mention a fourth person. He is Tom English (Mr. English). He did not give evidence although his name was mentioned many times during the hearing. He is and was at all material times a director of the defendant and is now an employee of the plaintiff. Neither side notified him as a likely witness to the other prior to trial. Neither side procured a witness statement from him. However at the conclusion of the first day of the hearing counsel on behalf of the defendant asked me to make an order directing his attendance in court the following day. I declined to do so since there was ample opportunity to issue a subpoena in the normal way well in advance of the trial. During the overnight adjournment the defendant procured the attendance of Mr. English in court but he was not called to give evidence.
The Premises
The premises is an abattoir at Freshford, Co. Kilkenny. It was formerly owned by a company called Honeyclover which was controlled by two brothers with the surname Blake.
In July, 2003, Honeyclover wished to dispose of the premises. Negotiations with a view to doing so were apparently conducted with two Pakistani nationals. They approached Mr. Bradshaw with a view to him becoming involved. A meeting was proposed for 30th September, 2003, at which those individuals were to purchase the premises. The sale did not go ahead.
When that arrangement fell through one of the Blakes approached Mr. Bradshaw and he contracted to purchase the premises instead. The purchase price was €1.4 million. The contract was executed on 30th September, 2003.
Mr. English was the general manager of Honeyclover when it ran the abattoir. Mr. Bradshaw apprised him as to his intentions in respect of the factory and invited him to become involved in the venture. He agreed.
Mr. Bradshaw has been buying and selling cattle from the time that he left school at the age of 12. His intention was to run the premises as an abattoir having been involved with the Blake brothers whilst their company, Honeyclover, was running it.
Before Christmas 2003, Mr. Bradshaw got a phone call from Mr. English. It was an invitation to meet Mr. English in the abattoir. At that time, apparently, Mr. English had agreed to go into business with Mr. Bradshaw and was involved in drawing up a business plan to present to the bank. Despite that, Mr. English served a 28 day notice on behalf of Honeyclover on Mr. Bradshaw to force him to complete the sale. Mr. Bradshaw then proceeded to organise his finances. He had received a letter of offer on 20th November, 2003, from the Bank of Ireland agreeing to advance him the sum of €1.1 million. It would appear that at the time that he executed the contract on 30th September, 2003, to purchase the premises personally for €1.4 million, he did not have any funds organised to enable him to do so.
Mr. Bradshaw was apparently owed €300,000 by one of the Blake brothers and this was utilised in part discharge of the purchase price of €1.4 million.
In any event, the sale of the premises was completed on 1st April, 2004. The property was in fact transferred to the defendant rather than to Mr. Bradshaw personally.
Meanwhile, prior to the closing of the sale, the ubiquitous Mr. English was busying himself in arranging contacts between Mr. Bradshaw and representatives of the plaintiff. Those contacts resulted in a series of meetings at which negotiations took place.
The Negotiations
The first meeting took place at Freshford on 9th February, 2004. Whilst it was attended by Messrs. Waugh and Bradshaw there were also present Mr. Jim Smith of a company called Irish Country Meats and Mr. English. There is considerable dispute as to things that were said at that meeting. The starkest contrast is in respect of Mr. Waugh’s evidence that Mr. Bradshaw was proposing that the abattoir be sold outright. Mr. Bradshaw contends that he made it clear that the premises were not for sale. Rather he said that he was interested only in leasing the premises with certain entitlements to him to kill 100 to 200 cattle for what were described as “home sales”. Whatever about these discussions and the conflict of evidence in relation to them there is no dispute but that nothing was agreed at this meeting.
The second meeting took place about a week later at the same venue. Again this meeting was attended by a number of persons, none of whom gave evidence with the exception of Messrs. Waugh and Bradshaw. Again there is very substantial conflict between these two witnesses as to what went on at the meeting. Mr. Bradshaw contends that, having retired from the meeting with Mr. English who gave him certain advice, an agreement was made with Mr. Waugh. That alleged agreement included terms that the plaintiff would purchase a 90% interest in the factory with Mr. Bradshaw retaining 10%, that he would remain as head of procurement, that he would be allowed to kill in excess of 100 cattle for himself and would be paid €5 per head per animal killed by the plaintiff at the premises. Mr. Bradshaw was also to have rights to phone masts and the rents received from them and the factory was to be run under the name Bradshaw Foods. Mr. Waugh does not accept any of this. In fact he said that he had to go back and have discussions with his own board which was divided on the topic of becoming involved at all.
Mr. Bradshaw gave evidence of a third meeting in Freshford attended only by himself and Mr. Allen, a director of the plaintiff. This meeting was concerned with the disposal of waste water and effluent. This encounter led to the setting up of a further meeting.
Mr. Waugh says that the next instalment in the saga occurred when Mr. English came up with a proposal of granting a lease on the factory for one year with an option to buy it. That gave rise to another meeting between Messrs. Waugh, Bradshaw and English. Mr. Waugh believes this meeting took place probably in the first week in March. This proposal was acceptable to the plaintiff and he says instructions were given to Mr. Fanning to proceed, along with the plaintiff’s solicitors, to give effect to it.
Mr. Fanning only became involved in the negotiations at a time when the plaintiff had decided to proceed with an arrangement involving a letting of the premises for one year with an option of purchase at the end of that year.
Mr. Fanning attended his first meeting with Messrs. Bradshaw and English on 5th March, 2004, at the Seven Oaks Hotel in Carlow. As far as he was concerned the meeting fell into two parts. The first was to deal with the lease and the option to purchase and the second was to deal with what he described as operational issues.
He took notes at that meeting and they were put in evidence before me. They are consistent with his testimony. I am satisfied that there was a discussion about the lease having a term of one or two years. The plaintiff was firmly against the notion of a two year lease. That appears to have been accepted on the defendant’s side because it produced a one year lease document within a short time. A rent of €15,000 per month was also agreed as was the question of waste water disposal being attended to by the defendant at an agreed price of €15 per tonne.
A further meeting took place on 24th March, 2004. Messrs. Fanning and Bradshaw were amongst the attendees. Again Mr. Fanning took contemporaneous notes which were put in evidence. There were also two parts to this meeting. The first involved a discussion of the lease and purchase agreement and the second involved a discussion on operational matters. Between the two meetings Mr. Fanning had been in regular communication with Mr. English.
Once again the notes which were taken by Mr. Fanning appear to me to support the version of events which he gave in evidence.
Another meeting took place on 5th April. Mr. Fanning was not present at that. Mr. Waugh, Mr. Bradshaw and Mr. English were. This took place on the day before the written agreement was executed.
By this time there was a draft agreement in existence. Indeed such a document had existed for some time and legal advice had been taken upon it. The agreement was essentially a tenancy agreement whereby the plaintiff took a letting from the defendant for a term of one year. As a result of the negotiations which had taken place the agreement also provided an option on the part of the plaintiff to purchase the premises at the expiration of the one year term subject to certain conditions. It also contained a number of other terms which had been the subject of discussions in the various meetings to which I have referred and were by then agreed. They were specifically incorporated into the draft.
The evidence satisfies me that over a period of time the defendant sought to modify the purchase option so as to ensure that if it were exercised he would be entitled to retain 10% of the ownership of the premises. He had been seeking to do this from the time that the plaintiff first intimated its wish to purchase the premises. At the meeting of 5th April, the plaintiff relented and agreed to such a proposition. Steps had then to be taken to ensure that it would be incorporated into the written agreement.
A number of other amendments to the draft agreement were also agreed upon at this meeting.
Subsequent to it, steps were taken to bring about amendments to the draft. Mr. Fanning was at this stage brought back into the picture. Curiously enough that appears to have occurred as a result of him being sent an email by Mr. English which summarised a number of points that had been agreed at the meeting of 5th April. These points were to be incorporated into the agreement. Amongst these points was the entitlement on the part of the defendant to retain 10% on certain conditions should the purchase option be exercised. Other points dealt with in the email concerned the telephone masts, intake dockets and the retention of Mr. Bradshaw as head of procurement.
Mr. Fanning took instructions from his superiors in relation to the contents of this email from Mr. English and dealt with the plaintiff’s solicitors in that regard. These dealings took place on the morning of 6th April, 2005.
It was in the afternoon of that day that the ultimate agreement was signed.
I accept the evidence of Mr. Fanning as to what transpired on that day. I am satisfied that he liaised with the plaintiff’s solicitors for a good part of the morning of 6th April and then set off to the meeting which was scheduled to finalise the contractual arrangements at Bewley’s Hotel, Newlands Cross that afternoon.
The Final Meeting
This meeting took place on the afternoon of 6th April, 2004. Mr. Fanning was responsible for booking the room at the hotel and for generally ensuring that the relevant parties were present to enable the written agreement be executed. He was the person responsible for producing the agreement and doing whatever explaining was required in relation to it.
Of the three witnesses who gave evidence before me he was undoubtedly the most businesslike. He was the only person who kept notes of the earlier meetings that he attended.
I accept his evidence of what transpired on the afternoon in question.
In particular I accept his evidence in relation to the alterations which were necessary in order to provide for the possibility of the 10% interest being retained by the defendant. As he was on his way to Dublin it occurred to him that if that option were to be availed of it would result in an adjustment to the purchase price. He remained in contact with his solicitors on that matter and received an e-mail on the topic after he arrived in the hotel. The revision provided for in that e-mail was explained to Mr. Bradshaw and the agreement was executed with that being incorporated into it.
I reject the suggestion that was made to the effect that the agreement was altered subsequent to its execution. On the contrary I am satisfied that Mr. Fanning was the person who was responsible for the presentation of the final draft to the parties who executed it. He was there during its execution. Subsequent thereto he took the document away with him.
Two other features of the meeting on this afternoon are notable. The first is the absence of Mr. English. He participated in many of the negotiations which took place prior to this day and I am satisfied that he did so for the most part in his capacity as a director of the defendant and on its behalf. Secondly, on his own evidence Mr. Bradshaw never read the document that afternoon prior to its execution by him. He executed it in two capacities. The first was as a director of the defendant. Secondly, he did so personally.
He gave evidence that the question of what he described as a complete buyout which is provided for in the agreement was unknown to him when he signed. There is no doubt but that from his own discovery such a proposition featured in a version of the agreement which antedated that produced at the meeting on 6th April. The explanation for this is that much of both the negotiating and textual changes to drafts were done not by Mr. Bradshaw but by Mr. English. In fact it is clear from the evidence that for the most part Mr. Bradshaw relied upon Mr. English when it came to detailed business negotiations or the drafting of documents. He never read the documents himself.
The Written Agreement
The agreement which was executed on 6th April, 2004, and is the subject of these proceedings contains a number of elements which are pertinent to the issues in this case.
The first part of the document is a letting agreement whereby the defendant agrees to let the premises for a term of one year from 6th April, 2004, at an annual rent of €180,000 plus VAT. Many of the covenants in this part of the agreement are unremarkable and could be found in any standard letting agreement.
Clause 2(o) is however atypical of such an agreement. It provides that Mr. Bradshaw is to be retained as head of procurement for the beef slaughtering activity on the premises for the duration of the term. He in turn agrees that that position is strictly subject to the direction of the plaintiff and that he will be obliged at all times to report and account to it in respect of any decisions required in connection with such engagement.
The landlord’s covenants are unremarkable.
Clause 4 of the agreement provides that the plaintiff is to have the option to purchase the premises at the expiration of the term subject to a number of conditions. They include service of a notice exercising the right at any time during the term but in any event not later than one month prior to the expiry of it. The purchase price and how it is made up is stipulated. The closing date is prescribed as being four weeks from the date of service of the option notice.
Clause 5 of the agreement provides that in the event of the plaintiff in its sole discretion electing to exercise the option through the method of purchasing 90% of the issued share capital of the defendant rather than by purchasing the premises, then the parties are obliged to negotiate a share purchase agreement in good faith as soon as practicable. In such event the following terms are to be included in such agreement. They are:
(a) Mr. Bradshaw shall retain 10% of the entire issued share capital in the defendant and;
(b) In the event that the defendant is run as a non-profit making entity Mr. Bradshaw shall not be required to contribute to capital expenditure costs.
Clause 5(ii) provides that in the event of the plaintiff electing to exercise the option by acquiring 90% of the issued share capital in the defendant and the shareholder retaining 10% of the issued share capital in the defendant the amount due by the plaintiff in exercise of the option on completion is to be the sum which represents 90% of the purchase price less the deposit. This adjustment was necessary to reflect the 10% interest being retained by Mr. Bradshaw.
The agreement contains 10 special conditions. Some are unremarkable and very much what one would expect in an agreement of this sort. Two however do have a bearing upon the issues that I have to decide.
The first is condition number eight whereby the defendant retains the right for the duration of the term to erect telephone masts on the premises subject to certain conditions. The second is condition number ten whereby the lairage intake dockets are required to be prepared under the logo of the defendant.
The Alleged Collateral Contract
The defendant contends that the evidence establishes the existence of a collateral agreement which was negotiated at various stages during the negotiating process dealing with nine different matters. They are as follows:
1. The payment to the defendant of a sum of money for each head of cattle slaughtered. Mr. Bradshaw contends that this sum was fixed at €4 per head. He contends that that was agreed between himself and Mr. English with the latter acting not as a director of the defendant but as general manager of the plaintiff.
I am unable to hold as a matter of probability that there was such a term agreed. In so far as there was a conflict of evidence between Mr. Bradshaw and the plaintiff’s witnesses I prefer their testimony to his. Quite apart from the absence of any evidence from Mr. English there is also Mr. Bradshaw’s own evidence to the effect that he was at a loss of between €2,500 and €3,000 a week because of the failure to pay this sum to him. Despite that loss he took no steps to recover any of that sum during the year of the term. He says that he spoke to Mr. Fanning about it at one stage but that appears to be the height of it. Not merely were no steps taken to deal with such a substantial loss over the period of a year but no claim is made in the counterclaim in these proceedings either. If there was such an agreement it is most unlikely that such arrears would be allowed to mount up with no action being taken to deal with the issue. As a matter of probability therefore I hold that there was no such term agreed.
2. The second term allegedly agreed concerned what were called home sales. This amounts to an alleged entitlement on the part of Mr. Bradshaw to slaughter at least a hundred animals for what he described as the home trade. Again I am not satisfied as a matter of probability that any such agreement was entered into. Again I prefer the evidence of the plaintiff’s witnesses to that of Mr. Bradshaw in this regard.
3. The third matter which is alleged to have been agreed collateral to the written agreement concerns the running of the business under the title Bradshaw Foods Limited. Insofar as there was any agreement between the parties, in my view, it is reflected in the terms of the written agreement at special condition number ten and is limited to that alone. This term accurately reproduces what is contained in the email from Mr. English of 5th April, 2004. That is all that was agreed on this topic.
4. The fourth matter which is alleged to form part of the collateral arrangements involved the continued employment of Anne-Marie Tiernan. It is not denied on the part of the plaintiffs that there was such an arrangement and indeed it is accepted by both sides that it has been honoured throughout. It did not find its way into the written agreement but there appears to have been no necessity for it to do so since it was never in contention. Neither has it been breached.
5. The fifth collateral arrangement alleged concerns the answering of the telephones in the name of Bradshaw Foods. I am not satisfied as a matter of probability that there was any such agreement and in that regard I once again prefer the evidence of the plaintiff’s witnesses to that of Mr. Bradshaw.
6. The sixth element of agreement concerns the disposal of waste water. I am satisfied that there was an arrangement between the parties in that regard. It is not the subject of the written agreement before me but there is no dispute as to its terms. It has not been breached.
7. The seventh term of the collateral arrangement relates to the retention of Mr. Bradshaw as head of procurement. There is no doubt but that there was an agreement between the parties in that regard and it has found its way into the written agreement. It is expressly provided for at Clause 2(o). It also figured in Mr. English’s email of 5th April, 2004. That term of the written agreement has been honoured throughout.
8. There was negotiation between the parties concerning the telephone masts at the premises. There was an agreement in respect of that and it has found its way into the written agreement and is contained at special condition eight.
9. The ninth alleged term concerns an entitlement whereby Mr. Bradshaw would obtain the rents from masts already existing. On balance I think that unlikely to be the case.
Conclusion
As is clear from the above I take the view that the defendant has not discharged the burden of proof in satisfying me of the existence of any collateral agreement over and above that which I have already found to be the case. Neither has the defendant demonstrated a breach of any of those terms such as to disentitle the plaintiff to exercise the option as it did. There is no question but that the option was exercised within time and accordingly it follows that the plaintiff is entitled to specific performance of the agreement as claimed.
I have some sympathy for the position of Mr. Bradshaw. He is, as his counsel admitted, not a man to deal in written documents or matters of that sort. He put nothing in writing. He read very little if any of the documents which were generated in respect of this transaction. He did not even read the agreement in suit before executing it.
Despite his lack of formal education he has obviously had considerable success in his dealings with cattle and their slaughter. But the business side of such arrangements were not attended to by him. He reposed considerable faith in Mr. English and appears to have relied upon him to look after his interests and that of the defendant company. Mr. Bradshaw appears to be a man of very considerable optimism as evidenced by his agreement to purchase the property in the first place at a time when he hadn’t even obtained sanction from the bank for the €1.1million which he had to find. A similar optimism appears to have been displayed in his belief that contractual arrangements had been entered into with the plaintiff when they had not. In that regard much of his belief was formed as a result of conversations with Mr. English. In the event his beliefs have proven to be without substance.
The Counterclaim
The defendant’s counterclaim seeks possession of the premises on the basis that the plaintiff has wrongly remained in possession of them. In the light of my findings that is not the case. Consequently there is no entitlement on the part of the defendant to possession of the premises.
There is also a claim for mesne rates from 5th April, 2005. This is on the basis that the plaintiff is in unlawful occupation of the premises since that date. That manifestly is not the case. Either the plaintiff is in occupation pursuant to the provisions of Clause 6 of the agreement which provides that if the tenancy should continue beyond the date specified then it shall in the absence of a new agreement be deemed to be a tenancy determinable by one calendar month’s notice in writing, or alternatively, as purchaser in possession. In my view the facts of the case demonstrate that the plaintiff occupies the premises in the latter capacity.
The plaintiff was at all times ready willing and able to complete the purchase of the premises. The only reason that it could not do so was the refusal on the part of the defendant to accept the exercise of the option. It’s belief in its entitlement to do so has not been borne out and consequently the counterclaim is dismissed.
There will be a decree for specific performance of the sale of the premises to the plaintiff.
Aer Rianta CPT v. Ryanair Ltd.
[2000] IEHC 205 (5th December, 2000)
Estoppel / Variation
JUDGMENT of Mr Justice Kelly delivered the 5th day of December, 2000.
1. This is an application for summary judgment in the sum of £356,777. That sum is claimed for landing charges and passenger load fees in respect of the Defendant’s Dublin/Paris and Dublin/Brussels routes. A claim in respect of the Dublin/Bristol route which existed when the summary summons was issued is no longer extant, it having been discharged with a payment of £103,108.
2. Landing charges and passenger load fees are payable by airlines using the facilities of airports operated by the Plaintiff Dublin Airport is one such airport and is the only one involved in this case.
3. Pursuant to the provisions of Section 39 of the Air Navigation and Transport (Amendment) Act, 1998 the Plaintiff is entitled to recover these charges as a simple contract debt.
4. For some years now the Plaintiff has operated a discount scheme in respect of these charges. These are given under traffic growth incentives and the discounts allowable are
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very large, sometimes as much as 90% or even 100%. These schemes were first introduced in 1994. The terms of the scheme involved in this action were set forth in a letter dated the 16th January, 1997 and sent to all relevant airlines. The scheme has a term of five years and was notified to all of the Plaintiff’s scheduled airline customers.
5. A dispute arose between the Plaintiff and the Defendant as to the operation of the scheme in question. In accordance with the terms of that scheme the dispute was referred to the Department of Public Enterprise. Whilst the scheme provides that the decision of that department is final and binding it does not exclude the right of either party to have recourse to the courts. Indeed, even though the Plaintiff contends that it was successful before the department it does not seek in any way to argue that the view of the department is binding on this Court and still less summarily enforceable by it. I will ignore the views of the Department for the purposes of this motion.
6. It is accepted by Counsel for the defence that in essence this is a single issue case. The defence which is proffered through the mouth of the Defendant’s Chief Executive Mr Michael O’Leary on affidavit is that there were discussions between him and a Mr Brian J Byrne of the Plaintiff which resulted in either (a) a variation to the scheme for the benefit of the Defendant, or (b) a collateral contract which gave the Defendant additional advantages under the scheme. It is said that in bringing this action account has not been taken of either of these matters. A third proposition is also made. It is said that the Plaintiff is estopped from pursuing this action successfully by reason of a promissory estoppel arising from the representations made by Mr Byrne.
7. The Plaintiff denies in categoric terms that there was or indeed ever could have been such a variation as is alleged without specific board approval on the part of the Plaintiff
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which was never given. The Plaintiff contends that the line of defence is, on the evidence adduced, not credible and/or that there is no fair or reasonable probability of the Defendant having a real or bona fide defence.
8. The test which I have to apply on this application is that set forth by the Supreme Court in First National Commercial Bank plc v. Anglin [1996] 1 IR 75. In that case Murphy J speaking for the Court said:
“For the court to grant summary judgment to a plaintiff and to refuse leave to defend it is not sufficient that the court should have reason to doubt the bona fides of the defendant or to doubt whether the defendant has a genuine cause of action (see Irish Dunlop Co Ltd v. Ralph (1958) 95 ILTR 70).
In my view the test to be applied is that laid down in Banque de Paris v. de Naray [1984] 1 Lloyd’s Law Rep 21, which was referred to in the judgment of the President of the High Court and reaffirmed in National Westminster Bank Plc v. Daniel [1993] 1 WLR 1453. The principle laid down in the Banque de Paris case is summarised in the headnote thereto in the following terms:-
“The mere assertion in an affidavit of a given situation which was to be the basis of a defence did not of itself provide leave to defend; the Court had to look at the whole situation to see whether the defendant had satisfied the Court that there was a fair or reasonable probability of the defendants having a real or bona fide defence.”
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In the National Westminster Bank case, Glidewell LJ identified two questions to be posed in determining whether leave to defend should be given. He expressed the matter as follows:-
“I think it right to ask, the words of Ackner LJ in the Banque de Paris case, atp. 23, ‘Is there a fair or reasonable probability of the defendants having a real or bona fide defence?’ The test posed by Lloyd LJ in the Standard Chartered Bank case Court of Appeal (Civil Division), Transcript No. 699 of 1990. ‘Is what the defendant says credible?’, amounts to much the same thing as I see it. If it is not credible, then there is no fair or reasonable probability of the defendant having a defence.”
9. In his first affidavit which is animadverted upon very strongly by Counsel for the Plaintiff Mr O’Leary the Defendant’s Chief Executive at paragraph 4 of the affidavit accepts that the discount scheme applied generally. But he says
“I say that the application of the Scheme to Ryanair’s proposed commencement on the Dublin/Brussels and Dublin/Paris routes was specifically and deliberately amended following discussions between the plaintiff and the defendant, prior to and in order to procure the Defendant’s commencement on these routes”.
10. From the exhibits contained in his affidavit it is quite clear that the Defendant announced its commencement of services to Brussels and Paris on the 7th February, 1997.
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11. Details of fares payable for these flights and ancillary arrangements for passengers to be taken from distant airports to Paris and Brussels by coach or taxi were also announced on that date. It is clear therefore, on Mr O’Leary’s own evidence that the Defendant had made its arrangements to commence these routes not later than the 7th February, 1997.
12. It follows therefore, that the “specific and deliberate” amendment to the discount scheme which was allegedly made “to procure” Ryanair’s commencement on these routes must have occurred prior to the 7th February, 1997.
13. Details of the negotiations which led to the alleged amendment to the discount scheme are set forth at paragraphs 19-30 of Mr O’Leary’s first affidavit. Paragraph 19 reads:
“As set out above, the Plaintiff’s concerns in relation to the Dublin/Brussels Route for 1997 were such that in early 1997 they entered into negotiations with the Defendant. The Defendant was interested in starting a service on the Dublin/Brussels route, but only if it was not penalised by being denied growth discounts for the 17,500 CityJet passengers who had already qualified for growth discounts in 1996 anyway”.
14. Paragraph 20 continues:
“I became involved in the discussions with the Plaintiff at that stage. I dealt with the Plaintiff’s Assistant Chief Executive of Operations, Brian J. Byrne. I made the Defendant’s position quite clear to the Plaintiff and informed the Plaintiff that unless an agreement could be reached whereby the Defendant would obtain the
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full benefit of the growth discount scheme in 1997 the Defendant would not start services to Brussels in 1997”.
15. This final sentence makes it clear that any amendment must have been finalised prior to the 7th February, 1997.
16. The following three paragraphs of Mr O’Leary’s affidavit read:-
“21. I had a number of discussions, by telephone and in person, during January and early February, 1997 with Mr Byrne about the application of the growth discount scheme to the Dublin/Brussels route. It was expressly agreed between us that Aer Rianta would vary the scheme with the Defendant to encourage Ryanair to commence a Dublin/Brussels service in 1997. The Plaintiff agreed that the Defendant would be entitled to the frill benefit of the growth discount scheme and that CityJet’s traffic would be ignored in setting the base rate for the purpose of calculating growth on the Brussels route because at that time, late January 1997, CityJet was no longer an incumbent on the route. The base rate for 199 7 would be the traffic for the incumbent carrier on the route, Aer Lingus.
22. Our discussions at this time also concern the Dublin/Paris route. In relation to Dublin/Paris the Defendant agreed to operate on that route on the express agreement that the base, from which growth would be calculated, would be determined by treating the Aer France/Air
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Inter/CityJet group as one and Aer Lingus as the other incumbent carrier. Any increases generated by the Defendant over the 1996 figures for these incumbents would be deemed to be growth under the growth discount scheme.
23. Mr Byrne stated to me that Aer Rianta was prepared to accommodate Ryanair. Consistent with the prior practice of Aer Rianta, we did not set out formally in writing the terms agreed. However, in view of the assurances he gave me and the fact that on all previous occasions Aer Rianta had performed the oral variations, I was not concerned to have a specific written variation. I was completely satisfied that we had agreement on the point and on foot of this Ryanair held a press conference which Minister Dukes and Aer Rianta attended to announce the launch of the Dublin/Brussels and Dublin/Paris routes on 7th February, 1997.”
17. In the following paragraph of his affidavit he states:
“24. The fact of our agreement is clearly set out in subsequent correspondence between the Plaintiff and the Defendant (he then exhibits the correspondence to which I will return in a moment). I was concerned to receive the Plaintiff’s letter of the 14th February, 1997 which, although it acknowledges the application of the discount scheme to the new services
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on Dublin/Brussels and Dublin/Paris, did not adequately express our agreement on the variation of the growth discount scheme.”
18. I turn now to a consideration of the correspondence which Mr O’Leary says clearly sets out the fact of the agreement allegedly reached between him and Mr Byrne.
19. The first item of correspondence is a letter of the 14th February, 1997 from Mr Byrne to Mr O’Leary. It reads:
“Dear Michael
May I take this opportunity to congratulate you and your team on the launch of your new services to Europe. Paris and Brussels are two key routes for Ireland and Aer Rianta and I have every confidence that these routes will be successful for Ryanair and will complement your existing extensive UK network. You are, no doubt already familiar with the terms of our generous and much improved traffic incentive scheme and its application to city pair routes. Based on your share of net route growth, discounts of 90% for the first three years and 70% for a further two years will be allowed for that space of growth.
Marion O‘Brien will be available to discuss any specific aspect of the scheme with your representative”.
20. This letter provides no support for an assertion that the discount scheme had been altered in favour of the Defendant. On the contrary it sets out the terms of the scheme
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applicable to all airlines without amendment. Not merely does it do that but it makes no reference at all to any negotiations of the type alleged by Mr O’Leary and is inconsistent with them.
21. The next exhibit is an internal memorandum from Mr O’Leary to an official of the Defendant called Howard. In it he says
“Howard
I spoke to Brian Byrne this morning, who confirmed that there is “nothing of any significance” in the second paragraph of his letter of the 14th. He also confirmed to me that to the extent that Aer Lingus’ passenger carryings do not decline on either the Paris or Brussels route, then most or all of Ryanair ‘s traffic will qualify for the growth rebates.
I have also asked him to give Don Treacy every assistance with the allocation of three additional stands to us for the summer operation, and he has undertaken to do so.
It may well be worthwhile to have someone (perhaps yourself- given the importance of this issue) follow up with Marion O’Brien over the next couple of days, just so we have all of these issues out in the open before we start, rather than in arrears.”
22. This document does not appear to me to provide any support for the variation which had already allegedly been agreed as between the parties. Indeed, the final paragraph is inconsistent with such a variation ever having been effected.
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23. It is also of some significance that there is no evidence either in this memorandum or in any other document which suggests that Mr Byrne’s letter of the 14th February, 1997 (which I have already reproduced) is wrong.
24. On the same day that he wrote the memorandum which I have just quoted Mr O’Leary wrote a letter to the Plaintiff. It reads
“Dear Brian
I refer to your letter of the 14th and our subsequent telephone conversation of this morning. May I also thank you and your team at Dublin Airport for your help over last weekend, during which further passenger records were set by Ryanair doubtless to our mutual benefit.
In relation to the improved traffic incentive scheme for our new services to Europe – a scheme which we support – I think your suggestion of a meeting with Marion O’Brien at this stage to iron out these minor issues and ensure that there are no misunderstandings is helpful. Howard will contact Marion to arrange such a meeting as soon as possible.
I thank you for your confirmation that to the extent that Aer Lingus’ traffic on Paris and Brussels does not decline in 1997 over 1996, then Ryanair’s traffic on these routes will be treated as entirely incremental growth and will attract the appropriate discounts.
I would also welcome your assistance in confirming that the three additional priority stands, which we need at the A Pier in order to be able to operate our full
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planned summer schedule, will be made available to us. Conor and Charlie are dealing with Don and his people on this subject.”
25. Again, this letter provides no support for the Defendant’s contention. The penultimate paragraph is indeed inconsistent with the agreement which is contended for.
26. The next letter is from the Plaintiff and is dated the 11th March, 1997 insofar as it is relevant it reads
“Your letter of 17th February refers.
Just to keep the record straight, may I point out that our traffic incentive scheme is based on the overall net growth of a route or “city pair” route, regardless of what airlines or indeed how many airlines are serving such routes. For example, the Paris route would take account of traffic generated by Aer Lingus and Air Inter/CityJet and not just Aer Lingus, as stated in your letter. I’m sure you already understand this point and the local discussions at Dublin Airport with Marion O’Brien will, in any event, clarify any such issues.”
27. This letter makes it clear that it is the general scheme which applies and not some special arrangement allegedly entered into more than a month beforehand between Mr Byrne and Mr O’Leary. A criticism is made of the fact that this letter is dated the 11th March and is in reply to one of the 17th February. Nothing turns on that since there was no need to respond to the earlier letter which was completely consistent with the scheme as applied generally.
28. On the same day Mr O’Leary responded. Insofar as it is relevant he said
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29. “Your letter of the 11th refers. I don’t have any difficulty with computing the overall net growth on any route or “city pair” but must emphasise that the net growth will not be shared with any incumbent unless that incumbent actually generates growth on its own services. To the extent that Aer Lingus and Air Inter/City Jet don’t increase their carryings in calendar 1997 over calendar 1996 on the Dublin/Paris route for instance, then they will not attract any growth rebates. We will not accept a situation whereby growth actually delivered by us is then shared on some arbitrary rebate formula basis with those incumbents.”
30. This letter of the 11th March from the Defendant does not provide any support for the variation contended for.
31. This correspondence is dealt with at paragraphs 25 and 26 of Mr O’Leary’s affidavit. In dealing with the letter of the 17th February, 1997 which was not responded to until March, 1997 Mr O’Leary swears
“In order to ensure that there was no doubt about the matters between the Plaintiff and the Defendant I caused the letter of the 17th February, 1997, to be written. As appears from paragraph 3 of that letter I stated ‘I thank you for your confirmation that to the extent that Aer Lingus traffic on Paris and Brussels does not decline in 1997 over 1996 then Ryanair’s traffic on these routes will be treated as entirely incremental growth and will attract the appropriate discounts.’
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32. No reply was received to that letter until March, 1997. In the meantime the Defendant took all of the necessary decisions, committed the necessary resources and began selling its very low fares and marketing its new routes from Dublin to Paris and Dublin to Brussels.”
33. This last averment is wholly inconsistent with the launch having taken place on the 7th February, 1997 by which time all arrangements were made. It furthermore destroys any claim of promissory estoppel.
34. In my view far from establishing an “express agreement clearly set out in correspondence” the documents in this exhibit demonstrate the opposite.
35. There are other inconsistencies in the Defendant’s approach. For example, in the memorandum to the Department of Public Enterprise it stated “It is quite clear that the exchange of correspondence between Ryanair and Aer Rianta in February and March, 1997, which formed the basis for Ryanair’s entry into those routes, formed a written agreement between the two companies for the specific application of the scheme”. This assertion of a written agreement was wrong. There was no such agreement. Furthermore, this exchange of correspondence post-dated Ryanair’s announcement of its entry into those routes when, having regard to the launch which took place on the 7th February, 1997 all necessary arrangements had been made.
36. Even on Mr O’Leary’s own affidavit and exhibits it is difficult to see how there is any support to be obtained for his assertion on oath concerning an alleged variation to the scheme. The variation is denied by the Plaintiff who asserts not merely that no variation occurred but says that it could not have occurred since it would have required the express approval of the Plaintiff’s board of directors. Moreover, they allege that prior to the launch on
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the 7th February, 1997 they were not even aware of what cities the Defendant would be flying to, having been refused such information by the Defendant. Indeed, that much is clear having regard to the letter of the 20th September, 1996 from Ryanair where they say:
“The cities and airports we propose to serve are commercial (sic) confidential but are not relevant to Aer Rianta’s consideration of its element of our cost base”.
37. There is of course conflict on the affidavits. But a mere assertion in an affidavit of a given situation which is said to be the basis of a defence does not of itself constitute a ground for granting leave to defend. I have to look at the whole situation to see whether the Defendant has satisfied me that there is a fair or reasonable probability of it having a real or bona fide defence. I have to ask ‘is what the Defendant says credible’? In my view it is not. Mr O’Leary’s credibility is undermined by the very documents which he exhibits, his assertion of an agreement when the exact opposite is indicated by those exhibits and the inconsistencies both as to the form of the agreement and when it was allegedly entered into.
38. In my view there is no fair or reasonable probability of the Defendant having a defence to these proceedings and the Plaintiff is entitled to summary judgment in the amount claimed.
Carey v. Independent Newspapers (Ireland) Ltd.
[2003] IEHC 67 (7 August 2003)
JUDGMENT of Mr. Justice Gilligan delivered on the 7th day of August 2003.
The plaintiff in these proceedings is a journalist by occupation and a married lady. She appears to have been a very distinguished journalist joining Ireland on Sunday in September, 1997 and rising to be the political editor correspondent earning approximately £35,000 (€44,440.00) per annum on a contractual basis in February, 1999. While with Ireland on Sunday she worked Tuesday through Saturday, commencing at 10 a.m. in the morning and concluding on Saturday with the 4 p.m. deadline for the following day’s edition and this arrangement dovetailed perfectly with the plaintiff’s domestic responsibilities in respect of her son, Eamon, who was born on the 20th November, 1998.
The Facts
The plaintiff was contacted by Paul Drury who was then the editor of the Evening Herald newspaper at some time in late September, 1999, with a view to ascertaining if she would be interested in taking up a position as political correspondent with the Evening Herald. A meeting was arranged at the Palace Bar. The plaintiff says she made it clear to Mr. Drury that it would be impossible for her to
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work in the early mornings at the offices of the Evening Herald by reason of the fact that she could not get a child minder and that she would have to work from home for the first edition. The proposed salary was also discussed. Mr. Drury indicated to her that he would have to go back to discuss the matter with Mr. Carlisle, Mr. Dunne and Mr. Roche.
From his perspective, Paul Drury gave evidence that the previous political correspondent with the Evening Herald had resigned and the paper was being relaunched and in his professional opinion it was essential to get a senior responsible journalist to fill the vacancy as political correspondent as quickly as possible. He had known the plaintiff who had worked on occasion for him on a free-lance basis and knew that she was a self-starter. He referred to the fact that she had been responsible for the breaking of some major stories such as the child organ retention scandal and he saw her as particularly suitable for the proposed new agenda for the Evening Herald. When he went to the first meeting with the plaintiff at the Palace Bar he was of the mind that the paper had a serious weakness without a political correspondent and he wanted to know if Mairead Carey, the plaintiff, was interested in the proposed position. At first she appeared to him to be a little hesitant and she referred to the fact that her job was going well with Ireland on Sunday. This appears to be an important factor because there is no suggestion whatsoever that prior to this meeting, the plaintiff had any plans to leave her existing well paid position. Mr. Drury says that he outlined the plan for the Evening Herald to the plaintiff and that they were going to aim at the mid-market as he wanted a heavyweight political correspondent with a Dublin focus. He accepts that she raised the issue of not being able to work in the early hours in the office as it was not practical for her and she would have to cover the morning session from her home.
He accepts that there was a discussion as regards salary and that it was the plaintiff who suggested a figure and when this initial meeting concluded there were two issues to be clarified, one being salary and the other being the plaintiff working from home in the early hours. He accepts that he indicated that he would have to talk to his colleagues, Mr. Dunne, Mr. Roche and possibly Mr. Carlisle but he is not sure if he ever actually discussed the situation with the latter. His concern was that he wanted a candidate found as quickly as possible and if necessary he was going to recommend that the additional money as required be forthcoming. He also wanted
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approval for the slightly unusual arrangement of the plaintiff working from home for the first edition shift.
The subsequent events appear to me to be of significant importance. Mr. Drury did go back and he discussed the matter with Mr. Michael Roche who was the Group Managing Editor of the Independent Group Newspapers. It is of particular significance that when Mr. Drury discussed the matter with Mr. Roche he had serious reservations as regards the plaintiff working from home. He was aware that the plaintiff had some difficulty but he took the view that if it suited Mr. Drury and his team and if he believed it workable, he was happy to go along with it.
However, Mr. Roche was reluctant to confirm the issue of working from home in writing as he indicated to Mr. Drury that the group may want to review this issue in the future and I am left with the distinct impression that Mr. Roche was not at all happy about the arrangement and in this regard I am satisfied that Mr. Drury never advised Ms. Carey that Mr. Roche had a serious concern about the proposed working arrangements.
Mr. Drury also had a previous conversation with Mr. Dunne in his capacity as Group News Editor for the Evening Herald and the Irish Independent and Mr. Dunne did not have any reservations about the agreed working arrangements, provided they worked out. He did become aware of Mr. Roche’s reservations and he took the view that if the system as arranged worked, it would be okay but that it was a matter for the editor and it was his responsibility to make it work.
There were apparently a number of other candidates but the plaintiff was the desired corn candidate and Mr. Drury discussed the matter with Mr. Paul Dunne and got good reports in relation to the plaintiff.
Mr. Drury also obtained approval for the plaintiff’s salary arrangements in the sum of IR£45,000 (€57,138.21) and there were then a number of telephone calls between the plaintiff and Mr. Drury in which the two central matters pertaining to the plaintiff’s salary and working from home for the first edition were agreed and, insofar as the plaintiff could not obtain confirmation in writing as regards the working arrangements, she took Mr. Drury’s word for it against the background where she was aware that he had discussed the matter with senior management.
At the second meeting between Mr. Drury, Mr. Dunne and the plaintiff, other than there having previously been a mention that Mr. Brennan, the
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News Desk Editor, may not have been that happy with the arrangement proposed, neither Mr. Drury nor Mr. Dunne put the plaintiff on notice that in the background serious reservations had been expressed by Mr. Roche group editor about the proposed working arrangements.
In my view, this amounted to a significant breakdown in communication, principally between Mr. Drury and the plaintiff. He had the unique knowledge and insight into the plaintiff’s position that she could not work for the Evening Herald if she was required to attend at their offices for the first edition. She was not interested in any private arrangements, or ad hoc agreements. From her point of view, she made it plain that she could not take the job if she had to go into work in the early mornings and Mr. Drury was fully aware of this fact. I am satisfied on the evidence that Mr. Drury never advised Mr. Roche and Mr. Dunne that the plaintiff could only take up the position she was being offered provided she did not have to work from the office in the early mornings.
Accordingly, insofar as an agreement was reached between the plaintiff and Mr. Drury, there was no room for the situation being left to see how it worked out or, impliedly, that if it did not work out, the plaintiff would then have to come into work in the early mornings to the office of the Evening Herald which, quite simply, she could not do.
In my view, on the evidence, Mr. Drury had full authority to negotiate the agreement with the plaintiff on the defendant’s behalf and by representing to the plaintiff that her requirement that she would work from home for the first edition in the mornings would be acceded to in the light of the knowledge that he possessed, this was in my view an inducement to the plaintiff to give up her contractual relationship with Ireland on Sunday so as to take up employment as Political Correspondent with the Evening Herald.
I accept Mr. Drury’s evidence that following the second meeting, the plaintiff was told she had the job and that the matters subsequent to that arrangement were formalities, namely the medical which the plaintiff passed, the application for the job and the subsequent interview. I am fortified in the view which I have arrived at in relation to the agreement having been reached at the second meeting by the evidence of Mr. Carlisle where he says that by the time of the interview which took place on the 9th November 1999, it was very clear to him that the deal was done.
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Mr. Drury entered the arrangement on behalf of the company and offered the plaintiff employment in good faith and he could not envisage the employee being told of major changes in employment and any changes during his period of control would be by agreement.
As I have previously indicated I do not believe that events which took place subsequent to the plaintiff being told she had the job are of any great relevance to the legal issue that arises in this case. Clearly with Mr. Drury’s departure from the position of editor, a number of people were concerned that the arrangement as agreed with the plaintiff would not work out. I accept Mr. Roche’s evidence that he was not aware of the fact that Mr. Drury’s position was in jeopardy until at best a few days before his employment ended. I accept the submission of counsel for the defendant that it would be unrealistic to penalise the defendant company in some way because of the fact that Senior Management may have been discussing the termination of Mr. Drury’s employment and management at a lower level were not made aware of this fact.
I fully accept that Independent Newspaper Group were well intentioned to Ms. Carey and that in a different set of circumstances, the arrangement would probably have worked very well. Because of Ms. Carey’s experience, Independent Newspapers were clearly keen to take her on as Political Correspondent and she was equally keen to take up the position and advance herself within the Group but unfortunately events conspired to overtake both the plaintiff and Mr. Drury with the inevitable conclusion that because the plaintiff could not work the 7 a.m. – 9.30 a.m. shift at the offices of the Evening Herald, her employment came to an end in April 2000.
I accept Mr. O’Regan’s evidence that if it had been his decision, he would never had taken on the plaintiff as Political Correspondent on the basis that she was not going to be able to attend in the offices for the first edition shift. He said the arrangements for the plaintiff were unworkable and the plaintiff could see no difficulties why she could not have been allowed work from home.
In this regard I am satisfied that Mr. O’Regan was bona fide in the views that he holds and he is entitled to have his professional opinion respected. In the particular circumstances, the difficulty that arises is that Mr. Drury had already put the arrangement in place against the background which I have previously outlined and the reality of the situation was that the plaintiff could not adhere to Mr. O’Regan’s
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proposed regime so that in effect, on a bona fide basis, the new editor required the plaintiff to be in attendance from 7 a.m. onwards and equally on a bona fide basis the plaintiff could not comply with this request and indeed never could have because of her domestic circumstances.
It is quite clear from the manner in which this case is presented to the Court by the Independent Newspaper Group that no aspersion is cast on the plaintiff’s capacity and integrity as a journalist and in particular as to her role as Political Correspondent.
Post Termination.
Following the termination of her employment, the plaintiff attempted to obtain alternative work of a similar nature. In this regard, I accept her evidence that jobs in the nature of a political correspondent do not come up very often and she had no alternative but to return to freelancing, working for alternative media sources and she also worked for a text messaging agency. Her accountant has given evidence as regards her actual financial loss. The plaintiff has studied for the degree of Barrister-at-Law at the King’s Inns and has recently qualified and is hoping to commence practice. Counsel for the plaintiff in opening the case submits that one year’s notice would have been reasonable in the circumstances of this case. The evidence given on behalf of the plaintiff by Seamus Dooley, the Irish Organiser of the N.U.J. was to the effect that the current N.U.J. has agreement with the Defendant provides for a one month notice period for an employee such as the plaintiff and this agreement came into place in or about May, 2001, the plaintiff’s employment having been terminated in April, 2000. He accepted that there was no particular custom or practice in place at the time of the termination of the plaintiff’s employment and he considered that the one month notice period provided for in the current N.U.J. agreement was reasonable.
Ryan Dowling, a Senior Political Correspondent, gave evidence that the current notice period applicable to his employment with the Defendant, was one month and that when he moved from the Defendant Group to the Sunday Times Newspaper he entered into a contract which provided expressly for a three months notice period in 2001. Mr. Dowling indicated that when he left The Independent Newspaper Group to take up employment with the Sunday Times, he gave them one month’s notice of termination of his employment.
Submissions of the plaintiff
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The plaintiff’s first claim is for damages for breach of contract and/ or for wrongful dismissal (paragraph 5, Statement of Claim), and her second claim is for general damages for negligent misstatement/ misrepresentation (paragraph 6, Statement of Claim). The central allegation of the plaintiff in these respects is that the defendant represented to her during the negotiations leading up to her contract of employment that she would be employed under the conditions pleaded in paragraph 4 of the Statement of Claim, the most important of which in the context of this claim is the matter set out at paragraph 4(b) in the Statement of Claim, i.e. “That the plaintiff would work from home from 7.00am until the first edition deadline and from thereafter would work from the Dail for the remainder of the working day.” The plaintiff further alleges that the defendants knew or ought to have known that this was not true. The plaintiff claims that she relied on the representations and was induced by them to enter into the contract of employment with the defendant and suffered loss as a result.
The plaintiff submits that the summary termination of her contract by the defendant on 17th April 2000 without cause was in breach of the terms and conditions of her contract with the defendant, in particular the agreed working arrangement whereby she would work from home from 7am until the first edition deadline which, it is submitted, is a fundamental term of the plaintiff’s contract and accordingly cannot be varied except by consent.
The plaintiff contends that the defendant represented to the plaintiff during the negotiations for her contract of employment that if she were to be employed by the defendant as the political correspondent of the Evening Herald that she could work from home from 7am until the first edition deadline and as such was a statement of fact. The plaintiff submits that the parties intended that the statement would constitute a binding promise on the defendant and as such was a binding collateral warranty which the defendant breached.
With regard to the question of whether the plaintiff is entitled to additional damages where the dismissal caused injury to her reputation (as is contended by the plaintiff), the plaintiff submits that the position in the United Kingdom that such an entitlement does not exist has not yet been accepted in Ireland and has been rejected by the rest of the common law world and in any event that additional damages have always been recoverable under the remoteness test laid down in Hadley v. Baxendale.
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Submissions of the defendant
The defendant contends that if the court finds that the plaintiff did have a contract of employment with the defendant in accordance with the alleged representations, then by definition there was no misrepresentation and the plaintiff can only succeed in her claim for breach of contract/ wrongful dismissal.
In the alternative, the defendant submits that if the court finds that representations were made about the nature of the contract of employment that would be entered into and that these representations did not accord with the actual contract of employment, the court will have to determine the issue of whether such representations were made negligently and what loss arose. It is submitted that the loss complained of was that the plaintiff changed job and that she would not have done this had the representation not been made.
The defendant contends that the plaintiff’s contract did not contain a term to the effect that she was entitled to work from home from 7am until the first edition deadline and thereafter to work from the Dail for the remainder of the working day. The defendant contends it was a work practice and not a term of the contract of employment and therefore subject to change by the defendant when done bona fide in pursuit of the business interests of the defendant newspaper group. Further, it is submitted that the work practice was contingent on Mr. Drury and/ or the arrangement working to the satisfaction of both parties.
Making the assumption that the contract of employment does not contain the term to the effect that the plaintiff was entitled to work from home from 7am until the first edition deadline and thereafter to work from the Dail for the remainder of the working day, the defendant concedes that if the court finds that a representation was made to the plaintiff that she would be employed on the basis of this term, the plaintiff’s contract of employment did contain such a term.
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The defendant contends that the plaintiff is not entitled to make separate claims for breach of contract/ wrongful dismissal on the one hand and misrepresentation on the other hand, given the differing purposes of damages for these differing claims. The defendant contends that the purpose of damages for breach of contract/ wrongful dismissal is to place a plaintiff in the same position as if the contract had been properly performed. In light of this, the defendant contends that in the circumstances of this case the application of this principle means that damages must be awarded on the basis that the plaintiff had been given reasonable notice that the contract would be terminated- in other words, damages for breach of contract/ wrongful dismissal should be confined to the notice period.
With regard to the claim for negligent misrepresentation/misstatement, the defendant submits that the basis for assessing damages for alleged negligent misrepresentation is placing the plaintiff back in the position he/she would have been had the alleged misrepresentation not occurred. The defendant contends that in the circumstances of this case, this would mean awarding damages to the plaintiff on the basis that had the alleged negligent misrepresentations not been made, she would have remained in her post as political correspondent with Ireland on Sunday. Accordingly, the defendant contends that the court cannot award damages both on the basis that the plaintiff should have had her contract terminated in accordance with a period of reasonable notice and on the basis that the plaintiff would have remained with Ireland on Sunday had the representations not been made
A claim for damages for injury to the plaintiff’s reputation as a journalist was made in paragraph 6 of the Statement of Claim. The defendant contends that damages for this part of the plaintiff’s claim are not recoverable given the general rule at common law that in an action for wrongful dismissal, a plaintiff is not entitled to claim damages for the injury to reputation flowing from the dismissal.
With regard to the question of reasonable notice, the defendant concedes that there was an implied term in the plaintiff’s contract that reasonable notice had to be given as there was no express agreement regarding notice periods between the parties.
Referring to the evidence of Seamus Dooley, the Irish Organiser of the NUJ, Brian Dowling and the evidence of the plaintiff (the defendant contends that the effect
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of the plaintiff’s evidence is that there is no custom or practice with regard to notice and that this contention is supported by the evidence of Mr. Dowling), the defendant submits that the evidence before the court clearly establishes that a one-month notice period is reasonable and that there is absolutely no evidential basis for the plaintiff’s contention that a reasonable notice period in the circumstances would be not less than one year.
The law of warranty
Not every statement or representation of fact made by parties in pre-contractual negotiations will form part of any concluded contract: such statements may be made in the interests of extracting the best possible bargain from the give and take nature of negotiations. Further, any potential for contractual effect such statements may have could be negated by the express intentions of the parties. However, there is a tension between such situations and situations where (for one party at least) the contractual incorporation of a matter ventilated in negotiations may be of fundamental importance: circumstances could leave a question mark hovering over whether such matters were in fact mutually understood as having contractual effect. Given the need to define the boundaries of any contractual arrangement, the common law has drawn a distinction between representations having no contractual effect and those having such contractual effect: the textbooks classify the former as “mere representations” and the latter as “warranties” (for example, see McDermott, Contract Law, p.269).
Broadly, “warranty” means a term having contractual effect: more narrowly, it denotes a contractual term any breach of which will give rise to an entitlement to damages.
The manner in which the courts will approach the question of whether a representation constitutes a warranty or a matter having no contractual effect is outlined in Scales v. Scanlan (1843) 6 ILRCL 432 by Lefroy B at p.457 of the report:
“To make a warranty it is not necessary that the word “warrant” or “warranty” should be used. There was a time in law when it was otherwise… but it has long since been well settled, that words of affirmation, affirming a matter of fact, on the faith of
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which the party contracts, are as competent to make a warranty as any strict technical term.”
It is well established that the significance of the representation to the eventual entry into the contract on the part of either or other of the parties is a relevant factor in ascertaining the existence of a warranty: see Murphy v. Hennessey (1897) 31 ILT 404 and Gill v. Cape Contracts Ltd [1985] ILR 49.
In Dick Bentley Productions Ltd v. Harold Smith [1965] 2 All ER 65 at 67, Lord Denning MR stated:
“Looking at the cases once more, as we have done so often, it seems to me that if a representation is made in the course of dealings for a contract at the very purpose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract, that is a prima facie ground for inferring that the representation was intended as a warranty. It is not necessary to speak of it as being collateral. Suffice it that the representation was intended to be acted on and was in fact acted on. But the maker of the representation can rebut this inference if he can show that it really was an innocent misrepresentation, in that he was in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it.”
This statement of principle was approved and applied in the employment context by the Queen’s Bench Division of Northern Ireland in Gill v. Cape Contracts Ltd. [1985] ILR 49. In that case, the defendant company required around 40 insulation engineers to complete a contract in the Shetland Islands. The defendant company contacted their representatives in Northern Ireland who passed word among the insulation engineers employed by Harland and Wolff (which included the plaintiffs). The plaintiffs, who were married men in the main, were informed that they would receive a much higher wage than they were earning at Harland and Wolff to compensate for the difficult conditions working in the Shetlands would entail. They were told that the job would last for at least six months: as a result of the assurances they received, the plaintiffs applied for employment with the defendants. When the plaintiffs were informed that they were acceptable, they gave notice to Harland and
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Wolff which, irked at losing workers in this way, told the plaintiffs that they would not be employed there again. The opportunity in the Shetlands fell through due to industrial relations problems and the plaintiffs sued for damages. O’Donnell LJ held that the plaintiffs were entitled to damages for breach of a warranty by the defendants as the defendants failed to honour a representation to the plaintiffs forming a collateral contract that if they gave up their existing employment, they would be employed by the defendant company in the Shetlands for approximately six months at wages considerably in excess of their existing earnings. The court again reaffirmed the basic principle that if a representation is made in the knowledge and intention that the representee will act on it, it constitutes a warranty. In Gill, the court characterised the representations made by the defendants as representations which the defendant intended the plaintiff to act upon and upon which the plaintiffs did act. With regard to the role of the representations in the plaintiffs’ decision to switch their employment from Harland and Wolff to the defendant, the court remarked at p.51:
“The plaintiffs were in the main married men, in steady employment. To give up such employment on the mere expectation of obtaining employment at Sullum Voe, albeit with vastly increased wages, would have been foolhardy in the extreme. Both parties were aware of this and it appears to me that negotiations never proceeded on this basis. I do not believe that the plaintiffs would have terminated their employment with Messrs Harland & Wolff, had they been offered no more than a reasonable expectation of obtaining employment.” Accordingly, the court awarded damages for loss of bargain.
Negligent misrepresentation/ misstatement
The nature of misrepresentation required- will silence constitute a representation?
In Stafford v. Mahony, Smith and Palmer [1980] ILRM 53 at 64, Doyle J laid down the criteria for the action of negligent misrepresentation as follows:
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“In order to establish the liability for negligent or non-fraudulent misrepresentation giving rise to action there must first of all be a person conveying the information or the representation relied upon; secondly, that there must be a person to whom that information is intended to be conveyed or to whom it might reasonably be expected that the information would be conveyed; thirdly, that the person must act upon such information or representation to his detriment so s to show that he is entitled to damages.”
In principle, the Irish courts have accepted that silence or non-disclosure regarding facts or changes in circumstance not known to the other party can give rise to an obligation to disclose such facts and circumstances and such failure to disclose will constitute a misrepresentation. In Pat O’Donnell and Co v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 at 202, O’Flaherty J remarked:
“In general, mere silence will not be held to constitute a misrepresentation. Thus, a person about to enter into a contract is not, in general, under a duty to disclose facts that are known to him but not to the other party. However, in certain circumstances, such a party may be under a duty to disclose such facts. A duty of disclosure will arise, for example, where silence would negate or distort a positive representation that has been made, or where material facts come to the notice of the party which falsify a representation previously made.”
The duty of care and contractual negligent misrepresentation
The substance of the plaintiff’s claim in this respect is that she was induced to enter the contract by the representation made by Mr. Drury that she would be allowed to work from home from lam until the first edition deadline: thereafter, she would work from the Dail.
In Securities Trust Ltd. v. Hugh Moore & Alexander Ltd. [1964] I.R. 417. Davitt P. defined the context in which liability may arise as follows at p. 421:-
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“… circumstances may create a relationship between two parties in which, if one seeks information from the other and is given it, that other is under a duty to take reasonable care to ensure that the information given is correct…”
In Esso Petroleum v. Mardon [1976] QB 801, Lord Denning MR formulated the duty of care in the following manner at p. 820:-
“… if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another – be it advice, information or opinion – with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side to enter into a contract with him, he is liable in damages.”
Irish law reflects this line of thinking. In Forshall v. Walsh (unreported, High Court, Shanley J, 18th June, 1997), Shanley J stated at p.64 of the transcript:
“A party seeking damages for negligent misrepresentation must establish that the representative failed to exercise due care in making the representation as a result of which representation the person to whom it was made was induced to enter into the particular agreement and suffered damage in consequence of the inaccurate representation. Closely aligned to the claim of negligent misrepresentation is the wider tort of negligent misstatement. In relation to negligent misstatement the first matter a plaintiff must establish is that the defendant owed him a duty of care.”
The most recent affirmation of these principles in Irish law is King v. Aer Lingus plc [2002] 3 I.R. 481. So far as apposite to the present context, the facts and issues in this case were as follows. In 1989, Aer Lingus transferred its service and maintenance engineering component into a new subsidiary company, a process which involved lengthy and detailed negotiations between management and trade unions. The workforce felt that the only option was a secondment type arrangement where employees would retain their employment relationship with Aer Lingus while working in the subsidiary. As part of the negotiation process, the defendant company
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wrote similar letters to the plaintiffs, containing statements to the effect that in the event of TEAM (i.e. the subsidiary to which the service and engineering component was transferred) getting into financial difficulties, existing employees would continue to maintain the Aer Lingus fleet at a minimum. The agreement also contained a clause that the company would not cause or permit a lockout during the lifetime of the agreement. The plaintiffs transferred to TEAM, which ran into financial difficulty in 1993 and was eventually sold in 1997. 97% of the workforce transferred to the purchasing company: however, the plaintiffs were among those who instead decided to return to Aer Lingus. The plaintiffs failed to secure the fleet maintenance jobs they were assured they would retain in any circumstance in the 1989 letters and were working on clerical or operative positions on their return. They claimed that they were entitled to do the same kind of work that they had always done and claimed that insofar as Aer Lingus had failed to provide such work, the plaintiffs were entitled to damages for breach of the assurances given to them in 1990.
At p. 48 of the report, Kearns J held:
“The commitment contained in the letter… can only be seen, be it a representation or term of the agreement, as conveying that fleet maintenance work would be available ‘at a minimum’ with the defendant at the point of return for those workers who, having transferred to TEAM in 1990, opted to return to the parent company in 1998 against the backdrop of difficulties described in evidence. For the avoidance of any doubt, however, I find that the assurance contained in Mr. O’Neill’s’ letter of the 30th April, 1990, was both a representation and a term of the agreement and that, insofar as it may be regarded as a representation, the defendants, in making it, were under the duty of care alluded to in Hagen & ors. v. ICI Chemicals and Polymers Limited [2002] IRLR 31. It is proper to record that the defendants did not deny the existence of such a duty in a transfer of undertaking situation, which for all practical purposes existed in this case, but rather sought to argue that the plaintiffs had failed to plead any specific misrepresentations. The duty of care, it seems to me, it self-evident and no more than basic common sense, and a general plea of misrepresentation is sufficient in the circumstances.”
With regard to the question of damages, Kearns J held at p.489 of the report:-
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“… the plaintiffs are entitled to be treated as though they had never transferred to TEAM, that they are entitled to all appropriate increments or benefits on the basis that they earned and achieved the same seniority by 1998, as those Aer Lingus employees who did not transfer, that they were, on returning, entitled to such recognition and are now entitled to compensation in lieu thereof if they have suffered financial loss as a consequence of not getting such recognition.”
This case re-affirms two propositions. First, there is a duty of care to avoid making negligent representations or statements in pre-contractual, negotiation stages which have the effect of inducing a plaintiff to act to his/ her detriment. The case took place in a “transfer of undertaking” context, but there is nothing in the language of the judgment to suggest that the duty of care is confined to this situation. Where a new contract and terms of employment are being negotiated with prospective employees, there is a duty of care on the part of the prospective employer to avoid making negligent misrepresentations/ statements which are intended or have the effect of inducing an employee to leave his present position and which results in detriment to the employee. As regards the question of damages, Kearns J treated the employees as though the inducement to transfer to TEAM never took place: this is consistent with the basis on which damages for negligent misrepresentation are awarded in tort.
Is there any duty on the representee to ascertain the truth of the position before he acts on the representation?
The cases are uncertain in the context of claims for misrepresentation where the representation complained of induced a plaintiff to enter into a contract. In several cases, it has been suggested that when the representee is, or in the circumstances should be, informed or better informed of matters relating to the misrepresentation, any carelessness in reliance upon the misrepresentation will not deprive the misrepresentee of a remedy.
In Redgrave v. Hurd (1881) 20 Ch.D 1 at 13, it was held that it was not a “sufficient answer” to an action to rescind the contract between two solicitors for the
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purchase of a practice that the representee had the means of discovering and might, with reasonable diligence, have discovered the truth. In Nocton v. Ashburton [1914] AC 932, Lord Dunedin stated at p.962:
“No one is entitled to make a statement which on the face of it conveys a false impression and then excuse himself on the ground that the person to whom he made it had available the means of correction.”
In Strover v. Harrington [1988] Ch. 390, Sir Nicholas Browne-Wilkinson VC stated at p.410-
“… if it is once shown that a misrepresentation has been made, it is no answer for the representor to say that the representee has been negligent and could have found out the true facts if he had acted otherwise. The representee is under no duty of care to the representor to check on the accuracy of the representation. The representor is bound by his representations, however careless the representee may have been.”
At p.596 of Butterworth’s’ The Law of Contract, it is stated that “In Scotland, in contrast, Walker asserts a general rule to the contrary that there is no recission (reduction) if the error was attributable to the negligence of the plaintiff (pursuer). The true state of the law may lie between these positions. Courts engage in what has been described as ‘balancing the equities’.”
However, in the broader tort action of negligent misstatement, the court will enquire whether it was reasonable for the former to rely on the statements of the representor in the circumstances of the case: see Smith v. Eric S Bush [1990] 1 AC 831.
Degree of inducement necessary
The next question is the degree of inducement necessary to satisfy the requirement of inducement. There are four possible scenarios. In the first situation, the significance of the truth to the plaintiff of what turns out to be a misrepresentation may be such that, if the plaintiff representee appreciated the true position, they would not have entered the contract at all (see Horry v. Tate and Lyle Refineries Ltd [1982] 2
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Lloyd’s Rep 416 at 422, per Peter Pain J). This obviously meets the standard required for a legally effective inducement. The second situation is where, depending on the circumstances, a representation may be material to the decision of the plaintiff representee to enter into the contract without being decisive: if the representee had known the truth, the representee would still have been willing to conclude the contract, but perhaps on different terms. This will also suffice to meet the requirement of inducement: the best example of this in Irish law is Donnellan v. Dungoyne Ltd. [199511 ILRM 388.
The third situation is where, despite the relevance of the misrepresentation to the eventual contract, if the plaintiff representee had known the truth, the plaintiff would still have concluded the contract. This will not meet the standard of an operative inducement. The fourth possibility lies somewhere between the second and third possibilities: it cannot be said for certain whether the misrepresentation induced the plaintiff to enter the contract or not, but it might be said that the misrepresentation might have been material, if not decisive, to the decision to enter the contract.
In an action for negligent misstatement, the law requires that any loss be caused by the misstatement or misrepresentation. In other words, the effect of the misrepresentation (which constituted the inducement) must be causal in the sense of decisive (see Edgington v. Fitzmaurice (1885) 29 Ch.D 459 at 483, per Bowen LJ). The plaintiff who has been misled by the representation must have relied upon the representation in the sense that but for the misrepresentation, the plaintiff would not have made the contract at all, or at least not in the same terms: in short, the first and second situations of inducement outlined above.
Quantum of damages for negligent misrepresentation
The measure of damages applicable in the tort of deceit (i.e. where a fraudulent misrepresentation has been made) is also applicable to negligent misrepresentation. In Forshall v. Walsh (unreported, High Court, Shanley J, 18th June, 1997), Shanley J adopted the following passage from the judgment of Henchy J in Northern Bank Finance v. Charlton [1979] IR 149 at 199 (which occurred in the context of an action for fraudulent misrepresentation) and held that it was an accurate statement of the measure of damages in actions for negligent misrepresentation also:
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“As far as the tort of fraud or deceit is concerned, it is well settled that the measure of damages is based on the actual damage directly flowing from the fraudulent inducement, and that the award may include, in an appropriate case… consequential damages representing what was reasonably and necessarily expended as a result of acting on the inducement.”
Basis of Assessing Damages
An action for wrongful dismissal is an action for breach of contract: in essence, the breach complained of in such an action is that the plaintiff’s employment has not been terminated in accordance with his/ her contract or, where no such procedures exist, that the contract has not been terminated in accordance with fair procedures and the common law. The normal measure of damages in a wrongful dismissal action is the amount of salary the employee would have earned had he/ she been allowed to remain working for the balance of his contract, or for the period for which notice of termination should have been given in accordance with the contract. The same principle applies where no notice period as such has been incorporated into the contract: in such cases the common law implies a term into the contract that the employee may only be dismissed on giving reasonable notice and damages will be confined to the measure of the salary the plaintiff would have earned for the period of notice found reasonable in all the circumstances by the court. This has been the rule since Addis v. Gramophone Co. Ltd. [1909] AC 488.
However, the plaintiff has also made separate claims for breach of warranty and/ or negligent misrepresentation/ misstatement. The basis of awarding damages in these two contexts differs considerably from the attenuated scope for awarding damages in wrongful dismissal claims per se and is potentially far more remunerative: accordingly, it is necessary to outline the basis upon which the court will award damages in these contexts in some detail.
The common law courts have drawn a firm distinction between contract and tort in terms of awarding damages upon a finding of liability.
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In tort, the plaintiff is entitled to be put in the same position, as far as money can do so, as he would have been in had the tort not been committed. This has been established since Livingstone v. Rawyards Coal Co. (1880) 5 App. Cas. 25 at 39, per Lord Blackburn. This principle is the basis of awarding damages in tort in Irish law: subject to the application of the test of remoteness of damages laid down in Hadley v. Baxendale, the general purpose of an award of damages in a tort claim is to place the plaintiff in the same position as they had been before the commission of the tort in question: damages cannot be awarded for loss of bargain. In Foley v. Thermocement Products Ltd. (1954) 90 ILTR 92 at 98, the Supreme Court referred to restitutio in integrum as “the underlying principle by which courts are guided in awarding damages.”
In contract, however, the compensatable wrong consists not in the making but in the breach of the contract and accordingly the plaintiff is entitled to be placed in the position he would have been had the contract been performed. In other words, the plaintiff is entitled to recover damages for loss of bargain.
Experience has shown that the distinction between the principles upon which contract damages and tort damages are awarded outlined above tends to blur in cases involving misrepresentations of fact inducing entrance into contractual relations, which is the type of case at issue in the present proceedings: in such cases there is inevitable scope for pleading that the representation was a term of the contract entered into and that the misrepresentation leading to the non-observance of contractual obligations is an actionable tort. Where a plaintiff has been induced to enter into a contract by a misrepresentation of fact on the part of a defendant or his agent, if the representation forms part of the concluded contract (whether the representation constitutes a condition or a warranty is immaterial in this context), the plaintiff may sue for breach of contract and loss of bargain, which entitles the plaintiff to be placed in the same position as he/ she would have been had the representation of fact been true and obligations consequent upon the representation been performed by the defendant. However, if the representation is not a term of the contract, there is by definition no breach of contract and the plaintiff’s only remedy will lie in tort: the plaintiff will have a remedy in deceit where the misrepresentation is fraudulently made, and there will be a remedy in negligent misrepresentation where the
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misrepresentation was made negligently in the context of a duty of care owed by the representor to the plaintiff.
This vital distinction is established in Irish law. O’Hanlon J contrasted the basis upon which damages for misrepresentation in tort are awarded and the basis upon which damages for breach of warranty are awarded in McAnarney v. Hanrahan [1993] 3 I.R. 492 at 498 as follows-
“What now falls for consideration is the correct way in which damages should be assessed in a case of negligent misrepresentation. Damages in such cases are assessed by analogy with claims for damages for deceit. Where damages are claimed for fraudulent misrepresentation then they are assessed so as to put the plaintiff in the position he would have been in if the representation had not been made to him. This is different to the case where damages are being assessed in the case of a claim based on breach of warranty – then damages are assessed on the basis that the warranty was true. So, in the case of a sale of shares induced by fraudulent misrepresentation the normal measure of damages is the purchase price of the shares less their actual value at the time of acquisition (see McGregor, Damages, 15th Ed., paras. 17.18, 17.24 and 19.39) and in a case like the present one, where a plaintiff has been induced to enter into a contract for the purchase of land by a misrepresentation negligently made, the normal measure of damages is the price paid for the land less its actual value at the time of sale.”
O’Hanlon J followed his approach in McAnarney v. Hanrahan in Donnellan v. Dungoyne Ltd. [1995] 1 ILRM 388.
In this case, the plaintiff has made claims for breach of contract (at paragraph 5 of her Statement of Claim) and negligent misrepresentation (at paragraph 6 of her Statement of Claim). Applying the analysis above, if the plaintiff is entitled to succeed in her claim for negligent misrepresentation, the damages she is entitled to will be assessed on the assumption that she would not have left her position as political correspondent with Ireland on Sunday but for the misrepresentation that she would be permitted to work from home from lam until the first edition deadline and thereafter would work from the Dail for the remainder of the working day. In short,
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the plaintiff will not be entitled to damages based on the remuneration she would have earned had her contractual obligations with the Evening Herald been met.
If it is found that the representation with which the plaintiff takes most significant issue, i.e. that she would be allowed to work from home until the first edition deadline, is a term of the contract entered into by her and the defendant and that such term has been breached, the plaintiff will be entitled to damages awarded on the basis that the defendant would have observed the contract: in other words, the plaintiff will be entitled to damages based on the net pay she would have earned had the defendant allowed her to remain in her position at the Evening Herald.
The factual scenario in this case is but one illustration of the obvious possibility of the existence of a set of facts which conceivably give rise to concurrent liability in contract and tort. Given the differing principles upon which damages for contract and tort are awarded, should the defendant newspaper group be found liable for negligent misrepresentation and breach of warranty, the defendant will in effect be required to pay damages on the basis that the plaintiff both would have stayed in her position at Ireland on Sunday but for the misrepresentation and would still be with the Evening Herald had the defendant honoured its contractual obligation to allow the plaintiff to work from home until the first edition deadline every morning. In view of the possibility of concurrent liability (which in principle amounts to double compensation for the plaintiff), and the fact that the defendant has submitted that it is not open to the plaintiff to maintain an action in both contract and tort, the following appears to be the position in Irish law regarding concurrent liability in contract and tort.
Approaching the matter from first principles, the boundaries of contract and tort actions suggest that there is no conceptual objection to imposing liability in both contract and tort provided the facts as found meet the criteria of liability of the type of tort and contract action taken. Going back to first principles, the obvious condition precedent to an action for breach of contract is the existence of a contractual obligation: an action in tort has never required a contractual relationship between the parties, although the circumstances of a contractual obligation may give rise to a duty of care in tort over and above the normal “duty of care” (so to speak) to observe the
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terms of the agreement in the contractual context. To take the causes of action in tort and contract at issue in the present proceedings, it is not a requirement of an action for negligent misrepresentation that the parties enter into the contract, even if this is the effect of the representation. Secondly- again going back to first principles- in order to bring an action for negligent misrepresentation, it must be proved that the party making the representation owed a duty of care to the representee (Hedley Byrne v. Heller [1964] AC 465: see the first instance decision of O’Donnell v. Truck and Machinery Sales [1997] 1 ILRM 466 at 473, per Moriarty J. His decision was overturned on the facts by the Supreme Court but the Court did not question Moriarty J’s interpretation of the law). For an action for breach of warranty, the existence of the warranty as a contractual obligation is the only condition precedent to the finding of a compensatable breach: no duty of care of the standard required in tort is required.
The Irish courts have accepted that a defendant may be liable in both contract and tort: the law does not require a plaintiff to elect between the remedies and he may plead either or both. In Kennedy v. Allied Irish Banks plc [1998] 2 IR 48- at p.56 Hamilton CJ stated:
“…where a duty of care exists, whether such duty is tortious or created by contract, the claimant is entitled to take advantage of the remedy which is most advantageous to him subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle the parties must be taken to have agreed that the tortious remedy is to be limited or excluded.”
In O’Donnell & Co. Ltd. v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 at 198-99, O’Flaherty J remarked of the effect of the decision in Kennedy as follows:
“In the light of the decision of this Court in Kennedy v. Allied Irish Banks plc. [1998] 2 IR 48, it is clear that the law in this jurisdiction permits concurrent remedies. Indeed, the common law world would appear to be united in this regard: see, e.g., Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145 (The House of Lords); Central Trust Co. v. Rafuse (1986) 31 D.L.R. (4th) 481 (The Supreme Court of Canada); Bryan v. Maloney (1995) 182 C.L.R. 609 (The High Court of Australia); Aluminium Products (Qld.) Pty Ltd v. Hill [1981] Qd.R. 33 (a decision of the full
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Court of the Supreme Court of Queensland) and Macpherson & Kelley v. Kevin J. Prunty & Associates [1983] 1 V.R. 573 (a decision of the full Court of the Supreme Court of Victoria); Rowlands v. Collow [1992] 1 N.Z.L.R. 178 (The High Court of New Zealand). In relation to the American position, see Fleming, The Law of Torts, 8th ed. (1992) p.187; Prosser and Keeton on the Law of Torts, W. Keeton. Gen. Ed., (1984) page 444.
Thus, where under the general law a person owes a duty to another to exercise reasonable care and skill in some activity, a breach of that duty can give rise to a claim in tort notwithstanding the fact that the activity is the subject matter of a contract between them. There is no general duty of non-cumul des obligations such as is found in civil law systems.”
O’Hanlon J saw no obstacle to awarding damages for breach of warranty and negligent misrepresentation in Donnellan v. Dungoyne [1995] 1 ILRM 385. In that case, a plaintiff was interested in setting up his son in a shoe retailing business in Laois Shopping Centre, Portlaoise and engaged in negotiations from February 1991 with the letting agents of the defendant company, which owned the shopping centre in question, to lease a unit in the centre. In November 1991, the letting agents represented to the plaintiff that virtually all the units of the centre had been leased to tenants and would be occupied and trading by Christmas 1991. The defendant company executed a 35 year lease of a unit in the shopping centre to the plaintiff’s son. In January 1992, the plaintiffs realised that the centre had not been fully let and along with other tenants sought further rent-free periods from the defendants as compensation for the poor performance of the plaintiff’s son’s shoe retailing business: they argued that the centre attracted insufficient numbers of customers and that this caused the failure of the plaintiff’s son’s shoe business. Inter alia, on the facts of the case, O’Hanlon J found that the representation that the units in the shopping centre had been fully let was a contributing factor in the decision of the plaintiff and his son to embark upon the lease, but not decisive. However, the importance of the case in the present context is the tacit suggestion of O’Hanlon J that the remedies of breach of warranty and negligent misrepresentation are not mutually exclusive: at p.397 of the report, he remarked:
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“… I am of opinion that a case has not been made out for recission of the lease, as sought in the civil bill, but merely for damages for breach of warranty and negligent misrepresentation, as happened in the case of Esso Petroleum v. Mardon [1976] QB 801, and McAnarney v. Hanrahan [1993] 3 IR 492 to which I have been referred by counsel, and which I propose to follow.”
Reasonable notice
Where a termination procedure has been agreed and incorporated into the contract of employment, the courts are disinclined to substitute their own view of what is otherwise required to lawfully terminate the contract for the agreed termination procedure: accordingly, even where such a termination procedure does not specify that the employee in question may be dismissed on reasonable notice, the courts will not imply a term to this effect into the contract on the basis that the express agreement regarding termination is inconsistent with the implication of any other terms: see Grehan v. North Eastern Health Board [1989] IR 422.
However, in the converse situation- i.e. that where no termination procedure or notice period has been agreed between the parties- the law implies a term into every contract of employment where a notice period has not been expressly stipulated that reasonable notice must be given to terminate the contract. What constitutes “reasonable notice” is a matter of fact for the court to determine in light of all the circumstances. How the court will approach the question of what constitutes “reasonable notice” in any given context was set out by Tucker J in Warren v. Super Drug Markets Ltd. (1965) 54 DLR (2d) 183 as follows:
“The rules for determining what is a reasonable notice were set out by the full court in Speakman v. Calgary (City) (1908) 9 WLR 264, at 265, 1 Alta LIZ 454, by Beck, J. … viz.:
`… the question, what is a reasonable notice, depends upon the capacity in which the employee is engaged, the general standing in the community of the class of persons, having regard to their profession, to which the employee belongs, the probable facility or difficulty the employee would have in procuring other employment in case of
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dismissal, having regard to the demand for persons of that profession, and the general character of the services which the engagement contemplates.”
The plaintiff and defendant have cited a significant number of cases in Irish and English law concerning newspaper employees. However (leaving aside those employees whose terms and conditions of employment are dealt with under statute or where a termination procedure and notice period have been agreed and incorporated into a contract) no profession, job or category of employee is treated differently or favourably in the context of the rules used in determining what a reasonable notice period is: the cases are merely specific illustrations of generally applicable rules.
One common thread running through the cases is that “persons in well paid and prestigious jobs are entitled to relatively lengthy notices.” (Forde, Employment Law (2nd edition, p.166). In Lyons v. M.F. Kent & Co. (International) Ltd [1996] ELR 103, an accountant employed by a large construction company who spent much of his time on foreign assignment was held entitled to one year’s notice. In McDonald v. Minister for Education [1940] IR 316, a teacher was held entitled to six months’ notice. It seems the status and position of the employee in question has been the most significant factor in deciding notice entitlements in recent Irish case law. Among the most significant examples of such are: Carvill v. Irish Industrial Bank [1968] IR 325 (where a managing director of a small bank was held entitled to one years’ notice); Tierney v. Irish Meat Packers (1989) ILT 5 (where a group credit controller of a meat company was held entitled to six months notice); Robinson v. Corneil (unreported, High Court, Keane J, 10th April 1992) (where the responsibilities attached to a managerial position were held to justify six months’ notice).
Of interest in the context of the plaintiff’s situation in this case is Lowe v. Walter (1892) 8 TLR 358, which offers the nearest analogy to the plaintiff’s own situation in terms of the position of the person whose notice entitlements were being decided. The foreign correspondent to the Times was held to be entitled to six months’ notice.
A typical example of the length of period the courts are inclined to stipulate for positions of responsibility in the print media is Bowman v. Holten Press Ltd. [1952] 2 All ER 1121. A journalist and photographer were held entitled to six
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months. Much of the report of the case was taken up with the question of whether the plaintiff was employed under a contract of service or a contract for services and there is no guidance on the issue of reasonable notice: the report briefly recounts how, after finding that the plaintiff was employed under a contract of service the court determined that a reasonable notice period was six months and held that giving the plaintiff two week’s notice to leave was a breach of contract. However, it seems that this decision was based upon the status of the employee more than any other factor.
A good illustration of the relevance of the responsibilities of a position to the question of entitlement to reasonable notice is O’Reilly v. Irish Press (1937) 71 ILTR 194. The plaintiff was the chief subeditor of the Irish Press. He failed to prove a wage custom entitling him to six months’ notice, but the court gave him six months based on the responsibilities attaching to his role: the Court noted that on the evidence before it the success or failure of a newspaper depends to a great extent upon the competence, judgment and the taste of the chief subeditor. The plaintiff had 15 subeditors below him and in addition to being chief subeditor, the plaintiff was the night editor.
It seems proof of a custom regarding notice periods in a particular industry or sector is a significant factor for the court to weigh in deciding the matter and will appreciably influence the court’s thought processes: a reading of some of the cases on reasonable notice suggests that customs prevalent in the industry were of central significance to the court’s decision. However, the customs of a particular industry, if such are proved to exist upon the evidence, will not be decisive of the question of what amounts to reasonable notice: it is but one of the factors identified in Warren v. Superdrug Markets Ltd. to be taken into account in assessing the circumstances of the plaintiff’s employment and the notice period that such circumstances warrant.
One case where a custom of the particular industry proved significant in the court’s decision as to reasonable notice is O’Connell v. The Gaelic Echo Ltd. (1958) 92 ILTR 156. A member of the editorial staff of a monthly magazine was held to be entitled to at least one month’s notice and evidence was given on behalf of the plaintiff by a representative of the NUJ that the customary period for notice in the absence of express agreement in the Dublin area was one month for reporters, three months for sub-editors and six months for chief sub-editor. Another case emphasising the importance of custom is George Edwardes (Daly’s Theatre) Ltd. v. Comber (1926) 42 TLR 247. In that case, an actor had an option agreement with Daly’s
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Theatre whereby the theatre could require the actor to play the part of the Ambassador in the play Katja the Dancer in a West End theatre by giving the actor two weeks’ notice before the end of the season. The option was duly exercised, and the concluded agreement contained a clause that the actor would not perform for any other company or production for the run of the play. The actor subsequently tried to take up an acting engagement with another company before the end of the play’s run. An application by the plaintiff theatre company to restrain the defendant actor from taking this offer up was successful: the court rejected a submission that the agreement was terminable by fourteen days’ notice. Had the agreement been indefinite, this submission would have been accepted: however, the court accepted evidence that “so well known and established is the custom in the profession that a mere engagement of a person to play a part in a certain play in London or the provinces constitutes a contract for such engagement for the run of the play in London or the provinces constitutes a contract for such engagement for the run of the play in London or for the tour, as the case may be, and there is no power on either side to determine the contract during the said run.” Another such case is Grundy v. Sun Printing and Publishing Association (1916) 33 TLR 77, where the court accepted that the custom for a newspaper editor was a twelve-month notice period and that a sub-editor was entitled to a six-month notice period and determined the period of reasonable notice these persons were entitled to accordingly. Yet another example is Fox-Bourne v. Vernon and Co. (1894) 10 TLR 647 where a six-month notice period for an editor was found to be reasonable by reference to the established custom for editors: in the same vein, see also Chamberlain v. Bennett (1892) 8 TLR 234 (where a subeditor of newspaper was held to be entitled to six months based on evidence of a custom).
Claim for damages for injury to reputation
At paragraph 6 of her Statement of Claim, the plaintiff claims that she “… has suffered and continues to suffer loss, damage, expense and distress and in particular, has suffered injury to her reputation as a journalist. Further, the plaintiff has been damaged by reason of the misrepresentation and/ or negligent misstatement of the defendant company, its servants or agents.”
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At common law, the general rule for many years was that damages for the manner or unfortunate circumstances of the dismissal were not recoverable in a common law action for wrongful dismissal. This was laid down in Addis v. Gramophone Company Ltd. [1909] AC 488, where a plaintiff was awarded a sum of money in excess of the outstanding salary due to him for the notice period: the implication of this award was that the extra sum was compensation for the humiliating manner in which he had been dismissed. The House of Lords held that the plaintiff was only entitled to the salary he would have earned during the notice period, but the stressful and humiliating nature of the circumstances surrounding his dismissal could not be permitted to influence the court’s jurisdiction to award damages. Lord Loreburn LC commented:
“If there be a dismissal without notice the employer must pay an indemnity, but that indemnity cannot include compensation either for the injured feelings of the servant or for the loss that he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment.”
It was held that the employee may have a separate action in tort for defamation or nervous shock, but damages in the wrongful dismissal context remained limited to the notice period. Early Irish authority suggested that Irish law would develop along the lines of the position in Addis: in Kinlen v. Ulster Bank Ltd. [1928] IR 171 at 184, Kennedy CJ stated:
“The plaintiff has relied on two matters for the purpose of aggravating the damages to which he is entitled. In the first place, he said that the bank manager not only refused him the money to which he was entitled, but refused it contemptuously, and with contumely. Indeed, I have no doubt that the plaintiff was very badly treated indeed by the bank. In the second place, he urged that by reason of the first refusal he was subjected to great humiliation in raising money to pay his workmen. He had to pawn some of his personal belongings to raise part of the money, and he had to borrow part of it from a friend. These matters were greatly pressed upon us, and they evoke much sympathy with the plaintiff, but they are not matters which can be considered as elements of damages. It is very clearly settled, both in this country and in England, and affirmed in many cases, that in actions for breach of contract damages may not be given for such matters as disappointment of mind, humiliation, vexation, or the like, nor may exemplary or vindictive damages be awarded. See Breen v. Cooper IR 3 CL 621;
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Hamlin v. Great Northern Railway 1 H & N 8; Addis v. Gramophone Co., Ltd. [1909] AC 488″
In Malik v. BCCI [1998] AC 20 (HL), the plaintiffs successfully claimed what are colloquially known as “stigma damages”, their dismissal occurring in the wake of their employer’s involvement in fraudulent banking practices. The plaintiffs issued proceedings on the basis of their difficulty in finding alternative employment stemming from their association with BCCI. The House of Lords held that, as a result of the bank’s fraudulent activities, the bank had breached the implied term of trust and confidence in the employment relationship and this breach was sufficient to make the employer liable for the financial loss suffered by the plaintiffs: such losses were not limited to any notice period. However, Malik does not seem to have altered the Addis principle: the award of damages in Malik was based upon the breach of the implied term of trust and confidence and in any event the basis upon which the award of damages was made was purely financial. Nevertheless, the case is authority for a limited right of recovery where an employee’s future job prospects have been damaged by the employer.
The High Court in England departed from the Addis position in Cox v. Phillips Industries Ltd. [1976] 1 WLR 638, but in 1985 the Court of Appeal reaffirmed the position in Addis in Bliss v. South East Thames Regional Health Authority [1987] 1 ICR 700. In Johnson v. Unisys Ltd. [2001] 2 All ER 801, the House of Lords endorsed its decision in Addis. In Johnson, the plaintiff had been summarily dismissed and had already been awarded damages for unfair dismissal by an industrial tribunal. He sought further damages to compensate him for the losses he suffered due to the manner in which he was treated and dismissed. The plaintiff tried to invoke the decision in Malik by claiming that he was entitled to such damages on the basis of breach of the implied term of trust and confidence in that the employer failed to afford him a proper opportunity to defend himself in disciplinary proceedings and failure to abide by the company’s disciplinary code. The lower courts struck out his proceedings and the House of Lords dismissed the appeal, holding that where an employee was wrongfully dismissed, any damages awarded could not take account of the manner of the dismissal or any adverse consequences thereof for the plaintiff. The decision appears to have been based upon policy considerations: Lord Hoffmann considered that the plaintiff’s claim was tantamount to an invitation to the court to
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create a right to unfair dismissal at common law parallel to the statutory regime. He held at p.821 of the report that “…for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of parliament that there should be such a remedy but that it should be limited in its application and extent.”
Lord Hoffmann also considered whether the implied term as to trust and confidence could have any application or relevance at the dismissal stage. He concluded that the term had always been concerned with the preservation of the employment relationship and not its termination and to extend its scope to dismissal contexts would have been “inappropriate and unnatural.” He held that at common law there was no obligation on an employer who had decided to end the employment relationship only for good cause: this was a matter for unfair dismissals legislation. This analysis regarding the scope of the implied term as to trust and confidence was subsequently applied by the Court of Appeal in Boardman v. Copeland County Council (unreported, Court of Appeal, 13th June 2002).
It is of interest to note that other common law jurisdictions have rejected Addis. In Stuart v. Armourguard Security [1996] 1 NZLR 484, the New Zealand High Court held that it was an implied term of the employment contract that an employee should not be dismissed in a manner likely to cause distress or loss of reputation, without proper cause. In that case, a regional manager who was peremptorily dismissed after he declined to tender his “non-negotiable resignation” was awarded general damages not limited by the Addis principle.
Conclusions:
I am satisfied that the plaintiff made it perfectly plain to Mr. Drury that she could not work the morning shift for the first edition from the offices of the Evening Herald: accordingly, Mr. Drury knew that if such an arrangement was not in place, the plaintiff could not undertake the job. I am satisfied that Mr. Drury did not express the serious reservations that were held by Senior Management as regards the proposed working arrangements and equally that he did not advise Senior Management that the plaintiff could not take up the position if the proposed morning working arrangements were not agreed or proved unworkable. In my view, this is the crucial point in the
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case. I am satisfied that Mr. Drury was anxious to retain the services of the plaintiff and never foresaw that there would be any difficulty in the matter.
I take the view that the agreement as regards the morning working conditions was a fundamental term of the agreement reached between Mr. Drury and the plaintiff and that it constituted a warranty and an inducement to the plaintiff to give up her contractual arrangement with Ireland on Sunday. Furthermore, I am satisfied that the plaintiff left her job with Ireland on Sunday to join the Evening Herald as a result of the representation made by Mr. Drury that the plaintiff could work from home for the first edition of the Evening Herald. I am also satisfied on the evidence as a matter of probability that without the assurance on the morning working arrangements, the plaintiff would not have taken up employment with the defendants.
I fully accept that due to unforeseen circumstances, namely the departure of Mr. Drury as editor of the Evening Herald the agreed working conditions were immediately in jeopardy, leading to the termination of the plaintiff’s employment on 17th April, 2000.
I take the view that no blame attaches in this regard to the plaintiff and in any event there does not appear to me to have been any way open to the plaintiff to check on the accuracy of the representation which was made to her by Mr. Drury and she simply trusted him and relied on what he said. Accordingly, I come to the conclusion that the plaintiff is entitled to damages for breach of warranty as against the defendants.
I am satisfied that Mr. Drury owed the plaintiff a duty of care to avoid making a negligent representation in the precontractual negotiation stages which had the effect of inducing the plaintiff to act to her detriment in the circumstances that arose.
I accept that Mr. Drury may not have anticipated a problem and that he may have mentioned the fact of Mr. Brennan not being particularly happy with the proposed arrangements: in my view, however, Mr. Drury’s silence about the serious reservations expressed to him by senior management should have been communicated by him to the plaintiff, in compliance with the duty of care which he owed to her to enable her to fully assess the position, especially since Mr. Doyle was not prepared to reduce the terms of the plaintiff’s morning working arrangements to writing.
I take the view that Mr. Drury failed in the duty of care he owed to the plaintiff and made a negligent representation to her by positively affirming the morning working arrangements and failing to advise the plaintiff by his silence of the
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fact that senior management had serious reservations about the position regarding the early morning working arrangements.
Following on the decision of Doyle J. in Stafford v Mahony, Smith and Palmer [1980] I.L.R.M. 53, at 64, I am satisfied that there was, in the particular circumstances of this case, a person (Mr. Drury) conveying the information and representation relied upon and further that the relevant information was conveyed to the plaintiff and that she acted to her detriment upon the information and representation made to her.
Insofar as the misrepresentation in the particular circumstances of this case relates to a failure to disclose a material fact, it is quite clear to me that a duty of disclosure did arise because Mr. Drury’s silence in effect negated and distorted the positive representation that he made that the working arrangements were agreed to, he having discussed the matter with senior management. I accept that there is an argument to be made on the defendants’ behalf that the serious reservations on the part of senior management may not have falsified the representation previously made, but the reality of the situation is that Mr. Drury knew that the plaintiff could not take up the position if the morning working arrangements were not agreed to and he also knew that senior management were expressing serious reservations about the morning working arrangements, so that in effect, in my view, he was conveying to the plaintiff an inaccurate representation as to the true background position.
In my view, Mr. Drury owed the plaintiff a duty of care: he failed in this regard and accordingly I am satisfied that the defendants are guilty of a negligent misrepresentation in these circumstances and that the plaintiff is entitled to damages arising there from.
On the issue of reasonable termination of the plaintiff’s contract of employment, I take the view that both the N.U.J. current agreement and the situation that pertained to Mr. Dowling when he left the defendant company to join the Sunday Times are different from the situation that faced the plaintiff when she was approached by the defendant company because she had in place a contractual arrangement and if a termination period had been discussed, undoubtedly it would have been an important factor for her consideration. In any event, it was never discussed or indeed touched on in any way and there was no provision in place as to an agreed period of notice of termination.
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In all the circumstances of this case, including the factual background as to how the plaintiff came to be employed by the Defendant, the importance which Mr. Paul Drury attached to the plaintiff’s employment, her esteemed professional ability, the fact that she was moving from a job to take up this position and most importantly the difficulty that she would undoubtedly face as a Political Correspondent in achieving a similar position in the greater Dublin area lead me to the conclusion that a reasonable period of notice of termination of the plaintiff’s employment with the Defendant Group would be six months or alternatively six months’ net loss of earnings in lieu of notice.
Insofar as the plaintiff has advanced a claim for damages for injury to reputation, I do not consider that in the particular circumstances of this case the plaintiff has made out such a case for loss of reputation against a background where no aspersion was cast on the plaintiff’s capacity and integrity as a journalist and, in particular, as to her role as political correspondent. The reality of the situation, I believe, is that the defendants were well intentioned to the plaintiff and, as I have already stated, in a different set of circumstances the arrangement would probably have worked very well. Furthermore, if it were possible for the plaintiff to have worked for the first edition from the offices of the Evening Herald, it is quite clear that the arrangement would have continued. Accordingly, I conclude that there is no basis for any claim for injury to the plaintiff’s reputation and, in these circumstances, it is not necessary for me to consider the legal issue as to whether or not there is a remedy in Irish law in respect of a valid claim for damages for loss of reputation arising from a termination of a contract of employment.
My findings bring about a situation where I have to assess damages both for breach of warranty and for negligent misrepresentation. I am satisfied following the judgment of Hamilton C.J. in Kennedy v Allied Irish Banks PLC [1998] 2 IR 48 at p. 56, that the claimant in these proceedings is entitled to take advantage of the remedy which is most advantageous to her, subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that in accordance with ordinary principles the parties must be taken to have agreed that the tortious remedy is to be limited or excluded. In the particular circumstances of this case I am satisfied that the plaintiff is entitled to seek damages for concurrent remedies both in respect of breach of warranty and negligent misrepresentation.
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I am further satisfied following the decision of O’Hanlon J. in McAnarney v Hanrahan [1993] 3 I.R. at 498 that damages to which the plaintiff is entitled for negligent misrepresentation are to be assessed on the basis that the plaintiff would not have left her position as political correspondent with Ireland on Sunday but for the misrepresentation and these damages will be based on the plaintiff’s net loss of earnings and dependent on the remuneration she would have earned if she had remained on with Ireland on Sunday.
Insofar as the plaintiff is entitled to damages for breach of warranty, she is entitled to damages based on net loss of earnings and dependent on the remuneration she would have earned had she remained on in her position at the Evening Herald.
In assessing the appropriate level of damages for negligent misrepresentation, and breach of warranty I conclude that the appropriate measure is two years’ net loss of earnings less the net remuneration as earned by the plaintiff from alternative sources during this period.
Insofar as there is an element of dispute as regards the appropriate taxation levels relating to the plaintiffs earnings I propose to reply on the figures as produced by Mr. Russell because from the taxation perspective he has been for a number of years the plaintiffs accountant and has been responsible for her tax returns and I consider it probable that he is more familiar with the taxation situation than the person who produced the figures on behalf of the defendants.
Furthermore while I accept that on or about the 24th day of March, 2000 the plaintiffs salary was reduced by the exclusion of the fifth day due to the intervention of the Trade Union the plaintiffs contract with the defendants was for a salary of IR£45,000 and having regard to the unusual circumstances that brought about the change I propose for the purpose of assessing damages herein to disregard that change of circumstances and to rely on the original contract.
The plaintiff is entitled to six months’ notice of termination of her employment with the Evening Herald or, alternatively, six months’ net pay in lieu thereof, which I calculate to be a sum of €18,637.06.
In respect of the plaintiff’s claim for negligent misrepresentation, I assess damages in the sum of €33,227.61 being two years’ net loss of earnings from the plaintiff’s position with Ireland on Sunday less remuneration derived from alternative sources.
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In respect of the plaintiff’s claim for damages for breach of warranty, I assess damages in the sum of €52,266.00, being two years’ net loss of earnings from the plaintiff’s position with the Evening Herald less remuneration derived from alternative sources.
Accordingly, while the plaintiff is entitled to succeed in her claim as against the defendants under a number of headings, she is not entitled to recover damages under all of the headings because the claim arises out of the same set of circumstances and cause of action. The plaintiff is only entitled to recover damages under one heading of claim but she is entitled to recover damages from her optimum position which in the particular circumstances is in respect of her claim for breach of warranty and accordingly I award the plaintiff €52,266.00 damages.